Continental Ins Co v. J Ray McDermott Inc

*Pursuant to 5TH CIR. R. 47.5, the Court has determined that this opinion should
not be published and is not precedent except under the limited circumstances set forth in
5TH CIR. R. 47.5.4.
United States Court of Appeals
Fifth Circuit
F I L E D
November 11, 2003
Charles R. Fulbruge III
Clerk
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 02-21201
CONTINENTAL INSURANCE COMPANY,
Plaintiff-Counter Defendant-Appellant
versus
J. RAY MCDERMOTT, INC.,
Defendant-Counter Claimant-Appellee-
Third Party Plaintiff-Appellant,
CROWLEY MARINE SERVICES, INC.,
Third Party Defendant-Appellee.
Appeals from the United States District Court for
the Southern District of Texas
(USDC No. H-099-CV-3251)
_______________________________________________________
Before REAVLEY, JONES and CLEMENT, Circuit Judges.
REAVLEY, Circuit Judge:*

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We reverse and render judgment in favor of Continental Insurance Co.
(Continental), for the following reasons:
1. Section 6 of the hull policy states that “no party shall be deemed an additional
assured . . . to any extent greater than required by the agreement entered into between
such party and the Assured.” The reference to “the agreement” is a reference to the
charter party between J. Ray McDermott, Inc. (McDermott) and Crowley Marine
Services, Inc. (Crowley) (the assured).
2. “[C]harter party agreements are essentially contracts and they are subject to the
general rules of contract law.” Marine Overseas Servs., Inc. v. Crossocean Shipping Co.,
791 F.2d 1227, 1234 (5th Cir. 1986). “When interpreting unambiguous provisions of a
time charter, the charter party should be read as a whole, and a court may not look
beyond the written language of the charter to determine the intent of the parties.” Wilson
v. JOB, Inc., 958 F.2d 653, 657 (5th Cir. 1992). Generally, “[i]nterpretation of a
contract and the determination of ambiguity are questions of law, which this Court
reviews de novo.” FDIC v. McFarland, 33 F.3d 532, 539 (5th Cir. 1994). “This broad
standard of review includes the initial determination of whether the contract is
ambiguous.” American Totalisator Co. v. Fair Grounds Corp., 3 F.3d 810, 813 (5th Cir.
1993).
3. Construing the charter party as a whole, we do not read it to provide that
Crowley was required to obtain hull insurance, covering damage caused by cargo
operations and naming McDermott as an additional assured with respect to such

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coverage. On the contrary, we construe the agreement as placing responsibility for such
losses and insuring against such losses on McDermott.
4. As we read the charter party, section 7 sets out certain responsibilities of
Crowley, the owner, section 8 sets out certain responsibilities of McDermott, the
charterer, and section 9 requires these parties to obtain insurance corresponding to their
spheres of responsibility set out in sections 7 and 8. For example, section 7(b) makes the
owner liable for the injury to or death of the owner’s employees, and section 9(a)
correspondingly requires the owner to obtain “insurance coverage for the employees of
Owner (if any) for illness, injury or death to the full extent required by the laws
applicable thereto.” Section 9(d), especially when read in context, further appears to
require each party under sections 7 and 8 to obtain insurance covering its respective
responsibilities and liabilities. Section 9(d) states: “It is the intent of the parties to cover
by insurance the risks of loss of and damage to the Barge, other vessels, structures,
objects and Cargoes on board the Barge, as well as the liabilities assumed by each under
Section 7 and 8, respectively.”
5. Applying this same linkage between responsibilities and insurance to
McDermott, we note that section 8(d) imposes liability on the charterer for injury to or
death of the charterer’s employees, and section 9(b) correspondingly requires the
charterer to obtain “[i]nsurance coverage for the employees of Charterer (if any) for
illness, injury or death to the full extent required by the laws applicable thereto.”

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6. As to cargo operations, section 8 places the responsibility and liability on
McDermott. Section 8(a) provides that the charterer shall pay all “expenses of loading
and unloading Cargoes [and] delivery of Cargoes.” Section 8(b) provides that “[t]he
charterer shall arrange and, if necessary, contract for any ballast engineers, towage,
pilotage or like service . . . including . . . loading . . . discharging or launching Cargoes at
its expense . . . and shall be solely liable for any loss or damage resulting from actions or
omissions related to such services . . . .” Section 8(d) provides:
Unless such loss or damage results from the gross negligence or willful
misconduct of the Owner, or the Owner’s failure to exercise due diligence
to deliver and maintain the Barge in a seaworthy condition, the Charterer
shall indemnify and hold the Owner harmless from and against the
following: . . . (ii) all loss of or damage to Cargoes, howsoever caused, or
for damage caused by the Cargoes . . . (v) all liability for loss of or damage
to the Barge . . . occurring during the loading and/or discharging of the
Barge . . . .
Corresponding to these responsibilities concerning cargo and cargo operations, in our
view, is the requirement of section 9(b) that the charterer obtain “[f]ull form Protection
and Indemnity insurance” and “[a]ll-risk insurance for the full actual value of any and all
Cargoes,” as well as a commercial general liability policy of at least $10 million.
7. We believe that the only plausible interpretation of sections 7, 8 and 9, read
together, is that (1) McDermott was responsible under section 8 for handling cargo and
for the damages to the barge caused by the handling of such cargo, and (2) McDermott
was responsible under section 9 for obtaining insurance corresponding to these respective
responsibilities and liabilities assigned in section 8. Accordingly, under section 6 of the

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hull policy, McDermott was not required to be named as an additional assured under the
hull policy purchased by Crowley with respect to coverage for damage caused by the
handling of cargo. Because of this section 6 exclusion, McDermott was not an additional
assured under Crowley’s hull policy issued by Continental.
8. While we agree with McDermott that a contractual duty to obtain insurance
does not necessarily correspond to the assignment of liabilities and other obligations of
the contracting parties, we believe that in this case the charter party, read as a whole,
linked the charterer’s cargo handling responsibilities set out in section 8 with the
obligations to purchase insurance in section 9.
9. The issue regarding who, as between Continental and Crowley, is responsible
for the $50,000 deductible is now moot since the deductible only becomes relevant if
Continental is required to cover the accident.
10. Our construction of the charter party also necessarily leads us to hold that
there is no merit to the claim asserted in McDermott’s third party complaint that Crowley
breached the charter party by failing to procure the proper hull insurance. There is no
reason for a remand for further proceedings on this claim. As discussed above, the
agreement provides that each party shall purchase insurance, and nothing in the charter
party requires the hull policy purchased by the owner to cover damage caused by the
handling of cargo and to name McDermott as an additional assured on such coverage. On
the contrary, section 8(d) quoted above states the opposite—that McDermott shall hold
Crowley harmless for all damage to the barge occurring during the handling of

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cargo—and for the reasons discussed above McDermott was responsible for purchasing
insurance covering damage to cargo or barge caused by cargo operations. Further,
section 9(d) states that “[i]t is the intent of the parties to cover by insurance the risks of
loss of and damage to the Barge . . . and to look solely to such insurance for the recovery
of any loss, damage, liability and expense recoverable thereunder.”
11. Accordingly, the judgment is reversed and judgment is hereby entered that
Continental is not liable to McDermott under the hull policy. A take nothing judgment is
also hereby entered on the third party claim.
REVERSED AND RENDERED.

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