Reliance Ins. Co. v. McGrath

• Decision Date: 23 February 1987
• Docket Number: No. C 84-7279 TEH.,C 84-7279 TEH.
• Parties: RELIANCE INSURANCE COMPANY, Plaintiff, v. Bryant G. McGRATH, Defendant.
• Court: U.S. District Court — Northern District of California

671 F. Supp. 669

RELIANCE INSURANCE COMPANY, Plaintiff, v. Bryant G. McGRATH, Defendant.

No. C 84-7279 TEH.

United States District Court, N.D. California.

February 23, 1987.

Russell P. Brown, Meadows, Dorris, Stryker & Salentine, San Francisco, Cal., for plaintiff.

Charles H. Rible, San Mateo, Cal., for defendant.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

THELTON E. HENDERSON, District Judge.

Reliance Insurance Company brought this action against its insured, Bryant G. McGrath, seeking declaratory judgment that it is not liable, under a marine insurance policy that it issued to the defendant, for the damage claimed to have been sustained by the insured yacht, MY MISTRESS II. 28 U.S.C. §§ 2201, 1333. The case was tried without a jury. Based on the following findings of fact and conclusions of law, I conclude that plaintiff is not liable for the claimed loss, and the defendant McGrath should take nothing by way of his cross-complaint.

FINDINGS OF FACT

1. Plaintiff Reliance Insurance Company ("Reliance") is a Delaware corporation having its principal place of business in Philadelphia, Pennsylvania, and is licensed to do business and is doing business in the State of California as an insurer.

2. Bryant G. McGrath ("McGrath") is a citizen of the State of California residing in Menlo Park, California. McGrath was the insured under a standard All-Risk Marine Yacht Insurance Policy, Number YH5262805, issued by Reliance under certain terms and conditions against loss of or damage to his 37-foot wood Chris Craft motorboat named MY MISTRESS II. The policy was originally issued May 5, 1980, with a policy period of one year and renewed annually, the most recent policy period becoming effective May 5, 1984 through May 5, 1985. MY MISTRESS II was insured for Fifty Thousand Dollars ($50,000.00) on the hull and Five Thousand Dollars ($5,000.00) on any personal property on the vessel.

3. McGrath had owned wooden Chris Craft boats for 35 years. It had been his practice to haul his wooden boats every year to 18 months to inspect and repaint the hull bottom. In the four years prior to the sinking, however, MY MISTRESS II sat in the water alongside the dock, and prior to sinking, had not been hauled out and repainted for approximately three years.

4. The Policy provided in pertinent part:

Sue and Labor: In case of any loss or misfortune, it shall be lawful and necessary for the Insured, their factors, servants and assigns to sue, labor and travel for, in about the defense, safeguard and recovery of the property covered, or any part thereof without prejudice to this insurance; the charges whereof we, the company, will contribute according to the rate and quantity of the sum herein insured. It is especially declared and agreed that no acts of the company or Insured in recovering, saving or preserving the property covered, shall be considered as a waiver or acceptance of abandonment.

Notice of Loss and Filing of Proof: It is agreed by the Insured to report immediately to the nearest office of the company, or to the agent who shall have issued this Policy, every occurrence which may become a claim under this Policy and shall also file with the company, a detailed, sworn Proof of Loss and Proof of Interest within Ninety (90) days from date of loss.

Coverage: This Policy insures afloat or ashore, against all risks of direct physical loss of or damage to the property, covered from any external cause except as provided elsewhere in this Policy.

Exclusions: This Policy does not insure against loss, damage or expense caused by or resulting from: wear and tear, gradual deterioration, electrolysis, unseaworthiness, marring, denting, scratching, weathering or willful misconduct of the Insured.

Negligence and Latent Defect: Provided loss or damage has not resulted from want of due diligence by any owner of the vessel or by any Insured, this insurance also covers physical loss or damage to the property covered directly caused by the following:

Explosions, bursting of boilers, breakage of shafts or any latent defect in the hull or machinery (excluding in all cases the cost and expense of repairing or renewing the defective part); negligence of master, mariners, engineers, repairers, or pilots.

Misrepresentation or Fraud: This entire Policy shall be void if the Insured or its Agent has concealed or misrepresented any material fact or circumstance concerning this insurance or the subject thereof, or the interest of the Insured therein or in case of fraud or false swearing by the Insured touching any matter relating to this insurance or the subject thereof whether before or after a loss.

5. In mid-August 1983, defendant and his son took MY MISTRESS II from her berth, Berth 15 at Peninsula Marina, Redwood City, California, to get her refueled, a short distance from where she was docked. They did not take the boat into the harbor. This was the first time the boat had been out of her berth in two years. McGrath's signed statement to the investigating marine surveyor, Capt. F.K. Rabun, USN Ret., stated the following facts, in part, concerning that trip:

"I docked there (Pete's Harbor gas dock) for about one-half hour. When backing away from the dock into the channel, I heard some banging on the hull. As we proceeded back to Berth 15, I discovered that I couldn't reverse the starboard engine. I was able to get the vessel back to Berth 15 and moor it. Prior to hearing the banging when leaving Pete's Harbor, the vessel never took on water. During the last 2-3 months, the vessel has been taking on water at a fairly steady rate. There are automatic bilge pumps aboard. We have not had the pumps in the automatic mode. Twice a week I had an employee go down to the vessel and check the boat in general. In most cases, the employee had to turn on the bilge pump in the manual mode to pump the bilges. After I struck the submerged object about 6-8 months ago, I did not feel that much damage had been done to the vessel and consequently did not have it hauled immediately. During the rainy season, the vessel was taking on some water, but I felt it was from the rain. After the rainy season was over, the vessel was still taking on some water and that is when I felt I might have a leak as a result of striking a submerged object. It was my plan to have the vessel hauled at the end of September, 1984, to generally maintain the vessel and check out where the water was coming into the vessel.... After the vessel was hauled we observed a deep gouge on the port bow that I believed happened when I hit the submerged object about 6-8 months ago. I believe this is where the water entered my vessel. Further, I observed that a line was around the starboard shaft. It is my opinion that this was what prevented the starboard engine from going in reverse and what caused the starboard transmission to smoke when returning to Peninsula Marina about 6-8 months ago...."

/ / signed 9/14/84

6. The trip to the gas dock was the last time defendant used MY MISTRESS II before she sank. When defendant and his son returned to Berth 15, his son, in a wet suit, inspected the underwater portion of the hull by feeling along the bottom of the boat and particularly in the chine area of the hull with his hand. Young McGrath spent approximately 30 minutes inspecting the hull in the area of the bow and stern in this manner. Although he had a diving mask on, the water was muddy and murky, and he limited his inspection to where he could reach underwater with his hands.

7. Defendant McGrath last painted the hull bottom three years before the boat sank, putting on 2-3 coats of bottom paint; six years before she sank he had done a "complete" job, using 10 gallons of paint. The Court finds that a wooden-hulled vessel that is not used regularly requires painting of the hull bottom every year to 18 months.

8. During the three years MY MISTRESS II sat in the Marina, no maintenance was performed on the boat's paint work except that defendant's son would periodically "wash the boat down from top to bottom." Further, the Harbor Master telephoned the defendant on at least one occasion to tell him the boat was listing and needed pumping and on three other occasions prior to the sinking he called the defendant to tell him to bail his boat out.

9. The Harbor Master notified defendant at 7:30 a.m. on the morning of September 4, 1984, that his boat had sunk at its berth and thereafter called the fire department which arrived a short time later and pumped the boat out.

10. The Harbor Master towed the boat to Pete's Harbor boatyard some 1000 yards away where she was hauled out of the water. The underwater hull was immediately steam-cleaned of marine growth and slime and thereafter scraped of barnacles covering three-fourths of the bottom. A stream of water about the size of a pencil was seen coming out of the boat from a damaged section of the port chine and the garboard plank beside the keel. The boatyard manager pointed out to defendant, at the time the boat was hauled out, the damaged area of the port chine. The Harbor Master also noticed that the hull was very dirty, had dead paint on it which no longer had anti-fouling properties, had worm damage, and generally "had poor maintenance on the bottom side."

11. On September 11, after the boat sat in the yard for one week, defendant telephoned Thompson & Paulin Insurance Agency to notify them that his boat had sunk and been pulled out of the water. Ms. Bunte took notes of this conversation and her notes indicate that defendant told her that the boat had sunk as a result of an anchor piercing the hull. Defendant did not tell her that he had caught on an anchor rope. Thereafter, the Agency notified Reliance of the loss and Reliance assigned Capt. Rabun to investigate the cause, nature land extent of damage and to survey the boat. Reliance sent defendant a cablegram on September 13th informing defendant that only on inspection of the vessel by a qualified...