Steelmet, Inc. v. Caribe Towing Corp.

• Decision Date: 13 January 1986
• Docket Number: No. 82-6142,82-6142
• Citation: 779 F.2d 1485
• Parties: STEELMET, INC., Plaintiffs-Appellants, Cross-Appellees, Jarrell R. Jackson, Intervening Plaintiff-Appellee, v. CARIBE TOWING CORP., Marine Exploration Co., Inc., Defendant Third Party Plaintiff-Appellants, Alabama-Puerto Rico Barge Line, Inc., Defendant, and Frank J. Hall & Company, Third-Party-Defendant-Appellee, American Marine Underwriters, Calvert Fire Insurance Co., Third-Party-Defendants-Appellees, Cross-Appellants.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1485

779 F.2d 1485

1986 A.M.C. 1641

STEELMET, INC., Plaintiffs-Appellants, Cross-Appellees Jarrell R. Jackson, Intervening Plaintiff-Appellee, v. CARIBE TOWING CORP., Marine Exploration Co., Inc., Defendant Third Party Plaintiff-Appellants Alabama-Puerto Rico Barge Line, Inc., Defendant and Frank J. Hall & Company, Third-Party-Defendant-Appellee American Marine Underwriters, Calvert Fire Insurance Co., Third-Party-Defendants-Appellees, Cross-Appellants.

No. 82-6142.

United States Court of Appeals, Eleventh Circuit.

Jan. 13, 1986.

Donovan, Maloof, Culp & Kennedy, New York City, for Steelmet, Inc.

John B. Culp, Jr., G.J. Rod Sullivan, Jr., Jacksonville, Fla., for Steelmet, Inc.

Carl R. Nelson, Fowler, White, Gillen, Boggs, Villareal and Banker, P.A., Tampa, Fla., for United Kingdom Mut. S.S. Assur. Ass'n, et al.

Edward F. Gerace, Tampa, Fla., for Caribe and Marine Exploration Co.

Richard R. McCormack, Miami, Fla., for American Marine Underwriters and Calvert Fire Ins. Co.

John D. Kallen, Hayden & Milliken, Wm. E. Cassidy, Miami, Fla., for Jarrell R. Jackson.

Appeals from the United States District Court for the Southern District of Florida.

ON PETITION FOR REHEARING

(Opinion Nov. 29, 1984, 11 Cir., 747 F.2d 689).

Before GODBOLD, Chief Judge, JOHNSON and CLARK, Circuit Judges.

GODBOLD, Chief Judge:

The major issue raised in the petition for rehearing filed by Calvert Fire and American Marine Underwriters concerns whether, in a maritime action in federal court in Florida, there can be maintained a direct action against an insurer brought pursuant to Florida law. We addressed this matter in our decision at 747 F.2d at 696.

Steelmet sought to file an amended complaint stating a direct action against Calvert Fire and AMU. ¹ The district court did not rule on whether the amendment could be filed but rather said it would allow Steelmet to participate in proceedings as if it had a direct action. On appeal Steelmet urged that it had been improperly denied the right to a direct action; Calvert and AMU asserted Steelmet had no right to maintain such an action and, in any event, was permitted to participate at the trial as though it did have the right. The legal consequences of all this were so uncertain that we addressed the direct action issue and ruled on it in an effort to be helpful to the parties on remand. We thought that we were netting a minnow and found ourselves embraced by an octopus. Petition for rehearing and response have elevated what appeared to be a side issue of minor interest into a major controversy. Amici from the marine insurance industry have joined in, and decisions in several other maritime cases out of Florida are being withheld pending our acting on the petition.

We concluded, 747 F.2d at 696, that Steelmet could bring a direct action. We cited Shingleton v. Bussey, 223 So.2d 713, 716 (Fla.1969), in which the Florida Supreme Court had held that, as a matter of Florida public policy, a third party beneficiary under a motor vehicle liability policy could maintain a direct action against the insurer. Also we cited Quinones v. Coral Rock, Inc., 258 So.2d 485, 486 (Fla. 3d D.C.A.1972), in which the Florida Third District Court of Appeal held that Shingleton and following cases permitted joinder, in a suit for maritime personal injuries, of the maritime insurer on a protection and indemnity maritime policy.

The parties and amici have briefed legislative developments in Florida since Shingleton and Quinones were decided and subsequent caselaw as well. For reasons that follow we conclude that Shingleton and Quinones are a part of a correct analysis but, by themselves, do not give us an answer. Rather, we are required to examine the interplay between federal admiralty law and state law concerning the right to maintain a direct action against an insurer.

Federal admiralty law confers no general right to sue an insurance company directly, Continental Oil Company v. Bonanza Corp., 677 F.2d 455, 460 (5th Cir.1982), nor does it contain any specific bar against such an action. A state may, however, create a direct action against a maritime insurer, at least where the state action is not in conflict with any feature of substantive admiralty law or any remedy peculiar to admiralty jurisdiction. Cushing v. Maryland Casualty Co., 198 F.2d 536, 539 (5th Cir.1952), reversed on other grounds, sub nom. Maryland Casualty Company v. Cushing, 347 U.S. 409, 74 S.Ct. 608, 98 L.Ed. 806 (1954). In the Supreme Court, four justices in Maryland Casualty were of the view that the Louisiana statute was foreclosed by the Limitation Act, 46 U.S.C. Sec. 183, and four justices thought the contrary. To avoid impasse the former four justices joined with Justice Clark in the conclusion that the Limitations Act could be applied so that there was not any conflict between it and the Louisiana statute in question.

Wilburn Boat Co. v. Fireman's Fund Insurance Co., 348 U.S. 310, 75 S.Ct. 368, 99 L.Ed. 337 (1955), concerned whether an insurer under a maritime policy could deny liability on grounds of breach of an express warranty that was invalid under Texas law. The Court found that the policy was a maritime contract and thus within federal jurisdiction under the Admiralty Clause of the Constitution. But, it held, Congress has not taken over the regulation of marine insurance contracts in general or of specific provisions like the one there in question, thus no issue of conflict between state law and federal statute was presented. But, the Court went on to say, that did not answer the question presented, since a large part of the existing rules that govern admiralty has been fashioned by the Supreme Court, and states can no more override such validly fashioned judicial rules than they can override acts of Congress. Thus, the crucial questions narrowed down to whether there was a judicially established federal admiralty rule governing policy provisions like the one in question, and if not whether the Court should fashion one. 348 U.S. at 314, 75 S.Ct. at 370. The ultimate holdings were that there was no such admiralty rule and, because of the state interests in insurance and its regulation, none should be fashioned.

In Maryland Casualty the Limitation Act had been applied so as to avoid any conflict with the state statute. In Wilburn Boat the Court specifically held there was no conflict. Next, in Kossick v. United Fruit Co., 365 U.S. 731, 81 S.Ct. 886, 6 L.Ed.2d 56 (1961), the Court held that the New York statute of frauds was inapplicable to a dispute arising out of an oral contract concerning a seaman's maintenance and cure. The Court applied the "established rule of ancient respectability" that oral contracts are regarded as valid by maritime law. 365 U.S. at 734, 81 S.Ct. at 889. It noted that the contract might have been made anywhere in the world and that the validity of it should be judged by one law, while on the other hand there was no peculiar state or local concern. The case was not, the Court held, one where state law supplemented the remedies available in admiralty for the vindication of maritime rights. It distinguished Wilburn Boat, stating that the application of state law was justified in that case because of the nonexistence of a conflicting maritime rule, while in Kossick the maritime rule existed and was entitled to predominate.

In Olympic Towing Corp. v. Nebel Towing Co., 419 F.2d 230 (5th Cir.1969), cert. denied, 397 U.S. 989, 90 S.Ct. 1120, 25 L.Ed.2d 396 (1970), the court considered whether the Louisiana direct action statute conflicted with the concursus provision of the Limitation Act. Applying the position of the five justices in Maryland Casualty, the circuit court held:

With regard to the first matter, although four members of the Court would have voided the direct action statute because of conflict between the proceedings, five members, including Justice Clark, took a contrary position. Moreover, the right to proceed with a direct action after a limitation proceeding has been completed is an implicit holding that the policy underlying the concursus is not so strong or pervasive as to abrogate rights under the direct action statute. We hold that any conflict between the direct action statute and the federal provision for a concursus of claims in admiralty is so minimal as to be insignificant.

Id. at 235. In short, after examining the policy underlying the admiralty provision for concursus of claims, the court held that any conflict between that admiralty provision and the state statute was insignificant.

Summarizing this body of law: One must identify the state law involved and determine whether there is an admiralty principle with which the state law conflicts, and, if there is no such admiralty principle, consideration must be given to whether such an admiralty rule should be fashioned. If none is to be fashioned, the state rule should be followed. Wilburn Boat. If there is an admiralty-state law conflict, the comparative interests must be considered--they may be such that admiralty shall prevail, as in Kossick, or if the policy underlying the admiralty rule is not strong and the effect on admiralty is minimal, the state law may be given effect, as in Olympic Towing.

Our first step is to determine what the state law is, and the parties are sharply divided on this point. We must thread our way through the maze of whether Florida law permitted a direct action against the insurer at the time Steelmet's cause of action arose in December 1976 and when it filed its proposed amendment in 1981. In 1969 Shingleton stated a prevailing Florida public policy that a third party beneficiary under a motor vehicle liability policy could maintain a direct action against the insurer. The next year in Beta Eta House Corp., Inc. of Tallahassee v. Gregory, 237 So.2d 163 (Fla.1970), the Supreme Court applied Shingleton to an action against the insurer on a household liability policy. The Court...