Pace v. Insurance Co. of North America

• Decision Date: 03 July 1987
• Docket Number: No. 86-2130,86-2130
• Citation: 838 F.2d 572
• Parties: , 24 Fed. R. Evid. Serv. 705 John S. PACE, Plaintiff, Appellee, v. INSURANCE COMPANY OF NORTH AMERICA, Defendant, Appellant. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 572

838 F.2d 572

1993 A.M.C. 2695, 24 Fed. R. Evid. Serv. 705

John S. PACE, Plaintiff, Appellee, v. INSURANCE COMPANY OF NORTH AMERICA, Defendant, Appellant.

No. 86-2130.

United States Court of Appeals, First Circuit.

Heard July 3, 1987.

Decided Jan. 22, 1988.

Rehearing Denied Feb. 19, 1988.

Thomas E. Clinton, with whom Seth S. Holbrook and Clinton & Muzyka, P.C., Boston, Mass., were on brief, for defendant, appellant.

Robert W. Smith, with whom Edward L. Gnys, III and Gunning, Lafazia & Gnys, Inc., Providence, R.I., were on brief, for plaintiff, appellee.

Before CAMPBELL, Chief Judge, and BOWNES and TORRUELLA, Circuit Judges.

LEVIN H. CAMPBELL, Chief Judge.

This appeal involves an insurance claim based upon the sinking on March 25, 1984, in daylight hours and calm waters, of a 72-foot wooden Rhode Island fishing vessel "PATRIOT." The plaintiff-appellee, Pace, was the boat's owner and the defendant-appellant, Insurance Company of North America ("INA"), the issuer of a commercial hull policy in effect when the loss occurred.

The sinking resulted from an incursion of water which PATRIOT's captain, James Wilbur, thought was coming from a leaking hose servicing the deck wash pump. The hose seemed to be leaking at the place where it joined a bronze thru-hull fitting equipped with a gate valve and a brass nipple. When Captain Wilbur checked the engine room bilge at 5:45 a.m., there had been no excess water, but upon returning an hour later, at around 6:45 a.m., he found a foot and a half of water. Observing the leaking hose attached to the thru-hull pipe, the captain sought to staunch the flow with rags. The floor boards were afloat, the temperature of the water close to freezing, and the vessel was rolling. At some point while trying to stop the leak the captain fell against the thru-hull pipe, which bent and then gave way entirely, resulting in an uncontrolled flow of sea water through the 1 1/2-inch hole. The pumps could not keep pace with the rising water, and one of them, at least, stopped when the lister engine that drove it became inoperative. The crew abandoned ship on a life raft at around 8:00 a.m., and they were picked up by a neighboring fishing boat from which they continued to observe the PATRIOT until, in mid-afternoon, it sank. Although the Coast Guard offered to drop additional pumps, PATRIOT's captain refused to reboard the sinking vessel in order to attempt to save it.

PATRIOT's owner learned of his vessel's loss that same day from the Coast Guard. His claim to his insurer for payment was ultimately rejected because, according to INA, the vessel did not sink because of a peril of the sea or any other cause for recovery specified in the policy.

Maritime hull policies like the one in question are not "all risk" policies. ¹ While in modern times they have come closer to all-risk coverage because of the "Inchmaree clause" and other supplementary provisions, see, e.g., Tropical Marine Products v. Birmingham Fire Insurance Co., 247 F.2d 116 (5th Cir.), cert. denied, 355 U.S. 903, 78 S.Ct. 331, 2 L.Ed.2d 260 (1957), they still do not pay if the loss results not from some "peril of the sea" but from the vessel's unseaworthy condition at the commencement of the voyage, including the unseaworthiness of gear attributable to ordinary wear and tear. E.g., Sipowicz v. Wimble, 370 F.Supp. 442 (S.D.N.Y.1974). See By's Chartering Service, Inc. v. Interstate Insurance Company, 524 F.2d 1045 (1st Cir.1975) (no liability where damage due to gradual wear and tear). INA defended below chiefly on the basis that the loss was due to the inferentially corroded condition of the thru-hull fitting which had been in service for some years ² and which was not shown ever to have been disassembled for inspection and servicing. While at trial an expert called by plaintiff theorized that the major influx of water may have been from a source completely different from the suspected leaky hose and thru-hull fitting, plaintiff mentioned no such other source in the claim he originally presented to INA.

The case was tried in the district court to a jury, jurisdiction resting on diversity of citizenship. In addition to claiming for the face amount of the hull policy, plaintiff sought additional compensation under a cause of action recently established in Rhode Island allowing an insured to recover compensatory damages, punitive damages and reasonable attorney's fees from insurers who unlawfully and in bad faith refuse to pay or settle claims. ³ The jury returned a verdict under the hull policy of $200,000. On the claim for violation of the insurer's duty to deal in good faith, the verdict was $200,000 for plaintiff-owner's economic losses, $50,000 for his emotional distress, and $75,000 for punitive damages. The district court denied INA's motions for judgment n.o.v. and for a new trial. Thereafter, plaintiff requested attorneys' fees in the sum of $67,608.50, to which defendant objected. Judgment was entered for an aggregate sum, including interest at 12 percent, of $640,249.31, plus attorneys' fees. INA's appeal followed.

Appellant INA has assigned numerous errors on appeal which we discuss in turn.

1. Denial of Directed Verdict and Judgment N.O.V. on Count I

Count I was a contract claim on the hull policy written by INA on PATRIOT. The amount of the policy was $200,000 and there is no dispute that plaintiff was entitled to recover this sum as compensation for the loss of his boat if PATRIOT's demise was caused by one or more of the risks insured against, as defined in the policy. See note 1, supra.

INA asserts, however, that there was insufficient evidence to support a finding by the jury that the nature and cause of PATRIOT's loss was such as to fall within the policy coverage. The standard for this court's review of the denial of INA's motions for directed verdict and judgment n.o.v. is whether the evidence could lead reasonable men to but one conclusion, a determination made without evaluating the credibility of witnesses or the weight of the evidence at trial. de Mars v. The Equitable Life Assurance Society, 610 F.2d 55, 57 (1st Cir.1979) (cited in Hubbard v. Faros Fisheries, Inc., 626 F.2d 196, 199-200 (1st Cir.1980)). As we cannot say that reasonable men and women must necessarily have accepted INA's position, we sustain the lower court's rulings allowing the jury's verdict on Count I to stand.

To be sure, the record would easily have permitted the jury to go the other way. It could plausibly have deduced that the failure of the thru-hull assembly in calm sea conditions was best explained by weakness due to ordinary wear and tear, resulting from electrolytic corrosion as testified to by INA's expert. See Egan v. Washington General Insurance Corp., 240 So.2d 875 (4th Dist.Fla.App.1970) (corrosion of bolt due to electrolysis, not being a covered "latent defect," could be wear and tear and hence outside policy coverage). Both parties were hampered by the fact that, being at the bottom of the ocean, the PATRIOT and its parts were unavailable for inspection. Hence INA's theory necessarily rested on inferences drawn from such facts as that the thru-hull fitting had given way without any apparent reason to do so, suggesting an already weakened condition. INA also presented expert testimony that the combination of brass and bronze would cause electrolysis, resulting in corrosion, and pointed to evidence that the thru-hull had not been replaced for some years nor disassembled and serviced.

If the jury had been persuaded by this evidence and had found that the sinking was due to the defective and deteriorated condition of this vital part, on the effectiveness of which a vessel's water-tight integrity depends, it should have denied recovery. See, e.g., Sipowicz v. Wimble, 370 F.Supp. at 446-47.

However, while INA makes a good case for its theory, we cannot say that the jury had no reasonable alternative but to accept it. The plaintiff presented expert testimony to the effect that the water Captain Wilbur first observed emanated from putative damage that may have been sustained the previous afternoon at about the same time the steering shaft had suddenly parted. As a result of the parting of the shaft, the vessel could only be steered from the stern by an unwieldy emergency tiller which, the captain found, could move the rudder only with difficulty. Because of the steering problem, the captain had to stop fishing and was planning to go home the morning of the sinking. Under this theory, loose fishing gear in the water, including a "blivet" (a heavy sinker weighing over 100 pounds designed to secure the trawl to the bottom) may have become entangled in the rudder and propeller, first breaking the steering shaft (which could have been tightly held by the automatic pilot), and later ripping off an adjacent strut, thus opening up the wooden hull in that area. That the incursion of water was from a source additional to the leaking hose and thru-hull assembly was supported by evidence that, if the pumps had been functioning properly, as the captain testified they were, their purported capacity would have been more than adequate to keep up with any inflow from the 1 1/2-inch thru-hull hole. ⁴

INA argues that even if a leak was started the day previous, the allegedly corroded thru-hull fitting, when it broke off, brought more water in, and so was at least a partial cause of the loss. That sufficed, INA insists, to remove the loss from coverage. We disagree. Even supposing the thru-hull was unseaworthy, its contribution to the sinking would not be dispositive if the jury found another, covered cause was the "predominant efficient cause of the loss." Goodman v. Fireman's Fund Insurance Co., 600 F.2d 1040, 1042 (4th Cir.1979). More important, the jury was not bound to find that the thru-hull fitting failed because of corrosion. Testimony came in disputing defendant's expert's testimony that the gate valve thru-hull...