Decision Date09 September 1991
Docket NumberNo. 90-0862.,90-0862.
Citation773 F. Supp. 832
PartiesV/O EXPORTKHLEB v. M/V ANPA, In Rem, et al.
CourtU.S. District Court — Eastern District of Louisiana

John Barr Gooch, Jr., Montgomery, Barnett, Brown, Read, Hammond & Mintz, New Orleans, La., for plaintiff.

John Harold Clegg, Robert Burns Fisher, Jr., Daphne P. McNutt, Chaffe, McCall, Phillips, Toler & Sarpy, New Orleans, La., for defendants Sea Port Shipping Co., Ltd., Transmed Shipping Ltd.

Ralph E. Smith, Deutsch, Kerrigan & Stiles, New Orleans, La., for defendants Degesch America Inc.

Thomas Livingston Gaudry, Jr., Patricia Marie Crowley, Frederick H. Dwyer, Windhorst, Gaudry, Talley & Ranson, Gretna, La., for defendant Zurich Ins. Co. and third-party defendant American Guar. and Liability Ins. Corp.

Peter L. Hilbert, Jr., Kathleen K. Charvet, McGlinchey, Stafford, Cellini & Lang, New Orleans, La., for third-party defendant Universal Shipping Agency, Inc.

Vivian Joseph Gianelloni, III, American Admiralty Bureau, New Orleans, La., for movant American Admiralty Bureau, Ltd.

J. Dwight Leblanc, III, Lemle & Kelleher, New Orleans, La., for third-party defendant V/O Exportkhleb.


CHARLES SCHWARTZ, Jr., District Judge.

This matter involving the March 12, 1989 allision of the M/V ANPA with the Nashville Avenue Wharf while transiting the Mississippi River, was commenced pursuant to the Admiralty Jurisdiction of this Court. The claims by and between all of the parties to these consolidated proceedings were settled, with the exception of the cross-claim which was to be and in fact was filed against defendant, Degesch America, Inc. "Degesch"1 by its alleged insurer, Zurich Insurance Co. "Zurich"2 for reimbursement in the amount of the funded settlement and attorney's fees paid Degesch in defense of the main claims. Accordingly, the sole issues then before this Court for bench trial August 15, 1991 involved the coverage dispute aforementioned. The Court for reasons which will hereinafter be set forth in detail has determined that Zurich waived its "late notice" defense and ratified any and all action taken by or on behalf Degesch, its insured, upon hiring Degesch's counsel Ralph Smith in March of 1990 to defend both Degesch and Zurich's interest, without reservation of any rights. The Court is further of the opinion, that such suit against its own insured by Zurich is against public policy of the State of Louisiana.

To the extent that any of the findings of fact constitute conclusions of law, they are adopted as such. To the extent any of the conclusions of law constitute findings of fact, they are so adopted.


On March 12, 1989, the M/V ANPA, after departing the Peavey terminal above New Orleans and while transiting the Mississippi River, struck the Nashville Avenue Wharf in New Orleans, Louisiana, which resulted in damage to the wharf, the vessel and the vessel's cargo. Prior to the ANPA's departure from the Peavey terminal above New Orleans, Degesch installed tubing and recirculating equipment for intransit fumigation of a cargo of Sovietbound northern spring wheat as required by the vessel's charterers.

On March 13, 1989, following the collision, the vessel's cargo was removed from ANPA's hold No. 1. The damage sustained to hold No. 1 made it necessary to discharge the grain to survey for damage, and make repairs. During the period of March 13, 1989 up until March 17, 1989, there was no suggestion made by any of the parties to the effect that Degesch in any way caused or contributed to the aforementioned casualty of March 13, 1989 involving ANPA. James W. Sharpe, ANPA's local agent boarded the ANPA shortly after the accident to remove the fumigant from ANPA's No. 1 hold,3 however he was not informed at such time that Degesch was involved and therefore, did not inspect the electrical equipment on board at that time.

Via telefax transmission dated March 17, 1989 on behalf of the owners of the ANPA, Degesch was put on notice of said owners' intent to hold it responsible for the damages resulting from the March 13, 1989 allision occasioned by its alleged improper installation of equipment aboard the vessel at Peavey's grain elevator on March 11, 1989.4 During the time intervening between the date of the allision and notice to Degesch the following occurred: (1) the cargo from Hold No. 1 of the vessel had been discharged and disposed of to salvage purchasers; (2) surveys had been conducted by persons representing vessel and wharf interests; and (3) Degesch was neither notified of said surveys nor invited to participate.

Upon being notified approximately five days after the accident, Degesch engaged the services of Ralph E. Smith, Esq. of the lawfirm Deutsch, Kerrigan and Stiles in New Orleans, Louisiana, who immediately began an investigation, and in that vein called for a survey of the vessel, her cargo and the wharf. Mr. Smith further filed a petition to perpetuate the testimony of the master, chief engineer and other crewmembers onboard the ANPA in addition to retaining the services of Charles L. Reimer, Jr., a marine surveyor to attend the surveys and determine the necessity of engaging the services of any additional specialized surveyors, in the event the situation so dictated.

In fact all ANPA crewmembers who had any involvement in the events leading up to the allision were deposed, relevant shipboard surveys and inspections were conducted to determine the cause of the damage, and a report regarding same was made to Degesch based on the allegations then existing as to Degesch.5 Further investigation ensued which included obtaining sworn statements from Gulf-Best Electric employees who corrected problems aboard the ANPA after the allision, and the investigative report of the Coast Guard in this matter, which was included in Smith's final report to Degesch.

On December 12, 1989, Lewis Jolly, general counsel for Degesch, reported the occurrence involving the ANPA to Degesch's insurance broker, Marsh & McLennan in Richmond, Virginia. On December 20, 1989, William Yates of Marsh & McLennan passed the information along to Zurich's underwriting agent, B & D.A. Weisberger.6

Smith responded to requests for information by Zurich's claims specialist and provided copies of investigative materials and his reports dated March 28th and April 26th of 1989. Said claims representative concurred with Smith's opinion.7

As late as January 19, 1990 no legal action had been initiated, when Zurich's Dallas claims representative Scott Collier contacted Ralph Smith Degesch's counsel, thanking him for his Smith's visit on January 1, 1990 concerning the ANPA matter and stating in pertinent part:

As we discussed it appears no legal action has been taken at this time against our Insured Degesch and that we should simply await any such action since our investigation is complete.
* * * * * *
By investigating the claim initially, that may have served to prevent any legal action. Should any adverse developments arise, please contact me directly.8 emphasis supplied.

Finally, on March 9, 1990, suit was filed by Exportkhleb naming Degesch inter alia as a defendant. Degesch, through its general counsel, Lewis Jolly, referred the complaint to Zurich.9 On March 12, 1990, the complaint was forwarded to Zurich's Dallas office. On March 26, 1990, Zurich acknowledged the citation and petition, and referred the defense of the matter to Ralph Smith Degesch's local counsel for defense without reservation, to wit:

We Zurich have received the Citation and Petition served on you in connection with the above entitled matter Claimant-V/O Exportkhleb/Insured-Degesch Date of Loss 3/12/89. In accordance with your policy with our company, we will see that an Appearance and Answer is filed on your behalf. These papers have been referred to:

Ralph Smith Deutsch, Kerrigan & Stiles 755 Magazine St New Orleans, Louisiana XXXXX-XXXX

You may be assured that the necessary action will be taken for the protection of your interests. You will, of course, hear from the attorneys and we anticipate that you will cooperate with them fully. Should any additional papers be served on you, or should you get any further information relating to this case, please advise us immediately.10

Additional claims, cross-claims and/or third-party claims were referred by Zurich as received by Degesch and were referred to Ralph Smith of Deutsch, Kerrigan and Stiles for defense.11 On May 14, 1990, Zurich's New Orleans Claims manager, David DeLuca, called at the offices of Deutsch, Kerrigan and Stiles and reviewed all the pleadings and discovery documents and at which time Zurich provided Smith a litigation management guide and requested a comprehensive litigation report be completed and forwarded to Zurich's home office.12

On May 29, 1990, several months after hiring Degesch's counsel Ralph Smith to represent both the interests of Zurich and Degesch, and five months after the matter was fully reported to it, Zurich issued a reservation of rights letter to Degesch. Even after said reservation of rights letter issued Zurich again requested a comprehensive litigation management report, supplemental reports, copies of all documents and exhibits with respect to vessel and cargo interests, and deposition summaries. As late as October 25, 1990, Zurich continued requests for legal opinions on issues involved in the case, as well as opinions on the retained experts.13

It was not until November of 1990 that Zurich retained separate counsel. On March 19, 1991, only after "milking" Degesch's counsel Ralph Smith for the full product of his entire defense effort, and posturing itself for its own settlement efforts regarding the direct action against it, Zurich alleged it had been prejudiced by Degesch's failure to give timely notice of the claim and further demanded that Degesch reimburse Zurich for 50% of any settlement.14

At the time of the accident at issue, Degesch was the named insured under a policy of...

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