Opinion
Civil Action No. 99-0209 c/w, 99-0237, 99-0264, SECTION "T" (5)
September 14, 2000
This cause came for hearing on this date upon a Motion to Modify the Stay Order previously entered in the above-captioned matter. The Court, having heard the arguments of counsel, and having studied the legal memoranda and exhibits submitted by the parties, the record, and the applicable law, is fully advised on the premises and ready to rule.
ORDER AND REASONS
I. Background
On January 20, 1998, the O.S.V. CANE RIVER was involved in a collision with the M/V KRISTIN GRACE. Trico Marine Assets, Inc. and Trico Marine Operators, Inc. (collectively "Trico"), are the owners/operators/owners pro hac vice of the O.S.V. CANE RIVER, and Diamond Services Corp. ("Diamond"), is the owner/operator/owner pro hac vice of the M/V KRISTIN GRACE.
Trico avers that the collision was "solely caused by the fault, neglect, negligence and lack of due care of defendant Diamond and of the M/V KRISTIN GRACE." [Complaint, p. 4]. Furthermore, Trico instituted a complaint seeking exoneration from or limitation of liability for any and all losses and/or damages in connection with the collision. Diamond, on the other hand, denies that the collision was caused by any fault of the M/V KRISTIN GRACE. Based on ten alleged defenses, Diamond also prays for exoneration from or limitation of liability. [Answer, p. 10].
Various individuals filed claims in connection with said collision, some of which have settled. More important for purposes of the matter at hand is the fact that Diamond was first defended by its primary underwriters, but they have tendered their remaining policy limits to the claimants in the limitation proceedings. The primary underwriters were allowed by the Court to withdraw their Letter of Undertaking from the record.
However, excess [u]nderwriters contest whether primary [u]nderwriters have accurately accounted for and allocated attorney's fees, costs, and third party vendor expenses which were charged to the primary policy. Furthermore, excess [u]nderwriters argue that certain sums charged by primary [u]nderwriters to their policy limits perhaps should have been paid by the petitioner in limitation (i.e., Diamond Services), and that primary [u]nderwriters may not yet have exhausted their policy limits.
[Memorandum in Support of Motion to Modify Stay, p. 2].
The law firm of Burke Mayer represents the excess underwriters. It has threatened to bring suit against the primary underwriters and/or McAlpine Cozad ("McAlpine"), the law firm which formerly represented primary underwriters and currently represents Diamond in one of the limitation proceedings, for information and documentation concerning the amount of defense costs which were assessed against the primary policy limit.
McAlpine has brought the instant Motion to Modify the Stay to require that any such claim by the excess underwriters be asserted within the limitation proceedings. McAlpine argues that Diamond and the primary underwriters are the real parties in interest to such a claim, and that therefore such a claim would directly and adversely impact the limitation proceedings and the insurance coverage available to Diamond. Two of the individual claimants, Jay Hinson and Kevin Benton, oppose McAlpine's motion arguing that disputes a party and its insurer(s) simply are not within the scope of the maritime Limitation of Liability Act.
II. Legal Analysis
The Limitation of Liability Act provides that "[t]he liability of the owner of any vessel . . . for any loss, damage, or injury by collision . . . shall not . . . exceed the amount or value of the interest of such owner in such vessel, and her freight then pending." 46 U.S.C. app. § 183(a). Courts generally have adopted a liberal approach in determining who may maintain an action under the Limitation of Liability Act as a "vessel owner," however, a right to limitation may not be asserted by the vessel owner's insurer. See In re Sincere Navigation Corp., 317 F. Supp. 1, 2 (E.D. La. 1970); and In re Independent Towing Co., 242 F. Supp. 950, 954 (E.D.La. 1965).
This Court agrees with the collective assertion of Claimants Hinson and Benton that
[t]o the extent an insurer may have language in its policy which contractually limits its liability to that of the shipowner (i.e., a Crown Zellerbach clause), an insurer may be an indirect and unintended beneficiary of the [Limitation of Liability] Act. However, where such protection of insurers exists, the Court does not need to extend the stay order to include insurers, but need only ensure that the insurers are not exposed to judgment in excess of the shipowner's liability. In re Seabulk Offshore, 158 F.3d 897, 900-01 (5th Cir. 1998). There has been no suggestion to this Court that the fee dispute threatens to expose Diamond's insurers to liability in excess of Diamond's liability. To the contrary, Diamond only suggests that the dispute may exposed Diamond to liability in excess of its insurance (Diamond Memorandum in Support of Motion to Modify Stay, p. 1). The Limitation of Liability Act does not apply to such situations.
[Opposition to Motion to Modify Stay, p. 2].
Accordingly,
IT IS ORDERED that the Motion to Modify the Stay (Doc. 180) be, and the same hereby is DENIED.