Windsor Mount Joy Mut. Ins. Co. v. Giragosian

• Decision Date: 05 December 1994
• Docket Number: No. 94-1764,94-1764
• Citation: 57 F.3d 50
• Parties: WINDSOR MOUNT JOY MUTUAL INSURANCE COMPANY, Plaintiff-Appellant, v. John GIRAGOSIAN and Deborah Giragosian, Defendants-Appellees. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 50

57 F.3d 50

1995 A.M.C. 2542

WINDSOR MOUNT JOY MUTUAL INSURANCE COMPANY, Plaintiff-Appellant, v. John GIRAGOSIAN and Deborah Giragosian, Defendants-Appellees.

No. 94-1764.

United States Court of Appeals First Circuit.

Heard Dec. 5, 1994.

Decided June 16, 1995.

Michael J. Calabro, with whom Flanagan & Hunter, P.C., was on brief, for appellant.

Thomas M. Neville, with whom Segalini & Neville, was on brief, for appellees.

Before TORRUELLA, Chief Judge, COFFIN, Senior Circuit Judge, and CYR, Circuit Judge.

TORRUELLA, Chief Judge.

Windsor Mount Joy Mutual Insurance Company ("Windsor") sought a declaration from the district court of its rights and obligations with respect to an insurance policy held by John and Deborah Giragosian for their 34-foot sailboat Escape, which had sunk in Boston Harbor. The Giragosians counterclaimed for contract damages due to Windsor's allegedly improper failure to honor the policy. ¹ After a bench trial, the district court determined that Windsor had a contractual duty to indemnify the Giragosians in the stipulated loss amount of $58,000. Windsor now appeals this ruling. For the following reasons, we affirm.

BACKGROUND

In 1989, the Giragosians purchased the Escape, a 1987 model 34-foot Catalina sailboat with a 12-horsepower diesel auxiliary. The Giragosians insured the Escape with Windsor under a fairly standard marine insurance Seaworthiness Warranty. Warranted that at the inception of this Policy the vessel shall be in a seaworthy condition and, thereafter, during the term of this Policy, the Assured shall exercise due diligence to maintain the boat in a seaworthy condition.

policy which contained the following warranty of seaworthiness:

In the months before the Escape was lost, Mr. Giragosian's adverse experiences relating to the vessel were limited to the following: During one excursion, Giragosian ran the vessel aground, and called for help using his radio. Occasionally, the diesel engine stalled. In August of 1991, the engine stalled as Giragosian was entering Scituate Harbor after a pleasure cruise. He was unable to restart the engine, and thus obtained permission to moor the vessel in Scituate Harbor. Most significantly, on October 19, 1991, someone noticed that the Escape was lying very low in the water and the Coast Guard was called to pump the boat out. The Coast Guard pumped out the vessel and promptly informed the Giragosians of the situation.

Giragosian went to Scituate Harbor on October 24, 1991, accompanied by his friend Daniel Likely. The two planned to sail the Escape to the Bay Point Marina in Quincy to have it hauled for the season. Giragosian and Likely rowed to where the Escape was moored. Once on board, however, they realized that the locks to her cockpit had been changed by the Coast Guard personnel who had pumped the boat out five days earlier. Giragosian came ashore and retrieved the key from the Coast Guard station. At the station, Giragosian had a conversation with Coast Guard officials, who suggested that perhaps the water had gotten into the vessel's bilges by running down the mast, i.e., that it was rainwater.

After retrieving the key from the Coast Guard, Giragosian and Likely returned to the Escape, boarded the boat, and prepared to cast off. Before the Escape left Scituate Harbor, Giragosian looked into the bilge and noticed one to two inches of water. He considered this to be normal. He also noticed water stains indicating that there had been about six inches of water in the bilges at one time.

Giragosian unsuccessfully attempted to start the vessel's diesel engine. Because the batteries were low, Giragosian turned off the radio, but kept the depthfinder on throughout most of the voyage. Because he intended to operate by "dead reckoning" from Scituate Harbor to the Bay Point Marina, Giragosian did not think that he needed the electronic equipment. He also decided to make the trip solely under sail, as the winds were light, the day clear, and the sea calm.

At about 3:00 p.m., Giragosian headed the Escape out of Scituate Harbor under sail, towing a small inflatable dingy behind. He sailed northeast out of Scituate Harbor, navigating by compass and dead reckoning. He estimated that he was sailing at about six knots. At around 4:30 p.m., his depthfinder failed. Later, between 5:00 and 6:00 p.m. and well out in greater Boston Harbor, Giragosian noticed that his floorboards were now covered with sloshing water and that they had begun to float. He checked the bilges and found that they contained about four feet of water, so he and Likely attempted to pump the water out manually. At this point, the Escape still had sufficient power to operate the navigation lights, but only dimly. Giragosian tried to go below to get a flashlight, but could not find one as the water was now flooding the cockpit and the flashlight was underwater. He tried to use his radio to call for help, but could raise no one.

It was getting close to sunset, and the sea had become slightly choppy. Giragosian and Likely donned life preservers, retrieved the flare gun, dropped the sails, and hooked up the outboard motor to the inflatable dinghy. They abandoned the Escape and started toward a drilling rig light some distance away in the harbor. Their dinghy engine ran out of gas, so it took them two hours to paddle by hand to the rig, where they were rescued after some time by the Coast Guard. Neither Giragosian nor Likely saw the Escape go down. The Coast Guard searched for the vessel but was unable to find any sign of it.

The Giragosians gave proper notice to Windsor. Windsor conducted its own search for the vessel with underwater detection devices.

This search, however, proved futile, and the Escape was never seen again. Windsor eventually denied Giragosian's claim.

The district court found, based on the totality of the facts and circumstances presented during trial, that the water pumped out of the hold of the vessel by the Coast Guard had not actually come down the mast, but rather was the result of a leak in the hull, a defect which was aggravated by Giragosian's attempts to sail the boat. The court went on to find, however, that Giragosian was not actually aware that the vessel was leaking at or below the waterline, and he did not know or appreciate that sailing the vessel was aggravating the leak.

The district court found that the Escape was in a seaworthy condition at the commencement of the policy's coverage, and that the Giragosians exercised due diligence to maintain the boat in this condition. The court went on to find that the Escape was, however, unseaworthy on October 24, 1991 when Giragosian and Likely sailed her out into open waters. The court specifically found, however, that Giragosian did not know of the boat's unseaworthy condition, and that the condition was not caused by any lack of due diligence on Giragosian's part.

The court nevertheless ruled as a matter of law that Giragosian was negligent in taking the Escape out to sea on October 24, 1991. According to the court, the "objective combination of the facts"--that he knew that his boat had been low in the water and had been pumped out by the Coast Guard, and that he was aware that he had no auxiliary power and that his batteries were low--rendered Giragosian's decision to sail the Escape negligent. Yet this negligence, the court explained, did not necessarily preclude coverage under the insurance policy. Despite his negligence, the court concluded, Giragosian had not failed to exercise due diligence in maintaining the boat's seaworthiness, and therefore he is entitled to indemnification from Windsor under the policy. Windsor now appeals.

STANDARD OF REVIEW

Our standard for reviewing a district court's findings of fact and conclusions of law made in conjunction with a bench trial is well settled. We review claimed errors of law de novo. Williams v. Poulos, 11 F.3d 271, 278 (1st Cir.1993); Blanchard v. Peerless Ins. Co., 958 F.2d 483, 487 (1st Cir.1992). The district court's findings of fact, however, will not be set aside unless they are demonstrated to be clearly erroneous. Williams, 11 F.3d at 278; Fed.R.Civ.P. 52(a). In other words, we will give such findings effect unless, after carefully reading the record and according due deference to the trial court, we form "a strong, unyielding belief that a mistake has been made." Cumpiano v. Banco Santander Puerto Rico, 902 F.2d 148, 152 (1st Cir.1990). Where there are two permissible views of the evidence, the interpretation assigned by the trial court will therefore be adopted. Williams, 11 F.3d at 278.

"The clearly erroneous standard also ordinarily applies to our review of a district court's resolution of mixed questions of law and fact. In such situations, however, we are obligated to determine whether the court's decision was infected by legal error. And if a trial court bases its findings upon a mistaken impression of applicable legal principles, the reviewing court is not bound by the clearly erroneous standard." Id. (internal quotations omitted).

ANALYSIS

Windsor appeals the district court's decision on several grounds. First, Windsor contends that the court applied an incorrect legal standard both to the interpretation of the warranty of seaworthiness in the marine insurance policy, and to the warranty's "due diligence" requirement. Windsor also argues that certain factual findings of the district court are inconsistent, and that as a matter of law, the terms of the insurance policy preclude coverage for loss due to a "latent defect." We address these arguments in turn.

A. Did the district court apply the appropriate legal standard for interpreting the warranty of seaworthiness?

In interpreting the marine insurance policy, particularly the warranty of seaworthiness The propriety of maritime jurisdiction over a suit involving a marine insurance policy is unquestionable. Albany Ins. Co. v. Wisniewski, 579 F.Supp. 1004, 1013 (D...