Randall v. Chevron USA, Inc., 89-4346

• Decision Date: 16 March 1992
• Docket Number: No. 89-4346,89-4795.,89-4346
• Citation: 788 F. Supp. 1398
• Parties: Barbara RANDALL, et al. v. CHEVRON U.S.A., INC., et al.
• Court: U.S. District Court — Eastern District of Louisiana

788 F. Supp. 1398

Barbara RANDALL, et al. v. CHEVRON U.S.A., INC., et al.

Nos. 89-4346, 89-4795.

United States District Court, E.D. Louisiana.

March 16, 1992.

Louis John Cosenza, Randy Jay Ungar, Ungar & Wheelahan, New Orleans, La., for Barbara S. Randall.

Neal Douglas Hobson, Marion Fagan Skalley, John Randall, Santa Cruz, Milling, Benson, Woodward, Hillyer, Pierson & Miller, New Orleans, La., for Chevron U.S.A. Inc.

David John Plavnicky, Robert Jeffrey Bridger, Lea, Plavnicky & Moseley, New Orleans, La., for Sea Savage Inc.

John Frederick Kessenich, Michael G. Helm, Emmett, Cobb, Waits & Kessenich, New Orleans, La., for American Home Assur. Co.

MEMORANDUM AND ORDER

SEAR, District Judge.

Theodore Randall drowned while attempting a swing rope transfer from a fixed platform in the Gulf of Mexico to the M/V SEA SAVAGE. At the time of his death, he was employed by Chevron U.S.A., Inc. ("Chevron"). Chevron had time chartered the M/V SEA SAVAGE, from Sea Savage, Inc., owner of the vessel. Plaintiff, Barbara Randall, individually, on behalf of the estate of her late husband and her children, sought damages from Chevron and Sea Savage, Inc. Chevron in turn impleaded Underwriters Subscribing to Policy no. 12890 ("Underwriters"),¹ Sea Savage, Inc.'s primary protection and indemnity ("P & I") insurer, and American Home Assurance Company ("American Home"), Sea Savage, Inc.'s excess P & I insurer. Chevron sought insurance coverage because it was named an additional assured under the Sea Savage, Inc. policies.

On October 11, 1991, Underwriters filed a motion for summary judgment on Chevron's insurance claim. On November 5, 1991, during the pretrial conference, conducted on the record, the Underwriters' motion was granted because Underwriters argued and I ruled that the claim asserted against Chevron by plaintiff Williams fell outside the scope of the policy. The policy limits coverage to liability incurred "as owner" of an insured vessel and Chevron's liability could only be incurred as "time charterer," not "owner."² On November 7, 1991, American Home adopted and urged the same motion as the one granted in favor of Underwriters. Prior to beginning the trial, American Home's motion was granted for the same reason.³

This matter was heard without a jury. Following trial on the merits, Chevron, in its capacity as time charterer, was found to have negligently ordered the vessel to encounter dangerous seas.⁴ Accordingly, Chevron was cast in judgment and its negligence was fixed at twenty-five percent of plaintiff's total damages.

Chevron filed a motion styled "Motion for New Trial," which in fact seeks reconsideration of my ruling on its entitlement to insurance coverage in light of the findings of fact made following the trial. Sea Savage, Inc., on behalf of Underwriters, opposes reconsideration.⁵ After reviewing memorandum of counsel and applicable law, I find that reconsideration is appropriate. I further find that no prejudice will result from reconsideration of my previous ruling, even though the insurers did not directly participate in the trial of this action.

First, if Chevron is entitled to insurance coverage, that coverage does not impose upon the insurer a duty to defend its assured. The policy covers "costs, charges and expenses, reasonably incurred and paid by the Assured in defense against any liability insured against." Yet, no where in the policy does the assurer agree to provide the assured with a defense. Rather, pursuant to the terms of the policy regarding the defense of any liability insured against under the policy, "the Assured area obligated to and shall take steps to protect their (and/or the Assurer's) interests as would reasonably be taken in the absence of this or similar insurance."⁶

Second, if Chevron is entitled to coverage, the Underwriters interest in defending this action was not affected as a result of its dismissal as a named defendant for the reason that the Underwriters at all times remained exposed for any liability that would be imposed upon its named assured, Sea Savage, Inc., and for their assured's defense costs. The policy provides,

the Assurer hereby undertakes to make good to the Assured ... all ... (14) costs, charges and expenses, reasonably incurred and paid by the Assured in defense against any liability insured against hereunder in respect of the vessel named herein, subject to the agreed deductibles applicable, and subject further to the conditions and limitations hereinafter provided.

GENERAL CONDITIONS AND/OR LIMITATIONS

Warranted that in the event of any occurrence which may result in loss, damage and/or expense for which this Assurer is or may become liable, the Assured will use due diligence and give prompt notice thereof and forward to the Assurer as soon as practicable after receipt thereof, all communications, processes, pleadings and other legal papers or documents relating to such occurrences.

The Assured shall not make any admissions of liability, either before or after any occurrences which may result in a claim for which the Assurer may be liable. The Assured shall not interfere in any negotiations of the Assurer, for settlement of any legal proceedings in respect of any occurrence likely to give rise to a claim under this policy, the Assured are obligated to and shall take steps to protect their (and/or the Assurer's) interests as would reasonably be taken in the absence of this or similar insurance. If the Assured shall fail or refuse to settle any claim as authorized by Assurer, the liability of the Assurer to the Assured shall be limited to the amount for which settlement could have been made.

Whenever required by the Assurer the Assured shall aid in securing information and evidence and in obtaining witnesses and shall cooperate with the Assurer in the defense of any claim or suit or in the appeal from any judgment, in respect of any occurrence as hereinbefore provided.⁷

The policy provisions prohibiting the assured from interfering in settlement negotiations and compelling the assured to cooperate in any defense suggest that Underwriters had the option to defend its assured, Sea Savage, Inc., if it chose to. Yet, despite its potential exposure to any liability that might be imposed upon its assured and its obligation to reimburse defense costs incurred by its assured, Underwriters elected not to provide Sea Savage, Inc. with a defense nor to participate in the trial by assisting Sea Savage, Inc.'s retained counsel. Rather, Underwriters relied exclusively on Sea Savage, Inc.'s retained counsel to protect their interest, as it relies on Sea Savage in this motion. Because the Underwriters had the opportunity to participate and defend this action, I find that they are not prejudiced by reconsideration of my previous ruling dismissing them and their subsequent absence from the proceeding.

Underwriters admit that Chevron was named as an additional assured on their protection and indemnity policy.⁸ They contend, however, that the policy does not provide Chevron coverage for its loss because the policy terms limit coverage to losses incurred by Chevron as owner of an insured vessel. In denying coverage, the Underwriters rely on the following provision: "The Assurer hereby undertakes to make good to the Assured ... all such loss and/or damage and/or expense as the Assured shall as owners of the vessel named herein have become liable to pay and shall pay on account of ... liability for loss of life of ... any person."⁹ The Underwriters contend that because Chevron incurred its liability as time charterer and because maritime law does not characterize a time charterer as an owner of a vessel, Chevron is not covered by the policy.

First, Chevron argues that the policy permits additional assureds, such as Chevron, to delete the "as owner" clause and that it was in fact deleted. Specifically, the policy provides:

The so-called Other Than Owner, As Owner and/or Other Insurance clauses contained in this Policy shall not apply in respect of Named Assureds and shall also be deemed deleted as may be required by contract in respect of additional assureds. The insurance shall be deemed primary insurance as required by contract.

Notwithstanding the above, this clause shall not extend the insuring conditions beyond vessel operations.¹⁰

Thus, an additional assured can have any or all of these clauses deleted by way of a contract. Indeed, Chevron expressly had the "other than owner" clause deleted by an endorsement to the policy.¹¹ Specifically, that endorsement states: "With respect to ... Chevron U.S.A. ..., it is noted and agreed that the so called `other than owners' clause contained in this policy shall not apply."¹² Chevron contends that the endorsement deleting the "other than owner" clause served to delete the "as owner" clause as well. I disagree.

The phrases "other than owner" and "as owner" each has a distinct and separate purpose. The "other than owner" clause refers to the following provision:

It is expressly understood and agreed if and when the Assured under this policy has any interest other than as a shipowner in the vessel or vessels named herein, in no event shall the Assurer be liable hereunder to any greater extent than if such Assured were the owner and were entitled to all the rights of limitation to which a shipowner is entitled.¹³

The intent of the "other than owner" clause is "to limit the underwriter's liability to an amount no greater than that to which the assured would be entitled to limit liability if that assured were the owner."¹⁴ Thus, deleting the "other than owner" clause simply waives the insurer's right to limit its liability to that of the shipowner, who possesses the statutory right to limit liability to the value of its vessel and pending freight.¹⁵

The "as owner" clause, on the other hand, focuses on the status of the assured when the claim arose and limits the insurer's exposure to those liabilities that can be...