Shaver Transp. Co. v. Travelers Indem.
| Decision Date | 27 December 1979 |
| Docket Number | No. 78-556.,78-556. |
| Citation | 1980 AMC 393,481 F. Supp. 892 |
| Parties | SHAVER TRANSPORTATION COMPANY and Weyerhaeuser Company, Plaintiffs, v. The TRAVELERS INDEMNITY COMPANY, Defendant. |
| Court | U.S. District Court — District of Oregon |
Alex L. Parks, of White, Sutherland, Parks & Allen, Portland, Or., Robert A. Dowdy, Law Dept., Weyerhaeuser Co., Tacoma, Wash., for plaintiffs.
Kenneth E. Roberts, Sr., of Souther, Spaulding, Kinsey, Williamson & Schwabe, Portland, Or., for defendant.
This is an action to recover on a marine cargo policy issued by the defendant, The Travelers Indemnity Company (Travelers). The subject matter of marine insurance claims is "maritime" and within the admiralty jurisdiction of the federal courts. 28 U.S.C. § 1333; Jeffcott v. Aetna Insurance Company, 129 F.2d 582 (2nd Cir. 1942), cert. denied 317 U.S. 663, 63 S.Ct. 64, 87 L.Ed. 533 (1942).
Shaver Transportation Company (Shaver), a barge company, contracted with Weyerhaeuser Company (Weyerhaeuser) to transport caustic soda from Weyerhaeuser plants to a buyer of the soda, GATX. Following the terms of the agreement, Shaver arranged for marine cargo insurance with Travelers. Several different "coverages" were discussed. Shaver decided on Free from Particular Average and "standard perils" provisions supplemented with "specially to cover" clauses.
Shaver loaded the first shipment of caustic soda on one of its barges and transported it to the consignee, GATX. GATX refused delivery. The soda had been contaminated with tallow. It was unfit for GATX's purposes. The parties agree that contamination occurred as Shaver was loading the caustic soda aboard the barge. The barge had previously carried a load of tallow, and Shaver had not thoroughly cleaned the barge input lines.
The barge was returned to Shaver's dock. The cargo was heated to prevent the caustic soda from solidifying. A report of the contaminated cargo was made to the defendant through its insurance brokers, Johnson and Higgins (J & H). Shortly thereafter J & H notified Shaver that the contamination did not represent a recoverable loss under the defendant's marine open cargo policy.
Shaver continued to store the soda on board the barge. Shaver investigated possible on-shore storage facilities and finally contracted with a chemical salvage company for removal of the liquid. Because of the caustic nature of the cargo, Shaver incurred expenses in storage, including the cost of heating the soda and repair to corroded boilers and pipes. Weyerhaeuser lost the value of the shipment, offset partially by the salvage value. Shaver and Weyerhaeuser notified Travelers that they claimed under the marine cargo insurance policy and tendered abandonment of the cargo to Travelers. Travelers refused the tender and denied liability under the policy.
Although the plaintiffs request recovery under several theories, there is only one major issue in the case:
Are the losses incurred by the plaintiffs the consequences of an insured event under the marine cargo insurance policy?
If the losses are not insured against, no recovery is possible. If coverage is afforded, I must determine which expenses are covered under the policy. Plaintiffs have meticulously examined the policy and argue for recovery under several theories.
The Perils clause,1 almost identical to ancient perils provisions dating back several hundred years, defines the risks protected by the policy. U. S. National Bank of Galveston v. Maryland National Insurance Company, 218 F.Supp. 247, 248-49 (S.D.Tex.1963). In addition to a long list of "perils of the sea", the clause concludes with "and all other perils, losses, and misfortunes, that have or shall, come to the hurt, detriment, or damage to the said goods and merchandise". Plaintiff argues that the "forced" disposition of the caustic soda was like jettison (an enumerated peril) and is covered by the concluding language of the clause. That language has been interpreted to include only perils that are similar to the enumerated perils. Feinberg v. Insurance Company of North America, 260 F.2d 523, 527 (1st Cir. 1958); Commercial Trading Company v. Hartford Fire Insurance Company, 466 F.2d 1239, 1245 (5th Cir. 1972).
Whether or not I conclude the forced disposition was a type of jettison, plaintiffs are unable to show an insurable loss due to jettison. The loss—contamination of the cargo—occurred at the time of loading. The disposition of the cargo caused no loss to plaintiffs but rather an offset against previous losses. Plaintiffs cannot recover under the Perils clause of the policy.
The term "jettison" also appears in the Free from Particular Average clause.2 If jettison did occur, this clause affords coverage regardless of the amount of cargo damage. However, I find that a jettison did not occur in this instance. Jettison is the act of throwing overboard from a vessel a part of the cargo, in case of extreme danger, to lighten the ship.3 The orderly unloading and sale of the cargo to a chemical salvage company is not "jettison". Plaintiff cannot recover under the Free from Particular Average clause.
These clauses augment the Perils clause by defining the scope of the coverage intended. However, with the exception of the shore coverage, these clauses do not define the nature of the risks covered by the policy but merely define where physically the coverage extends.
To recover under either the Warehouse-to-Warehouse4 or the Marine Extension clause5 the plaintiffs must show that an insured peril existed and the damage was proximately caused by that peril. Lanasa Fruit Steamship & Importing Co. v. Universal Insurance Co., 302 U.S. 556, 58 S.Ct. 371, 82 L.Ed. 422 (1937); Northwestern Mutual Life Insurance Company v. Linard, 498 F.2d 556, 561 (2nd Cir. 1974). Although the parties disagree, the weight of authority indicates plaintiffs bear the burden of proving coverage. S. Felicione & Sons Fish Company v. Citizens Casualty Company of New York, 430 F.2d 136, 138 (5th Cir. 1970), cert. denied 401 U.S. 939, 91 S.Ct. 936, 28 L.Ed.2d 219 (1971); Continental Food Products v. Insurance Company of North America, 544 F.2d 834, 836 (5th Cir. 1977). Plaintiffs have not met that burden.
The shore coverage clause6 provides coverage for enumerated risks occurring on shore. Plaintiffs argue that contamination while loading is a shore accident. However, since the contamination occurred within the barge's intake lines, the incident arose "on board". Therefore shore coverage does not apply. Even if it were to apply, contamination of cargo is not within the enumerated risks covered by the shore coverage clause.
Under these provisions the insured is entitled to recover expenses associated with losses incurred as a result of an insured peril. American Home Assurance v. J. F. Shea, 445 F.Supp. 365 (D.D.C.1978); Continental Food Products v. Insurance Company of N.A., supra; Reliance Insurance Company v. The Escapade, 280 F.2d 482, 488 (5th Cir. 1960). For reasons outlined in Paragraph I, I find that the losses suffered by plaintiffs were not caused by a peril covered by the policy. Recovery under these provisions is therefore precluded.
The purpose of the Inchmaree clause10 is to expand the coverage of the policy beyond the perils provision. Saskatchewan Government Insurance Office v. Spot Pack, Inc., 242 F.2d 385, 391 (5th Cir. 1957); Allen N. Spooner & Son v. Connecticut Fire Insurance Company, 314 F.2d 753, 757 (2nd Cir. 1963), cert. denied 375 U.S. 819, 84 S.Ct. 56, 11 L.Ed.2d 54 (1963). Federal law, 46 U.S.C. § 192 (Harter Act), and 46 U.S.C. § 1304(2)(a) (Carriage of Goods by Sea Act), allows a vessel owner to become exempt from liability for fault or error in navigation or management of the ship. In contrast, the shipowner must retain liability for negligence in the care and custody of the cargo. Alf Larsen v. Insurance Company of North America, 362 F.2d 261, 262 (9th Cir. 1966). The Inchmaree clause is intended to provide coverage to a cargo owner when a loss is due to error in navigation or management of the vessel since the carrier is exempt from liability. Larsen, supra at 262. Plaintiffs argue the contamination was the result of an error in management and therefore covered under the Inchmaree clause. Defendant naturally urges the court to find the loss caused by fault in the care and custody of the cargo.
The United States Supreme Court has addressed the distinction between error in management and error in care of cargo but has not articulated a clear test. Oceanic Steam Navigation v. Aiken, 196 U.S. 589, 25 S.Ct. 317, 49 L.Ed. 610 (1905). The Ninth Circuit, noting that no precise definitions exist, advocates a case-by-case determination using the following test:
"If the act in question has the primary purpose of affecting the ship, it is `in navigation or in management'; but if the primary purpose is to affect the cargo, it is not `in navigation or in management'." Grace Line, Inc. v. Todd Shipyards Corporation, 500 F.2d 361, 374 (9th Cir. 1974).
Using this test, I find that the contamination of the cargo in this case was caused by fault in the care, custody, and control of the cargo. See Grace Line, supra at 374, fn. 11; Knott v. Botany Worsted Mills, 179 U.S. 69, 21 S.Ct. 30, 45 L.Ed. 90 (1900); John Penny & Sons v. M. V. Swivel, 266 F.Supp. 302 (D.Mass.1967). The Inchmaree clause will not provide coverage for plaintiffs' losses under the facts of this case.
The Negligence clause11 provides coverage against losses due to enumerated perils...
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...(2d Cir.), cert. denied, 302 U.S. 751, 58 S.Ct. 271, 82 L.Ed. 580 (1937) (emphasis added). See also Shaver Transportation Co. v. Travelers Indemnity Co., 481 F.Supp. 892, 897-98 (D.Or.1979); Todd Shipyards Corp. v. United States, 391 F.Supp. 588, 590 (S.D.N.Y.1975); United States v. Wessel,......