Lexington Ins. Co. v. Cooke's Seafood, 87-8043

• Decision Date: 19 January 1988
• Docket Number: No. 87-8043,87-8043
• Citation: 835 F.2d 1364
• Parties: , 10 Fed.R.Serv.3d 163, 24 Fed. R. Evid. Serv. 620 LEXINGTON INSURANCE CO., Plaintiff-Appellee, v. COOKE'S SEAFOOD, Defendant, Snooper Fleet, Inc., et al., Defendant-Appellant.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1364

835 F.2d 1364

1988 A.M.C. 1238, 10 Fed.R.Serv.3d 163,

24 Fed. R. Evid. Serv. 620

LEXINGTON INSURANCE CO., Plaintiff-Appellee, v. COOKE'S SEAFOOD, Defendant Snooper Fleet, Inc., et al., Defendant-Appellant.

No. 87-8043.

United States Court of Appeals Eleventh Circuit.

Jan. 19, 1988.

Barnard M. Portman, Paul H. Felser, Savannah, Ga., for defendant-appellant.

Robert S. Glenn, Jr., Hunter, Maclean, Exley & Dunn, P.C., Savannah, Ga., for plaintiff-appellee.

Appeal from the United States District Court for the Southern District of Georgia.

Before TJOFLAT and KRAVITCH, Circuit Judges, and TUTTLE, Senior Circuit Judge.

KRAVITCH, Circuit Judge.

The unfortunate destruction of the F/V C-JACK by Hurricane Juan in the Gulf of Mexico in October 1985 precipitated this case. Appellant Snooper Fleet, Inc. (Snooper) owned the C-JACK; John Hogan, a commercial fisherman with twenty years of experience, captained the C-JACK during the pertinent events. Appellee Lexington Insurance Co. (Lexington) issued a marine hull insurance policy on the C-JACK. This declaratory judgment action concerns the operation of the following provision in that marine insurance policy:

NAVIGATION WARRANTY: confined to the inland and coastal waters of the United States from Cape Hatteras, North Carolina to Brownsville, Texas not exceeding 100 miles offshore, excluding all territorial waters of Cuba or Mexico.

On Thursday, October 24, 1985, the C-JACK left Galveston, Texas purportedly to fish in an area known as the West Flower Garden Banks, approximately ninety miles from Galveston. In the early morning of the 25th, the sound of the engine roused Hogan, who noticed that the C-JACK had lost speed. Indeed, the C-JACK had slowed from its normal speed of 7-8 knots to only 2-3 knots. Suspecting that contaminated fuel had clogged the vessel's oil filters, Hogan installed two replacement filters, but contaminants in the fuel soon clogged them as well.

It is unclear how far the C-JACK was from Galveston at this time, ¹ but it is undisputed that Captain Hogan decided not to return to Galveston to obtain more oil filters but to proceed to a nearby manned oil rig, the ZAPATA NEPTUNE. The ZAPATA NEPTUNE was outside the 100-mile navigation limit of the insurance policy that Lexington had issued to Snooper. Hogan tied the C-JACK up at a buoy next to the ZAPATA NEPTUNE and called the rig's supply vessel about the possibility of obtaining replacement oil filters. The supply vessel did not have the filters that the C-JACK needed, but Hogan was told that the supply vessel was heading to port and could obtain replacement filters the next day.

At this point, the seas were not very rough. During Friday and Saturday, however, the seas began to rise, and on Saturday Hogan learned that a tropical depression to the south of the C-JACK had been upgraded by the National Weather Service to hurricane status and was moving in the direction of the C-JACK. The hurricane bore down on the C-JACK and the ZAPATA NEPTUNE so quickly that workers were unable to evacuate the rig, as would be customary. The four persons aboard the C-JACK rode out the storm until the morning of Sunday, October 27, when they abandoned ship. The crew of another supply vessel that had moored by the ZAPATA NEPTUNE pulled them out of the water. Immediately thereafter, the C-JACK broke loose, drifted away, and presumably sank.

In late 1985, Fred Woodruff, an independent adjustor handling claims for Lexington, interviewed Hogan by telephone to obtain information concerning an injury claim by a crew member. ² At the time of the interview, taped and transcribed by Woodruff, Hogan was in a bar having a drink. According to Woodruff's testimony at trial, Hogan told him that "he went to where he was going and never moved again. That he went to the place he was fishing." Woodruff got the impression that Hogan had intended all along to fish out near the ZAPATA NEPTUNE, and that the problems with the oil filters had not caused him to change his plans. Woodruff also testified that Hogan told him that he had not known about the 100-mile limit in the insurance policy, and that had he known about the limit he would not have sailed the C-JACK, because the fish he was seeking could not be found within 100 miles of shore.

Lexington filed this declaratory judgment action against Snooper on February 19, 1986. The complaint alleged that the insurance policy issued to Snooper was void because the C-JACK was beyond the 100-mile territorial limit on coverage at the time of the sinking. In a deposition Hogan testified that he had proceeded to the ZAPATA NEPTUNE instead of returning to Galveston on learning of the oil filter problem because the C-JACK had little power; without power the C-JACK might hit one of the many unmanned oil rigs on the way back to Galveston. Hogan testified that his reason for going to the oil rig was "to make repairs." Hogan also testified, however, that he did not contact the Coast Guard because "[a]t the time, I didn't think I was in any trouble," and that he didn't return to Galveston because

It wasn't a life threatening situation, to begin with. There was no threat of a storm. I did have some replacement filters. So, in a situation like that when you're at sea, you affect [sic] your repairs and continue on with your work. You can't be turning around and running to the dock every time you run into a little problem.

At trial Hogan was unavailable to testify. Although the parties had understood that Hogan's deposition testimony would be used at trial, when Lexington's attorney moved to introduce Woodruff's tape and transcript of his interview of Hogan, the defense attorneys objected. The trial court overruled the objection and entered judgment for Lexington. This appeal followed.

I.

The central issue on appeal is the effect of the navigation warranty on the insurance coverage for the C-JACK. Lexington points out that when the C-JACK was tied up by the ZAPATA NEPTUNE, it was outside the 100-mile navigation limit expressly warranted by the insurance policy; as a result, Snooper was in breach of warranty and the insurance coverage was voided. Lexington correctly notes that admiralty law requires the strict construction of express warranties in marine insurance contracts; breach of the express warranty by the insured releases the insurance company from liability even if compliance with the warranty would not have avoided the loss. Aguirre v. Citizens Casualty Co. of New York, 441 F.2d 141, 143 (5th Cir.), cert. denied, 404 U.S. 829, 92 S.Ct. 65, 30 L.Ed.2d 58 (1971); ³ accord Home Insurance Co. v. Ciconett, 179 F.2d 892, 894 (6th Cir.1950); Canton Insurance Office v. Independent Transportation Co., 217 F. 213, 217 (9th Cir.1914); Capital Coastal Corp. v. Hartford Fire Insurance Co., 378 F.Supp. 163, 172 (E.D.Va.1974).

It is also true, as Snooper argues, that admiralty law has always shown hostility towards a rule that would require the master of a vessel to choose between preserving lives at sea and preserving insurance coverage. For example, in The Iroquois, 118 F. 1003 (9th Cir.1902), aff'd on other grounds, 194 U.S. 240, 24 S.Ct. 640, 48 L.Ed. 955 (1904), the court held that the master of the Iroquois had been negligent in refusing to bring an injured sailor to port to obtain medical attention. The court rejected the argument that the master would have breached the implied warranty against deviation and invalidated the Iroquois' insurance coverage by departing from the vessel's course. ⁴ See also Mason v. The Blaireau, 6 U.S. (2 Cranch) 240, 257 n. 1, 2 L.Ed. 266, 272 n. 1 (1804) (reported observation of Chief Justice Marshall); The Henry Ewbank, 11 F.Cas. 1166, 1174 (C.C.D.Mass.1833) (No. 6376) (Story, Circuit Justice); Bond v. The Cora, 3 F.Cas. 838, 840 (C.C.D.Pa.1807) (No. 1621) (Washington, Circuit Justice); Peterson v. The Chandos, 4 F. 645 (D.Or.1880); Crocker v. Jackson, 6 F.Cas. 829, 830 (D.Mass.1847) (No. 3398). See generally Note, 11 Cornell L.Q. 385 (1926). ⁵

In this case, however, the district court found that "Captain Hogan's decision to proceed to the oil rig was not motivated by fear of Hurricane Juan but rather was influenced by his desire to effect repairs and to not be delayed in the performance of his, and the vessel owner's, business by the occurrence of a 'little problem.' " This finding is not clearly erroneous. When Hogan decided to head for the ZAPATA NEPTUNE, he was concerned about minor repairs, not the stress of weather. Furthermore, although Hogan testified that proceeding back to Galveston at reduced power might have endangered the vessel because of the possibility of striking unmanned oil rigs, the district court found that feasible alternatives were available, such as contacting the Coast Guard, seeking out a manned rig closer to shore, or proceeding to a "safety fairway" offering a clear channel to Galveston. Any of these alternatives would have kept the C-JACK within the warranted geographic limits and would have preserved life. ⁶ Leaving the warranted geographic limits was not, as one commentator has put it, an "unavoidable necessity." Note, 11 Cornell L.Q. at 389.

As the district court observed, navigation warranties ensure that when "little problems" arise on "little vessels," the masters will seek...