Opinion
Civil Action No. 99-0813, Section "K"(1)
July 18, 2001
ORDER AND REASONS
This matter came for trial on June 6, 2001 and continued through June 8, 2001. The focus of the trial concerned whether K.C. Boat Co., Inc. ("K.C. Boat"), which had been hired by Capital Marine Supply. Inc. ("Capital Marine"), was partly responsible for a barge breakaway that had occurred at the Capital Marine Fleet and resulted in a number of allisions down-river. For reasons orally assigned on June 14, 2001, the Court found that Capital Marine was solely at fault for the barge breakaway.
K.C. Boat claims that it is entitled to recover the defense costs it expended in defending Capital Marine's claims against it. No claim was ever made by any of parties who had been damaged by the breakaway; only Capital Marine sought to hold K.C. Boat liable. In order to determine whether such a claim has any merit, the Court must first examine the relevant charter party language and that of the relevant insurance policy.
Relevant Contract Language
Paragraph 19 of the Fully Found Charter and Fleet Services Agreement between K.C. Boat Co., Inc. and Capital Marine Supply, Inc. ("Charter") provides:
19. Hold Harmless. The parties hereto shall indemnify and hold harmless the others against any liability, loss, damages, costs, liens or claims of whatever kind or nature arising solely as a result of that party's negligence or fault;. . . .
Made part of the Charter is Schedule LI which requires K.C. Boat to carry certain insurance at its expense for the term of the Agreement. Protection and Indemnity insurance was required with endorsements to include Capital Marine as an Additional Assured with "a full waiver of subrogation" (Schedule II, ¶ 6(a) of Charter) and the coverage afforded was to be primary to any other insurance carried by Capital. (Schedule II, ¶ 6(d) of Charter).
Relevant Insurance Policy Language
K.C. Boat obtained the requisite Ocean Marine Policy through Underwriters Insurance Company including the PI coverage required under the Charter. The particular language of the policy provides in relevant part:
The Assurer hereby undertakes to make good to the Assured . . ., such loss and/or damage and/or expense as the Assured shall as owner of the vessel named herein have become liable to pay. . . .
(K.C. Boat's Exhibit "A", Insurance Policy at 15). The policy at page 10 provides Conditions of the Insurance which states in relevant part that the policy:
is extended to insure contractual liability of the Insured arising out of Hold harmless and/or indemnity agreements contained in such contracts as have been . . . entered into by the Insured for furnishing of insured vessels' services and naming such parties, . . . as additional assured and waiving subrogation rights only in respect of the insured vessel(s) employed by or actually working for named assureds . . .
(K.C. Boat's Exhibit "A", Insurance policy at 10).
In the same "Condition" section of the policy, it states:
It is understood and agreed that, while the within insured vessel(s) is/are employed by or actually working for the Company/Corporation for whom the Certificate of Insurance is issued, the same company/corporation is named as an additional assured and all rights of subrogation are hereby waived but only if the vessel(s) insured hereunder is/are employed by or actually working for the following company/corporation at the time of said loss, if any. . . .
(K.C. Boat's Exhibit "A", Insurance Policy at 11). The policy thus provided coverage to K.C. Boat for the losses incurred, and the insurer waived subrogation as to all claims against its named additional assured, Capital Marine.
Analysis
K.C. Boat has not paid any attorney's fees or costs. (Capital Marine's Exhibit C, Dep. of Terry Eymard, at 47). While K.C. Boat has brought this claim, it is in essence seeking to recover money paid by the insurer.
As noted by Judge McNamara in West of England v. Shell Offshore, Inc., 1994 WL 500952 (E.D.La. Sept. 8, 1994):
The Fifth Circuit has adopted the fundamental principle of insurance law which states that an insurer may not sue its own insured to recover under the insurance policy, nor may an insurer, by way of subrogation, recover from an insured or an additional assured any part of its payment for a risk cover by the policy. Peavey Co. v. M/V ANPA, 971 F.2d 1168, 1177 (5th Cir. 1992); Dow Chemical Co. v. M/V Roberta Tabor, 815 F.2d 1037, 1043 (5th Cir. 1987); Marathon Oil Co. v. Mis-Continent Underwriters, 786 F.2d 1301, 1394 (5th 1986). Recovery from an additional assured is barred even if the insurance would not have protected the additional assured with respect to liability arising out of the activity in which he was engaged
. . . but would have insured against "the type of risk" that occurred. . . . Dow Chemical, 815 F.2d at 1045.Id. at *2.
It is argued that because Capital Marine did not require K.C. Boat to have the "as owner" language deleted in the policy, Capital is only provided coverage for any liability it might have "as owner of the TED EYMARD, not for its own negligence or fault. Based on that premise, K.C. Boat contends that Capital Marine is not protected as to the costs incurred by K.C. Boats in the defense of the claim brought against it by Capital Marine. However, here, the "type of risk" — alleged negligence in the performance of its duties under the Charter agreement — was covered by the policy. Nonetheless, Capital Marine is an additional assured and as such, because the type of risk was covered, neither K.C. Boat nor its insurer can pursue recovery of their defense costs incurred because of the claim brought against it by Capital Marine. See Lanasse v. Travelers Ins. Co., 450 F.2d 580, 585 (5th Cir. 1971).
K.C. Boat argues that if it is precluded from recovering its costs, the indemnity agreement would eviscerated. This argument is without merit. As stated in Computalog U.S.A., Inc. v. Mallard Bay Drilling, Inc., 21 F. Supp.2d 620 (E.D.La. 1998):
A maritime contract must be interpreted according to the general rules of contract, construction and interpretation. See Marine Overseas Services, Inc. v. Crossocean Shipping, Co. Inc., 791 F.2d 1227 (5th Cir. 1986); Ogea v. Loffland Brothers Co., 622 F.2d 186 (5th Cir. 1980) (hereinafter "Ogea"). Each provision of a contract must be read in light of others so as to give each the meaning reflected by the contract as a whole. Southwestern Engineering Co. v. Cajun Elec. Power Co-op., Inc., 915 F.2d 972 (5th Cir. 1990). Finally, each provision of a contract must be given a meaning which renders it, along with all other provisions, effective rather than meaningless. See Lewis v. Hamilton, 652 So.2d 1327 (La. 1995).Id. at 624.
In Ogea v. Loffland Bros. Co., 622 F.2d 186 (5th Cir. 1980), the Fifth Circuit held that the insurance provisions and the indemnity provisions of a contract must be viewed as a whole. The court found that the limits of the insurance must be exhausted before the indemnity provisions would come into effect. In that case, there was also a waiver of subrogation provision. Ogea, 622 F.2d at 188.
In the case at bar the Charter and the policy language are very similar to those contracts involved in Tullier v. Halliburton Geophysical Services, Inc., 81 F.3d 552 (5th Cir. 1996) and Ogea. The policy limits have not been exhausted here and therefore the reasoning in Tullier andOgea apply. Moreover, the indemnity clause is not eviscerated by this finding. Any risk not covered by the policy would activate the contractual indemnity provision. If Capital Marine through its negligence caused pollution, clearly K.C. Boat would have a right of indemnity. This analysis would apply to any other damage caused by Capital Marine's negligence not within the scope of the insurance policy. Viewing the Charter and insurance policy provisions as a whole, as is required, it is reasonable to find that the intent of the parties to indemnify each other for claims arising solely out of one party's negligence were for all claims not subject to the insurance policies noted in Schedule II. Accordingly,
IT IS ORDERED that K.C. Boat Co Inc. claim for recovery of defense costs is DENIED.