Recent Developments

RECENT DEVELOPMENTS IN MARITIME LAW

Supreme Court Update Uniformity Of Admiralty Law Collision Law Passenger Liability Issues Who Are Jones Act "Seamen"? Workplace Stress-Related Illness Or Injury Not Compensable Application Of Osha Regulations To Seamen On Uninspected Vessels Unseaworthiness Strict Liability Non-Lhwca Employees Indemnity And Contribution Carriage Of Goods Limitations Deviation Himalaya Clause Pollution Liabilities Uniform Commercial Code Application To Maritime Services Contracts New Legislation Establishing Citizenship Of Owners Of Fishing Vessels Limitation Of Liability Salvage Law Insurance Issues

Certiorari has been granted in Brooker v. Durocher, 133 F.3d 1390, 1998 AMC 1314 (11th Cir. 1998), which determined that a seawall on which a worker employed in reconstructing it fell and was injured, was not a pier or wharf or "other adjoining area customarily used by an employer in loading, unloading repairing or building a vessel", irrespective that two barges were moored to buoys near to the seawall, on the basis that the seawall existed to protect an electric plant and not for any vessel-related activity.

Requirement of National Uniformity Recognized by Fifth Circuit. In an increasingly-rare departure from courts applying "balancing tests" whether state law should govern maritime activities, the Fifth Circuit held that federal admiralty law overrides state law where the nature of the activity required national uniformity. Green v. Vermilion Corp., 144 F.3d 332, 1998 AMC 2328 (5th Cir. 1998), involved injury to a cook/watchman of a duck hunting camp being transported to the camp. He boarded a small vessel bringing supplies to the camp to assist in unloading, and was injured when he slipped on the deck. It was held the plaintiff was covered under the state workers' compensation statute, and had a third party claim against his employer as operator of the boat. He was held to not be subject to the LHWCA, under the club/camp/-recreational operation exception of 33 USC § 902(3)(B). Because he was not subject to the LHWCA but was performing duties traditionally performed by seamen, the Fifth Circuit held that he was a Sieriecki seaman pro hac vice, entitled to a warranty of seaworthiness as well as a general maritime law negligence duty to protect his safety. The state workers' compensation statutory exclusiveness of a worker's compensation remedy was held to not apply: Southern Pacific v. Jensen and its progeny unequivocally hold that state workers' compensation statutes can not preclude an employee from asserting a general maritime law negligence claim against his employer for injuries sustained on navigable waters during the course of his employment - state workers' compensation statues can "only apply where the maritime tort involved matters of local concern which had remote or no relation to navigation or maritime commerce." 1998 AMC at 2339. In reaching this conclusion, the Fifth Circuit rejected the rationale of Brockington v. Certified Elec., Inc., 903 F.2d 1523, 1991 AMC 586 (11th Cir. 1990).

- BACK TO TOP -

Hurricane Clauses in Moorage Agreements: Duty of Vessel to Vacate Berth in Face of Storm Warnings. Burklow & Associates v. Belcher, 1998 Fla. LEXIS 11777 (Fl. App. 1998), involved liability of boat owners for their refusal to vacate the marine prior to arrival of a hurricane on the request of the marina owner. The trial court dismissed the action based on a Florida statutes which prohibits marinas from adopting policies which require removal of vessels from marinas after issuance of hurricane watches or warnings ("hurricane clauses" are common in many marina sip moorage agreements). The court of appeals found no duty of a vessel owner to remove his vessel from a marina under a storm threat if there was no enforceable "hurricane clause" in the moorage agreement. Compare, United States v. Bruce Dry Dock Co., 65 F.2d 938 (5th Cir. 1933), upheld the finding that the United States, as owner of a lightship, was negligent for failing to abide by the requests of a wharfinger to move the vessel from the wharf to a nearby anchorage in the face of a hurricane warning, where the vessel had large mushroom anchors and would have been safer at anchorage. The Burklow court discussed other cases involving the duty of care of a vessel operator to move the vessel from its berth after a storm warning: the cases impose a duty on a vessel owner to take reasonable care for the protection of the property of others, but held that there was no duty to remove the boat from the marina on the marina's request because an ordinarily prudent person would not undergo the expense and risk of personal danger of removing the boat, assuming that an alternate safe harbor was available. Burklow did not discuss the doctrine of "trespass for private necessity", which recognizes a limited license to trespass on the property of another to save property. Case law holds that the privilege does not extend to the infliction of any actual damage during the trespass, and makes the trespasser strictly liable for any damage that results. See Vincent v. Lake Erie Transp. Co., 124 N.W. 221 (Minn. 1910).

- BACK TO TOP -

Suit time bars enforced. Silware v. Holland-America Line Westours, Inc., 1998 AMC 2262 (W.D. Wa. 1998), held that the one-year time bar contained in Holland-America Line's passenger ticket met the test of being "reasonably communicated", thus was enforceable.

Loss of consortium claims. Douville v. Casco Bay Island Transit, 1998 AMC 2775 (D. N.H. 1998), held that a relative of a passenger can recover for loss of consortium under maritime law, if the death or injury occurred in the territorial waters of a state, not under jurisdiction of the Death on the High Seas Act.

- BACK TO TOP -

The "Fleet Seaman Doctrine" applies only to continuous employment by same employer. Shade v. Great Lakes Dredge, ____ F.3d ____ (3rd Cir. 1998), involved injury to a dredge worker who received his work assignments through a union hiring hall, had been employed by various companies, but the majority of his work had been with Great Lakes Dredging. He had worked as a deckhand and other duties since 1974. He had worked for another employer for approximately 10 months immediately before he was hired for a specific dredging operation 21 days before he was injured. The jury found that he was a "seaman", based on his employment history. On appeal of the issue of "substantial connection" to a vessel in navigation and application of the "fleet seaman" doctrine, the Court of Appeals reversed and remanded for new trial because the trial court had refused to exclude evidence of the plaintiff's prior work history. The Court of Appeals held the "fleet seaman" doctrine required that the plaintiff be employed on vessels under common ownership on a continual, uninterrupted basis:

After the termination of the employment relationship, the employee severs any duties that the employee had towards the employer with respect to the performance of the former job. The employee does not have any ongoing or regular responsibilities relating the vessels in the former employer's fleet. Upon being rehired, the employee does not recapture that prior relationship. Instead, the employee adopts a prospective set of duties and responsibilities that may be distinct from the employee's former performance and the connections the employee once had to any vessels in the employer's fleet are thus separate from the employee's new status. In effect, the employment in the new position could be considered to be for an entirely different employer, and as such, evidence of the prior employment would have no relevance to the employee's later position with the employer. Thus, we hold that evidence of an employee's prior assignment with the same employer is not admissible under the Fleet Seaman Doctrine if those assignments were not part of a continuous employment relationship between the employer and employee.

Workers on Construction Barges. In DeLange v. Dutra Construction Co., Inc., 1998 AMC 2764 (9th Cir. 1998), the Ninth Circuit adopted the rule of Ellender v. Kiva Construction, 909 F.2d 802, 1992 AMC 1875 (5th Cir. 1990), that a pile driving barge, which moved only incidental to its service as a work platform and it's function did not involve transport-ation of persons or goods across water, was not a Jones Act "vessel".

Duration of Employment. Foulk v. Donjon Marine Co., 144 F.3d 252, 1998 AMC 2926 (3rd Cir. 1998), reversed the summary judgment of a trial court that a commercial diver who was injured on the first day of his employment did not have a sufficient connection with a vessel because he was assigned to the vessel for only ten days: the Third Circuit held that the number of days of an assignment is only one factor to be considered in determining whether there was a "substantial connection" to a vessel in navigation, and the issue of fact should have been submitted to the jury. Witte v. Matson Navigation Co., Inc., 1998 AMC 2968 (W.D. Wa. 1998), held that a Port Relief Engineer hired to perform the duties of the regular engineering duty officers while a ship was in port for three days but was not hired to take the vessel to sea did not meet the test of a sufficient "substantial connection" to a vessel in navigation.

- BACK TO TOP -

Szymanski v. Columbia Transp. Co., 1998 AMC 2868 (6th Cir. 1998), held that a fatal heart attack allegedly caused by the stress of being compelled to work with an incompetent fellow seaman was not actionable, as there was no physical impact on the decedent or the decedent was not in the "zone of danger" of physical impact. The court cited to FELA cases involving stress-related illness from overwork: Consolidated Rail Corp. v. Gottshall, 512 U.S. 532, 1994 AMC 2113 (1994), consolidated with Consolidated Rail Corp. v. Carlisle, for the rule that illness and injuries suffered due to overwork are not compensable under FELA unless the employee suffered physical impact or was in the "zone of danger" of physical impact.

- BACK TO TOP -

The issue of application of OSHA regulations to uninspected seagoing vessels which sometimes operate in territorial waters of a state was addressed in Herman v. Tidewater Pacific, Inc., ____ F.3d _____ (9th Cir. 1998). OSHA issued two citations after inspecting an ocean-going tug in state territorial waters: one for substantive safety violations regarding confined space entry procedures, machine guarding and blood-borne pathogen exposure control plans; and a citation for failure to keep a log of injuries and illnesses as required by OSHA regulations. The Ninth Circuit rejected the rule of Clary v. Ocean Drillihng & Exploration Co., 609 F.2d 1120 (5th Cir. 1980), which held that OSHA regulations do not apply to the working conditions of seamen on vessels which operate on the high seas as Coast Guard regulations preempt application of OSHA regulations with respect to working conditions of seamen. It followed a "hazard based" approach exemplified by Donovan v. Red Star Marine Services, 739 F.2d 774 (2nd Cir. 1984), and

In re Inspection of Norfolk Dredging Co., 783 F.2d 1526 (11th Cir. 1986), which held that OSHA regulations applied to less regulated "uninspected vessels" where Coast Guard regulations do not specifically address the hazard that is the subject of OSHA regulation and citation. It held that OSHA regulations applicable to working conditions and to record keeping of illness and injury applicable to workers within a state apply to seamen on uninspected vessels. Thus, under 29 USC §§ 657(c)(2), 673(a) and 1904.4, an employer must maintain a detailed log supplementary to any reports of injury required by the Coast Guard of any injury or illness involving medical treatment, loss of consciousness, restriction of work or motion, or transfer to another job of any employee in state territorial waters.

- BACK TO TOP -

Green v. Vermilion Corp., 144 F.3d 332, 1998 AMC 2328 (5th Cir. 1998), involved injury to a cook/watchman of a duck hunting camp being transported to the camp. He boarded a small vessel bringing supplies to the camp to assist in unloading, and was injured when he slipped on the deck. It was held he was not a LHWCA employee, under the club/camp-/recreational operation exception of 33 USC § 902(3)(B). A similar exception applies to employees engaged in loading or unloading a vessel less than 18 tons net. 33 USC 902 (3)(H). Similar exclusions from LHWCA coverage apply to marina workers and aquaculture workers. Because he was not subject to the LHWCA but was performing duties traditionally performed by seamen, the Fifth Circuit held that he was a Sieriecki seaman pro hac vice, entitled to a warranty of seaworthiness as well as a general maritime law negligence duty to protect his safety.

- BACK TO TOP -

Knight v. Alaska Trawl Fisheries, Inc., 1998 AMC 2710 (9th Cir. 1998), involved claims by the employing vessel owner against a stevedoring company found 65% at fault for causing injury to a crewmember. The shipowner paid maintenance and cure, and settled claims for damages caused unseaworthiness and Jones Act negligence. The appeal involved the issue whether tort rules for contribution or contract rules of indemnity should be applied. Tort contribution principles would result in reduction of recovery to the employer in proportion to its own contributing negligence. Contract indemnity rules would hold a stevedoring contractor liable for 100% of damages because of its breach of the warranty of workmanlike service though the shipowner also was at fault. The court recognized the continuing vitality of application of contract indemnity by a negligent stevedoring contractor to a shipowner which has strict liability to its seamen for maintenance and cure benefits and damages from unseaworthiness, where the shipowner was not negligent in causing the injuries. It discussed the split between the circuits on the issue whether a negligent shipowner may obtain indemnification where the injury was caused in part by its own negligence. Some circuits apply indemnity rules even when the shipowner is partially at fault. See Cooper v. Loper, 923 F.2d 1045, 1991 AMC 1032 (3rd Cir. 1991); Oglebay Norton Co. v. CSX Corp., 788 F.2d 361, 1987 AMC 71 (6th Cir. 1986). Other circuits apply contribution rules with apportionment for comparative fault. See Smith & Kelly Co. v. S/S Concordia Tadj, 718 F.2d 1022, 1984 AMC 409 (11th Cir. 1983); Loose v. Offshore Navigation, Inc., 670 F.2d 493, 1984 AMC 1216 (5th Cir. 1982); Black v. Red Star Towing & Transp. Co., 860 F.2d 30, 1989 AMC 1 (2nd Cir. 1988). The Ninth Circuit adopted the latter rule: "a negligent shipowner is not entitled to receive Ryan Stevedor-ing Co. v. PanAtlantic S.S. Corp., 350 U.S. 124, 133-34, 1956 AMC 9, 17 (1956)] indemnity from a negligent contract when the shipowner is found liable under both negligence and unseaworthiness theories." Cruz v. Sea-Land Service, Inc., 1998 AMC 2277 (S.D. N.Y. 1998), involved the same issue with the same result.

- BACK TO TOP -

The Ninth Circuit has abandoned the rules that separated it from other circuits on the requirement that to be entitled to limit liability to $500 per package or, for goods not shipped in packages, per customary freight unit, the carrier had to provide the shipper a fair opportunity to declare a higher valuation. Subsequent cases have overruled that requirement. Vision Air Flight Service, Inc. v. M/V National Pride, ____ F.3d ____ (9th Cir. 1998), revisited the "fair opportunity to declare a higher value" issue, and restated the rules adopted by Royal Ins. Co. v. Sea-Land Service, Inc., 50 F.3d 723, 725, 1995 AMC 1189 (9th Cir. 1995), and Mori Seiki USA, Inc. v. M/V Alligator Triumph, 990 F.2d 444, 449,1993 AMC 1521 (9th Cir. 1993):

A carrier may limit its liability under COGSA "only if the shipper is given a `fair opportunity' to opt for a higher liability by paying a correspondingly greater charge." ... The carrier has the initial burden of producing prima facie evidence showing that it provided notice to the shipper that it could pay a higher rate and opt for higher liability. ... The carrier satisfied this initial burden by legibly reciting the terms of 46 U.S.C. App. ' 1304(5) or language to the same effect in the bill of lading. ... The burden then shifts to the shipper to prove it was denied such an opportunity. ...

Footnote 3 states:

The required language need not be prominent to meet the "fair opportunity" requirement. It need not appear on the front of the bill of lading and may appear in fine print. Further, a specific space for the shipper to declare a higher value is not required.

- BACK TO TOP -

Cargo Overboard: Stowing Containers On Deck under a Clean Bill of Lading. Konica Business Machines, Inc. v. Sea-Land Consumer, 1998 AMC 2705 (9th Cir. 1998), examined the issue of deviation in stowage in stowing containers on deck, were there is a general custom of stowing containers on deck though shipped under a clean bill of lading, where the goods are lost overboard and would not have been lost if the container had been stowed underdeck. The Ninth Circuit held that on specially-designed container ships, there is a well-established trade custom in the trade permitting stowage on deck notwithstanding they are carried under a clean bill of lading.

Intentional Damage to Cargo by Carrier. Vision Air Flight Service, Inc. v. M/V National Pride, ____ F.3d ____ (9th Cir. 1998), held that intentional damage to goods by the carrier could constitute "unreasonable deviation". It held that evidence of unloading a shipment of two trucks by a means which the carrier knew would cause damage (the stevedore used the same system to unload a second truck that had destroyed the first truck, with the same predictable results) could constitute unreasonable deviation with respect to carriage of the second truck.

Time Bars on Indemnity Causes of Action by Carrier against other Carriers. American Home Assurance, Inc. v. Internaves Shipping Corp., 958 F.Supp. 1154, 1998 AMC 2266 (S.D. Fl. 1997), held that the COGSA time bar does not apply to an indemnity action brought by the carrier against an ocean subcarrier. American Home Insurance discussed the three rules applied by various courts on the issue. Some courts hold that the COGSA one-year time bar never applies to an indemnity action, even when the indemnitor and indemnity have entered into a contract incorporating COGSA. See, e.g., Prudential Lines, Inc. v. General Tire Int'l Co., 440 F.Supp. 556, 1978 AMC 2337 (S.D. N.Y. 1977). Other courts enforce a contractual provision which incorporates COGSA. See, e.g., Hercules, Inc. v. Stevens Shipping Co., 698 F.2d 726, 1983 AMC 1786 (5th Cir. 1983), which held the time bar did not apply where there was no agreement subject to COGSA, and ITT Rayonier, Inc. v. Southeastern Maritime Co., 620 F.2d 512, 1981 AMC 854 (5th Cir. 1980). American Home, in dictum, adopted the rule that a COGSA limitation could apply to indemnity causes of action if the parties by contract incorporated COGSA (COGSA would not apply its own effect to an indemnity action).

- BACK TO TOP -

Akiyama Corporation of America v. M.V. Hanjin Marseilles, _____ F.3d ____ (9th Cir. 1999), applied the COGSA $500 per package limitation to a claim for damage to a printing press packed in four separate cases. All four cases were damaged while still aboard the ship during unloading by a contract stevedore. The total claim exceeded $1 million. The district court applied the COGSA limitation to each of the four cases (a total of $2000), and determined that the stevedoring company and terminal operator were entitled to the limitation under the Himalaya clause in the bill of lading. The Ninth Circuit affirmed, on the ground that the Himalaya clause in issue extended the protection to "every servant, agent and sub-contractor ... and the agents of each" of the carrier, and that such extended the benefits and protections of the bill of lading to terminal operators and stevedores engaged in unloading the cargo. The Ninth Circuit rejected the argument that there must be privity of contract between the shipper and the subcontractors claiming benefits.

- BACK TO TOP -

Defense of Third Party Act or Omission. OPA 90 provides only limited defenses to liability of a vessel owner or operator from which oil is discharged. 33 USC § 2702 allows defenses only where the discharge was cause solely by an act of God, act or war, negligence on the part of the United States Government, or an act or omission of a third party. The definition of "third party" is narrowly defined: where the claimed third party act or omission occurs in connection with any contractual relationship with the responsible party, the defense is not available. 33 USC § 2703(a)(3). United States of America v. J.F. Nelson Vessel, Ltd., 1 F.Supp. 3d 172, 1998 AMC 2249 (E.D. N.Y. 1998), held that a marina which was bailee of the vessel was not a "third party" because of the contractual nature of the bailment. Pilots have been held to have a contractual relationship with the vessel.

- BACK TO TOP -

Other Property. Transco Syndicate No. 1 v. Bollinger Shipyards, Inc., 1 F.Supp.2d 610 (E.D. La. 1998), looked to the "object of the parties' contract to determine what constituted the East River "product": it held that a vessel owner's contract to build a complete vessel precluded a tort claim even though the defective steering mechanism had been manufactured separately, and had caused damage to the steering gear, engine, pump and hydraulic system. Sea-Land Service, Inc. v. General Electric Co., 134 F.3d 149 3rd Cir. 1998), held that where Sea-Land overhauled an engine and installed eight G.E. connecting rods for the engine, one of which failed and damaged the engine, the entire engine was the "product" and dismissed the plaintiff's tort claims for damage to the engine.

- BACK TO TOP -

Princess Cruises, Inc. v. General Electric Co., 143 F.3d 828, 1998 AMC 2539 (4th Cir. 1998), addressed the issue whether the UCC to maritime contracts. Princess Cruises held that the UCC does apply to sales contracts, but not to services contracts, and that where a contract is "mixed", its predominant character controls. The "predominant character" is to be determined based on evidence including the wording of the contract, the nature of the supplier's business, and the intrinsic worth of materials provided in the contract.

- BACK TO TOP -

New legislation effective July 1, 1999, amends 46 USC § 12102(c) to require vessels applying for a fishery endorsement to have at least 75% of the interest in such entity, at each tier of ownership of such entity and in the aggregate, to be owned by U.S. citizens. The following types of control exercised by a person who is not a citizen of the United States shall be deemed to not comply with U.S. citizenship: (1) the right to direct the business of the entity; (2) the right to limit the actions of or replace the chief executive offer, a majority of the board of directors, any general partner, or any person serving in a management capacity of such entity; (3) the right to direct the transfer, operation or manning of any documented vessel with a fishery endorsement owned by such entity; and (4) the right to otherwise exercise authority or influence, directly or indirectly, over the management, sales, financing, or other operations of such entity, direct the transfer, operation or manning of any documented vessel with a fishery endorsement owned by such entity. The amendment will not apply to vessels which held a fishery endorsement on September 25, 1997, until October 1, 2001. Processing vessels and tender vessels which do not catch fish shall not be subject to the amendment until such time after October 1, 2001, "as the ownership of such vessel materially changes". The legislation requires an affidavit of citizenship setting forth all relevant facts regarding vessel ownership and control be filed with the Maritime Administration annually. Transfers of ownership and control will be "rigorously scrutinized" with particular attention given to leases, charters, mortgages, financing, and similar arrangements, and seafood sales agreements. Simplified requirements shall be established for vessels under 100 gross tons.

- BACK TO TOP -

Claims of states must be joined in a federal limitation proceeding, a state's immunities under the Ele-venth Amendment of the Constitution notwithstanding. Bouchard Transp. Co., Inc. Limitation Proceeds, 147 F.3d 1344, 1998 AMC 2409 (11th Cir. 1998), stated dictum that the Eleventh Amendment does not apply to a state's claims in a Supplementary Admiralty Rule F limitation proceeding, as such proceedings involve a bond or security for the value of the limitation fund and are sufficiently analogous to an in rem proceeding (but held that a state's claims for pollution damages under OPA 90 are not subject to a limitation of liability proceeding).

Seabulk Offshore, Limited v. Honora, ____ F.3d ____ (5th Cir. 1998), reviewed whether the filing of a limitation action requires enjoining direct action against the owner's insurers. It followed Magnolia Marine Transp. Co. v. LaPlace Towing Corp., 964 F.2d 1571 (5th Cir. 1992), which recognized the right of a plaintiff to proceed with a state court action is "contingent on protecting the absolute right of the shipowner to limit his or her liability", and that a direct action may deplete the shipowner's insurance coverage and frustrate its right to limit liability, but held that courts may fashion practical solutions to avoid judicial administrative conflicts. Seabulk stated that the district court could choose between two alternatives to staying the action against the insurer: (1) it could stay execution of any judgment against the insurers on the value of the limitation fund; or (2) could require that the claimants stipulate that the shipowner has a priority claim on the insurance proceeds.

- BACK TO TOP -

California State Lands Commission v. Deep Sea Research, ____ U.S. ____, 1998 AMC 1521 (1998), was applied in Sea-Services of the Keys, Inc. v. State of Florida, ___ F.3d ____ (11th Cir. 1998), on the issue whether the 11th Amendment's prohibition against jurisdiction of federal courts against property of a state. Sea-Services involved a salvage claim against a vessel towed to a port of safety by the claimant. The state discovered that the boat did not have a required hull identification number and seized it under a state forfeiture statute. The salvor initiated suit in rem for a salvage award and the federal district court issued a warrant for the boat's arrest. State officers refused to allow the U.S. marshal to serve the arrest warrant, and moved for dismissal of the suit on grounds of the Eleventh Amendment. The Florida forfeiture state provides that seizure by the state, alone, does not vest the state with legal possession of the boat: a forfeiture action in state court is required. As there had been no forfeiture action at the time of the attempt to execute the in rem arrest warrant, it was determined that the state did not have possession of the boat and the rule of Deep Sea Research allows the federal district court jurisdiction in the in rem action against the vessel.

Margate Shipping Co. v. M/V Ja Orgeron, 143 F.3d 976, 1998 AMC 2383 (5th Cir. 1998), involved the largest maritime salvage award in U.S. jurisprudence. The Fifth Circuit reduced an award of $6.4 million to $4.125 million, based on its determination that the district court erred in evaluating a NASA space shuttle fuel tank which was cargo on a barge which was salved. A 688-foot fully-laden tanker rescued a tug and barge in very rough waters near shoals. The tank was valued at its prototype product cost of $51,387,000, but replacement tanks could have been obtained at $19,014,000 each. The barge was valued at $2 million. The trial court awarded $12.5% of the value of the tug and the replacement value of the tanks, reviewing The Blackwall factors, which included an evaluation that the salving tanker itself incurred extremely high risk to itself and the lives of its crew in effecting the salvage, and considered the risk to the barge of environmental liability.

Evanow v. M/V Neptune, ____ F.3d ____ (9th Cir. 1998), involved a contract to aid a tug and its barge when the tug was disabled and grounded and encountering storm winds of over 90 knots, causing the barge to pound heavily against the tug. The Coast Guard became involved, in part because of its concern about the risk of pollution if either the tug or barge should break up or be holed. A contact was entered into an individual and two fishing boats to tow the barge into deeper waters, with agreement to pay the consultant $200 per hour, one of the fishing boats $800 per hour and the other fishing boat $750 per hour. There was no agreement as to time limits or any guarantee of success. Initial attempts to tow the barge away from the tug were unsuccessful. One of the fishing boats was dismissed. The other attempted to renegotiate a rate to $1000 per hour, and the tug owner counter-proposed $1500 per day, but there was no agreement for modification of the initial rate of $800 per hour. The tug owner requested that the fishing vessel remain providing mooring assistance to assist in steadying the barge for more than two days, until another tug took over and removed the tug from its strand. The individual salvage consultant and fishing vessels claimed pure and contract salvage. The tug owner counterclaimed for damage to the tug and barge caused by alleged negligent salvage. The trial court found for plaintiffs on the unmodified hourly contract salvage (offset by the amount the plaintiffs had received in settlement from cargo owners), and entered judgment against the tug interests. The Ninth Circuit affirmed the determination that the parties had entered into a salvage contract (as opposed to a towage agreement) and that the contract was not subsequently modified:

The character of the service rendered determines whether a contract is one for salvage. ... There is a marked and clear distinction between a towage and salvage service. When a tug is called or taken by a sound vessel as a mere means of saving time, or from considerations of convenience, the service is classified as towage; but if the vessel is disabled, and in need of assistance, it is a salvage service. ... The existence of a marine peril distinguishes a salvage contract from one of towage. Such a peril exists "when a vessel is exposed to any actual or apprehended danger which might result in her destruction." ...

The Ninth Circuit rejected defense argument that once the Coast Guard is involved in removal of a stranded vessel, the contract is for towage, not salvage. It avoided addressing the issue whether there is a presumption that salvage agreements are "no-cure-no-pay", on the ground that the two fishing vessels materially contributed to preventing damage to the barge. On the issue of how a settlement with a co-defendant should be apportioned to decrease an award against non-settling defendants in a salvage contract case, the Ninth Circuit rejected application of the McDermott v. AmClyde tort contribution rule to contract salvage: it held that the "universal non-admiralty rule is that contract damages are offset pro tanto by the amount of the settlement with a co-obligor" and this rule should be applied to contract towage.

Constructive in rem jurisdiction. A doctrine that strains traditional in rem principles arose in R.M.S. Titanic, inc. v. The Wrecked and Abandoned Vessel Believed to be the R.M.S. Titanic, 1998 AMC 2421 (E.D. Va. 1998). The Titanic litigation involved the issue whether persons other than the salvor who filed an in rem action against a sunken wreck on the bottom of high seas can be enjoined from interfering with the salvor's claimed property rights to the wreck. Though some artifacts were brought into the custody of the court by the salvor, the balance of the wreck remains on the sea bed and has not been arrested. This author doubts that a U.S. court has jurisdiction enjoin persons not parties to the action from photographing and viewing property not within the in rem jurisdiction of the court.

- BACK TO TOP -

Doctrine of Uberrimae Fidei. CIGNA Property & Cas. Ins. Co. v. Polaris Pictures Corp., ____ F.3d ____ (9th Cir. 1998), established that the doctrine of uberrimae fidei "exists under both California insurance law ... and federal admiralty law."

Number of Deductibles for Multiple Exposures of Asbestos to Multiple Claimants. The Prudential Lines bankruptcy case illustrates the problems courts have with determining the number of deductibles in multiple-claimants/multiple-exposure cases. A 1992 decision of the bankruptcy court held that only one deductible applied to each policy, irrespective that more than 500 separate claims were filed for asbestos exposure on the insured's ships: the term "occurrence" was ambiguous in the context of continuing torts that caused cumulative injury to multiple claimant in that it could include the condition which caused the multiple injuries. The district court remanded for a determination of the ambiguity considering extrinsic evidence of the historical pre-petition practice of the shipowner and the P & I club with respect to applying a separate deductible to the claim of each claimant. The bankruptcy court determined that the general presence of asbestos on the vessels was the "occurrence", triggering a single deductible for each vessel for each policy year. The district court reversed, determining that based on the historical practices of the insurer and the shipowner, a separate deducible applies to each asbestos claim for each of the policies implicated by each claim C a deductible applies to each claimant per each policy, rather than to each vessel: e.g., if a seaman claimant sailed on three Prudential Lines vessels during three different policy years, there would be three deductibles. The Second Circuit has affirmed the district court, rejecting the argument that the presence of asbestos on each ship constituted a single "occurrence" for each ship (the 2nd Circuit held that the presence of asbestos aboard ship was intended and therefore was not an "occurrence"), but also rejecting the insurer's cross appeal position that holding that each exposure to each claimant during each insurance policy period triggered a separate deductible. The rule affirmed by the Court of Appeals is that the ambiguity of what constitutes an "occurrence" can be resolved by looking to the longstanding acquiescence of shipowners and P & I clubs of applying a deductible to the claim of each claimant, based on the finding that liability of the shipowner attached to the "first exposure" to asbestos fiber laden air with respect to each seaman:

In any event, liability attaches following the first exposure; each Claimant's first exposure in the policy period is the final unfortunate event which causes injury, gives rise to the policyholder's potential liability, and triggers the policy; the Claimant's later exposures are a continuation of the same occurrence.

We hold that each claim arose from a separate occurrence, and a single deductible is applicable to each claim.

Pay-to-be-paid Requirements. The requisites for pay-to-be paid in the context of P & I club rules were examined again in In re Prudential Lines Inc., ____ F.3d ____ (2nd Cir. 1998). The bankruptcy court approved an plan where the shipowner's Trustee transferred funds to each claimant in satisfaction of his claim, and that claimant immediately transferred these funds back to the Trustee in the form of a non-recourse loans so the funds could be used again to pay the next claimant, until all claimants were paid. "Seed money" of $300,000 was thus leveraged to pay $13,000,000 of claims, and the bankruptcy court judge ordered the P & I club at risk to pay the $13,000,000. This "recycling agreement" was reversed by the district court, affirmed by the 2nd Circuit, as a "sham" that resulted in no monetary loss to the insured. The parties stipulated that New York law applied. The 2nd Circuit applied the New York test of "whether the assured has actually in good faith sustained the loss for which reimbursement is sought", and determined that a non-recourse debt which, financially, amounts to "nothing" is not a "loss", adopting the rationale of Conoco, Inc. v. Republic Insurance Co., 819 F.2d 120, 122, 1987 AMC 2975 (5th Cir. 1987), that payment of a claim with a non-recourse note does not amount to payment under an indemnity policy.

- BACK TO TOP -