Petition for Writ of Certiorari — Poysky v. Pacific Marine Insurance

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87 1107

No.

IN THE

Supreme Court of the United States

OCTOBER TERM, 1987

GEORGE POyYSKY, doing business as

ALASKA TOWING Co., and

SAMOAN MARITIME, LTD., a corporation,

Petitioners,

Vv.

PACIFIC MARINE INSURANCE CO., a corporation, and

DILLINGHAM TUG & BARGE CORPORATION, In personam,

and TUG MIKIALA II, in rem,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

NINTH CIRCUIT

JOHN F. MEADOWS

Counsel of Record

Meadows, Smith & Brown

425 California Street

Suite 1700

San Francisco, California 94104

(415) 981-5277

Counsel for Petitioners

December 30, 1987

CHAS. P. YOUNG CO. e 425 CALIFORNIA ST.¢ S.F., CA 94104 @ (415) 951-1300

QUESTIONS PRESENTED

A. As to respondent Pacific Marine Insurance Company:

1. Whether there is a judicially established Federal admi-

ralty rule creating an implied absolute warranty of seawor-

thiness in a hull insurance policy, regardless as to whether it

is voyage or time, which, on breach, will void the policy and

deny the insured owner coverage for a constructive total

loss, or is the decisional law of the State most involved in the

insurance transaction, which declares such forfeitures to be

against public interest, to be applied instead?

2. Whether, if there is such a judicially created Federal

admiralty rule, the standard of seaworthiness imposed there-

by is a relative one so that, when the insured vessel is a

harbor lighter, it need only be able to withstand all ordinary

perils in a harbor, 1.e., be “portworthy,” and therefore the

perils of the sea against which it is insured will be such perils

as would be extraordinary to a vessel of its type and other

characteristics known to the insurer.

3. Whether the express waiver of any breach of warranty

in the “Held Covered” clause of the hull insurance-policy is

inapplicable where the breach is of an implied warranty of

seaworthiness causing the constructive total loss of the vessel

but applicable if the damage is less than major.

4. Whether, even if there is an applicable implied war-

ranty of seaworthiness and its breach is not waived by the

‘““Held Covered” clause, does the Jnchmaree clause of a hull

policy, expressly covering losses directly caused by a latent

defect, waive the breach of the implied warranty if it also

constitutes a latent defect?

5. Whether the insurer under a huil insurance policy may

rescind the policy on receiving a constructive total loss claim

without returning or at least tendering the premium paid by

the insured for the policy.

6. Whether a claim under a marine insurance policy cover-

ing the hull of an unmanned barge may be denied on the

ground that the vessel’s damage was “ordinary wear and

tear” on a deteriorated hull and therefore not covered as a

peril of the seas when the damage the vessel incurred during

an ocean tow was enhanced by the elements.

B. As to respondent Dillingham Tug & Barge Corporation:

1. Whether, under the implied warranty of workmanlike

service owed by a professional tower to the owner of an

unmanned barge, the barge’s owner has the burden of prov-

ing negligent performance by the tower before it can recover

for damage to the barge or its loss occurring during the tow.

2. Whether, under warranty law as applied to a profession-

al tower, knowledge of the risks that an expert in the field

would have is imputed to the warrantor (tower) and its only

defense is that the warrantee (barge owner) hindered its

performance of the tow.

3. Whether as a matter of law it is a breach of the tower’s

warranty of workmanlike service not to head to a nearby

port of refuge when it becomes or should be obvious to those

on the tug that the unmanned barge is in danger, even if due

to a latent, pre-existing unseaworthy condition which is now

manifesting itself. 5

4. Whether a representation contained in the contract for

the towing of a vessel (an ex-Navy WW-II harbor lighter)

that the tow “‘shall be seaworthy and in all respects ready for

and capable of making the specified voyage” can be inter-

preted to require the tow’s absolute seaworthiness in any

weather, regardless of the type of vessel involved, the due

diligence of the tow’s owner to prepare it for sea, his lack of

knowledge of any unseaworthy condition, the lack of re-

liance by the tower as evidenced by its having inspected the

vessel to verify compliance with the tow survey’s recom-

mendations and subsequent events occurring at sea, such as

an emergency requiring towing by other than the regular

bridle.

ill

LIST OF PARTIES AND RULE 28.1 LIST z

The following listed parties have an interest in the out-

come of this case:

Petitioners, insureds and additional insureds of YCV-9:

George Poysky, dba Alaska Towing Co.

Samoan Maritime Ltd.

Max Rouse & Sons, Inc.

Max Rouse & Sons, Northwest (Affiliate of Max Rouse &

Sons, Inc.)

Morton Marine, Inc.

Dillingham Tug & Barge Corporation

Those not having appeared filed ratifications pursuant to

Rule 17(a), FRCivP.

Respondents:

Pacific Marine Insurance Company

Dillingham Tug & Barge Corporation (a subsidiary of

Dillingham Corporation)

ary pee eer ae bene Minne aE SATER cree SPS ey ee eos PR TE OT ae et PR ar

TABLE OF CONTENTS

TITLE PAGE

Fare ee, RE Bi ntkstincnnctanccesentsinscssesconananbuss 1

LIST OF PARTIES and RULE 28.1 LIST .......000000.... ill

eI laiinctiN sass dconcihiotosdactandnniannidvonsdishsbibase l

FAITE ccisncicnistndcinnianusatshesnsignibasenpinbinvesnpasnsins 2

STATUTORY PROVISIONS DISCUSSED................. 2

SEAR eee SO Oe GPR ish saiiininrcnsitcanecicnnecnes 2

REASONS FOR GRANTING THE PETITION........ 6

(a) State Law, Federal Law and The Policy

Itself Precluded Forfeiture of The Benefits of

The Policy Based on an Implied Absolute

Warranty of Seaworthiness ..................ccccccceeee 9

(b) The Law Applying a Warranty of

Workmanlike Service to the Professional

Tower Does Not Require Proof of the

Tower’s Negligence and, Where Such a

Tower Has Complete Control of the Towed

Vessel, as Where It is Unmanned, It Should

be Strictly Liable Where Damage or Loss is

Incurred by the Tow that was Avoidable ....... 19

Representation of the Tow’s Owner that the

Tow Shall Be Seaworthy and Ready For Sea

as Equivalent to the Absolute Warranty of

Seaworthiness, a Violation of the Rule of

SPI ek iecincctset laaicao seccinadihiepbiiacchs scoeatiadnilabiianie dications ee

CITI abssiiah ca na nodsSoeerncaebntte ccapigniasety secestiheccouiecadeh 25

PE srstcinssavnnsidilicnighsinncatisinshivabacneuatetieacbcincadaiibe la

TABLE OF AUTHORITIES

Cases PAGE

Ahmed v. Amer. SS Owners Mut. P&I Assoc., 444

F.Supp. 569 [ND Calif. 1978] affd 640 F.2d 993

OD OO. PPE Sencsaciecssstopedninbeidaeasabintaiabinatbiiaitiasinaieies 14, 16

Avemco Ins. Co. v. Chung, 388 F.Supp. 142

GP FER OF Pe eccvccinconniavesiprataetletrdtactacinventecessscseseseses 13

Bd. of Com’rs v. FARNSUM, 574 F.2d 289

COE Ce, Re eitacernikce cent inletiamssbiatidibhditeesiasniecensen 20

Bisso v. Inland Waterways, 349 U.S. 85, 75 S.Ct.

er Cte wennaicinsatacseeeaieceainiateasecilnidiiinns 8, 22, 24-25

Boston Metals v. SS WINDING GULF, 349 USS.

Ee 0 6 ae Pivssneiinnsceichaneadialid ideal ialeeiRNiiaditinisseetnencese 24

CalMar SS Co. v. Scott, 345 U.S. 427, 1953 AMC

Fas CEO ai icbcondeabasenda nee ainanntelntid ercsticmsedesicereeiees 13

Campbel! v. Hartford, 533 F.2d 496, 497-8 [9th Cir.

PF FUME snicaussanahsinsseeinends cement redid tiatndbtasinlsieansnencens 16

Chemical Transporter, Inc. v. M. Turecamo, Inc., 290

we Me et A | een 20

Cia. de Navegacion v. Fireman’s Fund Inc. Co. (The

WASH GRAY), 277 U.S. 66, 80 (1928) ......0..... 8, 10, 11

Crumady v. The J. H. FISSER, 358 U.S. 423, 428-9,

FO BAN, Ge I eivickalacicecisthatbatentaitkcercesienes: 23

Dillingham Tug & Barge Corp. v. Collier Carbon &

Chemical Corp., 707 F.2d 1086, 1091 (9th Cir.

1983). cert.den. 465 U.S. 1025, 104 S.Ct. 1280

(NA cihisliincsitciisantiabialte iain ae, 24, 24

Dixilyn Drill. Corp. v. Crescent Towing & Salvage,

372 U.S. 697, 698, 83 S.Ct. 967, 968 (1963)............ 24

Dunbar, Admx. v. H. Dubois Sons, 275 F.2d 304,

SOG ANE USGS Ci Ge, Te cvecsccscescscscicccseccescccess: 19

East River SS Corp. v. Transamerica Delaval,

USS. ERD BGG. SEI 0 BIE wntecsnecasccesecescconees 22

Eggers v. Nat’l Union Fire Ins. Co. (Texas No. 1)

bee POE. ke | ERRATA 17

Fairmont Shipping Corp. v. Chevron Int'l Oil Co., 511

F.2d 1252 (2d Cir. 1975), cert. den. 423 U.S. 838

PF Is csicssivasathasianmichiaseccunnilespuiadianinaacaiginiaminnsiniieaes 19, 22, 23

Vii

Cases PAGE

Fluor Western v. G&H Offshore Towing, 447 F.2d 35

SO a ctueepeinanndanse 24

Frangos v. Sun Ins. Co., L.L.R., Vol. 49, p. 354......... 19

Gaymon v. Prud. Lines, 473 F.Supp. 161, 164

Se REGIE Sel ALCS ea 19

Greenock SS Co. v. Maritime Ins. Co., 1 K.B. 367

SR RE SRG SAC SS A ee 15

Gwynedd Corp. v. Chilula, U.S.A. 1979 AMC 531,

ee TE Ue ID ‘eitattescettticencicnninccccencens 19

Healy Tibbitts Constr. Co. v. Foremost Ins. Co., 482

Fa ey. GP BME? CA. BTS sesescnsccsscascccccececes 14, 16

Henjes v. Aetna, 132 F.2d 715, 719 (2d Cir. 1943)..... 12

Hercules Inc. v. Stevens Shipping Co., 698 F.2d 726,

ee Be A | ne

Italia Soc. v. Oregon Steve. Co. 376 U.S. 315, 318,

Be ee a eciciecchneieeintecinbiltpnnaiinabuasntisntin’ 22, 23

James McWilliams Blue Line, Inc. v. Esso Standard

Oil Co., 245 F.2d 84, 1957 AMC 1213 (2d Cir.

(5, ARES: SECTS SE REESE nae ners ope Tn re nee lt 19

Kalmbach v. Ins. Co. of Penn, 529 F.2d 552, 555-557

SUNT RII: “UITIIIIITIN is cicthetndoncelinteeenianshdiahidasbdisaiesdahpidiinicindeanisasibiinmiasensn 16

King Fisher Marine v. NP SUNBONNET, 724 F.2d

1181 (Sth Cir. Ei FE CS Si SE 22

Klein v. Globe & Rutgers Fire Ins. (The

TORNADO), 2 F.2d 137 (3d Cir. 1924) wu... 11

Kossick v. United Fruit, 365 U.S. 731 733, 81 S.Ct.

a saseunebiséuanctes 8

Luria Bros. v. Alliance Assur., 780 F.2d 1082, 1986

AMC 1539, 1549-1551 (2d Cir. 1986)...............00000.. 16

McDonough Marine Serv. v. M/V ROYAL STREET,

SES FSU. FZG, FSS CED LB. TSTS) nnceccccsecccsccccccceee 21

Mellon v. Fed. Ins Co., 14 F.2d 997, 1002 (SDNY

_____ RSME O05 baer OES a ar ees AI a nO 17

Moran Towing v. M.A. Garmino Constr. Co., 363

a EI, WII inc onan denisabcennntemsertennnsemnies 19

Vill

Cases PAGE

Morrison Grain Co. v. Utica Mut. Ins. Co., 632 F.2d

vy me: £ F §. f» A Ret vn REGED eens 25

Offshore Co. v. G&H Offshore Towing, 262 F.Supp.

282, 287 (SD Tex. 1966) aff'd. 403 F.2d 715 (Sth

i RR, i EE RS a ee 20

Pillsbury v. Delta B&R, 1979 AMC 1221, 1233 (ED

By a atieadecdinnsadainisstadsavescacsaindsisnnsksbesinieoseniabetiane 21

PPG Ind. v. Ashland Oil Co., 592 F.2d 138 (3d Cir.

5 RRR REAR a 8. 26a I aac a 24

Queen Ins. Co. v. Globe & Rutgers Fire Ins. Co.,

262 U.S. 487, 1924 AMC 107 (1924)..............cccceeeees 13

Redna Marine v. Poland, 46 FRD 81, 87 (SDNY

BERRI 8 et ba A tenek Cea ip en Te 19

Russell Mining Co. v. Northwestern Fire & Marine

Ins. Co., 207 F.Supp. 162, 166 (ED Tenn. 1967)..... 1]

Ryan Stevedore v. Pan-Atlantic SS Co., 350 U.S.

ee iaiiciticacattsnsteiesantabianeensensonns 8, 20

Seas Shipping Co. v. Sieraki, 328 U.S. 85, 66 S.Ct.

i cueaaaans 22

Sorenson & Neilson v. Boston Ins. Co., 10 F.2d 563,

ee Ne I cst teinscestnecenandiiandikecensectiiccinepstionse 12

South v. Moran Towing, 360 F.2d 1002 [2d Cir.

Pe aiacactiiets aceite sila taliseneancepediiadiniibieeieitadinnaleiskinainpiias 20

Spooner v. Conn. Fire Ins. Co., 314 F.2d 753. 756

ee lcci ea ita lhl enietlaanetencainehiansianianenn 11

Standard Oil of N. J. v. U.S., 340 U.S. 54, 1950

Pe TERRI EC ik es Ee ae eo 13

Sternberg Dredging v. Moran Towing, 196 F.2d

S.-C 20

Stevens v. THE WHITE CITY, 285 U.S. 195, 202

Lg 6 2 RRR AEE SEND EROS Ss SEIN 1 I eR 22

Tebbs v. Baker-Whitely Tow. Co., 407 F.2d 1055 -

CI Mae een actienrtelat a lceieaistsensctenciceheneinensscnnsnieiattininnee 20

The ANTHONY D. NICHOLS, 49 F.2d 927 (SDNY

NON 16

Cases PAGE

The NATALIE, 1959 AMC 2379 (NY ARB).................... 12

The OSCEOLA, 189 U.S. 158, 23 S.Ct. 483 (1903)..... 22

The ROCONA v. Guy F. Atkinson Co., 173 F.2d

ee ee a iicnettntininctgsaniscsncespacrnepneness 21

The Soerstad, 257 F. 130, 131 (SDNY 1919).............. 19

The SPOT PACK, 242 F.2d 385, 392 (Sth Cir.

PI ee teienttachiciiiditadatiiched sskcndicdttatindedantidiistnctiambeshenanbntsntndes 17

The Steamer WEBB, 81 U.S. (14 Wall.) 406, 414

CE i cedicieletiineld tusetiiiacdaciabascdbitiedaianliiigbiiinasanesccresses 20

The XANTHO, 12 App. Cas. 503, 509(1887) ............ 11

Tropical Marine Prod. v. Birmingham Fire Ins.

Co., 247 F.2d 116, 123 (Sth Cir. 1957) cert. den.

pA, EAT aa eee ee 16, 17

Twenty Grand Offshore Inc. v. W. India Carriers,

Be Te Ce a inchs nchctdicekscniatannceniens 24

U.S. v. Tug MANZANILLO, 310 F.2d 220 (9th Cir.

RIND RET 52 iia ed yen ae ee Oe ee ee ee OT 20

USF&G v. Leong Dung Dye, 52 F.2d 567, 570-1

DO ay I idieictadidciadlacickcdsshiendnicdanscbadsnsberpdstccdanscese 16

Vella v. Ford Motor Co., 421 U.S. 1, 3, 95a S.Ct.

SF ee Ce Ce Fe Be CTS cicestncnictcccccsasscccens 6

Wilburn Boat Co. v. Fireman’s Fund, 348 U.S. 310, 320-

DF a By Oe i itiattncttncccessnnss 6, 8, 10, 13-15

Yacht DUET, 1967 AMC 1144 (D.Oreg. 1967)........... 19

Statutes

a csssesitinnbiapapnonscess G

SN I, a ceiansianisinisonnnnannnses eh

Marine Insurance Act of 1906 (MIA), 6

I oc cuenicbonannans 2, 7, 10, 13

I Oe oi ssntenesinnnacnenniodetinnssnbnsinie 8

pT EE Sa eke 2

Texts PAGE

1 ARNOULD’S LAW OF MARINE INSURANCE

AND AVERAGE (16th ed.) ...........ccceeeeeeeeeeeees 10, 17, 18

S AGUOE. TOs GE FI Bi. Bie BS wacscenccecccccncinceseccens 21

9 COUCH ON INSURANCE 24d, §37B:357, p. 271.... 10

16 C. Appleman, INSURANCE LAW OF

PRACTICE, §9260 at p. 393 (1981)... eee 16

Buglass,s MARINE INSURANCE AND GENERAL

AVERAGE IN THE UNITED STATES (2d ed.)

pp. 36-7 sical iinedandiatinindaiieaadii dd matalsableKoiiedininens 12, 17

Gilmore & Black, THE LAW OF ADMIRALTY

Ce 8 i, ee eaiktacikehiatetectatnneiectintiiciicinins 11, 14, 25

Keeton, “Insurance Rights at Variance with Policy

Provisions’, Vol. 83 Harv. L.R. [March 1970] at

i Sip iiscatcnicsenccenesttasibeaenisaaighadsiasaniiiens peteedancess 16

Parks, THE LAW OF TUG, TOW AND PILOTAGE

(2B OER} Dir Seal peach ain ccertaciiictssorceinsneses 25

Parks, THE LAW AND PRACTICE OF MARINE

INSURANCE AND AVERAGE (1987) at n. 846, p.

RAEI ss cvnsnioncinionsbsvnielialiniidinipliiananibtibiaaseinbiieeiniansatasnanonrias 6, 14

Prosser, LAW OF TORTS (Sth ed.) §98 pp. 692-4...... 22

Schoenbaum, ADMIRALTY AND MARITIME LAW

tee FR | rane eer ee 13, 24

Vol. 44, No. 10, Proceedings of The Marine Safety

CET, ie atid attri ciictivcncseistnsectesinacsccssenenn 9

Ce ee: REC EN 25

No.

IN THE rs

Supreme Court of the United States

OCTOBER TERM, 1987

GEORGE PoyskyY, doing business as

ALASKA TOWING Co., and

SAMOAN MARITIME, LTD., a corporation,

Petitioners,

PACIFIC MARINE INSURANCE CO., a corporation, and

DILLINGHAM TUG & BARGE CORPORATION, in personam,

and TUG MIKIALA II, in rem,

Respondents.

PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

The petitioners, George Poysky, dba Alaska Towing Co.,

and Samoan Maritime, Ltd., respectfully pray that a writ of

certiorari issue to review the judgment and order of the

United States Court of Appeals for the Ninth Circuit entered

in this proceeding on May 1, 1987.

OPINION BELOW

The opinion of the Court of Appeals, marked “‘Not for

Publication”, appears in App. A, infra. Findings of Fact and

Conclusions of Law of the District Court for the District of

Hawaii, not yet reported, appear in App. C, infra.

JURISDICTION

The judgment of the Court of Appeals for the Ninth Circuit

was entered on May 1, 1987. A petition for rehearing and sug-

gestion for rehearing en banc was filed on May 15, 1987 and

denied on October 7, 1987. App. B infra. This petition for

certiorari was filed within 90 days of that date. This Court’s

jurisdiction is invoked under 28 U.S.C. § 1254(1).

STATUTORY PROVISIONS DISCUSSED

Hawaii Rev. Stats. § 431-419.

Marine Insurance Act of 1906 (MIA), 6 Edw. 7 ch. 41.

(See App. F infra.)

STATEMENT OF THE CASE

This is a first party action by the insureds (plaintiffs and

petitioners, hereinafter ‘““Poysky”) on a policy of marine

insurance (hull) issued by defendant Pacific Marine Insur-

ance Company (Pacmar) and covering two harbor lighters

for $225.000 each while towed by Dillingham Tug & Barge

Corporation (Dillingham) from Pearl Harbor, Hawaii to

Seattle, “‘or held covered’’. Dillingham was joined as a de-

fendant, one of the causes of action being for breach of the

implied warranty of workmanlike service owed by a profes-

sional tower in the circumstances of this case. Poysky paid

Dillingham $75,000 in advance for the tandem tow. (Find-

ing of Fact [FF] 14, App. C.) The insurance was placed from

Honolulu (FF 24) and written by endorsement to an existing

time policy covering another vessel owned by Samoan Mari-

time, Ltd., a company with which Poysky is affiliated.

(FF 25.) The endorsement for the two barges, which also

covered Dillingham as an additional insured with waiver of

subrogation, incorporated all terms of the original policy.

(For the Policy and Endorsement 2, see App. E.) YCV-9, as

the ““Y” in its designation indicates, was a “‘yard”’, or harbor

lighter, 200 ft. long, 65 ft. in beam, 12 ft. deep at either rake

(but only 9 ft. deep inboard of the rakes [RT 130:23-131:10,

App. H]). (FF 5.) The “CV” stands for carrier vessel, mean-

ing aircraft carrier (ferrying planes around Pearl Harbor).

(FF 6.) Poysky had, shortly before placing the insurance on

the two barges, been the high bidder for them at auction

conducted by the Navy. They had been moored at Pearl

Harbor for an unknown length of time. Poysky, along with

other potential buyers from the mainland, had surveyed

them extensively before bidding. (FF 7-13.) Some of the

surveys of YCV-9 included multiple ultra-sound readings of

the steel thickness of the deck, sides and bottom. (FF 9, 12.)

Poysky, however, used a surveyor’s hammer in all 18 of the

barge’s compartments and did not know of the existence of

the other surveys. (FF 10, RT 73:1-77:23, App. H.) The

bottom of neither barge was surveyed, except by ultra-sound

gauging, because they were afloat. (FF 10.) The written sur-

vey of YCV-9 by Capt. Dickieson, made for an unsuccessful

bidder, expressly stated that the condition of the bottom

could not be determined without hauling it out. (FF 10.)

According to another marine surveyor, Anderson, there was

no way of determining the condition of the bottom without

having the vessel drydocked. (FF 13.) Poysky was unable to

ascertain the condition of the bottom of YCV-9, however,

even after he was awarded the vessel, because there was no

suitable drydock available in Hawaii. (FF 11.)

Prior to commencement of the tow, a marine surveyor was

hired (the same Capt. Dickieson [RT 101:3-12]) to conduct a

pre-tow survey of the barges and to specify all preparations

needed to make them “ready in all respects to be towed to

the U.S. mainland.” (FF 18.) Dillingham’s port captain,

Kapele, supervised the actual hook-up to the Dillingham tug

MIKIALA II and verified that all Capt. Dickieson’s recom-

mendations had indeed been carried out. (FF 21.) On depar-

ture, visual inspection of YCV-9 did not disclose any condi-

tion which might suggest that it was unsound or unfit for the

tow. (FF 22, 30.)

On the night of September 26, 1982, after two days of

towing through rough seas at full towing speed and when

wind velocity and wave height began to further increase, the

lower leg of the “Y” shaped bridle, which acts as a shock

absorber and is called the “surge chain” (composed of a

70-ft. length of stud-link chain each link of which was

formed by steel 1'/s to 15/s inches in diameter), broke.

(FF 19, 30-33.) This occurred 270.3 miles out of Pearl Har-

bor (and 2,151.5 mi. from Seattle [RT 1454:11-16]), but the

tug, instead of returning to port to fix the bridle (the tug crew

tried and failed to accomplish this at sea on October 2 when

the weather eased up [RT 1397:7-1398:10]), chose to con-

tinue to tow the rectangularly-shaped barge by its emergency

tow line affixed to a corner of the vessel. (FF 34, 42.) How-

ever, six davs later and 960.5 miles out from Pearl Harbor

(and 1,459.1 mi. from Seattle [RT 1442:4-25]), YCV-9 for

the first time showed damage — a crack in the leading

corner, through which it then slowly began to fill. (FF 41.)

The tug then moved the emergency tow ine and started

towing YCV-9 from a corner of the stern. (FF 41.) Other

damage developed during the tow which breached more

compartments on one side than on the other, causing the

barge to fill unevenly, so that it arrived in Seattle (eight days

late) floating at a 20-30% angle (RT 103:1-19). It was a

constructive total loss (CTL). The other WW-II barge, also a

“Y°’?, towed in the usual fashion by its bridle, arrived

undamaged.

On the arrival of the barges in Seattle, Poysky sought to

have the coverage continue on the barges but Pacmar denied

the request. On being drydocked, according to the District

Court’s findings based on the testimony of defendants’ ma-

rine surveyors, the bottom and sides of YCV-9 were found to

be “‘substantially wasted [up] to the wind and water line,

especially at the turn of the bilge’. The Court found that this

wastage pre-existed the voyage. (FF 49.) There was also a

fracture in the hull similar to one which could have been

made if the tug had come alongside in rough weather (it did).

(FF 54, 42.) Damage caused by slamming was also observed

as well as missing plates ‘tas to which there is only specula-

tion as to the potential causes.” (FF 55, 56, 58.)

On claim for a CTL being filed, Pacmar denied it on the

basis (sustained by the District Court) that the hull policy as

to YCV-9 was voided by the insured’s breach of an implied

‘absolute warranty of seaworthiness contained in every voy-

age policy”, because, though Pacmar admitted that the in-

sured had no actual knowledge of any defects in the barge,

the vessel was “not reasonably fit for its intended use”

because of “severe wastage/deterioration” of its underwater

hull and therefore unseaworthy. (FF 61, Conclusions of Law

[CL] 21 and 22.) Pacmar’s rejection letter (App. G) was also

based on a general allegation that the CTL was not due to

any “‘peril’’ covered by the policy, which the District Court

sustained through a “conclusion” that the damage resulting

in the CTL was “ordinary wear and tear during the voyage”

and therefore not a peril of the sea. (CL 24-27.) Judgment

was entered for Pacmar and Dillingham, the latter on the

basis that Poysky had breached what the District Court

concluded was a representation of seaworthiness (called a

“warranty” by the Court of Appeals) and because Poysky

had failed to meet his burden of proof as to the tower’s

negligence, even though the Court acknowledged that there

is an implied warranty of workmanlike service contained in

the towage contract. (CL 5-9.) Judgment was entered for

Poysky for the amount of the premium paid for YCV-9’s

coverage which had not been tendered back when Pacmar

voided the policy. Dillingham’s claim for charges at the

contract rate for the 8 days delay en route was denied

because the “delay due to heavy weather and delay due to

the unseaworthy character of the barge cannot be separat-

ed’’, which is inconsistent with the causation findings else-

where. (CL 10. See also FF 45, CL 21.)

Poysky and Samoan Maritime, in their appeal to~the

Ninth Circuit Court of Appeals from the judgment as to

both defendants, attacked the Findings of Fact as being

clearly erroneous and inconsistent but alternatively appealed

as to prejudicial, material errors of law requiring reversal

even if the findings were not clearly erroneous. The Court of

Appeals panel, however, in their order for judgment, dealt

only with the appeal as to Dillingham.

REASONS FOR GRANTING THE PETITION

This petition concerns the law applicable to two highly

specialized industries vital to the maritime commerce of the

United States: marine insurance (termed “one of the great

enterprises of the nation” by this Court in Wilburn Boat Co.

v. Fireman’s Fund, 348 U.S. 310, 320-1, 75 S.Ct. 368, 374

[1955]) and the tug and barge industry. The case has already

garnered a great deal of notoriety in these industries and is

mentioned in Alex Parks’s new two volume text, 2 THE

LAW AND PRACTICE OF MARINE INSURANCE AND

AVERAGE (1987) at n. 846, p. 1039. The reference in Parks

is to the effect that “[T]he courts found that there was no

bad faith involved in the underwriter’s refusal to pay

benefits under the policy and that the plaintiff/insured had

breached the warranty of seaworthiness. The case is now on

appeal.” Regardless of the “Not to be published”’ designa-

tion,’ that there was an affirmance has already been pub-

lished in the official reports. 817 F.2d 106 (9th Cir. 1987).

Accordingly, in Park’s next supplement to the text, the find-

ings and conclusions below and their affirmance will un-

doubtedly be discussed whether the FF/CL are reported

elsewhere or not.

As a result of the decision and its affirmance, the so-called

‘*‘American Rule.”’ which is only mentioned in some Second

and Fifth Circuit cases as dicta, has for the first time been

'**An opinion is written primarily to tell the litigants why the case has

come out as it has and to provide guidance to future litigants.” Vol. 64

ABA Journ. (August 1978), “The Enigma of Unpublished Opinions” by

Herbert J. Stern, U.S. District Court Judge for District of N.J. The Ninth

Circuit’s unpublished decision in our case is obviously premised on the

mistaken idea that the determination of the controversy has no actual

value to other litigants whose claims may be similar. Hopefully, we will be

able to show that the issues in this case are indeed of vital concern to the

two industries involved. And whether published or not, the Circuit

Court's judgment affirming the decision below is going to impress the next

District Court judge faced with any of these issues and presented with a

copy of the FF/CL of Chief Judge Fong. In any event, this Court has

reviewed and even reversed unpublished Circuit Court opinions. E.g.,

Vella v. Ford Motor Co., 421 U.S. 1, 3, 95a S.Ct. 1381, 1383, 1975 AMC

563 (1975).

made the basis for a decision, and as a result, owners claim-

ing damage to their vessels under the hull policy, whether

voyage or time (see § 25 MIA, App. F), will forfeit coverage

on breach of an implied warranty of absolute seaworthiness

(same thing: absolute implied warranty of seaworthiness).

Even where, as in this case, the insurer had as much knowl-

edge as the insured had of the vessel’s type, age and the

dangers of the voyage to be made, the insured, contrary to

his reasonable expectations, will find that by an implied

exclusion he has become the insurer himself. And it will

make no difference that the insured exercised due diligence

to prepare the vessel for sea, or that the vessel was in an

outport without facilities, such as a drydock, whereby the

owner could discover if there was a breach, or that the

unseaworthiness was a latent defect covered under the /nch-

maree Clause. Also, the presence in the policy of an express

‘“‘Held Covered” Clause waiving breach of “‘any” warranty

on payment of an “equitable”’ additional premium will avail

the insured nothing, despite his reasonable expectations,

against the implication of this warranty of absolute seawor-

thiness if the loss is total, or a CTL, or the damages are

major (exclusions not set out in the “Held Covered” Clause).

Then, as to owners of vessels towed by professional

towers, a clause in the towage agreement “warrant[ing] and

represent[ing]” that the tow is seaworthy and ready for sea

has become, through this decision (even though the District

Court calls it a “representation’’), yet another warranty of

absolute seaworthiness whereby the tower does not even

need to inspect the vessel before undertaking the voyage nor

need to go to a port of refuge when the barge becomes

distressed. Then, if the tow’s owner, who may have had no

witnesses to what happened at sea, can manage to dispute

the Tower’s claim that the damage or loss was due to the

barge’s unseaworthiness, he must, contrary to Second and

Fourth Circuit law based on decisions of this Court, go on to

prove the tower’s negligence.

The distortion of the applicable law by the decision below,

to the point that the rights of owners of insured vessels and

owners of tows are returned to square one where they were

eae

thirty years ago, i.e., before Wilburn Boat Co. v. Fireman’s

Fund Ins. Co., 348 U.S. 310, 75 S.Ct. 318 (1955), before

Ryan Stevedore v. Pan-Atlantic SS Co., 350 U.S. 124, 76

S.Ct. 232 (1956), before Bisso v. Inland Waterways, 349 U.S.

85, 75 S.Ct. 629 (1955) and even before Cia. de Navegacion

v. Fireman’s Fund Inc. Co. (The WASH GRAY), 277 U.S. 66,

80 (1928), very much warrants, we respectfully suggest, this

Court’s review and clarification of the questions presented.

Because of the double appeal, we doubt if there will ever be a

better vehicle coming before this Court for resolution of

these questions.

We submit, then, that the District Court and the Ninth

Circuit have, in this matter, decided important questions of

Federal law in a way conflicting with applicable decisions of

this Court as well as with decisions of other Circuits and of

the State of Hawaii. (Rule 17, Supreme Court Rules.) Addi-

uonally, in relation to Pacmar, this case presents questions

as to the interplay of State and maritime law as to which

great confusion exists because of the resistance of text

writers and various courts to this Court’s decision in

Wilburn Boat, supra. (As to the propriety of this ground, see

Kossick v. United Fruit, 365 U.S. 731, 733, 81 S.Ct. 886, 889

[1961]). We also submit that the Circuit Court’s judgment,

obviously dealing with only one of the two appellees despite

the discrete appeal as to the other appellee, has, in leaving

only half of the case reviewed and decided, yet affirming the

whole matter below, and in dealing with such important

issues aS are involved here by an abbreviated “Not to be

published” order, has “‘so far departed from the accepted

a8 and usual course of judicial proceeding ... as to call for an

exercise of this Court’s power of supervision.” (Rule 17,

Supreme Court Rules.) We respectfully suggest that these

compelling grounds, discussed in depth infra, exist for grant-

ing a writ of certiorari as to the questions presented as set

out above.

‘ton ve

ote

(a) State Law, Federal Law and The Policy Itself Precluded

Forfeiture of The Benefits of The Policy Based on an

Implied Absolute Warranty of Seaworthiness.

The principal danger portended by this case to insured

vessel owners is the holding that both the implied warranty

of seaworthiness and the perils of the sea which are covered

risks in the policy are fixed and absolute, without regard to

the type of vessel, the waters on which it was designed to be

operated, the mode of tow for which it was designed, its age,

the limitations existing in the particular port from which the

voyage is to commence as to ascertainment of its true condi-

tion, the insured’s diligence in readying the vessel for sea,

and what the insured knew and communicated to the insur-

er. True, the District Court, affirmed by the Ninth Circuit,

held that such a warranty means that the vessel must be

“reasonably fit for its intended use” (CL 21) but, after giving

this principle no more than lip service, the District Court

went on to ignore that YCV-9’s intended use was as a harbor

lighter. The District Court was really implicitly determining

that YCV-9 was unseaworthy because it was not able to

withstand perils of the seas that any barge should, in the

Court’s opinion, have been able to withstand and ignoring

what, for a harbor lighter, were extraordinary perils both of

the seas and the mode of towing, such as being towed with-

out a bridle (including the surge chain, the shock absorber)

and by a corner nearly all the way across the eastern Pacific.

The District Court’s absolute standard of seaworthiness

resulted in its ignoring the fact that the barge withstood

without damage two days of being towed by its bridle in

heavy weather and six more days of being towed by a corner.

(See as to the effects experienced by inland waters barges in

rough seas, Vol. 44, No. 10, Proceedings of The Marine

Safety Council, pp. 264-266, a Government (USCG) publi-

cation, which states, ““Complete failure of the hull can result

from continuous pounding for even a short time. This dan-

ger is particularly great for towed barges, since nobody is

aboard to feel that the barge is pounding.”’ We submit that

judicial notice may be taken of these USCG reported exam-

ples even at this stage of the action. FRE 201(b)(2) and (f).)

This erroneous standard of seaworthiness is also manifested *

in the District Court’s findings that the abstract vessel it

assumed YCV-9 to be was not subjected to abnormal stresses

by being towed by a corner and without a bridle (FF 40), that

YCV-9’s plating had “offered no resistance to normal sea

conditions” (FF 56), and that “Slamming the barge into seas

would not cause loss of the structural members” (FF 55 and

58). For a barge designed for ocean towing, perhaps, but how

about a harbor lighter?

This Court made it crystal clear long before the Poysky

case that, under an implied warranty of seaworthiness in a

voyage policy, there is no fixed and positive standard of

seaworthiness, i.e., that the term is relative. Chief Justice

Taft, speaking for the Court, held in Compania de Navega-

cion v. Fireman's Fund (The WASH GRAY), supra, 277 U.S.

at 80, a case very similar to ours but preceding Wilburn

Boat, that the implied warranty of seaworthiness has to

accommodate what is “reasonably practicable in a particular

case’’, 1.e., NO more is required than that her owner exercise

due diligence before she leaves port to make her as sea-

worthy “as reasonably practicable’. (See 9 COUCH ON

INSURANCE 2d, § 37B:357, p. 271 and 1 ARNOULD’S

LAW OF MARINE INSURANCE AND AVERAGE [16th

ed.] §§ 110-111.) This Court, in The WASH GRAY, likewise

held that “perils of the sea’”’ coverage is also relative, as, for a

vessel of The WASH GRAY’s description (an inland tug

being towed), winds of 25 mph, with occasional gusts, and

waves of 4-5 ft., would constitute a covered peril. Justice

Taft noted in The WASH GRAY that not every type of vessel

can be put into that condition of seaworthiness requisite for

the contemplated voyage, giving as an example a river boat

to be sailed from this country to Calcutta or Odessa. Accord-

ingly, even under §§ 33(3) and 39(1) of the English Marine

Insurance Act of 1906 (MIA) (App. F), imposing, at com-

mencement of the voyage, an absolute implied warranty of

seaworthiness in voyage policies (but only a duty of due

diligence if the policy is time), would not deny coverage in

our case, even if, instead of State law under Wilburn Boat,

English marine insurance law was applied as part of Federal

admiralty law on marine insurance. Chief Justice Taft added

that “the underwriter must be informed of the peculiar

nature of the risk’, i.e., it must be provided with “full

information as to the class of vessel and the intended voy- ~

age”. If the underwriter has this knowledge, then, according

to The WASH GRAY, should the insured vessel founder even

though due diligence was exercised to make it ready for sea,

the casualty will be ascribed to a peril of the sea rather than

to the vessel’s unseaworthiness. Likewise here, Pacmar had

full knowledge of the type of vessel involved, where it was

stored and the intended voyage. (Poysky believed he had

also sent Parks, the broker, a copy of the bid brochure. [RT

146:4-19].) Pacmar extended coverage nevertheless, and the

decision below as to the implied warranty of seaworthiness

and perils of the sea is totally erroneous and contrary to this

Court’s decisions. Unless it is corrected by this Court, the

decision will henceforih serve only to befuddle insured own-

ers, practitioners and the Courts alike, to the great dis-

advantage of the owners. See further Klein v. Globe &

Rutgers Fire Ins. (The TORNADO), 2 F.2d 137 (3d Cir.

1924), Spooner v. Conn. Fire Ins. Co., 314 F.2d 753, 756 (2d

Cir. 1963), Russell Mining Co. v. Northwestern Fire & Ma-

rine Ins. Co., 207 F.Supp. 162, 166 (ED Tenn. 1967) and The

XANTHO, 12 App. Cas. 503, 509 (1887).

Another aspect of this case is that it represents an attempt,

through the defendants’ attorneys, who, in the main, crafted

the FF/CL (not to be unfair, we should say that we also

proposed FF/CL pursuant to the District Court’s request of

all parties), to breathe life into the so-called ““American

Rule” and create precedent for its future use. According to

the “‘American Rule”, there is an implied warranty of sea-

worthiness imposed if a time policy incepts while the vessel

is in port. As Gilmore & Black, THE LAW OF ADMIRAL-

TY (2d ed.) state at pp. 63-67, that “rule” has so far been

entirely based on dicta. ““No case has been found squarely

basing decision on the so-called ‘American Rule’, and the

guess is ventured that the Supreme Court, if the issue was

even [ever?] tendered it, will not uphold this warranty.” /d.,

p. 65. See also Parks, THE LAW OF TUG, TOW AND

PILOTAGE (2d ed.) 548-560.

Even under the “American Rule”’, if the port the vessel is

in when the time policy commences is one without adequate

repair facilities, there can be no implied warranty of seawor-

thiness. The NATALIE, 1959 AMC 2379 (NY ARB). See

discussion concerning this important arbitration case and

criticizing the “American Rule” in Buglass, MARINE IN-

SURANCE AND GENERAL AVERAGE IN THE UNIT-

ED STATES (2d ed.) pp. 36-7.

There are reasons why an implied warranty of seaworthi-

ness is imposed in a voyage policy. The vessel is in port,

about to leave on a voyage and the owner usually knows or

has the means of knowing the condition of the ship in

relation to the rigors of the voyage ahead, but under a time

policy, when the policy expires and has to be renewed, the

vessel may be at sea or in a port other than its home port

and which may not have adequate repair facilities. Hence its

owner will not have such knowledge or means of acquiring

it. For further explanation, see Sorenson & Neilson v. Boston

Ins. Co., 10 F.2d 563, 565-7 (D. Md 1925). YCV-9 being in

Honolulu, which was not her home port and which is with-

out a civilian drydock large enough to handle it, then, ac-

cording to The NATALIE, supra, Sorenson & Neilson and the

cases cited at p. 565, there can be no implied warranty of

seaworthiness in the time policy.

We ascribe the above-mentioned intent to opposing coun-

sel because of the stated refusal in the FF/CL to decide

whether the policy they call a voyage policy several times

(FF 25, 26, 28) is a voyage.or a time policy. (CL 21.) But

even if the endorsement covering the barges was time rather

than voyage, because it was part of a time policy and ex-

pressly incorporated the time policy’s express and implied

terms, including warranties, and/or because the coverage of

the barges could be and was asked to be extended (i.e., “held

covered”) for longer than the voyage, the above cases show

that the “American Rule” could only be implemented if the

vessel was in its home port. See also Henjes v. Aetna, 132

F.2d 715, 719 (2d Cir. 1943). Under the “home port rule”, a

vessel owner should not be made to suffer a forfeiture of

coverage when the port in which the vessel lies does not

provide facilities so that an adequate inspection to evaluate

the vessel’s condition can be made. Hence, it is immaterial

whether you call it due diligence under the English rule

(where there is no implied warranty of seaworthiness in a

time policy [§§ 33(5)], MIA, App. F) or an exception to an

implied warranty under the so-called “American Rule”. It

could only make sense if this same exception applied to a

voyage policy as well.

While the foregoing discussion is necessary to under-

standing the District Court’s erroneous holdings, this

Court’s decision in Wilburn Boat, supra, makes it academic.

In Wilburn Boat, this Court reversed the two lower courts’

holdings that the express warranties in the hull policy were

“‘absolute’’, determined that there was no “federal admiralty

rule’ requiring literal compliance with warranties and held

that, on remand, State law would have to be applied as to the

effect to be given the warranties in the policy at hand.

(Justice Reed dissented, noting that all prior decisions

showed the necessity of a uniform rule in marine insurance

cases and that American marine insurance law should be

kept in harmony with Great Britain’s.*) The District Court

in our case, however, turned to what it erroneously consid-

ered (without citation) to be Federal law in regard “the

existence of an implied warranty of seaworthiness in mari-

time hull insurance policies” which voids the policy on

breach (CL 19, 20), rather than to a Hawaii Statute (HRS

§ 431-419) by analogy and as amplified by Hawaii decisional

law, which forbids voiding the policy on breach of warran-

ties. Avemco Ins. Co. v. Chung, 388 F.Supp. 142 (D. HI

*This court has several times stated that respect should be paid to

“established doctrines of English Maritime Law”, particularly in the

marine insurance field. Queen Ins. Co. v. Globe & Rutgers Fire Ins. Co.,

262 U.S. 487, 1924 AMC 107 (1924), Standard Oil of N. J. v. U.S., 340

U.S. 54, 1950 AMC 365 (1950), Ca/Mar SS Co. v. Scott, 345 U.S. 427,

1953 AMC 952 (1953). See also Schoenbaum, ADMIRALTY AND MAR-

ITIME LAW (1987) at p. 561.)

ry 14

1975). (CL 30.) Hawaii is, of course, the State with the

greatest interest in the coverage issues, it being from where

the insurance was placed (FF 23-24), the subject of the

insurance (the barges) were there, the tow commenced from

there, Dillingham (required by the towage agreement to be

made an additional insured) is a Hawaii corporation and

Dillingham, in the towage contract, also required that suit be

brought there. (See Art. 17-7, App. D. See also, as to choice

of law, Healy Tibbitts Constr. Co. v. Foremost Ins. Co., 482

F.Supp. 830, 835 [ND Cal. 1979], Ahmed v. Amer. SS Own-

ers Mut. P&I Assoc., 444 F.Supp. 569 [ND Calif. 1978] aff'd

640 F.2d 993 [9th Cir. 1981].) That the District Court found

that Oregon had the “most significant interest in regulating

[the] agency relationship” between Poysky and Parks (CL

16) had nothing to do with applying Hawaii law as to the

effect to be given a warranty in a marine insurance policy.

The District Court’s holding in this regard, we respectfully

submit, exemplifies the “state of turmoil” in which the law

of marine insurance has found itself, according to the com-

mentators, since Wilburn Boat. Parks, THE LAW AND

PRACTICE OF MARINE INSURANCE AND AVERAGE,

p. 13. Gilmore & Black, THE LAW OF ADMIRALTY (2d

Ed.) at p. 69, characterize the majority’s decision in Wilburn

Boat as “nightmarish” and, at p. 68, state that the case as

applied is “‘persistently problematic”. See also p. 71 n. 78a.

In fact, these authors, at pp. 70-71, state that they must

proceed in their text on the basis of pre-Wi/burn Boat cases,

inasmuch as

“It is utterly impossible to be at all sure, even yet, how

the Supreme Court will at last resolve these perplexities

and contradictions [referring to the preceding discussion

in their text as to all the myriad possibilities under

Wilburn).

zk*

The reader is sufficiently warned, however, of the incerti-

tudes that case has introduced. The lower federal courts

cannot authoritatively resolve those uncertainties; we will

not know what Wilburn Boat means unless and until the

Supreme Court clarifies the position further.”

It is time, we respectfully suggest, for a clarification of the

situation. And if State statutes and regulations, plus judicial

decisions amplifying them, are not to govern the application

of warranties, then a new Federal admiralty rule implement-

ing the views of the Court as set out in Wi/burn Boat should

be created. This Court showed it does not favor absolute

warranties, stating in Wilburn Boat (348 U.S. at 319-320, 75

S.Ct. at 373-374),

“In this very case, should we attempt to fashion an admi-

ralty rule governing policy provisions, we would at once be

faced with the difficulty of determining what should be the

consequences of breaches. We could adopt the old com-

mon-law doctrine of forfeiting all right of recovery in the

absence of strict and literal performance of warranties, but

this is a harsh rule. Most States, deeming the old rule a

breeder of wrong and injustice, have abandoned it in

whole or in part.”

Actually, there should have been no reliance below on any

warranty, much less an implied. one, inasmuch as the

Samoan Maritime time policy, expressly incorporated by the

endorsement bringing the barges into the policy, states: “11.

Held covered in the event of any breach of warranty, or

deviation from the conditions of this Policy, at an equitable

premium to be arranged, notice to be given on receipt of

advices.” (App. E.) The District Court, obviously relying on

an old English case but not citing it, Greenock SS Co. v.

Maritime Ins. Co., 1 K.B. 367 (1903), where the un-

seaworthiness (lack of sufficient fuel aboard on departure to

complete the voyage) was known to the owner, could have

been prevented and certainly had to result in the loss (none

of which conditions existed in our case [see Gilmore &

Black, supra, at pp. 65-66]), concluded that Clause 11 is

inapplicable because, “It is absurd to suggest that an insurer

would consider charging an ‘equitable premium’ for the

unseaworthiness present in this case, when such a premium

would at least equal the face value of the coverage”. The

other side of the coin is that only minor breaches of warranty

are excused under Clause 11, a distinction not set out in the

policy or found in the cases (which predominate in the Ninth

Circuit: Kalmbach v. Ins. Co. of Penn, 529 F.2d 552, 555-

557 [9th Cir. 1976] and Campbell v. Hartford, 533 F.2d 496,

497-8 [9th Cir. 1976]). Kalmbach holds that Clause 11

covers all warranties, express or implied, even as to seawor-

thiness, and regardless as to whether the breach is a major or

minor one. The decision below, by rewriting Clause 11,

made the insured his own insurer by means of a judicially-

imposed inequitable premium adjustment. The courts of the

land nowadays do a certain amount of policy rewriting but

only to effect coverage where such carries out the insured’s

reasonable expectations as to coverage (see Kalmbach, supra,

also Keeton, “Insurance Rights at Variance with Policy Pro-

visions”, Vol. 83 Harv. L.R. [March 1970] at p. 968) — and

the insured could never, obviously, expect to forfeit coverage

through a condition precedent which is implied and not

expressed and which is clearly contrary to Clause 11, the

“Held Covered” Clause.

Further in this regard, Pacmar failed to demand any “eq-

uitable premium” of Poysky or Samoan Maritime, which

constitutes a waiver. See Luria Bros. v. Alliance Assur., 780

F.2d 1082, 1986 AMC 1539, 1549-1551 (2d Cir. 1986}, The

ANTHONY D. NICHOLS, 49 F.2d 927 (SDNY 1931), 16 C.

Appleman, INSURANCE LAW OF PRACTICE, § 9260 at

p. 393 (1981). (And Pacmar also failed to return or tender

the premium with its denial of the claim on the ground that

the policy was void. [RT 1665:19, App. H. CL 32.] Under

Hawaii law, this defeats any attempt at rescission of the

policy. USF&G v. Leong Dung Dye, 52 F.2d 567, 570-1 [9th

Cir. 1931]. Hawaii law would govern interpretation of the

policy. Ahmed, supra, 444 F.Supp at 571, Healy Tibbitts,

supra, 482 F.Supp. at 835.)

There is yet another express provision of the policy, the

‘Additional Perils” or Jnchmaree Clause, which negates the

existence of an implied warranty of seaworthiness as to the

additional perils set out. Tropical Marine Prod. v.

Birmingham Fire Ins. Co., 247 F.2d 116, 123 (Sth Cir. 1957)

‘

saligebiiany Vid tasha sian? al

cert. den. 355 U.S. 903 (1957), The SPOT PACK, 242 F.2d

385, 392 (Sth Cir. 1957). Eggers v. Nat’l Union Fire Ins. Co.

(Texas No. 1) 112 F.2d 541 (Sth Cir. 1940). That clause

covers “cost of repairs or loss or damage to the subject

matter insured directly caused by .. . any latent defect in the

machinery or hull; ... or from other causes of whatsoever

nature . . . howsoever, causing loss of or injury to the proper-

ty hereby insured provided such loss or damage has not

resulted from want of due diligence by the Assured . . .” (See

App. E.)

As Buglass, supra, pp. 64-5, and ARNOULD, supra, at

§ 826 (“The general intent of the clause is to extend the

cover, in specified cases, to risk of damage to hull or machin-

ery which cannot be said to be the direct consequence of a

marine peril.’’), state and as pointed out by such cases as

Tropical Marine, supra, 247 F.2d at 118-9, the covered perils

were greatly extended by the “Additional Perils,” or Jnchma-

ree Clause. The clause in our policy is even a broadened

version of that clause, as a comparison of the clause on p. 65

of Buglass with ours shows.’ For one, the parenthetical

phrase “(excluding the cost and expense of replacing or

repairing the defective part)” qualifying the additional peril

of a Aatent defect in the machinery or hull” has been

omitted.

While Buglass’s opinion is that the “directly caused by”

language limits recovery for “bursting of boilers, breakage of

shafts” and latent defects to consequential damage only

(Buglass. supra, p. 127), he does not discuss what happens

when the particular version of the Jnchmaree clause in-

volved omits “(excluding the cost and expense of replacing

the defective part)”, though it does contain “directly caused

by”. While the reasonable expectations of the insured are

*Even the original Perils Clause in the policy (* TOUCHING the Ad-

ventures and Perils ...”) is an “all risk clause” requiring the insured only

to prove “that the loss was due to a casualty and was caused by some

event ... covered by the general expressions of the policy. ‘He is not

bound to go further, and prove the exact nature of the accident or casualty

whichever first occasioned his loss’ ’. Mellon v. Fed. Ins. Co., 14 F.2d 997,

1002 (SDNY 1926).

obviously affected by such a change to his advantage, Jropi-

cal Marine allowed full recovery of the vessel’s insured value

when the latent defect (deteriorated bottom in a wooden

boat first discovered at sea) resulted in a total loss, even

though the Jnchmaree clause there contained the parentheti-

cal clause discussed above. The Fifth Circuit pointed out in

Tropical Marine as follows: that a latent defect is a conditicn

that is not known or discoverable by the owner or one in

privity with him, that the defect is obviously latent where it

manifests itself, as by a hull which starts to leak 3'/2 days

after departing port (read 8 days in our case), and that,

alternatively, the loss is a casualty due to peril of the seas if

the sinking results from the action of the sea on an unsea-

worthy hull.

That Tropical Marine involved a time policy is not a valid

distinction in view of the District Court’s refusal to conclude

finally whether the policy in our case was time or voyage.

(CL 21.)But even if a voyage policy is what is involved in

our case, Vol. 2 ARNOULD, supra, § 829, states:

“The cover in respect of ‘latent defect’ would be virtual-

ly meaningless if this were not to be construed as applying

even in cases of inherent vice. Where this part of the

[Jnchmaree] clause applies, therefore, a defense of inher-

ent vice 1s not open to underwriters. Similarly, the latent

defect cover must, it is submitted, be regarded as overrid-

ing the implied warranty of seaworthiness in voyage poli-

cies, to the extent that there is a conflict between the

implied warranty and this head of cover. The point has

not been decided in this country, but the majority of the

American cases proceed on the basis that unseaworthiness

iS nO answer to a claim in respect of ‘latent defect.’ ”

See also 2 ARNOULD § 710, stating:

“It is submitted that in so far as unseaworthiness is

covered by this [Jnchmaree] clause, the express coverage

must prevail over the implied warranty and that an under-

writer cannot therefore rely on a latent defect as a breach

of the warranty of seaworthiness in a policy incorporating

the Institute Voyage Clauses.”

It is hoped that the Court will consider the need to clarify

and settle at the highest level these issues implicit in every

damage claim, total! loss or not, under a hull policy.

Finally, there is the question as to what is “ordinary wear

and tear” and whether it precludes, as the District Court

concluded (CL 26, 27), application of a covered peril.

Buglass, supra, pp. 83-4, discusses this very issue, conclud-

ing that, while the underwriter is not liable for wear and tear

from ordinary causes, it is liable where the effect of the risks

insured on the vessel (e.g., heavy weather) are enhanced by

this condition. ““This is sometimes called the ‘death blow’

theory but it is really a question of proximate cause; the

question to be asked is ‘would this damage have occurred

but for the operation of an insured peril?” (See FF 45 and

CL 10, inseparably linking unseaworthiness and heavy

weather to rule out delay charges. This is inconsistent with

ascribing all damage to unseaworthiness.) See also Yacht

DUET, 1967 AMC 1144 (D.Oreg. 1967), Moran Towing v.

M.A. Garmino Constr. Co., 363 F.2d 108 (1st Cir. 1966),

Redna Marine v. Poland, 46 FRD 81, 87 (SDNY 1969) and

Frangos v. Sun Ins. Co., L.L.R., Vol. 49, p. 354.

(b) The Law Applying a Warranty of Workmanlike Service

to the Professional Tower Does Not Require Proof of

the Tower’s. Negligence and, Where Such a Tower Has

Complete Control of the Towed Vessel, as Where It is

Unmanned, It Should be Strictly Liable Where Damage

or Loss is Incurred by the Tow that was Avoidable.

Turning to the subject of the implied warranty of

workmanlike service in the performance of a towage agree-

ment, the existence of such a warranty was noted in and

followed in Second Circuit cases since The Soerstad, 257

F. 130, 131 (SDNY 1919). See also James McWilliams Blue

Line, Inc. v. Esso Standard Oil Co., 245 F.2d 84, 1957 AMC

1213 (2d Cir. 1957), Fairmont Shipping Corp. v. Chevron

Int'l Oil Co., 511 F.2d 1252 (2d Cir. 1975), cert.den. 423

U.S. 838 (1975), Dunbar, Admx. v. H. Dubois Sons, 275 F.2d

304, 1960 AMC 1393 (2d Cir. 1960), Gaymon v. Prud.

Lines, 473 F.Supp. 161, 164 (SDNY 1919) and Gwynedd

Corp. v. Chilula, U.S.A. 1979 AMC 531, 542-3 (SDNY 1978)

(N.O.R.). See further Tebbs v. Baker-Whitely Tow. Co., 407

F.2d 1055 (4th Cir. 1969), Dillingham Tug & Barge Corp. v.

Collier Carbon & Chemical Corp., 707 F.2d 1086, 1091 (9th

Cir. 1983), cert.den. 465 U.S. 1025, 104 S.Ct. 1280 (1984),

U.S. v. Tug MANZANILLO, 310 F.2d 220 (9th Cir. 1962).

(To the contrary, see Hercules Inc. v. Stevens Shipping Co.,

698 F.2d 726, n. 25 at 737 [Sth Cir. 1983].) As Fairmont

Shipping points out, this warranty is related to that created

by this Court in Ryan Stevedore Co. v. Pan-Atl. SS Corp.,

350 U.S. 124, 76 S.Ct. 232 (1956) but is not limited to cases

where indemnity is sought as to liability to third parties. (See

Fairmont, supra, 511 F.2d at 1259-1260.)

The warranty is the answer to the problem faced by every

owner of an unmanned barge, whose last sight of his vessel

may well be that of its stern rake as it submissively trails

after the tug on its way to sea. As stated in Fairmont, 511

F.2d at 1255-8, 1260-1, and in Jebbs, supra, 407 F.2d at

1058, the warranty is imposed because the warrantor is in

the best position to adopt measures to prevent accidents and

must do so if it can or be cast in damages, regardless of the

tow’s seaworthiness or whether the tower merely brought a

pre-existing unseaworthy condition into play. (This is noth-

ing new, as the following negligence cases show: Chemical

Transporter, Inc. v. M. Turecamo, Inc., 290 F.2d 496, 497

[2d Cir. 1961], Sternberg Dredging v. Moran Towing, 196

F.2d 1002, 1005-6 [2d Cir. 1953], South v. Moran Towing,

360 F.2d 1002 [2d Cir. 1966], Offshore Co. v. G&H Offshore

Towing, 262 F.Supp. 282, 287 (SD Tex. 1966) aff'd. 403 F.2d

715 (Sth Cir. 1968). [This Court has held that circumstances

alone may cast a duty of explanation on the tug. The

Steamer WEBB, 81 U.S. (14 Wall.) 406, 414 (1871). See also

Bd. of Com’rs v. FARNSUM, 574 F.2d 289 (Sth Cir. 1978)].)

The extent of the warranty depends upon the circumstances

relating to the degree of control in the tower and on its

expertise. Jebbs at 1059. If the tower is a professional tower,

then the full degree of expertise should be presumed. This is

why, under warranty law, that knowledge of the risks that an

expert in the field would have is imputed to the warrantor

and his only defense is that the warrantee actively hindered

his performance. (Under negligence principles, on the other

hand, a plaintiff must prove that the defendant acted un-

reasonably in light of a known or constructively known risk.)

(See discussion 3 Amer. Law of Prod. Lia. 3d § 33:5.)

Obviously, in the case of an unmanned barge that runs

into trouble at sea, there is nothing that the warrantee can be

held to have done to hinder the tower’s performance because

the warranty requires that the professional tower act to save

the barge regardless of its pre-existing condition. If the barge

could have been saved, according to the opinion testimony

of an independent expert tug captain, the warranty is

breached unless all steps were taken which should have been

taken by a professional tower. (See The ROCONA v. Guy F.

Atkinson Co., 173 F.2d 661, 665 [9th Cir. 1949].) (Note that

the District Court accepted only the opinion of MIKIALA

II’s master as to what he could or should have done.) The

Ninth Circuit itself, in an earlier decision, followed this

principle, determining that the tug’s failure to head for the

nearest port “when it became obvious that the barge was in

trouble” was, on its face, a breach of warranty, even though

the barge was unseaworthy to begin with. Dillingham v.

Collier, supra, 707 F.2d at 1091 and n. 3.4

*To the same effect even if the cause of action is based on negligence:

McDonough Marine Serv. v. M/V ROYAL STREET, 465 F.Supp. 928, 935

(ED La. 1979), a case where plaintiff tow owner proceeded on the basis of

the tug’s negligence and tug defended. claiming the tow was unseaworthy.-

The District Court stated:

“... The (tug) was negligent in failing to take reasonable steps to

determine the exact condition of the tow and to correct the problem ...

Instead, the tow proceeded on while the bow of the barge continued to

lose its remaining freeboard and sink further. While the towing vessel is

not liable for a loss occasioned by the unseaworthiness of the tow, if it

continues to proceed when the unseaworthiness of the tow is disclosed or

apparent, it is negligent. (Cite.) Allowing the barge to become so full of

water that it is down by the bow was also negligence. (Cites.) This ts

especially true in light of the available alternatives ...” (Emphasis

added.)

Additionally, see Pillsbury v. Delta B&R, 1979 AMC 1221, 1233 (ED La.

1978), where tug passed up chances to beach the sinking barge. Held:

Tower is liable for negligence. ““The duty of a tug includes the obligation to

(footnote continued on next page)

It is possible under warranty law for the warrantor to be

held to be strictly liable if the unmanned barge comes to

grief and the circumstances show that there were reasonable

alternatives that an expert tower would have implemented

but the particular tug crew involved failed to take. (Note

that FF 39 did not set out what the “several options” were,

according to independent expert Capt. De La Hunt. See RT

1567:18-1568:19, 1581:2-14.) Strict liability under warranty

law is not unusual in admiralty, e.g., the shipowner’s duty to

its crewmembers under its warranty to provide a seaworthy

vessel (Seas Shipping Co. v. Sieraki, 328 U.S. 85, 66 S.Ct.

872 [1946] and The OSCEOLA, 189 U.S. 158, 23 S.Ct. 483

[1903]) and the manufacturer’s warranty as to the safety of

his product. Fairmont, at 1256, citing Ryan Stevedoring, 350

U.S. at 133-4, 76 S.Ct. at 237. See also East River SS Corp.

v. Transamerica Delaval, —U.S.—, 106 S.Ct. 2295 (1986),

Italia Soc. v. Oregon Stev. Co., 376 U.S. 315, 318, 84 S.Ct.

748 (1964), Prosser, LAW OF TORTS (Sth Ed.) § 98 pp.

692-4.

While the District Court adverted to the existence of the

warranty (CL 6) (which the Circuit Court referred to as the

‘so-called implied warranty of workmanlike service’’), the

District Court went on to state that, “Nevertheless . . . plain-

tiffs must prove negligence by the tow (sic) to recover for any

loss.” The District Court’s authority for this position, King

Fisher Marine v. NP SUNBONNET, 724 F.2d 1181 (Sth Cir.

1984) and Stevens v. The WHITE CITY, 285 U.S. 195, 202

(1932), never held such in regard to this implied warranty;

they are negligence cases. (In Stevens, “The tug [did] not

have exclusive control over the tow” and the cause of the

damage was known. 285 U.S. at 200. As for Stevens’ lan-

guage concerning bailment, it should be noted that in the

later case of Bisso v. Inland Waterways, supra, 349 U.S. at

90-91, this Court points out that release from negligence

clauses are thrown out in bailor-bailee situations, which the

Court then proceeded to do with the tug’s release from

(footnote continued from preceding page)

take such measures as are reasonably available to it to avert further

damage once it is evident that the tow is in peril.”

Adin Me sl a A seit Fe sa gh Wea en Ieee

ha lla ts Winn seb WALA BIN Wir cAI eddie lea lade aN dae

ate ne Sn ere Oa Tew ise ney

negligence clause in that particular case. Further, the law of

this Court is to the contrary, it stating in Jtalia Soc. v.

Oregon Stev. Co., supra, 376 U.S. at 323-4, 84 S.Ct. at 748,

that the warranty of workmanlike performance “... may be

breached by non-negligent as well as by negligent conduct.”

See also Crumady v. The J.H. FISSER, 358 U.S. 423, 428-9,

79 S.Ct. 445, 448 (1958). The District Court thus erred as a

matter of law in not considering that the tower’s only de-

fense to a breach of warranty action was the active hin-

drance of the tow. See Fairmont, supra, 511 F.2d at 1260-1.

Not even having raised this defense, it was waived. Even if it

had not been waived, Dillingham could not have proved it,

because YCV-9, while deterioration in its bottom was found

by the District Court, this condition was no hindrance to the

tug’s performance of the tow for the first eight days of the

voyage, as the FF/CL show. It would have not been a

hindrance later if YCV-9 had been returned to port to recon-

stitute the bridle or the simple precautions Capt. De La

Hunt advised had been taken.

Tow’s Owner that the Teg shall be seaworthy and ready

for sea as equivalent to the absolute warranty of seawor-

thiness, a violation of the rule of Bisso.

Article 4 of the towage agreement prepared by Dillingham

(FF 14) is to the effect that the tow’s owner “warrants and

represents that the Tow, at the time it is tendered to the Tug

for towage (i) shall be seaworthy and in all respects ready for

and capable of making the specified voyage, ...” (FF. 16.)

CL 4 is that Dillingham was entitled to rely on this “repre-

sentation of seaworthiness” and “was under no duty to make

a detailed inspection of [YCV-9’s] seaworthiness either

before or during the voyage” (emphasis added) (which

ignores FF 21 to the effect that there were no grounds for

reliance on the representation, since Dillingham’s port cap-

tain, Kapele, had actually “ascertained that all recommend-

ed towing arrangements were in place, and supervised the

hook-up”). CL 5 concludes that YCV-9’s pre-existing un-

seaworthiness is a breach of Article 4.

Since the District Court failed to consider Poysky’s lack of

knowledge as to the barge’s actual condition and his employ-

ing Capt. Dickieson to make ’CV-9 ready for sea, and since

it holds that the tug, without any inspection, may, without

more, merely hook-up and depart and continue to tow with-

out regard to a port of refuge nearby and the barge’s worsen-

ing condition, the decision in effect imposes another abso-

lute warranty (which is what the Circuit Court even said it

was) achieving indirectly what the exculpatory clause as to

negligence of the tow failed to do in Bisso. (Note the incor-

rect quote from Dillingham in CL 7, tellingly omitting the

“character of the tow” from what the tug must consider.) See

also Boston Metals Co., v. SS WINDING GULF, 349 U.S.

122 (1955) (tower tried to make the tug’s crew employees of

the tow) Dixilyn Drilling Corp. v. Crescent Towing & Salvage

Co., 372 U.S. 697, 698, 83 S.Ct. 967, 968 (1963), on remand

324 F.2d 272 (Sth Cir. 1963), op.set aside on rehearing 329

F.3d 754 (Sth Cir. 1964) (towage agreement attempted to

require tow to indemnify tug for any damage claims by third

parties) Hercules, Inc. v. Stevens Shipping Co., supra, 698

F.2d at 738-9 (incorporating COGSA defenses in towage

agreement failed) and Fluor Western, Inc. v. G&H Offshore

Towing Co., 447 F.2d 35 (Sth Cir. 1971) (clause in towing

contract upheld requiring owner of cargo on tow to fully

insure with waiver of subrogation, reason for upholding

being that right to proceed against tower would still be

available if insurer did not pay the claim). Twenty Grand

Offshore, Inc. v. West India Carriers, 492 F.2d 679 (Sth Cir.

1974) (same as Fluor), Dillingham Tug & Barge Corp. v.

Collier, supra, 707 F.3d at 1089-1090 (same as Fi/uor) and

PPG Industries v. Ashland Oil Co., 592 F.2d_.138 (3d Cir.

1978) (on rehearing, following Fluor).

Sohoenbaum, ADMIRALTY & MARITIME LAW (1987)

states, at 425, that there is “An unsettléd question [as to] the

extent to which Bisso forbids clauses limiting liability for

damages”. The above cases, however, show the limits drawn

on the tug industry’s resourcefullness in attempting to get

around Bisso. The absolute “representation” is the newest

example and should be vitiated, leaving the tower with no

more than what the usual representation requires. As stated

in Gilmore & Black, supra, at p. 63 n. 51, “[A] representa-

tion need only be substantially true.” To same effect, 41

Tulane L. Rev. 245, 250 and Parks, THE LAW OF TUG,

TOW AND PILOTAGE (2d ed.) p. 538 (A representation

may “be equitably and substantially answered; ...”). The

rule is the same whether the contract be an insurance policy

or a towage contract. See Morrison Grain Co. v. Utica Mut.

Ins. Co., 632 F.2d 424, 428 n.4 (Sth Cir. 1980).

CONCLUSION

The petition for a writ of certiorari should be granted.

Respectfully submitted,

MEADOWS, SMITH & BROWN

JOHN F. MEADOWS

John F. Meadows

Attorneys for Petitioners

wo >

mo on

= 0)

APPENDICES

Order and Judgment of the Court of Appeals

Order Denying Petition for Rehearing and

Suggestion for Rehearing En Banc

Findings of Fact and Conclusions of Law, Order

for Judgment

Lump Sum Towage Agreement

Pacmar Hull Policy (Time) and Endorsement 2

Thereto

Hawaii Rev. Stats. 431-419

Marine Insurance Act of 1906

Pacmar’s Letter Denying Claim

Reporter’s Transcript Excerpts

a a y

APPENDIX A

NOT FOR PUBLICATION

United States Court of Appeals

FOR THE

NINTH CIRCUIT

GEORGE POysky, dba

ALASKA TOWING CO., and

SAMOAN MARITIME, LTD.,

a corporation,

Plaintiffs-Appellants,

V. No. 85-2949

PACIFIC MARINE + D.C. No. 82-0731 HMF

INSURANCE COMPANY, a ORDER*

corporation, and

DILLINGHAM TUG &

BARGE CORPORATION,

in rem,

Defendants and Appellees. |

BEFORE: POOLE, NORRIS, AND BRUNETTI, CIRCUIT JUDGES.

The district court found that plaintiffs failed to establish

negligence or any improper performance in connection with

the towing operation; that the constructive total loss was not

due to abnormal stresses on the YCV-9 barge during towing

but was caused by substantial wastage to the wind and water

line, a condition which pre-existed the voyage and was itself

a breach of plaintiffs’ own warranty for seaworthiness. The

district court further found that any slamming damage sus-

tained by YCV-9 from the tug, from the other barge on

tandem tow, and any pounding damage from the seas, were

not sufficient to have caused the loss. These findings are not

clearly erroneous.

The district court further concluded that the so-called

implied warranty of workmanlike service did not subject the

* This order is not appropriate for publication and may not be cited to

or by the courts of the circuit except as provided by 9th Cir. R. 21.

tug to absolute liability; that the burden of proof was not

shifted to the defendants because of a “‘duty of explanation”

and that plaintiffs were required to, but did not, prove

negligent performance. These conclusions proximately

flowed from the court’s extensive findings of fact which were

supported by a preponderance of the evidence.

The judgment in favor of defendants and against plaintiffs

is AFFIRMED. Defendants are entitled to their costs on

appeal.

[File-stamped May 1, 1987]

United States Court of Appeals

FOR THE

NINTH CIRCUIT

GEORGE Poysky, dba

ALASKA TOWING CO., and

SAMOAN MARITIME, LTD.,

a corporation,

Plaintiffs-Appellants,

7” No. 85-2949

PACIFIC MARINE - D.C. No. 82-0731 HMF

INSURANCE COMPANY, a ORDER

corporation, and

DILLINGHAM TUG &

BARGE CORPORATION, in

personam, and

TUG MIKIALA II, in rem,

Defendants and Appeilees.

APPEAL from the United States District Court for

the District of Hawaii (Honolulu)

THIS CAUSE came on to be heard on the Transcript of

the Record from the United States District Court for the

District of Hawaii (Honolulu)

and was duly submitted.

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

hereby is afirmed

COSTS TAXED

Filed and entered May 01, 1987

[File-Stamped October 19, 1987]

APPENDIX B

IN THE

United States Court of Appeals

FOR THE

NINTH CIRCUIT

GEORGE PoyskyY, doing business |

as ALASKA TOWING CO.,

and SAMOAN MARITIME, LTD.,

a corporation,

eat clas No. 85-2949

. D.C. No. 82-0731 H-F

PACIFIC MARINE INSURANCE CO., ORDER

a corporation, and

DILLINGHAM TUG & BARGE

CORP., in personam, and

TUG MIKIALA II, in rem,

Defendants-Appellees. |

BEFORE: POOLE, NORRIS, AND BRUNETTI, CIRCUIT JUDGES

The panel has voted to deny the petition for rehearing and

to reject the suggestion for rehearing en banc.

The full court has been advised of the suggestion for

rehearing en banc and no judge in active service has request-

ed a vote to rehear the matter en banc.

Pursuant to Rule 35(b) of the Federal Rules of Appellate

Procedure, this petition for rehearing is denied and the

suggestion for rehearing en banc is rejected.

[File-Stamped October 7, 1987]

APPENDIX C

IN THE

United States District Court

FOR THE

DISTRICT OF HAWAII

GEORGE PoyYSsKY, dba ALASKA

TOWING COMPANY, and

SAMOAN MARITIME, LTD.,

a corporation,

. Plaintiffs,

vs. | CIivit No. 82-0731

PACIFIC MARINE INSURANCE IN ADMIRALTY

COMPANY, a corporation, and

DILLINGHAM TUG & BARGE

CORPORATION, in personam

and TUG MIKIALA II, in rem,

Defendants. |

FINDINGS OF FACT AND CONCLUSIONS OF LAW

This matter having come on for trial before the Honorable

Harold M. Fong, and the court having reviewed the pro-

posed findings of fact and conclusions of law and being

otherwise advised of the premises herein, finds as follows:

FINDINGS OF FACT

1. Plaintiff George Poysky, Jr. (hereinafter “*Mr. Poysky’’).

dba Alaska Towing Company, is a resident of the State of

Oregon and maintains offices in Seattle, Washington. Plain-

tiff Samoan Maritime Ltd., is a Washington corporation

wholly owned by Mr. Poysky.

2. Defendant Pacific Marine Insurance Company (herein-

after “‘Pacific Marine”) is an Alaska corporation with its

principal place of business in Seattle, Washington.

3. Defendant Dillingham Tug & Barge Corporation (here-

inafter ““Dillingham’’) is a Hawaii corporation with its prin-

cipal place of business in Honolulu, Hawaii. Defendant Tug

Mikiala II is owned and operated by Dillingham. It is in

custody of the court through a letter of undertaking given by

Dillingham and accepted by plaintiffs.

4. Mr. Poysky is and has been, at all relevant times,

engaged in the maritime industry. He has been involved in

the operation of tugs in the Samoan and Alaskan trade. He

has bought and sold government vessels on previous

occasions.

5. The YCV-9 is a 200-foot long, open-decked, double

square-ended steel barge with a raked bow and stern. It has a

65-foot beam and is about 12 feet deep. It is divided into

eighteen compartments by two longitudinal bulkheads and

four transverse bulkheads. The barge was built in 1944 at the

Pearl Harbor Naval Shipyard.

6. The barge was stored for several years in the water at Pearl

Harbor and was advertised for sale by the United States Navy

as “Lighter, Aircraft Transportation” with the warning: “The

hull of the YCV-9 is considered to be in poor condition ...

each bidder is urged to inspect the craft and rely solely on his

own inspection.” The invitation for bid also stated: “In water-

used-poor-condition. Total cost $249,384.” (Plaintiffs’ Exhib-

it 8).

7. Mr. Poysky spent three days making a detailed inspec-

tion of the YCV-9 and several other vessels prior to bidding

for the barge.

8. Mr. Poysky was high bidder on the YCV-9. Plaintiffs

purchased an interest in it on June 22, 1982, from the

United States Navy’s surplus reserve fleet at Pearl Harbor.

Other part purchasers included Morton Marine Company,

Seattle, Washington, and Max Rouse & Sons, Beverly Hills,

California.

9. The barge was surveyed both before and after plaintiffs

purchased it by R.W. Dickieson, Inc., Marine Surveying. In

the spring of 1982, Captain Dickieson had conducted an in-

water survey of the barge for Quigg Brothers McDonald of

Aberdeen, Washington, which was considering buying the

barge for use as a base for a heavy crawler-type crane. Robert

—~a e,ChlUe ee eee eo eee ee

W. Long, a naval architect for Quigg Brothers, asked Cap-

tain Dickieson to have certain audio gauge tests performed

on the barge to determine the thickness of the huil. These

tests were performed by Richard A. Schnase, an ultrasonic

technician for Coastal Marine, Inc., a subsidiary of the Dick-

ieson firm. Only one audio gauge reading was taken of the

bottom plating in each compartment (except in compart-

ment !C where water prevented a reading). No readings

were taken on the bottom plating at the turn of the bilge.

None of the readings were performed on the sides of the

barge at the wind and water line or below. Mr. Long request-

ed the latter readings upon seeing pictures of the barge, but

Mr. Schnase had no time to obtain them. Without these

readings, Mr. Long concluded that the barge could be safely

towed to Seattle and recommended its purchase to Quigg

Brothers.

10. Later, Ken Savaloja, representing Coast Marine Con-

struction Company, which was interested in purchasing the

barge from Mr. Poysky, requested Captain Dickieson to put

his notes from the Quigg Brothers survey into the form of a

report. The report, dated June 23, 1982, stated that the

barge appeared to be sound, but noted that the bottom was

not surveyed because the barge was then afloat. The report

warned: “No statement, express or implied, is made con-

cerning the condition of the bottom. This can only be deter-

mined by hauling out the barge.” Mr. Poysky testified that

he never knew of the existence of this report by Captain

Dickieson.

11. Mr. Poysky did not ascertain the condition of the hull

because there was no suitable drydock available to him in

Hawaii.

12. Marine Power & Equipment Co., Seattle, Washington,

competed with Mr. Poysky for high bidder on the barge. It

sent Lloyd Anderson to inspect the vessel at Pearl Harbor.

Mr. Anderson, who did not appear at trial but whose deposi-

tion testimony was admitted into evidence, testified that he

took six to eight ultrasonic readings per compartment, or a

total of between 100 and 200 “‘shots.”’ He could not produce

any record of his readings. Assuming that the readings were

as he remembered, those in the bilge strake portion of the

bottom were as low as 0.240 to 0.260 inches. Because he had

certain readings elsewhere close to 0.375, Mr. Anderson

assumed that this had been the original thickness of the hull.

Accepting it as the best available estimate, these readings

show wastage in the spots measured of 36.0% and 30.6%,

respectively. Both Captain Dickieson and Mr. Schnase testi-

fied that, as a general rule, the American Bureau of Shipping

requires replacement of plates which are 25% wasted.

13. Mr. Anderson did not see any large holes in the barge,

such as would come from collision. He believed from his

inspection that the barge was towable. He testified, however,

that tropical marine growth, such as barnacles, would eat

holes in the bottom plating of any barge, such as the YCV-9,

whic’ has lain in tropical waters for a long period of time.

Because of marine growth on the underwater portion of such

a vessel, he would not consider the condition of its bottom in

decicing whether and how to tow it. He testified that there

was no way of determining the condition of the bottom

plating on such a barge without having it drydocked, and

that its buyer would run the risk that extensive repairs would

be needed. Mr. Anderson’s testimony as to his barge survey-

ing experience shows that he is amply qualified to testify on

ultrasonic marine surveying and on the effect of tropical

marine growth on the condition of a steel barge hull.

14. Mr. Poysky contacted several tow boat companies,

including Sause Brothers, Crowley, and Dillingham, in an

attempt to secure a tug to tow the YCV-9 and another barge

he had just bought from the naval reserve fleet, the YFNB-6,

from Pearl Harbor to Seattle. On September 21, 1982, Rey

Jonsson of Dillingham advised that a tandem tow could be

arranged for a negotiated price of $75,000. On September

23, 1982, Mr. Poysky appeared at Dillingham’s office in

Honolulu, where he reviewed in detail the Lump Sum Tow-

age Agreement prepared by Dillingham. He did not question

or object to any provision of the agreement.

15. Article 3 of the agreement provided that Dillingham

was entitled to charges for delays in transit caused by the

fault of the customer.

16. Article 4 provided that Mr. Poysky warranted and

represented to Dillingham that the YCV-9 would be sea-

worthy at the beginning of the voyage and was ready in all

respects for tow to Seattle.

17. Article 12 provided that Mr. Poysky obtain insurance

for the full value of the YCV-9 during the tow. Mr.Poysky

testified that he understood that, for any loss or damage to

the YCV-9 which was or would have been covered by hull

insurance, he would look solely to that insurance for

compensation.

18. Prior to commencement of the voyage, Captain Dick-

ieson was asked to conduct a second survey of the barge to

specify the preparations needed to ready the barge for the

tow. Although there is some question as to whom Captain

Dickieson was working at that time, Captain Dickieson testi-

fied that he believed he was working on behalf of Mr.

Poysky. He recommended to Mr. Poysky that six tasks be

performed to render the barge “ready, in all respects, to be

towed to the U.S. mainland.” Mr. Poysky engaged Kevin

Moore, one of his employees, to carry out all of these

recommendations.

19. Mr. Moore constructed the YCV-9 towing bridle, and

surge chain or “pigtail” to the bridle, from used Navy stud

link anchor chain which he and Mr. Poysky found in a

storage locker on the barge YFNB-6. The age and prior use

of the chain were unknown. The bridle chain was between

one and one-fourth inches and one and five-eighths inches in

diameter.

20. Mr. Poysky’s employees attached an emergency tow

wire to a cleat just aft of the double bitt on the port forward

side near the bow in accordance with Captain Dickieson’s

instructions. This wire was about 200 feet long and one and

onefourth inches in diameter. Captain Dickieson testified

that the wire was surplus provided by the Navy and that its

condition and prior use were unknown.

21. Due to a prior commitment, Captain Dickieson was

unable to attend the hook-up of the YCV-9 to the tug Miki-

ala II. Dillingham port Captain Frank Kapele did attend,

ascertained that all recommended towing arrangements were

in place, and supervised the hook-up.

22. At the commencement of the tow on September 24,

1982, Mr. Poysky gave no special instructions to Dillingham

regarding the tow. Visual inspection of the YCV-9 afloat did

not disclose any condition suggesting that the barge was

unsound or unfit for tow to Seattle.

23. On or about August 2, 1982, Mr. Poysky telephoned

his insurance agent, Douglas D. Parks of Gene Sause &

Company, Insurance Brokers, Portland, Oregon, to obtain

quotations on insurance for the YCV-9 and YFNB-6 during

the tow. Mr. Parks obtained the requested quotations from

Stan Ogden of Pacific Marine and relayed the information to

Mr. Poysky.

24. On or about September 21, 1982, Mr. Poysky called

Gene Sause & Company to request insurance on the YCV-9

for the tow. It is disputed whether Mr. Poysky made the call

from Hawaii or Seattle; the court finds credible Mr. Poysky’s

testimony that he was in Hawaii when he requested the

insurance.

25. On September 22, 1982, via telex, Mr. Parks placed,

through Pacific Marine, the insurance which Mr. Poysky had

requested. This consisted of two forms of coverage for the

voyage from Hawaii to Seattle: a protection and indemnity

policy, and a hull policy. There was at the time already in

effect a time policy for plaintiffs’ tug Eva F. placed by Mr.

Parks with Pacific Marine. Mr. Poysky did not seek insur-

ance to remain in force after the delivery of the barges at

Seattle. He also did not seek or pay for insurance before-the

commencement of the tow. He desired only a voyage policy

because he had a contract for resale of the barges in Seattle.

26. The telex to Pacific Marine and the confirmation telex-

es to Mr. Poysky and additional assureds Max Rouse & Sons

and Dillingham each speak in terms of coverage for the

voyage, not coverage for a period of time.

27. Before agreeing to provide coverage, Pacific Marine

did not possess the Dickieson survey report of June 23,

1982. Pacific Marine did not possess any other information

which could reasonably have led it to question the condition

of the hull.

28. The contract of insurance made in September was not

reduced to writing until October 6, 1982. Mr. Parks then

added the voyage policy for two barges as an endorsement to

the existing time policy covering the Eva F. The endorse-

ment stated:

Insurances hereunder attach . . . for a voyage from Pearl

Harbor, Hawaii to Seattle, Washington . . . Insurances

hereunder commence with the making of the barges for

the trip . . . and continue during the course of the voyage

until the ““Mikiala II” releases the tow to the Assured at

Seattle, Washington or held covered.

29. The YCV-9, in tow of the Mikiala and accompanied by

the barge YFNB-6 on a separate tow wire, departed Pearl

Harbor on September 24, 1982.

30. When the YCV-9 left Pearl Harbor on Sept-

ember 24, 1982, none of the parties to this action knew the

condition of the bottom of the hull.

31. During the first two days of the voyage, the tow expe-

rienced rough seas. The YCV-9 appeared to be in good

condition during and at the end of this period. It had not

taken on so much water during the first two days of the

voyage so as to begin to list or sink.

32. On the night of September 26, 1982, two days out of

port, the tow wire to the YCV-9 parted.

33. Before the bridle broke, the tug’s chief mate, Francis

McCummiskey, testified that he had reduced the tug’s speed

due to increasing wind velocity and wave height. When the

bridle parted, the tug was not traveling at an excessive speed

for the prevailing conditions.

34. The next morning, the tug maneuvered to pick up the

emergency pennant rigged from the port bow of the barge.

After successfully picking up the pennant and attaching a

new tow wire, the tug proceeded with the tow to Seattle.

35. Captain Kapele testified that in his 30 years of experi-

ence as a tug master it was customary for the tug captain to

follow instructions given by the tow’s surveyors. When a

surveyor attaches an emergency tow wire to the barge, the

barge can be safely towed. Whether or not this towing ar-

rangement may be considered “unorthodox,” as plaintiffs

characterize it, plaintiffs have not sustained their burden of

showing that towing the barge from the corner caused its

internal scantlings and hull skin to experience stresses which

they were not built to withstand, and that this caused the

constructive total loss of the barge. Harold Coachman, mas-

ter of the Mikiala, understood on this voyage that it was

proper to tow by the emergency tow wire attached to the side

cleat, and he did not have any reason to know or believe that

towing the YCV-9 by the emergency wire would subject it to

any harm. The weather forecast ahead was favorable and the

barge did not appear damaged.

36. Plaintiffs’ expert, Thomas R. De La Hunt, testified

that it was customary in the towing industry for the marine

surveyor to determine the towing arrangements, including

how the tow wires were to be secured to the tow. Captain

De La Hunt admitted that he had never been told by any

marine surveyor that an emergency tow wire was not intend-

ed to be used for a long distance tow.

37. Captain Kapele testified that the Navy had established

a maximum towing speed of not more than eight knots for

the towage of its YCV barges. At no time during the voyage

did the tow speed of the YCV-9 exceed eight knots.

38. Captain De La Hunt testified that in his opinion the

tug was traveling at an excessive speed when the bridle

parted. He could not state, however, what a proper speed

would have been. Captain Kapele, Captain Coachman, and

Chief Mate McCummiskey testified that they had reviewed

the the entire log and had not located any instance of exces-

sive speed. The court has also reviewed the log and finds by

a preponderance of the evidence that the Mikiala was not

traveling at an excessive speed when the birdie broke or at

any other time during the voyage.

39. Captain De La Hunt testified that when the bridle

broke, the tug should have returned to Hawaii with the

YCV-9. He also testified, however, that the captain had

several options. Regarding the decision to proceed by towing

the barge by its emergency tow wire, Captain De La Hunt

testified that his main concern would have been whether the

emergency wire would break if the tow were continued. The

emergency tow wire did not break during the tow of the

YCV-9.

40. The court finds by a preponderance of the evidence

that the YCV-9 was not subjected to abnormal stresses caus-

ing or contributing to the constructive total loss of the barge

as a result of being towed by the corner on the emergency

tow wire. Raymond Thurston, a marine surveyor who

surveyed the barge on drydock in Seattle on October 19,

1982, testified that he saw no evidence of racking. hogging,

or sagging stresses. Dennis Morrell, another marine surveyor

who surveyed the barge on drydock in Seattle on October 20,

1982, testified similarly. Plaintiffs’ expert, Captain De La

Hunt, did not view the YCV-9 on drydock and has never

viewed the internal members of the barge. He is admittedly

unfamiliar with how the barge is built and has never towed a

similar barge.

41. On October 2, 1982, the barge was slightly down at the

bow. Captain Coachman put a man aboard the barge in an

attempt to reconstitute the bridle. During this operation, he

noticed a crack in an old weld seam. To relieve pressure

from that area, he began to tow the barge from the stern.

42. The next day, the tug came alongside the barge. Two

crewmen went aboard the barge to move the emergency tow

wire from the bow to the stern. They reconstituted the

emergency tow wire to the starboard stern cleat in the same

manner and configuration as Captain Dickieson had previ-

ously secured the emergency tow wire to the port bow cleat.

The tug came alongside the starboard side of the barge. The

tug’s black rubber fenders were in place and provided a

10c

cushion between the side of the barge and the side of the tug.

Captain Coachman, Chief Mate McCummiskey, and crew

member Francis C. Young testified that the tug did not strike

or hit the barge during this operation. Captain Coachman

and Mr. Young testified that if the barge and tug had struck

each other with sufficient force to cause any damage to the

barge, the fender would leave skid marks on the side of the

barge. The photographs in evidence show no such skid

marks. Captain Thurston testified that if the tug and barge

had collided with each other with sufficient force to damage

the barge, the tug would have been damaged as well. There is

no evidence of any damage to the tug.

43. After the decision was made to complete the voyage to

Seattle on the emergency tow wire, the crew exercised pru-

dent seamanship during the remainder of the voyage.

44. On October 15, 1982, the tug arrived at Shilsole Bay in

Puget Sound, Washington, with the barges in tow. The tow-

age time was 21 days. The normal time for a tandem tow is

13 days.

45. The delay in arrival was caused in part by rough

weather. How much of the delay was due to weather and

how much, if any, to the condition of the barge at the

inception of the voyage cannot be determined from the

record.

46. The barge’s running lights became inoperative during

the trip. The Coast Guard would not allow the tug and barge

to enter Puget Sound without proper navigation lights. Dil-

lingham incurred assist tug charges of $990.00 for the instal-

lation of navigation lights.

47. Dillingham incurred port charges of $72.32 for an

agriculture inspection upon arrival.

48. On October 19, 1982, Captain Thurston conducted a

survey of the YCV-9 while it was on drydock at Lockheed

Shipbuilding Construction Company in Seattle. On October

20, 1982, Mr. Morrell, a surveyor with the Salvage Associa-

tion, surveyed the barge at the Lockheed shipyard. The cost

of the latter survey was $432.00.

Te ee |

lic

49. Mr. Morrell’s survey report, the trial testimony of

Captain Thurston and Mr. Morrell, and the photographs of

the YCV-9 establish that the bottom and side of the barge

were substantially wasted to the wind and water line, es-

pecially at the turn of the bilge. This wastage preexisted the

voyage which began on September 24, 1982.

50. During the voyage, but after the barge had en-

countered difficulty, Mr. Parks contacted Captain Thurston

and asked him to survey the barge when it reached port. Mr.

Parks appointed Captain Thurston on behalf of both Mr.

Poysky and Pacific Marine, believing that the interests of the

insured and the insurer would be identical in a possible

adversary relationship to the tug. Captain Thurston believed

he was appointed for Pacific Marine.

51. Mr. Poysky was unrepresented by his own surveyor

when the barge arrived on October 15, 1982. This was not

the fault of Pacific Marine, which did not learn of the loss

until October 20, 1982, when it was so advised by telex from

Mr Parks. By that time, Mr. Poysky had already retained

counsel and the barge was already on the drydock. By the

morning of October 21, both Mr, Poysky and his counsel,

John Meadows, were aware that Captain Thurston believed

he was working for Pacific Marine; Mr. Poysky and Mr.

Meadows threatened a bad faith action. This occurred just

| before the barge came off the drydock and less than a day

after Pacific Marine learned of the loss.

, 52. Captain Thurston testified that he was not consciously

biased for or against any party in making his survey. Pacific

Marine is one of the larger, but not one of the largest,

surveying clients of M.A. Stram Associates, Inc., of which

Captain Thurston is part owner. Captain Thurston’s brother

is vice-president of Foss-Dillingham, a sister company to

defendant Dillingham. Captain Thurston testified that they

had never discussed this case.

53. Mr. Poysky was represented at the survey by his son

and partner, George Poysky, III.

54. During inspection in Seattle, a fracture was found in

the barge’s hull. If the tug came alongside in rough seas, it

aay te el lt CN ll nay OT | @.

12c

could cause a fracture similar to the one found. There is no

evidence of rough seas when the tug came alongside the

barge on October 3, 1982. Captain Thurston testified that a

tear caused by the tug would be horizontal and not vertical,

as was the tear in the barge. Mr. Morrell testified that the

fracture could have been caused by a collision but he thought

it was unlikely because there was metal missing from the

area. There is no testimony that the tug was ever alongside

the barge at the fracture site, which was about 93 feet from

the bow. Captain Coachman testified that he brought the

tow alongside the barge’s stern starboard side in changing

the emergency tow wire from the bow to the stern. The tug is

91.8 feet long.

55. Damage caused by slamming the barge into heavy seas

would be identified by indentations in the hull. Slamming

the barge into seas would not cause the loss of the structural

members. The metal surrounding the hole in the bow rake

was wasted. The plate was missing from the bow rake.

56. The thin edges in areas where the hull plating had

fallen out offered no resistance to normal sea conditions.

There is no direct evidence that the damage to the bow rake

and to the bottom of the barge where metal is missing from

the hull was caused by slamming. There is only speculation

as to the potential causes.

57. Lockheed and other firms estimated the cost of repairs

to make the YCV-9 seaworthy to be far more than the

market or insured value of the barge. Therefore, the YCV-9

is a constructive total loss.

58. The court finds by a preponderance of the evidence

that the constructive total loss of the barge was caused by

severely wasted, deteriorated metal in the bottom and sides

of the hull up to the wind and water line. The wastage

preexisted the tow’s departure from Pearl Harbor. Regard-

less of whether the barge sustained any slamming damage

from the tug or from the other barge on the tandem tow, or

any pounding damage from the rough seas, any such damage

would not have caused the constructive total loss of the

barge.

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59. Mr. Poysky was represented by experienced maritime

counsel from before the arrival of the tow in Puget Sound.

Counsel was vigorously representing plaintiff's rights from

the beginning, even to the point of threatening to bring a bad

faith claim against Pacific marine less than a day after the

latter had learned of the loss.

60. George Poysky, III, plaintiff's son, ordered Lockheed

to make temporary repairs to the barge while it was on

drydock which would be sufficient to keep the barge afloat

until it could be beached. Captain Thurston advised him on

what repairs were needed and supervised the work. The cost

of these repairs, plus the cost of drydocking, was $16,804.00

61. On November 22, 1982, Pacific Marine declined Mr.

Poysky’s claim for the insured value of the barge, $225,000,

asserting that the assureds breached the absolute warranty of

seaworthiness contained in every voyage policy.

62. Pacific Marine conducted a prompt and reasonably

sufficient investigation of the matter before it denied the

claim. Joseph Copeland, plaintiffs’ insurance expert, primar-

ily found fault with the fact that Pacific Marine did not

interview Captain Coachman before declining the claim.

The reason for declining the claim, however, was that the

vessel was unseaworthy at the inception of the voyage due to

severe wastage. Thus, there would have been little value to

interviewing Captain Coachman. Moreover, Pacific Marine

reviewed the vessel’s log before it declined the claim.

63. Mr. Copeland also found fault because Pacific Marine

did not review the Coast Guard report of vessel casualty.

That report, however, shows no information of significance

that was not Known to the insurer when it denied the claim.

Dillingham prepared the report forms primarily from the

tug’s log.

64. Any of the foregoing findings of fact which are proper-

ly conclusions of !aw shall be considered conclusions of law.

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CONCLUSIONS OF LAW

1. This action is a general maritime action pursuant to

Rule 9(h) of the Federal Rules of Civil Procedure.

2. The court has subject matter jurisdiction under 28

U.S.C. 1333 (1982), and venue is properly laid in this

district.

3. The tug Mikiala II is not liable for any loss occasioned

by the unseaworthiness of the tow.

4. Dillingham was entitled to rely upon the tow owner’s

representation of seaworthiness of the YCV-9 and was under

no duty to make a detailed inspection of its seaworthiness

either before or during the voyage. King Fisher Marine Serv-

ice, Inc. v. NP Sunbonnet, 724 F.2d 1181, 1183 (5th Cir.

1984); Nat G. Harrison Overseas Corp. v. American Tug

Titan, 516 F.2d 89, 94, modified on rehearing, 520 F.2d

1104 (Sth Cir. 1975).

5. The YCV-9 was unseaworthy at the inception of the

voyage due to extreme wastage in the underwater portion of

her hull which preexisted the voyage. This constitutes a

breach of Article 4 of the Lump Sum Towage Agreement.

6. Towage contracts contain an implied warranty to per-

form the required services in a workmanlike manner. Dil-

lingham Tug & Barge Corp. v. Collier Carbon & Chemical

Corp., 707 F.2d 1086, 1091 (9th Cir. 1983), cert. denied, 104

S. Ct. 1280 (1984). Nevertheless, a tug does not act as either

bailee or insurer for the tow, and plaintiffs must prove

negligence by the tow to recover for any loss. King Fisher,

724 F.2d at 1184; Stevens v. The White City, 285 U.S. 195,

202 (1932).

7. “The degree of care of the tug is measured with refer-

ence to the character of the sea and weather.” Dillingham

Tug & Barge v. Collier Carbon & Chemical Corp., 548 F.

Supp. 691, 697 (N.D. Cal. 1981), affd in part, rev'd in part,

707 F.2d 1086 (9th Cir. 1983), cert. denied, 104 S. Ct. 1280

(1984). Plaintiffs have failed to sustain their burden of estab-

lishing, by a preponderance of the evidence, that the crew of

the tug did not exercise reasonable care and maritime skill in

15c

towing the barge at the speed at which it was towed and in

the sea and weather conditions prevailing. Further plaintiffs

have not established that the tug was negligent in towing by

the corners of the barge on the emergency tow line. King

Fisher, 724 F.2d at 1184; Agrico Chemical Co. v. M/V Ben

W. Martin, 664 F.2d 85, 90 (Sth Cir. 1981).

8. Absent proof of negligence by a preponderance of the

credible evidence, this court will not second-guess the mas-

ter’s judgment; similarly, the testimony of experts evaluating

the master’s conduct in hindsight is attributed reduced

weight. Esso Standard Oil S.A. v. SS Gasbras Sul, 387 F.2d

573 (2d Cir. 1968), cert. denied, 391 U.S. 914 (1968); Federal

Insurance Co. v. SS Royalton, 328 F.2d 515 (6th Cir. 1964).

9. Article 12.6 of the towage agreement requires the owner

“to look solely to the applicable underwriter or to any re-

sponsible third party” to recover for any loss. Although

contractual limitations on liability for a party’s own negli-

gence are disfavored, Bisso v. Inland Waterways Corp., 349

U.S. 85, 90-92 (1955), Article 12.6 of the towage agreement

is valid and enforceable on these facts because there has

been no finding of negligence on the part of the party seeking

to exculpate itself. See, e.g., Dillingham Tug, 707 F.2d at

1089-90; United States v. SS President Van Buren, 490 F.2d

504, 508-09 (9th Cir. 1973).

10. The delay provisions of Article 3 of the towage agree-

ment are valid and enforceable. Dillingham, however, is not

entitled to recover the negotiated price of $8,800 per day for

eight days delay or any portion thereof. On the factual

record, delay due to heavy weather and delay due to the

unseaworthy character of the barge cannot be separated.

Dillingham has not carried its burden of proof on the coun-

terclaim of showing that the reduction in speed was due to

the unseaworthy condition of the vessel, or of proving facts

that would allow this court to allocate the delay, if any, due

to unseaworthiness and the delay due to weather conditions.

11. Under Article 7 of the towage agreement, Dillingham

is entitled to reimbursement for the additional expenses for

tug assist of $990.00, the agricultural inspection of $72.32,

l6c

and the Morrell survey cost of $432.00. In sum, Dillingham

is entitled to recover $1,494.32 from plaintiffs.

12. Plaintiffs are not entitled to recovery from Dillingham

nor from the tug Mikiala II. Dillingham may retain the

$75,000 towage fee.

13. Neither plaintiffs nor Dillingham are a “prevailing

party” against each other in this action within the meaning

of Article 17.7 of the towage agreement. Thus, neither may

recover attorneys’ fees from the other.

14. Marine insurance brokers are technically agents of the

assured, even though they are compensated by commissions

deducted from the underwriters’ premiums. They act as

intermediaries both in placing the risk and in handling

claims. Lien Ho Hsing Steel Enterprise Co., Ltd. v. Weihtag,

738 F.2d 1455, 1458 (9th Cir. 1984).

15. Although it is the custom for marine underwriters to

deal with insurance brokers as agents of the assured, a bro-

ker’s agency status arises neither from statute nor from

federal admiralty case law. Thus, the law of the state with

the greatest interest in the issue controls. Wi/burn Boat Co.

v. Fireman’s Fund Insurance Co., 348 U.S. 310 (1955); Lien

Ho Hsing, 738 F.2d at 1458.

16. Because Mr. Poysky is a resident of Oregon. and

because Mr. Poysky requested insurance through the Port-

land offices of Gene Sause & Company, the state of Oregon

has the most significant interest in regulating that agency

relationship.

17. Under Oregon law, a broker, as distinguished from an

agent, does not represent an insurance company but places

insurance with whatever company he can induce to insure

the risk. The broker therefore acts as the agent of the insured

for the purpose of placing coverage. Lien Ho Hsing, 738

F.2d at 1458.

18. Sause was an agent of plaintiffs for purposes of placing

the coverage.

19. Federal law governs the interpretation of a policy of

marine insurance. Only in the absence of an applicable

2 nA PSN eRe Ld

17c

federal rule would state law govern. Bohemia, Inc. v. Home

Insurance Co., 725 F.2d 506, 509-10 (9th Cir. 1984); Ahmed

v. American Steamship Mutual Protection & Indemnity Asso-

ciation, 640 F.2d 993, 996 (9th Cir. 1981).

20. The existence of an implied warranty of seaworthiness

in maritime hull insurance policies has long been recognized

under federal law. See e.g., D.J. McDuffie, Inc. v. Old Reli-

able Fire Insurance, Inc., 608 F.2d 145 (Sth Cir. 1979), cert.

denied, 449 U.S. 830 (1980); Gulfstream Cargo Ltd. v. Re-

liance Insurance Co., 409 F.2d 974 (Sth Cir. 1969).

21. The court need not determine whether the policy here

is more properly considered a time policy or a voyage policy.

Compare Gregoire v. Underwriters at Lloyds, 559 F. Supp.

596 (D. Alaska 1982) (discussing the differences between the

American and English “rules” regarding time and voyage

policies). Regardless of whether the policy is either a time or

voyage policy, the constructive loss of the barge was proxi-

mately caused by the unseaworthiness of the hull. Because

the barge was not reasonably fit for its intended use, plain-

tiffs’ breach of their implied warranty of seaworthiness

precludes recovery under the policy.

22. This result is unchanged by the “held covered” clause.

That clause provides:

Held covered in the event of any breach of warranty, or

deviation from the conditions of this Policy, at an equita-

ble premium to be arranged, notice to be given on receipt

of advices.

Citing Kalmbach, Inc. v. Insurance Company of the State of

Pennsylvania, 529 F.2d 552 (9th Cir. 1976), plaintiffs urge

that the “held covered” clause negates the implied warranty

of seaworthiness. Unlike in Kalmbach, however, the clause is

completely inapposite to the facts in this case. The “equita-

ble premium” to which the clause refers is that which the

insurer would customarily have charged for the voyage in

question had the actual condition of the vessel been known.

It is absurd to suggesi that an insurer would consider charg-

ing an “equitable premium” for the unseaworthiness present

in this case, when such a premium would at least equal the

face value of the coverage. Kalmbach is consistent with the

only reasonable conclusion: where a breach of the implied

warranty of seaworthiness would proximately cause the con-

structive total loss of the vessel, the “held covered” clause

will not negate the breach.

23. It is unnecessary to determine whether plaintiffs [sic]

breached the implied covenant of dealing in utmost good

faith. Because the court has found that plaintiffs did breach

the implied warranty of seaworthiness, they may not recover

for damages proximately caused by the unseaworthiness of

the YCV-9.

24. Even if the warranty of unseaworthiness had not been

breached, the underwriter would only be liable if the loss

had been proximately caused by a peril covered by the

policy. Under a marine policy, the assured has the burden of

proving that the loss arose from a covered peril. Antilles

Steamship Co., Ltd. v. Members Of American Hull Insurance

Syndicate, 733 F.2d 195 (2d Cir. 1984); Darien Bank v.

Travelers Indemnity Co.654 F.2d 1015 (Sth Cir.1981).

25. The “Perils of the Sea” clause provides:

TOUCHING the Adventures and Perils which we, the

said Assurers, are contented to bear and take upon us, they

are of the Seas, Men-of-War, Fire, Lightning, Earthquake,

Enemies, Pirates, Rovers, Thieves, Jettisons, Letters of

Mart and Countermart, Surprisals, Takings at Sea, Ar-

rests, Restraints and Detainments of all Kings, Princes

and Peoples, of what Nation, Condition or Quality soever,

Barratry of the Master and Mariners, and all other Perils,

Losses and Misfortunes that have or shall come to the

Hurt, Detriment or Damage of the said Vessel, &c. or any

part thereof.

To recover under this clause, plaintiffs would have to show

by a preponderance of the evidence that at least one of these

perils proximately caused the loss.

26. Perils of the sea are those perils which are peculiar to

the sea, and “not the inevitable result of the action of the

elements on the fabric of the vessel or its cargo.”’ Darien

Fo Neer Oa

19c

Bank, 654 F.2d at 1021 (citations omitted). A loss is occa-

sioned by a peril of the sea when it results from the unfore-

seen action of the sea, and not when it is caused by the

defective or deteriorated condition of the vessel.

27. The evidence clearly established that the constructive

total loss of the YCV-9 was caused by its deteriorated un-

derwater hull. The ordinary wear and tear of the voyage to

Seattle is not covered by the Perils of the Sea clause. By’s

Chartering Service, Inc. v. Interstate Insurance Co., 524 F.2d

1045, 1047 n.1 (ist Cir. 1975); Capital Coastal! Corp. v.

Hartford Fire Insurance Co., 378 F. Supp. 163, 168-69 (E.D.

Va. 1974).

28. Because the loss was caused by the unseaworthy char-

acter of the YCV-9, the loss here was also not covered by

either the additional vessels or additional perils clauses of

the policy.

29. The drydocking and temporary repair expenses at

Lockheed, and the expenses of beaching and maintaining the

barge. the latter of which continue, have also been proxi-

mately caused by the unseaworthy condition of the barge

and, therefore, are not covered under the policy.

30. Although the forfeiture of insurance coverage it

Strongly disfavored, Avemco Insurance Co. v. Chung, 388 F.

S_pp. 142 (D. Hawaii 1975), the court concludes that plain-

tiffs may not recover against Pacific Marine on the policy.

31. No bad faith was involved in Pacific Marine’s refusal

to pay benefits under the policy. Plaintiffs’ claim for exem-

plary damages therefore fails.

32. Pacific Marine must pay plaintiffs the sum of $2,250,

the premium plaintiffs paid on the YCV-9. Because the

entire premium 1s allocated to hull coverage, and no separate

premium was paid for protection and indemnity coverage,

the entire premium must be returned.

33. Neither plaintiffs nor defendants shall recover their

attorneys’ fees or costs.

34. Any of the foregoing conclusions of law which are

properly findings of facts shall be considered findings of fact.

20c

IT IS SO ORDERED.

DATED: Honolulu, Hawaii, October 25, 1985

/s/ Harold M. Fong

UNITED STATES DISTRICT

JUDGE

GEORGE POYSKY, et al. v. PACIFIC MARINE INS. CO..,

et al. CIVIL NO. 82-0731 — In Admiralty

(Findings of Fact and Conclusions of Law)

[File Stamped 10-25-85]

APPENDIX D

LUMP SUM TOWAGE AGREEMENT

IT IS AGREED this 23rd day of SEPTEMBER, 1982,

between DILLINGHAM TUG & BARGE CORPORA-

TION, a Hawaii corporation and subsidiary of Dillingham

Corporation, whose principal place of business and mailing

address is Pier 21, P.O. Box 3288, Honolulu, Hawaii 96801,

(“TUG OWNER”), and ALASKA TOWING, whose mailing

address is 18627 First Avenue, South, Seattle, Washington

98148, (*“CUSTOMER’”’), as follows:

ARTICLE 1. SERVICES TO BE FURNISHED.

1.1 TUG OWNER agrees to furnish tug MIKIALA II,

Official Number 585509, (the “Tug’’), and to use reasonable

efforts to tow barges YCV-9 and YFNB-13, (hereinafter col-

lectively the ““Tow™). from Pearl Harbor, Oahu, Hawaii, to

Seattle, Washington. The towage shall commence on or

about September 24, 1982.

1.2 TUG OWNER shall not be required at any stage of

performance of this Agreement to proceed to any location

which the Tug and Tow cannot safely reach or at which the

Tug and Tow cannot at all times of tide and weather safely

lie afloat. TUG OWNER does not guarantee any particular

speed during the voyage and does not warrant delivery of the

Tow at destination at any particular date or time or to meet

any particular market or in time for any particular use.

1.3 CUSTOMER shall not deliver or cause to be de-

livered to TUG OWNER any cargo or substance for towage

pursuant to this Agreement, nor shall the towage of any such

cargo or substance be required by the terms of this Agree-

ment, the possession or towage of which may result in sei-

zure of the Tug or Tow by any governmental authority or

other person, firm or corporation.

1.4 All documentation for the Tow shall be the sole re-

sponsibility of CUSTOMER and TUG OWNER shall not be

responsible for any consequence arising through any act or

omission of CUSTOMER in connection with the export or

entry declarations in respect of the tow. If TUG OWNER or

the Tug incurs a penalty or if the Tug or Tow is delayed as a

result of CUSTOMER’s failure to satisfy its obligations in

the preceding sentence, CUSTOMER shall reimburse TUG

OWNER for any such penalty and shall pay TUG OWNER

for any such penalty and shall pay TUG OWNER additional

compensation at the rate set forth in Article 3 for any such

delay.

ARTICLE 2. LUMP SUM CHARGE.

CUSTOMER shall pay towage charges to TUG OWNER

for the towage service provided for in this Agreement in the

lump sum of SEVENTY-FIVE THOUSAND AND NO/100

DOLLARS ($75,000.00), F.I.O., (plus applicable taxes and

other charges referenced below in Article 7, PORT AND

OTHER CHARGES). The towage charges specified above

shall become fully and irrevocably earned by TUG OWNER

upon commencement of the towage service regardless of

whether or not the Tow or cargo aboard it, if any, is lost,

disabled, or the Tow or cargo aboard it, if any, is unable or

unfit to continue to destination. Payment of the towage

charges (and other amounts required by Article 7 to be paid

to TUG OWNER) shall be made by CUSTOMER to TUG

OWNER without discount or setoff at TUG OWNER’s of-

fice address first set out hereinabove on or before

October 15, 1982.

ARTICLE 3. DELAY CHARGES.

If TUG OWNER is delayed in performing the towage

service as a result of the Tow’s not being ready when the Tug

arrives to commence towage or thereafter as a result of any

cause attributable to the fault of CUSTOMER or to CUS-

TOMER’s default in performing this Agreement, CUSTOM-

ER shall pay to TUG OWNER for the period of any such

delay, in addition to any other amounts required by the

terms of this Agreement to be paid by CUSTOMER to TUG

OWNER, the Tug’s daily rate of hire at the rate of EIGHT

THOUSAND EIGHT HUNDRED AND NO/100 DOL-

LARS ($8,800.00) per running (consecutive) day, or fraction

of any such running (consecutive) day, payable upon invoic-

ing by TUG OWNER; PROVIDED, HOWEVER, if the

3d -

period of delay exceeds ten (10) running (consecutive) days,

CUSTOMER shall, at TUG OWNER’s option, be liable to

TUG OWNER for actual damages for detention at a rate not

less than the Tug’s daily rate of hire specified above.

ARTICLE 4. TOW WARRANTED SEAWORTHY;

MULTIPLE TOWS.

4.1 CUSTOMER warrants and represents that the Tow, at

the time it is tendered to the Tug and towage (i) shall be

seaworthy and in all respects ready for and capable of mak-

ing the specified voyage, and (ii) shall be properly and suf-

ficiently equipped with navigation lights, towage shape,

chain bridle and towing bitts.

4.2 TUG OWNER shall be responsible for making up the

tow and for determining the method and position in which it

shall be towed and the time of sailing. TUG OWNER shall

have the absolute right to tow more than one towed vessel,

whether in tandem or by any other method which TUG

OWNER deems proper.

4.3 TUG OWNER is under no obligation to inspect the

Tow for seaworthiness.

ARTICLE 5. CONDITION OF THE TUG; SURVEY.

5.1 While nothing contained in this Agreement shall be

construed as a warranty of seaworthiness of the Tug, TUG

OWNER covenants that the Tug, at the time of commence-

ment of the towage service under this Agreement, shall be in

a seaworthy and serviceable condition to the extent due

diligence can make it so and shall be provided with all

certificates, licenses and documents required by the United

States Coast Guard and the American Bureau of Shipping to

perform the specified towage service.

5.2 Prior to the commencement of the towage service a

survey of the Tow (and Tug, if required) shall be conducted

by a mutually agreeable surveyor at the sole cost and expense

of CUSTOMER to enable CUSTOMER and its underwriters

to obtain a certificate of surveyors approving the Tug, the

Tow and the towing arrangement for the intended voyage. If

the surveyor shall recommend a specific voyage route or

limitation in speed or anything else which will delay delivery

of the Tow and cargo aboard it, if any, at the designated

destination or otherwise materially change the scope of per-

formance upon which the towage charge in Article 2 above

was determined by TUG OWNER, TUG OWNER shall be

entitled to receive and CUSTOMER shall pay an additional

charge for such delay or change in scope of performance

computed at the Tug’s daily rate of hire set forth in Article 3,

DELAY CHARGES.

ARTICLE 6. VESSEL SUBSTITUTION; DELEGATION.

TUG OWNER shall have the right (but not the obligation)

without restriction as to number of times to substitute

another tug for the Tug, provided the substituted tug shall be

equivalent in capacity and capability to the Tug. Any such

substitution shall not alter the terms, covenants or condi-

tions of this Agreement. TUG OWNER shall have the right

to delegate any of its duties under this Agreement, whether

by subcontract or otherwise, and to assign this Agreement to

an afhliate or successor in interest, provided that no such

delegation or assignment shall diminish TUG OWNER’s

responsibility to CUSTOMER.

ARTICLE 7. PORT AND OTHER CHARGES.

CUSTOMER shall be liable for the direct payment, or

reimbursement to TUG OWNER if such shall be paid by

TUG OWNER, of (i) that portion of all prot charges, pilot-

age fees, dockage, wharfage, harbor entrance fees, agency

fees, and similar fees for services or use Of facilities, and all

taxes (except net income taxes) incurred or accruing as a

result of or in connection with services rendered under this

Agreement, (ii) all fees. taxes and due levied, assessed or

accruing against the cargo or the Tow, and (iii) ramp rental

charges, additional tug assistance or barge shifting costs

necessitated by CUSTOMER’s instructions or directions or

otherwise deemed prudent by TUG OWNER.

ARTICLE 8. LIBERTIES.

The Tug shall have liberty to said with or without pilots, to

tow or be towed, and to deviate for the purpose of repair,

assisting vessels in distress, saving life or property, landing

any ill or injured person on board or taking on fuel, supplies

or other necessaries.

ARTICLE 9. CARGO HANDLING.

If cargo is to be carried aboard the Tow, CUSTOMER

shall be responsible for all cost, risk and expense of loading,

stowage, trimming and discharge of cargo on and discharg-

ing of cargo from the Tow. In the event that CUSTOMER

requests and TUG OWNER consents to use the services of

the master and/or crew of the Tug to load cargo aboard or

discharge cargo from the Tow, CUSTOMER shall pay TUG

OWNER for such services at the cargo handling rate set

forth in TUG OWNER’s applicable collective bargaining

agreement plus an additional charge of twenty-one percent

(21%) to cover handling and administration costs.

ARTICLE 10. LIMITATIONS OF AND EXEMPTIONS

FROM LIABILITY. —

10.1 TUG OWNER, the Tug and its owners, operators,

agents and charterers shall be entitled to assert by way of

limitation of or exemption from liability any principle of law

or any provision of any statute or regulation of the United

States, or other applicable jurisdiction, that affords a vessel

and its owners (or a carrier if cargo is carried aboard the

Tow) a limitation of or exemption from its liability. The

provisions of any such principle of law, statute or regulation,

including, without limitation, the Limitation of Liability

Statutes of the United States are incorporated into this

Agreement by this reference as though fully set forth in this

Article. Nothing contained in this Agreement shall be con-

strued to deprive TUG OWNER of any other right to limit

its liability. CUSTOMER waives any claim that this is a

personal contract of TUG OWNER.

10.2 TUG OWNER, the Tug and its owners, operators,

agents and charterers shall not be responsible for any loss,

damage, injury, death, or delay or failure in performing this

Agreement, arising or resulting from acts of God, force

majeure, perils of the sea, ice, saving or attempting to save

life or property at sea, latent defects in the Tug not

discoverable by due diligence, public or proprietary acts of

any governmenal authority (whether executive, legislative,

judicial or otherwise), labor disputes of whatsoever nature

not attributable to a violation of law by TUG OWNER,

criminal acts by third parties, war or other hostilities, acts of

terrorism, riot or civil commotion, acts or omissions of

CUSTOMER or cargo owner or the agents or representatives

of either, or any other cause of any nature whatsoever to the

extent it is beyond the control and without the fault of TUG

OWNER. Regardless of whether or not the same have been

arranged by TUG OWNER, TUG OWNER shall have no

liability with respect to the services of any assisting tugs

which are not owned or operated by TUG OWNER or its

affiliates or with respect to the Tow’s riding crew, if any, or

with respect to any lights or signaling equipment on the Tow.

10.3 Except as otherwise expressly set forth in this Agree-

ment, TUG OWNER makes no express warranty of any

kind with respect to its performance and, to the extent

permitted by law, disclaims all implied and statutory war-

ranties of any nature whatsoever, including, without limita-

tion, any warranty of workmanlike service. TUG OWNER

shall not be liable for any incidental or consequential dam-

ages of any nature whatsoever.

ARTICLE 11. INDEMNITY.

11.1 CUSTOMER shall indemnify, defend and hold TUG

OWNER harmless from all claims, demands, actions, causes

of action and liabilities of any nature whatsoever (including

costs and attorneys’ fees incurred by TUG OWNER in

defending against all such liabilities or in enforcing this

indemnity provision) which, during the terms of perform-

ance of this Agreement, arose out or were connected with

(i) failure of CUSTOMER to perform or satisfy any cove-

nant or condition required by the terms of this Agreement to

be performed or satisfied by CUSTOMER, (ii) negligent acts

or omissions or other fault of CUSTOMER, or (iii) violation

of any environmental pollution statute or regulation for

pollution attributable to the Tow or cargo aboard it, if any.

-h

11.2 All obligations and liability of CUSTOMER to in-

demnify, defend and hold TUG OWNER harmless pursuant

to the terms of this Agreement shall survive termination,

cancellation or expiration of this Agreement.

ARTICLE 12. CUSTOMER INSURANCE.

As part of the bargained for consideration for this towage

service, CUSTOMER shall procure and maintain, at its sole

cost and expense, during the entire period of performance of

this Agreement by TUG OWNER, the following insurance

with companies satisfactory to TUG OWNER:

12.1 Hull and Machinery Insurance upon the Tow in an

amount equal to its full actual delivered value, and Marine

Cargo Insurance (including risks of loading and discharging)

on any cargo aboard the Tow in an amount equal to its full

actual delivered value, plus freight, on terms equivalent to

the broadest coverage available from American under-

writers, provided, any deductible or franchise shall not ex-

ceed an amount satisfactory to TUG OWNER and shall be

for the sole account of CUSTOMER; and

12.2 Protection and Indemnity Insurance insuring its lia-

bility as owner of the Tow for, without limitation, wreck

removal expenses and for third party claims (including those

involving its employees) arising from death or personal inju-

ry, or from loss of or damage to property, with a minimum

limit of $1,000,000 applicable to any one accident or occur-

rence, provided, any deductible or franchise shall not exceed

an amount satisfactory to TUG OWNER and shall be for the

sole account of CUSTOMER; and

12.3 Pollution Insurance, if the Tow or anything aboard

the Tow oontains oil or hazardous substances, insuring

- (i) cost of cleanup in the event of a spill or leakage (with a

minimum limit sufficient to meet any minimum amount

required by law), and (ii) liability for third party claims in

the event of a spill or leakage (with a minimum limit of

$2,500,000 applicable to any one accident or occurrence),

provided, any deductible or franchise applicable to (i) and

(ii) above shall not exceed an amount satisfactory to TUG

OWNER and shall be for the sole account of CUSTOMER:

and

12.4 Each of the aforesaid policies shall provide for ten

(10) days’ notice to TUG OWNER of cancellation or modifi-

cation and shall name TUG OWNER and its affiliates as

additional assureds and expressly waive subrogation against

TUG OWNER and its affiliates, any vessel used by TUG

OWNER or its affiliates in the performance of this Agree-

ment and the master and crew of any such vessel. It is the

intent of TUG OWNER and CUSTOMER that all liabilities

of TUG OWNER and its affiliates, any vessel used by TUG

OWNER or its affiliates in the performance of this Agree-

ment and the master and crew of any such vessel, arising out

of or connected with this Agreement shall be covered by

appropriate marine insurance and the rates prescribed for

the towage service have been predicated upon this basis. In

the sole event that CUSTOMER satisfies its obligation to

procure and maintain Protection and Indemnity Insurance

pursuant to Article 12.2 above by membership in a foreign

Protection and Indemnity Club of which TUG OWNER is

not a member and which, without exception, refuses to

name nonmembers as additional assureds, TUG OWNER

and its affiliates agree to waive the aforesaid requirement

that they be named additional assureds on such Protection

and Indemnity Insurance so long as the subject Protection

and Indemnity Club waives subrogation against TUG

OWNER and its affiliates, any vessel used by TUG OWNER

or its affiliates in the performance of this Agreement and the

master and crew of any such vessel.

12.5 Prior to the commencement of performance by TUG

OWNER under this Agreement, or as soon thereafter as is

practicable, CUSTOMER shal! furnish TUG OWNER with

certificates or duplicate copies evidencing compliance with

this Article 12. No act of TUG OWNER, in commencing

performance under this Agreement or otherwise, shall con-

stitute a waiver of compliance with this Article 12 by

CUSTOMER.

12.6 Unless otherwise agreed in writing, CUSTOMER

may not elect to self-insure the risks required to be insured

against under 12.1, 12.2 and 12.3 above. In the event of any

loss, damage, injury or death which would have been or is

covered by insurance specified in 12.1, 12.2 and 12.3 above,

CUSTOMER agrees to look solely to the applicable under-

writer or to any responsible third party.

ARTICLE 13. TUG OWNER INSURANCE.

TUG OWNER shall, during the entire period of this per-

formance under this Agreement, procure and maintain the

following insurance at its sole cost and expense:

13.1 Hull and Machinery Insurance upon the Tug in an

amount equal to the full actual value of its interests insured.

provided, any deductible or franchise shall be for the sole

account of TUG OWNER; and

13.2 Protection and Indemnity Insurance insuring its lia-

bility as owner of the Tug for wreck removal expenses and

for third party claims (including those involving its em-

ployees) arising from death or personal injury, or from loss

of or damage to property, with a minimum limit of

$1,000,000 applicable to any one accident or occurrence,

provided, any deductible or franchise shall be for the sole

account of TUG OWNER.

13.3 If CUSTOMER so requests, each of the aforesaid

policies shall name CUSTOMER as an additional assured

and expressly waive subrogation against CUSTOMER to the

extent permitted by the policies, provided CUSTOMER

shall not be named an additional assured with waiver of

subrogation for risks required to be covered by CUSTOM-

ER insurance in accordance with Article 12 above.

ARTICLE 14. TUG OWNER’S LIEN.

TUG OWNER shall have a maritime lien on the Tow and

on all cargo aboard the Tow, and all freights and sub-

freights, to secure payment of any amounts due under this

Agreement. CUSTOMER will not suffer, or permit to be

continued, any lien or encumbrance incurred by it or its

agents, or under or through its directions or directions of its

agents, which might have priority over the title and interest

of TUG OWNER in the Tug.

10d

ARTICLE 15. BOTH TO BLAME COLLISION

CLAUSE.

If the Tug or Tow comes into collision or contact with

another vessel or object as a result of the negligence of the

other vessel and any act, neglect or default of TUG OWNER

or of the master, mariners, pilot or servants of TUG OWN-

ER in the navigation, management or maintenance of the

Tug or Tow, CUSTOMER will indemnify TUG OWNER, its

officers and employees, and the Tug against all loss or liabil-

ity to the other or non-carrying vessel or her owners or any

third parties insofar as such loss or liability represents loss

of, or damage to, or any claim whatsoever of TUG OWNER

or the ~~ners of the cargo or their underwriters, paid or

payable by the other or non-carrying vessel or her owners or

any third parties to TUG OWNER or the owners or under-

writers of the cargo and set off, recouped, or recovered by

the other non-carrying vessel or her owner or any third

parties as part of their claim against TUG OWNER, its

officers, employees, or any of its vessels. The foregoing pro-

visions shall also apply where the owners, operators or those

in charge of any vessel or vessels or objects other than, or in

addition to, the colliding vessels or objects are at fault in

respect of a collision or contact.

ARTICLE 16. SALVAGE.

All derelicts and salvage shall be for TUG OWNER’s and

CUSTOMER’s equal benefit after deducting TUG OWNER’s

and CUSTOMER’s expenses and crew’s PROPORTION.

ARTICLE 17. GENERAL PROVISIONS.

17.1 All notices and communications required by the

terms of this Agreement from TUG OWNER to CUSTOM-

ER and from CUSTOMER to TUG OWNER shall be made

in writing and addressed to the respective address of the

other party as set forth above in the preamble or such other

address of which the party seeking to give notice has been

advised in writing.

17.2 This instrument constitutes the entire agreement

between the parties with respect to the intended towage

lid

service. Neither party is relying or may rely on any written

or oral collateral, prior or contemporaneous agreement, as-

surance, representation or warranty not set forth in this

instrument. No modification of this instrument shall be im-

plied in law, equity or admiralty, nor shall any express

modification be effective unless in writing signed by the

party to be charged.

17.3 In the event payment is not made when due, TUG

OWNER shall be entitled to charge to and recover from

CUSTOMER all costs and expenses, including reasonable

attorneys’ fees, incurred in collecting the overdue amount.

All sums due and to become due under this Agreement, if

unpaid when due, shall, if permitted by law, bear interest at

the rate of eighteen percent (18%) per annum from and after

the date upon which the same shall have become due and

payable pursuant to the terms of this Agreement until paid

in full. If the aforesaid rate is not permitted by the law of the

State of Hawaii or of the United States, whichever is control-

ling, the interest rate applicable to delinquent payments shall

be the maximum allowed to be agreed to under the law of

the State of Hawaii or of the United States, whichever is

controiling.

17.4 Captions used in this Agreement are for convenience

of reference only and shall have no force or effect or legal

meaning in the construction or enforcement of this

Agreement.

17.5 This Agreement shall be for the benefit of and be

binding upon both parties, their successors and permitted

assigns.

17.6 All limitations of and exemptions from liability and

entitlement to indemnity, applicable to TUG OWNER by

law or the terms of this Agreement, shall apply to TUG

OWNER, DILLINGHAM CORPORATION, affiliates of

either, their officers, directors, employees and agents, and to

any vessel owned or chartered by any of the above, and the

master and crew of any such vessel.

17.7 Any suit, action or proceeding brought by either

party in consequence of or to enforce any term or provision

12d

of this Agreement shall be commenced in the First Circuit

Court of the State of Hawaii or the United States District

Court for the District of Hawaii at Honolulu, Hawaii, as

appropriate. CUSTOMER submits to the jurisdiction of the

courts of the State of Hawaii and consents to service of

process as provided in Section 634-35(a)(1), Hawaii Revised

Statutes. CUSTOMER submits to the jurisdiction of the

United States District Court for the District of Hawaii and

consents to service of process by certified mail, return re-

ceipt requested, addressed in accordance with Article 17.1

above. The prevailing party in any such suit, action or

proceeding shall be entitled to recover its costs of suit and

reasonable attorneys’ fees.

17.8 Unless notice in writing of specific loss, damage or

any other claim of any nature whatsoever is given to TUG

OWNER in accordance with Article 17.1 above within five

(5) days after delivery of the Tow to the port or place

designated as the destination, such delivery shall be deemed

to be prima facie evidence of the delivery of the Tow and

cargo aboard it, if any, in good order and condition. TUG

OWNER and the Tug shall be discharged from all liability in

respect of loss or damage claims arising under this Agree-

ment unless suit or action is brought within one (1) year

after delivery of the Tow and cargo aboard it, if any, or

within one (1) year after the date when the Tow and cargo

aboard it, if any, should have been delivered.

17.9 The interpretation of this Agreement and of the

rights and obligations of the parties in law, equity or admi-

ralty shall be governed by the substantive law of the State of

Hawaii and the general maritime law of the United States,

insofar as applicable.

17.10 lf any term or provision, or any part of any term or

provision, of this Agreement is held by any court or other

competent authority to be illegal or unenforceable, the

remaining terms, provisions, mghts and obligations shall not

be affected.

13d

ARTICLE 18. SPECIAL PROVISIONS.

18.1 CUSTOMER shall be liable for any costs attributable

to the Tow at Pearl Harbor and/or Seattle.

18.2 TUG OWNER shall release the Tow to CUSTOMER

at the West Seattle Buoy at Seattle. In the event CUSTOM-

ER does not take the Tow away on arrival, TUG OWNER

shall charge CUSTOMER the amount of EIGHT THOU-

SAND EIGHT HUNDRED AND NO/!100 DOLLARS

($8.800.00) per day or pro rata part thereof for any delay

time until the Tow is taken away.

ARTICLE 19. WARRANTY OF PERSON SIGNING.

The person signing below on behalf of CUSTOMER war-

rants (i) having read and understood the above provisions,

and (ii) having been authorized to sign this Agreement on

behalf of CUSTOMER.

ACCORDINGLY, the parties have signed this Agreement

as of the date first set forth above. |

DILLINGHAM TUG & BARGE

CORPORATION

By: /s/ KENT WHITMAN

Its: Vice President & General Manager

TUG OWNER

ALASKA TOWING

By: /s/ GEORGE POYSKY

Its: President

CUSTOMER

14d

GUARANTY

George Poysky, an individual, (“GUARANTOR”) whose

residence address is

hereby guarantees payment on or before October 15, 1982 of

all sums owing to TUG OWNER pursuant to Article 2 of the

Lump Sum Towage Agreement dated set

forth above. GUARANTOR waives any right to require

TUG OWNER to proceed against CUSTOMER or the Tow

as a condition to proceeding against GUARANTOR under

this Guaranty. GUARANTOR further waives all present-

ments, demands for performance, protests and notices of

nonperformances.

Dated: /s/ GEORGE POYSKY

George Poysky, an individual

GUARANTOR

APPENDIX E

(THIS PORTION IS PRINTED)

TUG HULL FORM

1955

To be attached to Policy No. 82 OM 08058

of the PACIFIC MARINE INSURANCE COMPANY

1. INSURING

(as attached)

2. ITS SUCCESSORS OR ASSIGNS, FOR ACCOUNT OF

WHOM IT MAY CONCERN.

3. LOSS, IF ANY, (Excepting Claims Required to be Paid to

Others Under the Collision Clause) PAYABLE TO

(as attached) OR ORDER.

4. DO MAKE INSURANCE AND CAUSE THEM TO BE

INSURED, LOST OR NOT LOST, TO THE AMOUNT

OF (as attached)

DOLLARS ($ ) (as attached)

5. AT AND FROM THE (as attached) DAY OF (as attached)

TO THE (as attached) DAY OF (as attached) beginning

and ending with (as attached) time.

6. Should the Vessel at the expiration of this Policy be at

sea, or in distress, or at a port of refuge or of call, she

shall, provided previous notice be given to the Under-

writers, be held covered at a pro rata monthly premium to

her port of destination.

7. This policy is agreed to cover the Vessel herein in-

sured as employment may offer, in port and at sea, in

docks and graving docks, and/or on ways, gridirons and

pontoons, at all times, in all places and on all occasions,

situations, services and trades whatsoever and wheresoev-

er, under power or Sail; with leave to sail or navigate with

our without pilots, to tow and to be towed, and to assist

vessels and/or craft in all situations and to any extent, to

render salvage services and to go on trial trips; upon the

Body, Tackle, Apparel, Machinery, Boilers, etc., equip-

ment and everything connected therewith, Ordnance,

Munitions, Stores, Artillery, Boats and other Furniture of

and in the Vessel called the:-

(as attached)

or by whatsoever other name or names the said Vessel is

or shall be named or called, beginning the adventure upon

the said Vessel, etc., as above, and shall so continue and

endure during the period as aforesaid. It shall be lawful

for the said Vessel, &c., to proceed and sail to and touch

and stay at any Ports or Places whatsoever and whereso-

ever without prejudice to this insurance. With liberty to

discharge, exchange. and to take on board goods, specie,

passengers and stores, wherever the Vessel may call at, or

proceed to, without being deemed a deviation, and with

liberty to carry goods, live stock, &c., on deck or other-

wise, and underwriters are liable for contribution towards

the jettison of same. Including all risks of docking. un-

docking, changing docks or moving in harbour as often as

may be required and going on or off slipway. gridiron

and/or pontoon and/or in graving dock as often as may

be done during the currency of this Policy and/or of

adjusting compasses. The said Vessel, etc., for so much as

concerns the Assured, by agreement between the Assured

and Assurers in this Policy, is and shall be valued at (as

below) which value for purpose of franchise shall be di-

vided as follows:-

. Hull, Tackle, Apparel, Equipment, Stores, Boats and

Furniture, etc., $ (as attached)

Machinery, Boilers, Equipment, Motor Generators

and other Electrical Machinery and everything con-

nected therewith $ (as attached)

s (as attached)

Winches, Cranes, Windlasses and Steering Gear

shall be deemed to be part of the Hull and not of

the Machinery.

10.

11.

12.

13.

14,

15.

16.

17.

The Insurers to be paid in consideration of this

insurance

Dollars being at the rate of (as attached) per

cent.

Omitted.

Held covered in the event of any breach of warranty,

or deviation from the conditions of this Policy, at an

equitable premium to be arranged, notice to be given on

receipt of advices.

Omitted.

Average payable on each valuation separately or on

the whole, without deduction of thirds, new for old,

whether the Average be particular or General.

Omitted.

TOUCHING the Adventures and Perils which we,

the said Assurers are contented to bear and take upon us

they are of the Seas, Men-of-War, Fire, Lightning, Earth-

quake, Enemies, Pirates, Rovers, Thieves Jettisons. Let-

ters of Mart and Countermart Surprisals, Takings at Sea,

Arrests, Restraints and Detainments of all Kings.

Princes and Peoples, of what Nation, condition or quali-

ty soever, Barratry of the Master and Mariners, and all

other Perils, Losses and Misfortunes that have or shall

come to the Hurt, Detriment or Damage of the said

Vessel, &c. or any part thereof. And in case of any Loss

or Misfortune it shall be lawful for the Assured and/or

Charterers and/or Operators and/or Lessees their Fac-

tors, Servants and Assigns, to sue, labor and travel for, in

and about the Defense, Safeguard and Recovery of the

said Vessel, &c., or any part thereof, without prejudice to

this Insurance; to the Charges whereof the said Insur-

ance Company will contribute according to the Rate and

Quantity of the sum herein insured. And it is expressly

declared and agreed that no acts of the Assurers or

Assured in recovering saving or preserving the property

re i

28.

29.

30.

31.

32.

33.

34.

35.

insured shall be considered as a waiver or acceptance of

abandonment.

. Omitted.

No recovery for a Constructive Total Loss shall be

had hereunder unless the expense of recovering and

repairing the Vessel shall exceed the insured vaiue.

In ascertaining whether the Vessel is a Constructive

Total Loss the insured value shall be taken as the

repaired value and nothing in respect of the damaged or

break-up value of the Vessel or wreck shall be taken into

account.

In the event of Total Loss or Constructive Total

Loss, no claim to be made by the Underwriters for

freight, whether notice of abandonment has been given

or not.

Omitted.

First Line Omitted.

This policy also covers the affliated companies of

the Assured be they Owners, Subsidiaries, or Inter-relat-

ed companies, and as Bareboat Charterers, or Charter-

ers or Subcharterers or Operators in whatever capacity

and is without right of subrogation against them.

Omitted.

NB—Printed form of Protection and Indemnity Policy

omitted.

(FOLLOWING PORTION IS TYPED)

HULL AND MACHINERY

PROTECTION AND INDEMNITY

1982-1983

Assured: Samoan Maritime,

Ltd.

Vessel: Tug “Eva F”

Sum Insured: Hull and Machinery — $ 350,000

Protection and — $1,000,000

Indemnity

Premium: Hull and Machinery — _ $8,750.00

Protection and — $8,000.00

Indemnity

At and From: May 21, 1982, Noon, P.S.T.

To: May 21, 1983, Noon, P.S.T.

Special Conditions and Warranties:

With respect only to the Hull and Machinery Policy and

the printed Tug Hull Form (McLelland 2139) attached:

e Omitted.

2. Omitted.

3. Deductible. Clause 12 of the printed Hull form is deleted

and replaced as follows:

Notwithstanding anything in this Policy to the contrary,

there shall be deducted from the aggregate of all claims

arising out of each separate accident, the sum of $5,000,

unless the accident results in a Total Loss of the Vessel,

in which case this clause shall not apply. A recovery

from other interests, however, shall not operate to ex-

clude claims under this Policy provided the aggregate of

such claims arising out of one separate accident if un-

reduced by such recovery exceeds that sum. For the

purpose of this clause each accident shall be treated

separately, but it is agreed that (a) a sequence of dam-

ages arising from the same accident shall be treated as

due to that accident, (b) all heavy weather damage which

occurs during a single round voyage shall be treated as

though due to one accident.

Omitted.

Additional Perils. Clause #18 of the printed Hull form is

deleted and the following substituted therefore:

This insurance also specially to cover (subject to the

Deductible) cost of repairs or loss or damage to the

subject matter insured directly caused by accidents in

loading, discharging or handling cargo, or in bunkering,

or in taking fuel; or by accidents in going on or off, or

while on drydocks, graving docks, ways, gridirons or

pontoons; or by explosions on shipboard or elsewhere;

or by breakdown of motor generators or other electrical

machinery and electrical connections thereto, bursting

of boilers, breakage of shafts, or any latent defect in the

machinery or hull; or by breakdown of or accidents to

nuclear installations or reactors not-on board the in-

sured vessel; or by contact with aircraft, rockets or sim-

ilar missiles or with any land conveyance; or through

negligence or error of judgement of Master, Mariners,

Officers, Engineers, Crew, Pilots, or other Servants or

Employees of the Shipowners or Charterers or Oper-

ators or Lessees, Pilots, Servants of Employees of Port,

Harbor or Dock Authorities, Stevedores, Laborers,

Repairers, Tradesmen or other Persons employed in,

near or about the Ship; or from other causes of what-

soever nature arising either on shore or otherwise, how-

soever, causing loss of or injury to the property hereby

insured, provided such loss or damage has not resulted

from want of due diligence by the Assured, the Owners

or Managers of the vessel, or any of them. Masters,

Officers, Mates, Engineers, Crew or Pilots are not to be

considered Owners within the meaning of this clause

should they hold shares in the vessel.

Omitted.

. Omitted.

With respect to both the Hull and Machinery and Pro-

tection and Indemnity Policies:

Additional Vessels. It is understood and agreed that addi-

tional vessels purchased by, chartered to, leased to,

loaned to, rented by or operated by the Assured on

which the Assured is obliged to arrange insurances are,

with or without prior notice to Assurers, automatically

covered hereunder, and insurances attach from moment

of vessel becoming at Assured’s risk but not exceeding

- $350,000 any one vessel with respect to Hull and Ma-

chinery Insurances. Assured agrees to report such addi-

tional vessels as above as soon as facts are known to

Assurers and pay premium at pro rata of appropriate

Tug and/or Barge rates as agreed. Full annual premium

is guaranteed Assurers in the event of a Total or Con-

structive Total Loss.

Omitted.

Trading Warranty. Vessel warranted confined to the

coastal waters and tributaries of Washington, Oregon,

California, British Columbia, Southeastern and South-

western Alaska not West of Adak Strait and including

the waters and tributaries of Bristol Bay and the Bering.

Sea not North of Kotzebue Sound except during the

period October 15, to April 15 vessel shall be warranted

out of Bristol Bay and Bering Sea and tributaries, or

held covered.

Endorsement No. 2 to be attached to and made a part of

Policy No. 82 OM 08058 (Hull) and 82 PI 08128 (P&I) Of

PACIFIC MARINE INSURANCE COMPANY issued to

SAMOAN MARITIME, LTD.

3. In consideration of an additional premium of $4,500.00,

it is agreed that insurances hereunder attach on the

Barges “YCV 9” and “YFNB 13” for a voyage from

Pearl Harbor, Hawaii to Seattle, Washington, subject to

Policy terms and conditions and as shown hereinafter.

Insurances hereunder commence with the making of the

barges for the trip in tow of the Dillingham Tug & Barge

Corporation Tug “Mikiala II” and continue during the

course of the voyage until the “*Mikiala II” releases the

tow to the Assured at Seattle, Washington, or held

covered. It is noted that the tow departed September 24,

1982.

With respect to the voyage insurances provided hereun-

der, Dillingham Tug & Barge Corporation and its af-

filiates, Max Rouse & Sons, Inc. and Max Rouse & Sons

Northwest, are included as additional Assureds without

subrogation.

Hull Loss Payee with respect to Barge “YCV 9”:

Samoan Maritime, Ltd., Max Rouse & Sons, Inc., Max

Rouse & Sons Northwest and Morton Marine, Inc., as

their interests may appear, or order.

Hull Loss Payee with respect to Barge “YFNB 13”:

Samoan Maritime, Ltd., Max Rouse & Sons, Inc. and

Max Rouse & Sons Northwest, as their interests may

appear, or order.

In the event of a Total Loss of a Vessel from perils

insured against, premium calculated at the rate of 3.00%

shall be due and immediately payable for the Vessel lost.

Voyage Hull Deductible each Vessel: $10,000.

Sum Voyage

Vessel Policy Insured Premium

TC F Hull $ 225,000 $2,250.00

P&I 1,000,000 Included

““YFNB 13” Hull $ 225,000 $2,250.00

P&I 1,000,000 Included

$4,500.00

All other terms and conditions remaining unchanged.

GENE SAUSE & COMPANY

October 6, 1982

APPENDIX F

Hawaii Revised Statutes

§431-419 Warranties, misrepresentations in applications.

All statements or descriptions in any application for an

insurance policy or in negotiations therefor, by or in behalf

of the insured, shall be deemed to be representations and not

warranties. A misrepresentation, unless it 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, shall not prevent a recovery on the policy.

Marine Insurance Act of 1906 (MIA), 6 Edw. 7 ch. 41

§2. Mixed sea ana land risks.

(2) Where a ship in course of building, or the launch of a

ship or any adventure analogous to a marine adventure, is

covered by a policy in the form of a marine policy, the

provisions of this Act, in so far as applicable, shall apply

thereto; but, eXcept as by this section provided, nothing in

this Act shall alter or affect any rule of law applicable to any

contract of insurance other than a contract of marine insur-

ance as by this Act defined.

§3. Marine adventure and maritime perils defined.

(2)... “*Maritime perils” means the perils consequent on,

or incidental to, the navigation of the seas, fire, war perils.

pirates, rovers, thieves, captures, seizures, restraints, and

detainments of princes and peoples, jettisons, barratry, and

any other perils, either of the like kind or which may be

designated by the policy.

§17. Insurance is uberrimae fidei.

A contract of marine insurance is a contract based upon

the utmost good faith, and, if the utmost good faith be not

observed by either party, the contract may be avoided by the

other party.

§18. Disclosure by assured.

(1) Subject to the provisions of this section, the assured

must disclose to the insurer, before the contract is conclud-

ed, every material circumstance which is known to the as-

sured, and the assured is deemed to know every circum-

stance which, in the ordinary course of business, ought to be

known by hisi. If the assured fails to make such disclosure,

the insurer may avoid the contract.

(2) Every circumstance is material which would influence

the judgment of a prudent insurer in fixing the premium, or

determining whether he will take the risk.

(3) In the absence of inquiry the following circumstances

need not be disclosed, namely —

(a) any circumstance which diminishes the risk;

(b) any circumstance which is known or presumed to

be known to the insurer. The insurer is presumed to

know matters of common notoriety or knowledge, and

matters which an insurer in the ordinary course of his

business, as such, ought to know;

waived by thé insurer;

(d) any circumstance which it is superfluous to dis-

close by reason of any express or implied warranty.

(4) Whether any particular circumstance, which is not

disclosed. be material or not is, in each case, a question of

fact.

§25. Voyage and time policies.

(1) Where the contract is to insure the subjectmatter at

and from, or from one place to another or others, the pclicy

is called “*voyage policy,” and where the contract is to insure

the subject-matter for a definite period of time the policy is

called “time policy.” A contract for both voyage and time

may be included in the same policy.

§27. Valued policy.

(1) A policy may be either valued or unvalued.

(2) A valued policy is a policy which specifies the agreed

value of the subject-matter insured.

x 3f

§33. Nature of warranty.

(1) A warranty, in the following sections relating to war-

ranties, means a promissory warranty, that is to say, a war-

ranty by which the assured undertakes that some particular

thing shall or shall not be done, or that some condition shall

be filled, or whereby he affirms or negatives the existence of

a particular state of facts.

(2) A warranty may be express or implied.

(3) A warranty, as above defined, is a condition which

must be exactly complied with, whether it be material to the

risk or not. If it be not so complied with, then, subject to any

express provision in the policy, the insurer is discharged

from liability as from the date of the breach of warranty, but

without prejudice to any liability incurred by him before

that date.

§34. When breach of warranty excused.

(3) A breach of warranty may be waiv¢d by the insurer.

§39. Warranty of seaworthiness of ship.

(1) In a voyage policy there is an implied warranty that at

the commencement of the voyage the ship shali be sea-

worthy for the purpose of the particular adventure insured.

(2) Where the policy attaches while the ship is in port.

there is also an implied warranty that she shall, at the

commencement of the risk, be reasonably fit to encounter

the ordinary perils of the port.

(4) A ship is deemed to be seaworthy when she is reason-

ably fit in all respects to encounter the ordinary perils of the

seas of the adventure insured.

(5) In a time policy there is no implied warranty that the

ship shall be seaworthy at any stage of the adventure, but

where, with the privity of the assured, the ship is sent to sea

to an unseaworthy state, the insurer is not liable for any loss

attributable to unseaworthiness.

§84. Return for failure of consideration.

(3) In particular—

(a) where the policy is void, or is avoided by the

insurer as from the commencement of the risk, the

premium is returnable, provided that there has been no

fraud or illegality of the insured; .. .

RULES FOR CONSTRUCTION OF POLICY

§7. Perils of the seas.

The term “perils of the seas” refers only to fortuitous

accidents or casualties of the seas. It does not include the

ordinary action of the winds and waves.

APPENDIX G

November 22, 1982

Samoan Maritime, Ltd.

c/o Gene Sause & Company

200 Southwest Market Street

Portland OR 97201

Attention: Mr: Doug Parks

RE: “BARGE YCV-9”

D/L: 10/15/82

Claim Number 15310 Under Policy 82 OM 08058

Gentlemen:

We have considered your tender of abandonment of the

vessel and all other materials and information submitted by

you and must advise you that we do not agree that the barge

is a total loss by any peril insured against and therefore

confirm our previous rejection of your tender of abandon-

ment and deny your claim for total loss.

It is underwriters’ position that the barge was unseaworthy

at the commencement of the risk, by reason of severe wast-

age/deterioration of its hull. Underwriters are prepared,

however, without prejudice to that position, to pay in ex-

change for a full release of all liabilities from ail as-

sureds/loss payees the cost of repair of the damages itemized

in paragraph 3.1 of Lockheed invoice number BR 10465-

24902F, together with the costs of diving, drydocking and

cropping and sealing deck vents and manhole covers (items

1, 2 and 4), and, in addition, to pay reasonable towing

charges in connection with the placement of the barge on

drydock and its removal (less, of course, the $10,000 deduct-

ible). We know of no evidence that would attribute any other

damage to an insured peril.

Maritime, Ltd.

D/L: 10-15-82

“Barge YCV-9”

Page Two

In denying liability on the ground of unseaworthiness, we

are not asserting that you had actual knowledge of the wast-

age/deteriorated condition of the hull. In a “voyage” policy

insuring the vessel for a specified voyage (as opposed to a

policy insuring the vessel for a period of time), there is an

absolute warranty of seaworthiness which is not conditioned

on knowledge of unseaworthiness by the owner. See, for

example, “Marine Insurance and General Average in the

United States,’ by Buglass (2nd Edition), page 34. If a vessel

is unseaworthy at the commencement of the voyage, the

underwriters are relieved from liability for loss or damage,

howsoever caused.

Notwithstanding our position that underwriters are not

liable at all, we are, however, prepared to compromise on the

basis of payment of the items described above, less the

policy deductible of $10,000. That amount cannot be calcu-

lated from the Samoan information presently in our

possession.

We will be pleased to consider any further information

you may wish to submit.

Very truly yours,

PACIFIC MARINE INSURANCE COMPANY

Linda Pysher

Manager, Marine Department

Enclosure: Lockheed Invoice BR 10465-24902F

CC: Mr. George Poysky

18627 Ist avenue South

Seattle, WA 98184

John F. Meadows, Attorney

425 California Street, Suite 1606

San Francisco, CA 94104

Martin P. Detels, Attorney

file

APPENDIX H

PLAINTIFF/PETITIONER

George Poysky RT 130:23 -— 131:10

Q. What I want to know is how far off of the water was that

deck of the YCV-9 when you were making this investigation

of the exterior of the bow rake or the stern rake?

A. The deck was probably seven feet off the water.

Q. Only seven feet?

A. Yes.

Q. What was the draft of the YCV-9 when you were making

the investigation?

A. About two feet.

Q. And what is the depth of the YCV-9?

A. It’s actually about nine feet; they listed it a little different

in the book. They listed it eight; it’s a little more than that.

George Poysky - RT 73:1 - 77:23

Q. Specifically focusing on you and your brother’s trip —

I’m referring to your brother John Poysky — could you

describe what your trip entailed as to going on board the

YCV-9, for the first or any number of times, what you saw?

A. We came over together on a morning flight, and made

arrangements 24 hours in advance to view these vessels,

which was a requirement of the government; and he accom-

panied me the first day, and then he left I believe the next

morning or the next noon, and | stayed for four or five days

and surveyed them.

Q. Can you describe what you saw the first day, and then

we'll go into even more detail as you describe what you

saw .

A. In regards to the VC-9?

Q. Yes, let’s start with the YCV-9, since that’s really the. ...

A. Yes, we went aboard it, and it wasn’t completely opened

up. It was, say, rafted alongside of a YO Tanker, and had a

small work barge on the outside of it, and I think one or two

compart

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