481 F. Supp. 892

SHAVER TRANSPORTATION COMPANY and Weyerhaeuser Company, Plaintiffs, v. The TRAVELERS INDEMNITY COMPANY, Defendant.

No. 78-556.

United States District Court, D. Oregon.

Dec. 27, 1979.

*893Alex L. Parks, of White, Sutherland, Parks & Allen, Portland, Or., Robert A. Dowdy, Law Dept., Weyerhaeuser Co., Tacoma, Wash., for plaintiffs.

Kenneth E. Roberts, Sr., of Souther, Spaulding, Kinsey, Williamson & Schwabe, Portland, Or., for defendant.

SKOPIL, Circuit Judge, Sitting by Designation:

This is an action to recover on a marine cargo policy issued by the defendant, The Travelers Indemnity Company (Travelers). The subject matter of marine insurance claims is “maritime” and within the admiralty jurisdiction of the federal courts. 28 U.S.C. § 1333; Jeffcott v. Aetna Insurance Company, 129 F.2d 582 (2nd Cir. 1942), cert. denied 317 U.S. 663, 63 S.Ct. 64, 87 L.Ed. 533 (1942).

FACTS

Shaver Transportation Company (Shaver), a barge company, contracted with Weyerhaeuser Company (Weyerhaeuser) to transport caustic soda from Weyerhaeuser plants to a buyer of the soda, GATX. Following the terms of the agreement, Shaver arranged for marine cargo insurance with Travelers. Several different “coverages” were discussed. Shaver decided on Free from Particular Average and “standard perils” provisions supplemented with “specially to cover” clauses.

Shaver loaded the first shipment of caustic soda on one of its barges and transported it to the consignee, GATX. GATX refused delivery. The soda had been contaminated with tallow. It was unfit for GATX’s purposes. The parties agree that contamination occurred as Shaver was loading the caustic soda aboard the barge. The barge had previously carried a load of tallow, and Shaver had not thoroughly cleaned the barge input lines.

The barge was returned to Shaver’s dock. The cargo was heated to prevent the caustic soda from solidifying. A report of the contaminated cargo was made to the defendant through its insurance brokers, Johnson and Higgins (J & H). Shortly thereafter J & H notified Shaver that the contamination did not represent a recoverable loss under the defendant’s marine open cargo policy.

Shaver continued to store the soda on board the barge. Shaver investigated possible on-shore storage facilities and finally contracted with a chemical salvage company for removal of the liquid. Because of *894the caustic nature of the cargo, Shaver incurred expenses in storage, including the cost of heating the soda and repair to corroded boilers and pipes. Weyerhaeuser lost the value of the shipment, offset partially by the salvage value. Shaver and Weyerhaeuser notified Travelers that they claimed under the marine cargo insurance policy and tendered abandonment of the cargo to Travelers. Travelers refused the tender and denied liability under the policy.

ISSUES

Although the plaintiffs request recovery under several theories, there is only one major issue in the case:

Are the losses incurred by the plaintiffs the consequences of an insured event under the marine cargo insurance policy?

If the losses are not insured against, no recovery is possible. If coverage is afforded, I must determine which expenses are covered under the policy. Plaintiffs have meticulously examined the policy and argue for recovery under several theories.

THEORIES OF RECOVERY

I. Recovery under Perils of the Sea clause and Free from Particular Average clause

The Perils clause,1 almost identical to ancient perils provisions dating back several hundred years, defines the risks protected by the policy. U. S. National Bank of Galveston v. Maryland National Insurance Company, 218 F.Supp. 247, 248 — 49 (S.D.Tex.1963). In addition to a long list of “perils of the sea”, the clause concludes with “and all other perils, losses, and misfortunes, that have or shall, come to the hurt, detriment, or damage to the said goods and merchandise”. Plaintiff argues that the “forced” disposition of the caustic soda was like jettison (an enumerated peril) and is covered by the concluding language of the clause. That language has been interpreted to include only perils that are similar to the enumerated perils. Feinberg v. Insurance Company of North America, 260 F.2d 523, 527 (1st Cir. 1958); Commercial Trading Company v. Hartford Fire Insurance Company, 466 F.2d 1239, 1245 (5th Cir. 1972).

Whether or not I conclude the forced disposition was a type of jettison, plaintiffs are unable to show an insurable loss due to jettison. The loss — contamination of the cargo — occurred at the time of loading. The disposition of the cargo caused no loss to plaintiffs but rather an offset against previous losses. Plaintiffs cannot recover under the Perils clause of the policy.

The term “jettison” also appears in the Free from Particular Average clause.2 If jettison did occur, this clause affords coverage regardless of the amount of cargo damage. However, I find that a jettison did not occur in this instance. Jettison is the act of throwing overboard from a vessel a part of the cargo, in case of extreme danger, to lighten the ship.3 The orderly unloading and sale of the cargo to a chemical salvage company is not “jettison”. Plaintiff cannot recover under the Free from Particular Average clause.

II. Recovery under Warehouse-to-Warehouse clause; Marine Extension clause; Shore Coverage clause

These clauses augment the Perils clause by defining the scope of the coverage *895intended. However, with the exception of the shore coverage, these clauses do not define the nature of the risks covered by the policy but merely define where physically the coverage extends.

To recover under either the Warehouse-to-Warehouse4 or the Marine Extension clause5 the plaintiffs must show that an insured peril existed and the damage was proximately caused by that peril. Lanasa Fruit Steamship & Importing Co. v. Universal Insurance Co., 302 U.S. 556, 58 S.Ct. 371, 82 L.Ed. 422 (1937); Northwestern Mutual Life Insurance Company v. Linard, 498 F.2d 556, 561 (2nd Cir. 1974). Although the parties disagree, the weight of authority indicates plaintiffs bear the burden of proving coverage. S. Felicione & Sons Fish Company v. Citizens Casualty Company of New York, 430 F.2d 136, 138 (5th Cir. 1970), cert. denied 401 U.S. 939, 91 S. Ct. 936, 28 L.Ed.2d 219 (1971); Continental Food Products v. Insurance Company of North America, 544 F.2d 834, 836 (5th Cir. 1977). Plaintiffs have not met that burden.

The shore coverage clause6 provides coverage for enumerated risks occurring on shore. Plaintiffs argue that contamination while loading is a shore accident. However, since the contamination occurred within the barge’s intake lines, the incident arose “on board”. Therefore shore coverage does not apply. Even if it were to apply, contamination of cargo is not within the enumerated risks covered by the shore coverage clause.

III. Recovery of Extraordinary Expenses under Landing and Warehousing clause 7 ; Extra Expenses clause 8 ; Sue and Labor clause 9

Under these provisions the insured is entitled to recover expenses associated with *896losses incurred as a result of an insured peril. American Home Assurance v. J. F. Shea, 445 F.Supp. 365 (D.D.C.1978); Continental Food Products v. Insurance Company of N.A., supra; Reliance Insurance Company v. The Escapade, 280 F.2d 482, 488 (5th Cir. 1960). For reasons outlined in Paragraph I, I find that the losses suffered by plaintiffs were not caused by a peril covered by the policy. Recovery under these provisions is therefore precluded.

IV. Recovery under Inchmaree clause

The purpose of the Inchmaree clause 10 is to expand the coverage of the policy beyond the perils provision. Saskatchewan Government Insurance Office v. Spot Pack, Inc., 242 F.2d 385, 391 (5th Cir. 1957); Allen N. Spooner & Son v. Connecticut Fire Insurance Company, 314 F.2d 753, 757 (2nd Cir. 1963), cert. denied 375 U.S. 819, 84 S.Ct. 56, 11 L.Ed.2d 54 (1963). Federal law, 46 U.S.C. § 192 (Harter Act), and 46 U.S.C. § 1304(2)(a) (Carriage of Goods by Sea Act), allows a vessel owner to become exempt from liability for fault or error in navigation or management of the ship. In contrast, the shipowner must retain liability for negligence in the care and custody of the cargo. Alf Larsen v. Insurance Company of North America, 362 F.2d 261, 262 (9th Cir. 1966). The Inchmaree clause is intended to provide coverage to a cargo owner when a loss is due to error in navigation or management of the vessel since the carrier is exempt from liability. Larsen, supra at 262. Plaintiffs argue the contamination was the result of an error in management and therefore covered under the Inchmaree clause. Defendant naturally urges the court to find the loss caused by fault in the care and custody of the cargo.

The United States Supreme Court has addressed the distinction between error in management and error in care of cargo but has not articulated a clear test. Oceanic Steam Navigation v. Aiken, 196 U.S. 589, 25 S.Ct. 317, 49 L.Ed. 610 (1905). The Ninth Circuit, noting that no precise definitions exist, advocates a case-by-case determination using the following test:

“If the act in question has the primary purpose of affecting the ship, it is ‘in navigation or in management’; but if the primary purpose is to affect the cargo, it is not ‘in navigation or in management’.” Grace Line, Inc. v. Todd Shipyards Corporation, 500 F.2d 361, 374 (9th Cir. 1974).

Using this test, I find that the contamination of the cargo in this case was caused by fault in the care, custody, and control of the cargo. See Grace Line, supra at 374, fn. 11; Knott v. Botany Worsted Mills, 179 U.S. 69, 21 S.Ct. 30, 45 L.Ed. 90 (1900); John Penny & Sons v. M. V. Swivel, 266 F.Supp. 302 (D.Mass.1967). The Inchmaree clause will not provide coverage for plaintiffs’ losses under the facts of this case.

V. Recovery under Negligence clause

The Negligence clause11 provides coverage against losses due to enumerated *897perils caused by the unseaworthiness of the vessel. To recover under this clause plaintiffs must show that the barge was unseaworthy. This unseaworthiness must then cause a loss through one of the enumerated perils: “sinking, stranding, fire, explosion, contact with seawater, or by any other cause of the nature of any of the risks assumed in the policy”.

“Seaworthiness” depends on such factors as the type of vessel, character of the voyage, reasonable weather, navigational conditions, and type of cargo. The Isis, 290 U.S. 333, 346-49, 54 S.Ct. 162, 78 L.Ed. 348 (1933); PPG Industries v. Ashland Oil Company-Thomas Petroleum Transit Division, 592 F.2d 138, 146 (3rd Cir. 1978). A vessel is unseaworthy if she is not reasonably fit to carry cargo she has undertaken to transport. The Silvia, 171 U.S. 462, 464 — . 65, 19 S.Ct. 7, 43 L.Ed. 241 (1898). I find Shaver’s barge unseaworthy as a result of improper loading of cargo. See Alaska Native Industries Co-op Ass’n v. United States, 206 F.Supp. 767, 772 (W.D.Wash. 1962).

Plaintiffs must demonstrate that the unseaworthiness of the barge caused a loss to cargo by one or more of the enumerated perils. Since contamination is not an enumerated peril, plaintiff urges coverage under the doctrine of ejusdem generis12 by suggesting the barge was in imminent danger of sinking. Although there is evidence that the caustic soda would have eventually corroded through the barge and caused it to sink, the process would have taken three to five years. This possibility is too far removed to find coverage under a provision providing for loss due to sinking. No recovery is possible under the Negligence clause of this policy.

VI. Recovery under General Average clauses 13

General average is a venerable doctrine of maritime law that dates back 2,800 years.14 The doctrine provides that when a portion of ship or cargo is sacrificed to save the rest from a real and substantial peril, each owner of property saved contributes ratably to make up the loss of those whose property has been sacrificed. Alamo Chemical Transportation Company v. M/V Overseas Valdes, 469 F.Supp. 203, 215 (E.D.La. 1979). General average contribution exists independently of marine insurance and is owed even in the absence of cargo insurance. However, cargo owners typically insure themselves against possible obligation arising from a general average situation. This policy contains such protection.

The United States Supreme Court in Barnard v. Adams, 51 U.S. (10 How.) 270, 13 L.Ed. 417 (1850), described three events that created a general average situation: (1) A common danger to which ship, cargo, and crew were all exposed and which is imminent and apparently inevitable; (2) A voluntary sacrifice of a part for the benefit *898of the whole; and (3) Successful avoidance of the peril. Modern law has eased the requirement of imminency and requires only that a peril be real and substantial. Navigazione Generate Italiana v. Spencer Kellog & Sons, 92 F.2d 41, 43 (2nd Cir. 1937), cert. denied 302 U.S. 751, 58 S.Ct. 271, 82 L.Ed. 580 (1937).

Two classes of general average exist: those which arise from sacrifices of part of ship or cargo made to save the whole adventure, and those which arise out of extraordinary expenses incurred for the joint benefit of ship and cargo. McAndrews v. Thatcher, 70 U.S. (3 Wall) 347, 18 L.Ed. 155 (1865). Expenditures made by the carrier to avert a peril must be made in good faith. Navigazione, supra at 43.

To require a general average contribution, there must first be a general average situation. Navigazione, supra at 43. Plaintiffs assert that the imminent sinking of the barge is a general average situation that requires contribution from the cargo owners. Defendant contends that no real peril existed and any alleged loss occurred at the time of contamination.

Did a general average situation exist? “Mere incidents of the voyage” not giving rise to extraordinary common danger to vessel or cargo do not require general average sacrifices. United States v. Wessel Duval & Company, 123 F.Supp. 318, 329 (S.D.N.Y.1954). To create a general average situation there must be “fair reason to regard a vessel in peril”, and the peril must be “real and substantial”. Navigazione, supra at 43. Although there was evidence of corrosion due to the nature of the cargo that would have eventually caused the barge to sink, no real and substantial peril existed. Compare The Star of Hope, 76 U.S. (9 Wall) 203, 19 L.Ed. 638 (1869); Orient Mid-East Lines, Inc. v. A Shipment of Rice, 496 F.2d 1032 (5th Cir. 1974).

Plaintiffs have incurred extraordinary expenses as a result of the contamination of the cargo. Nevertheless, I find that under the circumstances of this case no general average situation existed.15 Sacrifices where there is no peril present no claim for contribution. The Star of Hope, supra.

Even assuming that a peril existed, defendant claims that contribution cannot be requested when the vessel owner was at fault in creating the situation. The Irrawaddy, 171 U.S. 187, 186 S.Ct. 831, 43 L.Ed. 130 (1898). Vessel owners have long placed in bills of lading a provision incorporating the protections of the Harter Act, 46 U.S.C. §§ 190-196, and Carriage of Goods by Sea Act, 46 U.S.C. §§ 1300-1315. This provision, known as the Jason clause16 entitles shipowners to contribution notwithstanding negligence in creating the general average situation. However, the shipowner must comply with 46 U.S.C. § 1303(l)(a) requiring due diligence to make the vessel seaworthy. Bubble Up International Ltd. v. Transpacific Carriers Corporation, 458 F.Supp. 1100, 1105 (S.D.N.Y.1978); Complaint of Flota Merchante Grancolombiana, 440 F.Supp. 704, 725-26 (S.D.N.Y.1977).

The burden of proving “due diligence” to make the vessel seaworthy falls on the vessel owner. Orient Mid-East Lines, supra at 1038; Todd Shipyards Corporation v. United States, 391 F.Supp. 588 (S.D.N.Y.1975). I find that Shaver did not meet this burden. Shaver failed to properly clean or inspect the barge’s input lines. Thus if I assume that a peril existed, contribution from the cargo owner (in this case, insurance proceeds) cannot be requested. Shaver failed to use due diligence to make the barge seaworthy.

CONCLUSION

Plaintiffs suggest a number of theories of recovery under the marine cargo insurance *899policy. None is suited to this case. I am aided in my construction of this policy by one additional fact. Shaver rejected insurance coverage costing more but expressly covering the risks of contamination of cargo. I conclude that the plaintiffs did not believe contamination was covered under the policy. Plaintiffs’ present attempt to include this type of loss within the coverage of the policy is an afterthought.

Judgment shall be entered for the defendant.

This opinion shall constitute findings of fact and conclusions of law pursuant to Fed.R.Civ.P. 52(a).

Shaver Transportation Co. v. Travelers Indemnity Co.
481 F. Supp. 892

Case Details

Name
Shaver Transportation Co. v. Travelers Indemnity Co.
Decision Date
Dec 27, 1979
Citations

481 F. Supp. 892

Jurisdiction
United States

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