Travelers Indem. Co. v. Calvert Fire Ins. Co.
| Decision Date | 29 August 1986 |
| Docket Number | No. 85-3019,85-3019 |
| Citation | 798 F.2d 826 |
| Parties | TRAVELERS INDEMNITY COMPANY, Plaintiff-Appellee, v. CALVERT FIRE INSURANCE COMPANY, et al., Defendants-Appellants, The London Steamship Owners' Mutual Insurance Association, Ltd., Defendant-Appellant. UNITED STATES of America, Plaintiff-Appellee, v. TA CHI NAVIGATION (PANAMA) CORPORATION, et al., Defendants, Fenton Insurance Company, et al., Defendants-Appellants. |
| Court | U.S. Court of Appeals — Fifth Circuit |
J. Paul McGrath, Asst. Atty. Gen., Torts Branch, Civ. Div., U.S. Dept. of Justice, Washington, D.C., for U.S.A.
Appeals from the United States District Court for the Eastern District of Louisiana.
Before WILLIAMS, GARWOOD, and JONES, Circuit Judges.
This case ultimately arises from the collision of the S/S EURYBATES, a Panamanian cargo ship, insured by the appellants insurance companies, and a United States naval destroyer in international waters off the Panama Canal. Appellant The London Steamship Owners' Mutual Insurance Association, Ltd. (The London Club), which provided P & I coverage to the EURYBATES' owner, appeals the district court's exercise of personal jurisdiction over it. Appellant Calvert Fire Insurance Company, representing a group of hull underwriters (Hull Underwriters), which provided collision coverage on the EURYBATES, appeals the reformation of the counter indemnity agreement between Hull Underwriters and appellee Travelers Indemnity Company (Travelers), which furnished the EURYBATES' Supplemental Rule F bond, making Hull Underwriters liable for cargo, as well as collision, damages resulting from the accident. We determine that The London Club is not shown to have had sufficient minimum contacts with Louisiana for the district court to exercise personal jurisdiction over it in this action, and we accordingly reverse the portion of the judgment related to The London Club. We hold that the evidence is sufficient to support the district court's finding that there was a mutual mistake in the terms of the counter indemnity agreement between Travelers and Hull Underwriters since at the time the Rule F bond was issued and the counter indemnity agreement signed both parties intended the agreement to include all items covered by the bond, including the amount the Navy paid in settlement to the owner of the cargo carried by the EURYBATES. Accordingly, we affirm the reformation of the counter indemnity agreement.
This suit is one in a series resulting from the collision of the S/S EURYBATES and the destroyer USS DAHLGREN off the Panama Canal on August 8, 1975. Both vessels were damaged in the collision and the EURYBATES' cargo was also damaged. 1 Collision liability coverage on the EURYBATES was provided its owner by Hull Underwriters, a group of underwriters whose membership is fifty percent American and fifty percent foreign. Calvert Fire Insurance Company is the lead American company for Hull Underwriters, and throughout the litigation served as lead underwriter and representative of the hull underwriting group. Liability coverage respecting cargo aboard the EURYBATES was provided under a mutual protection and indemnity policy (P & I) 2 issued to the vessel's owner through The London Club. 3
After the collision, the owner of the EURYBATES, Ta Chi Navigation (Panama) Corporation (Ta Chi), a foreign national corporation headquartered abroad and apparently owned by non United States interests, filed suit in the United States District Court for the Eastern District of Louisiana pursuant to Supplemental Rule F of the Federal Rules of Civil Procedure seeking limitation of liability. Ta Chi was represented by counsel furnished by Hull Underwriters. The United States government, on behalf of the United States Navy, also filed an action against Ta Chi in the same court for damages to the destroyer resulting from the accident. Hull Underwriters furnished counsel also represented Ta Chi in that suit. As required by Supplemental Rule F of the Federal Rules of Civil Procedure, Robert Deane, counsel for Hull Underwriters acting on instructions from Hull Underwriters and on behalf of Ta Chi, filed a bond for the value of the EURYBATES to prevent its arrest. Travelers was the surety on this bond. Travelers provided the terms of the counter indemnity agreement between Travelers and Hull Underwriters, which followed the standard London form. In the counter indemnity agreement, each hull underwriter promised to pay its portion of the total value of the ship "in accordance with the terms of the policy of insurance." Travelers did not seek any indemnification from the P & I carrier, The London Club, but relied upon Hull Underwriters to indemnify it for the entire amount of the bond.
Concurrent with the filing in Louisiana of the limitation action, four cargo interests brought suit against Ta Chi in the United States District Court for Puerto Rico for damages sustained in the collision. The London Club selected counsel for Ta Chi in the Puerto Rico litigation to defend the cargo claims. The cargo interests and counsel for Ta Chi selected by The London Club jointly consented to transfer the cargo suits to the United States District Court for the Eastern District of Louisiana so that all actions would be consolidated in the limitation trial in Louisiana. Following the transfer and consolidation, The London Club-selected counsel did not represent Ta Chi, which continued to be represented by counsel furnished by Hull Underwriters. Prior to the limitation trial, the United States government, assuming it would be found partially at fault, settled with the cargo owners, paying them one hundred percent of the agreed-upon cargo damages. 4
In the limitation proceeding, the district court ultimately found that the EURYBATES was solely at fault for the collision and that Ta Chi was liable for all damages. Matter of Ta Chi Navigation (Panama) Corp., S.A., 513 F.Supp. 148 (E.D.La.1981). The court rejected the ship's COGSA "error in navigation defense," which would have exempted it from liability to cargo, finding that the EURYBATES was unseaworthy because it was manned by an incompetent crew. A prerequisite to any of the COGSA defenses is a showing that the ship was seaworthy. Since the Navy was not at fault, it was not liable to cargo, and since the EURYBATES did not have a COGSA defense, it was liable to cargo. The district court found that the damages that the Navy paid to cargo therefore were not collision damages, but rather were cargo damages, and that Ta Chi was liable to the Navy for those damages because the Navy was an equitable subrogee of Ta Chi's debt to cargo. 513 F.Supp. at 156-157.
After the district court rendered its decision in the limitation proceeding, Hull Underwriters concluded that since the damages paid by the Navy to cargo were not collision damages, but were cargo damages, the amount was not covered by the hull insurance policy. Consequently, Hull Underwriters assertedly was not liable for that part of the Rule F bond covering the cargo loss paid by the Navy, and refused to indemnify Travelers for the entire amount of the bond. Since the district court's decision was to Hull Underwriters' advantage in this respect, it decided not to appeal, but it did inform the P & I insurance broker of the district court's decision. P & I had not participated in the limitation action, but the broker for Hull Underwriters contacted a broker that represented The London Club and met with representatives from The London Club. No one informed Travelers of the limitation proceeding decision or Hull Underwriters' determination that it was not liable for the full amount of the bond. Travelers learned of the district court's decision after the sixty-day period for an appeal had run, and unsuccessfully sought under Federal Rule of Civil Procedure 60(b) to have the judgment reformed to make all the damages collision damages, claiming that it should have been informed of the outcome of the limitation proceeding. We sustained the district court's denial of Rule 60(b) relief, holding that "the question should have been raised on appeal, and a Rule 60(b) motion was an improper vehicle for raising or testing it," and that Hull Underwriters owed no obligation to Travelers to inform it of the outcome of the limitation proceeding in time for it to file an appeal. Matter of Ta Chi Navigation (Panama) Corp. S.A., 728 F.2d 699, 703-04 (5th Cir.1984). The London Club was not ever a party to the limitation proceeding (or to the Puerto Rico proceeding).
Travelers then brought the present declaratory judgment action in the United States District Court for the Eastern District of Louisiana against Hull Underwriters and against The London Club seeking to reform the counter indemnity agreement to require Hull Underwriters to pay the entire amount of the bond, and alternatively to make The London Club pay for the cargo damages. In the district court, The London Club asserted that the court lacked personal jurisdiction over it because the suit did not arise out of activities in Louisiana and The London Club did not have sufficient contacts with Louisiana. In addition, The London Club alleged various policy defenses. The district court found that it had personal jurisdiction over The London Club and rejected its policy defenses. 5
The district court reformed the indemnity agreement between Hull Underwriters and Travelers on three grounds. First, the court found that the parties mutually intended at the time of the issuance of the bond for Hull Underwriters to be liable for the entire amount of the bond. Second, it found that Hull Underwriters was estopped from denying that it owed Travelers...
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