Price v. Zim Israel Navigation Co., Ltd.

• Decision Date: 03 April 1980
• Docket Number: No. 78-1604,78-1604
• Citation: 616 F.2d 422
• Parties: Tyrone PRICE, Plaintiff, v. ZIM ISRAEL NAVIGATION CO., LTD., a corporation, Defendant. ZIM ISRAEL NAVIGATION CO., LTD., a corporation, Third Party Plaintiff-Appellee, v. TOKIO MARINE & FIRE INSURANCE COMPANY, LTD., a corporation, Third Party Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 422

616 F.2d 422

Tyrone PRICE, Plaintiff, v. ZIM ISRAEL NAVIGATION CO., LTD., a corporation, Defendant.

ZIM ISRAEL NAVIGATION CO., LTD., a corporation, Third Party Plaintiff-Appellee, v. TOKIO MARINE & FIRE INSURANCE COMPANY, LTD., a corporation,

Third Party Defendant-Appellant.

No. 78-1604.

United States Court of Appeals Ninth Circuit.

April 3, 1980.

Richard F. Runkle, Shield & Smith, Los Angeles, Cal., for Tokio Marine & Fire Ins. Co.

Kenneth R. Chiate, Lilick, McHose & Charles, Los Angeles, Cal., for Zim Israel Navigation.

Appeal from the United States District Court for the Central District of California.

Before WRIGHT and SNEED, Circuit Judges, and FITZGERALD, ^* District Judge.

SNEED, Circuit Judge:

In a world in which dwell injured longshoremen, their stevedore employers, shipowners, and maritime insurance companies, this case between a shipowner and insurance company arises. The shipowner won below, the insurance company brought this appeal, and we affirm.

The district court held appellant, Tokio Marine & Fire Insurance Company (Tokio), liable to appellee, Zim Israel Navigation Company (Zim), under an insurance policy issued by Tokio which named Zim as an additional insured. Suit was brought after Tokio refused to assume responsibility for a suit brought against Zim by a longshoreman injured while performing stevedoring operations aboard a Zim vessel. Tokio contended that it had no contractual obligation to Zim under the insurance policy and that such a contractual obligation would in any event be void under section 18 of the Longshoremen's and Harbor Workers' Compensation Act Amendments of 1972, 33 U.S.C. § 905(b) (1976). The district court rejected both contentions and ordered Tokio to reimburse Zim, and Tokio has appealed. We agree with the district court.

I.

Zim, an Israeli corporation which transports cargo between ports throughout the world by means of cargo vessels, entered into a contract on April 4, 1972 with International Transportation Service (ITS), a stevedoring company. Paragraph 9.4 of the contract provided that Zim would "defend, indemnify and hold harmless" ITS against any claims, losses, or expenses arising from Zim's negligence or from unseaworthiness or substandard conditions of Zim's vessels or equipment. ¹ Paragraph 9.6 provided that Zim would be named as a coinsured under ITS's liability insurance policies. ²

On May 11, 1973, Tokio, a Japanese corporation with its principal place of business in California, issued to ITS a comprehensive liability insurance policy, effective through May 1976. Six months after the issuance of this policy, on November 16, 1973, an endorsement was added at the request of ITS including Zim "as an additional insured as respects operations performed for Zim . . . ." The endorsement was typewritten on a printed form providing that all other terms and conditions remained unchanged.

No additional premium was paid for this endorsement at the time it was added to the policy. In 1974, however, Zim and ITS agreed that paragraph 9.6 of the stevedoring contract, the provision naming Zim as a coinsured, should be eliminated because ITS's insurance premium would be substantially increased as a result of the coverage extended to Zim. In a subsequent stevedoring contract executed by Zim and ITS on August 1, 1974, paragraph 9.6 was omitted. Paragraph 9.4, the indemnification provision, was retained. The November 16, 1973 endorsement was not explicitly cancelled.

A longshoreman, Tyrone Price, was injured while working for ITS aboard a Zim vessel in January 1975. A month later, Price filed suit against Zim, alleging negligence and strict liability in tort. In September 1975, Zim tendered the defense of the action to Tokio. Although a year earlier Tokio had accepted the defense of a personal injury suit brought by a longshoreman injured while working on a Zim vessel. Tokio refused to defend the Price suit on the grounds that the suit was not within the policy's coverage and that in any event the Zim endorsement had been cancelled. Zim then brought this action against Tokio. In due course the Price suit resulted in a settlement which all parties accept as fair. On the basis of stipulated facts, the district court entered judgment directing Tokio to reimburse Zim for the amount of the Price settlement and for its legal fees and costs. Tokio appeals from that judgment.

Two questions are before us on this appeal: Was Tokio obligated under the insurance policy to assume responsibility for the Price suit? ³ And was the Zim endorsement void under 33 U.S.C. § 905(b) (1976)? We answer the first yes and the second no.

II.

Tokio maintains that Price's suit against Zim was not within the coverage of the insurance policy. The Zim endorsement extended the policy's coverage to Zim "as respects operations performed for Zim . . .," presumably by ITS. Since Price was an ITS employee and was injured aboard a Zim vessel while ITS was engaged in stevedoring operations for Zim, the endorsement appears to provide the coverage upon which Zim insists. However, Tokio argues that the endorsement was applicable only if ITS operations were the legal source, not merely the factual context, of Zim's liability. Thus, Zim would be insured against a suit alleging that Zim was vicariously liable for the acts of ITS. However, where Zim was directly liable for an injury, as in this case, the endorsement would not apply; the fact that the injury occurred during ITS operations would merely be coincidental.

Tokio insists that this interpretation of the endorsement is necessary to avoid rendering meaningless paragraph 9.4 of the stevedoring contract, by which Zim agreed to indemnify and hold harmless ITS against all claims arising from Zim's negligence or from the unseaworthiness of Zim's vessels or equipment. We disagree. This paragraph has its purposive roots in prior law. Before the enactment of 33 U.S.C. § 905(b) in 1972, so-called Ryan triangle suits, ⁴ in which injured longshoremen sued shipowners who in turn sued the longshoremen's employers for contribution or indemnity, were quite common. See Robertson, Shipowner Negligence and Stevedore Immunities under the 1972 Amendments to the Longshoremen's Act, 28 Mercer L.Rev. 515, 537 (1977). Paragraph 9.4 was addressed to this situation. It protected ITS from such third party suits by Zim. In return, Zim was protected by paragraph 9.6, which provided that Zim would be covered by ITS's liability insurance. The two paragraphs thus established a mutually satisfactory way of disposing of claims by injured longshoremen. By providing for a single insurer, paragraph 9.6 reduced the possibility of litigation regarding the application of paragraph 9.4. By contrast, it seems improbable that the parties would have intended that ITS obtain insurance which would not cover the common Ryan triangle suits but would be applicable only in less likely instances of acts by ITS for which Zim was vicariously liable.

Moreover, Tokio's construction, although plausible, is not the most natural reading of the language of the endorsement. The most that Tokio has shown is that the endorsement is ambiguous. Under standard principles for construing insurance policies, we must resolve ambiguities in favor of Zim, the insured. Gray v. Zurich Insurance Co., 65 Cal.2d 263, 269, 54 Cal.Rptr. 104, 419 P.2d 168 (1966); 13 Appleman, Insurance Law and Practice § 7386 (1976).

Tokio also contends that its contract is inapplicable to the Price suit because of an exclusion which provided that "(t)his insurance does not apply . . . to bodily injury . . . arising out of the ownership, maintenance, operation, use, loading or unloading of . . . any watercraft owned or operated by . . . any insured, . . . but this exclusion does not apply to watercraft while ashore on premises owned by, rented to or controlled by the named insured; . . ." ⁵ Noting that the policy twice uses the term "vessel" in its typewritten description of the hazards covered, Zim contends that the term "watercraft" in the policy denotes a small boat and that the "watercraft" exclusion does not apply to a larger "vessel," such as the one on which Price was injured. Although this construction may seem strained, the paramount principle of insurance policy construction is that a policy should be interpreted to give effect to the intention of the parties. Healy Tippits Construction Co. v. Employers' Surplus Lines Insurance Co., 72 Cal.App.3d 741, 748, 140 Cal.Rptr. 375 (1977); 13 Appleman, supra, § 7385. In ascertaining that intention, an endorsement normally prevails over inconsistent provisions of the policy. 13A Appleman, supra, § 7537 at 146. In this case it is stipulated that Tokio knew at the time it issued the endorsement that ITS performed stevedoring work on Zim vessels. The purpose of the endorsement, we believe, was to extend insurance coverage to Zim with respect to these operations. However, to give the watercraft exclusion the effect upon which Tokio insists would deny coverage for such operations both to Zim and to ITS. Thus, we conclude that the watercraft exclusion did not operate to relieve Tokio of its contractual obligation with respect to the Price suit.

This is consistent with California case law. In O'Neill v. Caledonian Insurance Co., 166 Cal. 310, 135 P. 1121 (1913), for example, a written clause in a fire insurance policy covering an "auto repair shop" was held to prevail over a printed clause suspending coverage if more than one quart of gasoline were kept on the premises. "(I)t must be presumed," the court wrote, "that the company undertook to insure against all risks incident to the conduct of that business when carried on in the usual manner." Id. at 314, 135 P. at 1122. See also Yoch v. Home Mutual Insurance Co., 111 Cal. 503, 44 P. 189 (1896).

Tokio relies upon Oakland Stadium v. Underwriters at Lloyd's, 152 Cal.App.2d 292, 313 P.2d 602 (1957), in which the court held that...