Thanh Long Partnership v. Highlands Ins. Co.

Decision Date19 September 1994
Docket NumberNo. 94-40021,94-40021
Citation32 F.3d 189
PartiesTHANH LONG PARTNERSHIP, Plaintiff-Appellant, v. HIGHLANDS INSURANCE COMPANY, Defendant-Appellee.
CourtU.S. Court of Appeals — Fifth Circuit

John Blackwell, Gibbens, Blackwell & Stevens, New Iberia, LA, for appellant.

James E. Diaz, Sr., Onebane, Donohoe, Bernard, Torian, Diaz, McNamara & Abell, Lafayette, LA, for appellee.

Appeal from the United States District Court for the Western District of Louisiana.

Before GARWOOD, SMITH and DeMOSS, Circuit Judges.

DeMOSS, Circuit Judge:

This insurance dispute arises from the ill-fated and final voyage of the M/V BIG TOM, a Florida-style double rig shrimp trawler which sank in the Gulf of Mexico at Vermillion Block 122-A. Thanh Long Partnership (Thanh Long), the vessel owner, sued Highlands Insurance Company (Highlands), its maritime hull insurer, claiming that the BIG TOM was lost due to the master's operational negligence, which is a covered peril under

the Inchmaree Clause of the policy. Highlands denied coverage, claiming alternatively that (1) the vessel was intentionally scuttled; (2) the owners breached an express warranty requiring an operable high water bilge alarm; or (3) the Inchmaree Clause did not provide coverage because the owners breached the implied warranty of continuing seaworthiness, demonstrating a lack of due diligence. The district court denied coverage, finding that the BIG TOM did not sink due to a covered peril of the sea. Because we find the district court's findings of fact and conclusions of law amply supported by the evidence, we affirm, although we navigate a slightly different legal course to reach that destination.

Insured Perils of the Sea

Thanh Long insured the BIG TOM under the Highlands maritime hull policy in the amount of $150,000. The policy includes an express warranty obligating Thanh Long to install and maintain in an operable condition a high water bilge alarm system. 1 The Highlands policy also includes an Inchmaree clause. An Inchmaree clause significantly expands the hull insurer's undertaking by specifying coverage for a variety of perils in addition to the "adventures and perils" of the sea specified in the ancient language of the standard form policy. Highland's Inchmaree clause provided, in relevant part, that the policy insured against "latent defects in the machinery or hull" and against operational negligence committed by the "master, mariner, engineer or pilot." Excluded from coverage under the Inchmaree clause, however, is any loss caused by a lack of due diligence on the part of the "assured, the owner or manager of the vessel or any of them." The policy also obligated Thanh Long to comply with any recommendations made by marine surveyors hired by Highlands as soon as practicable and, in any event, before any further fishing operation.

The Loss of the BIG TOM

BIG TOM was owned by the Thanh Long Partnership which was in turn owned 50 percent by Quang Tran and 50 percent by Nguyet D. Le. Nguyet Le's husband, Son Le, was the initial purchaser and business manager of the vessel. 2 He conducted quarterly inspections and was responsible for the purchase and installation of electrical equipment, including the high water bilge alarm. Quang Tran generally acted as master of the vessel on fishing voyages but Son Le's testimony established that Quang Tran was also responsible for equipment used in shrimping, some maintenance on shore, and preparations for voyage.

At about mid-day on November 30, 1990 the BIG TOM left port at Intercoastal City for a two-week fishing trip with master/owner Quang Tran (Tran) and two other crew members on board. After motoring six hours, the vessel reached Vermillion Block 122-A, about 30 miles offshore, and tied off to an uninhabited oil platform for the night because Tran determined that the four- to six-foot seas were too rough for shrimping.

After tying the boat off to the platform, Tran testified that he began using the vessel's sea water piping system to clean the boat. The plumbing system included a suction pump and three gate valves: (1) the sea suction valve opened to allow sea water to be sucked through the suction pump near the bilge; (2) the deck gate valve opened to allow the flow being discharged from the pump to be released into hoses for cleaning: and (3) the bilge suction valve, when opened, allowed the suction pump to be used to evacuate water from the bilge for discharge overboard. A marine surveyor hired by the Highlands had recommended the installation of an additional valve, a check valve, on the bilge suction line to prevent sea water from entering the bilge if, by some error, both the sea suction valve and the bilge suction valve Tran testified that on the evening of November 30 he first opened the sea suction valve and the deck gate valve to use sea water to wash down the deck and the fish hold. Tran gave differing accounts explaining what he did after he finished cleaning the deck and fish hold. In his initial statement, he claimed not to have pumped any water from the bilge that night because it was not needed. At trial, however, he testified that he did pump the bilges, at the same time removing the check valve from the bilge suction line to facilitate faster flow.

were left open. Thanh Long claims that it did install the recommended valve.

After Tran completed his washdown operations, he retired for the evening at about 11 p.m. Near 4 a.m. a member of the crew woke Tran because the deck light was flickering and there was a foul smell. The two men went to the engine room where they discovered that the engine room had taken on a substantial amount of water, enough to cover the bilge suction valve and half the generator. Tran and the two crew members then abandoned ship by swimming to the platform where they waited several hours until oil workers arrived who called the Coast Guard. Later that morning the Coast Guard delivered two pumps and Tran and another crew member returned to the BIG TOM, which was at that point still afloat. While the men tried to pump the vessel the BIG TOM rolled, the men abandoned ship, and the BIG TOM finally sank. It is undisputed that from start to finish the high water bilge alarm system never sounded.

The Evidence

Divers hired to investigate the wreck found that the sea suction valve, the deck gate valve and the bilge suction valve were all in the open position. The divers also located and retrieved the bilge suction line, which was found to be without a check valve. The district court found that, contrary to the testimony of Son Le and Quang Tran, the condition of the suction line was such that it did not support any claim that a check valve had ever been installed. The consequence of leaving all three valves open and the absence of a check valve on the bilge suction line would be that water could flow freely from the sea into the bilge of the vessel. Credible expert testimony established that there was no legitimate reason for opening all three gate valves at the same time.

The district court held that the Inchmaree clause did not cover loss of the BIG TOM because Tran demonstrated a lack of due diligence by knowingly permitting the BIG TOM to break ground on November 30 in an unseaworthy condition. See Saskatchewan Gov't Ins. Office v. Spot Pack, Inc., 242 F.2d 385 (5th Cir.1957) (stating that although an Inchmaree clause clearly insures against some forms of unseaworthiness, there exists a modified implied warranty which prohibits the owner from knowingly permitting an unseaworthy vessel to break ground). The court found unseaworthiness was based on its fact findings that, when the vessel sailed on November 30, Quang Tran knew that it sailed without a check valve on the bilge suction line and without an operable high water bilge alarm.

Although Thanh Long contends that the check valve was present when the BIG TOM sailed, it concedes in its brief that the high water bilge alarm did not sound because, "of the two wires to the horn, one had corroded and come off." The bilge alarm consisted of a float mechanism in the bilge and a horn mounted in the pilothouse. If water rose above a certain level in the bilge, a mercury switch in the float connected and the alarm would sound. According to Son Le, the float assembly was anchored with a piece of angle iron.

The divers investigating the wreck did not find either the float or the angle iron used to anchor the assembly, although over three and one-half hours were expended in two separate dives searching for the equipment in the engine room, which measured approximately 10...

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