Marine insurance and maritime law report - Spring 2006
June, 2006
By
Marilyn Raia
RECENT DECISIONS
MARITIME STATUTE NOT EXPANDED TO CREATE CATEGORY OF SPECIAL CIRCUMSTANCES INVOLVING VESSELS OPERATING IN CONCERT AND PURSUANT TO AGREED MANEUVERS
Crowley Marine Serv. Inc. v. Maritrans Inc.
06 C.D.O.S. 3745 (9th Cir. 2006)
Crowley Marine Services, Inc. ("Crowley") provides vessel escort and assistance services in Puget Sound. Federal law requires that any tanker transiting Puget Sound east of navigational buoy R with oil cargo be escorted by two vessels. Maritrans Operating Company L.P. ("Maritrans") hired Crowley to provide escort services for the tanker Allegiance. Crowley provided two tug boats, the Sea King and the Chief.
According to the agreed-upon plan, the Allegiance would travel east towards Buoy R. While the Allegiance was still two to three miles away, the two tugs would depart from Buoy R. The Allegiance would gradually overtake the two tugs and pass between them, at which point the tugs would take up position on either side of the tanker to complete the escort maneuver, with the Chief tethered to the stern and the Sea King on the tanker's port shoulder.
Each of the three vessels sailed with auto-pilot set to 58 degrees true, with the Allegiance gradually overtaking the tug boats. During this time both the Allegiance and the Chief made numerous adjustments to account for the fact that the vessel's auto-pilot function maintains a ship's heading but does not reflect changes due to wind or currents. The Sea King made no comparable adjustments to its course. While the Sea King was still a short distance ahead, the pilot and helmsman aboard the Allegiance realized that the tug was also closing the lateral distance between the vessels. As the Sea King came closer, the Captain aboard the Allegiance decided that the vessels' proximity exceeded his comfort zone. Although later testifying that he did not see any risk of collision, the captain of the Allegiance radioed the Sea King, inquiring of the captain, "Don, are you ok?" The Sea King's captain responded affirmatively.
Shortly after the radio communication, the Allegiance and the Sea King collided, causing more than $2 million in damages. The exact dynamics of the collision were disputed. Crowley presented expert testimony that the two vessels gradually converged until the Allegiance struck the Sea King almost directly from behind. Maritrans presented testimony that the Sea King veered suddenly to starboard, into the path of the Allegiance.
At trial, each side attributed fault entirely to the other, relying in large part on alleged violations of the International Regulations for Preventing Collisions at Sea, or COLREGS. These rules apply to "all vessels upon the high seas and in all waters connected therewith navigable by seagoing vessels." Rule 1(a).
Crowley argued that Maritrans violated multiple COLREGS, including Rules 8 and 13, which govern a ship's obligation to avoid a collision while overtaking another vessel. Maritrans argued that Rules 8 and 13 should not apply because Maritrans fit within the special circumstances exception set forth in Rule 2, emphasizing that no court has applied the overtaking rule to vessels that were operating in concert pursuant to maneuvers conducted under an agreed-upon plan.
Rule2(b) provides that "[i]n construing and complying with these Rules due regard shall be had to all dangers of navigation and collision and to any special circumstances, including the limitations of the vessels involved, which may make a departure from these rules necessary to avoid immediate danger." The question was whether such special circumstances are limited to those involving immediate danger, or include circumstances that are "special" in a more generic sense. The District Court found, (and Maritrans argued on appeal) that courts have either expanded the scope of Rule 2(b)'s special circumstances or have created a wholly separate category of special circumstances involving vessels operating in concert and pursuant to agreed maneuvers. The District Court apportioned fault 75% to Crowley and 25% to Maritrans. Crowley appealed. In what it characterized as a "matter of first impression," the Ninth Circuit disagreed with the District Court.
The Ninth Circuit began its analysis with the plain language of the statute. By the terms of Rule 2, special circumstances are limited to circumstances "which may make departure…necessary to avoid immediate danger." Thus, vessels may justify departure from the COLREGS in order to avoid immediate danger, but not for more generic special circumstances. As written, the COLREGS reflect numerous policy judgments that are not vitiated by agreed cooperation between two vessels and such cooperation does not change the meaning of Rule 2 limiting it to situations in which there is immediate danger.
The Ninth Circuit further noted that the decision did not determine the ultimate allocation of liability in the case. Despite construction of the COLREGS in accordance with their plain meaning, including the special circumstances exception, the assignment of liability is not absolute. The blameworthiness of each party's conduct would ultimately depend not only on the rules that each party violated but also on whether those violations actually caused the collision. The flexibility and adaptability of the apportionment concept helped explain why the Ninth Circuit was unswayed by the collection of policy arguments offered by Maritrans.
The Ninth Circuit remanded the case to the District Court for a redetermination of the percentage of fault to be allocated to the parties in light of its opinion.
BILL OF LADING PROVISION EXONERATING CARRIER FROM LIABILITY FOR HIJACKING OF CARGO UPHELD
Polimeros Tecnologica, S.A. (Polytec) v. Maersk Sealand
2006 A.M.C. 356 (S.D.Tx 2005))
Polimeros was the importer of a containerload of polyethylene plastic shipped under a through bill of lading from Houston, Texas to Guatemala City, Guatemala. The shipment was transported by vessel from Houston to Santo Tomas de Castilla, Guatemala. It was discharged from the vessel and loaded onto a truck for inland carriage. During the inland carriage, the truck was hijacked and the cargo was not recovered. The cargo was valued at $23,776.
Polimeros sued the carrier, Maersk Sealand, for the value of the stolen cargo. Maersk Sealand denied liability on the basis of a provision in its bill of lading that exonerated it from liability arising out of or in connection with the acts of any person who, by the use of threats, seizes control of the cargo, i.e. hijacks it.
Maersk Sealand moved for summary judgment on the basis of the exonerating provision in its bill of lading. Polimeros argued that the exonerating provision was void because it conflicted with the provision in the United States Carriage of Goods by Sea Act [COGSA] that prohibits carriers from inserting clauses in their bills of lading that lessen the carrier's liability from that provided in COGSA. 46 USC § 1303(8). Maersk Sealand's motion was granted.
The District Court began its analysis noting that COGSA compulsorily applies to contracts of carriage to or from the United States in foreign trade. It applies from the time that the goods are loaded onto the carrying vessel until they are discharged from the carrying vessel, otherwise known as the "tackle to tackle" period. Although COGSA does not apply of its own force outside of the "tackle to tackle" period, the parties to the bill of lading can contractually extend its applicability to those periods. In those instances, COGSA is merely a contractual term and its provisions can be modified by other contractual language.
The District Court found three facts to be uncontroverted: 1) that the hijacking occurred outside the "tackle to tackle" period; 2) the bill of lading contained a provision extending the applicability of COGSA to the entire time that the cargo was in the carrier's custody and that COGSA applied as a contractual provision when the hijacking occurred; and 3) the hijacking fell within the scope of the exonerating language in the bill of lading. It then turned to the axiom that contracts are to be construed to give meaning to all of its terms.
Under the facts before it, the District Court held that the most reasonable interpretation of the bill of lading provisions extending the application of COGSA to inland carriage and exonerating the carrier from liability for the hijacking of the cargo (and the only one to give both of them effect) is one that holds the carrier liable for all loss or damage suffered by the cargo except those falling with the language that exonerates the carrier. Further, the District Court noted that Polimeros did not present any evidence that the exonerating language in Maersk Sealand's bill of lading was the result of fraud, undue influence or overwhelming bargaining power so as to make it unenforceable.
LIMITATION OF LIABILITY PETITION DISMISSED AS UNTIMELY WHEN VESSEL OWNER SUED IN STATE COURT AS A FICTITIOUS DEFENDANT MORE THAN SIX MONTHS BEFORE PETITION FILED
P.G. Charter Boats, Inc. v. Soles
2006 A.M.C. 410 (11th cir 2006)
On March 14, 2002, Soles, an employee of Quality Inspection Services [QIS] was injured aboard a spud barge, the NAVI, owned by P.G. Charter Boats, Inc. [P.G.] P.G.'s president and sole shareholder was Gazzier. Soles filed suit in Alabama state court against QIS, Gazzier and Gazzier Shipyard. The state court complaint also named three fictitious corporations as defendants. The complaint alleged causes of action for Jones Act negligence, general maritime negligence, unseaworthiness and maintenance and cure. Soles also alleged that he was injured aboard the NAVI and that the NAVI was owned, operated and/or controlled by the defendants.
Soles served the state court complaint on Gazzier on April 7, 2004. During discovery Soles learned that P.G. was the actual owner of the NAVI. On December 7, 2004, Soles moved to amend his complaint to name P.G. as a defendant. On May 7, 2005 P.G. filed a limitation of liability petition in the District Court for the District of Alabama naming Soles and QIS as defendants. Soles moved to dismiss the petition on timeliness grounds. The District Court granted the motion. P.G. appealed. The Eleventh Circuit affirmed.
The Limitation of Liability Act, 46 U.S.C. app. 183 (a) allows a vessel owner to limit its liability for a maritime accident to the value of the vessel and her pending freight. A petition for limitation of liability must be filed within six months of receipt of a written notice of claim. The issue on appeal was whether P.G. received written notice of a claim such as to trigger the six month period for filing a limitation of liability petition. That is, if the required written notice of claim was received when Soles served his state court complaint on Gazzier, then P.G.'s petition for limitation of liability was untimely. If, however, the required notice of claim occurred when the Soles amended his complaint to add P.G. as a defendant., then the petition for limitation of liability was timely.
The Limitation of Liability Act does not define what "written notice of claim" is. Most of the reported decisions address what information is required in the notice. Two tests have been developed to determine the sufficiency of the notice. Under one test, the notice is sufficient if it informs a vessel owner of an actual or potential claim which may exceed the value of the vessel and is subject to limitation. Under the second test, the notice is sufficient if the writing 1) demands a right or supposed right; 2) blames the vessel owner for the damage or loss and 3) calls on the vessel owner for anything due to the claimant.
P.G. did not argue that the state court complaint failed to provide sufficient information under either of the two tests. P.G. also did not argue that Gazzier was not authorized to receive the written notice on behalf of P.G. Instead, P.G. argued that it did not have notice that Soles was asserting a claim against P.G. because it was not a named defendant in the state court complaint until December 2004. Further, it argued that state court complaint named Gazzier and Gazzier Shipyards as the owners of the NAVI and therefore Soles sued the wrong party.
The District Court and the Eleventh Circuit found that the complaint was clear that Soles was suing the vessel owner and referred to all of the defendants as the vessel owner, operator and/or controller. They also found that the complaint was served on Grazzier who was the sole shareholder and president of the vessel owner, P.G. P.G. relied on two cases which the courts distinguished. The first case, In Re Complaint of Lady Jane, Inc. 818 F. Supp. 1470 (M.D. Fl 1992) was distinguished on the grounds that the claimant did not give notice that the pending claim was against the vessel owner. The second case, Billiot v. Dolphin Services, Inc. 225 F.3d 515 (5th cir 2000) was distinguished on the ground that the vessel involved in the injury was not properly identified in the claimant's complaint. Soles, on the other hand, did not misidentify the vessel on which he was injured and there was no dispute that he was asserting a claim against the vessel owner.
NO COVERAGE UNDER HULL POLICY WHEN VESSEL OWNER FAILED TO OVERCOME PRESUMPTION OF UNSEAWORTHINESS WHEN VESSEL SINKS AT BERTH IN CALM WATER.
J & A Fleeting, Inc. v. Fireman's Fund McGee Marine Underwriters
2006 A.M.C. 535 (E.D. Ky 2006)
The AHLEY W sank at her dock in calm water. The sinking resulted from the failure of a pump in the vessel's shaft alley. The vessel owner knew of a problem with the propellor shaft that was allowing more water to enter the shaft alley than was usual. Although he monitored the situation and had ordered a new part, he continued to use the vessel every day pending receipt of the new part.
The vessel owner submitted a claim to Fireman's Fund for the total loss of the vessel. Fireman's Fund declined the claim on the ground that the loss resulted from wear and tear and lack of maintenance, not from a covered peril. The vessel owner sued. The District Court invited the parties to file cross motions for summary judgment.
In its motion, Fireman's Fund asserted that the vessel owner allowed the vessel to deteriorate while continuing to use it and that the deterioration constituted non-covered wear and tear. It also asserted that the continued use of the vessel when in a state of disrepair breached a warranty of seaworthiness implied in the hull policy. In its motion, the vessel owner argued that he and his pilot had monitored the pump during the week before the sinking and had ordered a new part but could not drydock the vessel at that time. Further, the vessel owner argued that a computer failure and a power surge at the terminal caused the sinking and were superceding and unforeseeable causes that were covered by the policy.
The District Court granted Fireman's Fund's motion and denied the vessel owner's motion. It noted that the vessel owner had a duty to exercise due diligence to make the vessel seaworthy as a condition of payment under the policy and that such duty could be found in the policy's Inchmaree Clause. Under usual circumstances, the burden of proof would be on the insurer to establish a breach of the warranty of seaworthiness implied in the policy. However, in this case, the burden would be on the vessel owner to rebut the presumption of unseaworthiness that was created when the vessel sank at the dock in calm water. Once the vessel owner rebutted the presumption of unseaworthiness, the burden of proof would shift back to Fireman's Fund. The District Court held that the vessel owner did not carry its burden of rebutting the presumption of unseaworthiness. Other than the statements of the vessel owner and pilot, there was no proof "to establish any kind of preservative maintenance had ever been done on this boat."
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IN BRIEF
In Fischer v. S/Y NERAIDA 2006 A.M.C. 508 (S.D. Fl 2005) the District Court exonerated vessel owners from liability for damage to the dock at which their vessel was docked during Hurricane Frances. The Court found that Hurricane Frances was an act of God because it caused unprecedented wind velocity, tidal rise and upriver surge. Even though Hurricane Frances was an act of God, the defendant vessel owners would be relieved from liability only if they could show that the dock damage could not have been prevented by the exercise of reasonable care. The District Court found that the use of two heavy anchors, and furling and covering the sales were reasonable to the vessel owners in light of the information known to them at the time. The District Court also found that that the S/Y NERAIDA was not unseaworthy and that the claimants did not prove that there was a defect in the vessel that caused it to break away from its moorings.
In Ngo v. Supreme Alaska Seafoods, Inc. 2006 AMC 849 (W.D. WA 2006) the plaintiff suffered injuries when he fell off of a stool aboard the defendant's vessel in December 2003. He filed suit for negligence under the Jones Act, for unseaworthiness under admiralty law and for maintenance and cure. He was deposed in December 2005 at which time he did not remember much about how his accident had occurred. In February 2006, the defendant moved for summary judgment on the negligence and unseaworthiness claims. Instead of seriously opposing the motion, the plaintiff requested a continuance so that he could go aboard the vessel on which he was injured and refresh his recollection as to what had happened. The District Court denied the defendant's motion for summary judgment without prejudice and granted plaintiff's request with certain limitations. The plaintiff had seven days to return to the vessel. He could remain on board for not more than two hours and would be subject to a new deposition after that visit. The defendant was allowed to renew its motion for summary judgment thereafter.
In Northern Insurance Company of NY v. Chatham County, Georgia 2006 DJDAR 4885 (USSC 2006), the United States Supreme Court held that Chatham County which owned, operated and maintained a drawbridge was not immune from a suit brought by subrogated hull insurer, whose insured's vessel was damaged by the drawbridge. Because the County was not acting as an "arm of the state" when it operated the drawbridge, it was not entitled to the "sovereign immunity" enjoyed by the state of Georgia.
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