Opinion
Civil Action No. 00-1504 Section: I/1
August 6, 2002
John A. Bolles, John A. Scialdone, Terriberry, Carroll Yancey, Michael A. Rosenblatt, Fowler, Rodriguez, Kingsmill, Flint, Gray Chalos, Francis J. Barry, Jr., Allen F. Campbell, William K. Terrill, II, Joseph E. Lee, III, Deutsch, Kerrigan Stiles, Michael A. Rosenblatt, Joseph Patrick Tynan, Arthur Gordon Grant, Jr., Philip S. Brooks, Jr., Montgomery, Barnett, Brown, Read, Hammond Mintz, Michael A. Rosenblatt, New Orleans, LA, For Plaintiffs.
John J. Broders, William Joseph Joyce, S. Michele Ray, Jones, Walker, Waechter, Poitevent, Carrere Denegre, Kathleen K. Charvet, Michael M. Noonan, Colvin Gamble Norwood, Jr., McGlinchey Stafford, PLLC, Sarah S.W. Mahoney, Krebs, Farley Pelleteri, LLC, Richard A. Fraser, III, Norman Charles Sullivan, Jr., Rachel Azzarello Maestri, Gelpi Sullivan Carroll, New Orleans, LA, For Defendants,
FINDINGS OF FACT AND CONCLUSIONS OF LAW
This is a civil action for damages filed by a vessel owner and its insurers arising from a fire aboard a tugboat and its consequent sinking. Trial was before the Court sitting without a jury. Upon consideration of the evidence adduced at trial, including the testimony of the witnesses and the admitted exhibits, the briefs and arguments of counsel, and the law, the Court makes the following findings of fact and conclusions of law pursuant to Rule 52(a) of the Federal Rules of Civil Procedure.
I.
The M/V KAY ECKSTEIN (the "KAY") was a triple screw, steel hulled push boat, 148 feet in length and 45 feet in breadth. It was originally constructed in 1973. In 1992, It was repowered by Marquette Transportation Company ("Marquette") with three new Caterpillar 3606 engines capable of 7,300 horsepower. As described below, in 1999, the KAY'S three engines were overhauled and it was extensively renovated.
On May 23, 1999, the KAY sustained a catastrophic fire in her engine room. The fire erupted and spread so rapidly that approximately 20 to 25 minutes elapsed from the time the chief engineer first observed the fire to the time he decided to leave the vessel. All crew abandoned the ship. The efforts of the crew and the St. Francisville, Louisiana, fire department to extinguish the fire were unsuccessful and between 6:00 p.m. and 6:30 p.m. the vessel sank near Mile 268 in the Mississippi River. The KAY was declared a constructive total loss as a result of the fire and its sinking.
Plaintiffs, Marquette, Bluegrass Marine, Inc., and Iowa Fleeting Service, Inc., were the owners, owners pro hac vice, and operators of the KAY. Plaintiff, Zurich American Insurance Company, was the hull insurer of the KAY and paid the proceeds of the hull policy to its insured. Plaintiff, Water Quality Insurance Syndicate, provided insurance coverage to the KAY's owners and operators for environmental clean-up costs and paid insurance proceeds for those expenses.
Plaintiffs have sued Quality Shipyards, Inc. ("Quality"), and Louisiana Machinery Company, Inc. ("Louisiana Machinery"). Quality owns and operates a shipyard in Houma, Louisiana. It entered into a repair agreement with Marquette to perform certain work on the KAY, principally the installation of kort nozzles on the propellers. Louisiana Machinery, a Caterpillar dealership located in Morgan City, Louisiana, entered into a contract with Marquette to rebuild the KAY's three main Caterpillar 3606 diesel engines.
A September 24, 1998, letter appended to the repair agreement lists the work Marquette contracted with Quality to perform. The renovations requested by Marquette included drydocking the vessel, designing and fabricating three kort nozzles and I struts around the propellers, removing, modifying, and reinstalling the propellers, rudders, and shaft lines, painting necessary parts, hiring a marine architect, and testing and delivering the vessel. The contract price for the Quality work was $870,000.
Exhibit 2A.
Exhibit 3D describes the modified overhaul on the KAY's three Caterpillar engines including the center main engine, the starboard main engine, and the port main engine. The engine overhaul included installing new fuel and oil filters, resealing and rebushing the oil pump, and several other items. The overhaul did not include replacing the fuel discharge line check valve and fittings unless they were damaged or overly worn.
On the day of the fire, May 23, 1999, the KAY was pushing a flotilla of 28 barges, 10 of which were loaded and 18 of which were empty, up the Mississippi River. During the morning, the vessel had taken on fuel in Baton Rouge, Louisiana. James Carnes, the chief engineer aboard the KAY, was on duty early in the day, but left at 11:30 a.m., when he was relieved by Mark Demel, the assistant engineer. Mr. Carnes got a cup of coffee from the galley and returned to the engine room at 5:30 p.m. although his shift was to begin at 6:00 p.m. He chatted with Mr. Demel in the engine control room. Mr. Demel had just added fuel to the generator day tank. Eventually Mr. Demel left the engine room and walked toward his cabin. Mr. Carnes went to the galley to get another cup of coffee. About five to ten minutes later, while he was still in the galley, a deckhand told Mr. Carnes that there was a fire in the engine room. Mr. Carnes looked toward the engine room. Through the engine room control window he observed flames coming up over the top of the center main engine through the bulkhead, or outside wall, and in front of the center main engine.
Mr. Carnes entered the engine room and he observed fire coming up the bulkhead in front of the center main engine. He did not see flames emanating from the starboard engine or on the starboard side of the engine room. Edward Holeman, relief mate on the KAY, testified by deposition that he was in the galley with Mr. Carnes and he saw fire in front of the center main engine.
Mr. Carnes, Mr. Holeman, and other crew members attempted to fight the fire. Ten to fifteen minutes from the time Mr. Carnes first saw flames, the fire had spread across the engine room.
At approximately 6:15 p.m., Dennis Wadley, the captain of the KAY, was in the wheelhouse when he was told over the intercom that there was a fire in the engine room. He chose not to shut the engines down because he was trying to navigate the vessel and its tow to the east bank of the river where the current was not as swift. About five to ten minutes after he was notified of the fire, the vessel lost engine propulsion. The three engines shut down one at a time. The last engine to shut down was the center main engine.
At some point, Captain Wadley noticed that the second deck was on fire. Having lost power, the tow and the vessel were drifting down the river. There was an explosion in the engine room and two crew members ended up in the river. The other crew members were rescued from the stern by a pontoon boat. No crew members were injured, but the fire swiftly caused the vessel to sink. The vessel logs went down with the ship.
Plaintiffs allege that the source of the fuel which caused the fire was a leak in the fitting above the center main engine check valve which was located on the discharge line between the fuel transfer pump and the fuel filters. Their theory is that at some time during or following the engine overhaul by Louisiana Machinery and the work performed by Quality, the 37 degree flared fittings on the top and bottom of the center main engine check valve were placed back on the vessel having not been properly tightened. Plaintiffs allege that shortly before the fire, the improperly tightened fittings loosened to such a degree that fuel began to spray onto the diesel generator exhaust lagging. The heat from the exhaust then allegedly ignited the fuel.
In a report submitted prior to trial, Dr. John Atherton, one of plaintiffs' experts, described "two loose couplings" on the check valve on the outlet side of the primary fuel pump and he stated that, "the loose couplings would provide a source of fuel in the correct location and which could travel a significant distance to encounter an ignition source." Exhibit 54-A, p. 23-24. However, at trial, plaintiffs appeared to take the position that the source of the fuel for the fire was the loose fitting above the check valve.
The KAY arrived at the Quality shipyard in January, 1999. Its three Caterpillar 3606 engines were removed by Louisiana Machinery personnel and taken to the Louisiana Machinery facility. Several different Louisiana Machinery mechanics worked on the KAY's engines. Whether employees of either defendant worked on the center main engine fuel discharge line and whether the check valve fittings should have been or were checked and tightened with a wrench is disputed. A number of witnesses testified with respect to these issues.
Eric Dupuis, an employee of Louisiana Machinery since 1988, has studied diesel mechanics and attended basic and advanced electronics and gas classes on 3500 and 3600 series Caterpillar engines. He described the work done on the KAY'S engines. As would normally be done while the engine was aboard the vessel, only parts that needed to be changed would be replaced.
Mr. Dupuis testified that his work on the center main engine included changing fuel filters, oil filters, mounting the oil pump, and reinstalling the fuel transfer pump. Mr. Dupuis had no independent recollection of working on the discharge line of the center main engine, but he did testify that he normally would have checked the fittings on the discharge line with a wrench. According to Mr. Dupuis, that included the fittings around the check valve. Mr. Dupuis testified that after installing the fuel transfer line, he would have used a crescent wrench to check the tightness of the fittings.
George Casellas, an engineer who testified as an expert witness, took notes while interviewing Louisiana Machinery employees about the work that was done on the KAY's engines. These notes include the notation, "FUEL LINES replaced. Line from f. transfer pump to filters replaced. Old line exhibited wear." Whether that notation concerned the fuel line on the center main engine or the port main engine is disputed.
After Mr. Dupuis reinstalled the fuel pump and the center main engine was placed in the KAY, the fuel transfer line had to be disconnected in order to insert a drill press and drill the soft engine mountings, "Cat paws", for the new engine. There is no direct evidence regarding who reinstalled the fuel transfer line after the engine mountings were drilled, i.e., there is no notation on any invoice or written record indicating that the work was done and no witness testified that he did the reinstallation or saw another person do the reinstallation.
"Cat paws", a soft engine mounting unique to Caterpillar engines, absorbed a significant amount of vibration from the engine and reduced the amount of vibration sustained by the hull of the vessel.
There is disagreement regarding the date that the vessel left the Quality shipyard for sea trials. Records indicate that the KAY left the shipyard for sea trials either on April 12 or 15, 1999. The testimony of Charles Ray Gaudet, a Louisiana Machinery mechanic, is that the engines were started and cranked on April 14, 1999, for dock trials and that the vessel left the dock on April 15, 1999. Mr. Gaudet testified that the KAY left the Quality facility in Houma on April 15, 1999, and that it arrived at the Bollinger Shipyard facility in Harvey, Louisiana at 1:00 a.m. or 2:00 a.m. on April 16, 1999. Mr. King, Marquette's port engineer, was aboard the ship for sea trials and he did not observe any leaks on any components of the center main engine. As stated, the fire erupted in the engine room on May 23, 1999, approximately 5 weeks after the KAY departed the Quality Shipyards facility in Houma.
The exact date is not critical to this Court's opinion. The final engine alignment sheet was signed on April 12, 1999, by Keith Marcotte for Louisiana Machinery and by Eldred Forest for Quality Shipyard. Exhibit 2s. However, the Louisiana Machinery road trip report dated April 15, 1999, by Charles Gaudet stated that Gaudet "rode boat to Bollinger in Harvey." Exhibit 6a.
The experts who testified at trial agreed on at least four matters. The first is that a cataclysmic fire erupted in the engine room which rapidly lead to the sinking and loss of the vessel. The second is that in order for a fire to be sustained, there must be a fuel source, ignition, and oxygen to spread the fire. The third is that the fire in question was likely a fuel fed fire, although there was some disagreement about whether the fuel was diesel or lube oil. Both diesel or lube oil were plentiful in the KAY's engine room. The fourth agreed upon fact is that the fire was likely not the result of arson.
The plaintiffs' theory of the cause and origin of the fire was expressed by its key expert, Dr. John Atherton. Dr. Atherton has a B.S. in Industrial Chemistry and a Ph.D. in combustion science. His dissertation was in gas phase combustion of hydrocarbons. He is a chartered chemist and engineer and he is recognized as an expert in the cause and origin of fires. As a forensic scientist, he also has expertise in engineering and hydrocarbon chemistry.
The vessel was raised on June 3, 1999. It had been underwater, suffering the currents of the Mississippi River, for about 10 days. Dr. Atherton examined the vessel on June 4, 1999. There was approximately a foot of river silt on the horizontal surfaces of the vessel and it was very dark in the ship's interior. The check valve and certain other parts were removed on June 4, 1999. The vessel was cleaned using high pressure fresh water hoses and a 6 inch vacuum line. The vessel was reinspected after it was cleaned.
Based on the physical evidence and discussions with the crew, Dr. Atherton determined that the "initial event" was an oil fuel fire that developed at the forward end of the engine room, most probably at the forward end of the center main engine. Dr. Atherton testified that he searched for the origin of the fuel source, examining a number of potential sources. He determined that the most probable fuel source was loose couplings on the center main engine check valve on the outlet side of the primary fuel pump. The check valve was located at the forward end of the engine.
The engine fuel flows up from the fuel pump to the fuel filters. Fuel for the KAY passes through the fuel check valve on the discharge line of the center main engine located between the fuel transfer pump and the fuel filters. The fuel enters the check valve at the bottom fitting which is located at the inlet side of the check valve. Fuel exits the check valve at the top fitting which is located at the outlet side of the check valve.
The fuel check valve holds pressure on the line so that the fuel will flow in the direction it is supposed to go. The pressure in the line is approximately 70 pounds per square inch (p.s.i.). There are 37 degree flared fittings on each side of the brass check valve.
Dr. Atherton surmised that if the fittings around the check valve were sufficiently loosened, fuel would spray from the check valve and travel far enough to come into contact with an ignition source in the engine room. After considering a number of ignition sources, particularly the diesel generator exhaust, the main engine exhaust, and a fluorescent light fixture, Dr. Atherton determined that heat from the diesel generator exhaust elbow above the center main engine was the most likely source of ignition. According to Dr. Atherton, once the fuel spray came into contact with the insulation surrounding the diesel generator exhaust, ignition could have occurred within minutes or
it could have taken an hour. Dr. Atherton estimated the point of ignition to be about 36 inches from the top of the check valve.
Dr. Atherton testified that in order to sustain the fire, at least two gallons of fuel spread over two square meters at the forward end of the center main engine were necessary.
In order to test his theory that oil spraying from the couplings on the check valve came into contact with the diesel generator exhaust, Dr. Atherton, using an exemplar check valve, conducted spray tests to determine how far the fuel traveling through the fuel line at 70 p.s.i. would have sprayed. Although 20 degrees of looseness in the fittings may have produced about a 50 inch spray, Dr. Atherton acknowledged that the jet of liquid fuel would have traveled about 40 inches. The approximate 50 inch spray included droplets. The solid spray did not go that far.
When conducting the tests, Dr. Atherton could not duplicate the angle of the spray nor could he model which direction the spray traveled. Only one fitting was opened during the spray tests. According to Dr. Atherton, there would be a variation of spray pattern each time he ran his test. He did not think an identical spray pattern could be replicated. Critical to Dr. Atherton's analysis was information supplied by Robert Harshman, a colleague of Dr. Atherton, who was qualified by the Court as an expert in mechanical engineering.
At the time Mr. Harshman first inspected the check valve fittings after the KAY was raised, the vessel had been underwater about 10 days and exposed to river currents. Dr. Atherton was not present when Mr. Harshman inspected the check valve and its fittings. Mr. Harshman advised Dr. Atherton that the couplings on the upper and lower parts of the center main engine check valve on the fuel discharge line between the fuel pump and the fuel filters were loose. Dr. Atherton did not know how loose the couplings were when Mr. Harshman inspected them.
When Mr. Harshman attempted to reproduce the looseness of the check valve fittings, he estimated a 3/10 of an inch rotation. He did not mark or torque the components because he was afraid that it might disturb any evidence on the 37 degree flared fittings. He did not contemporaneously note the degree of looseness. His determination of how loose the fittings were was based on his degree of "gentle shaking" and his ability to rotate the fittings approximately 20 degrees. When Mr. Harshman rotated the fittings, he rotated them until they were handtight. Three-tenths of an inch from handtight is almost a 20 degree rotation.
When Dr. Atherton conducted his spray experiments, he tested the fittings surrounding the check valve at different degrees of looseness. Dr. Atherton's report described the degree of looseness in the fittings as being more than 10 degrees as that figure was used to cover any degree of error in the report. Both Dr. Atherton and Mr. Harshman acknowledged that 1/10 of an inch of rotation can make a substantial difference in the amount of spray produced. Each 1/10 inch that the fittings surrounding the check valve were loosened would translate to approximately seven degrees of rotation. When Dr. Atherton rotated the fitting seven degrees a stream of oil began falling "under gravity", at thirteen degrees the fittings sprayed, and at twenty degrees there was a substantial spray traveling approximately 50 inches from the source.
Dr. Atherton had not reviewed any articles about loose couplings and he had no knowledge of the propensity of this type of fitting to loosen and to leak.
Dr. Atherton acknowledged that there were no actual measurements taken of the check valve couplings in order to determine exactly how loose they were. Mr. Harshman's determination, according to Dr. Atherton, was not a precise measurement.
Defendants suggest that because the degree of looseness was critical, Mr. Harshman should have marked both sides of the fittings and then tightened the fittings to determine the degree of looseness. Mr. Harshman testified that he did not mark the fittings because it would disturb the evidence.
Dr. Thomas Shelton, a professor of engineering at LSU, qualified as an expert in metallurgical, mechanical, and material science engineering, as well as failure analysis. While he testified principally on other issues, he would not criticize Mr. Harshman's methodology. He did state that if the fittings could have been marked, he would have done so as long as it did not disturb the evidence. He admitted that the degree to which you can handtighten would differ before the fire and after the fire and that handtightening varies from individual to individual. Based upon the testimony provided to the Court, it appears that the degree to which a fitting is tightened can differ from individual to individual.
The degree of looseness of the fittings was a critical part of Dr. Atherton's theory. If the fittings had been marked by Mr. Harshman, the Court would have been greatly assisted in evaluating how loose the fittings were. The Court is not convinced, based on all of the testimony presented, that Mr. Harshman correctly decided not to mark the fittings.
In assessing the plaintiffs' claim, the Court has also sought to determine whether it is more probable than not that the couplings were loose at the time the vessel left the shipyard or whether vibration or heat from the fire likely loosened the fittings. As a corollary to that issue, if the fittings were improperly tightened before the vessel left the shipyard, would the fittings have leaked at some point after the ship left the shipyard and prior to spraying fuel on the date of the fire?
Dr. Atherton noted that before the fire there was no indication that there was any spray or drips at the center main engine check valve site. If hourly inspections were made, he would have expected that someone would have noticed a leak prior to any spraying.
Mr. Carnes, present on the ship from the day it left the shipyard until the fire, testified that while on duty on the KAY, it was his practice to make an hourly visual inspection of the engine room. When he made his visual inspection, he checked the bilges, the ballast tanks, the fuel tanks, the generators, and the rudder room. During his rounds he looked for leaks, seepages, anything loose, or anything broken. If he saw anything leaking or seeping, he would get a rag, wipe it, and tighten the leaking connection. With respect to any connections that were difficult to see, Mr. Carnes would touch the connection with his hand or use a rag to check for seepage. If he did not see any connection or coupling leaking, he would not tighten it with a wrench because over-torquing a fitting could cause problems.
In addition to making a visual inspection each hour he was on duty, every three hours Mr. Carnes did a log reading. The engineer noted the temperatures, fuel oil and lube oil pressures, and revolutions per minute of the engines. He took readings on various gauges. When not doing readings or making rounds, he sat in the engine control room because it provided an excellent view of the engine room. Mr. Carnes testified that the same inspection procedure used by him was used by the assistant engineer during his six hour shift.
Mr. Carnes was aboard the vessel after it left the shipyard and before the May 23, 1999, fire, when barges being towed by the KAY made contact with the Chester Bridge on the upper Mississippi River. No part of the KAY actually hit the Chester Bridge. Mr. Carnes made an inspection of the engine room after the allision, specifically looking for broken brackets, pipes, and anything that was jarred loose.
At no time after the KAY left the Quality shipyard, either before or after the allision with the bridge, did Mr. Carnes ever recall seeing the relevant fittings leak or seep. He did observe a fuel leak around the 37 degree fitting above the port main engine check valve. The connection was barely loose and fuel was seeping. He looked at the fitting and tightened it with a regular open-end wrench. Mr. Carnes did not recall seeing any leaks or seepages on the center main engine check valve.
Mr. Carnes also explained, and other witnesses corroborated, that it is uncommon to get fuel leaks around flared fittings. It is also uncommon for flared fittings to vibrate loose. Mr. Carnes testified that the check valve vibrates left to right. After kort nozzles were installed to help with the vessel's propulsion, he testified that the check valve would vibrate 1/8 to 1/4 of an inch. Mr. Carnes, who started working for Marquette aboard towboats in 1991, testified that he has never seen a 37 degree fitting vibrate loose.
Fred Buquet, III, an employee of Louisiana Machinery, was lead mechanic working on the vessel's center main engine. He testified that if there was a leak around the check valve; any seepage could be visualized. He described the 37 degree flared fittings as very durable. Although he has seen them spray a couple of feet when they are sufficiently loose, he does not know how quickly the leak increases.
Significantly, on the day of the fire, neither Mr. Carnes nor Mr. Demel observed any leakage or seepage at either end of the center main engine check valve. On the day of the fire, Mr. Demel made his rounds during his afternoon shift, i.e., from 12:00 p.m. to 6:00 p.m. He checked for fuel or oil leaks, loose parts, etc. In addition to making two main rounds at three hour intervals, on the afternoon of May 23, 1999, he checked for leaks and loose parts every 30 to 45 minutes.
Mr. Demel last checked for fuel or oil leaks between 5:00 p.m. and 5:30 p.m. He was finishing his rounds at about 5:30 p.m. when, as previously stated, Mr. Carnes arrived in the engine room prior to his 6:00 p.m. shift. Mr. Demel stated that he observed no leaks or seepage from either the top or bottom fitting on the center main engine check valve on the fuel discharge line. The fire erupted at about 6:00 p.m.
Mr. Dupuis testified that there would be no difficulty seeing a leak on the fittings surrounding the check valve. If the fittings were not tight because they were improperly torqued, a leak would likely develop as soon as the engine was cranked and it built pressure.
There was some dispute regarding the proper method to tighten the connections and the proper torque to be applied to the connection. Mr. Dupuis testified that the torque specs in the Caterpillar instruction manual would be used for high pressure lines and not for low pressure lines such as a 70 p.s.i. line which is at issue in this case. Mr. Dupuis also testified that you would not put as much torque on a brass check valve as on a steel line.
It is clear from all testimony that at the dock and sea trials of the KAY, there was no leakage observed at the area surrounding the center main engine check valve. All of the persuasive testimony appears to be that these 37 degree flared fittings do not frequently leak.
Bob Hall, who has been a customer service engineer of Caterpillar for 16 years, and Stephen Schoup, a Caterpillar engineer who does tech support work and who has worked at Caterpillar for 31 years, testified at trial by deposition. According to Mr. Hall, vibration in the 3600 series Caterpillar engines does not tend to loosen connections. He has seen nothing indicating that the engines or its components are subject to excessive vibration. According to Mr. Schoup, if the 37 degree flared fittings are not properly torqued, they would be more susceptible to loosening because of vibration. The amount of leakage from a joint not properly torqued would depend on the degree of improper torquing. In order for a connection of this type to leak, it would have to be noticeably undertorqued because the 37 degree fittings are fairly tolerant to torque. Mr. Schoup testified that even if the fittings were 50% undertorqued, the fitting would probably seep some fuel that would be noticeable to a mechanic, although it still might not spray any fuel.
Thomas A. Wick, who started working in the Caterpillar engineering department at Caterpillar in 1967, also testified by deposition. Mr. Wick was part of the 3600 Caterpillar engine program prior to its release in the field and he has had substantial experience with these types of engines. According to Mr. Wick, there are no high pressure fuel lines on the 3600 series engines. He has never had problems with the 37 degree flared fittings on the fuel lines and he has not seen them leak. However, when these fittings do leak, there is not an "horrendous" amount of leakage. Mr. Wick, who has seen these flared fittings connected many times, testified that the proper method to install the fittings is to put them together with your hand and use a wrench to tighten them.
Following five or so weeks of engine operation without noticeable leakage around the check valve, Mr. Wick testified that he would not expect the 37 degree flared fittings on each side of the check valve, within a period of 30 minutes to an hour, to progress from a drip or no leak to an exploding spray of fuel. In his opinion, such an event was highly improbable. Mr. Wick stated that the basic simple design of the 37 degree flared fitting provides "a lot of warning that there is a loose fitting by having small amounts of liquid leaking" and that there is a better than 10% tolerance in the torque on each side of the fitting.
Dr. Atherton opined that between 5:30 p.m., when Mr. Demel finished his visual inspection, and 6:00 p.m., when the fire was reported, the fittings on the check valve could have loosened to the point where they were loose enough to spray fuel a distance of at least 36 inches. Dr. Atherton admitted, however, that he did not have specific experience with 37 degree flared fittings. He also admitted that he would expect loose fittings to first leak or seep such that engine room personnel would have detected that the fittings were loose prior to any spraying.
Dr. Shelton testified that if the fittings on the check valve on the Caterpillar engine are properly tightened, they will not come loose even when the fittings vibrate. However, if the fittings on the check valve are not properly tightened, Dr. Shelton testified that vibration can loosen fittings seated in the thread and the fittings can become unscrewed. He could not, however, predict how quickly the fittings would loosen without knowing more about the vibration. Dr. Shelton estimated the degree of looseness of the check valve fittings at the center main engine to be 10 to 20 degrees which is consistent with Dr. Atherton's testimony.
Dr. Shelton was of the opinion that the fittings on each side of the check valve were loose before the fire started because there were carbon deposits on the mating surfaces of the fittings. One fitting may have been looser than the other, although he could not tell the degree of difference. According to Dr. Shelton, the fittings would have been spraying as opposed to seeping or just leaking. He noted that loosening occurs slowly at first and then it accelerates with time. However, according to Dr. Shelton, although he did not know all the variables, it is possible for a fitting to move from seepage to a spray in a short period of time.
George Hero, III, was called by Quality as an expert witness in fire cause and origin, fire and explosion investigation, and failure analysis. The Court recognized Mr. Hero as an expert as tendered. However, after listening to Mr. Hero's testimony and having heard the testimony of George Casellas, the fire expert called by Louisiana Machinery, the Court will not rely upon Mr. Hero's testimony in arriving at its opinion in this case.
George Casellas, an engineer, was recognized by the Court as an expert in the cause and origin of fires as well as failure analysis. Mr. Casellas has an impressive resume in this area. He is self-employed in a marine consulting business which has a special emphasis on the cause and origin of marine and petrochemical fires. Mr. Casellas' background is in engineering and he has been certified in fire and explosion investigation. He has qualified as an expert in fire related cases approximately 80 to 100 times. His work is also apparently recognized by plaintiffs' counsel as he has been called by them to consult in connection with other unrelated cases.
Mr. Casellas initially visited the KAY a few days after it had been salvaged. It was impossible to conduct an investigation at that time because of the mud, the debris, and the darkness. After the engine room was cleaned and lights placed in it, Mr. Casellas inspected it.
Mr. Casellas is very familiar with the 37 degree fittings which are at issue in this case. They are widely used in the marine/offshore industries. According to Mr. Casellas, leaks from 37 degree fittings are usually detected immediately when the engine is started. He also thought that it would be very unlikely to see both fittings at each end of the check valve becoming loose at the same time. Mr. Casellas has never known these type of fittings to spray before they leak. He testified that one would not expect a leak right away and there would be seepage before a spray unless the fitting was so loose that the fitting would instantly spray.
In connection with his testimony, Mr. Casellas familiarized himself with many of the reports and statements generated as a result of this loss. Mr. Casellas was unable to accept Dr. Atherton's conclusion that loose fittings surrounding the check valves allowed fuel to spray which made contact with lagging on the port generator exhaust line. According to Mr. Casellas, a leak of the magnitude described by Dr. Atherton would have had to seep first and it would not have materialized within a short period of time. He testified that it would be very unlikely that a fitting would go from no leak to a massive leak after having operated continuously for approximately five weeks.
Mr. Casellas also testified that the fire pattern did not reflect a flash pattern. If spraying of fuel would have occurred on the fittings around the center main engine check valve, Mr. Casellas testified that the paint on the coolant pipes adjacent to the check valve would not have been present. However, Mr. Casellas noted that there was some burned paint present on the coolant pipes.
All of Mr. Casellas' conclusions appear well-reasoned. Mr. Casellas could not tell how the fire started because there was too much damage to the engine room. Even if the fire started around the center main engine, Mr. Casellas still did not know what caused the fire. As he stated, "I don't think anybody can."
Dr. Lacy Clark McDonald, who has a Ph.D. in engineering, is trained in material science and metallurgy. He is a consulting engineer with expertise in accident reconstruction and failure analysis. He has co-authored two patents. Dr. McDonald was recognized as an expert in the fields of mechanical engineering, metallurgy, and material sciences and failure analysis.
Dr. McDonald examined each of the fittings surrounding the check valve in order to determine if they were loose before the fire. He based his opinions on two visual inspections and on a general understanding of materials, metals and their reaction to fire. Dr. McDonald concluded that he was unable to confirm that the fittings were loose or leaked before the fire.
Dr. McDonald marked the fittings prior to examining them. When marking the fittings, he marked the bottom fitting, which was the upstream fitting or inlet portion of the check valve, with an A. He marked the downstream fitting, or outlet portion of the check valve, with a B.
Dr. McDonald disputed both Dr. Shelton's and Dr. Atherton's opinions on several key points. Dr. McDonald testified that there was no evidence to indicate that the fittings were loose before the fire. The electronic microscope scan utilized by Dr. Shelton did not change Dr. McDonald's findings. Although there were carbon deposits on the fittings, the microscope did not provide quantitative numbers reflecting the amount of carbon. The electron scan also failed to show the source of the carbon. According to Dr. McDonald, the carbon detected on the scan was not all from fuel residue.
Dr. McDonald also testified that Dr. Shelton did not have a scientific basis for concluding that prior to the fire, the check valve fittings were 10 to 20 degrees loose. Dr. McDonald noted that Dr. Shelton stated that the gaps between the mating surfaces of the fittings could be larger or smaller than the thickness of the deposits. Dr. Shelton did not indicate how much larger or how much smaller.
With respect to Dr. Atherton's conclusion that both sides of the fittings began spraying at the same time, Dr. McDonald disagreed. Dr. McDonald could think of no scientific reason why both fittings would loosen to the same degree and he opined that it was not very likely that the fittings would operate for five weeks and then become loose at the same time and begin to spray. Dr. McDonald testified that the odds of two of the fittings becoming loose at the same time were "astronomical."
Although Dr. Shelton stated that the gap surrounding each of the fittings may have existed before the fire, Dr. McDonald stated that there was no basis for that conclusion. He would expect heat from the fire to cause a gap. The gap would vary depending upon the heat and the rate that heat was applied to the geometry of the fittings.
After thoughtfully considering all of the evidence presented, the Court rejects the notion that these fittings, alleged to be loose at the time the KAY left the Quality shipyard, would have loosened to a degree that they spouted a full spray within the approximate 30 minutes that elapsed after the assistant engineer last inspected the engine room. While there was some vibration in the engine, the preponderance of the evidence leads to the conclusion that these 37 degree flared fittings did not frequently leak or spray. Prior to a substantial spray, there would have been some leakage or seepage which would have occurred before a full spray developed. Based upon the totality of the evidence, the Court finds that had the fitting connections above and below the center main engine check valve been loose and improperly tightened before the KAY left the shipyard, the 37 degree flared fittings would have leaked or seeped to some degree prior to the approximate five week period that elapsed between the vessel leaving the shipyard and the fire.
Even if the check valve fittings were loose enough to spray fuel, a substantial amount of testimony was offered with respect to whether the spray, during the time period in question, could have reached the lagging on the diesel generator exhaust in sufficient quantities for the fuel to ignite. Dr. Atherton testified that one to two pints of fuel were necessary for the heat of the diesel generator exhaust to ignite the fuel spray.
Mr. Casellas did not think that the spray could have reached the exhaust pipe and, even if it could, he did not think that the fuel oil spraying onto the lagging would have penetrated the insulation within the time frame necessary to ignite. Mr. Casellas was also of the opinion that the metal exhaust line was not hot enough to ignite diesel fuel.
Eric Morphy, who has a master's degree in naval architecture and engineering from the University of Michigan, testified as an expert in naval architecture and marine engineering. Mr. Morphy has lectured at the University of Michigan in forensic engineering and marine engineering. His work includes analysis of failures of generators and diesel engines. He was hired to determine the feasibility of Dr. Atherton's theory that fluid from the check valve fittings could spray onto the generator exhaust. He inspected the KAY and took measurements of the center main engine and photographs of the center main engine. He then constructed a model using photographs and precise measurements. Mr. Morphy testified that the model is the same dimensionally as that which is on the engine.
Mr. Morphy noted that the vertical distance from the leakage point identified by Dr. Atherton to the bottom of the generator exhaust pipe is 16 1/2 inches. The horizontal distance is 32 inches from the edge of the transverse piece adjacent to the check valve to the elbow of the generator exhaust.
The check valve abuts the transverse piece which is really a front housing piece that protects the gears.
Robert Taylor, an engineer with 30 years of experience who has a M.S. in engineering from the University of California at Berkeley, was retained by the defendants. Mr. Taylor was recognized as an expert in the field of naval architecture and marine engineering as well as marine accident reconstruction. Mr. Taylor has qualified as an expert in 48 trials and he has been deposed in 300 to 400 marine accident reconstruction cases.
Mr. Taylor was hired to evaluate Dr. Atherton's theory that the fuel spray from the 37 degree flared fitting above the center main engine check valve could reach the diesel generator exhaust piping, including specifically the area around the elbow. He determined that it could not.
In testing Dr. Atherton's theory, the location of the check valve was replicated by Mr. Morphy through the model he constructed. The geometry and obstructions to the flow patterns were critical to testing Dr. Atherton's theory. When constructing his model, Mr. Morphy used the same type of check valve and 37 degree flared fittings that were used on the KAY to construct the model.
In his experiment, Mr. Taylor reproduced the vessel conditions at the time of the fire including fluid flow and pressure on the fittings. Internal fluid pressure on the fittings was adjusted to 70 p.s.i., the same pressure as the fluid flowing through the check valve. Mr. Taylor used water instead of fuel oil during his test because he did not want to make a mess with the diesel fuel. Mr. Taylor testified that because water is less viscous and lighter than fuel oil, water would spray farther than fuel oil. Accordingly, Mr. Taylor testified that by using water instead of fuel oil, he was overpredicting the distance that the fuel would squirt. In order to take engine vibrations to consideration, the check valve was moved to different positions and distances away from the transverse piece.
Numerous tests were conducted by Mr. Taylor. Even with the fitting loosened 20 degrees, the spray would not reach the point of ignition suggested by Dr. Atherton, i.e., the diesel generator exhaust.
Mr. Taylor noted that Dr. Atherton's placement of the check valve was not the same as the configuration on his model. Mr. Taylor believed that Dr. Atherton's placement of the check valve was incorrect. However, even accepting Dr. Atherton's check valve position as being higher than the check valve position on the model, Mr. Taylor's tests indicated that the spray would still not have reached the generator exhaust.
In rebuttal, Dr. Atherton testified that the bypass line controlled the height of the check valve. The lower that the check valve is placed in relation to the transverse section, the more difficult it is for the spray to reach the generator exhaust pipe. According to Dr. Atherton, when Mr. Morphy made his measurements the bypass line was there, but the check valve was not. Dr. Atherton cited that as the reason why Mr. Morphy had the check valve in the wrong position.
Considering the evidence, the Court finds it unlikely that oil spray from the top fitting of the check valve could have saturated the lagging on the diesel generator exhaust in sufficient quantities to ignite and cause such an explosive fire in the time frame at issue. While it is possible that some of the spray could have connected with the lagging, it is improbable that enough fuel would have soaked into the lagging to ignite within approximately 30 minutes. Given questions regarding the angle of spray from the fittings on top of the check valve, uncertainty about the degree of looseness, the reliability of these types of fittings, the placement of the transverse cover, cooling pipes and the other obstructions, and the short time period between the engine room inspection and the fire, the Court finds that plaintiffs theory relative to the source of ignition is not more probable than not.
This Court finds that Dr. Atherton's theory relative to the source of ignition is not supported by the evidence. The fact that such a theory is not supported by the evidence bolsters this Court's view that its decision to reject Dr. Atherton's theory relative to the source of the fuel is correct.
II.
This Court has admiralty and maritime subject matter jurisdiction of this action pursuant to 28 U.S.C. § 1333 and Federal Rule of Civil Procedure 9(h). Venue is proper in the Eastern District of Louisiana inasmuch as the ship repair work was performed within this district.Under maritime law, "a shipowner may sue in either tort or contract for negligent repairs to his vessel." La Esperanza de P.R., Inc. v. Perez y Cia de Puerto Rico. Inc., 124 F.3d 10, 16 (1St Cir. 1997). The La Esperanza court explained:
A ship repairer potentially faces three sources of liability for repairs he performs improperly on a vessel. He may be liable in contract for a breach of his expressly assumed obligations or for a breach of an implied warranty of workmanlike performance that attaches to admiralty contracts under the rule of Ryan Stevedoring Co. v. PanAtlantic S.S. Corp., 350 U.S. 124, 76 S.Ct. 232, 100 L.Ed. 133 (1956). A ship repairer may also be liable for the maritime tort of negligence. Importantly, negligence causes of action in admiralty invoke the principles of maritime negligence, not those of the common law. Moreover, while the implied warranty of workmanlike performance "parallel[s] a negligence standard rather than imposing [the] strict liability" that attaches to the implied warranties in landbased contracts under the Uniform Commercial Code . . ., "a shipowner may receive indemnity from a marine contractor for breach of implied warranty of workmanlike serve, albeit that such performance was done without negligence." Finally, federally developed maritime law applies both when a court construes the terms of a repair contract and when it construes the standard of performance due thereunder.
La Esperanza, 124 F.3d at 16-17 (internal citations omitted).
In a civil action in admiralty, the burden of proof falls upon the party who institutes a suit in admiralty. Gulf Oil Corp. v. The PATSY CHOTIN, 131 F. Supp. 489, 491 (E.D. Ky. 1955). In order to establish liability, plaintiff must prove both fault and causation. "Without proof of causation there can be no liability." Dillingham Tug Barge Corp. v. Collier Carbon Chemical Corporation, 707 F.2d 1086, 1092 (9th Cir. 1983), quoting Logsdon v. Baker, 517 F.2d 174, 175 (D.C. Cir. 1975). Fire cases present a unique proof problem. "By the very nature of a fire, its cause must often be proven through a combination of common sense, circumstantial evidence and expert testimony." Minerals Chemicals Philipp Corporation v. S.S. National Trader, 445 F.2d 831, 832 (2nd Cir. 1971).
See also, Harrelson v. United States, 420 F. Supp. 788, 793 (S.D. Ga. 1976); CEH, Inc. v. F/V Seafarer, 70 F.3d 694, 698 (1St Cir. 1996).
Plaintiffs sue defendants for maritime negligence and for breach of express and implied warranties of workmanlike service. They must establish that the defendants were negligent under the maritime law or that they failed to perform the ship repair work in a workmanlike manner and that such negligence or failure to properly perform ship repair work was the cause of the damages. The cause and origin of the fire is the central dispositive issue in this case.
There is no direct evidence of the cause of the fire because no witness observed the fire ignite. Two KAY crew members did observe the fire after it began. The plaintiffs' case rests almost entirely on circumstantial evidence and expert opinion testimony.
In order to establish liability, plaintiffs must prove that some action or inaction on the part of the defendants was the cause of the fire. In support of their theory as to the cause of ignition, plaintiffs must prove that at the time the vessel left the Quality shipyard, the fittings on the check valve were not properly tightened which caused fuel to spray approximately five weeks later.
As explained by the court in Union Carbide Corp. v. M/V IRENE CHOTIN 1974 A.M.C. 2232 (E.D. La. 1974), where there are opposing, but equally reasonable, theories regarding the cause of explosion, one which sponsors a determination that the defendant is at fault and one which sponsors a determination that the accident was caused without defendant's fault, "the Court will not rely on `speculation', but will find for the defendant." Union Carbide, 1974 A.M.C. at 2239, quoting, Universe Tankships v. Pyrate Cleaners, 1957 A.M.C. 1436, 152 F. Supp. 903 (S.D.N.Y. 1957). Plaintiff offers a possible, but unlikely theory regarding the cause of the fire.
For reasons previously noted in this opinion and based upon the evidence presented at trial, the Court finds it improbable that the fire resulted from fuel which sprayed from a loose fitting located above the center main engine check valve. The Court also rejects the notion that such a spray permeated the elbow joint of the diesel generator exhaust in an amount sufficient to ignite a catastrophic fire.
Plaintiffs have not proved by a preponderance of the evidence that there was any contractual breach or maritime negligence by either defendant. Plaintiffs have also not met their burden of proof with respect to causation. Accordingly, the Court finds that plaintiffs have failed to prove by a preponderance of evidence that any actions or inactions on the part of defendants, Quality and Louisiana Machinery, were the cause of the fire and the loss of the KAY.
"[A] defendant cannot be held liable for damages that he has not been shown to have caused." Pizani v. M/V COTTON BLOSSOM, 669 F.2d 1084, 1088 (5th Cir. 1982).
By way of counterclaim, defendant, Quality Shipyards, Inc., claims entitlement to attorney's fees and costs pursuant to the indemnification provision of the repair agreement between Marquette and Quality. The repair agreement between Quality and Marquette contains a number of provisions, three of which are of particular relevance to Quality's argument that it is entitled to indemnification from Marquette. The first, referred to as the indemnification provision, is contained in paragraph 8(c) of the repair agreement. It states:
Rec. Doc. No. 6. At oral argument, counsel for Quality acknowledged that attorney's fees and costs incurred in defending this action are being paid by the insurer which provides contractual liability coverage.
Each party agrees to defend, indemnify, and hold harmless the other party's Indemnitees free and harmless from and against any and all suits, claims, or liabilities (including, without limitation, the cost of defending any suit and reasonable attorney's fees) for loss or damage to property owned, leased or operated by the indemnitor, regardless of cause, including the negligence or other legal fault of any of each party's Indenmitees.
In paragraph 4, the repair agreement contains a section known as the warranty provision. It states in pertinent part:
(A). Shipyard warrants that it shall perform the modifications and repairs contemplated by this agreement according to the drawings and specifications. Shipyard further warrants that its workmanship in its performance of this agreement shall be free of defects. The express warranty set forth in the paragraph regarding the Shipyard's workmanship shall commence on the date that Shipyard satisfactorily completes the Work hereunder and shall expire six (6) months thereafter; and any and all other warranties, express or implied, whether of merchantability, or fitness for a particular purpose with respect to the Shipyard's workmanship are hereby specifically disclaimed.
(B). In the event that Owner, within the aforesaid warranty period, notifies Shipyard of any defects covered under the aforesaid warranty, then Shipyard shall repair any such defects.
(C). Shipyard shall have no responsibility to repair and/or replace, or cause to be repaired or replaced, any defects caused by negligent operation of the Vessel after completion of the Work. Furthermore, Shipyard shall not be liable for any damages for delay, demurrage, loss of profits, loss of use, or any other consequential damages that may be suffered by Owner regardless of cause including the fault of the Shipyard, if defects in materials, equipment or workmanship occur after the Vessel is delivered to Owner.
The mandatory insurance provisions in the repair agreement, located in paragraph 7 of the agreement, state:
Prior to the commencement of work hereunder; each party shall obtain at its own expense for its own employees, properties and operations, the following policies of insurance:
(A) By Shipyard —
(1) Worker's Compensation (including occupational disease) and employer's liability insurance and/or appropriate maritime employers coverage in accordance with all applicable state and federal statutory requirements with the minimum limits on the employer's liability coverage of not less than U.S. $1,000,000.00 for bodily injury per person;
(2) Comprehensive Public Liability and Ship Repairers' Liability Insurance, subject to the SP9B form, or equivalent, including broad form contractual liability coverage, with minimum limits of not less than U.S. $5,000,000.00 for bodily injury and U.S. S 5,000,000.00 for property damage per occurrence, with watercraft exclusion deleted;
(3) Automobile liability insurance covering owned, non-owned and hired automotive equipment with minimum limits of U.S. $500,000 for injury or death of any one person, and U.S. $1,000,000 for any one accident and U.S. $500,000 property damage; and
(4) Full form physical damage insurance on all property (including floating equipment and vessels) owned, chartered, operated, or otherwise used by the Shipyard. Such insurance shall be in an amount equal to the full value of such property.
(13) By Owner —
(1) Worker's Compensation insurance (including occupational disease) and employer's liability insurance, or appropriate maritime employer's coverage in accordance with all applicable state and federal statutory requirements with the minimum limits on the employer's liability coverage of not less than U.S. $1,000,000.00 for bodily injury per person;
(2) Comprehensive Public Liability insurance, including broad form contractual liability coverage, with minimum limits of not less than U.S. $5,000,000.00 for bodily injury and U.S. $5,000,000.00 for property damage per occurrence.
(3) Automobile Liability insurance covering owned, non-owned and hired automotive equipment with minimum limits of U.S. S 500,000.00 for injury to or death of any one person, and U.S. $1,000,000.00 for any one accident and U.S. $500,000.00 property damage; and
(4) Protection and Indemnity Insurance on the Vessel. Such protection and indemnity insurance shall be on Form SP-23 or equivalent and shall be in an amount equal to the value of the Vessel, but not less than U.S. $1,000,000.00; and
(5) Hull and machinery insurance on the Vessel. Such insurance shall be on American Institute Hull Clauses June 2, l977, form, or equivalent, and shall be in an amount equal to the full value of the Vessel.
Exhibit 2A.
United States District Judge Martin L.C. Feldman, to whom this case was previously assigned, issued the following rulings with respect to the indemnification provision:
Rec. Doc. No. 112.
(1) Judge Feldman granted Quality's motion to exclude parole evidence regarding the intent of the parties to the contract, finding that the terms of the contract were not ambiguous;
(2) Judge Feldman denied Quality's motion for summary judgment on the issue of indemnification, finding that while the "terms of the agreement are unambiguous, the indemnification provision is not enforceable if the defendants acted with gross negligence."
Gross negligence on the part of a contractor will invalidate an exemption of liability in a contract. Todd Shipyards Corp. v. Turbine Service. Inc., 674 F.2d 401, 411 (5th Cir. 1982). The Court does not find that Quality acted with gross negligence or, for that matter, any negligence.
Plaintiffs argue that Quality is isolating the indemnification provision in an attempt to enforce it and that the indemnification provision must be reviewed along with the other provisions of the contract. As observed by the court in Ogea v. Loffland Brothers Co., 622 F.2d 186 (5th Cir. 1980), the repair agreement must be considered as a whole and all of the provisions of a contract "must be read in conjunction with each other in order to properly interpret the meaning of the contract." Id. at 189-190.
In Ogea, in addition to an indemnification provision, the contract required the operator of a drilling platform to obtain and maintain certain insurance policies. It also required the owner of the drilling platform to name the owner of the platform as an additional insured under the policy. The Ogea court rejected the contention that the contract should be governed exclusively by the indemnity provisions of the contract, holding that inclusion of the mandatory insurance provisions meant that the parties would first look to insurance to cover claims and damages. Only after insurance coverages were exhausted would the indemnity provisions be enforced. Id.
In Tullier v. Halliburton Geophysical Services. Inc., 81 F.3d 552 (5th Cir. 1996), the court held that the "insurance procurement and indemnity provisions of a drilling contract `must be read in conjunction with each other in order to properly interpret the meaning of the contract.'" 81 F.3d at 553-554, quoting Ogea, 622 F.2d at 190. The Tullier court found that the controlling fact in Ogea and other similar cases "is the existence of `additional assured' coverage whereby an indemnitee agreed to procure insurance coverage for the benefit of the indemnitor." 81 F.3d at 554.
The repair agreement between Marquette and Quality required Quality to obtain "Comprehensive Public Liability and Ship Repairer's Liability Insurance. . . including broad form contractual liability coverage." Quality was also required to obtain other insurance. The repair agreement required Marquette to obtain hull and machinery insurance on the vessel equal to the vessel's full value along with liability insurance, including contractual liability coverage. The contract did not require that each party name the other as an additional named insured on the required policies. Quality argues that because the shipowner and shipyard were not required to be named additional named insureds on the insurance policies, this contract is removed from the Ogea and Tullier line of decisions.
In In re Diamond Services, 2001 WL 531091 (ED. La. May 16, 2001), a master service contract between the dredge contractor, Diamond Services Corporation ("Diamond"), and a pipeline contractor, Chet Morrison Contractors, Inc. ("CMC"), contained reciprocal indemnity provisions. It also required the dredge contractor to secure commercial general liability providing contractual liability coverage. The contract did not require that Diamond name CMC as an additional insured under the commercial general liability policy. The master service contract also required Diamond to obtain a P I policy which named CMC as an additional named insured. The master service contract did not require that the P I policy contain contractual liability coverage.
Diamond's dredge allegedly damaged a pipeline while Diamond was working as a subcontractor for CMC. Diamond sought indemnity from CMC under the indemnity provisions of the master service contract. Diamond argued that because the master service contract did not require contractual liability coverage under the P I policy, the P I coverage requirement did not respond to CMC's indemnity obligations to Diamond. Diamond, 2001 WL 531091 at *2.
Judge Fallon stated:
Indemnity and insurance procurement provisions of a contract must be construed harmoniously to effect the meaning intended by the contract as a whole.
The Court is unpersuaded that these facts require an exception to the Ogea line of cases. . . .
There is no reason for an indemnitor to require an indemnitee to procure insurance if the indemnitor did not intend to limit its indemnification obligations to the excess of the required insurance coverage. To read the indemnity and insurance requirements any other way produces an incoherent result, e.g., why would CMC require Diamond to obtain certain insurance policies if CMC is required to indemnify Diamond for any claims covered under those policies.
. . . The essential fact is that the liability insurance provided to both Diamond and CMC under Diamond's P I policy is primary and, therefore, before CMC is required to indemnify Diamond, the limits of the P I policy must be exhausted. Once the policy limit is exhausted, the indemnity provisions of the MS Contract come into effect.
Id. at *3. Judge Fallon did not consider the "additional insured" component of the P I policy to be dispositive, but instead reasoned that the critical fact was that both parties were required to procure certain insurance policies covering liabilities which could be incurred.
Judge Fallon's decision was affirmed by the Fifth Circuit. See, In re Diamond Services, 281 F.3d 1279 (5th Cir. 2001) (Table).
After considering the repair agreement as a whole, and reading the indemnity provisions along with the insurance provisions, the Court finds that the parties must look to the insurance procured pursuant to the repair agreement as being primary over the contractual indemnity provisions. There is no logical way to reconcile the indemnity provisions and the mandatory insurance provisions of the repair agreement other than to find that the parties intended that the insurance coverages be exhausted prior to the indemnity obligation being triggered.
Although the Tullier court held that the critical fact in the Ogea line of decisions was the existence of an additional assured requirement, this Court takes a broader view. What is essential is the existence of mandatory reciprocal insurance obligations. Quality did obtain the required contractual insurance coverage pursuant to its repair agreement with Marquette and it presented no evidence that the policy limits on the coverages required by the repair agreement were exhausted. Accordingly, Quality's claim for attorney's fees and costs pursuant to the indemnity agreement is without merit.
Plaintiffs also argue that the indemnity provisions conflict with the warranty provisions of the repair agreement. Because the Court finds that the indemnity provisions do not come into effect until the mandatory insurance coverage is exhausted, the Court need not reach this issue.