# Petition for Writ of Certiorari — Lemar Towing Co. v. Fireman's Fund Insurance > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385607_0809%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1973 - **Citation:** 414 U.S. 976 ## Text ' = | | &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 SB eg PE PORE I BLS i FIT OLIN HEIL REE ELROD IO LT * eeeeenerenere 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 ~~ ae as bali a a a a ord Ee a ee eS ele RS 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. 4 4 5 5 3 5 4 oe é a ; Nothing in this record indicates that _ 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 \ ‘) cette te! DEES Susi» + ‘v 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 SP EUS TIEIN ILS Katt cence Lind ah Sete S wap oe SNE EM PA LOTTIE RPO TNT OF or or ed eB: Bae PT ALL 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. ; % . x . 4 o v B4 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 ~ Ic is Io ix it] i= jew 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 t PRE... Jt i; ‘ CH: i ar cal Peace sg = "ey wu Lh a De ee ee ee ee i ee Saher -45 ADDENDUM C IN THE United States Court of Appeals FOR THE FIFTH CIRCUIT z o “i N ' w ° ° «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. SS OR TES ae nt ee eR ne ee ee piraldteind @ how = "a6 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. Adm. Office, U.S. Courts—Scofields’ Quality Printers, Inc., N. O., La. ees ae » iL BU SERRE HSE AI NTN ORS PS DA Vale PEE aes fee o . ; é --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385607_0809%3A1. Public record. Not legal advice.