One Beacon Insurance v. Crowley Marine Services, Inc.

Case: 10-20417 Document: 00511554349 Page: 1 Date Filed: 07/28/2011

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT United States Court of Appeals

Fifth Circuit

FILED

July 28, 2011

No. 10-20417 Lyle W. Cayce

Clerk

ONE BEACON INSURANCE COMPANY

Plaintiff – Cross Appellee

v.

CROWLEY MARINE SERVICES, INC.,

Defendant-Third Party Plaintiff – Appellee Cross-Appellant

v.

TUBAL-CAIN MARINE SERVICES, INC.,

Third Party Defendant – Appellant Cross-Appellee

Appeals from the United States District Court

for the Southern District of Texas

Before KING, WIENER, and CLEMENT, Circuit Judges.

KING, Circuit Judge:

This suit arises out of a dispute between a ship repair contractor, barge

owner, and insurance company over the terms of a ship repair service contract

and a maritime insurance policy. The contractor appeals from the district

court’s ruling that the contractor breached its contractual obligation to procure

insurance coverage for the barge owner and that it was contractually obligated

to defend and indemnify the barge owner against damages ensuing from a

workplace injury that occurred while the barge was being repaired. The barge

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No. 10-20417

owner cross-appeals from the district court’s ruling that it was not entitled to

additional insured coverage under the contractor’s insurance policy. We affirm

the judgment of the district court in all respects.

I. FACTUAL AND PROCEDURAL BACKGROUND

Crowley Marine Services, Inc. (“Crowley”) owns and operates a large fleet

of vessels, including tugs, tankers, and specialty offshore work barges. Tubal-

Cain Marine Services, Inc. (“Tubal-Cain”) performs ship repair work at its

fabrication and dry dock facility in Port Arthur, Texas. In March 2007, Crowley

hired Tubal-Cain to perform work on one of Crowley’s vessels, the MWB 403

Barge. Tubal-Cain in turn hired Rio Marine, Inc. as a subcontractor to perform

lighting and electrical work on the barge. On or about April 23, 2007, Marcus

Parker, an employee of Rio Marine, allegedly sustained severe and disabling

injuries caused by an electrical shock and a resulting fall that he suffered while

performing repairs to the barge. Parker filed suit against Tubal-Cain and

Crowley in Texas state court, alleging that their negligence caused his injuries.

Crowley subsequently made a formal demand for defense and indemnity

from Tubal-Cain for any liability or expense incurred as a result of Parker’s suit,

and sought defense and coverage from One Beacon Insurance Company (“One

Beacon”) as an additional insured under the Maritime Comprehensive Liability

Policy that One Beacon issued to Tubal-Cain (the “Policy”). One Beacon denied

coverage for Crowley and subsequently filed a declaratory judgment action in the

District Court for the Southern District of Texas—the action giving rise to this

appeal—seeking a declaration that Crowley was not entitled to coverage as an

additional insured under the Policy. In its complaint, One Beacon asserted that

it never received a request from Tubal-Cain to add Crowley as an additional

insured on the Policy, and that there was no “insured contract” between Tubal-

Cain and Crowley that would entitle Crowley to coverage under the Policy’s

terms.

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Crowley filed a third-party complaint against Tubal-Cain in the

declaratory judgment action. Crowley alleged that the terms and conditions

referred to in the repair service order (“RSO”) which Crowley issued in

connection with the repair work for the barge required Tubal-Cain to defend and

indemnify Crowley against any claim brought by Tubal-Cain employees and

contractors against Crowley relating to the work performed under the RSO.

Crowley also alleged that the terms and conditions required Tubal-Cain to carry

various insurance policies naming Crowley as an additional insured. In the

alternative, Crowley asserted a claim against Tubal-Cain for fraud and negligent

misrepresentation, alleging that Tubal-Cain falsely led Crowley to believe that

it had obtained the requested insurance coverage.

The parties agreed to try the case to the district court by written

submission. The district court found in favor of Crowley on its claim against

Tubal-Cain for contractual defense and indemnity and its claim that Tubal-Cain

breached its contractual obligation to obtain insurance coverage.1 One Beacon

Ins. Co. v. Crowley Marine Servs., Inc., No. H-08-2059, 2010 WL 1463451, at *14

(S.D. Tex. Apr. 12, 2010). The district court further held that Crowley did not

qualify as an additional insured under Tubal-Cain’s policy and entered judgment

in favor of One Beacon on its declaratory judgment claim. Id. Tubal-Cain

appeals from the judgment, and Crowley cross-appeals.

II. DISCUSSION

“The standard of review for a bench trial is well established: findings of

fact are reviewed for clear error and legal issues are reviewed de novo.” Water

Craft Mgmt. LLC v. Mercury Marine, 457 F.3d 484, 488 (5th Cir. 2006) (citation

and internal quotation marks omitted). A factual finding is “clearly erroneous”

when “ ‘although there is evidence to support it, the reviewing court on the

1

The district court also dismissed with prejudice Crowley’s fraud and negligent

misrepresentation claims. Crowley does not challenge this ruling on appeal.

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entire evidence is left with the definite and firm conviction that a mistake has

been committed.’ ” Anderson v. City of Bessemer City, 470 U.S. 564, 573 (1985)

(quoting United States v. United States Gypsum Co., 333 U.S. 364, 395 (1948)).

A. The Contract Between Crowley and Tubal-Cain

Crowley and Tubal-Cain do not dispute that they reached an agreement

for repair services for Crowley’s barge; instead, they dispute whether they had

a written agreement obligating Tubal-Cain to defend, indemnify, and obtain

insurance for Crowley.

The existence of a maritime contract involves questions of fact. Ham

Marine, Inc. v. Dresser Indus., Inc., 72 F.3d 454, 458–59 (5th Cir. 1995). The

interpretation of contract terms is a matter of law that we review de novo. Id.

at 459. A contract for the repair of a vessel is a maritime contract, governed by

general maritime law. Todd Shipyards Corp. v. Turbine Serv., Inc., 674 F.2d

401, 412 (5th Cir. 1982). General maritime law “stems from the maritime

jurisprudence of the federal courts,” and is “an amalgam of traditional common

law rules, modifications of those rules, and newly created rules” drawn from

state and federal sources. 1 Thomas J. Schoenbaum, Admiralty & Mar. Law

§ 5-1 (4th ed. 2004) (quoting E. River S.S. Corp. v. Transamerica Delaval, Inc.,

476 U.S. 858, 864–65 (1986)); cf. Har-Win, Inc. v. Consol. Grain & Barge Co., 794

F.2d 985, 987 (5th Cir. 1986) (applying general principles of contract law as

adopted by general maritime law, rather than state law, to the interpretation of

maritime contracts).

Except where noted, the district court’s factual findings pertaining to the

parties’ agreement for repairs to the barge are not in dispute on appeal. In

March 2007, Crowley Port Engineer Ricky Bastian met with John Durio, Tubal-

Cain’s Production Superintendent, and Eddie Van Huis, Tubal-Cain’s President,

to discuss repair work to the barge. The repair work commenced soon

thereafter. Crowley had previously contracted with Tubal-Cain eight times in

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the preceding year for minor work to other Crowley vessels, and Crowley

contracted with Tubal-Cain for fifteen additional jobs following the job at issue

here.

For each of these projects, Crowley issued an RSO to Tubal-Cain. Each

RSO outlined the contemplated scope of the repairs and assigned a project

number to the repair job, but contained no pricing terms and was not signed by

either party. Following the March 2007 meeting, and in conformity with its

standard practice, Crowley issued and mailed to Tubal-Cain an RSO, number

9501229, dated April 2, 2010. The RSO at issue in this case, as well as each RSO

that Crowley issued to Tubal-Cain in connection with the prior and subsequent

repair service jobs, contained the following notice prominently displayed on the

first page:

THIS IS A CONFIRMATION. DO NOT DUPLICATE.

THIS RSO IS ISSUED IN ACCORDANCE WITH THE PURCHASE

ORDER TERMS & CONDITIONS ON WWW.CROWLEY.COM /

DOCUMENTS & FORMS, UNLESS OTHERWISE AGREED TO IN

WRITING.

THE ABOVE REPAIR SERVICE ORDER (RSO) NUMBER MUST

APPEAR ON ALL BILLING INVOICES. FAILURE TO COMPLY

WILL RESULT IN INVOICES BEING RETURNED.

The terms and conditions referred to in the RSO were located on a subpage

of Crowley’s website. The terms and conditions could not be accessed by typing

“www.crowley.com / documents & forms” into a web browser. The district court

found that “www.crowley.com / documents & forms” was not intended to be a

web address indicating the exact location of the page containing the terms and

conditions, but merely provided directions to assist in locating the terms and

conditions on Crowley’s website. To access the terms and conditions, a

contractor would have had to take the following steps: (1) go to Crowley’s home

page, “http://www.crowley.com”; (2) click on a link on the menu bar titled

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“Documents & Forms”; (3) select “Vendor Relations” from a drop-down menu;

and (4) select “Purchase Order Terms and Conditions.” The terms and

conditions were displayed in approximately four-point font. Based on testimony

by Daniel Mock, the Crowley employee responsible for placing the terms and

conditions on Crowley’s website, the district court found that neither the location

nor the content of Crowley’s terms and conditions changed during the course of

Crowley’s working relationship with Tubal-Cain.2

Crowley’s terms and conditions require contractors to defend and

indemnify Crowley for any claim that may be brought against Crowley

arising out of any injury (including death) or damage to any persons

or property in any manner, caused or occasioned by any defect in the

goods or services or any act, omission, fault, negligence or default of

any person, firm, corporation or other entity . . . even if the same be,

or is alleged to be, due to the sole active negligence of [Crowley] or

anyone acting on its behalf.

Further, the terms and conditions mandate that contractors procure, at their

own expense, certain insurance policies including a commercial general liability

policy with limits of not less than $1 million for any one occurrence, with no

watercraft exclusion, and covering the work being conducted in accordance with

the RSO. The insurance policy was to be endorsed to name Crowley, “as [an]

additional insured[] and . . . endorsed to waive all rights of subrogation against

Crowley an[d] the Property,” in this case, Crowley’s barge.

The parties do not dispute that Crowley did not specifically discuss the

terms and conditions with Tubal-Cain and did not furnish to Tubal-Cain a hard

copy of the indemnity or insurance requirements set forth in the terms and

conditions. Tubal-Cain’s President, Eddie Van Huis, who received and reviewed

the RSO, testified that he never visited Crowley’s website nor investigated the

RSO’s reference to the online terms and conditions, believing that it was

2

Crowley has since redesigned its website.

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unnecessary to do so. Van Huis testified that, typically, when a contract came

in, he would review it with, among other professionals, Tubal-Cain’s CPA and

corporate attorney. He did not follow this procedure with Crowley’s RSOs

because he believed that they were merely confirmations of the parties’ oral

agreements, and not contracts in and of themselves.

At the conclusion of its work on the barge, and in accordance with his

routine practice, Van Huis prepared an invoice for the repair work on Crowley’s

barge. The invoice, which included the project number on Crowley’s RSO,

provided that Tubal-Cain “reserves the right to review any and all purchase

orders prior to their acceptance.” The district court found that every invoice that

Tubal-Cain submitted to Crowley contained this reservations of rights. At no

time in connection with the repair job to Crowley’s barge or any prior or

subsequent repair jobs did Tubal-Cain object to any of Crowley’s terms and

conditions. The invoice for the work on Crowley’s barge was issued to Crowley,

where it was approved, signed by Crowley’s port engineer, and paid.

The district court concluded that the March 2007 oral agreement,

Crowley’s RSO, and Tubal-Cain’s subsequent invoice together constituted one

written contract between Tubal-Cain and Crowley for the repair service job in

question. The district court found that the RSOs that Crowley had issued to

Tubal-Cain for this and all prior repair service jobs contained identical notice

provisions that “plainly and conspicuously” incorporated the terms and

conditions on Crowley’s website. The district court further found that the

parties established a course of dealing from which the court could infer that

those terms and conditions were implied in every contract. The district court

held that by accepting the RSO and issuing an invoice for payment without

exercising its right to object to the terms and conditions, Tubal-Cain ratified

their course of dealing and assented to these terms. Furthermore, although the

terms were on a subpage of Crowley’s website and in the equivalent of four-point

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font, the district court held that the terms were “sufficiently legible and

accessible” that enforcement of the online terms was not unconscionable.

Accordingly, the district court concluded that Tubal-Cain was bound by

Crowley’s terms and conditions and therefore required to defend and indemnify

Crowley for claims arising out of the work specified in the RSO and to procure

insurance coverage for Crowley.

1. Course of dealing

On appeal, Tubal-Cain argues that the parties entered into a binding oral

agreement regarding the scope and price of the repair work in March 2007, and

that Crowley’s subsequently-issued RSO was merely a confirmation of that oral

agreement. Because the oral agreement was silent with regard to defense,

indemnity, and insurance requirements, Tubal-Cain contends that the RSO did

not and could not confirm more than what the parties orally agreed to. Further,

Tubal-Cain asserts that the RSO was sent to Tubal-Cain after work began on the

barge, and therefore Tubal-Cain had no opportunity to review and assent to the

terms prior to beginning performance.

“[O]ral contracts are generally regarded as valid by maritime law.”

Kossick v. United Fruit Co., 365 U.S. 731, 734 (1961); see also Fuesting v.

Lafayette Parish Bayou Vermilion Dist., 470 F.3d 576, 580 (5th Cir. 2006) (“Oral

contracts . . . are valid in admiralty.”). Under general maritime law, terms and

conditions contained in subsequently-issued purchase orders may supplement

an oral agreement if there is evidence of a prior course of dealing between the

parties from which a court may infer that the parties were aware of and

consented to those additional contractual terms. See Campbell v. Sonat Offshore

Drilling, Inc., 979 F.2d 1115, 1120 (5th Cir. 1992), superseded by statute on other

grounds; see also Restatement (Second) of Contracts § 223(1) (1981) (defining

“course of dealing” as “a sequence of previous conduct between the parties to an

agreement which is fairly to be regarded as establishing a common basis of

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understanding for interpreting their expressions and other conduct”); id. at

§ 223(2) (“Unless otherwise agreed, a course of dealing between the parties gives

meaning to or supplements or qualifies their agreement.”). In construing

maritime contracts, we have held that “[w]here parties share a history of

business dealings and standardized provisions have become part of those

dealings, such familiar provisions within purchase orders issued after

performance are binding where they are accepted without objection.” Campbell,

979 F.2d at 1120.

This principle has been applied in the context of the ship repair industry,

where it is “not unusual” for parties to enter into an oral agreement for repair

work, and for the ship repair contractor to send a purchase order or invoice

containing terms and conditions after the repair work has begun or is completed.

B & B Schiffahrts GmbH & Co. v. Am. Diesel & Ship Repairs, Inc., 136 F. Supp.

2d 590, 592, 594–95 (E.D. La. 2001); see also M/V Am. Queen v. San Diego

Marine Constr. Co.,708 F.2d 1483, 1489 (9th Cir. 1983) (“In giving effect to

exculpatory clauses, courts have recognized that it is a practice in the ship repair

industry to do repair work before sending an invoice containing the contract for

repairs.”); Hudson Waterways Corp. v. Coastal Marine Serv., Inc., 436 F. Supp.

597, 604 (E.D. Tex. 1977) (“[T]he custom in ship repair industry is to first do the

repair work, and then send out the invoice which contains on it the contract.”).

For instance, in Hudson Waterways Corp., the District Court for the

Eastern District of Texas concluded that limitation of liability terms contained

in a ship repair contract were binding despite the fact that “the written

document which constitute[d] the contract for repair was not sent to the Plaintiff

until some time after the repair work was completed.” 436 F. Supp. at 604. The

court noted:

Between 1970 and 1975, the Defendant did 102 separate repair jobs

for the Plaintiff. For each of these jobs, the invoice and contract

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were sent to the Plaintiff after the work was completed, and it

contained the . . . clause which the Plaintiff now contends is void.

The Court believes this is sufficient to put the Plaintiff on full notice

that this clause was implied in every repair contract.

Id. at 604–05; see also Coastal Iron Works, Inc. v. Petty Ray Geophysical, 783

F.2d 577, 582–83 (5th Cir. 1986) (party had notice that ship repair contract

contained a limitation of liability clause where the clause appeared in previous

repair contracts and party never repudiated the clause nor instructed its agents

not to sign contracts in the future containing the clause); Alcoa S.S. Co. v.

Charles Ferran & Co., 383 F.2d 46, 54–55 (5th Cir. 1967) (limitation of liability

clause contained in ship repair contractor’s invoice, sent after repair work was

completed, was binding on ship owner who admitted that it was aware of the

clause from prior invoices received from the contractor and that such clauses

were standard in the industry).

Tubal-Cain disputes the district court’s findings that the RSO’s terms and

conditions constituted part of a written agreement between the parties as a

result of their course of dealing with respect to the RSO process, and that Tubal-

Cain ratified their course of dealing by submitting an invoice for the work on the

barge without objecting to the terms and conditions. See New Moon Shipping

Co., Ltd. v. MAN B & W Diesel AG, 121 F.3d 24, 31 (2d Cir. 1997) (“An inference

of the parties’ common knowledge or understanding that is based upon a prior

course of dealings is [a] question of fact.”). Tubal-Cain claims that the prior

working history between the parties does not support an inference that they

intended the terms and conditions referred to in the RSO to be implied in every

contract, noting that there had been only eight jobs for minor repair work to

Crowley’s vessels prior to the contract for repairs to the barge, and those jobs

were completed within only six months of the job in question. However, courts

have found a course of dealing between parties to a maritime contract based on

a party’s receipt of as few as three or four bills of lading containing the same

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limitation of liability terms, see Royal Ins. Co. v. Sea-Land Serv. Inc., 50 F.3d

723, 727 (9th Cir. 1995), and upon a party’s approval of only nine invoices

containing identical limitation of liability clauses, see Lykes Bros. S.S. Co. v.

Waukesha Bearings Corp., 502 F. Supp. 1163, 1172–73 (E.D. La. 1980). Thus,

the parties’ relatively brief relationship prior to the repair job to the barge is not,

without more, a basis for finding that the district court erred.

2. Incorporation by reference of Crowley’s online terms and conditions

Tubal-Cain next disputes the district court’s finding that the RSO was

sufficient to put Tubal-Cain on notice of Crowley’s insurance and indemnity

terms. Tubal-Cain contends that, because it lacked notice of those terms, the

district court erred in concluding that Tubal-Cain was aware of and assented to

them. Regarding the indemnity term in particular, Tubal-Cain correctly states

that indemnity terms which, like the one at issue here, purport to indemnify a

party for damages caused by its own negligence, must be “specific and

conspicuous” to be enforceable under maritime law. Orduna S.A. v. Zen-Noh

Grain Corp., 913 F.2d 1149, 1153 (5th Cir. 1990) (quoting Restatement (Second)

of Contracts § 195 cmt. b (1981)); see also Theriot v. Bay Drilling Corp., 783 F.2d

527, 540 (5th Cir. 1986) (“Long-established general principles of interpreting

indemnity agreements [in maritime contracts] require that indemnification for

an indemnitee’s own negligence be clearly and unequivocally expressed.” (citation

and internal quotation marks omitted)).

Tubal-Cain argues that the language of the RSO itself did not provide any

notice to Tubal-Cain that it would be required to indemnify or procure insurance

coverage for Crowley, much less provide “specific and conspicuous” notice as

required to render the indemnity term enforceable. Tubal-Cain contends that our

decision Orduna S.A. v. Zen-Noh Grain Corp. is controlling on this point. In

Orduna, Zen-Noh sought to enforce an indemnity clause incorporated by

reference into a berth application against Orduna, a ship owner whose vessel was

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damaged during an accident involving a grain elevator owned by Zen-Noh.

Orduna’s agent had signed the berth application, certifying that Orduna was “in

compliance with and subject to all applicable tariffs, rules, and regulations of

Zen-Noh Grain Corporation, The South Louisiana Port Commission, and the

Federal Grain Inspection Service, copies of which have been received and read.”

913 F.2d at 1153 & n.3. The relevant indemnity clause was contained in a dock

tariff. Id. at 1153.

On appeal, we noted that “[b]efore enforcing an indemnification clause for

an indemnitee’s own negligence, a court must be firmly convinced that the

exculpatory provision reflects the intention of the parties.” Id. We upheld the

district court’s finding that Orduna never received nor consented to the

indemnity clause because “[n]o excerpts of the pertinent texts of the[] documents

[containing Zen-Noh’s terms and conditions] or even a list of the documents

appeared on the berth application;” “the berth application did not identify by

either date or number the specific dock tariff that purported to exculpate

Zen-Noh from its own negligence;” and Orduna had never received a copy of the

relevant dock tariff when applying for the berth. Id. at 1153-54. We therefore

affirmed the district court’s holding that the indemnity clause was unenforceable.

Tubal-Cain notes that—like Zen-Noh in Orduna—Crowley did not furnish

the relevant provisions in hard copy, and they were not contained in the text of

the RSO itself; thus, Tubal-Cain contends that it never received or consented to

the terms and conditions. Tubal-Cain observes that in Campbell, where we

enforced certain indemnity and insurance provisions referred to in a purchase

order, the relevant provisions were expressly included on the reverse of the

purchase order itself. Campbell, 979 F.2d at 1118. Tubal-Cain argues that here,

in contrast, the terms and conditions were “hidden” on Crowley’s website in four-

point font and, like the reference to the dock tariff in the berth application in

Orduna, the reference to the terms and conditions on the RSO failed effectively

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to identify the location of the indemnity and insurance provisions on Crowley’s

website. Accordingly, Tubal-Cain contends that it lacked reasonably conspicuous

notice of the terms, and we therefore cannot infer that Tubal-Cain intended to be

bound by them.

Under general contract principles, where a contract expressly refers to and

incorporates another instrument in specific terms which show a clear intent to

incorporate that instrument into the contract, both instruments are to be

construed together. See 11 Williston on Contracts § 30:25 (4th ed. 1999)

(hereafter “Williston”) (“Where a writing refers to another document, that other

document, or the portion to which reference is made, becomes constructively a

part of the writing, and in that respect the two form a single instrument.”). The

incorporation by reference doctrine applies to maritime contracts as well. See,

e.g., New Moon Shipping Co., 121 F.3d at 30; Cargill, Inc. v. Kopalnia Rydultowy

Motor Vessel, 304 F. App’x 278, 281–82 (5th Cir. 2008) (per curiam) (rejecting an

argument that an indemnity clause that was incorporated by reference into a

berth application was not enforceable because the provision was not included in

the text of the berth application itself). Under both general contract principles

and admiralty law, a separate document will become part of the contract where

the contract makes “clear reference to the document and describes it in such

terms that its identity may be ascertained beyond doubt.” 11 Williston at § 30:25;

see also New Moon Shipping Co., 121 F.3d at 30. Terms incorporated by

reference will be valid so long as it is “clear that the parties to the agreement had

knowledge of and assented to the incorporated terms.” 11 Williston at § 30:25.

Notice of incorporated terms is reasonable where, under the particular facts of

the case, “[a] reasonably prudent person should have seen” them. Coastal Iron

Works, 783 F.2d at 582.

We see no reason to deviate from these principles where, as here, the terms

to be incorporated are contained on a party’s website. We note that contracts

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formed in whole or in part over the internet present relatively new considerations

for the courts, and will continue to challenge the courts as the internet plays an

increasingly important role in commerce. However, “[w]hile new commerce on

the Internet has exposed courts to many new situations, it has not fundamentally

changed the principles of contract.” Register.com, Inc. v. Verio, Inc., 356 F.3d

393, 403 (2d Cir. 2004); see also Specht v. Netscape Commc’ns Corp., 306 F.3d 17,

31 (2d Cir. 2002) (traditional contract principles applicable to “the world of paper

transactions” regarding the enforceability of contract terms against a party on

notice of the existence of those terms “apply equally to the emergent world” of

online contracting); Feldman v. Google, Inc., 513 F. Supp. 2d 229, 236 (E.D. Pa.

2007) (applying “traditional principles of contract law” to determine

enforceability of terms and conditions governing a “clickwrap” agreement);

Barnett v. Network Solutions, Inc., 38 S.W. 3d 200, 204 (Tex. Ct. App.—Eastland

2001, pet. denied) (holding that a party with notice of and opportunity to review

contract terms is bound by those terms even where party has not read them, and

“[t]he same rule applies to contracts which appear in an electronic format”).

We note that other courts, applying traditional contract principles in the

non-admiralty context, have expressly or implicitly rejected the very argument

that Tubal-Cain makes here, recognizing, for instance, that “internet provisions

clearly incorporated by reference [into a purchase order], readily available on the

identified internet site, and plainly and clearly set forth therein,” are binding

even where the party has not read them. Pentecostal Temple Church v.

Streaming Faith, LLC, No. 08-554, 2008 WL 4279842, at *5 (W.D. Pa. Sept. 16,

2008); see also Schwartz v. Comcast Corp., 256 F. App’x 515, 520 (3d Cir. 2007)

(a customer on notice of contract terms available on the internet website is bound

by those terms); Spartech CMD, LLC v. Int’l Auto. Components Grp. N. Am., Inc.,

No. 08-13234, 2009 WL 440905, at *5 (E.D. Mich. Feb. 23, 2009) (rejecting

argument that arbitration clause was invalid because it was contained in terms

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and conditions that party never received, where terms and conditions were

contained on party’s website and incorporated by reference into a purchase

order); cf. Oceanconnect.com, Inc. v. Chemoil Corp., No. H-07-1053, 2008 WL

194360, at *2–5 (S.D. Tex. Jan. 23, 2008) (arbitration clause enforceable under

Texas law and UCC where terms and conditions were incorporated by reference

in party’s order confirmation and available for review on party’s website, and

where there was a course of dealing between the parties). We are persuaded that

under admiralty law—which generally follows the common law of contracts in

resolving maritime contract disputes—maritime contracts may validly

incorporate terms from a website in the same manner that they may incorporate

by reference terms from paper documents, and therefore reject Tubal-Cain’s

argument that the terms and conditions at issue here are unenforceable solely

because they were never set down and delivered in paper format.

The chief consideration when determining the validity of contractual

terms—in contracts with or without a nexus to the internet—is whether the party

to be bound had reasonable notice of the terms at issue and whether the party

manifested assent to those terms. See, e.g., Feldman, 513 F. Supp. 2d at 236–37.

We can imagine situations involving online terms and conditions where,

analogous to Orduna, the terms and conditions were not unambiguously

incorporated into the parties’ agreement or where there was insufficient notice

of the location of the terms and conditions such that a reasonable person would

not be expected to find them. See, e.g., Trujillo v. Apple Computer, Inc., 578 F.

Supp. 2d 979, 989–95 (N.D. Ill. 2008) (arbitration clause unenforceable where

consumer had no reason to know that the terms and conditions containing the

clause could be found on vendor’s website, the terms and conditions could be

found only by using the website’s search bar, and the version of the terms and

conditions available on the website was out of date). Under the facts of this case,

however, we agree with the district court that Crowley’s online terms and

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conditions were clearly incorporated into the RSO and that Tubal-Cain had

adequate notice of and opportunity to review them.

Here, Crowley’s intent to incorporate the terms and conditions is clear from

the explicit incorporating language prominently placed on the face of the RSO in

all capital letters. And, unlike in Orduna, the RSO clearly referred to a

particular document—Crowley’s website—containing these terms and conditions.

And in this case, unlike in Orduna, Tubal-Cain had access to the terms and

conditions, which were at all times available to Tubal-Cain on Crowley’s website.

It is undisputed that neither the content nor the location of the terms and

conditions changed during the relevant time period. The district court found that

Crowley’s website was easily navigated, and that a reasonable person would have

been able to find the terms and conditions, findings that Tubal-Cain does not

adequately challenge. Further, the district court found that Van Huis, whose

duties at Tubal-Cain included reviewing the RSOs, was “internet savvy.”

Moreover, Van Huis testified that he understood the notice provision on the RSO

and admitted that he could have accessed the terms and conditions on the

website at any time. Finally, the district court did not clearly err in concluding

that both parties were commercial entities with sophisticated procedures in place

for reviewing contracts, even if Tubal-Cain did not implement those procedures

in this case. Consistent with these findings, the district court found that Van

Huis had actual notice of and access to the terms and conditions, even if he

believed that he did not have to read them.

Although Crowley undoubtedly could have provided clearer directions to

the location of the terms and conditions on the website, we agree with the district

court that notice of the terms and conditions was reasonable under the particular

facts of this case. Cf. Jimenez v. Peninsular & Oriental Steam Navigation Co.,

974 F.2d 221, 224 (1st Cir. 1992) (in deciding whether maritime passenger ticket

provided sufficient notice of incorporated terms and conditions, “the standard is

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one of reasonableness, not perfection” (citation and internal quotation marks

omitted)). We therefore find no reason to disturb the district court’s holding that

the terms and conditions were effectively incorporated into the RSO.

We also agree with the district court that the indemnity term in particular

was sufficiently clear and conspicuous to be enforceable. It is not disputed that

the text of the indemnity provision itself “expressly and specifically manifested”

an intent to indemnify Crowley from the consequences of its own negligence.

Branch v. Fid. & Cas. Co. of N.Y., 783 F.2d 1289, 1294 (5th Cir. 1986). And

whereas in Orduna we found a similar indemnity provision to be unenforceable

because we were not “firmly convinced that the exculpatory provision reflect[ed]

the intention of the parties” because notice of the provision was not “specific and

conspicuous,” Orduna S.A., 913 F.2d at 1153, Orduna is distinguishable from the

facts here. The indemnity term in Orduna was deemed unenforceable because

the berth application that comprised the contract between the parties did not

make clear that it was subject to terms and conditions contained in the separate

dock tariff, it further failed to identify the particular dock tariff that contained

those terms and conditions, and the dock tariff was never made available to the

party to be bound. As discussed above, these problems are not present in this

case. Nor does Crowley’s use of a small font “call into question the non-drafting

party’s consent” under these circumstances. Brown v. Pac. Life Ins. Co., 462 F.3d

384, 397 (5th Cir. 2006). The font size could be enlarged on a computer screen,

and the paragraph containing the indemnity provision was clearly labeled in bold

text.

We hold that the district court did not err in concluding that the RSO terms

and conditions supplemented the oral agreement between the parties because

notice of the terms and conditions was clearly and conspicuously displayed in

every RSO that Crowley sent to Tubal-Cain, the terms and conditions were at all

times reasonably accessible and available to Tubal-Cain, and Tubal-Cain

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manifested assent by accepting the RSOs without objection to the terms and

conditions. Under ordinary contract principles, Tubal-Cain is therefore bound by

those terms and conditions, even if neither Van Huis nor anyone else at Tubal-

Cain ever visited Crowley’s website in order to familiarize himself with those

terms and conditions. As the district court correctly stated, “[t]he fact that a

party chooses not to review a contract, or terms and conditions, when they had

the opportunity does not negate the fact that they are bound by those Terms and

Conditions.” One Beacon Ins. Co., 2010 WL 1463451, at *5; see also Am. Heritage

Life Ins. Co. v. Lang, 321 F.3d 533, 538 (5th Cir. 2003) (“It is a widely accepted

principle of contracts that one who signs or accepts a written instrument will

normally be bound in accordance with its written terms.” (citation and internal

quotation marks omitted)); Restatement (Second) of Contracts § 23 cmt. b

(“[W]here an offer is contained in a writing [a party] may, without reading the

writing, manifest assent to it and bind himself without knowing its terms. . . .

[A]n offeror or offeree who should be aware of [the terms of a writing] may be

bound in accordance with them if he manifests assent.”). Tubal-Cain may not

avoid contractual terms by pleading ignorance of their existence, if the contract

is clear on its face that such terms were intended to be incorporated, Tubal-Cain

had knowledge of and an opportunity to review those terms, and manifested

assent thereto. Cf. 11 Williston at § 30:25. We therefore affirm the district

court’s holding that there was a written agreement between Tubal-Cain and

Crowley which obligated Tubal-Cain to defend, indemnify, and procure insurance

for Crowley.

B. One Beacon’s Insurance Policy

Crowley contends that it was entitled to coverage as an additional insured

under the One Beacon policy issued to Tubal-Cain. The parties do not dispute

that Texas law controls the interpretation of the Policy. See N. Am. Specialty Ins.

Co. v. Debis Fin. Servs., Inc., 513 F.3d 466, 470 (5th Cir. 2007) (“Absent a specific

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and controlling federal rule, cases involving marine insurance contracts are

governed by state law.” (citing Elevating Boats, Inc. v. Gulf Coast Marine, Inc.,

766 F.2d 195, 198 (5th Cir. 1985)). Insurance policies are contracts, and thus “are

controlled by rules of interpretation and construction which are applicable to

contracts generally.” Nat’l Union Fire Ins. Co. of Pittsburgh v. CBI Indus., Inc.,

907 S.W.2d 517, 520 (Tex. 1995) (citations omitted). “The primary concern of a

court in construing a written contract is to ascertain the true intent of the parties

as expressed in the instrument.” Id. (citation omitted). When interpreting

contract language, courts must strive to give meaning to “every sentence, clause,

and word to avoid rendering any portion inoperative.” Balandran v. Safeco Ins.

Co. of Am., 972 S.W.2d 738, 741 (Tex. 1998).

Section IV of the Policy, entitled “Who is an Insured,” provides a list of

persons and entities covered by the Policy. The Policy includes an endorsement,

entitled “Additional Insured and Waiver of Subrogation Endorsement (Specific),”

that modifies Section IV as follows:

1. Section IV of the policy (Who is an Insured) is amended to

include the persons(s) or organization(s) shown below as an Insured

hereunder to the extent that you are obligated by an “insured

contract” to include them as Additional Insured, but only with

respect to “your work.”

2. We waive any right of recovery we may have against such

Additional Insured as shown below because of payments we make for

“bodily injury” or “property damage” arising out of “your work” done

with that Additional Insured, but only to the extent of such

obligation under the “insured contract”. The waiver applies only to

the person(s) or organization(s) shown below:

The space below the endorsement states only

NAME AND ADDRESS

TO BE ADVISED

The district court found that, to be an additional insured under the terms

of the additional insured endorsement to the Policy, Crowley had the burden of

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establishing both (1) that Tubal-Cain was obligated by an “insured contract” to

include Crowley as an additional insured on the One Beacon policy; and (2) that

Crowley was specifically identified in the endorsement as an additional insured.

See Rep. Waste Servs. of Tex., Ltd. v. Empire Indem. Ins. Co., 98 F. App’x 970, 971

(5th Cir. 2004) (“Under Texas law, additional insureds are strangers to an

insurance policy and must bear the burden of proving additional insured status.”

(citing Rep. Nat’l Bank of Dallas v. Nat’l Bankers Life Ins. Co., 427 S.W.2d 76, 80

(Tex. App.—Dallas 1968, write ref’d n.r.e.))).

The district court held that the oral agreement, the RSO, and the

subsequent invoice together constituted one entire transaction or agreement

between the parties that satisfied the “insured contract” requirement as defined

by the Policy. But the district court held that the language of the endorsement

unambiguously required that Crowley also be specifically named in the Policy to

qualify as an additional insured. Crowley’s name does not appear on the

endorsement, and Crowley does not dispute that it is not specifically named

anywhere in the Policy as an additional insured. Because Crowley was not

named, the district court held that Crowley was not entitled to additional insured

coverage.

On appeal, Crowley disputes the district court’s holding that Crowley was

required to be specifically named in the additional insured endorsement or in the

Policy to be eligible for coverage. Crowley contends that Section IV of the Policy

(entitled “Who is an Insured”) includes a list of persons, such as Tubal-Cain’s

executive officers, directors, and employees, who qualify as additional insureds

covered by, but who do not have to be specifically named in, the Policy. Crowley

contends that the additional insured endorsement adds to this list another

category of parties that need not be named in the Policy to be eligible for coverage

as additional insureds: any party that is a party to an “insured contract” with

Tubal-Cain within the meaning of the Policy. Noting that the term “named” does

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not appear in the endorsement, Crowley argues that the endorsement provides

blanket additional insured coverage for those parties with an “insured contract”

with Tubal-Cain. Crowley points to evidence that purportedly shows that it was

Tubal-Cain’s intention to procure blanket coverage for its ship repair customers,

as opposed to specific coverage that required new parties to be added to the Policy

as specific named additional insureds. Crowley contends in the alternative that

the Policy is ambiguous on this point, and should therefore be construed in favor

of coverage.

We agree with One Beacon that Crowley’s reading of the endorsement as

providing coverage for any party that has an “insured contract” with Tubal-Cain

renders meaningless other language in the endorsement. Section 1 of the

endorsement reads: “Section IV of the policy (Who is an Insured) is amended to

include the persons(s) or organization(s) shown below as an Insured hereunder to

the extent that you are obligated by an “insured contract” to include them as

Additional Insured . . . .” (emphases added). Moreover, Section 2 also clearly

applies “only to the person(s) or organization(s) shown below.” The language of

the endorsement unambiguously requires an additional insured to be named in

the endorsement. Therefore, we affirm the district court’s holding that

Crowley—which is not named in the Policy—is not an additional insured under

the Policy.3

C. Attorney’s Fees

Crowley seeks a remand for a calculation of attorney’s fees to which it

claims it is entitled. Crowley argued before the district court that it was entitled

to fees for its defense of the underlying personal injury suit and requested an

3

Because we find that Crowley is not entitled to coverage under the Policy as an

additional insured on this basis, we need not reach One Beacon’s alternative argument that

Crowley did not have an “insured contract” within the meaning of the Policy as required by

the additional insured endorsement.

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additional hearing on the issue of attorney’s fees in the event that it prevailed on

its claims. The district court made no ruling regarding attorney’s fees, and we

therefore remand to the district court for a determination of Crowley’s

entitlement, if any, to attorney’s fees in this case.

III. CONCLUSION

For the foregoing reasons, we AFFIRM the judgment of the district court,

and REMAND for further proceedings consistent with this opinion. Costs shall

be borne equally by Tubal-Cain and Crowley.

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