Walker v. Travelers Indem. Co.

• Decision Date: 06 February 1974
• Docket Number: No. 6021,6021
• Citation: 289 So.2d 864
• Parties: Wallace C. WALKER v. The TRAVELERS INDEMNITY COMPANY.
• Court: Court of Appeal of Louisiana — District of US

Page 864

289 So.2d 864

Wallace C. WALKER v. The TRAVELERS INDEMNITY COMPANY.

No. 6021.

Court of Appeal of Louisiana, Fourth Circuit.

Feb. 6, 1974.

Arthur A. De La Houssaye, Charles J. Rivet, New Orleans, for plaintiff-appellee.

Jones, Walker, Waechter, Poitevent, Carrere & Denegre, John O. Charrier, Jr., New Orleans, for defendant-appellant.

Before GULOTTA, SCHOTT and MORIAL, JJ.

MORIAL, Judge.

We must decide if a yacht (marine) insurance policy covered the loss of the yacht 'Bon Conge'. Was the cause of the sinking due to a latent defect or unseaworthiness? The trial court found that the loss was the result of a latent defect and rendered judgment for the plaintiff for $8,609.00.

The 'Bon Conge' was insured under Yacht Policy No. MYA 1783200 of Travelers Indemnity Company for the period July 1, 1969 to July 1, 1970. The Policy was issued through and signed by George S. Kausler, Limited, an agent of Travelers Indemnity Company.

On January 25, 1970, the plaintiff, Wallace C. Walker, was notified that the 'Bon Conge' sunk at its moorings in Boathouse No. 11 at the New Orleans Marina at West End. He immediately went to the marina and found the 'Bon Conge' submerged in ten feet of water; the plaintiff promptly contacted P. T. Baumgartner (Bumgardner) or George S. Kausler, Limited. Baumgartner (Bumgardner) met the plaintiff at the marina and told him the loss was covered. He advised the plaintiff to file a claim, have the boat repaired and keep a running tally of repair costs.

The sinking was caused from water entering the yacht through a hole in the bottom of the muffler, or 'maxim silencer' as it is referred to in the record, which was partially concealed in its location in the engine room. This is not disputed.

POLICY

The pertinent provisions of the insurance policy under which the plaintiff claims are:

'Section A--Hull Insurance

'WHERE COVERED:--In part and at sea, under power or sail, in docks and graving docks, and on ways, gridirons, pontoons, and on shore. With leave to sail with or without pilots, to tow and assist vessels or craft in all situations, and to be towed and to go on trial trips.

'PROPERTY COVERED:--Hull, Spars, Sails, Trckle, Apparel, Machinery, Boats and other furniture of an in yacht hereby insured. * * *'

'EQUIPMENT ON SHORE:--It is also agreed that should any part of the furniture, tackle, boats or other property of the said yacht be separated and land up on shore during the life of this Policy, then this Policy shall cover the same to an amount not exceeding 20% Of the sum stated in Coverage A, on Page 1. The amount attaching on the said yacht shall be decreased by the amount so covered.

'PERILS INSURED:--The insurance provided by this section cover against:

'(a) All risks of physical loss or damage to the property covered from any external cause.

'(b) Physical loss or damage to the property covered directly caused by the following:

(1) Explosions, bursting of boilers, breakage of shafts, or any latent defect in the machinery or hull (excluding the cost and expense of replacing or repairing any defective part;

(2) Negligence of master, mariners, engineers, repairers, or pilots; provided such loss or damage has not resulted from want of due diligence by the owner of the yacht or by the insured.'

The defendant contends that the policy by its terms does not cover:

'* * * (a) Any loss, damage or expense caused by wear and tear, gradual deterioration, weathering, moths, vermin, mold, marine life or unseaworthiness.'

The policy basically insured against 'all risks of physical damage' for a definite period. Therefore, it is a time policy ¹ of marine insurance with an all risk ² provision.

Under the 'Perils Insured' provisions in (b)(1) is covered '* * * any latent defect in the machinery or hull * * *', and (b)(2) contains, with almost ritualistic uniformity, the historic Inchmaree Clause. ³ 44 Am.Jur.2d, Insurance, Section 1383.

TESTIMONY

The uncontradicted testimony of the plaintiff was that: he purchased the 'Bon Conge' in 1953 and in 1958 it was completely overhauled and outfitted with a new engine, including a new muffler, i.e., 'maxim silencer'. He was told the life of the muffler was 2500 hours and it should be replaced at the next overhaul of the engine; that the day the 'Bon Conge' sank the engine showed 1400 hours. Periodically, mechanics inspected the engine and attendant equipment including the muffler. Once a year George Engine Co. would inspect the yacht. Each year the yacht was hauled from the water by Ouliber Boat Works and inspected from stem to stern. Oulliber had blanket authority to repair the 'Bon Conge' or any of its parts anytime Oulliber deemed repairs necessary. Jules Schubert, a marine repairman, would periodically check the engines. At least once a week Jim Thomas, an employee, inspected the engine room, ran the engines and wiped off all parts of the engine including the muffler. Every Saturday he conducted an inspection of the 'Bon Conge' which included running the engine, checking the muffler and the bilges and a complete check over. The day before the yacht sank he inspected it and ran the engine for fifteen minutes. (Tr. pp. 13--31)

Two witnesses appeared for the defendant-appellant: a marine surveyor who did not see the muffler, but expressed his opinion from facts provided by counsel for the defendant-appellant that the cause of the hole in the muffler was from rusting out (Tr. p. 146); the other, Manuel Joseph Stroecker (Stroker) a mechanic employed by George Engine Co., who replaced the muffler. He testified that the hole in the muffler was caused by 'a wasting away or deterioration'. (Tr. p. 110) Stroecker (Stroker) threw the 'old' muffler away when he replaced it. When shown Plaintiff's Exhibit No. 5, that had previously been identified as the replacement muffler (Tr. p. 83), he could not identify it. (Tr. pp. 110--111)

LAW GOVERNING INTERPRETATION OF POLICY

We find that the policy is one of marine insurance and a maritime contract, though not within the exclusive admiralty and maritime jurisdiction of the United States courts. Insurance Company v. Dunham, 78 U.S. (11 Wall.) 1, 20 L.Ed. 90 (1870); Kossick v. United Fruit Co., 365 U.S. 731, 735, 81 S.Ct. 886, 6 L.Ed.2d 56 (1961).

The interpretation and application of the policy are to be governed by state law. Wilburn Boat Company v. Fireman's Fund Insurance Company, 348 U.S. 310, 75 S.Ct. 368, 99 L.Ed. 337 (1955); Irwin v. Eagle Star Insurance Company, Ltd., 455 F.2d 827, (5th Cir. 1972). However, to interpret the disputed clause and the law applicable, we rely on general maritime law which governs policies of marine insurance. Anders v. Poland, 181 So.2d 879 (La.App.4th Cir. 1966).

In determining the meaning of the terms of the policy we are guided by what was said in Henjes v. Aetna Ins. Co., 132 F.2d 715, 719 (2d Cir. 1943), cert. denied, 319 U.S. 760, 63 S.Ct. 1316, 87 L.Ed. 1711 (1943):

'It is a general rule of construction that where the language of a policy of insurance may reasonably be construed in more than one way the meaning beneficial to the insured is to be given effect by resolving fair doubts against the insurer who chose the language which created them. Ashenbrenner (Aschenbrenner) v. United States F. & G. Co., 292 U.S. 80, 54 S.Ct. 590, 78 L.Ed. 1137; DeHart v. Illinois Casualty Co., 7 Cir., 116 F.2d 685. That is particularly applicable to a time policy of marine insurance.'

LATENT DEFECT

Our court first defined latent defect in 1943 as follows:

'A latent defect is a hidden defect and generally involves the material out of which the thing is constructed.' Ross v. Tynes, et al., 14 So.2d 80, 83 (Orl.App.1943).

This definition was later applied in Schon v. James, 28 So.2d 531 (Orl.App.1946), and since has been sanctioned by other cases in the jurisprudence of Louisiana, none of which involved a marine loss. Our examination of the jurisprudence of other states and federal cases dealing with maritime law reveals that our definition of latent defect that has its origin in Ross v. Tynes, et al., sutra, is incomplete.

A latent defect is defined in Black's Law Dictionary, 4th Ed., as a defect which a reasonably careful inspection would not reveal or a defect that could not have been discovered by any known or customary test.

A latent defect is a defect which is not apparent and which would not be discoverable upon reasonable inspection. Zillah Transportation Co. v. Aetna Insurance Co., 175 Minn. 398, 221 N.W. 529 (1928); Reisman v. New Hampshire Fire Insurance Company, 312 F.2d 17. (5th Cir. 1963) Latent defect means a defect not manifest, but hidden or concealed and not visible or apparent; a defect hidden from knowledge as well as from sight, and specifically a defect which reasonable inspection will not reveal. Glens Falls Ins. Co. v. Long, 195 Va. 177, 77 S.E.2d 457 (1953). See also Reliance Insurance Company v. Brickenkamp, 147 So.2d 200 (Fla.App.1963); Watson v. Providence Washington Ins. Co., 106 F.Supp. 244, appeal dismissed, 4 Cir., 201 F.2d 736.

From the foregoing we are compelled to conclude that a necessary element is not present in the Louisiana jurisprudential definition of latent defect. That necessary element is that to be latent a defect must not have been discoverable upon a reasonable inspection. We restrict the definition of 'latent defect' in Ross v. Tynes, et. al., supra, to the facts of the cases where it has been cited. A classic definition of latent defect is found at 26A C.J.S. Defect p. 133. ⁴ Accordingly, we deem a proper definition of latent defect to be a defect that is hidden or concealed from knowledge as well as from sight and which a reasonable customary inspection would not reveal.

The defect was certainly latent. The hole in the 'maxim silencer' could not be discovered because of the partially concealed location of the 'maxim silencer' in the engine room of the 'Bon Conge'.

The fact that this record stands uncontradicted that the...