Monarch Ins. Co. of Ohio v. Cook, 48731

• Decision Date: 17 August 1976
• Docket Number: No. 48731,48731
• Parties: MONARCH INSURANCE COMPANY OF OHIO v. Grady COOK, Jr.
• Court: Mississippi Supreme Court

Page 738

336 So.2d 738

MONARCH INSURANCE COMPANY OF OHIO v. Grady COOK, Jr.

No. 48731.

Supreme Court of Mississippi.

Aug. 17, 1976.

Mize, Thompson & Blass, Gulfport, Joseph P. Tynan, New Orleans, La., for appellant.

Page, Mannino & Peresich, Biloxi, for appellee.

Before PATTERSON, P.J., and ROBERTSON and BROOM, JJ.

ROBERTSON, Justice, for the Court:

Monarch Insurance Company of Ohio, a non-resident corporation, insurer of Biloxi Machine Works, Inc., appeals from a judgment for $64,015 rendered against it, and in favor of Grady Cook, Jr., by the Circuit Court of Harrison County on a writ of garnishment suggested by Cook.

Cook first brough suit against Biloxi Machine Works, Inc., a Mississippi corporation, for the loss of his tugboat 'Capt. Bull' which sank while being operated on a test run by Biloxi Machine Works, Inc., the contract repairer. This first suit resulted in a judgment for Cook rendered on May 10, 1973, and the writ of garnishment was based on this judgment against Monarch's insured.

Monarch interposed three affirmative defenses:

First, the insurer was not given notice by the insured 'of any legal proceeding being filed against it and further failed, after being served with process, to forward a copy of the Summons to the Garnishee Defendant, and by such actions did thereby relieve any duty of the Garnishee' to defend or indemnify the insured under the policy. In support of this defense, Monarch quoted paragraph 7 of the policy:

'It is further stipulated and is a consideration for this insurance that in the event of any occurrence which may result in loss, damage and/or expense, for which these Assurers are or may become liable under this insurance, notice thereof shall be given to this Company as soon as practicable, and further, that any and every process, pleading and paper of any kind relating to such occurrence shall be forwarded promptly to this Company.' (Emphasis added).

Second, the insured 'had removed its vessel to Fletcher's Shipyard in Pascagoula, Mississippi, . . . and by removal in excess of fifteen '15 miles violated the terms of the policy.' Monarch quoted Paragraph 1A of the policy:

'1 This insurance is to cover the legal liability of the Assured as ship repairers upon the terms and conditions and subject to the limitations hereinafter set forth.

A. This insurance covers the legal liability of the Assured as ship repairers for loss or damage to vessels, craft, and equipment, cargoes, freights, and other interests on board, which are in their care, custody or control for the purpose of alteration of repair at locations within the United States or while such vessels or craft are being shifted and /or moved via inland waters for distances not in excess of fifteen miles in connection with their repair or alteration.' (Emphasis added).

Third, James Garland, president of the insured, Biloxi Machine Works, Inc., 'did violate the provisions of Paragraph 8 of the attached insurance policy' by admitting liability for the alleged accident our of which the claim of Grady Cook, Jr. arose. Paragraph 8 provides:

'8. In respect of any accident or occurrence likely to give rise to a claim under this insurance, the Assured is obligated to and shall take such steps to protect its (and the Assurers') interests as would reasonably be taken in absence of this or similar insurance. This insurance, however, shall be void and of no force or effect, in respect of any accident or occurrence, in the event the Assured shall make or shall have made any admission of liability either before or after such accident or occurrence or in the event the Assured shall interfere in any negotiations of the Assurers for settlement or in any legal proceedings in respect of any claim for which the Assurers are or may be liable under this insurance.' The circuit judge in his written opinion said:

'After approximately eight months of work on the vessel, a bad vibration was experienced during trial runs. At that time, Jim Garland, President and Manager of Biloxi Machine, decided to take the 'Capt. Bill' to the nearest shipyard which could haul the vessel from the water. The vessel was taken to Fletcher's Shipyard in Pascagoula, Miss., and repairs were made to the vessel after it was hauled from the water.

'At approximately sunset on January 15, 1973, the vessel was returned to the water at Pascagoula. . . . The vessel set out from Pascagoula with Garland acting as master of the vessel and two of his employees acting as crew. . . . At approximately 3:00 a.m. on the morning of the 16th, Garland was working in the engine room and his employee, Joe Hahn, was steering the vessel. Garland had detected further vibrations in the engine and was working to locate and correct them. Due to either a faulty steering mechanism installed by Biloxi Machine or to oversteering by Hahn, the vessel went into a hard turn at a high speed and capsized. Fortunately, all aboard were rescued.'

The circuit judge in his written opinion found:

'On or about January 28, 1973, a notice of loss was transmitted by Mickey Bellande, Garland's Insurance Agent, to Harry Gauthreaux, the Branch Manager for William H. McGee and Company, New Orleans, La. William H. McGee and Company is a General Agent for Garnishee, Monarch Insurance Co. (Hereinafter Monarch Insurance). Gauthreaux employed Arthur Terry, a Marine Surveying Firm, to investigate the claim. On January 29, 1973, Gauthreaux received Terry's initial report. Terry's second report was deted February 8, 1973, and stated that the site of the sinking was 14.1 nautical miles from the Biloxi Machine Yard in Biloxi. (Emphasis added).

'Gauthreaux informed Monarch Insurance that there was no liability under the policy and on February 15, 1973, forwarded the claim file to Charles Dittmer, Jr., an attorney in the firm employed to represent Monarch Insurance. On February 16, 1973,...