Petition — D. J. McDuffie, Inc. v. Old Reliable Fire Insurance
Supreme Court brief1980
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‘Gupreme Court, U. 7
FILED
IN THE
MAY 20 1980
DAK, JR., CLERN
Supreme Court of the United
OCTOBER TERM, 1979
29-1842
D. J. McDUFFIE, INC., ET AL.
Petitioners
VERSUS
OLD RELIABLE FIRE INSURANCE
COMPANY, ET AL.
Respondents
PETITION OF D. J. McDUFFIE, INC. AND
WARD DRILLING CO., INC. FOR A WRIT OF
CERTIORARI TO THE COURT OF APPEALS
FOR THE FIFTH CIRCUIT
NEAL D. HOBSON
JOSEPH W. LOONEY
MILLING, BENSON, WOODWARD,
HILLYER, PIERSON & MILLER
1100 Whitney Building
New Orleans, Louisiana 70130
Michael E. Wanek
HULSE, NELSON & WANEK
One Canal Place
New Orleans, Louisiana 70130
ATTORNEYS FOR PETITIONERS,
TABLE OF CONTENTS
Page
Table of Cases, Statutes and Other Authorities ........... ill
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ON ot on, PS 5 5a a doe ath ce
AG SUN 6 5 Sok ai sb ei oo wee Le 8 ee cee .
Statutes Involved ..... babu eek beet k bane eee
Reis PUOIIIINE oes cn oR Oe ee eee 12
ene OE UN OD ok ons a dco oe kee eee 12
Surietiction of the Court Below . ow kc cok i ce cede sens aen 15
Senn Tor SIGNS FOTUUE ook a cs een beh kee een ewe 15
I. The Rule of the Fifth Circuit Per-
mitting Amendments to Removal
Petitions, After the Expiration of the
Time to File a Removal Petition, to
Correct Deficient Allegations and to
Add Missing Allegations Is Contrary
to the Rulings of the District Courts
In Other Circuits, Violates the In-
tention of the Applicable Statutes
Ge Gus Be TNS oc Ss So ve es ck en oe kee 1S
II. The Fifth Circuit and the District
Court Ruled Contrary to the Ruling
Of This Court In Wilburn Boat Co.,
uv. Fireman’s Fund Ins. Co., 348 U.S.
TABLE OF CONTENTS CONTINUED
Page
310, In Holding That General Mari-
time Law Applied to Require the
Avoidance of a Marine Hull Insurance
Policy for Breach of an Implied
Warranty When an Applicable, Valid
Louisiana Statute Provides to the Contrary .......... 18
kc s ces se ces cccccces 23
EE Sr 24
EE A A-1
il
TABLE OF AUTHORITIES
Page
CASES:
American Motorist Insurance Co. v. Ameri-
can Employers Insurance Company,
CR FT ee RE bis obo week ae ewes Venteken seme 17
Bell v. Whittenton, 250 F.Supp. 550
Cee, WO COE book ke ae hGH Ae RS 16
Bradford v. Mitchell Brothers Truck Lines,
247 5, OOO. Sas Cre. VO EOE. oko 655d kde kE SS 16
Browne v. Hartford Fire Ins. Co., 168
Pe, Fe ee Oe SE on eck ane ake aee 17
Carlton Properties, Inc. v. Crescent City
Leasing Corp., 212 F. Supp. 379 (D.C. Pa. 1962)........ 17
Chapman v. Ozark Forest Products, Inc.,
256 F. Sele. B16 CB. ee, PGS? oko kek was dense. 17
Evans-Hailey Company v. Crane Company,
wt Fae Bee Cee, PE, SD seks 5 oo see eee 18
Fireman’s Fund Ins. Co. v. Wilburn Boat
Co., 300 F.2d 631, 647 n. 12 Gh Cit. 1962) 2... eo ss 20
Franks v. City of Okemah, Oklahoma,
75 F . Supp. 199 CED. CR FPSO oa kw i ve Sa eee 17
Garza v. Midland National Insurance Com-
pany, 296 F. Supe. 12 (3.0. Fe. FOG) oc cho ecsekeaes 17
iil
TABLE OF AUTHORITIES CONTINUED
CASES:
Guerrino v. Ohio Casualty Insurance Com-
pony, 423 F.20 419 (ord Chr. 19D)... eee
Gulfstream Cargo Ltd. v. Reliance Ins.
Co., 409 F.2d 974, 981 ns. 19, 20
EE ro 5 oo en chan eis acne ees
Jackson v. Allen, West & Bush, Brown
Brothers & Co., et al., 132 U.S. 27,
POP. Ge, hy Oo Bee I, BP CPOE) ss cee care cece.
Kenney v. Columbia Savings & Loan Assn..,
oP US. 70, 66 Le. TCISD) ... oi eee ness
New York & R.P.S.S. Co. v. Aetna Ins.
ey ape ee ae Ee ) ren
Rodriguez v. Continental Oil Company,
et al., 334 F. Supp. 656 (S.D. Texas, 1971) .......
Rosenberry v. Fredell, 174 F. Supp. 937
eG Fre rer
Saskatchewan Government Ins. Office v.
Spot Park, 242 F.2d 385 (Sth Cir. 1957) .........
Shamrock Oil & Gas Corp. v. Sheets, 313
Se. BP, Oe Be OR. BEE ELTED ca ce reine ees
Smith v. Fisher Pierce Company, 248 F.
BUR. Bie CED. TORR. TPES) 6 oi cc eee
iv
Page
TABLE OF AUTHORITIES CONTINUED
Page
CASES:
Stevens v. Nichols, 130 U.S. 230, 9 S. Ct.
Se Ee Bs Se OUD ys 6 os Voie ee kes oh auake es 16
Teeter v. lowa-Illinois Gas & Electric Com-
pany, 237 F. Supp. 961 (N.D. Towa, 1964) ............ 17
Tropical Marine Products v. Burmingham
Ins. Co. of Pa., 247 F.2d 116 (Sth Cir.
ET Si CUA KS A be OE ee Soe eee eee 22
Van Horn v. Western Elec. Co., 424 F.
ee, Ss ee PU, PEED oo ev ad b cescandacluenes 17
Walsh v. American Airlines, Inc., 264 F.
eh eer, OED oo ah ewe oe a ee 18
Wilburn Boat Co. v. Fireman’s Fund Ins.
Co., 348 U.S. 310, 75 S. Ct. 368, 99
a Ro, |. ee 12, 14, 15, 18, 20, 22, 23
William Kalivas Constr. Co. v. Vent Kontrol
of Kansas City, Inc., 325 F. Supp.
De Se Ps, Ss Ce. SN ae 17
Statutes:
United States Code:
Se as 54-65 ew ain we ees a alee ee 2
i, Ce os on wh ons Ou ee a ees 3, 16, 18
REED 5s We nk wena bn k wae ean 4,13, 14, 15, 16
EE, os 6 acs vw craw x vad actueeeeee ey
TABLE OF AUTHORITIES CONTINUED
Page
Federal Rules of Civil Procedure:
INE SOT Pe het A rs ote eS ata ae ite np eee eee 6
Louisiana Revised Statues:
ee ew kaa ee Rn 8,19
Nl ae i a dk on a Wa wee we oe 8,11,19
I See Garay Bee. Ware na yea eae 9,14, 19
a tO eae ete « Rae 9,14, 19
EE) ICSD Sy SE oe ae hg aie a eRe 10
Other Sources:
ge eR Seer re 22
vi
IN THE
SUPREME COURT OF THE UNITED STATES
OCTOBER TERM, 1979
NO.
D. J. McDUFFIE, INC., ET AL,
Petitioners
VERSUS
OLD RELIABLE FIRE INSURANCE
COMPANY, ET AL.,
Respondents
PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT CF
APPEALS FOR THE FIFTH CIRCUIT
D. J. McDuffie, Inc. and Ward Drilling Co., Inc., plaintiffs
in the captioned cause, respectfully pray that a writ of certiorari
issue to review the judgment of the United States Court of
Appeals for the Fifth Circuit entered in this proceeding on
December 10, 1979 (original decision) and on February 29,
1980 per curiam denial of rehearing and amendment to original
opinion).
CITATIONS TO OPINIONS BELOW
The opinion of the District Court was entered on August 5,
1977, and has not been reported. Copy of the opinion is found
in the appendix to this petition for writs. The original opinion
of the District Court appears at 608 F.2d 145 and is reproduced
in the appendix to this petition for writs. The opinion the
Fifth Circuit Court of Appeals in denying the petition for
rehearing en banc appears at F.2d and is reproduced in the
appendix to this petition for writs.
JURISDICTION
The per curiam opinion of the United States Court of Ap-
peals for the Fifth Circuit denying rehearing in this cause was
entered on February 20, 1980. This petition for certiorari
was filed within ninety (90) days of that date. This Court’s
jurisdiction for this petition is invoked under 28 U.S.C §
1254 (1), 62 Stat. 928. Petitioners here, plaintiffs below,
contest the diversity jurisdiction of the Court based on missing
and defective allegations in defendants’ removal petition. This
jurisdictional question is one of the questions presented in this
petition.
JUDGMENTS BELOW
The judgment of the District Court was entered on August 5,
1977, at 3:30 P.M. Copy of the judgment of the District Court
is reproduced in the appendix to this petition for writs. The
judgment of the Court of Appeals for the Fifth Circuit was
entered on December 10, 1979. Copy of the judgment of the
Court of Appeals for the Fifth Circuit is reproduced in the
appendix to this petition for writs.
STATUTES INVOLVED
UNITED STATES CODE
28 U.S.C, §1254
Courts of Appeals; certiorari; appeal; certified questions.
Cases in the Courts of Appeals may be reviewed by the
Supreme Court by the following methods.
(1) By writ of Certiorari granted upon the petition of
any party to any Civil or Criminal case, before or after rendition
of judgment or decree:
28 U.S.C. §1332
§1332. Diversity of citizenship; anount in controversy; costs
(a) The district courts shall have original jurisdiction of all
civil actions where the matter in controversy exceeds the sum
or value of $10,000, exclusive of interest and costs, and is be-
tween
(1) citizens of different States;
(2) citizens of a State, and foreign states or citizens or sub-
jects thereof; and
(3) citizens of different States and in which foreign states
or citizens or subjects thereof are additional parties.
(b) Except when express provision therefor is otherwise made
in a statute of the United States, where the plaintiff who files
the case originally in the Federal courts is finally adjudged to
be entitled to recover less than the sum or value of $10,000,
computed without regard to any setoff or counterclaim to
which the defendant may be adjudged to be entitled, and ex-
clusive of interest and costs, the district court may deny costs
to the plaintiff and, in addition, may impose costs on the
plaintiff.
(c) For the purposes of this section and section 1441 of this
title, a corporation shall be deemed a citizen of any State
-
by which it has been incorporated and of the State where it
has its principal place of business: Provided further, That in
any direct action against the insurer of a policy or contract
of liability insurance, whether incorporated or unincorporated,
to which action the insured is not joined as a party-defendant,
such insurer shall be deemed a citizen of the State of which
the insured is a citizen, as well as of any State by which the
insurer has been incorporated and of the State where it has
its principal place of business.
(d) The word “State”, as used in this section, includes the
Territories, the District of Columbia, and the Commonwealth
of Puerto Rico.
28 U.S.C. § 1446
§ 1446. Procedure for removal
(a) A defendant or defendants desiring to remove any civil
action or criminal prosecution from a State court shall file
in the district court of the United States for the district and
division within which such action is pending a verified petition
containing a short and plain statement of the facts which
entitle him or them to removal together with a copy of all
process, pleadings and orders served upon him or them in such
action.
(b) The petition for removal of civil action or proceeding shall
be filed within thirty days after the receipt by the defendant,
through service or otherwise, of a copy of the initial pleading
setting forth the claim for relief upon which such action or
proceeding is based, or within thirty days after the service of
summons upon the defendant if such initial pleading has then
been filed in court and is not required to be served on the
defendant, whichever period is shorter.
If the case stated by the initial pleading is not removable,
petition for removal may be filed within thirty days after
-4-
receipt by the defendant, through service or otherwise, of a
copy of an amended pleading, motion, order or other paper
from which it may first be ascertained that the case is one
which is or has become removable.
(c) The petition for removal of a criminal prosecution may be
filed at any time before trial.
(d) Each petition for removal of a civil action or proceeding,
except a petition in behalf of the United States, shall be accom-
panied by a bond with good and sufficient surety conditioned
that the defendant or defendants will pay all costs and disburse-
ments incurred by reason of the removal proceedings should
it be determined that the case was not removable or was im-
properly removed.
(e) Promptly after the filing of such petition and bond the
defendant or defendants shall give written notice thereof to
all adverse parties and shall file a copy of the petition with
the clerk of such State court, which shall effect the removal
and the State court shall proceed no further unless and until
the case is remanded.
(f) If the defendant or defendants are in actual custody on
process issued by the State court, the district court shall issue
its writ of habeas corpus, and the marshal shall thereupon take
such defendant or defendants into his custody and deliver a
copy of the writ to the clerk of such State court.
28 U.S.C. § 1653
§ 1653. Amendment of pleadings to show jurisdiction
Defective allegations of jurisdiction may be amended, upon
terms, in the trial or appellate courts.
FEDERAL RULES OF CIVIL PROCEDURE
Rule 15
Rule 15.
AMENDED AND SUPPLEMENTAL PLEADINGS
(a) Amendments. A party may amend his pleading once as a
matter of course at any time before a responsive pleading is
served or, if the pleading is one to which no responsive pleading
is permitted and the action has not been placed upon the trial
calendar, he may so amend it at any time within 20 days
after it is served. Otherwise a party may amend his pleading
only by leave of court or by written consent of the adverse
party; and leave shall be freely given when justice so requires.
A party shall plead in response to an amended pleading within
the time remaining for response to the original pleading or
within 10 days after service of the amended pleading, which-
ever period may be the longer, unless the court otherwise
orders.
(b) Amendments to Conform to the Evidence. When issues
not raised by the pleadings are tried by express or implied
consent of the parties, they shall be treated in all respects as
if they had been raised in the pleadings. Such amendment of
the pleadings as may be necessary to cause them to conform to
the evidence and to raise these issues may be made upon motion
of any party at any time, even after judgment; but failure so
to amend does not affect the result of the trial of these issues.
If evidence is objected to at the trial on the ground that it is
not within the issues made by the pleadings, the court may
allow the pleadings to be amended and shall do so freely when
the presentation of the merits of the action will be subserved
thereby and the objecting party fails to satisfy the court that
the admission of such evidence would prejudice him in main-
taining his action or defense upon the merits. The court may
die
grant a continuance to enable the objecting party to meet
such evidence.
(c) Relation Rack of Amendments. Whenever the claim or
defense asserted in the amended pleading arose out of the
conduct, transaction, or occurrence set forth or attempted to
be set forth in the original pleading, the amendment relates
back to the date of the original pleading. An amendment
changing the party against whom a claim is asserted relates
back if the foregoing provision is satisfied and, within the
period provided by law for commencing the action against
him, the party to be brought in by amendment (1) has received
such notice of the institution of the action that he will not
be prejudiced in maintaining his defense on the merits, and
(2) knew or should have known that, but for a mistake con-
cerning the identity of the proper party, the action would
have been brought against him.
The delivery or mailing of process to the United States
Attorney, or his designee, or the Attorney General of the
United States, or an agency or officer who would have been
a proper defendant if named, satisfies the requirement of
clauses (1) and (2) hereof with respect to the United States
or any agency or officer thereof to be brought into the action
as a defendant.
(d) Supplemental Pleadings. Upon motion of a party the court
may, upon reasonable notice and upon such terms as are just,
permit him to serve a supplemental pleading setting forth
transactions or occurrences or events which have happened
since the date of the pleading sought to be supplemented.
Permission may be granted even though the original pleading
is defective in its statement of a claim /or relief or defense.
If the court deems it advisable that the adverse party plead to
the supplemental pleading, it shall so order, specifying the
time therefor.
REVISED STATUTES
ee ee se
§ 2. Insurance regulated in the public interest
A. Insurance is a business affected with the public interest
and it is the purpose of this Code to regulate that business in
all its phases.
L.S.A.-R.S. 22: 6
Kinds of insurance .
Insurance shall be classified and defined as follows:
(13) Marine and transportation (inland marine).
(a) Insurance against loss or damage to vessels, craft, aircraft,
vehicles of every kind, (excluding vehicles operating under their
own power or while in storage not incidental to transportation)
as well as all goods, freights, cargoes, merchandise, effects,
disbursements, profits, moneys, bullion, precious stones,
securities, choses in action, evidence of debt, valuable papers,
bottomry and respondentia interests and all other kinds of
property and interests therein, in respect to, appertaining to or
in connection with any or all risks or perils of navigation,
transit or transportation, including war risks, on or under any
seas or Other waters, on land or in the air, or while being assem-
bled, packed, crated, baled, compressed or similarly prepared
for shipment or while awaiting the same or during any delays,
storage, trans-shipment or reshipment incident thereto, includ-
ing marine builder’s risks and all personal property floater
risks;
(b) Insurance against loss or damage to persons or property
in connection with or appertaining to marine, inland marine,
transit or transportation insurance, including liability for loss
of or damage to either arising out of or in connection with the
construction, repair, operation, maintenance, or use of the
subject matter of such insurance, (but not including life in-
surance or surety bonds nor insurance against loss by reason
of bodily injury to’ the person arising out of the ownership,
maintenance or use of automobiles);
(e) “Marine protection and indemnity insurance,’ meaning
insurance against, or against legal liability of the insured for,
loss, damage, or expense incident to ownership, operation,
chartering, maintenance, use, repair or construction of any
vessel, craft or instrumentality in use in ocean or inland water-
ways, including liability of the insured for personal injury,
illness or death or for loss of or damage to the property of an-
other person.
L.S.A. - R.S. 22: 619
§ 619. Warranties and misrepresentations in negotiation; ap-
plication
A. Except as provided in Sub-section B of this Section and
R.S. 22:692, no oral or written misrepresentation or warranty
made in the negotiation of an insurance contract, by the insured
or in his behalf, shall be deemed material or defeat or avoid the
contract or prevent it attaching, unless the misrepresentation
or warranty is made with the intent to deceive.
B. In any application for life or health and accident in-
surance made in writing by the insured, all statements therein
made by the insured shall, in the absence of fraud, be deemed
representations and not warranties. The falsity of any such
statement shall not bar the right to recovery under the contract
unless such false statement was made with actual intent to
deceive or unless it materially affected either the acceptance
of the risk or the hazard assumed by the insurer.
-9.
L.S.A. - R.S. 22: 692
§ 692. Breach of warranties and conditions of fire policies
and applications therefor
No policy of fire insurance issued by any insurer on property
in this state shall hereafter be declared void by the insurer
for the breach of any representation, warranty or condition
contained in the said policy or in the application therefor.
Such breach shall not avail the insurer to avoid liability unless
such breach (1) shall exist at the time of the loss, and be either
such a breach as would increase either the moral or physical
hazard under the policy, or (2) shall be such a breach as would
be a violation of a warranty or condition requiring the insurer
to take .-d keep inventories and books showing a record of
his business. Notwithstanding the above provisions of this
Section, such a breach shall not afford a defense to a suit on
the policy if the fact or facts constituting such a breach existing
at the time of the issuance of the policy and were, at such time,
known to the insurer or to any of his or its officers or agents,
or if the fact or facts constituting such a breach exited at the
time of the loss and were, at such time, known to the insurer
or to any of his or its officers or agents, except in case of fraud
on the part of such officer or agent or the insured, or collusion
between such officer or agent and the insured.
L.S.A. - R.S. 22:1403
§ 1403. Scope of rate regulation
A. This Part applies to fire, marine and transportation (inland
marine), title insurance and casualty insurance risks or opera-
tions in this state.
B. For the purpose of this Part, fire insurance includes insur-
ance coverage as defined in paragraphs (10), (11b), and (12) of
-10-
R.S. 22:6, and such other coverages as are usually written by
fire insurers other than motor vehicle insurance; marine and
transportation (inland marine) insurance includes personal
floater insurance and the kinds of insurance defined in para-
graph (13) of R.S. 22:6 and such other inland marine coverages
as may be so established by interpretation, by ruling of the
commission, or by general customs of the business; title insur-
ance includes the kind of insurance coverage as defined in
paragraph (9) of R.S. 22:6, and casualty insurance includes
the kinds of casualty insurance defined in paragraphs (3), (4).
(5), (6), except personal property floater, (7), (8), (lla) of
R.S. 22:6, and such other coverages as are usually written by
casualty insurers.
C. This Part shall not apply:
1. To reinsurance, other than joint reinsurance to the extent
stated in R.S. 22:1414.
2. To insurance of vessels or craft, their cargoes, marine
builders’ risks, marine protection and indemnity; or other risks
commonly insured under marine, as distinguished from inland
marine, insurance policies.
3. To insurance against loss or damage to aircraft or against
liability, other than workmen’s compensation and employers’
liability arising out of the ownership, maintenance or use of
aircraft, nor to insurance of hulls of aircraft, including their
accessories and equipment.
4. To health and accident insurance.
D. If any kind of insurance, subdivision of combination
thereof or type of coverage is subject to regulation under
Sections of this Part, the provisions of which conflict, an
insurer to which such conflicting provisions are otherwise
applicable shall file with the commission a designation as to
which of said sections shall be applicable to it with respect
a
to such kind of insurance, subdivision or combination thereof
or type of coverage.
QUESTIONS PRESENTED
I.
Whether the rule of the Fifth Circuit, which is contrary to
the rulings of district courts of several other circuits, is correct
in holding that a removal petition may be amended, after the
expiration of the time to file a removal petition, to correct
deficient allegations and to furnish missing allegations necessary
to show @iversity jurisdiction.
Il.
Whether the District Court and Court of Appeals ignored
the clear holding of the United States Supreme Court in Wil-
burn Roat Co. v. Fireman’s Fund Ins. Co., 348 U.S. 310, when
those courts held that United States general admiralty law
applied to avoid a marine hull insurance policy for breach of
an implied warranty when an applicable, valid Louisiana statute
provides that no breach of warranty may void the policy unless
made with the intent to deceive.
STATEMENT OF THE CASE
This case was originally commenced in the Tweny-Fourth
Judicial District Court for the Parish of Jefferson in the State
of Louisiana, when D. J. McDuffie, Inc., former owner of the
inland barge drilling rig known as the RIG NO. 15, formerly
the DELSEY D, commenced this suit for $275,000.00, and
certain additional amounts, against defendant underwriters,
Old Reliable Fire Insurance Company, Yosemite Insurance
Company and Reserve Insurance Company on a policy of
marine hull insurance insuring the vessel. McDuffie’s interest
<a
in the vessel and in the policy arose from its position as owner
of the vessel, which was, however, subject to a lease with option
to purchase in favor of Ward Drilling Co., Inc. Subsequently,
the vessel, where it then lay mostly submerged and upside down
in the deep water ship channel connecting New Orleans with
the Gulf of Mexico, was transferred by McDuffie to Ward
Drilling, together with all claims pursuant to the insurance
policy which forms the subject of this suit, McDuffie, however,
retaining an interest in the recovery under the policy.
Defendant insurance companies timely filed a removal
petition.
Subsequently, a motion to remand was filed on the grounds
that the removal petition failed to allege diversity of citizenship
between the plaintiffs and defednats as of the time of the filing
of the original suit and as of the time of the filing of the re-
moval petition, and failed to allege the location of the principal
offices of defendant insurance corporations.
Subsequent to the thirty (30) day period permitted by
28 U.S.C. §1446 for filing removal petitions, defendants sub-
mitted an amended removal petition furnishing the missing
allegations. The District Court permitted the filing of this
amended petition and then held that the amended petition
cured the missing removal allegations.
Petitioners sought, and were denied, the right to certify
this question to the Court of Appeals for review at that time.
Subsequently, Ward Drilling Co., Inc. intervened in the suit
and defendants answered denying liability for various reasons,
including an alleged breach of the warranty of seaworthiness.
Following an extensive trial on the merits, the District Court
held that the RIG NO. 15 was unseaworthy as of the time of
the inception of the policy, and applied United States general
maritime law, to the exclusion of Louisiana state law, to hold
-13-
that this served to acoid the policy for breach of an implied
warranty of seaworthiness at the inception of the policy.
Louisiana Revised Statutes, Title 22, Section 619 provides in
part as follows:
“Warranties and misrepresentations in negotiation;
applications
A. Except as provided in Sub-section B of this Section
and R.S. 22:692, no oral or written misrepresentation or
warranty made in the negotiation of an insurance contract,
by the insured or in his behalf, shall be deemed material
or defeat or avoid the contract or prevent it attaching,
unless the misrepresentation or warranty is made with the
intent to deceive.” _1/
On appeal to the United States Court of Appeals for the
Fifth Circuit, that court affirmed holding:
1.The faulty allegations of citizenship could be amended
by an amended removal petition filed after the 30 day
period provided in 28 U.S.C. § 1446(a); and
2.That general maritime law applied to the exclusion of
Louisiana law to hold that a breach of warranty at the
inception of a policy avoided the policy.
Petitioners’ petition for rehearing and for rehearing en banc
directed to the Fifth Circuit was denied, the Fifth Circuit,
however, amending its original opinion to insert a footnote
distinguishing Wilburn Roat Co. v. Fireman’s Fund Ins. Co.,
1 Sub-section B is not applicable because it refers to life or health
and accident policies, and R.S. 22:692 refers to fire policies.
-14-
348 U.S. 310, on the grounds that several Fifth Circuit opinions
announced subsequently to this Court’s opinion in the Wilburn
Roat case in 1955 sufficed to establish a federal rule of general
maritime law concerning implied warranties of seaworthiness
sufficient to vitiate the ruling of this Court in Wilburn Boat.
After the appeal was lodged in the Fifth Circuit, Reserve
Insurance Company was put into liquidation. The Fifth Circuit
denied a motion to stay this case pending determination of the
liquidation proceedings.
JURISDICTION OF THE COURT BELOW
As set forth above, this case was removed by defendants from
the Twenty-Fourth Judicial District Court for the Parish of
Jefferson, State of Louisiana, to the United States District
Court for the Eastern District of Louisiana based on a defective
removal petition, which was amended after the expiration of
the 30 day period provided by 28 U.S.C. §1446. Petitioners
contest this jurisdiction and this jurisdiction is one of the issues
contained in this petition for certiorari.
REASONS FOR GRANTING WRITS
I.
THE RULE OF THE FIFTH CIRCUIT PERMIT-
TING AMENDMENTS TO REMOVAL PETITIONS
AFTER THE EXPIRATION OF THE TIME TO FILE
A REMOVAL PETITION TO CORRECT DEFI-
CIENT ALLEGATIONS AND TO ADD MISSING
ALLEGATIONS IS CONTRARY TO THE RULINGS
OF THE DISTRICT COURTS IN OTHER CIR-
CUITS, VIOLATES THE INTENTION OF THE
APPLICABLE STATUTES AND SHOULD BE
REVERSED.
o} 5-
The United States Court of Appeals for the Fifth Circuit
affirmed the District Court in permitting an amendment to the
allegations of a removal petition to correct missing allegations
with respect to diversity after the 30 day period for removal
granted by 28 U.S.C. 81446 had expired and after a motion
to remand had been filed and brought on for hearing.
Petitioners, plaintiffs below, contend that the rule of the
Fifth Circuit permitting amendments of removal petitions to
correct defective and missing allegations of citizenship with
respect to diversity jurisdiction is incorrect and suggest that
this Court should grant writs to review this rule and to clear up
a conflict in decisions between the Fifth Circuit and the District
Courts of other districts.
The original removal petition failed to allege that diversity
of citizenship pursuant to 28 U.S.C. §1332 existed both as
of the time of the filing of the original complaint and as of the
time of the filing of the removal petition. 2/Further the peti-
tions failed to allege the principal place of business of the
defendant corporations, which is likewise an improper allega-
tion.
It is beyond dispute that without the amendment, the lack
of these allegations was fatal to the diversity jurisdiction of
the District Court. Jackson v. Allen, West & Bush, Brown
Brothers & Co., et l, 132 U.S.27, 10 S.Ct. 9, 33 L.Ed. 249
(1889); Stevens v. Nichols, 130 U.S. 230, 9 S.Ct. 518, 32 L.Ed.
914 (1889); Rodriguez v. Continental Oil Company, et al, 334
F.Supp. 656 (S.D. Texas, 1971); Bell v. Whittenton, 250
F.Supp. 550 (W.D. Missouri, 1966); Smith v. Fisher Pierce
Company, 248 F.Supp. 815 (E.D. Tenn. 1965); Bradford v.
Mitchell Brothers Truck Lines, 217 F.Supp. 525 (N.D. Calif.
2/ Copies of the original petition and of the removal petition are
reprinted in their entirety in the appendix.
-16-
(N.D. Calif. 1963); Garza v. Midland National Insurance Com-
pany, 256 F.Supp. 12 (S.D. Fla. 1966); Guerrino v. Ohio
Casualty Insurance Company, 423 F.2d 419 (3rd Cir. 1970):
Chapman v. Ozark Forest Products, Inc., 246 F.Supp. 816
(W.D. Mo. 1965); Teeter v. Iowa-Illinois Gas & Electric Com-
pany, 237 F.Supp. 961 (N.D. Iowa, 1964); Franks v. City of
Okemah, Oklahoma, 175 F.Supp. 193 (E.D. Okla., 1959):
and Browne v. Hartford Fire Insurance Company, 168 F.Supp.
796 (N.D. Ill. 1959).
When the motion to remand was filed in the District Court,
well after the 30 day period for removal had expired, defen-
dants moved to amend their petition to provide the missing
allegations with respect to the principal place of business and
to amend the defective allegations. The District Court per-
mitted this amendment and denied the motion to remand.
The Fifth Circuit has consistently held that amendments
should be freely permitted in order to permit the correction
of defective allegations with respect to diversity of citizenship
or to permit the addition of missing allegations which could
have been made but were not made at the time of the filing
of the removal petition. The Fifth Circuit relies on Rule 15(a)
of the Federal Rules of Civil Procedure and on 28 U.S.C.
§ 1653. See also American Motorist Insurance Co. v. American
Employers Insurance Company, 608 F.2d 624 (1979), where
the Fifth Circuit, on its own motion, remanded a case for
amendment of the defective removal petition.
District courts in other districts have held to the contrary
that amendment is not permitted after the time for removal
has passed. Roseberry v. Fredell, 174 F.Supp. 937 (D.C. Ky.
1959); Carlton Properties, Inc. v. Crescent City Leasing Corp.,
212 F.Supp. 370 (D.C. Pa. 1962); Van Horn v. Western Elec.
Co., 424 F.Supp. 920 (E.D. Mich. 1977); William Kalivas
Constr. Co. v. Vent Kontrol of Kansas City, Inc., 325 F.Supp.
1008 (W.D. Mo. 1970); Brown v. Hartford Fire Ins. Co., 168
ft.
F.Supp. 796 (D.C. Ill. 1959); Walsh v. American Airlines, Inc.,
264 F.Supp. 514 (E.D. Ky. 1967).
Still other district courts have held that amendments should
be permitted to correct defective allegations but not to supply
missing allegations. Evans-Hailey Company v. Crane Company,
207 F.2d 193 (D.C. Tenn. 1962). This would seem to be in
accord with the early cases from this Court. Kenney v. Colum-
bia Savings & Loan Assn., 191 U.S. 78, 48 L.Ed. 103 (1903).
The removal statute should be strictly construed and removal
petitions should be granted only where the dictates of Congress
have been strictly complied with. Shamrock Oil & Gas Corp. v.
Sheets, 313 U.S. 100, 85 L.Ed 1214 (1941).
It is submitted that the policy of the Fifth Circuit freely
permitting amendments of removal petitions both to permit
the correction of defective allegations and to permit the supply-
ing of missing allegations necessary for removal of cases pursu-
ant to diversity jurisdiction as set forth in 28 U.S.C. §1332
runs contrary to the intent of Congress, permits overcrowding
of the courts, and is contrary of the decisions of the district
courts in many other circuits. Accordingly, it is submitted
that writs to be granted to review this rule of the Fifth Circuit
and to remove the conflict between the circuits.
II.
THE FIFTH CIRCUIT AND THE DISTRICT
COURT RULED CONTRARY TO THE RULING OF
THIS COURT IN WILBURN BOAT CO. V. FIRE-
MAN'S FUND INS. CO., 348 U.S. 310, IN HOLD-
ING THAT GENERAL MARITIME LAW APPLIED
TO REQUIRE THE AVOIDANCE OF A MARINE
HULL INSURANCE POLICY FOR BREACH OF
AN IMPLIED WARRANTY WHEN AN APPLI-
CABLE, VALID LOUISIANA STATUTE PROVIDES
TO THE CONTRARY.
-18-
The District Court held that a breach of an implied warranty
of seaworthiness at the inception of an insurance policy served
to avoid the policy and defeat plaintiffs’ claims pursuant
thereto. 3/This finding by the District Court was on the basis
that the general maritime law of marine insurance applied and a
holding that there was an implied warranty of seaworthiness
imposed on all policies. In doing so, the court refused to apply
Louisiana law, and, in particular, La. R.S. 22:619, which
provides in part:
‘Warranties and misrepresentations in negotiation; appli-
cations
A. Except as provided in Subsection B of this Section
and R.S. 22:692, no oral or written misrepresentation or
warranty made in the negotiation of an insurance contract,
by the insured or in his behalf, shall be deemed material
or defeat or avoid the contract or prevent it attaching,
unless the misrepresentation or warranty is made with the
intent to deceive.” 4/
3/The face amount of the policy was $275,000, and plaintiffs claim
a further amount of $68,750, being 25% of the face amount as sue and
labor and salvage expenses, together with attorneys’ fees, penalties and
interest for failure to pay. It was not contested in the District Court that
the face amount of the policy and the sue and labor expenses at least
would be due but for the court’s holding that the policy was avoided by
the breach of warranty and the court’s further finding that the casualty
resulted at least in part from the cordition of the vessel. The Fifth Circuit
did not consider the causation problems but relied entirely on the avoid-
ance of the policy as a result of breach of warranty.
4/ Sub-section B and R.S. 22:692 do not apply. Sub-section A is made
applicable to marine hull insurance by the Louisiana Insurance Code
R.S. 22:2 and R.S. 22:6.
-19-
There was no evidence that any breach of warranty was made
with any intent to deceive. It is clear that if this Louisiana
statute were found to apply, the policy would not be found
to be void.
The Fifth Circuit affirmed stating that this court’s decision
in Wilburn Boat Co. v. Fireman’s Fund Insurance Co., 348
U.S. 319, 75 S.Ct. 368, 99 L.Ed. 337 (1955), does not apply
because since the pronouncement of Wilburn Boat by this
court several intervening Fifth Circuit cases had established
a general maritime rule to the effect that a breach of warranty
of seaworthiness at the inception of the policy serves to avoid
the policy. Gulfstream Cargo Ltd. v. Reliance Ins. Co., 409
F.2d 974, 981 ns. 19, 20 (Sth Cir. 1969); Fireman’s Fund
Ins. Co. v. Wilburn Boat Co., 300 F.2d 631, 647 n. 12 (Sth Cir.
1962); and Sadkatchewan Government Ins. Office v. Spot Park,
242 F.2d 385 (Sth Cir. 1957).
It is submitted that this decision by the Fifth Circuit, and
the similar decision by the District Court, is directly contrary
to the rule pronounced by this Court in Wilburn Boat, and
that writs should be granted and this opinion and judgment
reversed.
No explanation by this counsel is needed to explain the
decision by this Court in Wilburn Boat. This Court, at 99
L.Ed. 337, at 346, stated:
“Under our present system of diverse state regula-
tions, which is as old as the Union, the insurance business
has become one of the great enterprises of the Nation.
Congress has been exceedingly cautious about disturbing
this system even as to marine insurance where Congres-
sional power is undoubted. We, like Congress, leave the
regulation of marine insurance where it has been - with
the State.” (footnotes omitted) 99 L.Ed. 337, at 346
-20-
Earlier in that decision, this Court, in the opinion by Justice
Rlack, considered the undoubted power of the federal courts
to fashion an admiralty rule, considered the possible alterna-
tives, and clearly rejected them. Justice Black’s language was
as follows:
In this very case, should we attempt to fashion
an admiralty rule governing policy provisions, we
*(320]
would at *once be faced with the difficulty of
determining what should be the consequences of
breaches. We could adopt the old common-law
doctrine of forfeiting all right of recovery in the
absence of strict and literal performance of warran-
ties, but that is a harsh rule. Most States, deeming
the old rule a breeder of wrong and injustice, have
abandoned it in whole or in part. But that has left
open the question of what kind of new rule could be
substituted that would be fair both to insurance
companies and policyholders. Out of their abundant
broad experience in regulating the insurance business,
some state legislatures have adopted one kind of new
rule and some another. Some States for example
have denied companies the right to forfeit policies
in the absence of an insured’s bad faith or fraud.
Other States have thought this kind of rule inade-
quate to stamp out forfeiture practices deemed evil.
The result, as this Court has pointed out, has been
state statutes like that of Texas which “‘go to the root
of the evil” and forbid forfeiture for an insured’s
breach of policy terms unless the breach actually
contributes to bring about the loss insured against.
Northwestern Nat. L. Ins. Co. v. Riggs, 203 US 243,
253, 254, 51 L ed 168, 172, 173,27 S Ct 126,7 Ann
Cas 1104. Thus there are a number of other possible
rules from which this Court could fashion one for
admiralty. But such a choice involves varied policy
21.
considerations and is obviously one which Congress is
peculiarly suited to make. And we decline to under-
take the task.
It is readily apparent that the Fifth Circuit chose to ignore
this decision of this Court and went ahead, nevertheless, to
fashion its own rules concerning an implied warranty of sea-
worthiness with respect to marine insurance policies. It should
be noted that all of the cases cited by the Fifth Circuit in
support of its rule, Gulfstream Cargo Ltd. v. Reliance Ins. Co.,
409 F.2d 974 (Sth Cir. 1969); Tropical Marine Products v.
Birmingham Fire Ins. Co. of Pa., 247 F.2d 116 (Sth Cir. 1957);
and Sadkatchewan Government Ins. Office v. Spot Park, 242
F.2d 385 (Sth Cir. 1957), arose after this Court’s decision in
Wilburn Boat, and were directly contrary to the instructions
given therein.
It should further be noted that even the concurring opinion
by Justice Frankfurter, which would have preferred to restrict
the ruling in Wilburn Boat to strictly inland water policies is
not adverse to petitioners here. The evidence presented below
clearly indicated that the RIG NO. 15 had been wholly within
the inland waters of the State of — for the entire
period for which the policy was in effect. =
5/ Plaintiffs further submitted to both the District Court and the
Fifth Circuit authorities to show that even the alleged general maritime
law implied warranty of seaworthiness at the inception of the policy
did not apply because the drilling rig was, in fact, on a voyage at the time
the policy attached. See New York & R.P.S.S. Co. v. Aetna Ins. Co.,
204 Fed. 225 (2nd Cir. 1913); Healy, 41 Tul. L. Rev. p. 235. Neither
the District Court nor the Fifth Circuit confronted this argument.
«22
For the foregoing reasons, it is submitted that this petition
for writ of certiorari should be granted and that after due
proceedings had, this matter should be remanded to the District
Court, with instructions this matter be reconsidered in light of
the Louisiana statute which holds that a breach of warranty
shall not void the policy unless there be a showing of an intent
to deceive.
CONCLUSION
Wherefore, it is submitted that writs should be granted, and
that after due proceedings had, this matter should be remanded
to the District Court, with instructions that this matter be
remanded to the state court for further proceedings.
Alternatively, it is submitted that in the event that diversity
jurisdiction is found to exist, this matter should then be re-
manded to the District Court, with instructions that further
proceedings be had pursuant to Louisiana law in accordance
with the rule established in Wilburn Boat Co. v. Fireman’s Fund
Ins. Co., 348 U.S. 310, and in accordance with the law of
Louisiana with respect to the effect of an alleged breach of
warranty in a marine insurance policy.
Respectfully submitted,
oe 2 eS
Neal D. Hobson
aT
(Moseph W. Looney
; lb oe
Michael E. Wanek
Counsel for Petitioners
«2%.
CERTIFICATE OF SERVICE
I hereby certify that copy of the above and foregoing was
mailed, postage prepaid, to counsel for respondents, Mr. Benja-
min W. Yancey, International Trade Mart, New Orleans, Louisi-
ana 70130, this 20th day of May, 1980.
hal as —fuctn OS.
-24.
APPENDIX
A-1
D. J. MCDUFFIE, INC. v. OLD REL. FIRE INS.
D. J. McDUFFIE, INC., et al.,
Plaintiffs-Appellants,
Vv.
OLD RELIABLE FIRE INSURANCE CO. et al.,
Defendants-Appellees.
No. 77-2968.
United States Court of Appeals,
Fifth Circuit.
Feb. 20, 1980.
Action on marine hull policy was dismissed by the United
States District Court for the Eastern District of Louisiana,
Edward J. Boyle, Sr., J., and insureds appealed. The Court of
Appeals affirmed, 608 F.2d 145. Thereafter, the Court of
Appeals denied rehearing but amended opinion by including
footnote holding that it was not required that federal court’s
decision on policy coverage be governed by appropriate state
law, in light of existence of a federal maritime rule extending
an implied warranty of seaworthiness to a maritime hull policy.
Rehearing denied.
Admiralty Key 1.20(2)
Where there existed a federal maritime rule extending an
implied warranty of seaworthiness to a maritime hull insurance
policy, federal court, in suit on such a policy was not prevented
from deciding case with reference to established federal mari-
time rules and was not required to govern its decision on policy
coverage by appropriate state law.
Appeal from the United States District Court for the Eastern
District of Louisiana.
ON PETITION FOR REHEARING AND PETITION FOR .,
REHEARING EN BANC ‘s
(5 Cir. 1979, 608 F.2d 145)
Before THORNBERRY, GEE and HATCHETT, Circuit
Judges.
PER CURIAM:
On consideration of the Petition for Rehearing and Petition
for Rehearing En Banc, the panel has determined that it would
be helpful to include a discussion of Wilburn Boat Co. v. Fire-
man’s Fund Insurance Co., 348 U.S. 310, 75 S.Ct. 368, 99
L.Ed. 337 (1955). Accordingly, the opinion is amended by
including a footnote following the citation to Gulfstream Cargo,
Ltd. v. Reliance Insurance Co., on page 147, last paragraph,
left column, twenty lines from the bottom of the page. The
footnote shall read as follows:
Wilburn Boat Co. v. Fireman’s Fund Insurance Co.,
348 U.S. 310, 75 S.Ct. 368, 99 L.Ed. 337 (1955), does not
require our decision on policy coverage be governed by
appropriate Louisiana law. As noted by Justice Harlan in
Kossick v. United Fruit Co., 365 U.S. 731, 81 S.Ct. 886,
6 L.Ed.2d 56 (1961), and as this court recognized in
Gulfstream and in the final Wilburn case, the Supreme
Court premised its application of state law in Wilburn on
the lack of a federal maritime rule governing the matter
there presented. See, Gulfstream Cargo Ltd. v. Reliance
A-3
Ins. Co., 409 F.2d 974, 981 ns.19, 20 (Sth Cir. 1969):
Fireman’s Fund Ins. Co. v. Wilburn Boat Co., 300 F.2d
631, 647 n.12 (Sth Cir. 1962). Our circuit acknowledges
the existence of a federal maritime rule extending an
implied warranty of seaworthiness to a maritime hull
insurance policy. Gulfstream; Tropical Marine Producis
v. Birmingham Fire Ins. Co. of Pa., 247 F.2d 116 (Sth
Cir. 1957); Saskatchewan Government Ins. Office v.
Spot Park, 242 F.2d 385 (Sth Cir. 1957). In light of this
rule, we are not prevented by the Wi/burn holding from
deciding the case with reference to established federal
maritime rules governing the warranty involved.
The Petition for Rehearing on behalf of McDuffie and Ward
Drilling Co. is DENIED and no member of this panel nor
Judge in regular active service on the Court having requested
that the Court be polled on rehearing en banc (Rule 35 Federal
Rules of Appellate Procedure; Local Fifth Circuit Rule 16),
the Petition for Rehearing En Banc is DENIED.
Adm. Office, U.S. Courts - West Publishing Company,
St. Paul, Minn.
A-4
D. J. McDUFFIE v. OLD RELIABLE FIRE INS.
D. J. McDUFFIE, INC., et al.,
Plaintiffs-Appellants,
Vv.
OLD RELIABLE FIRE INSURANCE CO., et al.,
Defendants-Appellees.
No. 77-2968.
United States Court of Appeals,
Fifth Circuit.
Dec. 10, 1979.
In action removed from state court, the United States Dis-
trict Court for the Eastern District of Louisiana, Edward J.
Boyle, Sr., J., dismissed action by insureds against insurers
seeking to recover proceeds of marine hull policy, and insureds
appealed. The Court of Appeals, Hatchett, Circuit Judge, held
that: (1) faulty allegations of diversity jurisdiction in original
removal petition were properly cured in amended petition;
and (2) evidence was sufficient to support finding that in-
sureds breached their implied warranty of seaworthiness at
outset of policy period, thereby voiding policy.
Affirmed.
1. Removal of Cases Key 94
Failure to specifically allege in original petition for removal
citizenship of parties at time suit was brought and at time
petition was filed was not fatal omission which could not be
cured by amendment; such faulty allegations were proximately
A-5S
cured in amended petition for removal. 28 U.S.C.A. §§ 1441
(a) 1653; Fed.Rules Civ.Proc. rule 15(a), 28 U.S.C.A.
2. Removal of Cases Key 94
Amendment of petition for removal to cure defective allega-
tion of diversity jurisdiction is authorized by terms of statute
providing that defective allegation of jurisdiction may be
amended, upon terms, in trial of appellate courts. 28 U.S.C.A.
§§ 1441(a), 1653.
3. Insurance Key 336.6
In action by insureds against insurers seeking to recover
under marine hull policy, evidence was sufficient to support
finding that insureds breached their implied warranty of sea-
worthiness at outset of policy period, thereby voiding policy.
Appeal from the United States District Court for the Eastern
District of Louisiana.
Before THORNBERRY, GEE and HATCHETT, Circuit
Judges.
HATCHETT, Circuit Judge:
D. J. McDuffie, Inc. (McDuffie) and Ward Drilling Company,
Inc. (Ward) appeal an order of the district court dismissing
their action for proceeds of an insurance policy underwritten
by the appellees. We affirm.
This action stems from the capsize of a submersible drilling
barge (Rig No. 15) owned by McDuffie and operated by Ward.
A-6
At the time of the capsize, Rig No. 15 was insured by a marine
hull policy in the amount of $275,000, which covered loss due
to “Perils .. . of the Seas” and “‘all other like Perils.” The policy
also extended coverage for damage “‘directly caused” by:
(j) Bursting of boilers, or any latent defect in the muchin-
ery or Hull...
(n) Negligence of the masters, mariners, charterers, engin-
eers, pilots, and other members of the drilling crew;
provided such loss or damage has not resulted from want
of due diligence by the owners of the vessel .. ..
When appellees refused to provide coverage, McDuffie
brought suit in state court. On petition of the insurers, the case
was removed to the federal district court by way of original
diversity jurisdiction under 28 U.S.C. § 1441(a). Citing evi-
dence demonstrating the extensively deteriorated condition
of the vessel, the district court found that the appellants had
breached their implied warranty of seaworthiness attaching
at the outset of the policy period. Breach of the implied war-
ranty rendered the policy ineffective and made unnecessary
a determination of actual causation. Nevertheless, the judge
went on to conclude that in any event the loss did not result
from any of the insurable causes.
The appellants argue that: (1) the case was improperly
removed to federal court; (2) the district court erred in de-
claring the policy void for breach of implied warranty; and
(3) the loss of the rig was caused at least in part by one or
more insured perils.
[1] In their original petition for removal the insurers failed
to specifically allege the citizenship of the parties at the time
the suit was brought and at the time the removal petition was
filed. Appellants moved to remand the cause to state court,
A-7
citing the failure to specifically allege citizenship. The district
court allowed the insurers to amend their removal petition
to cure the omission, and denied the motion to remand. The
appellants argue that the missing allegation is a fatal omission
which cannot be cured by amendment. We disagree.
{2] In Firemen’s Insurance Company of Newark, Nd. v.
Robbins Coal Company, Inc., 288 F.2d 349 (Sth Cir. 1961),
where a movant had failed to allege corporate citizenship in a
petition for removal, we held that, ‘a defective allegation of
diversity jurisdiction in a suit originally filed in a federal district
court can be amended in the Court of Appeals.” Id., at 350.
As we pointed out in Firemen’s Insurance, the amendment is
authorized by the term of 28 U.S.C. § 1653. That section
provides that, “[d]efective allegations of jursidiction may be
amended, upon terms, in the trial of appellate courts.”
In light of our decision in Firemen’s Insurance, we hold that
the faulty allegations were properly cured in the amended
petition for removal filed in the federal district court. See,
American Motorists Insurance Co. v. American Employers’
Insurance Co., 600 F.2d 15 (Sth Cir. 1979); RUle 15(a), Fed.R.
Civ.P.
[3] We also hold that the record supports the district court’s
finding that the appellants breached their implied warranty of
seaworthiness at the outset of the policy period. Gulfstream
Cargo, Ltd. v. Reliance Insurance Co., 409 F.2d 974 (Sth Cir.
1969). Rig No. 15 had not been dry-docked and its hull had not
been inspected during a six-year period preceding the capsize.
During that time, it was in regular use and exposed to the
normal abuse attendant upon an inland barge’s operation. The
appellant’s expert witness testified that one month before the
policy was to take effect, he had recommended that Rig No. 15
be dry-docked for critical repairs. The trial court found that
the vessel lacked necessary deck plating, manhole systems,
A-8
compartmental separations, and bottom plating. Each of these
rig fixtures must be functioning properly to give the vessel the
watertight integrity it requires. Facts also demonstrated that
recurrent listing to port or starboard and constant pumping of
water became standard operating procedures. On the basis of
these facts, the district court concluded “that Rig No. 15 was
not reasonably well-suited for its intended use as an inland
drilling barge as of August 15, 1974.” See, Gulfstream Cargo,
Ltd. v. Reliance Insurance Co. After reviewing the record, we
cannot say that the challenged finding was clearly erroneous or
without evidentiary support. Accordingly, we sustain the
finding. Rule 52(a), Fed.R.Civ.P.: Baggett v. Richardson, 473
F.2d 863 (Sth Cir. 1973).
Because breach of the implied warranty of seaworthiness
voids the insurance contract, we do not reach the appellants’
contention that the capsize resulted from a peril insured against
in the policy.
The judgment is AFFIRMED.
Adm. Office, U.S. Courts - West Publishing Company,
Saint Paul, Minn.
A-9
UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 77-2968
D. J. McDUFFIE, INC., ET AL.,
Plain tiffs-Appellants,
versus
OLD RELIABLE FIRE INSURANCE CO., ET AL.,
Defendants-Appellees.
Appeal from the United States District Court for the
Eastern District of Lov‘siana
Before THORNBERRY, GEE and HATCHETT,
Circuit Judges.
JUDGMENT
This cause came on to be heard on the transcript of the
record from the United States District Court for the Eastern
District of Louisiana, and was argued by counsel;
ON CONSIDERATION WHEREOF, It is now here ordered
and adjudged by this Court that the judgment of the said
District Court in this cause be, and the same is hereby, affirmed;
IT IS FURTHER ORDERED that the plaintiffs-appellants
pay to the defendants-appellees the costs on appeal, to be taxed
by the Clerk of this Court.
December 10, 1979
ISSUED AS MANDATE: February 28, 1980
A-10
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
D. J. McDUFFIE, INC., ET AL
VERSUS
OLD RELIABLE FIRE INSURANCE CO., ET AL
Filed: 1977
MEMORANDUM OPINION AND ORDER
Neal D. Hobson, Esq.
Michael E. Wanek, Esq.
Milling, Benson, Woodward, Hillyer and Pierson
Attorneys for Plaintiffs
Benjamin W. Yancey, Esq.
Rufus C. Harris, III, Esq.
Terriberry, Carroll, Yancey & Farrell
Attorneys for Defendants
BOYLE, District Judge:
This litigation stems from the capsize on September 27,
1974 of a submersible drilling barge while it was under tow on
the Mississippi River Gulf outlet and en route from the area of
Eloi Bay to the Harvey Canal. The vessel at the time was owned
by the plaintiff corporation D. J. McDuffie, Inc. [McDuffie] ,
but had been leased to, and was being operated by, the plaintiff
corporation Ward Drilling Company, Inc. [Ward]. Called the
“Delsey D” by McDuffie, the barge was re-designated by Ward -
and will be referred to hereafter - as “‘Rig No. 15.”
A-11
Ward is the named insured and McDuffie ‘‘an additional
insured”’ in a marine hull policy (CU 10151), insuring Rig No.
1S in the amount of $275,000 for the one-year period com-
mencing on August 15, 1974. See Exh. P-1. The policy was
issued through Continental Underwriters of the South, Inc.,
and it apportioned participation among the defendants Old
Reliable Fire Insurance Co. (57%), Yosemite Insurance Co.
(25%) and Reserve Insurance Co. (18%). See id. It generally
covered loss due to “Perils... of the Seas...and... all other
like Perils. . . .” causing damage to the vessel. By a specially
endorsed Inchmaree Clause, coverage also was extended to
damage ‘“‘direcily caused”’ by, inter alia:
(j)Bursting of boilers, or any latent defect in the machi-
nery or Hull...
[and](n) Negligence of the masters, mariners, charterers,
engineers, pilots, and other members of the drilling
crew provided such loss has not resulted from want
of due diligence by the owners of the vessel or any
of them....
See id.
Upon the refusal of the defendants to accept tender of the
vessel following its capsize and to acknowledge coverage for
the damage incurred, McDuffie brought suit against the under-
writers in state court. See D. J. McDuffie, Inc. v. Old Reliable
Fire Ins. Co., et al., No. 170049, Docket 5, 24th Judicial
District Court for Parish of Jefferson. The defendants peti-
tioned for removal to this court on the ground of our original
diversity jurisdiction, pursuant to 28 U.S.C. § 1441(a), and we
denied McDuffie’s motion to remand. See Record Doc. No. 8.
The complaint then was amended to add Ward as a party
plaintiff, that company, subsequent to the casualty, having
acquired the barge as well as an assignment of McDuffie’s
rights under the hull policy subject to the payment to McDuffie
A-12
of a fixed portion of whatever insurance proceeds might be
recovered. See Exh. P-6. McDuffie and Ward now jointly seek
judgment in the face amount of the policy ($275,000), plus
$68,750 for “sue and labor” expenses allegedly owed under
the policy, a 12% penalty and attorney’s fee said to be owed
by the defendants under state law (LSA-R.S. 22:658) because
of their arbitrary refusal to provide coverage and pre-judgment
interest from the date of said refusal.
Rig No. 15 was built in 1942 and acquired by McDuffie in
1957. It was an unpowered, all-welded steel barge measuring
196’ x 34 x 11’, with a key-way slot at one end and a total of
ten compartments below. 1/ When purchased in 1957, the
vessel was dry-docked and the necessary rig equipment installed
to convert it into a drilling barge. Several years thereafter, in
1961, the rig again was dry-docked, this time for repairs by the
American Marine Corporation in New Orleans. The latter’s
invoices reflect that McDuffie delivered the barge in “critical
sinking condition,’ and that the work, performed between
December of 1961 and mid-February of 1962, included hull
repair and the installation of some new plating. See Exh. P-26.
The final dry-docking of the rig before its capsize took place
in 1968. An invoice dated August 31 of that year from Hunt
Tool Company of Houston, Texas, indicates that there was a
dry-docking for “inspection and repairs,’ and that the work
included replacing part of the barge’s keel-cooler system,
replacing a section of deck plate and removing, as well as
“blanking off,” certain pipe inside the hull. See Exh. P-31. 2/
A! For present purposes, the key-way end of the barge will be con-
sidered forward and the opposite end aft. The compartments will be
designated as either port or starboard and numbered one through five,
from bow to stern. See Exh. P-23.
2/ Jerry Merritt, a McDuffie employee assigned to the barge at the time
of these repairs, testified that the pipe blanked off was located in the
portside number three compartment, and he marked this location with an
“x” next to his initials on a sketch of the barge compartment system made
part of the evidence. See Exh. P-23.
A-13
Preparatory to executing the lease/option-to-purchase agree-
ments whereby Ward would undertake the operation of Rig
No. 15, a barge inventory was performed at Ward’s request on
March 12, 1974. The inventory, signed by McDuffie representa-
tives Jerry Merritt and D. J. McDuffie (the company’s presi-
dent), and on Ward’s behalf by Roger King and Danie! Faherty,
Jr. (Ward’s president in charge of operations), lists practically
all equipment in “fair” or “good” condition and concludes
that the overall condition of the barge was “‘fair,”’ while at the
same time noting that one compartment had a split seam,
there was one leaky “seacock” (a valve fitted into a ship’s
plating used to flood tanks), and “‘some water’ was leaking
into a fuel compartment. See Exh. p-21.3/ A letter of July 22,
1974 to Danie! Faherty from Harry Reineke, Jr., an indepen-
dent marine suveryor, certifies that he (Reineke) physically
surveyed the barge and found it equipped as per the inventory.
See id. In testimony at trial, however, Reineke admitted that
e did not conduct an actual physical survey of the vessel,
which at the time was sitting on the bottom of a dry well-hole,
but merely “spot checked” the rig’s equipment after the inven-
tory had been made by others (presumably the aforementioned
signatories). See Transcript, at 136-37 [Record Doc. No. 49].
During the same month of March, 1974, Jerry Merritt be-
came a Ward employee, and was instructed by the company to
oversee certain repairs to Rig No. 15 which would be performed
in Venice, Louisiana, by Superior Welding, Inc. The Superior
invoices show that these repairs occurred during the period
from March 14 to March 18, 1974, inclusive. See Exh. P-25.
3) Obviously mistaken is the inventory’s reference to a last dry-docking
of the vessel in 1969. See id. As indicated supra, the Hunt dry-docking
occurred in 1968.
Merritt testified that he himself tightened stem packing around
a leaky seacock located in the portside number two compart-
ment, and also supervised the cement-patching of a leak from a
rere” 9 the portside of the hull near the corner of the key-way
slot. *
Merritt eventually reported to Faherty that the reparis were
completed and Rig No. 15 ready for operation. For the next
several months, it worked in different field locations south of
Bayou Barataria. On April 1, 1974, McDuffie and Ward formal-
ly executed the lease and option-to-purchase contracts. See
Exh.’s P-3 & P4.
The rig had living quarters on deck, and assigned to it were
two separate crews working alternatingly in 12-hour shifts.
In each crew there was a toolpusher who supervised the rig’s
general operation, a driller who was responsible for actually
moving and operating the barge, several crewmembers who
assisted the driller and a cook. The crewmembers of Rig No. 15
who testified at trial included Dennis Melancon, first a rough-
neck and later a driller who left the rig prior to the day of its
capsize, Jerry Merritt, a toolpusher who was assigned to the rig
but was not aboard the day of the capsize, and several crewmen
who were aboard when the barge turned over, toolpusher Arch
Lamar Windham and drillers Michael Mahaney and Blake Short.
Their testimony affords a picture of the general condition of
Rig No. 15 both prior to and during the several months it was
operated by Ward.
It first appears that the barge interior could not be made
watertight should its deck become submerged. Both Melancon
and Short testified that covers for the eight manholes on deck
which led into the barge’s water-holding compartments were
Al At trial Merritt marked both the seacock and seam locations with
arrows on the sketch of the barge compartments. See Exh. P-23.
A-15
either missing altogether or else lacked workable latches - or
“dogs” - needed to close them tightly. 5/ Mahaney likewise
stated that, during his attachment to the rig from April to
September of 1974, certain manhole covers were missing. 6/
Finally, Melancon recalled that many of the covers which did
exist had rusted holes in them, as well as rotted linings which
prevented their being sealed when shut. As for the condition
of the deck plate itself, Melancon declared that, as of March,
1974, there were several holes in it both near the blow-out
preventer stack in the portside key-way area and near the
pump-room situated sternward. He said they appeared to have
resulted from a rusting away of the metal as well as from the
occasional dropping of heavy equipment on the deck. Mahaney
recollected seeing during his tenure a “‘few holes” in one corner
of the deck, in addition to others which the crew previously had
patched.
5/ Melancon worked hitches on the barge from 1973 until “about
March, 1974,” and it is not clear whether his description of these condi-
tions as of the latter month refers to a time before or after the mid-March
repairs by Superior Welding, Inc. But Short’s testimony refers to his
hitches from July, 1974 until the day of the capsize in September.
6/Mahaney marked the approximate location of the manholes by draw-
ing oval-shaped circles on a sketch of the barge. See Exh. P-30A. As the
drawing indicat4s, the two forward-most holes were situated relatively
close to the rig’s center line, while most were near the edge of the deck.
Mahaney also depicted on the same sketch, with a red line, how all man-
holes save for the two located forward were surrounded by a seawall,
which he estimates was roughly two and a half feet high.
A-16
yr
Regarding conditions below, all crewmembers who testified
agreed to the necessity of having to monitor and periodically
pump out the lower compartments of Rig No. 15. 2/ it general-
ly was admitted that when the barge was being moved over
longer distances than those entailed in short moves within a
given field, it was customary to keep a steady watch on the
water levels in the various compartments. The levels were
observable visually through the maholes - those with covers
were kept open for this purpose - and would be measured in
height according to where the water reached the rungs on the
ladders in the compartments. When the water reached a certain
height, usually three feet, pumping out of the compartment
commenced.
Melancon recalled that he personally had observed leaking
holes in just about every compartment. He testified that when
such a hole was reported to the driller, the standard remedy
was to plug a wooden peg into the hole to stop the leak. He
further testified that both the seacocks and the “‘reach-rods”
attached to them for use in their opening and closing were
rusted, so much so that the rods often became detached in hand
and had to be welded back onto the seacock. See note 13, infra
(testimony of diver Kenneth Honegger). It was his experience
that, as the end result of such conditions, pumping out of
compartments while the barge was under way was required as
often as every thirty minutes, depending upon how fast the
pumps were being run.
Michael Mahaney was somewhat more specific. He testified
that, during his tenure as driller, there was steady water intake
1 The barge was equipped with diesel-powered pumps as well as
smaller, two-inch pumps (called “baywater pumps” by the witnesses
and so designated hereafter). The larger pumps were used to suck up and
jet out water from a given compartment. The baywater pumps pumped
water into a pit, providing the storage water needed as a source for the
suction power by which the diesel pumps would jet out.
A-17-
in Rig No. 15 both from a leaky valve in the portside number
two compartment and from an unidentified source in starboard
number four. The former, he said, sometimes could be suffi-
ciently slowed by blanking off the leaking valve with a steel
plate. However, the latter routinely demanded ten to fifteen
minutes of pumping every hour or so simply in order to main-
tain an acceptably high amount of freeboard and to keep the
barge moving On an even keel. 8/
According to Mahaney, both toolpushers were aware of the
rig’s leakage, and this appears clearly to have been the case on
the basis of their own testimony. Jerry Merritt admits to having
had to pump the barge out every hour or hour and a half during
a move from Lafitte to Eloi Bay in the middle or end of July,
1974, although he stated that the portside number three com-
partment was taking water, in addition to a continuing ingress
of water in portside number two through the same seacock
around which he had tightened the packing in March of 1974.
See note 4, supra, and accompanying text. Lamar Windham
likewise acknowledged an awareness of leaks in the barge from
the very beginning of Ward’s operation, although he recalled
them being in the port and starboard number three and four
compartments. At trial, Windham testified that in his opinion
the leaks were due to faulty valves. Yet, he also admitted the
correctness of a statement given by him in connection with
this litigation on October 2, 1974, to the effect that he sus-
pected even prior to the capsize that the leaks may have been
due to a holed bottom. See Exh, P-30, at 16-18.
8/ Mahaney claimed to have discovered during one such pumping out
that there was a free communication of water above a level of four or
five feet between those port and starboard compartments divided by a
common bulkhead (i.e., all those not separated by the key-way slot). He
observed that, in pumping just one side, whatever water was in the corres-
ponding side would be simultaneously lowered until the level of four or
five feet. He did not ever see holes in the dividing bulkhead, but inferred
it was not watertight.
A-18
Merritt and Windham both emphasized that these leaks were
not problematical but easily remediable by the barge’s purnping
system, and that regular pumping was simply a standard part of
the barge’s routine. Still, both testified to having discussed the
leakage with their immediate superior, Ward Rig Manager
William “Red” Royce. In fact, Windham suggests in his state-
ment of October 2, 1974 that he mentioned the possibility of
a holed bottom to Royce several weeks prior to the casualty,
and, in testimony at trial, recalls making a report to Royce on
the very afternoon preceding the accident that “‘we are jetting
out about every hour and a half... . [b]ut nothing to worry
about.”” See Transcript, at 164 [Record Doc. 37]. Royce
himself, who became Rig Manager about a month and a half |
before the capsize, confirmed only that both toolpushers
notified him of ‘‘a slight leak” in one of the compartments;
but he did not regard the matter as one for concern, and speci-
fically denies ever having been informed beforehand of the
need for regular pumping, or “‘jetting out.’ See id., at 218,
224-25.
In connection with negotiations for an assumption of the
Rig No. 15 lease by Coastal Drilling Company, Ward engaged
Harry Reinecke to conduct a “‘condition and evaluation survey”
of the barge. As in the case of the earlier survey he had per-
formed in March of 1974, Reinecke did not see the rig afloat,
but only when it was “sitting down” on the bottom. The
survey report of July 10, 1974, concludes with several recom-
mendations, including those that the vessel be dry-docked
and repaired ‘‘as necessary.” See Exh. P-20. At trial, Reinecke
testified that he intended by this proposal that the barge be
dry-docked, audio-gauged to check for plate thickness of the
hull and examined for wastage, so as to “‘put it back not neces-
sarily as original but at least in good working order.” See
Transcript, at 121 [Record Doc. No. 49]. No such dry-docking
or repair was performed by Ward.
Following an uneventful trip from the area south of Bayou
Barataria to Eloi Bay in August of 1974, Rig No. 15 operated
on several drilling sites in the Bay. In early September, a hurri-
cane passed near the Louisiana coast and blew the rig off
location, causing some damage to certain machinery aboard.
Red Royce testified that to the best of his recollection the
equipment was repaired. Shortly thereafter, on September 27,
1974, the rig was prepared for towage by two tugs from Eloi
Bay to the Harvey Canal, from there to be taken to several new
job locations.
Mike Mahaney’s crew was working the shift from 6:00 P.M.
to 6:00 A.M. He testified that by 5:00 o’clock on the morning
of September 27, the barge had been pumped out until it was
sitting lightly on the bottom. The next crew relieved Mahaney’s
and Blake Short took over as driller. The tugs arrived between
8:00 and 9:00 A.M. and, after Short finished pumping out the
barge, both made up to the stern and began towing. 2
Short’s testimony confirmed that, once en route on Septem-
ber 27, 1974, the barge still was taking water in port number
two - through the leaky valve attested to, supra, by both Jerry
Merritt and Mike Mahaney - as well as in starboard number
four - from a source which Short, like Mahaney, was unable
to identify. Short felt that the former intake was not serious
and he did not pump out the port number two compartment
during his tour, although he remembers it had about three
feet of water in it when he checked it before going off duty
at 6:00 P.M. He was compelled, however, to pump out the
starboard number four tank for about five minutes every
fifteen to thirty minutes in order to keep the barge from
listing to starboard, and this pumping usually occurred when-
ever the compartment showed a water level of three feet.
9/ At some point in the early afternoon, the tugs turned Rig No. 15
around and resumed towing from the key-way end. According to Wind-
ham, Short and Mahaney, this was preferable on long moves, It apparently
permitted a more stable tow.
A-20 >
In Short’s view, only one “unusual’”’ event occurred during
his shift, and this was in connection with pumping operations
around 11:00 A.M. or noon. He and Mahaney both testified
that only one of the rig’s several baywater purnps was operative
on the day of the capsize; one pump had been washed over
during the September hurricane and another had been mal-
functioning for several weeks. 10/ When this pump ceased
pulling enough storage water into the barge pit to allow the
suction needed for jetting out the starboard number four
compartment, Short says the barge began listing badly to star-
board and, at one point, had only two inches of freeboard. | 1/
He reported the difficulty to Windham, whom he recalls rather
cavalierly remarking that the rig had been in worse shape
before and that there was nothing to worry about. Eventually,
10/ Short and Mahaney each recall having reported this malfunction
to Lamar Windham. Short presumed a new pump engine had been ordered.
Mahaney expected an electrician to be sent to work on the machine,
but says no one appeared. According to Red Royce, he was notified
about two weeks before the capsize that a couple of pump engines were
running hot. He says a mechanic was sent out to work on them and later
reported they were working properly.
11/ There was conflicting testimony as to the average amount of
freeboard while the rig was under way. Jerry Merritt claimed it had an
average of 4-1/2 or 5 feet of freeboard at midship while moving. But
Lamar Windham testified to an average of 1-1/2 feet in the middle and
2-1/2 feet at the opposite ends (which were slightly turned up).
A-2]
Short was able to repair the baywater pump and resume normal
pumping operations before the list worsened. 12/
At the time the Mahaney crew came back on duty around
6:00 P.M., Short says the barge was on a relatively even keel,
although Mahaney recalls a list to port or about one degree.
Around 7:00, Mahaney remembers, this portside list increased
to the extent it was necessary to pump out the leaking com-
partment number two. Then, at approximately 7:30, there
developed a list to starboard, and Mahaney noticed that the
water level had increased in starboard number four by about
a foot in the hour and a half he had been on duty. After jetting
out this compartment for about ten minutes, the supply of
storage water for suction was depleted and pumping had to
stop. Mahaney estimated that it would take approximately
45 minutes for the one functioning baywater pump to replenish
the water supply sufficiently to pump out the starboard com-
partment and level the rig. He therefore suggested to Lamar
Windham that the tugs be ordered to push the barge sideways,
12! There also was conflicting testimony from other observers of Rig
No. 15 during the shift of Short’s crew on September 27, 1974. H. G.
Vogt, Jr., a diver, testified that he passed the barge in the Ship Channel
around 11:00 A.M., while he and his son were heading in the opposite
direction to a survey job. The barge, he says, was floating level at the time
but several streams of water could be observed being pumped out of
its starboard side. When Vogt was returning from the survey, he overtook
the barge around 5:00 P.M.; and, on passing it this time, noticied a list
to port which gave him the impression the vessel was holed. He testified
to trying unsuccessfully to contact the tugs by radio in order to offer his
services as a diver.
Yet, Wiley Falgout, captain of one of the towing tugs (the CAPTAIN
WOOT), testified that he observed the rig around 5:00 P.M. and noticed
no list or anything out of the ordinary. He further stated that he was
tending the radio on the marine channel frequencies at all times, but was
not contacted by Vogt.
According to Windham, one of the tugs - he believes it was the CAP-
TAIN WOOT .- did call him “once or twice” within a two hour period of
the start of the tow in the morning, and warned that the barge was listing
slightly.
A-22
starboard side first, into the bank of the channel, and in this
way stabilize the vessel until pumping could be resumed.
At approximately this time, around 7:30 P.M., Blake Short
was off duty and in the galley. He recalls a starboard list deve-
loping and steadily worsening until items were sliding off the
tables. It was his initial testimony at trial that he then went
below and discussed the problem with Mahaney, and that they
arrived at the idea of pushing the rig into the bank. However,
when trial was re-commenced following a recess of about eleven
months (from September 12, 1975 until October 18, 1976),
Short again took the stand and announced that his original
testimony had been “incomplete” in one important respect.
He said he had not revealed that when he initially investigated
the starboard list at about 7:30 P.M. on September 27, 1974,
he discovered that Mahaney intentionally had caused the list
by opening the starboard seacocks and flooding the compart-
ments on this side. According to Short, Mahaney - who was
not recalled as a witness and presumably was unavailable to
testify when the trial resumed - had listed the rig in order to
facilitate the cleaning of the mud pits located sternward; the
accumulated mud and water apparently would flow more
rapidly through drains in the bottom of the pits if the barge
were leaning over. Although such pit-cleaning was a routine
job, said Short, it was not customary to list the barge as part
of the cleaning operation. 13
13/ Both Short and J. D, Ward, Ward Chairman of the Board at the
time of the capsize, testified that Short made his disclosure to Ward
during the recess on some indeterminate date five or six months before
trial was resumed. Short explained that he had been hopeful Mahaney,
a friend of his, would tell the full story; but, when Mahaney did not, he
finally realized he could not in good conscience fail to do so himself.
Yet, according to Short, Ward called him on the phone one day and
then visited him at his residence that afternoon in order to inquire about
a report to the effect another member of the rig’s crew had left a valve
open prior to the capsize. Short says he then disclosed to Ward what he
A-23
In any event, Lamar Windham readily agreed with the sugges-
tion of Mahaney once the starboard list had developed. He
therefore instructed the tugs to push the starboard side of the
barge against the shallower bank. He claims he did not specify
the right-hand bank as the shallower; but he felt the tugs were
correct in considering it such as they began pushing toward it,
because the trees along the bank indicated shallower water to
him. Meanwhile, as this maneuver commenced, Mahaney says
he opened the portside seacocks (i.e., in the port number two
and four compartments) in order to counteract the starboard
list by flooding and lowering the left side of the barge. Wind-
ham recalls that he agreed to this tactic when Mahaney pro-
posed it. The latter claims that he closed these valves as soon
as the barge started to level off, but, in his post-recess testi-
mony, Blake Short stated that the barge capsized before Ma-
haney could get back to shut the portside seacocks!4/
_13/ Continued
he knew about the intentional listing. Ward, on the other hand, testified
that he was seeking Short for the purpose of his giving a deposition in a
separate lawsuit growing out of the accident, and that, after unsuccess-
fully trying to reach Short personally, he telephoned his wife and arranged
through her to visit Short at home that eveining. Ward recalls that Short
made the disclosure in the course of a general conversation about the
incident.
14/ The testimony of two divers who inspected the seacocks of Rig
No. 15 in its capsized position fails to satisfactorily resolve the conflict.
Kenneth Honegger, who performed an inspection dive for Ward in Novem-
ber of 1974, and O. Kiel (“O.K.”) Moore, who dived during the Ward
salvage operation in early 1975, testified to finding the port number two
valve partially open and open (respectively). But Honegger could not
locate the portside number four seacock, and Moore, who did locate it,
said it was closed.
On the opposite side, Honegger found the valve in starboard compart-
ment number two open, and, when he tried to close it using the reach
rod, the latter came off in his hand. Moore also said the starboard number
two valve was open (partially) when he saw it.
A-24
As the tugs continued to push Rig No. 15 toward shore,
Mahaney had enough storage water to resume jetting out of the
starboard side. Both he and Short recall that the barge was just
about level as it was being pushed up against the bank. Mahaney
says he then realigned the pumps and began jetting out the port
number four compartment, where he approximates three feet of
water had accumulated while the seacock was open. By the
estimation of both Mahaney and Windham, there next occurred
a period of equilibrium which lasted about five minutes. It was
followed by a very sudden list to port, which steadily became
more extreme. The pumps operated at ful! speed and began
overheating, unable to counter the increasing list. Finally, as
the boats sounded danger signals and pulled away, Rig No. 15
rolled over to port and capsized in the calm waters of the Gulf
Outlet. One crewmember drowned, and others of the barge’s
crew were rescued by the tugs.
The next morning, Daniel Faherty, Jr., and Jerry Merritt
inspected the barge in its upside-down position. It was mostly
submerged, but one corner - the stern starboard comer - was
protruding above the water. Merritt recalls noticing at this
time that this visible section of the hull was holed.
On September 29 and 30, 1974, Wallace Shiver, a marine
surveyor for Maritime Surveyors, Inc., was engaged by certain
underwriters of the barge to survey the capsized rig, and a series
of photographs he took on those days were admitted into evi-
dence. See Exh. D-7. Several of these show a hole measurin
roughly 3-1/2 by 1-1/2 inches in the bottom of the vessel, 15
which Merritt recognized as the same hole he had observed the
morning after the accident. See Exh. D-7(A) through (E).
15/ An expert metallurgist later called upon to examine the hole,
Stephen Teleshak, traced its shape and size on a piece of paper. See
Exh. Teleshak No. 1.
A-25
Shiver measured a distance of about seven feet between the
hole and the aft bulkhead of Rig No. 15 (i.e., that dividing
the fuel tank from the mud pump tank), and measured inboard
a distance of about fifteen feet between the starboard edge of
the barge and the hole. Given the dimensions of the rig, the
arrangement and size of the compartments (see Exh. P-23)
and the fact that the holed section was the stern starboard
corner of the hull, it thus becomes clear that the hole was
located in the bottom of starboard compartment number
four, 16
Also engaged by Maritime Surveyors, Inc., to inspect the
capsized barge on September 30, 1975 was diver H. G. Vogt,
Jr., the same individual who had passed the rig twice on the
day of its fateful journey. See note 12, supra. Viewing the
exposed bottom as well as what was beneath the water, Vogt
recollects that there was wasted plate in the vicinity of the hole,
and, more specifically, pit-mark indications of thin plating
within an area of five or six feet therefrom. In his view, wastage,
as opposed to a sudden puncture, created the hole.
Two experts who inspected the barge around the same time,
Shiver and metallurgist Stephen Teleshak, agreed. The former
observed that the plating in the holed area seemed to be “‘very
thin” and that the edges of the hole were sharp and turned
inward, indicating to him that the plate had just wasted away
and finally was pushed in either from water pressure or from
being struck with something. Teleshak, who was called upon
by Maritime Surveyors to visit the rig on October 3, 1974,
remembered that the edges of the hole were flat instead of
turned in - a recollection made somewhat questionable by
16/ In fact, reconstructing its location on the basis of the earlier visual
sightings of the hole, one of the expert marine surveyors who testified,
Ryan Uhlich, so depicted its situation in a sketch prepared after the
salvage operation. See Exh. D-17.
A-26
the photographs themselves, exhibits D-7(A) through (E) - but
nonetheless concurred that the plating in the area of the hole
was wasted away to a paper-like thinness. In his opinion. set
forth in a report of July 28, 1975, the depression formed by a
girder in the area of the hole caused the retention there of water
inside the hull and led to gradual corrosion from the interior
outward. See Exh. D-1.
Following the failure in December, 1974, of Ward’s initial
arrangement for the salvaging of the rig by Statler Marine
Service, Inc., the company decided in the early part of 1975 to
have the salvage performed under Jerry Ward, a son of J. D.
Ward who had studied engineering and also worked as a rough-
neck on some of Ward’s rigs. As noted, supra, the diver hired in
connection with the operation was O.K. Moore, who recalls
that the salvage work covered a period between March and May
of 1975. Moore testified that when he and a fellow-diver (who
was not called as a witness) inspected the overturned deck of
Rig No. 15 prior to pumping the barge with air to raise it, they
discovered and patched no less than five leaks, some of which
were holes while others were cracked welds. !7/ An explosive
charge then was set off to cut loose the derrick, which explo-
sion - according to Moore - blew the patch off of one leak and
widened another, but which - according to Jerry Ward - also
created some new openings. After further patching and sealing
such leaks, the compartments of the barge were pumped full of
air and its stern-half lifted to the surface. Cables were wrapped
around the hull and hitched to a derrick, which rolled Rig No.
15 back to an upright position. See Exh. P-29(a) through (1).
The resurrected barge was towed to a yard in the Harvey
Canal. There it lay moored, stripped of all equipment, as its
condition was observed in the late summer of 1975 by several
17! Moore marked the locations of the leaks by green numbers one
through five on a sketch of Rig No. 15 which was assumed to depict an
upside-down view of the vessel. See Exh. P-23A.
A-27
experts who were called to testify for the defendants. Ryan
Uhlich, a marine surveyor and President of Maritime Surveyors,
Inc., visited the location on July 26, 1975 along with another
surveyor engaged by him, Kenneth Trueman. The latter identi-
fied and individually described a series of 32 photographs taken
by Uhlich on that day. See Exh. D-8, Nos. 1-32. Some of these
show general pitting and wastage in various areas of the deck
plating. See id., Nos. 3, 5-9, 13-15, 19, 21, 22 and 24. Others
represent a fracture in one of the corners of the key-way slot.
See id. Nos. 10 and 11. Still others depict a pitted manhole
cover, a cover without latches and a manhole without a cover.
See id., Nos. 4, 12 and 25. Uhlich, who also visited the rig in
this location on July 29 and August 9, 1975, identified another
set of 19 photographs which he took of the rig’s interior. See
Exh. D-9, Nos. 1-19. Among these are pictures of corrosion and
holes which he says-he observed in the pipeline of the starboard
number three compartment connecting the latter with its
portside counterpart. See id., Nos. 7-14. A group of six photo-
graphs were identified as having been taken on Uhlich’s August
9 inspection. See Exh. D-10, Nos. 1-6. Several of these illustrate
holes and rust in the connecting pipeline located in the port
number three compartment as well. See id., Nos. 3, 4 and 6.
On the basis of these inspections, Uhlich concluded that the
deck of the barge was in an “‘advanced state of deterioration,”
and that, as Michael Mahaney had observed during the vessel’s
operation (see note 8, supra), there was free communication
between the number three compartments due to the corroded
condition of the inter-connecting pipe. These interior findings
were graphically summarized on a sketch of the barge compart-
ments. See Exh. D-17. 18/ Uhlich further opined that these
18/ The sketch represents a “wood plug ia [a] hole” found in the star-
board number three compartment’s pipeline. See id. One of the photo-
graphs was described by Uhlich as showing the same plugged hole. See
Exh. D-9, No. 6. Corroborated at least to some extent, therefore, is the
testimony of Dennis Melancon that drillers ordered holes discovered in the
barge’s interior simply plugged up with wooden pegs. See pp. 9-10, supra.
A-28
conditions, as he observed them in 1975, pre-existed the 1974
casualty, and in fact appeared to have éxisted over a period of
many - perhaps ten to twenty - years.
Arthur Sargent, an expert in naval architecture and marine
engineering, saw Rig No. 15 in the Harvey Canal on July 30,
1975. As noted in a letter report of that day made to counsel
for the defendants, the deck was found to be “heavily wasted
and thin” in most places and “perforated through corrosion,”
manhole covers were found wasted and securing cover latches
missing and the deck at the corners of the key-way slot was
observed to be fractured. See Exh. D-3. Sargent recommended
that the vessel’s plating be audio-gauged to determine its thick-
ness and condition, before concluding his report with the
remarkably understated opinion that the hull in its then-existing
condition was “‘not suitable’ for operations as a workover
barge. See id.
Pursuant to Sargent’s suggestion, marine surveyor Leonard
3rechtel visually inspected Rig No. 15 on August 9, 1975, and
then audio-gauged its accessible plating on August 12. Among
the results of the first visit - as he noted in a subsequent report -
were his findings that the vessel’s deck was “heavily wasted,
holed and fractured in numerous locations,” and that the pipe
located in and connecting the port and starboard compartments
number three also was “heavily wasted and holed... .”’ See
Exh. D-13. Several photographs taken by Brechtel at the time
illustrate the wasted holes on the deck level as well as those he
found in the compartmental pipeline. See Exh. D-13, photo
Nos. 1-5. 19/ With regard to the audio-gauging, a vessel diagram
~~
19/ An additional photograph purports to show a corroded sea chest
valve in one of the compartments (Brechtel believes it was starboard num-
ber two), from which the reach rod had become detached. See ied., No. 6.
This is the same rod which diver Kenneth Honegger says came off in his
hand in November of 1974. See note 14, supra.
A-29
represents the various measurements of metal thickness made in
areas on deck as well as along the sides of the hull. See Exh.
D-13(a). All such measurements are indicated as being less - in
most cases, considerably less - than the thickness of .375”
which Brechtel testified is customary for a vessel such as Rig
No. 15.
When asked at trial about the duration of the conditions
they observed, both Sargent and Brechtel, like Ryan Uhlich,
ruled out the possiblility that these were recent phonomena.
Brechtel felt that the deficiencies which he noted in August of
1975 had not grown up within a period of only one year.
Sar,ent concluded that the deterioration he observed was the
cumulative effect of ‘“‘many years’ service”’ of the vessel.
Concerning the actual cause of the capsize, the opinions
offered by various witnesses are not so easily reconciled. Testi-
fying on the plaintiffs’ behalf, Harry Reinecke averred that a
combination of improper actions taken by the rig’s and tugs’
crews led to the sinking. He explained that, in the circumstances
of this case, opening valves in order to list a barge for cleaning
purposes - as Mahaney is alleged to have done - would demon-
strate a lack of good seamanship for the simple reason that the
freeboard of a barge under way and already listing to one side
should be increased, and not reduced by the further intake of
water. Likewise improper, according to a letter report by
Reinecke to plaintiffs’ counsel, was ahaney’s opening of the
portside valves to counteract the starboard list as the rig was
being pushed toward the bank of the channel. See Exh. P-22.
In Reinecke’s view, this not only increased immersion of the
barge by adding to its overall intake of water, but also, in
conjunction with the ongoing pumping out and eventual ground-
ing of the starboard side, inevitably produced a serious list
A-30
to port,20/ As a final incident of judgmental error, Reinecke
cited the decision to shove the barge sideways into the right-
hand bank. He claims it should have been pushed bow-first
into the shore, since this would have provided leverage against
the rig rolling over and afforded it greater stability when
grounded-particularly in light of the water depth and cut of
the bank. 21/
An expert marine engineer called by the defendants, Arthur
Sargent, agreed that the forces created by pushing Rig No. 15
into this particular bank contributed to the port side list and
20/ Mike Mahaney had a different notion as to what caused the sudden
portside list. He opined that continued pushing by the tugs of the star-
bard side into the mud bank created a suction effect on the hull itself,
and that the suction finally broke off with sufficient impetus to force
an irreversible roll in the port direction.
21/ According to a sketch of depth soundings made by Jerry Ward at the
time of salvage, the bank sloped out gradually but then, at a depth of ten
feet, dropped off rather precipitously to twenty feet in the area where,
450 feet from shore, the barge capsized. See Exh. p-23. It is safe to assume
that the rig, which was eleven feet deep, had less than a foot of freeboard
by the time it reached shore, given the extreme starboard list and the
intake of water through open valves on the port side. When grounded
then, the barge apparently was up against the bank at the ten-foot depth
where the sharp drop-off occurred; and, as suggested by a diagram based
upon one drawn by Reinecke and made part of the evidence, the continu-
ed pushing by the tugs and intake of water on the port side could hardly
assure stable beaching under these circumstances. See Exh. Reinecke -1.
Lamar Windham effectively endorsed this view. He testified that,
if he knew then what he now knows about the steep cut of the bank,
he would undertake the beaching maneuver of September, 1974, by
pushing either the bow or stern of the rig onto shore.
A-31
capsize, and submitted an illustrative sketch reminiscent of that
drawn by Reinecke. compare Exh. Sargent-2 with Exh. Rein-
ecke-1. I‘owever, Sargent emphasized that any ignorance or
incompetence on the part of the crew should be viewed in the
prospective of the barge’s overall condition of instability and
disrepair as of the date of capsize. He noted that Rig No. 15
had not been dry-docked in well over the two years described
by him the normal interval for dry-docking such barges, despite
the recommendation of Reinecke himself only a few months
before the accident that a dry-docking occur and notwithstand-
ing ongoing leakage and the needfor unusually frequent and
sustained pumping out. Asked to define the cause of the catas-
trophe, Sargent concluded that it was
{t]he lack of proper care on the part of the owners
for not taking the necessary precautions . . . for ex-
ample, dry-docking the vessel, making proper inspec-
tion, examining the valves, looking at the bottom,
taking care of the holes, making certain that the covers
on the deck plates were in proper efficient operation.
In short [he added], the vessel was in the worst
condition of just about any operating vessel that I have
ever seen.
See Transcript, at pp. 356-57 [Record Doc. No. 49].
Such opinion evidence clearly is germaine to a determination
whether the loss of Rig No. 15 was due to a cause covered
under the hull policy. However, one of the arguments made on
behalf of the underwriters is that the plaintiffs breached their
implied warranty of unseaworthiness at the outset of the
policy period, precluding coverage ab initio and making it
unnecessary to resolve the question of causation. We find merit
in this defense.
The Fifth Circuit has held that in time policies of marine
A-32
insurance there exists such an implied warranty of seaworthi-
ness running in favor of the insurer. See Gulfstream Cargo,
Ltd. v. Reliance Insurance Co., 409 F.2d 974 (Sth Cir. 1969);
Tropical Marine Prod. v. Birmingham Fire Ins. Co. of Pa.,
247 F.2d 116 (5 Cir.), cert. denied, 355 U.S. 903, 78 S.Ct.
331, 2 L.Ed. 2d 260 (1957); Saskatchewan Government In-
surance Office v. Spot Pack, 242 F.2d 385 (5 Cir. 1957). In
an earlier opinion, we recognized the existence and effect of
such an obligation:
It is impliedly warranted that the vessel is seaworthy
as of the very moment of the attachment of the in-
surance; and if the vessel is in fact unseaworthy at the
time the insurance were to attach, the breach avoids
the policy.
See Lemar Towing Co., Inc. v. Fireman’s Fund Insurance Co.,
352 F. Supp. 652, 660 (E.D. La. 1972), aff'd 471 F.2 609
(S Cir.), cert denied, 414 U.S. 976, 34 S.Ct. 292, 38 L.Ed.
2d 219 (1973).
For present purposes, it is important to distinguish this
implied guarantee from the continuing warranty of seaworth-
iness which arises once the policy comes into existence, and
under which it is warranted that the insured owner will not
knowingly or in bad faith allow the vessel to go to sea in an
unseaworthy condition. The former is premised upon the
general insurance principle of uherrim fides, i.e., complete
candor in disclosing all facts materially affecting the risk in-
volved. See Texaco, Inc. v. Universal Marine, Inc., 400 F. Supp.
311,322 ( B.C. La. 1975). Hence, unlike the continuing warran-
ty of seaworthiness - breach of which must proximately cause
the loss in order for the underwriter to be exonerated - a
breach of the implied warrenty which attaches at the very
commencement of the risk avoids coverage and renders the
policy ineffective even if the actual loss stems from a separate
and totally unconnected source. See Gulfstream Cargo, Ltd.
A-33
v. Reliance Insurance Co., supra, at 983 nn. 26 & 28 (5 Cir.
1969); Lemar Towing, Inc. v. Fireman’s Fund Insurance Co.,
352 F. Supp. at 660.
Rig No. 15 had not been dry-docked and its hull inspected
for a full six years prior to the capsized. Yet, during the same
period, it was in regular use and exposed to the normal wear
and tear attendant upon an inland workover barge’s operation.
The evidence clearly preponderates, and it is hardly to be
unexpected as a practical matter, that over this course of time
the vessel deteriorated both internally and externally. Eventual-
ly, it lacked the necessary deck plating and manhole system
above, as well as properly operating seacocks, compartmental
separation and sound bottom plating, to give it watertight
integrity while under way. On any move other than short ones
within the same field, recurrent listing to either port or star-
board and periodic, corrective pumping out became standard
features of the rig’s routine. Finally, that such general dilapi-
dation existed as of the commencement of the hull policy’s
term on August 15, 1974, appears established not only by the
credible testimony of the experts who inspected the barge in
its capsized and salvaged state, but also from the opinion of
plaintiffs’ own expert witness, Harry Reinecke, who, only one
month before the policy was to take effect, recommended to
Ward that Rig No.15 be dry-docked for repairs. He explained
at trial that he felt this action advisable in order to “‘put [the
barge] back .. . in good working order.”
Judge Lumbard of the Second Circuit Court of Appeals
quite appropriately noted that
[a] vessel which requires constant pumping at virtual-
ly the capacity of her pumps in order to keep afloat
is not seaworthy. Were it otherwise, seldom would a
vessel be unseaworthy as it could always be said that
her defects were curable by emergency measures.
A-34
See McAllister Lighterage Line, Inc. v. Insurance Company of
North America, 244 F.2d 867, 870 (2 Cir. 1975).
‘““Seaworthiness,” of course, is not a rigid concept, depend-
ing for its definition upon the nature and purpose of the par-
ticular vessel. Still, it generally comtemplates a ship
sufficiently strong and staunch and equipped with the
the appropriate appurtenances to allow it to safely
engage in the trade for which it was intended.
See Texaco, Inc. v. Universal Marine, Inc., supra, at 320. Even
giving such words their most liberal import, we think it clear
by a preponderance of the evidence that Rig No. 15 was not
reasonably well-suited for its intended use-as an inland dnilling
barge as of August 15, 1974. 22/ This constituted a breach
of the implied warranty of seaworthiness which extended to
the underwriters at the commencement of the risk. According-
ly, coverage of the vessel’s loss under the policy is avoided.
Although not compelled to go further, we might add that the
same conclusion as to the absence of coverage appears support-
able via an alternative analysis. Assuming effective coverage
22/ In reaching this conclusion we may again invoke the testimony of
the plaintiffs’ expert, Reinecke. The following exchange occurred during
cross-examination of the latter by defendants’ counsel:
Q. “Do you have any comment to make about a barge which could
be kept afloat only by pumping every hour or so?”
A. “Yes, sir, it should be dry-docked and repaired.”
Q. “And the watertight integrity, during moves in deep water,
is vital not only to the safety of the vessel but the safety of the
people aboard it, isn’t that true?”
A. “‘Of course, yes, sir.”
See Transcript, at p. 150 [Record Doc. No. 49].
A-35
of Rig No. 15 as of the commencement of the hull policy,
it of course becomes the plaintiffs’ burden to prove that the
subsequent loss of the rig was a peril insured against. See S.
Felicione & Sons Fish Co. v. Citizens Causalty Co. of N.Y.,
430 F.2d 136, 138 (5 Cir. 1970), cert. denied, 401 U.S. 939,
91 S. Ct. 936, 28 L. Ed. 2d 219 (1971). More particularly, it
is the obligation of these plaintiffs to show that the capsize
resulted either from a “peril of the sea,” from a “‘latent defect”
in the barge’s hull or machinery, or from the negligence of the
drilling crew.
As used in marine insurance policies, the phrase ‘“‘perils of
the sea” refers to risks associated with the sea, including such
features of the sea as may cause damage to a vessel. See in re
Gulf & Midlands Barge Line, Inc., 509 F.2d 713, 719 (5 Cir.
1975).
It is understood to encompass
those perils which are peculiar to the sea, and which
are of an extraordinary nature or arise from irresistible
force or overwhelming power, and which cannot be
guarded against by the ordinary exertions of human
skill and prudence.
See Reisman v. New Hampshire Fire Insurance Co., 312 F.2d
17, 19 (5S Cir. 1963). The evidence in this case convinces us that
Rig No. 15 was in a condition of serious deterioration on
September 27, 1974, and that its sinking resulted from this
circumstance rather than from some extraordinary and perilous
force of the sea. 23/
_23/ Reinecke testified that in his opinion the hole in the bottom of star-
board compartment number four had been made just prior to the move of
the rig from Eloi Bay. Even crediting this theory, however, we are per-
suaded by the evidence concerning the wastage in the area of the hole that
longstanding deterioration finally allowed the bottom of the rig to be
holed.
A-36
Neither have the plaintiffs carried their burden of proving
to our satisfaction that the condition of the barge which led
to its capsize was a “latent defect” in the hull. Such a defect
must be one not discoverable by a reasonably careful inspec-
tion, see Reisman v. New Hampshire Fire Insurance Co., supra,
at 20, and is not the result of gradual deterioration and ex-
pected wear and tear. See Waterman S.S. Corp. v. U.S. S. R.
& M. Co., 155 F.2d 687 (5 Cir. 1946) and cases cited at p.
691, nn. 9, 10 & 11. A prior drydocking and routine in-
spection of the hull would have alerted the owner and/or
operator of Rig No. 15, if not to the hole itself, then at least to
the condition which was conducive to holing.
Finally, as to the negligence of the crew, it is important to
note the limitation in this section of the Inchmarce Clause
to the effect that the loss must not have resulted from “‘want of
due diligence”’ on the part of the vessel owner. Based on the
foregoing, it should be patent that McDuffie, as well as Ward,
failed to exercise ordinary and reasonable care in attending to
the inspection and repair of the rig, and that this carelessness,
as much as any subsequent negligence in operating the barge,
resulted in its loss. -24
24/ An illustration is provided by the lack of sufficient pumping equip-
ment aboard the rig on the day it sank. The problem arose earlier in the
month of September, 1974, when a hurricane apparently reduced the
number of functional baywater pumps to one, and the matter was re-
ported to Red Royce. Yet, a leaking and listing barge in need of frequent
jetting out made the move from Eloi Bay with but one machine available
to provide the storage water necessary for the pumping operation. Notab-
ly, it was the inadequacy of this equipment situation which not only
caused a near-crisis during Blake Short’s tour, but which also precipita-
ted the fatal attempt to ground the rig.
Having rejected the plaintiffs. main demand for recovery of
the face amount of the policy, we may briefly dispose of their
additional claims for “‘sue and labor” expenses, penalty and
attorney’s fees and pre-judgment interest. The inappropriate-
ness of fees and interest is self-evident. As to the recovery of
expenses incurred by the plaintiffs pursuant to the policy’s
“Sue and labor” clause, it is likewise clear that the rationale
and applicability of this provision are obviated in the absence
of coverage. See Continental Food Products, Inc. v. In Co.,
Etc., 544 F.2d 834, 837 (5 Cir. 1977).
Judgment therefore will be entered in favor of the defen-
dants, dismissing the plaintiffs’ action against them with costs.
UNITED STATES DISTRICT JUDGE
New Orleans, Louisiana
August 3, 1977
A-38
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
D. J. McDuffie, Inc.
Versus
Old Reliable Fire Insurance Company,
Reserve Insurance Company,
Yosemite Insurance Company
Filed August 5, 1977
JUDGMENT
Considering the Court’s Memorandum Opinion and Order
filed herein dated August 3, 1977,
IT IS ORDERED, ADJUDGED AND DECREED that there
be judgment in favor of defendants, Old Reliable Fire Insurance
Company, Reserve Insurance Company, and Yosemite In-
surance Company, and against plaintiffs, D. J. McDuffie, Inc.
and Ward Drilling Company, Inc., dismissing plaintiffs’
action at plaintiffs’ costs.
New Orleans, Louisiana, this 5th day of August, 1977.
NELSON B. JONES, CLERK /S/
NELSON B. JONES, CLERK
APPROVED AS TO FORM:
ILLEGABLE
UNITED STATES DISTRICT JUDGE
A-39
TWENTY FOURTH JUDICIAL DISTRICT COURT
PARISH OF JEFFERSON
STATE FO LOUISIANA
DIVISION
D.J. McDUFFIE, INC.
versus
OLD RELIABLE FIRE INSURANCE COMPANY,
RESERVE INSURANCE COMPANY AND
YOSEMITE INSURANCE COMPANY
Filed December 4, 1974
A. Guccione /S/
Deputy Clerk
PETITION
The petition of D.J. McDuffie, Inc., a Louisiana corporation,
which has its registered office in the City of Plaquemine,
Louisiana, respectfully represents:
l
The defendants, Old Reliable Fire Insurance Company,
Reserve Insurance Company and Yosemite Insurance Company
are foreign corporations licensed to do business in this State,
and are indebted jointly, severally and in solido unto the plain-
tiff in the amount of FOUR HUNDRED SEVENTY FIVE
THOUSAND AND 00/100 ($475,000.00) DOLLARS, to-
gether with penalties and attorney’s fees, legal interest and all
costs of these proceedings, for the following, to wit:
2
On September 27, 1974, the above named insurance com-
panies were the hull insurance underwriters for the movable
drilling barge known as the: Ward Barge and Rig No. 15”
and also known as the “Delsey D’. A copy of the policy is
attached and made a part of this pleading.
A-40
3
At the aforementioned time, D.J. McDuffie, Inc. was the
owner and additional insured under the hull insurance policy
issued by the defendants.
On the aforementioned date and at approximately 8:00 p.m.,
the “‘Delsey D” capsized in the Gulf Outlet Seaway which is
within the confines of this Parish.
5
Despite repeated requests by plaintiff for hull insurance
coverage, defendants have denied coverage on the grounds
that the capsizing does not fall within paragraph 2 of the
additional perils clause of the policy in question.
6
Representatives of defendants conducted a partial investi-
gation by interviewing some of the crew members and conduct-
ing a metallurgical survey. To date, plaintiff has not received
the results of this survey, even though requested on numerous
occasions; additionally, a review of those statements taken of
crew members clearly show that the sole and proximate cause
of the capsizing of the “Delsey D’’ was caused by crew negli-
gence, which is a peril covered by the policy of insurance.
7
Defendants’ denial of coverage is without foundation, and
amounts to an arbitrary and capricious aciton on their part
subjecting them to penalties and attorneys fees under LSA-
R.S. 22:658.
8
As a result of the capsizing, the “‘Delsey D’”’ has been ren-
dered a constructive total loss, and therefore, plaintiff has
sustained a loss as his interest appear in the amount of
$275,000.00; additionally, the policy of insurance provides
a 25% of the face value of the policy for the raising of the
A-41
drilling barge or an additional amount of $68,750.00.
9
Plaintiff is continuing to suffer losses for down time, rental
and deterioration in the amount of $200,000.00.
WHEREFORE, plaintiff prays for judgment against the
defendants in the full sum of FOUR HUNDRED SEVENTY
FIVE THOUSAND AND 00/100 ($475.000.00) DOLLARS,
along with penalties, attorneys’ fees and legal interest.
Michael E. Wanek /S/
HAMMETT, LEAKE, HAMMETT,
HAYNE & HULSE
4600 One Shell Square
New Orleans, 70139
Tel. 581-2121
PLEASE SERVE:
Old Reliable Fire Insurance Co.
Through the Secretary of State
Baton Rouge, La.
Reserve Insurance Company
through the Secretary of State
Baton Rouge, La.
Yosemite Insurance Company
through the Secretary of State
Baton Rouge, La.
A-42
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
D.J. McDUFFIE, INC.
versus
Old Reliable Fire Insurance Company,
Reserve Insurance Company, and
Yosemite Insurance Company
PETITION OF DEFENDANTS FOR REMOVAL
The petition of Old Reliable Fire Insurance Company,
Reserve Insurance Company, and Yosemite Insurance Company
respectfully represents:
I
D.J. McDuffie, Inc., a Louisiana coporation, has filed a suit
in the 24th Judicial District Court, Parish of Jefferson, State
of Louisiana, against the petitioners, seeking to recover
$475,000.00 together with alleged penalties and attorney’s
fees, interest and costs.
II
Petitioner Old Reliable Fire Insurance Comapny is a corpora-
tion organized and existing under the laws of the State of
Missouri, petitioner Reserve Insurance Company is a corpora-
tion organized and existing under the laws of the State of
Illinois, and petitioner Yosemite Insurance Company is a
corporation organized and existing under the laws of the
State of California.
Ill
The action aforesaid is a civil action where the amount in
controversy, as to each defendant, exceeds the sum or value
of $10,000.00 exclusive of interest and costs, and is between
citizens of different states, so that this honorable Court has
jurisdiction thereof pursuant to Title 28, United States Code,
Section 1332.
A-43
IV
Defendants are entitled to remove the action aforesaid
from the 24th Judicial District Court, Parish of Jefferson,
State of Louisiana, to this Honorable Court, the United States
District Court for the Eastern District of Louisiana.
V
The pleadings in the action aforesaid were served on de-
fendants through the Secretary of State of Louisiana on Decem-
ber 6, 1974.
VI
Petitioners attach hereto copies of all process, pleadings
and orders served on them in the action aforesaid.
VII
Petitioners herewith file and accompany this petition with
bond as specified by United States Code Title 28, Section
1446(d).
WHEREFORE, your petitioners pray that this action be
removed from the 24th Judicial District Court, Parish of Jeffer-
son, State of Louisiana, to this Honorable Court, the United
States District Court for the Eastern District of Louisiana.
December 20, 1974.
Benjamin W. Yancey/S/
Benjamin W. Yancey
Rufus C. Harris, Jr. /S/
Rufus C. Harris, Jr.
Rufus C. Harris, III /S/
Rufus C. Harris, ITI
A-44
TERRIBERRY, CARROLL, YANCEY & FARRELL
2141 International Trade Mart
New Orleans, La. 70130
Telephone: 523-6451
Attorneys for Petitioners
VERIFICATION
STATE OF LOUISIANA
PARISH OF ORLEANS
Benjamin W. Yancey, of lawful age, being duly sworn, de-
posed and said that he is one of the attorneys for petitioners
herein, that he has prepared and read the foregoing petition
for removal, and the matters and things contained therein are
true and correct to the best of knowledge, information and
belief.
Benjamin W. Yancey/S/
Benjamin W. Yancey
Sworn to and Subscribed
before me this 20th day
of December, 1974.
Edward Merrit
Notary Public
A-45
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
CIVIL ACTION NO? 74-3416
SECTION “D”
DJ. McDUFFIE, INC:
VERSUS
OLD RELIABLE FIRE INSURANCE COMPANY,
RESERVE INSURANCE COMPANY, AND
YOSEMITE INSURANCE COMPANY
MOTION TO AMEND PETITION FOR REMOVAL
NOW INTO COURT, through undersigned counsel comes
Old Reliable Fire Insurance Company, Reserve Insurance
Company, and Yosemite Insurance Company who respectfully
move that they be allowed to amend their peition for removal
in the following manner:
1. By amending paragraphs I, II, III, as follows:
I
“D.H. McDuffie, Inc., a Louisiana corporation now and at
the time this action was brought, with its principal place of
business in Louisiana, has filed a suit in the 24th Judicial
District Court, Parish of Jefferson, State of Louisiana, against
the petitioners, seeking to recover $475,000 together with
alleged penalties and attorneys’ fees, interest and cost.
II
“Petitioner Old Reliable Fire Insurance Company when the
aforesaid action was commenced, was and now is a corporation
organized and existing under the laws of the state of Missouri,
with its principal place of business at 231 West Lockwood
Avenue, Webster Groves, Missouri; petitioner Reserve Insurance
Company when the aforesaid action was commenced, was and
now is a corporation organized and existing under the laws of
the state of Illinois, with its principal place of business at 65
A-46
East South Street, Chicago, Illinois; and petitioner Yosemite
Insurance Company when the aforesaid action was commenced,
was and now is a corporation organized and existing under the
laws of the state of California, with its principal place of bus-
iness at 717 Market Street, San Francisco, California.
Ill
The action aforesaid is a civil action where the amount in
controversy, as to each defendant, exceeds the sum or value
of $10,000 exclusive of interests and costs, and is between
citizens of different states, now and at the time when this
action was brought, so that this Honorable Court has jurisdic-
tion thereof pursuant to Title 28, United States Code, Section
1332.
2. All the other allegations of the petition, and the prayer
thereof remain, and shall be taken to remain, as set forth in
the original petition.
TERRIBERRY, CARROLL, YANCEY
& FARRELL
Benjamin W. Yancey /S/
Benjamin W. Yancey
Rufus C. Harris, Jr./S/
Rufus C. Harris, Jr.
Rufus C. Harris, III /S/
Rufus C. Harris, Ill
2141 International Trade Mart
New Orleans, La. 70130
Telephone: 523-645 1
A-47
ORDER
IT IS ORDERED that leave to amend petition for removal
is granted, and that the said petition be, and it hereby is, a-
mended in conformity with the foregoing.
Edward Boyle, /S/
JUDGE
April 23,-1975
CERTIFICATE
I hereby certify that a copy of the foregoing has been served
upon opposing counsel in person this 23 day of April 1975.
Benjamin W. Yancey /S/
A-48
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