Drilling Rig Exclusion Precluded Insured’s Reimbursement Claim Against Excess Insurer

The U.S. Fifth Circuit Court of Appeals recently addressed an insurance coverage question involving an excess insurer and an offshore injury.  The Plaintiff was injured while working on a drillship in the Gulf of Mexico.  Plaintiff filed a lawsuit in 2011 pursuant to the Jones Act and general maritime law in the U.S. District Court for the Western District of Louisiana.  Later that year, his employer was named as a third party defendant.  The employer filed cross claims against its primary insurer in 2012 and against its excess insurer 2014.  The Jones Act employer eventually settled with the Plaintiff, but maintained its claims for reimbursement against its two insurers.


The excess insurer moved for summary judgment and argued the excess insurance policy excluded coverage.  Specifically, the policy contained an exclusion for “any liability or expense arising out of the ownership, use or operation of drilling rigs, drilling barges, drilling tenders, platforms, flow lines, gathering stations and/or pipelines, but this exclusion shall not apply to craft serving the foregoing such as crew, supply, or utility boats, tenders, barges or tugs.”  The District Court agreed the injury occurring on a drillship fell within this exclusion and dismissed the employer’s claim for reimbursement against the excess insurer.  The employer appealed to the Fifth Circuit.


On appeal, the employer argued in part that the excess insurer waived coverage defenses by not raising them until 2014 and not issuing a reservation of right letter.  Under Louisiana law, waiver occurs when there is 1) an existing right, 2) knowledge of its existence, and 3) an actual intention to relinquish it or conduct so inconsistent with the intent to enforce the right as to induce a reasonable belief that it has been relinquished.  The Court found the excess insurer satisfied the first two elements by possessing the coverage defense and having knowledge of the accident as early as 2011.  The employer argued that the excess insurer’s conduct of not raising the coverage defense for three years satisfied the third element and effectively waived the insurer’s right to assert a coverage defense.  The Fifth Circuit determined that because the excess insurer was not made a party to the case until three years after the lawsuit being filed, there was no evidence that the excess insurer had assumed defense of the employer with the intention or conduct of eventually denying coverage.  In other words, the insurer’s conduct prior to being brought into the lawsuit did not create a belief that it intended to waive the coverage defense, which was asserted in its initial filings.  Thus, the excess insurer had not waived its right to lodge a coverage defense and the Fifth Circuit affirmed the dismissal of the employer’s claim against its excess insurer.


Richard v. Dolphin Drilling

Fifth Circuit Weighs in on P&I Insurance Coverage Dispute

Following a verdict in favor a Jones Act seaman, Larry Naquin, for injuries he sustained in a land-based crane accident, an insurance coverage dispute arose between Naquin’s employer, Elevating Boats, LLC (“EBI”), and its insurance companies, State National Insurance Company (“SNIC”) and Certain London Insurers (“London Insurers”).  EBI alleged that SNIC and London Insurers breached their insurance contracts by denying EBI’s claims related to Naquin’s accident and failing to provide defense and indemnity.  EBI also sought damages for bad faith on the part of SNIC and London Insurers.  SNIC moved for summary judgment, arguing there was no coverage for Naquin’s land-based accident under its Protection & Indemnity Policy (the “Policy”) and that EBI failed to provide sufficient notice as required by the Policy.  The District Court granted summary judgment and entered final judgment in favor of SNIC.


On appeal, the Fifth Circuit reviewed the “Indemnity” provision of the policy that called for indemnification of EBI “as owner of the Vessel” for liability arising out of “any casualty or occurrence[.]”  SNIC argued that the “as owner of the Vessel” clause did not provide coverage for EBI’s negligence in Naquin’s land-based accident.  EBI’s assertion to the District Court was that the “any casualty or occurrence” clause provided coverage for the accident.  The Fifth Circuit, interpreting Louisiana law, found that the only way to give meaning to the “Indemnity” provision of the Policy was to construe it as limiting coverage to “any casualty or occurrence” which arises out of EBI’s conduct “as owner of the Vessel.”  Since Naquin’s injuries resulted from a land-based crane accident, the Court held that there was no causal operational relation between the vessel and injury so as to extend coverage of the Policy in this instance.  The District Court’s summary judgment was affirmed.


Naquin v. Elevating Boats, L.L.C., et al.

Alleged Seaman’s Claims Dismissed for Lack of Negligence

Plaintiff was injured when he allegedly fell from a defective rope ladder while working on a barge.  He filed a lawsuit against his employer, Weber Marine, alleging negligence under the Jones Act, unseaworthiness of the barge, and seeking maintenance and cure.  In the alternative, he sought damages under Section 905(b) of the LHWCA.  Weber Marine filed two Motions for Summary Judgment.  The first motion argued that plaintiff would be unable to support his claims for Jones Act negligence, unseaworthiness, or 905(b) vessel negligence at trial.  In support of the motion, Weber Marine asserted that the ladder was in good working order, the accident was unwitnessed, and that it did not own the barge in question.  In its second motion, Weber Marine argued the plaintiff was not a Jones Act seaman and was instead a maritime worker covered by the LHWCA.


The district court judge for the U.S. District Court for the Middle District of Louisiana granted both of Weber Marine’s motions.  In holding plaintiff was not a Jones Act seaman, the Court determined his claims for Jones Act negligence, unseaworthiness, and maintenance and cure were moot.  Furthermore, the Court recognized that while a maritime worker has a tort-based cause of action against his employer by virtue of Section 905(b), the plaintiff had failed to raise any facts supporting his claim for negligence.  The Court dismissed the plaintiff’s claims with prejudice and instructed him to pursue any claim he may have under the LHWCA before the U.S. Department of Labor.


Bourgeois v. Weber Marine

A Case of Sexual Harassment?

Plaintiff, Valerie Russo, sued her employer, APL Marine Services, Ltd. and Captain James Londagin for sexual harassment, sexual discrimination, retaliation, negligence and unseaworthiness after her employment was terminated. The case arose out of a failed romantic relationship between Russo and Capt. Londagin. The two met in 2004 when Russo was serving as chief cook aboard the M/V APL KOREA. Over the next eight years, Russo made eleven voyages aboard the APL KOREA. In 2011, while serving together, they began a consensual sexual relationship. On completion of the voyage, their relationship continued on land. In late 2012 Russo signed up to serve aboard the APL KOREA to be with Capt. Londagin for its December 4, 2012 voyage to Japan. At the beginning of the voyage, the romance continued. About ten days into the voyage, however, Russo ended the relationship over a dispute. Russo alleged that after she ended her relationship, he engaged in harassing behavior towards her. She alleged that he slapped her on her buttocks on at least one occasion, requested they have “make-up sex” on ten occasions, banged on her door at night on several occasions, lay on the deck outside her cabin, criticized her work performance, and denied her overtime pay.

On December 21, 2012, Capt. Londagin terminated Russo’s employment and she was escorted off the ship at Yokohama. Capt. Londagin alleged she threw a Sharpie pen at him. That same day, Russo received a letter from APL advising she was terminated “for exhibiting aggressive behavior towards a senior officer.”

In March 2014, she filed suit. Thereafter defendants moved for dismissal of all claims.

First, the Court dismissed all of Russo’s claims under California law as the acts complained of occurred in international waters. This included her claims for sexual harassment, sexual discrimination, retaliation, and wrongful termination. The Court recognized that state statutes are ordinarily not given extraterritorial effect. The Court found that application of the California laws hinged on the “situs of both employment and the material elements of the cause of action.” Residency, place of the employment contract, and place of termination are not themselves sufficient to overcome the presumption that state law will not apply when the tortious conduct and situs of employment are outside the state. Here plaintiff spent the vast majority of her time of employment on vessels overseas, as did the conduct about which she complained.

As for her unseaworthiness claim on the grounds that Capt. Londagin was unfit for duty, the Court stated that the Captain’s temperament and abilities “must be within the usual and customary standards of the calling.” The question was whether the behavior was “within the usual and customary standards of the calling” or whether it was “a case of a seaman with a wicked disposition, a propensity to evil conduct, a savage and vicious nature.” The Court dismissed the unseaworthiness claim noting that Capt. Londagin slapped her on the buttocks on only one occasion. Citing prior holdings, the Court found that “even unwelcome and harassing physical contact is insufficient to support a claim for unseaworthiness absent ‘a savage and vicious attack’.” A slap on the buttocks did not rise to that level.

The Court did keep intact Russo’s claim for negligent infliction of emotional distress under the Jones Act. The maritime law provides that negligent infliction of emotional distress occurs when a defendant subjects a plaintiff to emotional harm within the “zone of danger” created by the conduct of the defendant.

The Court found that the “zone of danger” test allows recovery for those plaintiffs who sustain a physical impact as a result of defendant’s conduct or who are placed in an immediate risk of physical harm by that conduct. Russo did not allege that she suffered physical impact, but the Court found that there were material questions of fact as to whether she feared an immediate risk of physical harm by the alleged sexual harassment aboard the ship. Russo provided evidence that she feared for her safety so much that she kept a chair behind her stateroom door so that he could not enter. This allegation was sufficient to support her claim that she feared the “immediate risk of physical harm.” Thus, her claim for negligent infliction of emotional distress was preserved for trial. Russo v. APL Marine Services, Ltd., 2015 WL 5626638, U.S. District Court, C.D. Calif.