Archives for August 2011

Mooring: The Respective Duties and Responsibilities of Vessel and Wharfinger

A heavily laden bulk carrier is scheduled to arrive at midnight at your wharf on the Mississippi River.  The river is running high and fast and due to fog, visibility is limited.  The ship is under the command of a river pilot as required by law, and is being assisted by helper tugs.  As she makes her way into the berth, it takes considerable effort to secure the ship due to the weather and river conditions.  Hours after she is finally secured, the ship breaks her mooring lines, is set adrift and causes significant damage to vessels and wharfs down river where she runs aground.  Lawsuits are filed and the ship owner blames you, alleging negligence in that you failed to provide a safe berth, failed to ensure a sufficient number of mooring lines were deployed and failed to provide a standby tug to help keep the ship in its berth.  What is your defense?

First, to establish maritime negligence the ship owner in this scenario must demonstrate there was a duty owed by you to the vessel, breach of that duty, damages sustained and a causal connection between your conduct and the plaintiff’s injury.  In Re: Cooper/T. Smith, 929 F.2d 1073 (5th Cir. 1991).

In 1975, the Fifth Circuit Court of Appeals set forth the duty of a wharfinger towards a vessel in Trade Banner Line, Inc. v. Caribbean Steamship Co., 521 F.2d 229 (5th Cir. 1975), when it held, “It is well settled that a wharfinger is not the guarantor of the safety of a ship coming to his wharf.  He is, however, under a duty to exercise reasonable diligence to furnish a safe berth and to avoid damage to the vessel.  This includes the duty to ascertain the condition of the berth, to make it safe or warn the ship of any hidden hazard or deficiency known to the wharfinger or which, in the exercise of reasonable care and inspection, should be known to him and not reasonably known to the ship owner.”

In 1977, the Fifth Circuit Court of Appeals in Bunge Corporation v. M/V FURNESS BRIDGE, 558 F.2d 790 (5th Cir. 1977), elaborated and, citing Trade Banner, stated, “The wharfinger’s duty to warn applies only to ‘any hidden hazard or deficiency . . . not reasonable known to the ship owner.”  Thus, no warning is required “where the alleged obstruction or condition is open and obvious to those in charge of the vessel’s management or where those in control of the vessel have actual knowledge.”

In 1989, the late Honorable George Arceneaux wrote, “The duty of a wharfinger (person or entity operating a wharf, dock, etc.) towards a vessel is well established.  Although a wharfinger does not guarantee the safety of vessels coming to his wharves, he is bound to exercise reasonable diligence in ascertaining the condition of the berths there at, and if there is any dangerous obstruction to remove it, or to give due notice of its existence to vessels about to use the berths.”  Delta Commodities v. M/T JOE OAK, 1989 WL 149253 (E.D. La. 1989).

In Trade Banner, supra, the Court also addressed the duty of a vessel and held that when the mooring of the vessel is controlled by the ship’s crew and under the supervision of its master, the responsibility of the mooring lay with him, stating, “it is the master, when present and supervising, and not a wharfinger absent some type of contractual commitment not present here, who is responsible for mooring of a ship.  Judge Charles Schwartz came to the same conclusion in Petro United Terminals, Inc. v. J.O. Odfjell Chemical Carriers, 756 F. Supp. 269 (E.D. La. 1991) when he held, “in addition, the proper mooring of a vessel is the responsibility of the vessel and her master, not the dock owner, although the dock owner itself is required to keep its facility in proper condition.”

In Bunge, supra, the court addressed this issue also.  It stated, “Bunge, as a dock owner, had no duty to supervise the Furness Bridge’s docking procedure, absent, perhaps, a hidden defect in the docking facilities.  Rather, the master, and expert mariner, is responsible for the docking of his ship.”

When it comes to use of tugs, the courts have refused to place on the wharfinger the duty of providing assist tugs to a ship planning to moor at its facility.  In Bunge, supra, the court held that “use of tugs is an integral part of docking procedure and as such is a navigational operation for which the ship’s master has exclusive responsibilities.”

The role of the compulsory pilot in mooring operations was succinctly discussed by the Fifth Circuit Court of Appeals in Bunge, supra.  The Court stated in footnote 6:

During the docking in question, the vessel was being navigated by a compulsory pilot as required by LSA-R.S. 34:1041, et seq.  “The authority of the master of a vessel is not in complete abeyance,” however, “while a pilot, who is required by law to be accepted, is in discharge of his functions.”  In fact, our conclusion as to the respective duties of the parties is strengthened by the presence of the compulsory pilot who must be held to an unusually high standard of care because he “is selected for his personal knowledge of the topography through which he steers his vessel . . . .  He must . . . be familiar with all dangers that are permanently located in the course of the river . . . All this he must know and remember and avoid.”  . . . “[S]uch skillfulness requires a high degree of knowledge predicated on special training and inquiry, and not casual competence.”  Thus, absent a finding of actual knowledge, the pilot may be charged with knowledge of a local condition as a matter of law.  In the instant case, the compulsory pilot was charged with constructive, if no actual, knowledge of the mooring dolphins and the risk t hey presented.”

In our hypothetical scenario the rising, fast running river, fog and darkness would be open and obvious conditions about which you should not have to warn the ship’s master or pilot.  As experienced mariners, they are presumed to possess the skills necessary to ensure safe mooring of the ship.  Mooring is the responsibility of the ship and should be under the control of the ship’s crew under the supervision of the ship’s officers.  As stated by the court in Trade Banner, supra,  “parting of the lines provided by the ship and set out by its crew cannot be blamed on the wharfinger.  The courts have also held that the ship owner cannot complain that the wharf was too small to safely moor the ship.  This allegation was addressed by the court in Bunge and rejected.  The court stated, “this characteristic was obvious indeed, unmistakable and required no warning.  Those in control of the ship must be charged as a matter of law with knowledge of the comparative sizes of their vessel and the wharf.

With regard to the decision at night in fog the courts have refused to place responsibility on the wharfinger.  With regard to the number or  type of mooring lines the courts have found that as a matter of law there is no duty on the part of the dock owner to assist in mooring.  As a matter of law, the dock owner’s failure to provide line handlers to assist in mooring cannot be a valid basis for liability.

In sum, unless there are contractual obligations assumed by the dock owner requiring its involvement or unless the dock owner voluntarily involves it self in the mooring of the ship, its only obligation to provide a reasonably safe berth.

Assuming no such involvement, you, the dock owner, should bear no liability.  As stated by the Fifth Circuit Court of Appeals:  We see no reason to disturb the traditional standard of care to which the wharfinger is held.  Whether it be tugs or tankers that come to berth at his dock, the wharfinger remains in the same position in terms of his ability to protect his structure.  Those in control of the vessel’s navigation must bear the greater responsibility for bringing their ship safely into and out of port.  The dock owner’s liability should extend only so far as the vessel’s master could not have averted an accident, such as where a hidden hazard is or reasonably should be known to the wharfinger and cannot be known to the master in the exercise of ordinary care.

New FECA Regulations Go Into Effect Today

Pursuant to the Department of Labor’s website, new regulations for the Federal Employees’ Compensation Act (“FECA”) go into effect today.  A copy of the regulations can be found here.  These regulations also effect the War Hazards Compensation Act (“WHCA”), including the direct payment regulation, 20 C.F.R. § 61.105.  When a case is accepted for direct payment, the Division of Federal Employees’ Compensation furnishes medical care in accordance with FECA.  Although no changes were made to the WHCA’s regulations, any changes to FECA’s medical care regulations will have a ripple effect on the WHCA’s direct payment regulation.  The good news is that the regulations were amended to bring them up to speed with organizational changes at the Office of Workers’ Compensation programs, and to account for advancing medical billing technologies. 

ALJ Did Not Have Power to Resolve Defense Base Act Insurance Dispute

Sandi Group, Inc., employed Iraqi nationals who were injured or killed during their employment.  Pending before the Office of Administrative Law Judges (“OALJ”) are two claims against Sandi Group, one by an injured claimant, and another on behalf of a deceased claimant.  In those proceedings, Sandi Group has taken the position that the claimants were employees working under a subcontract with Dyncorp.  Further, Sandi Group alleged that it was entitled to coverage under Dyncorp’s insurance policy because Dyncorp is the employer who is statutorily responsible for providing Defense Base Act coverage for these incidents.”  Dyncorp’s insurer, Continental Insurance Company (“Continental”), disagreed, noting that the Dyncorp policy did not cover foreign nationals.  Continental then filed a declaratory judgment action in the United States District Court for the District of Columbia to resolve the insurance coverage dispute.  Sandi Group asked the court to either dismiss or stay the action, but the court refused.

Sandi Group’s position was that the Administrative Law Judge (“ALJ”) before whom the claimant’s claims were pending had to determine the insurance coverage dispute.  If the ALJ did not, then there could be inconsistent rulings.  Continental argued that contractual indemnification provisions were outside the scope of an ALJ’s review.  An ALJ’s statutory grant of power “to resolve all questions ‘in respect of’ an employee’s claim should be defined as all questions ‘integral to’ the employee’s claim against the employer.”  Here, the court concluded that Section 19 of the Longshore and Harbor Workers’ Compensation Act (“LHWCA”) assigns an ALJ the power to resolve one issue, “the claimant’s entitlement to payment,” and that the insurance dispute between Continental and Sandi Group was collateral to that issue.  Even if an ALJ has concurrent authority to consider the scope of a DBA insurance policy, the court reasoned, there was no reason to conclude that the resolution of the insurance question required “specialized knowledge that is resident at the Department of Labor, or that it will turn upon an examination that the ALJ is particularly suited to undertake.”  Finally, the court was not convinced that the judicial economy militated in favor of dismissal or a stay considering the fact that the declaratory judgment action can be resolved expeditiously with dispositive motions.

Continental Ins. Co. v. Sandi Group, Inc., — F. Supp.2d —-, 2011 WL 3648253 (D.D.C. Aug. 19, 2011).

Note: This decision is concerning because it overly restricts an ALJ’s power.  The Western District of Washington previously addressed a similar issue in Insurance Co. of N. Am. v. San Juan Excursions, No. C05-2017Z, 2006 WL 2091059 (W.D. Wa. July 25, 2006).  There, the court stated that “[t]he absence of statutory language granting administrative tribunals the specific power to decide LHWCA-related contractual issues that are necessary to resolve a claim for benefits does not automatically mean that such power lies with the district courts.”  Further, in San Juan Excursions, the Director took the position that insurance companies need to litigate liability disputes inside the LHWCA’s administrative system and not in civil courts.  Simply put, insurance liability disputes are often considered by ALJs when those disputes  are “integral” or “essential” to resolving the rights and liabilities of the claim, the employer, and the insurer regarding a compensation claim.  For instance, last responsible carrier issues require an ALJ to consider which of multiple insurance carriers are liable for a claimant’s injury.  Resolution of those issues determines the rights and liabilities of the employer and carriers, which is an essential part of resolving a claimant’s entitlement to payment.

Fifth Circuit Holds That Repair Service Order Validly Incorporated Online Terms And Conditions By Reference

As the Internet continues to play an increasingly important role in commerce, courts have begun to deal with relatively new considerations arising out of contracts formed in whole or in part online.  The United States Fifth Circuit Court of Appeals recently dealt with some of these new considerations in One Beacon Insurance Co. v. Crowley Marine Serv., Inc., 2011 WL 3195292 (5th Cir. 2011).

This case arose out of a dispute over the terms of a ship repair contract and maritime insurance policy.  Crowley Marine Services, Inc. (“Crowley”) hired Tubal-Cain Marine Services, Inc. (“Tubal-Cain”) to perform ship repair work on one of its barges.  Tubal-Cain hired a subcontractor to perform lighting and electrical work.  During repairs to the barge, an employee of the subcontractor was severely injured by an electrical shock and resulting fall.  The injured employee initiated an action in Texas state court alleging that Crowley and Tubal-Cain were negligent.  This prompted Crowley to formally demand defense and indemnity from Tubal-Cain purportedly arising out the ship repair contract between them.  Crowley also sought defense and coverage from One Beacon Insurance Company (“One Beacon”) as an additional insured under Tubal-Cain’s Maritime Comprehensive Liability Policy.

In response to Crowley’s actions, One Beacon denied coverage and filed a declaratory judgment action seeking a ruling that Crowley was not entitled to coverage as an additional insured.  One Beacon alleged that Tubal-Cain never requested that Crowley be added to the policy and did not otherwise qualify for coverage.  Crowley filed a third-party complaint against Tubal-Cain in the declaratory judgment action, alleging that terms and conditions incorporated into a repair service order issued in connection with the repair work required Tubal-Cain to procure certain insurance policies that named Crowley as an additional insured.

The district court, trying the case on written submission, ruled for Crowley on its contractual defense and indemnity claim against Tubal-Cain and on its claim that  Tubal-Cain failed to perform is obligation under their agreement to procure the required insurance coverage.  The court also held that Crowley did not qualify as an additional insured under the policy and granted One Beacon’s declaratory judgment claim.  Tubal-Cain and Crowley cross-appealed the district court’s judgment.  While it was undisputed that a ship repair agreement existed between the parties, there was a dispute as to whether a written agreement existed requiring Tubal-Cain to defend, indemnify and procure insurance for Crowley.

Executives and management for the two companies met in March 2007 to discuss the necessary barge repairs.  The companies had previously entered into similar agreements for minor repairs on eight prior occasions and contracted an additional fifteen times following the disputed agreement.  Each time, Crowley issued a repair service order (“RSO”) to Tubal-Cain outlining the scope of repairs.  The RSOs did not include pricing terms and were not signed by the parties.  The RSOs all contained a prominently displayed notice that they were issued in accordance with the purchase order terms and conditions on Crowley’s website unless the parties agreed otherwise in writing.  The terms and conditions, which were displayed in four-point font on a subpage of the website, required contractors to defend and indemnify Crowley for injury or damage even if alleged to be caused by the sole active negligence of Crowley.  The terms and conditions also included the provision requiring contractors to purchase certain policies of insurance and name Crowley as an additional insured.  The terms and conditions were never discussed and no hard copy was ever provided to Tubal-Cain.

On appeal, Tubal-Cain argued that an oral agreement was reached between the parties and the RSO merely confirmed that agreement.  Since defense, indemnity, and insurance were never made a part of the oral agreement, the RSO could not confirm more than what was already agreed to orally.  Further, the RSO was sent after Tubal-Cain had already commenced work and they did not have an opportunity to review and assent to it before beginning performance on the contract.

The Fifth Circuit noted that in construing maritime contracts, it has held that where parties share a history of business dealings and standardized provisions have become a part of those dealings, such familiar provisions within purchase order issued after performance are binding where they are accepted without objection.  Responding to Tubal-Cain’s argument that the relatively brief business dealings between the parties could not have established a course of dealing, the Fifth Circuit noted that courts have found a course of dealing between parties based on receipt of as few as three or four bills of lading.  Accordingly, the court concluded that the district court did not err in holding that the parties had established a course of dealing from which the court could infer that Crowley’s terms and conditions were implied in every contract.

Tubal-Cain also disputed the lower court’s finding that the RSO was sufficient to put Tubal-Cain on notice of the insurance and indemnity terms.  Specifically with respect to the indemnity, Tubal-Cain argued that indemnity provisions which purport to indemnify a party for its own negligence must be conspicuous to be enforceable.  The court explained that under general contract principles, where a contract expressly refers to and incorporates another instrument in specific terms clearly showing an intent to incorporate the instrument, both instruments are to be construed together.  The court held that maritime contracts may validly incorporate by reference terms from a website in the same manner that they may incorporate terms from a paper document.  Although Crowley could have been clearer in providing directions to the location of the terms and conditions, notice of the terms was reasonable under the facts of the case.

The Fifth Circuit also went on to affirm the district court’s additional holdings that the indemnity provision was sufficiently clear and conspicuous as to be enforceable and that the RSO terms and conditions supplemented the oral agreement.

One Beacon Ins. Co. v. Crowley Marine Services, Inc., — F.3d —-, 2011 WL 3195292 (5th Cir. July 28, 2011).