Pacific Indemnity Company v. Sussex, 66-59.

• Decision Date: 02 March 1967
• Docket Number: No. 66-59.,66-59.
• Citation: 264 F. Supp. 865
• Parties: PACIFIC INDEMNITY COMPANY, a corporation, Libelant, v. Hugh SUSSEX, T. M. Harmer and Eugene G. Hulett as United States Marshal for the District of Oregon, Respondents.
• Court: U.S. District Court — District of Oregon

264 F. Supp. 865

PACIFIC INDEMNITY COMPANY, a corporation, Libelant, v. Hugh SUSSEX, T. M. Harmer and Eugene G. Hulett as United States Marshal for the District of Oregon, Respondents.

No. 66-59.

United States District Court D. Oregon.

March 2, 1967.

Kenneth Roberts, Mautz, Souther, Spaulding, Kinsey & Williamson, Portland, Or., for libelant.

Gunther Krause, Portland, Or., for respondents.

MEMORANDUM OPINION

von der Heydt, District Judge.

The Pacific Indemnity Company (Pacific) seeks a declaratory judgment of non-liability under a policy of hull insurance for the sinking of respondents' yacht, DUET. Pacific contends that the sinking was caused by DUET'S unseaworthiness and not by any peril of the sea covered by its policy. It also contends that if the policy does apply, respondents' recovery must be limited to $850 plus salvage costs, because respondents failed to take the reasonable steps to minimize damages required by the policy's "sue and labor" clause.

Respondents Sussex and Harmer contend that the sinking of the DUET was caused by a peril of the sea, and that the loss is covered by the policy. Respondents also allege they acted reasonably to minimize damage to the vessel, and that the cost of repairing damage caused by the sinking exceeded the policy's $20,000 limit.

The evidence introduced at trial indicated respondents discovered the 46-foot sailing yacht, DUET, in Mazatlan, Mexico. After refurbishing, the vessel was sailed to Astoria, Oregon, where the United States Marshal impounded it pending foreclosure of a preferred ship's mortgage, which respondents had purchased from the original mortgagee. Respondents became owners of the vessel by reason of purchase at a marshal's sale.

The marshal had moved the DUET to Bart's Marina at Portland, Oregon, where it was moored in deep water in the Columbia River. When the marshal took custody of the vessel he was added as an insured under the policy which Pacific had issued on the DUET before the vessel left Mazatlan.

Sussex and Harmer both testified that they saw the DUET at Bart's Marina several weeks before it sank. At that time it was moored in deep water and it was noted to have a small hole in its starboard side twelve to fourteen inches above the water line.

Some time after respondents' visits, the DUET was transferred to a mooring nearer the shore. By mid-October the annual decline in the river level left only six feet of water at low tide at the DUET'S new moorage. The DUET draws more than seven feet at its keel. Each time the tide went out the DUET became grounded, and its mooring lines caused it to lean toward the dock which was on its starboard side. Low tides caused the vessel to lean enough so that water flowed through the hole in the hull, and the DUET sank at its mooring on October 17, 1965.

On October 18, a crew from Willamette Tug and Barge Company (Willamette) raised the DUET and towed it to Willamette's moorage. Willamette installed an automatic bilge pump and opened drawers and closets to allow them to dry. On October 19, respondent Sussex came to Portland to inspect the damage. He worked on the vessel himself, and instructed a Willamette employee to do whatever was necessary to dry the vessel. Sussex testified that two employees of Pacific were present when he authorized this work.

Sussex returned two days later accompanied by Harmer. Both testified that the bilges were dry but that the cabin area below decks remained damp because water was trapped in the vessel's Celotex insulation. The Celotex could not be reached without ripping out much of the DUET's paneling, which they hoped to salvage by allowing it to dry slowly. Sussex and Harmer spent several days removing equipment and working to dry the vessel.

Pacific had the DUET surveyed on October 22 and 26, 1965, by surveyor Clark, who estimated damage caused by the sinking to be $850. A second surveyor, Newton, estimated damage to be $2,000, and recommended an $8,000 reserve for repairs incidental to sinking. Respondent's survey was performed by E. F. Weeks, United States Salvage Association, on November 29 and 30, 1965. Surveyor Weeks estimated the cost of necessary repairs to be $9,436, plus $604 to replace lost equipment. None of the estimates include $1,990 salvage costs, which Pacific concedes to be reasonable.

Respondent Sussex dry-docked the DUET and commenced extensive repairs on June 1, 1966. He asserts that as he worked he discovered additional hidden damage caused by the sinking that raised the cost of necessary repairs to $35,000.

The Court holds that a preponderance of the evidence indicates the DUET's sinking was caused by a peril of the sea, and that Pacific's policy insured against the loss.

Although water entered through the hole in the hull, the sinking was not the inevitable result because of the existence of the hole. In spite of the hole, the DUET remained afloat until low water grounded it and caused it to roll onto its starboard side. Thus, the sinking was "in the realm of the possibilities and not of the inevitabilities." Compania Transatlantica Centroamericana, S. A. v. Alliance Assurance Co., Ltd., 50 F.Supp. 986, 991 (S.D.N.Y.1943). In Alliance, a vessel filled with water and had to be beached to avoid sinking because a vapor escape valve stuck open, creating an unseaworthy condition. A small wave or slight list splashed water through the open valve and created a siphon in the vapor pipe which caused the ship to fill. The Court held that the loss was caused by a peril of the sea, at p. 991,

"the casualty was the result of a fortuitous entry of the sea water; * * it was an event which might and did happen, not one which must happen."

In Frederick Starr Contracting Company v. Aetna Insurance Company, 285 F.2d 106, 85 A.L.R.2d 441 (2d Cir. 1960), the Court held that the insurer's policy against perils of the sea covered damage to libellant's barge caused by striking a hard bottom at ebb tide. The Court quoted with approval Hagar v. New England Mutual Marine Ins. Co., 59 Me. 460, 463:

"All ships moored in tide-harbors are liable, as the tide ebbs, to take the ground in a malposition or to strike their bottom against some hard substance and to be thereby injured. This danger constitutes one of the perils of the sea for which the underwriters are responsible." (Emphasis added.)

Pacific cites several occasions where vessels sank at their moorings after water entered through openings below or slightly above the water line. Coburn v. Utah Home Fire Insurance Co., 233 Or. 20, 375 P.2d 1022 (1962), Yacht ROWDY, D.C., 177 F.Supp. 932, and Founders Insurance Co. v. Rogers, 305 F.2d 944, 98 A.L.R.2d 945 (9th Cir. 1962). These are not in point, as in each the issue was whether the opening was caused by a peril of the sea, not whether the loss was inevitable once the opening existed. Similarly, the Court held in Long Dock Mills and Elevator Co. v. Mannheim Ins. Co., 116 F. 886 (D.S.N.Y.1902) that libellant's barge sank solely because of its unseaworthiness, which violated an implied warranty of seaworthiness in the insurance agreement made with respondents.

Each party asserts that the other carried the burden of proof. Since, in any event, respondents have carried the burden by showing by a preponderance of the evidence that the DUET'S sinking was caused by a peril of the sea, the Court need not decide this issue.

The surveyors' reports differ widely in estimates of damage caused by the DUET'S sinking. Although surveyor Weeks did not inspect the DUET until six weeks after the sinking, his conclusions are found to be more convincing and reasonable than those of surveyors...