White Star SS Co. v. North British & Merc. Ins. Co.

• Decision Date: 18 January 1943
• Docket Number: No. 15653.,15653.
• Citation: 48 F. Supp. 808
• Parties: WHITE STAR S. S. CO. et al. v. NORTH BRITISH & MERCANTILE INS. CO., Limited, et al.
• Court: U.S. District Court — Western District of Michigan

48 F. Supp. 808

WHITE STAR S. S. CO. et al. v. NORTH BRITISH & MERCANTILE INS. CO., Limited, et al.

No. 15653.

District Court, E. D. Michigan, S. D.

January 18, 1943.

Hill, Hamblen, Essery & Lewis, of Detroit, Mich. (Carl V. Essery, of Detroit, Mich., of counsel), for libelants and impleaded respondent.

Miller, Canfield, Paddock & Stone, of Detroit, Mich., and Horace T. Atkins, of New York City, for respondent.

TUTTLE, District Judge.

This is an action on the sue and labor clause of a policy of hull insurance. It has been heard on the pleadings, an agreed statement of facts filed by the parties, the documents to which reference is made in the statement, and the arguments of proctors for the respective parties.

Libelant, White Star Steamship Company, a Michigan corporation, was the owner and libelant, Tashmoo Transit Company, a Michigan corporation, was the charterer, under a season charter, of the steamer Tashmoo, a passenger vessel operated in the excursion business on Detroit River, Lake St. Clair and St. Clair River. Respondent, North British & Mercantile Insurance Company, Ltd., is a British corporation engaged in the business of marine insurance. Impleaded respondent, Osborn & Lange, Inc., is an Illinois corporation with its principal office at Chicago, engaged in the business, among others, of arranging for marine insurance coverage and of average adjusting.

The Facts

On May 31, 1936, respondent North British & Mercantile Insurance Company, Limited, issued a policy of hull insurance to libelants, upon the steamer Tashmoo in the sum of twenty thousand ($20,000.00) dollars. Respondent's policy was part of a total hull insurance of one hundred thousand ($100,000.00) dollars. The policy contained, among other provisions, a sue and labor clause as follows:

"And in case of any loss or misfortune it shall be deemed lawful and necessary for the Assured, their factors, servants and assigns, to sue, labour and travel for, in, and about the defense, safeguard and recovery of the said Vessel, etc., or any part thereof, without prejudice to this insurance; to the charges whereof the said Assurers will contribute according to the rate and quantity of the sum herein insured. No abandonment shall in any case be effectual unless notice thereof be made in writing to the agents of the Assurers, nor unless the expense of recovering and repairing the vessel, as finally established, exceeds the combined value of vessel, etc., as stated herein. It is especially declared and agreed that no acts of the Assurers or Assured shall be considered as a waiver or acceptance of the abandonment; and that if the Assurers undertake to salve the said Vessel (or to have her salved), they shall not thereby be deemed to have incurred any obligation to make repairs, but shall have the right to tender the Vessel back to the Assured at the conclusion of the Salvage operations, if at that time it appears that the expense incurred or to be incurred in recovering and repairing the vessel does not exceed such combined value."

Libelants also took out policies of protection and indemnity insurance which insured libelants as owner and as charterer, respectively, of the Tashmoo against certain liabilities, among others the following:

"(e) Any attempted or actual raising, removal or destruction of the wreck of the said vessel or the cargo thereof, or any neglect or failure to raise, remove or destroy the same. There shall be deducted from such claim for cost or expenses, the value of any salvage from or which might have been recovered from the wreck, inuring, or which might have inured, to the benefit of the Assured."

None of the underwriters on the policies of protection and indemnity insurance was an underwriter on the policies of hull insurance.

All of the insurance was arranged for libelants by Osborn & Lange, Inc., who also acted as average adjusters by appointment of libelant, in respect to the several claims which arose under the said insurance as a result of the disaster sustained by the Tashmoo on June 18, 1936, the disaster out of which this suit arises.

About 11:30 P. M. on June 18th, the Tashmoo, while enroute from Sugar Island in lower Detroit River to Detroit, Michigan, on a moonlight excursion, struck some object concealed beneath the water and holed her bottom in the way of the boiler room, causing her to leak badly and the water to enter the boiler and engine rooms. She immediately proceeded at full speed to the nearest available dock at which she could disembark her passengers, the Brunner-Mond dock on the Canadian shore just above Amherstburg, Ontario, Canada, where she arrived about 11:50 P. M. On arrival at the dock, as the water was gaining on the pumps, a tug with extra pumping equipment was summoned from Amherstburg. The tug arrived in a short time but despite the efforts of the tug, the water continued to gain and early on the morning of June 19 the Tashmoo settled on the river bottom alongside the Brunner-Mond dock, listed to port about 15 degrees with her main deck under water and her upper decks above water.

A surveyor of United States Salvage Association, Inc., acting for respondent and the other hull underwriters, examined the Tashmoo on June 19th and at his direction and that of Hull Underwriters, bids for raising the vessel were invited and on June 20th a contract on a "no cure no pay" basis, to raise the vessel and deliver her to the nearest dry dock was let to Pyke Salvage Company of Kingston, Ontario. Before salvage operations were begun, at the suggestion of libelants and with the approval of the surveyor for Hull Underwriters and all other parties concerned, certain furniture and equipment on the upper decks of the Tashmoo, of a nature that was particularly susceptible to being damaged or lost during salvage operations, was removed by libelants and taken to their warehouse at Detroit for safekeeping. It was agreed by all the parties that this furniture and equipment was to be put back aboard the Tashmoo if and when she was raised and delivered in dry dock.

Salvage operations were carried on until July 8th when serious additional damage to the hull of the Tashmoo having developed, Pyke Salvage Company declined to proceed further with the contract. In the meantime, officials of the Canadian Government, acting under statutory powers, had notified libelants that the Tashmoo in the position in which she lay was a menace to navigation and must be removed without further delay. Under Canadian law, when a vessel which has sunk in navigable waters is found by the Government officials to be a menace to navigation, the owner is required to remove the vessel at his own expense and on failure of the owner to do so the Canadian Government is authorized by statute to remove the vessel and collect the cost of removal from the vessel's owner.

A further examination of the vessel was made by the surveyor for Hull Underwriters on July 8th and 9th, following which he telegraphed his principals as follows:

"Tashmoo situation greatly changed. Vessel broken open starboard side and bottom and various beams buckled. Also hull buckled and twisted. Upper decks badly twisted and buckled and otherwise damaged including paddle boxes and starboard wheel. This due to vessel's uneven position on rock and boulder bottom also current and wash of passing steamers which has also hampered salvor's efforts. In my opinion provided vessel floated and delivered to drydock repairs would exceed $130,000 and probably more. My opinion hull underwriters should make no further effort salvage vessel which is also opinion our wreckmaster, but should consent to owner taking any steps owner may desire as to removal of wreck. As Canadian Government has ordered and pressing removal should have prompt action. Sue labor expenses should not exceed $1,500. Equipment removed has sound value approximately same amount."

To this telegram the Hull Underwriters replied: "We agree to stopping salvage operations and owners making arrangement to remove wreck at their expense."

On receipt of this telegram the surveyor of United States Salvage Association, Inc., acting in this instance for libelants' Protection and Indemnity Underwriters, invited bids for removal of the wreck of the Tashmoo in compliance with the order which had been given to libelants by the Canadian Government. The lowest bid received was that of Pyke Salvage Company and with the approval of Protection and Indemnity Underwriters, libelants entered into a contract with Pyke wherein he agreed to remove and dispose of the wreck of the Tashmoo to the satisfaction of the Canadian Government for the sum of $12,840 and any salvage he might be able to realize from the wreck. The removal of the wreck was completed on August 29 and on certification by the Canadian Government and Brunner-Mond, Canada, Ltd., that the removal had been completed in satisfactory manner, libelants, through their Protection and Indemnity Underwriters, paid to Pyke the sum of $12,840. called for in his contract.

Following the exchange of telegrams between the surveyor and Hull Underwriters, libelants, acting through Osborn & Lange, Inc., as their average adjusters, served formal proofs of loss on Hull Underwriters and claimed a total loss under the policies of hull insurance. In due course, Hull Underwriters paid to libelants the face amounts of the hull policies but refused to accept abandonment of the wreck previously tendered to Hull Underwriters by libelants and expressly disclaimed any title thereto. Respondent, North British & Mercantile Insurance Company, Ltd., which paid the face of its policy of $20,000 on July 16, noted on the policy "Total loss paid hereunder," and took a receipt for the payment which included this language: "In full settlement of all claims except Sue & Labor and Travel for expenses per S/S Tashmoo 6/18/36, a/c White Star S/S Co."

On July 27th United States Salvage Association, Inc., received an...