Petition for Writ of Certiorari — Lemar Towing Co. v. Fireman's Fund Insurance

' = |

| &upreme Ceurt, U. $.°

| FILED J

LIBRARY

SUPREME COURT, U.S. ) AUG 7 1873 |

IN THE | wiOmast neta oem ee

Supreme Court of the United States _

OCTOBER TERM, 1973

wo 73-258

LEMAR TOWING CO., INC.,

Petitioner

versus

FIREMAN'S FUND INSURANCE COMPANY,

Respondent

PETITION FOR CERTIORARI TO THE

COURT OF APPEALS FOR THE FIFTH CIRCUIT

JOAQUIN CAMPOY

WILLIAM S. STONE

Suite 901

225 Baronne Street

New Orleans, La. 70112

Attorneys for Petitioner

ELDON T. HARVEY,III

LAWRENCE E. ABBOTT

CAMPOY, STONE & HARVEY

Of Counsel

SEEMS NT GAEG bic Kee

CONTENTS

PAGE NO.

Opinions Below and Jurisdiction---- 1

Question Presented------------------ 1

Statute Involved------- -- ek.

Statement of the Case-------------- 3

Argumen t--------------------------- 8

Conclusion------------------------- 15 .

Appendix:

Opinion of the District Court--- 17

Judgment of the District

Per Curiam Opinion of the

Court of Appeals-------------- 45

Judgment of the Court of

Order of the Court of Appeals

Denying Rehearing and Rehearing

En Banc----~------------------ 47

eo PPR oy

7 ex

TABLE OF AUTHORITIES

PAGE NO.

STATUTES :

Louisiana Revised Statutes,

Title 22, Section 628 (Acts 1948,

No. 195, Section 14.18, re-

enacted without change, Acts

1958, No. 125) ------------------- 3

CASES:

Aguirre vs Citizens Casualty Company

of New York, 441 F2d 141 (CA 5-

1971), cert. den., 404 US 829

(1971) --------------------------- 8

Askew vs American Waterways Operators

Inc., 93 §.Ct. 1590, 41 L.W.

4507 (April 18, 1973)------------ 3,12,13

Carnes, C.E. & Co. vs Employers'

Liability Assur. Corp., 101

F2d 739 (CA 5-1939) -------------- 12

Cobb vs Unity Industrial Life Ins.

Co., 19 La. App. 539, 140 So.

877 (Orl.-1932) ------------------ BI

Claribel, The (Coleman vs Jahncke

Service, Inc.), 341 F2d 956 (CA 5-

1965), reh. den., 348 F2d 868,

cert. den. and dism., 382 US

967 (1966) ----------------------- 10

Gulfstream Cargo, Ltd. vs Reliance

Insurance Company, 409 F2d 974

(CA 5-1969) ---------------------- 9

Kelly vs Washington, 302 US l

(1937) --------------------------- 12

. cee |

AUTHORITIES (Page 2)

PAGE NO.

Laurent vs Unity Industrial Life

Ins. Co., 189 La. 426, 179

So. 586 (1938) -----------~-~---~- 11

Lion Oil Co. vs Gulf Oil Corporation,

181 F2d 731 (CA 5-1950)------... 12

Miller vs Kellerman, 228 F. Supp.

446 (WD La.-1964), aff'd and reh.

den., 354 F2d 46 (CA 5-1964),

cert. den., 384 US 951 (1966)--- 1l

Sea Pak, The (Tropical Marine Pro-

ducts vs Birmingham Fire Ins.

Co. of Pa.), 247 F2d 116 (cA 5-

1957), cert. den., 355 uS 903

(1957) --------------------~-- 9

Spot Pack, The (Saskatchewan Govern-

ment Insurance Office vs Spot

Pack), 242 F2d 385 (CA 5-1957) --- 9

Texaco, Inc. vs Vermilion Parish

School Board, 244 La. 408, 152

So2d $41 (1963) ----...........-—.— 11:

Union Insurance Co. of Philadelphia

vs Smith, 124 uS 405 (1888)------ 9,14

Wilburn Boat Co. vs Fireman's Fund

Insurance Co., 348 us 310 (1954)- 2,8,12,

15

Wisconsin Barge Line, Inc. vs Coastal

Marine Transport, Inc., 414

F2d 872 (CA 5-1969) --------.....- 10

Rees DMV IT

AUTHORITIES (Page 3)

PAGE NO.

OTHER:

The Symposium on the Hull Policy,

41 Tulane Law Review,

page 253 (1967) ---------------- 10,15

43 Am. Jur. 2d, Insurance,

Section 1043, p.968 (1969) ----- 15

hE 4

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1973

%, NO

s

~ 3

LEMAR TOWING CO., INC.,

Petitioner

versus

FIREMAN'S FUND INSURANCE COMPANY,

Respondent

PETITION FOR CERTIORARI TO THE

COURT OF APPEALS FOR THE FIFTH CIRCUIT

Petitioner seeks certiorari to review

the judgment of the Court of Appeals for

the Fifth Circuit in this case, and, in sup-

port of its petition, respectfully shows:

OPINION BELOW and JURISDICTION

The District Court's opinion is reported

at 352 F. Supp. 652. The judgment of the

District Court is dated July 19, 1972. The

Court of Appeals affirmed, per curiam, at

471 F2d 609, the District Court's opinion.

The judgment of the Court of Appeals is dated

January 12, 1973. Rehearing and rehearing

en banc were denied on June 11, 1973. Juris-

diction of this Court lies under 28 USC

1254(1).

QUESTION PRESENTED

Whether, in a suit by an assured against

a marine underwriter to recover for the loss

of a sunken inland tug under a marine time

2

hull policy issued in Louisiana, the under-

writer may validly assert as a defense to the

suit an alleged breach of an implied warranty

of continuing seaworthiness, including a

warranty that the crew of the vessel will be

qualified in compass navigation, even though

the policy as written contains no express

warranty of any kind; when Wilburn Boat Co.

vs Fireman's Fund Insurance Co., 348 US 310

(1954), requires that state law control

policy warranties; and when R.S. 22:628 of

the Louisiana Insurance Code, which code ap-

plies to marine policies under settled de-

cisions, provides that:

7” one

"No agreement in conflict with,

modifying, or extending the coverage

of any contract of insurance shall

be valid unless in writing and made

a part of the policy."

Re oe ey

The decision has nationwide importance,

_ since the holding

(1) affects every American time hull

policy written without warranties of sea-

worthiness; and enables insurers, notwith-

standing coverage of crew negligence under

the Inchmaree clauses of such policies, to

avoid such coverage on the theory below that

incompetence of the master or crew affords a

secret defense;

wars nis cahAA all AMA Aha ie

| (2) effectually deprives States in the

Fifth Circuit of the right to require, by

‘salutary legislation, that insurers doing

business in those States reduce their entire

“agreement with the assured to writing, to

javoid fraud and secret defenses; and

ene} tye a

(3) unduly militates against the powers

of States to enact legislation in the maritime

: FP PAPER FE ne —

3

field. Askew vs American Waterways Operators,

Inc., 93 S.Ct. 1590, 41 L.W. 4507 (April 18,

1973).

STATUTE INVOLVED

Louisiana Revised Statutes, Title 22,

Section 628:

DASE TONAL A ROY

“No agreement in conflict with,

modifying or extending the coverage

of any contract of insurance shall

be valid unless in writing and made

a part of the policy."

(Acts 1948, No.195, Section 14.18,

reenacted without change, Acts 1958,

No. 125).

PPT NE Sa 2

STATEMENT OF THE CASE

SONOMA YER ORI LS YO ARIE A

ed

This action was filed in the United

States District Court for the Eastern District |

of Louisiana to recover on a policy of marine ©

insurance. Admiralty and diversity juris- z

diction were invoked. Petitioner owned the

Tug TRUDY B, a small inland vessel insured

by Respondent which issued a marine hull

policy containing no requirement that the

vesse) be maintained in a seaworthy condition,

and no provisions as to the qualifications or ©

competence of the crew. ‘

The vessel was, however, seaworthy in

her hull and machinery at all times and her

good physical condition was proved beyond

dispute at trial, and was accepted by the

Court.

Shortly after leaving a shipyard where

she had received routine hull repair and

maintenance, the TRUDY B was dispatched by

Petitioner on an inland canal and river

SE eee oe mE K SOY OUR ES EES ILS A

PRP Se MPSA! ALP

a

voyage from the Inner Harbor Navigation

Canal, New Orleans, eastward in the Gulf

Intracoastal Waterway to the Rigolets (an

inland pass running north-northwest from

Lake Borne into Lake Pontchartrain), thence

up the West Pearl River, to return via the

same route. Inland use of this type was

the vessel's usual employment. The master,

Ronald Bearb, who had been recommended to

Petitioner as being qualified to act as cap-

tain of the TRUDY B, turned out to be un-

skilled in the use of a compass, but this

was unknown to Petitioner at the time he was

hired or at the time of the commencement of

; the voyage in question.

En route up the West Pearl River the

TRUDY B grounded, an event covered by the

perils clause of Respondent's policy, which

grounding caused a hole in the vessel's

hull and damage to her screws and propeller

. shafts which caused her to make water through

_ her stuffing boxes. After telephone dis-

_ cussions with Petitioner's president, Bearb

effected emergency repairs, borrowed a pump

to supplement the vessel's two pumps, and

began the return voyage to New Orleans for

_ shipyard repairs.

Arriving in the Rigolets around midnight,

Bearb encountered fog and moored at a rail-

way bridge. The fog began to clear after about

half an hour, and he set forth in a westerly

direction across the approximately one-mile-

wide Rigolets pass, bound for the entrance

to the Gulf Intracoastal Waterway. However,

the entrance to the Gulf Intracoastal Water-

* way required rounding Catfish Point, in an

' area where the channels are winding and mud

- shoals abound, so when Bearb encountered fog

- again he attempted to turn about and return

+ to the bridge. Unfortunately, he lost his

apy cia MAN GBA ade icR

Gewese DUTY

5

way in the fog and darkness, and ran into

Lake Borgne, thence into Mississippi Sound

where he proceeded in an easterly direction

throughout the night.

At dawn the fog cleared and Bearb found

that he had traveled as far east as Gulfport,

Mississippi. There the TRUDY B encountered

an oyster boat which gave Bearb a course

heading to New Orleans via the Gulfport Ship

Channel. A great quantity of water had

leaked into the hull of the TRUDY B during

the night, and she was down heavily by the

stern. When she entered the choppy waters

of the Gulfport Ship Channel she capsized

and sank.

The insurer declined liability initially

on the sole basis that the vessel had breach- ©

ed the limits of her navigation warranty,

which defense the District Court rejected

and characterized as lacking in common

sense. However, at trial Respondent raised

another defense on which, notwithstanding

Petitioner's plea of estoppel, Respondent

prevailed, namely, that the assured had

breached an implied warranty of seaworthi-

ness because the master was unskilled in the

use of the compass.

eae ¥

ASAE SIGNS BS oe bOI NS FA 7

The District Court was of the opinion

that because Bearb was not skilled in the use

of the compass at the time of the commence-

ment of the proposed inland voyage, Petition-

er had failed to make the vessel seaworthy

crew-wise; and that seaworthiness of that

species was required by an implied warranty

in the time hull policy. The Court con-

sidered that Bearb, with the use of the com-

pass, should have been able to make it safe-

ly through the fog and to New Orleans and a

safe berth before sinking. :

ak et ued

2 BP DWERI

6

For purposes of this petition, Petition-

er assumes that Bearb was unable to chart a

compass course in the Gulf of Mexico. But

the question here reduces to the effect, on

vessel owners in every State, of the Dis-

trict Court's holding (Addendum A) which

was subsequently affirmed per curiam:

"We conclude that the crew of the

TRUDY B, and particularly its cap-

tain, was incompetent at the com-

mencement of the voyage, thus render-

ing the vessel unseaworthy at that

and subsequent times and that such

unseaworthiness proximately resulted

from the owner's neglect in failing

to determine the qualification and

competence of the crew to man the

vessel for the intended voyage before

its commencement. We further con-

clude that such unseaworthiness was

the proximate cause of the loss of

the TRUDY B. And since the unsea-

worthiness was caused by the incom-

petence of the crew, and not by the

negligence of the master or crew, the

Inchmaree Clause is thus inappli-

cable."

"Having so breached the implied

warranty of seaworthiness, plaintiff

is not entitled to recover."

The courts below declined to consider

the effect that Louisiana law might have on

the case, because in their view, as stated

in the District Court's opinion, the doctrine

of implied warranty of seaworthiness is so

entrenched in federal law that it cannot be

modified by state law. The District Court

said (page 21):

SEE BR omaP gia SR

7

“Before reaching the merits of this

defense, we must first determine

whether the issues raised herein are

to be governed by the law of Louisi-

ana or by that of the sea. In Wilburn

Boat Co. v. Fireman's Fund Ins. Co.,

348 U.S. 310, 75 S.Ct. 368, 99 L.Ed.

337 (1955), the United States Supreme

Court held that the regulation of

marine insurance should be left to

the states. Justice Harlan, ina

later case, remarked that '[t]he ap-

plication of state law in [Wilburn]

was justified by the Court on the

basis of a lack of any provision of

maritime law governing the matter

there presented.’ Kossick v. United

Fruit Co., 365 U.S. 731, 742, 81 S.Ct.

886, 894, 6 L.Ed. 2d 56 (1961), cf.

Irwin v. Egal Star Ins. Co., Ltd.,

455 F.2d 827 (5th Cir. 1972). The

rule to be followed in the Fifth

Circuit is that State law should be

applied in the field of marine in-

surance where there is no controlling

federal authority with respect to

the specific issue before the court.

Fireman's Fund Insurance Co. v. Wilburn

Boat Co.,300 F.2d 631 (5th Cir. 1962)

(on remand), cert. den. 370 U.S. 925,

82 S.Ct. 1562, 8 L.Ed. 2d 505. Since ‘

the standard of seaworthiness is :

solidly entrenched in federal mari-

time jurisprudence, Aguirre v.

Citizens Casualty Company of New York,

441 F.2d 141, 146 (5th Cir. 1971),

we must apply the federal maritime

law."

Cb RY BIST a aN IR

SR” oO

0. ISD

PR ee OPE Meee My

sca ile i Aan Rea aA :

,

§

7

8

ARGUMENT

a - As to the Non-Existent

“Implied Warranty"

In Wilburn Boat Co. vs. Fireman's Fund

Insurance Co., 348 US 310 (1954), this Court

established the right of the State to enact

legislation governing the effect to be ac-

corded warranties in marine insurance poli-

cies in the absence of a controlling Federal

standard.

When the policy in suit was issued on

March 23, 1969, no Federal standard implying

a warranty of seaworthiness in a time hull

policy was entrenched in the Fifth Circuit,

nor would there be any such standard now

unless its entrenchment by the instant case

is allowed to stand. Both Courts below fell

into error in assuming that the earlier case

of Aguirre vs Citizens Casualty Company of

New York, 441 F2d 141 (CA 5-1971), cert.

den., 404 U.S. 829 (1971), stands for the

proposition that there is an implied warranty

of seaworthiness in every marine policy, for

in Aguirre the policy contained "an express

warranty of seaworthiness .. . that at the

inception of this policy the vessel shall

be in a seaworthy condition and, thereafter,

during the currency of this policy, the as-

sured shall exercise due diligence to keep

the vessel seaworthy, and in all respects

fit, tight, and properly manned. equipped

and supplied." Aguirre, supra at 143.

Thus, the Aguirre decision cannot sustain

the implication of such a warranty.

It was erroneous, also, for the District

Court below to hold that "the Fifth Circuit

recognizes that there exists in a time

policy, such as the one sued on herein, an

9

implied warranty of seaworthiness," citing

The Spot Pack (Saskatchewan Government In-

surance Office vs Spot Pack), 242 F2d 385

(CA 5-1957); The Sea Pak (Tropical Marine

Products vs Birmingham Fire Insurance Co.

of Pa-), 247 F2d 116 (CA 5-1957), cert. den.,

355 US 903 (1957); and Gulfstream Cargo,

Ltd. vs Reliance Insurance Company, 409

F2d 974 (CA 5-1969). Sea Pak certainly does

not support this proposition. And in Spot

Pack, the Fifth Circuit questioned the so-

called "negative" warranty that the vessel

should not knowingly be permitted to “break

ground in an unseaworthy condition," and

inquired "[h} ow this came to be the rule

of general acceptance for all Time policies," |

as it is traceable to Union Insurance Co.

of Philadelphia vs Smith, 124 us 405 (1888),

which, aS pointed out in Spot Pack, "“contain- =

ed not alone an express warranty of sea- :

worthiness, but an express exclusion of

losses caused by unseaworthiness or by in-

competence of Master and Mariners;" but the

Court in Spot Pack decided that it "need

not determine whether, and to what extent,

the rule should be different for a Time

Policy," The Spot Pack, supra, at 388, 389.

The Gulfstream Cargo case, supra, was

handed down five days after the policy hee in |

suit was issued. While it moots the "Ameri- §

can rule" as to implied warranties in a :

footnote, 409 F2d at 983, referring to the ;

Fifth Circuit's decision in Spot Pack, Gulf- —

stream turned on the fact that fraud was

sought to be perpetrated by the assured, who ~

concealed "spectacular unseaworthiness" ex-

isting prior to the inception of the risk

which vitiated the coverage under both state

and federal law. Gulfstream Cargo, supra,

at 983. But fraud is not involved in the

instant case. The question here is whether _

10

standards of seaworthiness may be implied in

an insurance contract between a vessel owner

and an insurer (not between a vessel owner

and innocent third parties such as a seaman),

or whether the Louisiana statute, R.S. 22:628,

which would not have recognized any warranty

unstated in the policy, should be given af-

fect.

The question was and is squarely pregented

at all levels, and Petitioner stands on its

position in both Courts below, that in a time

hull policy the correct rule is as stated in

> The Symposium on The Hull Policy, 41 Tulane

> Law Review, p. 253 (1967): "The true American

+ rule applicable to time hull policies seems

to be that there is no implied warranty of

seaworthiness."

The "American Rule" now adopted by the

Fifth Circuit, sub silentio and per curiam,

if it is to be indeed an "American Rule,"

should be established by this Court, since

its effect involves policyholders in every

littoral state. This Court has not establish-

ed such a rule; nor, if one is now to be

fashioned, should the secret defense of breach

of implied warranty be allowed to function to

the detriment of state police power.

ST Fe eee RL a OE ee oer

F b — The Denial of State Police Power

5 Both Courts below acted in derogation of

public policy expressed by the Louisiana In-

surance Code and the State's highest Court.

It is settled in the Fifth Circuit that the

Louisiana Insurance Code applies to all marine

policies issued in that state. The Claribel

(Coleman vs Jahncke Service, Inc.), 341 F2d

956 (CA 5-1965), reh. den., 348 F2d 868, cert.

den. and dism., 382 US 967, 974 (1966); Wis-

consin Barge Line, Inc. vs. Coastal Marine

MN sta 0H ORG Ss BA Pe ing ln Me

Ree as OEMS TENE SPAMS LI Te RE Mh PATON

11

Transport, Inc., 414 F2d 872 (CA 5-1969).

"The plain intendment of the law [of

Louisiana] is that the respective obligations

of both parties to the contract of insurance

be determined by the policy itself," as it

is the fixed public policy of this state that

every policy of insurance 'shall contain the

entire contract between the parties." Laurent

vs Unity Industrial Life Ins. Co., 189 La.

426, 179 So. 586, 588 (1938) , quoting Cobb vs.

Unity Industrial Life Ins. Co., 19 La. App.

539, 140 So. 877, 878-9 (Orl.-1932).

It should be added that the injection, in-

to a contract between insurer and assured, of

the dictum in Union Insurance Co. of Phila-

delphia vs. Smith, 124 uS 405 (1888), that there

is an implied warranty at the beginning of the

risk, is plainly not authority for denying

coverage of a stranding and sinking occurring

months after the policy was issued, concededly

from causes which did not exist at the time

the policy issued. However, the implication

of such a warranty effectually rewrites the

policy for the insurer's benefit to create

a defensive agreement never agreed to by the i

parties, in derogation of all accepted canons

of construction of contracts, including insur-

ance policies.

Pas a Oe b

a al Lae eh

<a

The Eastern District of Louisiana has pre-

viously considered that it has no authority

to rewrite a policy, or any other written

agreement between the parties, as the altera-

tion or making of a new contract for the

parties is not within the province of the

courts. Miller vs. Kellerman, 228 F.Supp. 446,

463 (WD La. - 1964), aff'd and reh. den., 354

F2d 46 (CA 5-1964), cert. den., 384 US 951

(1966). Louisiana law is the same. Texaco,

Inc. vs Vermilion Parish School Board, 244 La.

——— - a |

eth oe

fer SAAS

ae

12

408, 152 So.2d 541 (1963). And, in the Fifth

Circuit, the Court's duty has been considered

in the past to be "restricted to the interpre-

tation of the contract as the parties made it

for themselves." Lion Oil Co. vs Gulf Oil

Corporation, 181 F2d 731, 733 (CA 5-1950).

The Fifth Circuit has therefore declined

to insert coverages "not in the minds of the

parties when [the] contract of insurance was

entered into," and it will not "banish the

parties, permit our imagination to hold sway,

and write into the policy terms never contem-

plated by them", which "would be the creation

of a new contract." C.E. Carnes & Co. vs.

Employers' Liability Assur. Corp., 101 F2d 739,

741 (CA 5=-1939).

But even if it were permissible, absent

other circumstances, to write an implied war-

ranty into a marine policy in some states in

the Fifth Circuit, Louisiana has acted to pro-

tect assureds by prohibiting unstated conditions

of coverage.

It can hardly be said that the state has

no control over matters maritime. It can in-

spect tugs, Kelly vs Washington, 302 US l

(1937), and has power over warranties in poli-

cies on tugs, under Wilburn Boat Co. vs Fire-

man's Fund Insurance Company, 348 US 310 (1954).

This Court has recently supported the right

of the state of Florida to legislate in the

maritime field. Askew _vs American Waterways

Operators, Inc., 93 S.ct. 1590, 41 L.W. 4507

(April 18, 1973).

This Court's extensive discussion, in

Askew, of the scope of permissible state action,

makes it unnecessary to repeat the extensive

authority cited there. This Court affirmed,

93 S.Ct. at 1593-94, 41 L.W. at 4508, the

rae te we

REAGAN RAEN TE LENE PRD A Te I

13

right of the States to enact legislation pro-

moting the welfare of the "coastal people."

Louisiana's attempt to act in similar fashion

to protect its citizens from secret warranties

in marine policies has been rendered ineffectual |

if the instant decision is allowed to stand. ,

Mr. Justice Douglas' comment applies here:

"To rule as the District Court has

done is to allow federal admiralty juris-

diction to swallow most of the police

power of the States over. . - the lives |

of the coastal people." Askew, supra

at 1594, 41 L.W. 4508.

c - The Destruction of Inchmaree

Clause Coverage

The decisions below have deeply disturbed

the marine industry, members of which filed

briefs amicus curiae in the Fifth Circuit.

NEA et ABELL IONE PAA IEE, CEI IGS

ie embet He

For over half a century, vessel owners have

insured against negligence of the master,

engineers, and mariners under Inchmaree clauses

such as the clause in the policy in suit, which |

provides in pertinent part: ;

“This insurance also specially to

cover (subject to the deductible average

and other conditions of this policy) ‘

loss of or damage to the subject matter

insured directly caused by the following:

* * *

"Negligence of Charterers and/or Repair-

ers, provided such Charterers and/or Re-

pairers are not assured(s) hereunder;

Negligence of Master, Mariners,

Engineers or Pilots;

= .

B oetrenenecsswsmencemecnemmemvnmenremeneannpemnnncten Pe ee |

sa Shae AO eR ETN 2 RE:

14

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."

The Courts below have in the instant case

effectively removed this protection. In nearly

every hull claim underwriters may now, exer-

cising as they did here their right to take

statements from the master and crew, probe

until they find some crew shortcoming, such

as inability to run an accurate compass course

in fog; then assert that such shortcoming

rendered the mariner incompetent and put the

vessel owner in breach of the “implied warranty

of seaworthiness," thereby vitiating the

coverage of crew negligence.

The Fifth Circuit, in adopting the dictum

of Union Insurance Co. of Philadelphia vs

Smith, reversed its prior conception ot the

Inchmaree clause as an expansion of coverage,

and; to the consternation of the industry,

rendered that clause well-nigh useless, al-

though, incongrously, that Court had said in

Sea Pak, 247 F2d at 122:

"We cannot emphasize too strongly

that, as was the purpose of the under-

writers in making the change, the Inch-

maree clause is an expansion of cover-

age of considerable magnitude. Unlike

sO many cases, Union Insurance Co. of

Philadelphia v. Smith, 124 U.S. 405,

8 S.Ct. 534, 31 L.Ed. 947; Continental

Insurance Co. of City of New York v.

Patton-Tully Transportation Co., 5 Cir.,

212 F2d 543, 1954 AMC 889; Ideal Cement

Co. v. Home Insurance Co., 5 Cir., 210

F2d 937, 1954 AMC 663; Hanover Fire

Insurance Co. v. Holcombe, 5 Cir., 223

F2d 844, 1955 Amc 1531, certiorari

Ree i ET I 1 RII RR EN EIS PE LOE LLL GID DAOC EG APIS SS Ie ~ ose

15

denied 350 U.S. 895, 76 S.Ct. 154, 100

L.Ed. 787, where each policy contained

an express warranty of continuing sea-

worthiness and an exclusion of losses

caused by unseaworthiness, 2 Time Hull

Policy with no warranty of continuing

seaworthiness but with an Inchmaree

Clause does in fact underwrite unsea-

worthiness of many types."

The last sentence clearly no longer states

the law in states within the Fifth Circuit;

for the sake of uniformity and harmony in the

maritime law of all states, there should be

clarification at the Supreme Court level of

the important problem presented.

we

CONCLUS ION

Certiorari should be granted to resolve:

a - Once for all, the disputed “Amer ican

Rule" as to whether in a marine time hull

policy, there is an implied continuing war-

ranty that the vessel and crew shall at all

times be in a seaworthy condition. The pre-

sent weight of authority, except insofar as ‘

altered by the Fifth Circuit's present opinion,

is to the contrary. The Symposium on The

Hull Policy, 41 Tulane Law Review, P. 253

(1967); 43 Am Jur. 2d, Insurance, Section 1043,

p. 968. '

a es

b - The right of a state under its police

power to require all terms and conditions of

a marine insurance policy, or any other in-

surance policy, to be stated in writing,

negativing surprise and fraud. Louisiana so

requires, RS 22:628; the Fifth Circuit has

ignored this salutary legislation notwith-

standing this Court's holding in Wilburn Boat

Co. vs Fireman's Fund Insurance Co-, 348 US

310 (1954), that states may legislate as to

oe —

16

marine policy warranties.

c¢ - The nationwide problems arising from

the invocation of implied warranties of sea-

worthiness by way of crew incompetence, to

defeat Inchmaree clause coverage of crew

negligence.

Respectfully submitted,

JOAQUIN CAMPOY

and

WILLIAM S. STONE

of

CAMPOY, STONE & HARVEY

Suite 901 - 225 Baronne St.

New Orleans, Louisiana 70112

Telephone: 522-8183

Attorneys for Petitioner

Lemar Towing Co., Inc.

ELDON T. HARVEY, III

LAWRENCE E. ABBOTT

CAMPOY, STONE & HARVEY

Of Counsel

July, 1973

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ADDENDUM A

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF LOUISIANA

NEW ORLEANS DIVISION

LEMAR TOWING CO., INC. NO. 70-1054

VERSUS CIVIL ACTION

FIREMAN'S FUND INSURANCE COMPANY SECTION D

(Filed: July 17, 1972)

Joaquin Campoy, Esq.

William S. Stone, Esq.

Campoy, Hurley & Senter

Attorneys for Plaintiff

Francis Emmett, Esq. 3

Bruce W. Dinwiddie, Esq. e

Terriberry, Carroll, Yancey & Farrell

Attorneys for Defendant 3

BOYLE, District Tudge:

1

The Tug TRUDY B left the Industrial Canal

in the Port of New Orleans on October 14,1969,

at about 11:00 p.m., bound, via the Intra-

coastal Waterway and waters known as the

Rigolets, for a destination on the West Pearl

River some 80 miles north of its mouth, all

of said waterways being Louisiana waters.

At all times pertinent the TRUDY B was

manned by a captain, a mate and a deckhand.

pees eee ~ ao -

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18

The two light shell barges she was to deliver

to a Jahncke loading dock were made up for

pushing until she reached the Rigolets when

they were placed in tow astern because of the

shallow waters of that body. When she reached

the mouth of the West Pearl the barges were

again positioned for pushing and so remained

until reaching their destination.

The voyage was not uneventful. On the

night of October 15, 1969, when in negotiating

a bend in the West Pearl, not far above lock

#2, the tug struck and scraped her port side

against the river bottom, bank or some other

unknown submerged object. Fearful that some

damage may have been caused by the grounding,

the captain backed the TRUDY B down to lock

#2, tied off the barges, and put the tug on

the bank for the night.

The next morning, at approximately 6:00

a.m., it was discovered that there was at

least a foot of water above the engine room

deck plates. Captain Bearb then sent the mate

to telephone the Jahncke facility to request

a pump since the vessel's electric pump,which

had been underwater during the night, was

feared inoperative. Using both the Jahncke

pump and the vessel's engine pump, the captain

was able to pump out the vessel to the point

where he could see that water was entering

through the, loosened stuffing boxes and a

small crack’ which he discovered in the vessel'

port chine. The stuffing boxes were tightened

to a mere drip and the tug continued upriver

to the Jahncke location where Captain Bearb

- again inspected the vessel.

Captain Bearb then contacted Marcus Smith,

then secretary-treasurer and now the president

of Lemar Towing Co., Inc., (hereafter Lemar)

and reported the condition of the tug. Smith

= EEL LEE DIELS EE YL GLI TELE LIE ROP TE EIEN EE LILO N GI LIET Nigh ter Ne 8

19

instructed the captain to change the oil in

the clutches, plug the leak by placing rags in

the crack, and return the tug to a shipyard

on the Harvey Canal in Harvey, Louisiana.

These tasks were accomplished and the tug was

once again underway.

During the return voyage down the West

Pearl the vessel's electric pump had dried

and was used only intermittently to prevent

its overheating. The engine pump remained

operative and the entry of water was apparently

controlled.

Nearing the mouth of the West Pearl, at

approximately 11:00 p.m., the TRUDY B momen-

tarily paused at the Highway 90 bridge to take 4

on fresh water and to check the water level

in the engine room which was then below the

floor plates. Leaving the West Pearl the

TRUDY B next stopped at the railroad bridge

which crosses the Rigolets where she tied up. ;

When the fog patches, which were encountered :

about the railroad bridge, appeared to be '

lifting the vessel then headed for Catfish F

Point around which lay the Intracoastal Water- :

way and the route home. Between the Highway c

90 bridge and the railroad bridge both pumps

were continuously used to control the water

level in the engine room.

The captain testified that after running

for approximately twenty-five minutes in the

direction of Catfish Point the TRUDY B en-

countered dense fog and attempted to return

to the railroad bridge. However, the vessel

did not find the return course and after the

estimated running time had elapsed without

locating the bridge the captain realized that

he was lost. The vessel, having no anchor,

kept running in search of a place to tie off.

When the fog finally lifted, it was 4:00 a.m.

a aes SER GOP IE DEE LT STINE IE «AALS ROS

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on the morning of the 17th and, as was later

discovered, the vessel was off the coast of

Mississippi near the Gulfport-Biloxi area.

At 6:00 a.m. the vessel came upon an

oyster boat whose crew gave her directions to

the Gulfport Ship Channel which led into the

Intracoastal. Pursuing the given course, the

TRUDY B, now with water above her floor plates

in the engine room, found the channel and the

buoy markers as described by the oyster boat-

men. As she passed Ship Island about 7:00

a.m., she encountered heavy seas and, already

having taken a slight list to port, on one

heavy roll to port she was unable to recover,

continued to roll over, and then sank in the

vicinity of the intersection of the Intra-

coastal and the Gulfport Ship Channel near

buoy #25. The crew was taken from the sinking

vessel by a passing yacht.

Notice of the sinking and tender of aban-

donment of the vessel to defendant underwriter

was immediately given by plaintiff. Defendant

rejected tender of abandonment and, while re-

serving all rights and defenses under the

policy, denied coverage for the reason that

the vessel appeared to have been beyond the

navigational confines of the policy (Joint

Exhibit #1). Plaintiff hired a diver to at-

tend to the wreck and to determine the fea-

sibility of raising it. Plaintiff was also

required to rent a buoy for marking the wreck

because of the Coast Guard's insistence that

it constituted a hazard to navigation. The

Tug TRUDY B was subsequently raised in March,

1970, at a cost of $18,000.00. Having con-

cluded that the vessel was a total construc-

tive loss,~ plaintiff sold the wreck for the

sum of $1.00 to Gulf Marine Surveyors who bore

the expense of raising.

It is undisputed that defendant issued its

21

Ocean Marine term policy v-57424 on the steel

tug TRUDY B owned by plaintiff; that plain-

tiff paid a premium of $3,262.50; that the

TRUDY B sank within the time period specified

in the policy; and that the defendant was

timely notified of the casualty but has not

made any payments under the policy nor re-

turned the premium, or any part thereof, to

the plaintiff.

Plaintiff has brought this suit to recover |

from defendant the full insured value under iy

the policy, “sue and labor" expenses and ;

penalties for the defendant's alleged arbi- :

trary and capricious failure and refusal to :

pay to plaintiff the amount claimed under said é

policy. ;

Defendant takes the position that the

policy issued does not cover the loss occasion-

ed by the vessel's sinking on the grounds that

several terms and conditions of said policy

were breached by plaintiff prior to and at the

time of the sinking, namely: (1) That the

vessel was not within the navigation limits

of the policy thereby suspending coverage;

(2) alternatively, if the vessel had re-entered

the navigation limits and sank therein, the

policy did not reattach since the vessel was

not seaworthy at the time of re-entry; (3) a

breach of the management warranty; (4) that

the sinking did not result from a peril of the

sea, but from the unseaworthiness of the vessel

known by the owners; and (5) failing to notify

the defendant of the grounding and the result-

ing damage thereby depriving defendant of its

right to survey the vessel after every acci-

dent. Plaintiff contends that these defenses

are without merit and, in the alternative,

that defendant should be estopped from

asserting any defense other than breach of

the policy's navigation limits, numbered

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22

(1) above. _

I. ESTOPPEL

The plea of estoppel urged by plaintiff is

based on the ground that defendant initially

denied coverage under the policy for breach of

the navigation limits and merely added other

defenses at its convenience. In support of

this plea plaintiff relies on the following rule

of law; "When a party to a contract refuses to

perform and bases its refusal on one ground it

will be held to have waived all other grounds

and to be estopped when suit is brought from

setting up other grounds for its refusal."

We need not determine the propriety of apply-

ing such rule to the case at bar since plain-

tiff is in error as to its major premise. On

October 20, 1969, only three days after the

sinking of the TRUDY B, defendant sent plain-

tiff a telegram? in which it not only denied

liability for the reason that the sinking oc-

curred outside of the policy navigation limits

but also specifically reserved all of its

rights and defenses under the policy.®

Plaintiff also contends that defendant

should not be allowed to defend on any basis

because of its failure to tender a return of

the premium.’ As authority for this proposition

plaintiff cites Cass Bank & Trust Co. v.National

Indemnity Co., 326 F.2d 308 (8th Cir. 1964) and

Phoenix Assurance Co. of New York v. City of

Buckner, 305 F.2d 54 (8th Cir. 1962). Both

cases, which involve the application of Missouri

law, are inapposite for they hold that a tender

or return of premium is a prerequisite for de-

fending on the ground that a policy is void ab

initio. We do not construe the defenses raised

by the underwriter as contending that the policy

sued on was void ab initio. on the contrary,

' said defenses are based on the policy, its terms

_ and conditions.

BE teres raga cern ee ON A DS EEE

23

We note with considerable interest, how-

ever, the language of the policy with respect

to the management warranty clause:

"Tt is agreed that if, during the j

currency of this Policy, the Assured's

interest in the vessel hereby insured

shall change or there shall be any

change in the management of the Vessel,

this Policy shall become null and :

void from the date of such change unless e

such change shall have been assented F

to in writing by the Underwriters. In ‘

event of such termination a pro rata

daily return of net premium shall be

made." ;

Defendant argues that a change in management

of the vessel occurred prior to the time of

its sinking and that the policy terminated as

of the date of said change; yet defendant has

neither tendered nor made any: pro rata daily

return of the net premium. Defendant's reten-

tion of the entire premium, in view of the

policy language, seems inconsistent with its

contention that the policy had been terminated

prior to the sinking of the vessel. Understand-

ably such conduct on the part of defendant, if

allowed, would work to the detriment of the :

plaintiff in that plaintiff would have neither

a proportionate return of the premium nor the

protection of the policy which said premium was

to secure. Both Federal and Louisiana decisions

require that a defendant be held estopped from

asserting a breach of warranty in its defense

where its actions are inconsistent with a denial

of liability. Reliance Ins. Co. v. The Escapade,

280 F.2d 482 (5th Cir. 1960); Kahmann & McMurry

v. Aetna Ins. Co. of Hartford, Conn.,242 F. 20

(5th Cir. 1917); Sholes v. Continental Casualty

Company, 196 So. 2d 680 (La. App. 4th Cir. 1967).

24

A holding on this issue would be in accord

with the decisions which recognize that an in-

surer may be estopped by its conduct from in-

sisting upon a forfeiture provision of the

policy, but that coverage or restrictions on

coverage may not be extended by the application

of the doctrine or waiver or estoppel. Reisman

v. New Hampshire Fire Insurance Company, 312 F.

2d 17 (5th Cir. 1963); Reliance Insurance Com-

pany v. The Escapade, supra. See also Cc. E.

Carner & Co. v. Employers' Liability Assur.

Corp., 101 F. 2d 739 (5th Cir. 1939) (applying

Louisiana law). However, a holding on the

issue of estoppel with respect to the management

warranty clause is not required, for we are con-

vinced that the warranty was not breached.

II. THE MANAGEMENT WARRANTY CLAUSE

Defendant points to several factors which

indicate that prior to her sinking the TRUDY B

_ was managed and operated by M. & L. Boat Rental,

_ Inc. (hereafter M. & L.), an entity separate

and apart from the assured, Lemar. The evidence

further revealed that M. & L., in business as a

boat rental brokerage company, was solely owned

by Leroy Buras and Marcus Smith who also served

as its officers. Primarily M. & L. handled the

chartering of Lemar's vessel, arranged for her

repairs and furnished her crew. It was estab-

lished that Buras and Smith together owned 50%

of the stock of Lemar and at the time of the

voyage and sinking in question they were its

managing officers; Buras served as president

and Smith was secretary-treasurer.

Micah ANLL Blit SAA TR PE

We find that Leroy Buras and Marcus Smith,

whether acting on behalf of Lemar or M. & L.,

retained direction and control of the vessel.

We, therefore, conclude that here there was no

change in the management of the vessel as

opposed to the change found in Whiteman v. Rhode

(MAR aS nat Ries EOE A ee Rh Reo

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25

Island Insurance Co., 78 F.Supp. 624 (E.D. La.

1948), the decision relied on by defendant

herein.

III. NOTICE OF CASUALTY

Underwriter next contends that the policy

was voided by the assured's failure to give

prompt notice of the grounding and the damage

resulting therefrom, and that underwriter was

thereby denied its right to survey the vessel

after every accident.

Apparently the underwriter is contending

that when the assured received notice, on

October 16, of the grounding which occurred on

the prior night, that information should have

been immediately conveyed to the underwriter

by the assured. The policy requires prompt

notice of any casualty so that underwriter will

have reasonable opportunity to be represented

at a survey of the damage. However, under-

writer offered nothing to show that such a

survey would have been required or whether one

would have been conducted on the West Pearl.

The assured first learned that the TRUDY

B was having trouble on the morning of the

16th when it received a call from the Jahncke

people and was advised that a pump had been

taken to the tug. Captain Bearb later called

and informed the assured that the tug had been

holed and was taking water but that the pumps

could control the flow. Bearb was instructed

to secure the leak in the best possible manner

and to proceed immediately to a yard on the

Harvey Canal where the necessary repairs could

be effected. Leroy Buras, president of the

assured corporation, admitted that he did not

consider having temporary repairs made on the

West Pearl nor did he consider contacting the

underwriter to have a survey made.

2 es PII ROSS SPs tp PSANTR INR BAO ER Sa et a RON

ne a ae MO ASIAN >.

26

Both the captain and the assured believed

that it would be entirely safe for the TRUDY B

to make the return voyage to the Harvey Canal.

Under the circumstances then known, it can be

said that the assured acted in an ordinarily

prudent manner in directing the immediate re-

turn of the vessel. While the assured has a

duty under the policy to promptly report any

casualty, it has been held that every seemingly

trivial accident which occurs need not be re-

ported. Utah Home Fire Ins. Co. v. Mechanical

Equipment Co., 242 F. 2d 513 (5th Cir. 1957).

In Utah Home Fire Ins. Co., supra, the TUNA

FISH grounded and, while being towed to its

home yard in Houma, flooded and sank. There

the assured was not held to have breached a

similar notice clause in failing to notify the

underwriter of the grounding. There it was

also significant that the libellant felt that

he had no claim under the policy since the

oP pgaanan damage did not exceed the deduc-

tible.

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_ the assured considered whether he had a claim

' under the policy; however, our attention is

directed to the policy provision which contains

a $2,000.00 deductible resulting from any one

casualty. It is likely that the extent of the

damage, then known to the assured, was within

the $2,000.00 deductible. On the authority

of Utah Home Fire Ins. Co. v. Mechanical Equip-

ment Co., supra, we hold that the warranty of

_ prompt notice was not breached. What has just

_ been said relates only to the grounding of the

_ vessel on October 15, for it has been stipulated

that underwriter was timely notified of the

vessel's sinking.

IV. NAVIGATION LIMITS

It is also stipulated that "the vessel

Siren spss renee eset a eT REO HEEL ELT IIT LTE LLB IN CAI MIE III TEL YEH IEE SLE PETES

27

sank . . - within the territorial waters of the

State of Mississippi, but less than 50 miles

from the shore of Louisiana." The navigation

limits of the policy are contained in the

clause which reads:

Warranted by the Assured limited to

the use and navigation of the inland

and coastal waters of Louisiana in-

cluding the Mississippi River not north

of Baton Rouge and not exceeding fifty

(50) miles offshore.

Underwriter interprets this clause as limiting

coverage to an area within the Louisiana State

boundary lines extended 50 miles offshore.

Thus, underwriter would place the casualty sued

on herein outside of such an area since the

sinking occurred on the Mississippi side of

the extended Louisiana-Mississippi State line.

Plaintiff, on the other hand, insists that the

clause clearly covers a loss occurring in any

water, Louisiana or Mississippi, within 50

miles of the shore or coast of Louisiana.

The issue in dispute, as we see it,

hinges on the interpretation of the phrase

"coastal waters of Louisiana." In the recent

case of Simon v. Switzerland General Insurance

Co., 238 So.2d 257 (La. App. 3rd Cir.) writ

refused, 256 La. 897, 240 So.2d 232 (1970), a

Louisiana Appellate Court was faced with the

interpretation of a policy restriction: "Navi-

gation Limits: Inland and Coastal Waters of

Texas, Louisiana, and Mississippi." But there

the issue was whether the phrase “coastal

waters" of Louisiana extended only three miles

from land or extended to distances of 30 to 50

miles from the Louisiana coastline. In arriv-

ing at the conclusion that an accident which

occurred approximately 35 miles south of the

Louisiana shoreline was within the coverage of

Re eT ae ia Lae yee ees sere 3, - ” .

SRE ey NRRL URE TINA LAE TRIS EH PPR RENIN ME ELAM EAL I LAIN LE IRENE

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28

the policy, that Court reasoned:

", . « Common sense would seem to

dictate that a three mile limitation

from land would be as unreasonable, if

not an absurd, limit where one is al-

lowed to travel from Louisiana to

Mississippi or Texas or even from Texas

to Mississippi along the coast.

We feel, in the case at bar, that it would be

equally unreasonable if one were allowed to

travel 50 miles off shore from a given point

on the Louisiana coast and be withir. coverage,

but be denied coverage for venturing into

Mississippi waters considerably less than 50

miles from that same point on the Louisiana

coast. Common sense would, therefore, dictate

that the interpretation of the navigation

limits proposed by the underwriter is unaccept-

able.

A realistic look at the Louisiana coast-

line, particularly in the area of the Mississ-

ippi Sound and the Chandeleur Sound,’ supports

this conclusion. The Chandeleur Islands,

within the territorial limits of Louisiana,

are approximately 10 miles south, or seaward,

of the area in which the TRUDY B went down.

Her farthest penetration into Mississippi

waters in the Mississippi Sound area was less

than 50 miles if measured from the easternmost

mainland coast of Louisiana or from the

Chandeleur Islands to either point, east or

west of the Gulfport channel where (on Exhibit

Bearb #1) Bearb marked the locations, at which

he said, at various times, he met the oyster

boat on the morning of October 17, 1969. The

waters of the Mississippi Sound lie within the

Louisiana boundary east of Lake Borgne and

south of the coast of the State of Mississippi,

thus forming the coastal waters of both

a + vse ~~ Oe ee :

29

Louisiana and Mississippi in that area.

We have given what we consider a reasonable

construction to the language of the policy,

one which is contrary to the contentions of

the underwriter. Such a result would have been

reached in any event for when the terms of a

policy are not clear and are subject to dif-

ferent construction, as is the language here,

said terms are construed against the underwriter

who has included them in its policy. Simon v.

Switzerland General Insurance Co., supra.

We conclude that the vessel had not ven-

tured outside the navigation limits provided

in the policy. Having so concluded, we need

not consider defendant's contention that the

vessel returned in an unseaworthy condition.

The grounding of the tug, which allegedly

caused the loss, occurred in the inland waters

of Louisiana. Its sinking and its travel prior

thereto occurred within the navigation limits

of the policy.

V. THE ALLEGED UNSEAWORTHINESS

Underwriter, in its final attempt to

avoid liability, contends that the TRUDY B was

unseaworthy and that her owners knowingly sent

her to sea in said unseaworthy condition.

Underwriter further adds that the loss of the

vessel was caused by the same unseaworthy con-

dition which, it is contended, is not an in-

sured peril and for which there is no coverage.

Such contentions resemble the "double-bottomed

defense of avoidance of the whole policy and a

negation of damage from an insured peril"

raised in cases where the policies in question

"contained an express warranty of continuing

seaworthiness which was patently breached."

Saskatchewan Government Insurance Office v. Spot

pO EEE OE EEE ——————e

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30

Pack, 242 F.2d 385, at 388 (5th Cir. 1957).

Before reaching the merits. of this defense,

we must first determine whether the issues

raised herein are to be governed by the law

of Louisiana or by that of the sea. In Wilburn

Boat Co. v. Fireman's Fund Ins. Co., 348 U.S.

310, 75 S.Ct. 368, 99 L.Ed. 337 (1955), the

United States Supreme Court held that the regu-

lation of marine insurance should be left to

the states. Justice Harlan, in a later case,

remarked that "[t]he application of state law

in [Wilburn] was justified by the Court on the

basis of a lack of any provision of maritime

law governing the matter there presented."

Kossick v. United Fruit Co., 365 U.S. 731, 742,

81 S.Ct. 886, 894, 6 L.Ed. 2d 56 (1961), cf.

Irwin v. Egal Star Ins. Co., Ltd, 455 F.2d 827

(Sth Cir. 1972). The rule to be followed in

the Fifth Circuit is that State law should be

applied in the field of marine insurance

where there is no controlling federal authority

with respect to the specific issue before the

court. Fireman's Fund Insurance Co. v. Wilburn

Boat Co., 300 F.2d 631 (5th Cir. 1962) (on re-

mand), cert. den. 370 U.S. 925, 82 S.Ct. 1562,

8 L.Ed. 2d 505. Since the standard of sea-

worthiness is solidly entrenched in federal

maritime jurisprudence, Aguirre v. Citizens

Casualty Company of New York, 441 F.2d 141,

146 (Sth Cir. 1971), cert. den. 404 u.sS. 829,

we must apply the federal maritime law.

Though the insurance contract on the

TRUDY B contains no express warranty of sea-

worthiness, the Fifth Circuit recognizes that

there exists in a time policy, such as the one

sued on herein, an implied warranty of sea-

worthiness. Saskatchewan Government Insurance

Office v. Spot Pack, supra; Tropical Marine

Products, Inc. v. Birmingham Fire Insurance Co.

31

247 F.2d 116 (5th Cir. 1957), cert. denied,

355 U.S. 903, 78 S.Ct. 331, 2 L.Ed. 2d 260;

Gulfstream Cargo, Ltd. v. Reliance Insurance

Co. ,409 F.2d 974 (5th Cir. 1969). It is

impliedly warranted that the vessel is sea-

worthy as of the very moment of the attach-

ment of the insurance; and if the vessel is

in fact unseaworthy at the time the insurance

were to attach, the breach avoids the policy.

Gulfstream Cargo, Ltd. v. Reliance Insurance

co., supra.

yet the implied warranty does not end

there; it is a continuing obligation that

the vessel “[o]wner, from bad faith or

neglect, will not knowingly permit the vessel ~

to break ground in an unseaworthy condition." —

Saskatchewan Government Insurance Office v.

Spot Pack, supra at 388. However, @ breach

of the implied negative warranty after the

policy has attached does not avoid the policy |

altogether and only exonerates the under-

writer for loss or damage proximately caused

by the unseaworthy condition. Saskatchewan

Government Insurance Office v. Spot Pack,

supra.

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There is no allegation that the TRUDY B

was unseaworthy as of March 23, 1969, the

inception of the policy. The insurance,

therefore, became effective as of that date.

We noted earlier that defendant was not

claiming that the policy was void ab initio.

On or about July 12, 1969, the TRUDY B was

placed in drydock at Wall Shipyard where her

underwater condition and her running and

steering gear was thoroughly inspected and

overhauled at a cost of $1,018.98.8 In

October, 1969, just prior to her fatal voyage,

the TRUDY B was again drydocked at the wal

Shipyard for minor repairs to her bottom.

This evidence supports our finding that the

shipowner exercised due diligence in

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Se eae Na Se eae a

32

maintaining its vessel in a seaworthy

condition.

The defendant does contend that the crew

which manned the vessel on her voyage to the

West Pearl was incompetent, thereby rendering

the vessel unseaworthy. To escape liability

by way of this contention the underwriter

must prove that the shipowner had knowledge

of this unseaworthy condition, if in fact it

did exist, and that said condition was the

proximate cause of the loss. Gulf Coast

Trawlers, Inc. v. Resolute Insurance Company,

239 F. Supp. 424 (S.D. Tex. 1965).

Mindful of the rule that the underwriter

bears the burden of proving unseaworthiness,

we must determine whether the TRUDY B was

unseaworthy because of her crew solely on

the weight of the evidence anc without regard

to whatever maritime skills the Court may

possess. Saskatchewan Government Insurance

Office v. Spot Pack, supra; Hanover Fire In-

surance Company v. Holcombe, 223 F. 2d 844

(Sth Cir. 1955), cert. denied 350 U.S.895,

76 S.Ct. 154, 100 L.Ed. 787. While sea-

worthiness is a comprehensive term requiring

that the vessel be staunch and strong, fitted

Out with proper equipment and a sufficient

and competent crew, it is also a relative

term, relative to the type of voyage or

service proposed. Gilmore and Black, The

Law of Admiralty 58 (1957).

i) Ahad aan iar

- Pees aie

The concept of seaworthiness extends

not only to the vessel and its gear but also

to its crew. Waldron v. Moore-McCormack

Lines, Inc., 386 U.S. 724, 87 S.ct. 1410,

18 L. Ed. 2d 482 (1967); Crumady v. The

Joachim Hendrik Fisser, 358 U.S. 423, 79

S.ct. 445, 3 L.Ed. 2d 413 (1959); Boudoin

v. Lykes Bros. S.S. Co., 348 U.S. 336,

= RESP ES Ie FS eS Pe ee EN ED ear er Ee we Terra wog het ties rR

SMa RO Enea

33

715 S. Ct. 382, 99 L.Ed. 354 (1955). It is

clearly the duty of a shipowner to not only

provide a crew sufficient in number, June T.

Inc. v. King, 290 F. 2a 404 (5th Cir. 1961),

but also a crew competent for the duties it

may be called upon to perform, including

provision for any exigency which is likely

to be encountered. Petition of United States,

303 F.Supp. 1282 (E.C. N.C. 1969) aff'd 432

F.2d 1357 (4th Cir. 1970); Empire Seafoods.

Inc. v- Anderson, 398 F.2d 204 (5th Cir.

1968); Admiral Towing v. Woolen, 290 F.2d

641 (9th Cir. 1961).

“Seaworthiness, as that term has been :

defined and redefined, is reasonable fitness

to perform or do the work at hand." Walker

v. Harris, 335 F.2d 185 (5th Cir. 1964),

cert. denied, 379 U.S. 930, 85 S.Ct. 326,

13 L.Ed. 2a 342 (1964). Walker teaches that

the answers to the following questions will ;

lead to the ultimate conclusion as to the

seaworthiness Or unseaworthiness of the

vessel: "What is the vessel [here the crew]

to do? What are the hazards, the perils, the

forces likely to be incurred? Is the vessel

or the particular fitting under scrutiny

[here the crew], sufficient to withstand

those anticipated forces? If the answer is

in the affirmative, the vessel (or its

fitting) is seaworthy." 335 F.2d at 191.

PT SOLS si EN

The TRUDY B was hired *o take two empty

barges from a location on the Industrial

Canal to a loading facility on the West

Pearl River and to return with the loaded

barges, a voyage requiring navigation

through inland waters only. TO accomplish

this task the TRUDY B was manned by

Captain Ronald Bearb, a mate and a deckhand.

The tug had no radar but was equipped with

a liquid compass. The Jahncke people on the

TSA trea

j Weiter SES geas sence es

ee eS NEP TE RES NRE GY NEES SS IS RRS Te —— —

, POM ARSE Te te ED

34

Industrial Canal provided Captain Beard with

a map of the Intracoastal heading east and

showing the way to the railroad bridge and

from there to the mouth of the West Pearl.

Beard testified that there were no charts

of the West Pearl aboard the tug and that

he found the river difficult to navigate

because of its many bends. Though the record

is not clear, there is some evidence that

someone was to meet the TRUDY B on the West

Pearl to assist in the navigation of that

river; but upon the tug's arrival at the

Highway 90 bridge Bearb found no one and

took the vessel upriver himself. We are

: unable to determine whether that person was

3 to be someone connected with Jahncke or Lemar.

Captain Bearb was 21 years old at the

time the voyage commenced. He left school at

14, after completing the sixth grade, and

farmed until he was 16, when he began working

on boats. Apparently, he worked for one

employer for about three years as a deckhand

and one month as a mate on a tug. When he

was laid off, he returned to farming for

about eight months, following which, in 1969,

he was employed for approximately seven months

as skipper of a crew boat transporting

personnel from Dulac, Louisiana, offshore in

the Gulf of Mexico. He claimed that as

skipper of the crew boat he would run 100 to

150 miles on compass. His crew boat had

charts aboard which he claimed he could read

and from which he said he could fix a compass

course.

Le A

Si che ak DARE Alc RE AltA AN TN ORE Anta Dial Raioc Ba

It should be noted that in his testimony

concerning events following the TRUDY B's

' departure from the railroad bridge on its

» return voyage to New Orleans on the night of

/ October 16, 1969, Bearb testified that a

90° turn would have turned the vessel in the

= PREGA AE < PERE RETREAT NEO

35

direction from which it was then proceeding

and that a 160° turn would be a full circle.

After his employment aboard the crew

boat terminated he was hired by Leroy Buras,

with the knowledge of Marcus Smith , following

the hurricane "Camille" which struck

Louisiana and Mississippi in late August,

1969. He worked as mate aboard the tug

CAPTAIN SCOTT, an M. & L. vessel, for about

one month and then went to M. & L.'s KENDALL

Ss, during which a part of the time he acted

as captain. Since he went aboard the TRUDY B

on October 14, 1969, the total time he

served on the KENDALL S was CAPTAIN SCOTT

was only fora period of about one month (sic).

Landry further testified that the operations

of the CAPTAIN SCOTT were primarily confined

to inside waters. Landry considered Bearb :

well qualified to serve as a tugboat captain

and recommended him for that position when,

due to the illness of another captain,

was offered and did accept the position of

captain aboard the tug KENDALL S.

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Neither the mate nor the deckhand were

called to testify. Defendant's attempt to

have their out of court statements admitted

into evidence was aborted when plaintiff's

objection thereto was sustained. Bearb

testified that the deckhand's first service

was aboard the TRUDY B on this occasion. He

also testified that he had been acquainted

with the mate before the latter entered the

armed forces and had previously worked with

him on the vessels of another boat operator.

The evidence further indicates that the mate

had one year's prior service as a deckhand

and one month's prior service as a mate.

Bearb testified that he employed the mate for

service aboard the TRUDY B, but didn't know

if the mate had ever been in the Intracoastal

EM UES ree

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36

Canal east of the Mississippi River pre-

viously or whether he could read charts.

As president of Lemar, Leroy Buras was

in charge of hiring the captains and crews

for the TRUDY B. Apparently, as a normal

procedure he required that captains have four

years on tugs and that mates have 18 to 24

months on deck with knowledge of handling

tugs.

But Buras testified that he delegated

to Beard, who began working for his various

companies in August, 1969, when he later

became captain of the TRUDY B, the hiring

of the mate and deckhand. Although he

acknowledged it was his obligation to see

they were qualified, he was not aware that

the mate had only served as a deckhand one

year and as mate only one month previously,

nor did he check into their prior experience.

As to Beard, Buras stated he knew

Beard had worked on boats and had the ex-

perience necessary to be captain; but he

also testified that he didn't know what

Bearb's qualifications were, had never worked

with Bearb aboard vessels, gave him no ex-

amination, knew he had no license, his

company had no personnel records and didn't

know how long Bearb had been on the TRUDY B

at the time of the sinking. Furthermore,

he acknowledged that he knew Beard was not

familiar with the waters in the Pearl River

area.

olla LAPS

gM eT Chae

: The tug experienced no difficulty on her

: voyage from New Orleans through the Intra-

: coastal Canal and with the aid of the map

: provided by the Jahncke people easily found

3 the mouth of the West Pearl after passing

5 the railroad bridge which crosses the Rigolets.

7

Pr a aa a =

37

On deposition Beard estimated that it took

the tug 2 hours to run the Intracoastal and

another 2 hours to reach the mouth of the

west Pearl. On trial, however, Beard stated

that it took about 5 hours to navigate from.

the Intracoastal to the mouth of the West

pearl, a distance which he estimated to be

about 7 miles but which is actually less than

3 miles. Beard explained that because of the

shallow water between the Intracoastal and

the mouth of the West Pearl he had to put his

two empty barges astern and proceed at a slow

speed. However, the chart shows that there is ©

little, if any, shallow water in that area.

Other than the grounding, during the

voyage up the West Pearl on a number of

occasions the tug got stuck. In all it took

more than 30 hours from the time the tug

entered the winding West Pearl for her to

reach the Jahncke facility some 80 miles from

the river's mouth.

ROE ELI ORES GENIE

The TRUDY B, in her damaged condition

and without her barges, departed the Jahncke

dock near 3:00 p.m. On the afternoon of the

16th. After running for only 8 hours she

reached the mouth of the West Pearl. It was

then 11:00 p.m. and somewhat hazy. On

clearing the railroad bridge at about 11:30,

Beard testified that the weather appeared

good and that it was not necessary to lay a

compass course to Catfish Point for he could |

see the point and the shore line on each side.

Beard claims to have hit a solid fog bank ;

at about 12:00 midnight.

From the railroad bridge to the channel

of Intracoastal Waterway below Catfish Point

the distance is shown to be slightly over

one mile. Catfish Point is less than a mile

from the railroad bridge and, as Beard

RI ALORA RALLIES ELMER Oe ee |

38

testified, was visible from the railroad

bridge. There are two flashing lights in

the area of Catfish Point, one at the Intra-

coastal Waterway and the other slightly to

the southeast of the first light. Apparently,

Bearb had used one of those lights in naviga-

ting from the Intracoastal toward the mouth

of the West Pearl en route to the Jahncke

facility.

The light at the Intracoastal Canal

channel is approximately one mile from the

railroad bridge and should have been seen

by Bearb upon his departure from the bridge

if, as he testified, the weather was

sufficiently clear for him to see the land

at Catfish Point at that time. He also

testified that the fog set in at about

midnight, 30 minutes after the time of his

claimed departure from the railroad bridge.

Bearb testified that the tug was making

about nine miles per hour after leaving the

railroad bridge and before running into the

fog, the point of which he indicated on the

chart, (Exhibit "Bearb #3"), by an arrow

placed approximately opposite Catfish Point,

a distance of less than one mile from the

railroad bridge. If the tug's speed was

nine miles per hour during the 30 minutes

after departure from the railroad bridge

when Bearb claimed the fog set in, he would

have been nearly five miles from the rail-

road bridge and approximately four miles

south or southeast of Catfish Point when the

fog set in.

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The tug, running at a speed of nine

miles per hour, should have reached the

channel of the Intracoastal with the lights

in full view after only 10 minutes, or at

11:40 p.m., if the fog did not set in until

' midnight.

I TRO eepenes: PRE NORE BIE Repay

as

39

Bearb testified that after running in

the fog for a few minutes he became nervous

and then executed a 90° turn which he ex-

pected would bring him back to the railroad

bridge. We infer, considering that the

vessel was later determined to be in the

waters of the Mississippi Sound off the

Gulfport --Biloxi area, that the 90° turn was

to port and that if it was executed in the

proximity of the point indicated by Bearb

on the chart where the fog was to have set 4

in, Beard would have run the tug aground

shortly thereafter at some point opposite

and to the east-northeast of Catfish Point.

c

¢

s,

4

APY

Beard testified that during the night

he ran his engines at idle speed or about

two miles per hour. At such rate of speed

there would have been no way he could have

traveled over 30 miles between midnight and

4:00 a.m. What is even more incredible is

that Bearb could have reached a point off the |

Gulfport-Biloxi area without having grounded ~

at some point previously considering the

shallow waters en route to that area from

Catfish Point, the fog claimed to be present

and Beard's complete lack of knowledge of

the waters he traversed.

2 LETTE RRS

Nevertheless, the TRUDY B proceeded in

excess of 30 miles in an easterly direction

to the point where she encountered the oyster

boat off the Mississippi Coast.

Bearb's testimony concerning the location

where he encountered the oyster boat, which

he previously said was a shrimp boat, and

his testimony with respect to the course he

followed to where the vessel sank near bouy

#25 in the Gulfport Channel is hopelessly

confused. On deposition Bearb stated that

he encountered the oyster boat west of the

MIELE HLTA TT EN SE LL NTL TIE LIL I NE I a |

40

Gulfport Channel. From there, a 210° course

which Bearb said he was given by the oyster

boat crew would not have taken him to the

Gulfport Channel but would have headed him in

the direction of the Intracoastal. On trial

Bearb testified that he located the oyster

boat east of the Gulfport Channel and had he

steered the 210° course from there it would

have brought him into the Gulfport Channel at

some point north of its intersection with the

Intracoastal. At all events, when the TRUDY

B sank she was in the Gulfport Channel about

six miles south of the point where the

Intracoastal intersects with the Gulfport

Channel.

About seven hours after the TRUDY B

encountered the fog as Bearb claimed, she

sank as previously mentioned above. Had she

_ found Catfish Point and the Intracoastal

+ Waterway between 11:30 p.m. and midnight on

» the night of October 16th, she probably

would have reached New Orleans and a safe

harbour long before 7:00 a.m. on the 17th.

Beard testified that on the voyage from New

Orleans the tug, with barges in tow, was

averaging about seven miles per hour and that

the distance from the Industrial Canal where

the voyage began to the point where the tug

left the Intracoastal Waterway to proceed

past the railroad bridge to the mouth of the

' West Pearl was approximately 20 miles. Using

_ the tug's estimated speed of seven miles

per hour with barges in tow, the return trip

to New Orleans from that point would have

required approximately three hours. Using

an estimated speed of nine miles per hour,

which Bearb claims he was maintaining after

leaving the railroad bridge on the return

voyage, the tug, without her tow, could

have reached New Orleans from that point

sometime between two and three hours.

SRRreente er reste caper EROS LILO A LEY PH BULLI Rs LNB BS

pS a erga

41

However, the TRUDY B did not reach New

Orleans. During the seven hours from the

time of departure from the railroad bridge

she took on a quantity of water which con-

tributed to her sinking.

Fred Perrin, a marine surveyor who

examined the vessel on March 11, 1970, after

she had been raised, testified that the

grounding of the TRUDY B not only caused her

to be holed but also caused damage to the

vessel's propeller shaft struts. It was

Perrin’'s opinion that the damage to the

struts caused the propeller shaft to whip

which in turn caused the packing glands in

the stuffing boxes to become disarranged so

as to eventually allow the influx of an

amount of water sufficient to cause the

sinking. It was also his opinion that the

crack opened by the grounding would not have

permitted the entry of such a quantity of

water which could have overcome the vessel's

pumps and caused her to sink. Perrin's

testimony was substantiated by the survey

report made at the time of his examination.

We conclude that the crew of the TRUDY

B, and particularly its captain, was incom-

petent at the commencement of the voyage,

SME PEt

PORE IESE FE

thus rendering the vessel unseaworthy at that

and subsequent times and that such unsea-

worthiness proximately resulted from the

owner's neglect in failing to determine the

qualification and competence of the crew to

man the vessel for the intended voyage be-

fore its commencement. We further conclude

that such unseaworthiness was the proximate

cause of the loss of the TRUDY B. And since

the unseaworthiness was caused by the in-

competence of the crew, and not by the

negligence of the master or crew, the

Inchinaree clause is thus inapplicable.

Py ity opt At aL a ce Tua LLU tal tai ann ana) Sa ea ea

eee! il end lbted

42

Having so breached the implied warranty

of seaworthiness, plaintiff is not entitled

to recover. Accordingly, judgment shall be

entered for the defendant dismissing plain-

tiff's suit at its cost.

This opinion shall serve as our

findings of fact and conclusions of law.

New Orleans, Louisiana, July 17,1972.

(Signed) Edw. J. Boyle, Sr.

United States District Judge

——

FOOTNOTES

1 The tug TRUDY B (ex-MANDY LEE), official

number 270811, was built in 1955; she was of

38 gross and 26 net tons, 48'3" long,

16'6" in beam, and 6'6" in draft; she had

twin screws powered by two v8-71 GM diesel

engines, developing a total of approxima-

tely 600 horsepower.

2 captain Bearb described the crack as

being about 8' in length and about 1/4 of

an inch wide. Marine Surveyor Fred Perrin,

who examined the vessel, testified that the

total crack was 8" but that only 3 or 4

inches of the crack were open and then only

about 1/32 of an inch wide.

Defendant, at page 1 of its pre-trial

memorandum conceded that the TRUDY B, after

sinking on October 17, 1969, was a total

constructive loss.

rw 8 I TF OEE LOE EL PIE AE ALI LE EET ORS pn me ey re

43

4 This "rule" is contained in a footnote to

an annotation in 18 ALR 2d 491 §31 which

treats with the insurer's inability to raise

the defense of the insured's failure to

give written notice of a claim where the

insurer has previously denied coverage on

some other ground.

Joint Exhibit #1.

6 Fireman's Fund Exhibit #2 and Plaintiff's

Exhibit #9. :

7 Fireman s Fund Exhibit #1.

8 plaintiff's Exhibit #5.

9 plaintiff's Exhibit #6.

:

10 The distance from Catfish Point to :

Gulfport is about 35 miles and to Biloxi is

about 42 miles. 4

See Plaintiff's Exhibit #10.

a i Oe ee ee |

44

ADDENDUM B

UNITED STATES DISTRICT CouRT

EASTL.Gt DISTRICT OF I'miiSTACA

No. 70-1054

CIVIL ACTION

FIREMAN'S FUND INSURANCE COMPANY SECTION D

This cause came on for trial before the Court om September 13,

1971 and September 14, 1971, and after hearing the evidence the Court took

the matter under submission.

he Laat enh atti Aight Ge Pl

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Now, therefore, for the written reasons on [ile he: cin;

IT IS ORDERED, ADJUDCED AND DECREED thet there be judgment in

: favor of the defendant, Fireman's Fudd Insurance Company, an. »gainet the

plaintiff, Lemar Towing Company, Inc., diemissing said plaintiff's suit

at ite cost.

Seb ie

Rew Orleans. Louisiana. thin PP des af tate 107

BENJAMIN W. REISCh, CLERK

SE ma

Joaquin Campoy, Esq.

Willias S$. Stone, Esq.

Trancis Emmett, Esq.

Bruce W. Dinwiddie, Esq.

sat 25 er2

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-45

ADDENDUM C

IN THE

United States Court of Appeals

FOR THE FIFTH CIRCUIT

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°

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«1

PE IN TERT ee

LEMAR TOWING COMPANY,

FIREMAN’S FUND INSURANCE COMPANY,

Defendant-Appellee. ;

Ch mek Ma

Appeal from the United States District Court for the

Eastern District of Louisiana

(January 12, 1973)

Before THORNBERRY, COLEMAN and INGRAHAM,

Circuit Judges.

PER CURIAM: The opinion of the District Court

is reported, Lemar Towing Company v. Fireman’s

Fund Insurance Company, F.Supp. ___. On the

basis of that opinion we affirm the judgment below.

AFFIRMED.

*Rule 18, 5 Cir.; see Isbell Enterprises, Inc. v. Citizens Casualty

Company of New York, et al, 5 Cir., 1970, 431 F.2d 409, Part I.

Adm. Office, U.S. Courts—Scofields’ Quality Printers, Inc., N. O., La.

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ADDENDUM D

United States Court of Appeals

For THE FirtH Circuit

October Term, 1972

No. 72-3007

Summary Calendar

D. C. Docket No. 70-1054 "D"

LEMAR TOWING COMPANY,

Plaintiff-Appellant,

versus

FIREMAN'S FUND INSURANCE COMPANY,

Defendant-Appellee.

Appeal from the United States District Court for the

Eastern District of Louisiana

Before THORNBERRY, COLEMAN and INGRAHAM, Circuit Judges.

JUDGMENT

This cause came on to be heard on the transcript of the

record from the United States District Court for the Eastern

District of Louisiana, and was taken under submission by the

Court upon the record and briefs on file, pursuant to Rule 18;

ON CONSIDERATION WHEREOF, It is now here ordered and adjudged

by this Court that the judgment of the said District Court in this

oause be, and the same is hereby, affirmed;

It is further ordered that plaintiff-appellant pay to

defend

t-appellee the costs on appeal to be taxed by the Clerk

of this Court,

January 12, 1973

47

ADDENDUM E

IN THE

United States Court of Appeals

FOR THE FIFTH CIRCUIT

No. 72-3007

AR GO REST OD SN

LEMAR TOWING COMPANY,

Plaintiff-Appellant,

versus

FIREMAN’S FUND INSURANCE COMPANY,

Defendant-Appellee.

Appeal from the United States District Court for the '

Eastern District of Louisiana

ON PETITION FOR REHEARING AND PETITION

FOR REHEARING EN BANC

(Opinion Jan. 12, 1973, 5 Cir., 1973, ___ F.2d __).

(June 11, 1973)

Before THORNBERRY, COLEMAN and INGRAHAM, -

Circuit Judges.

PER CURIAM: The Petition for Rehearing is DE-

NIED and no member of this panel nor J udge in regu-

lar active service on the Court having requested that

ESET E RL IELTS GEE PLE IE LINO EES EG I Ne EE YR

48.

2 LEMAR TOWING CO. v. FIREMAN’S FUND INS. Co.

the Court be polled on rehearing en banc, (Rule 35

Federal Rules of Appellate Procedure; Local Fifth Cir-

cuit Rule 12) the Petition for Rehearing En Banc is

DENIED.

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