McKeithen v. SS FROSTA

• Decision Date: 10 March 1977
• Docket Number: 76-3275 and 76-3654.,Civ. A. No. 76-3251
• Citation: 430 F. Supp. 899
• Parties: Dorothy S. McKEITHEN, Individually and on behalf of her Deceased husband, Charles S. McKeithen, v. The S. S. FROSTA and the M/V GEORGE PRINCE et al. In the Matter of A/S J. LUDWIG MOWINKELS REDERI, as owner of the M/T FROSTA, petitioning for exoneration from or limitation of liability. In the Matter of the DEPARTMENT OF HIGHWAYS, STATE OF LOUISIANA, ex rel. William J. GUSTE, Jr., Attorney General, as owner of the M/V GEORGE PRINCE, petitioning for exoneration from or limitation of liability.
• Court: U.S. District Court — Eastern District of Louisiana

430 F. Supp. 899

Dorothy S. McKEITHEN, Individually and on behalf of her Deceased husband, Charles S. McKeithen, v. The S. S. FROSTA and the M/V GEORGE PRINCE et al.

In the Matter of A/S J. LUDWIG MOWINKELS REDERI, as owner of the M/T FROSTA, petitioning for exoneration from or limitation of liability.

In the Matter of the DEPARTMENT OF HIGHWAYS, STATE OF LOUISIANA, ex rel. William J. GUSTE, Jr., Attorney General, as owner of the M/V GEORGE PRINCE, petitioning for exoneration from or limitation of liability.

Civ. A. Nos. 76-3251, 76-3275 and 76-3654.

United States District Court, E. D. Louisiana.

March 10, 1977.

Daniel E. Becnel, Jr., Reserve, La., Joel T. Chaisson, Destrehan, La., Eldon E. Fallon, A. Remy Fransen, Jr., New Orleans, La., James A. George, Baton Rouge, La., Salvador E. Gutierrez, Jr., John R. Martzell, New Orleans, La., for plaintiffs.

Francis J. Mooney, Jr., New Orleans, La., for New Orleans — Baton Rouge, Steamship Pilots Association and Nicholas F. Colombo.

Walter Carroll, Jr., Charles F. Lozes, Benjamin W. Yancey, New Orleans, La., for S. S. Frosta and A/S J. L. Mowinckels Rederi.

John P. Hammond, John R. Peters, Jr., Henry J. Read, New Orleans, La., for the M/V George Prince.

Nigil Rafferty, New Orleans, La., for Southern American Ins. Co.

Donald Ensenat, New Orleans, La., for Department of Highways, State of Louisiana.

OPINION WITH RESPECT TO INSURANCE POLICY ISSUED BY SOUTHERN AMERICAN INSURANCE COMPANY

ALVIN B. RUBIN, District Judge:

A number of interrelated motions raise as a primary issue the extent of the policy coverage provided by Southern American Insurance Company (Southern American) to its insured, the Department of Highways of the State of Louisiana, owner of the ferry M/V George Prince, with respect to claims arising out of the October 20, 1976 collision between that ferry and the Norwegian tanker, the M/T Frosta. Two days later the owner of the M/T Frosta petitioned this court for exoneration from or limitation of liability pursuant to 46 U.S.C. §§ 181-189 and Rule F, Fed.R.Civ.P. On November 22, the Department of Highways of the State of Louisiana (Department of Highways) filed a similar proceeding as owner of the M/V George Prince. In accordance with the statute, and without a hearing, the court enjoined the filing of any actions against the vessels and their owners. However, in accord with Olympic Towing Co. v. Nebel Towing Co., 5th Cir. 1969, 419 F.2d 230, cert. denied 397 U.S. 989, 90 S.Ct. 1120, 25 L.Ed.2d 396, direct actions against the underwriters filed in this court were excepted from the restraining order.

Subsequently Southern American intervened in the limitation action of the Department of Highways, seeking a declaratory judgment and interpleader, and praying for a determination, binding on all parties, that its liability under its policy insuring the Department of Highways cannot exceed the sum of $300,000 in respect of all claims resulting from the collision. The individual claimants and the Department of Highways contend that the policy provides coverage of $300,000 per claimant, or alternatively, its amount can not be determined without extrinsic evidence; hence that an interpleader is improper. The court ordered Southern American to file a motion for summary judgment in all proceedings growing out of this collision including the direct actions against it and the limitation action of the Department of Highways, seeking a determination that the policy on its face is limited to coverage of $300,000.¹ By this procedure all parties would be afforded a hearing on the issue. If it were determined that the policy coverage as a matter of law is only $300,000, based on the face of the policy, the objections to the interpleader procedure would be ill-founded. If, on the other hand, it was decided that the policy provided coverage in some other amount, or that additional evidence was needed, the course of future proceedings in all related actions could then be determined.

I

For reasons indicated by the Court at prior oral argument, there is some doubt whether interpleader is permissible where there is a real dispute concerning the amount of the stake or fund to be deposited. United Artists Corp. v. Fields Productions, Inc., S.D.N.Y.1973, 363 F.Supp. 903; Connecticut General Life Insurance Co. v. Yaw, W.D.N.Y.1931, 53 F.2d 684; Cf., Wright & Miller, Federal Practice and Procedure, § 1716, at 457; Girard Trust Co. v. Vance, E.D.Pa.1946, 5 F.R.D. 109. However, because the issue of policy coverage is now raised concurrently by a motion for summary judgment, the Court may determine the scope of coverage if there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Rule 56, Fed.R.Civ.P.² If the contract is sufficiently clear to lend itself to interpretation on its face, as a matter of law, no party is prejudiced by its concurrent interpretation for purposes of the declaratory judgment and interpleader.³

A policy of marine insurance is a maritime contract, but the policy in this case does not insure a blue water peril; it covers a ferry boat plying the internal waters of a state from one side of the river to another. Both parties agree the contract is sufficiently local to warrant application of state law as required by Wilburn Boat v. Fireman's Fund Ins. Co., 1955, 348 U.S. 310, 75 S.Ct. 368, 99 L.Ed. 337.⁴ The first inquiry before this Court, then, is whether under Louisiana law, there is a genuine issue of material fact as to the scope of policy coverage.

II

The policy at issue reads in relevant part:

"Amount hereby insured $300,000.00

* * * * * *

In consideration of the premium and subject to the warranties, terms, and conditions herein mentioned, this Company hereby undertakes to pay up to the amount hereby insured . . . such sums as the assured . . . shall have become legally liable to pay and shall have paid on account of:

Loss of life of, or injury to, or illness of, any person;

Loss of, or damage to, or expense in connection with any fixed or movable object or property of whatever nature;

* * * * * *

Costs and expenses incurred with this Company's approval, of investigating and/or defending any claim or suit against the assured arising out of a liability or an alleged liability of the assured covered by this policy.

* * * * * *

Liability hereunder in respect of loss, damage, costs, fees, expenses, or claims arising out of or in consequence of any one occurrence is limited to the amount hereby insured. (For the purpose of this clause each occurrence shall be treated separately, but a series of claims hereunder arising from the same occurrence shall be treated as due to that occurrence.)"

The State of Louisiana and the Plaintiffs' Committee contend that, while the policy unambiguously provides $300,000 for each "occurrence", each death or injury constitutes one occurrence, so that a separate $300,000 is provided for the claim with respect to each victim. Additionally, and regardless of how the court rules on their first contention, these parties also contend that any costs of investigation and defense incurred by Southern American in connection with claims asserted against it, as opposed to the insured, or incurred in prosecuting its interpleader, are not subject to policy limits, and must be paid in addition to whatever liability Southern American may have under the terms of the policy.

Words and phrases employed in a contract of insurance must be construed, in their ordinary and popular sense, rather than in a technical, philosophical or limited sense.⁵ Hendricks v. American Employers Ins. Co., La.App.1965, 176 So.2d 827, 830. See also Levy v. Duclaux, La.App.1975, 324 So.2d 1, 10; Thomas v. Protective Life Ins. Co., La.App.1975, 319 So.2d 878, 880; Schwegmann Bros. Giant Super Markets v. Underwriters at Lloyd's, London, La.App. 1974, 300 So.2d 865, 868, application denied 303 So.2d 172; Atlas Lubricant Corp. v. Federal Ins. Co. of New Jersey, La.App. 1974, 293 So.2d 550, 552.

The policy makes it clear that "a series of claims" can arise from one "occurrence". The term "occurrence" standing alone might refer to each death or injury. But that word is not used in isolation in the contract. The policy expressly refers to "claims arising out of or in consequence of any one occurrence." (Emphasis supplied.) This makes it evident that the clause is intended to include all claims arising out of a single event, that is all damages claimed to have been caused by that event. Doubtless after the collision of the M/T Frosta and the George Prince a myriad of events happened: individuals aboard the ferry sought to escape, the ferry and the automobiles aboard it sank, most of the passengers and crew were drowned and a few may have died in some other manner, a few were injured and escaped. But no one or all of these is a separate "occurrence" as that term is used in the policy clause already quoted.

Plaintiffs argue that the policy by its express terms covers "loss of life of, or injury to, or illness of, any person," (emphasis supplied), and that use of the singular indicates an intent to provide $300,000 to any one person as opposed to a group of persons.⁶

But the policy does not provide coverage of $300,000 for "each" person. The insurer undertakes to pay the amount insured ($300,000) for loss of life, injury or illness to "any" person. Subsequently it limits its liability for all loss, damage, costs, fees, expenses and claims arising out of or in consequence of any one occurrence to the amount insured, or $300,000. Hence, the company may be liable for any sum up to $300,000 for losses sustained by any one person, but, if more than one person sustains damage aggregating over $300,000, the company is not liable for more than $300,000.

III

This interpretation is consistent with the jurisprudence defining the term "occurrence" in other insurance contracts issued in Louisiana. In Anchor Casualty Co....