Grupo Protexa, SA v. All American Marine Slip, Civ. A. No. 86-4212.

• Decision Date: 16 January 1991
• Docket Number: Civ. A. No. 86-4212.
• Citation: 753 F. Supp. 1217
• Parties: GRUPO PROTEXA, S.A., et al., Plaintiffs, v. ALL AMERICAN MARINE SLIP, et al., Defendants.
• Court: U.S. District Court — District of New Jersey

753 F. Supp. 1217

GRUPO PROTEXA, S.A., et al., Plaintiffs, v. ALL AMERICAN MARINE SLIP, et al., Defendants.

Civ. A. No. 86-4212.

United States District Court, D. New Jersey,

November 16, 1990.

As Amended January 16, 1991.

Riker, Danzig, Scherer, Hyland & Perretti by Gerald Liloia, Kenneth Van Deventer, Morristown, N.J., for plaintiffs.

Liddell, Sapp, Zivley & Hill by Harold K. Watson, David D'Aloia, Houston, Tex., and Saiber, Schlesinger, Satz & Goldstein by David J. D'Aloia, Newark, N.J., for defendants.

OPINION

WOLIN, District Judge.

This is a maritime action, the substance of which centers on the wreck removal provision of a policy of insurance issued to Perforaciones Maratimas Protexa, S.A.C. ("Protexa"). The initial inquiry is whether the wreck removal engaged in by Protexa was compulsory by law. The analytical framework necessary to that determination is set forth in a prior opinion of this Court. Grupo Protexa S.A., et al. v. All American Marine Slip, et al., No. 86-4212, 1988 WL 88442 (D.N.J. Aug. 26, 1988) (1988 U.S. Dist. LEXIS 9339). Cognate to that inquiry is whether Protexa, as required by the policy, acted as a prudent uninsured. The pivotal focus of that probe is directed to Protexa's decision to remove its own wreck without resort to the use of a third-party salvor. Because of unresolved issues of fact this matter was tried before the Court.¹ In accord with Rule 52(a), Federal Rules of Civil Procedure, the following constitutes this Court's findings of fact and conclusions of law.

I. FINDINGS OF FACT

In the early morning hours of December 14, 1985, the HUICHOL II ("HUICHOL") sank in the watery depths of the Bay of Campeche. A tragic consequence of this occurrence was a significant loss of crew. More than 27 able-bodied seamen accompanied and remained with the HUICHOL until their remains were recovered on February 10, 1986. With this brief scenario at hand, the Court will move to an explanation of the events that precipitated this litigation.

A. The Parties

The plaintiff Grupo Protexa, S.A., is a Mexican conglomerate engaged in transportation, food stuffs, bottling and canning, tourism, real estate, industrial, construction and drilling and marine operations. It conducts these commercial ventures through separate corporations. It develops and manages maritime construction projects through Condux and Construcciones Maritimas Mexicanas. Condux was the owner of the HUICHOL when it sank. Cruz Script at 2.

The defendant All American Marine Slip ("AMMS") is a marine insurance company, located in New York, that reinsured 30% of the reinsured risk under protection and indemnity policies issued by Mexican insurers. Guerrero Script at 2. The defendant Cigna/AFIA is a marine insurance company that reinsured 5% of that same risk. Id.

B. The Wreck

On December 14, 1985, at approximately 8:00 a.m., the HUICHOL sank in the Bay of Campeche approximately 50 miles offshore from Cuidad del Carmen ("Carmen"). Winds in the vicinity at that time were reported to be 55 knots with seas at 3 meters and a northerly swell at 5 meters.

The wreck of the HUICHOL was located at latitude 19-25.8 degrees north, longitude 091-58.5 degrees west in 45 meters of water. It was lying on a bottom of soft mud, capsized to port at about 150 degrees. Exhibit 221D. It was lying in an inverted position within a Petroleos Mexicanos ("Pemex") oil exploratory zone.² Fredericks Script at 6. The wreck lay 1.5 miles within the easterly border of the Pemex zone and over three miles from the nearest oil platform structure. Umbdenstock Script at 3. More than 50 oil drilling platforms and related structures belonging to Pemex are located and operated in this exploratory zone. Cruz Script at 5. Protexa constructs and services the pipelines, platforms and related structures needed by Pemex. Almost 100% of Protexa's maritime construction business flows from Pemex. Moreover, Pemex's production is important to the Mexican economy, since it is a major source of Mexico's hard currency. Cruz Script at 3.

C. The Policy

The policy of marine insurance was written by Energy Insurance International of Houston, Texas ("EII"). Keith Mollman was an account manager assigned to Protexa's account. Pablo Cruz was Protexa's employee assigned to procure insurance and manage risks for its construction, marine and air divisions. Cruz Script at 1. In 1985 Cruz negotiated an insurance policy covering risks and property damage to all or part of Protexa's Marine Construction Division. All of the risk except for 5% was placed with non-Mexican insurance companies.³ Cruz Script at 7. The policy written for Protexa was a Protection and Indemnity-type, designated as "SP-23 (Revised 1/56)." The policy had two distinct layers of coverage:

The primary layer was liable for the first $2,500,000 of any loss covered by the policy. There were four primary level underwriters. They were U.S. Fire which had 35% of the primary level, Wetzel which had 27.5% of the primary layer, AOIS which had 7.5% of the primary level and FFIC which had the remaining 25% of the primary level.

If any single loss exceeded $2,500,000 it pierced the excess layer and the excess layer underwriters would have to respond to the loss in excess of the primary limit. There were three excess underwriters, those being AAMS which had 30% of the excess layer and various Lloyds/London underwriters which carried 65% of the risk. AFIA had 5% of the excess layer.

Mollman Script at 3.

The total adjusted loss was $12,121,726, of which the primary layer was liable for the first $2,500,000. Mollman Script at 41. Therefore, according to Mollman, the balance for which the excess layer was liable was $9,631,726. Five percent of that liability remained with the Mexican insurance company. The three remaining excess carriers, London, AAMS and AFIA were liable for their respective share of 95% of the balance. Therefore, AAMS, if responsible, owes 30% of 95% of $9,631.726, which equals $2,745,042. AFIA, if liable, would owe 5% of 95% of $9,631.726, which equals $507,000. London, which had already paid its share, owed 65% of 95% of $9,631.726, which equalled $5,947,591. Mollman Script at 41. The hull and machinery claim was $1,523,000; sue and labor,⁴ $504,065; and wreck removal, $10,104,461. Exhibit 202D at 000904. Since the hull and machinery plus sue and labor claims amounted to $2,027065, and the primary layer of coverage as only $2,500,000, all but $472,035 of the wreck removal expenses fell squarely on the shoulders of the excess tier of coverage.

The effective date of the policy was from May 1, 1985 to May 1, 1986. AAMS had reinsured Protexa's marine risk in years prior to the policy year in issue. The 1985-86 policy differed from its predecessor in that the prior wreck removal coverage was of a broader form. It permitted wreck removal when it was compulsory by law and also when it was deemed necessary by the assured. EII had attempted to negotiate, on behalf of Protexa, the same coverage for the 1985-86 policy year, but AAMS was unwilling to provide such coverage and the policy that issued for the 1985-86 policy year provided coverage for wreck removal only when such removal was compulsory by law. Guerrero Script at 2.

The policy also required that the assured act as a prudent uninsured in the settlement of claims. Exhibit 258 at 40000591. A prudent uninsured is a term applied to assureds. It indicates that an assured's judgment should be reasonable and employed notwithstanding the existence of insurance.

D. Claims Adjustment Process

The established protocol for channeling communications between underwriters and the assured is the broker. Underwriters receive their information from surveyors/adjusters who are sent to the scene of a wreck for that very purpose. The surveyor is the underwriter's operative on the scene.

He is their eyes, ears and at times their mouth. It is his responsibility to make sure the underwriters are kept fully informed of what is happening on the scene. He is also responsible for reviewing the insured's claim at the end of the process, making the appropriate adjustments, and issuing the proofs of loss by which the claims are submitted to the underwriters.

Mollman Script at 3. In a situation such as the HUICHOL with multiple underwriters involved, the surveyor files general reports with the broker who in turn contacts the underwriters. Underwriters generally reply through the broker. The surveyor represents the underwriters and is paid by them. Mollman Script at 4.

Immediately after the loss of the HUICHOL was communicated to EII, Rush Johnson Associates ("RJA") was appointed surveyor/adjuster for the underwriters. Captain Theo Tyssen was assigned to this claim. Mollman Script at 4. Tyssen was at the scene of the wreck on December 16, 1985. Mollman Script at 6. AAMS acknowledges that Tyssen served as the eyes and ears of the underwriters. Tr. 469 at 25. However, under no circumstances was Tyssen authorized to enter into contracts on behalf of the underwriter or commit an underwriter to pay any sum in satisfaction of a claim. This was especially true of AAMS. Guerrero Script at 4.

E. The Events Succeeding the Wreck

After Tyssen was dispatched to the wreck, he met with various parties concerning the situation. In a report to Mollman, Tyssen advised that, according to his conversation with divers who had tried to do a survey, the vessel was completely saturated with water and was rapidly sinking into the muddy, silty bottom. He also said that the wreck was located in a Pemex zone of heavy drilling activities and it seemed definite that the unit would have to be removed. Furthermore, the Mexican government indicated that, after the vessel was raised and before it could be scuttled, government officials would want to remove the bodies and do an investigation into the cause of the loss. Tyssen said that he had some very preliminary discussions with Protexa's engineers regarding their...