Lloyd's US Corp. v. Smallwood

• Decision Date: 23 August 1989
• Docket Number: No. 88-491-CIV-18.,88-491-CIV-18.
• Parties: LLOYD'S U.S. CORPORATION, as attorney in fact of the underwriters at Lloyd's U.S., a Texas Lloyd's plan insurer, Plaintiff, v. Robert D. SMALLWOOD, Jr., and Grace E. Smallwood, his wife, Defendants.
• Court: U.S. District Court — Middle District of Florida

719 F. Supp. 1540

LLOYD'S U.S. CORPORATION, as attorney in fact of the underwriters at Lloyd's U.S., a Texas Lloyd's plan insurer, Plaintiff, v. Robert D. SMALLWOOD, Jr., and Grace E. Smallwood, his wife, Defendants.

No. 88-491-CIV-18.

United States District Court, M.D. Florida, Orlando Division.

August 23, 1989.

John N.C. Ledbetter, Toole, Bubb & Beale, Jacksonville, Fla., for plaintiff.

Robert Parrish, Taylor, Moseley & Joyner, Jacksonville, Fla., and J.W. Goodloe, Jr. and Thomas E. Sharp, III, Vickers, Riis, Murray and Curran, Mobile, Ala., for defendants.

ORDER

G. KENDALL SHARP, District Judge.

This case was tried before the court without a jury on April 11-13, 1989. Judgment was entered on April 19, 1989, in favor of defendants in the amount of $175,000.00 with prejudgment interest and postjudgment interest thereon as well as costs. Based upon the testimony and evidence admitted at trial, the facts admitted in the joint pretrial stipulation, and the facts found by the court at trial, the court enters the following findings of fact and conclusions of law pursuant to Rule 52(a) of the Federal Rules of Civil Procedure. This order also will address defendants' motion for attorneys' fees (Doc. 28) and plaintiff's motion to strike certain, supporting affidavits accompanying defendants' motion for attorneys' fees (Doc. 32). Both of these motions were filed subsequent to the entry of judgment. Plaintiff has responded to defendants' motion for attorneys' fees (Doc. 30); defendants have not responded to plaintiff's motion to strike.

FINDINGS OF FACT

This case concerns the insurance coverage on the constructive, total loss of a commercial fishing vessel, co-owned by defendants Robert and Grace Smallwood, and insured by plaintiff Lloyd's U.S. Corporation (Lloyd's). Defendant Robert Smallwood has been engaged in commercial fishing all of his life and in shrimping since 1956. After comparing various shrimp boats, he had the subject vessel, the CAPT. BOB, built to specification by reputable boat builders in Alabama in 1977. Smallwood requested a more enhanced, steel V-hull rather than the typical Southern fishing boat so that the vessel would have greater stability, similar to a sailboat.

In February, 1986, Smallwood applied to Barnhardt Marine Insurance, Inc. in Jacksonville, Florida, for hull and liability insurance. He dealt with Frank L. Barnhardt, owner/president of the insurance corporation. Regarding the use and navigation limits, the application states, "Shrimp-Cape Kenedy sic to Brownsville Texas mostly Key West area." Smallwood requested $175,000.00 hull insurance and $300,000.00 protection and indemnity coverage. Smallwood's original marine insurance, acquired through Barnhardt, was not with Lloyd's.

Also in February, 1986, Jackson and Associates Marine Surveyors of Key West, Florida, prepared a condition and valuation survey on the CAPT. BOB. The market value is stated as $200,000.00, and the replacement value for a new vessel in 1986 as $350,000. In addition to enumerating the equipment on the CAPT. BOB, the survey generally describes the condition of the subject vessel as clean, well painted, and mostly owner operated. Note is made that housekeeping, structure, protective coatings and machinery were "Good." The principal surveyor commented as follows: "The subject vessel is designed for and in service as standard built, steel hull, stern trawling, double rigged commercial Shrimp Fishing Trawler. Captain/Owner Robert Smallwood Jr. is an experienced Fisherman, Operator and Shrimp Boat Owner, having owned other vessels prior to the Capt. Bob. Over 20 years."

In December, 1987, Smallwood decided that he wanted to convert his shrimp trawler into a scallop boat or scalloper. Scallops are loaded on deck while shrimp are loaded below deck. The principal equipment modification in transforming a shrimp boat into a scalloper is changing the nets. Testimony clarified that there are no scallop boats per se, only shrimp boats converted into scallop boats. Smallwood testified that he called Barnhardt to ascertain whether his insurance covered using his vessel for scalloping before he invested the non-refundable amount of $6,000.00 for the purchase of scallop nets. (Trial Transcript at 195-96).

From a telephone near the docks at Cape Canaveral, Smallwood, with his wife standing by, called Barnhardt at his office. Smallwood testified that he would not have gone into scalloping unless he was insured, and that Barnhardt told him that there would be no difference in insurance coverage. (Trial Transcript at 196). Defendant Grace Smallwood testified that she had a pen and paper to record any instructions from Barnhardt, and that she took no notes. (Trial Transcript at 561).

Frank Barnhardt, the sole agent for plaintiff Lloyd's has been contradictory in his recollection of Smallwood's call. His May 24, 1988, post-capsize and post-claim facsimile message to Lloyd's and his September 26, 1988 affidavit state that he does not remember Smallwood's December, 1987 call inquiring as to his insurance coverage if he converted his shrimp boat into a scalloper. Had such a call occurred, Barnhardt claims in these documents, he would have told Smallwood that a deck-load analysis would be required for insurance coverage. He also admitted that he was uncertain as to what was involved in a deck-load analysis. (Trial Transcript at 467).

At trial, Barnhardt admitted the telephone conversation in which Smallwood informed him that he wanted to convert his shrimp boat into a scalloper. (Trial Transcript at 459, 461, 466). Although Barnhardt testified that he advised Smallwood that a deck-load analysis was required, he did not remember whether he told Smallwood that he must provide Barnhardt's office with a copy of the deck-load analysis before he could commence scalloping. Barnhardt wrote Smallwood a letter on February 9, 1988, stating that the insurance on the CAPT. BOB would renew on February 15, 1988. Barnhardt quoted Smallwood pertinent coverage of $175,000.00 on the hull and machinery, and a handwritten notation indicates an additional $100,000.00 excess protection and indemnity. On the letter, an underscored, handwritten notation states, "2/10/88 Renew per Mr. Smallwood." The letter does not mention any qualifications for the type of fishing done on the CAPT. BOB.

Plaintiff's expert Andrew Lebet, a naval architect, knowledgeable concerning the design and stability of boats, testified that a deck-load analysis is a stability test to determine maximum deck loading. He explained that piling great weight on deck raises the center of gravity. On cross examination, he admitted that he made no specific calculations as to the shifting of the center of gravity on the CAPT. BOB. (Trial Transcript at 393). While Lebet also admitted that his opinions were derived from looking at pictures of the capsize of the boat and the 1986 survey and that he had no first-hand knowledge of the CAPT. BOB, his testimony as to general stability principles substantiated the court's findings. (Trial Transcript at 318, 336, 389-90).

Based upon assurances that Smallwood received when he called Barnhardt in December, 1987, he made the necessary modifications to convert his shrimp boat into a scallop boat. Smallwood testified that he called Barnhardt's secretary, through whom he had received information during his business relationship with Barnhardt, in order to verify his coverage for scalloping in connection with his February, 1988 insurance renewal for the CAPT. BOB. (Trial Transcript at 572). Furthermore, the certificate of documentation for the CAPT. BOB designates "NONE" under restrictions and remarks, and documents the vessel for "FISHING."

Barnhardt testified that he changed insurance companies to Lloyd's with the February, 1988 renewal of coverage on the CAPT. BOB. The court found that Lloyd's issued the subject policy to Smallwood for the CAPT. BOB with actual knowledge provided to its agent Barnhardt that the vessel would be used as a scalloper and that a deck-load analysis was not provided by Smallwood. The court also found that plaintiff/insurer knew that the center of gravity or stability of the CAPT. BOB changed because of its transformation into a scalloper, but that it was not unseaworthy. The court further found that, even if Barnhardt had told Smallwood that a deckload analysis was required before the vessel could be insured for scalloping, this advice was a recommendation rather than a condition of insurance coverage since no exception preventing scalloping was ever appended to the policy.

The subject marine insurance policy was issued by Lloyd's through Barnhardt Marine Insurance, Inc. for the year February 15, 1988, to February 15, 1989. The $17,844.00 premium insured the hull and machinery for $175,000.00, and gave $100,000.00 protection and indemnity and $100,000.00 excess protection and indemnity. The insured vessel is described as a "1977 80' Steel/Diesel Fishing Vessel `CAPT. BOB' # 579497." Since there is neither mention in the policy as to the type of fishing done by the CAPT. BOB nor requisite qualifications for particular fishing, the court found that the subject insurance policy contained no restrictions precluding scalloping.

With respect to the policy, two provisions have been used by the parties to advance their respective positions. Plaintiff contends that it is exempt from coverage on the subject policy based on the following warranty of seaworthiness:

Warranted that at the inception of this Policy the Vessel shall be in a seaworthy condition and, thereafter, during the currency of this Policy, the Assured shall exercise due diligence to keep the Vessel seaworthy, and in all respects fit, tight, and properly manned, equipped, and supplied.

While the CAPT. BOB was considered seaworthy at the inception of the policy, Barnhardt testified that it was Smallwood's responsibility to maintain the vessel in a seaworthy...