National Liability & Fire Insurance v. R & R Marine, Inc.
756 F.3d 825
5th Cir.2014Background
- Hornbeck's Erie Service vessel, undergoing repairs at R&R's Lake Sabine shipyard under a Shipyard Repair and Drydock Agreement, was in R&R's custody when it began sinking.
- Hornbeck retained on-site project managers with authority to issue orders to R&R and monitored subcontractors for conformity with specifications.
- R&R notified Hornbeck of weather delays as Tropical Depression No. 9 formed, eventually Humberto, and the shipyard did not implement precautions despite warnings.
- The Erie Service sank due to rainwater and waves entering open vessel openings, with sinking occurring before a hurricane warning was issued.
- Salvage costs were incurred; Hornbeck and R&R demanded National, R&R’s insurer, pay salvage costs under the policy.
- National sued for declaratory judgment; Hornbeck asserted coverage for all sums R&R owed for damage to the Erie Service; R&R cross-claimed alleging R&R's negligence caused the sinking.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether R&R's negligence caused the sinking | Hornbeck asserts full custody and breach of duty by R&R | R&R contends no clear negligence and/or lack of exclusive custody negates presumption | R&R's negligence affirmed; full custody found and presumption not overcome |
| Whether R&R had full custody creating a presumption of negligence | Delivery to R&R afloat and control over mooring demonstrates custody | Hornbeck agents' access and subcontractors negate exclusive control | Full custody upheld; presumption of negligence applicable |
| Whether Hornbeck had standing to bring a third-party claim against National | Rule 13(a) allows compulsory counterclaims; standing under Erie doctrine preserved | Texas law requires final judgment against insured before insurer pays third-party damages; Rule 13(a) applicable but standing contested | Rule 13(a) valid; Hornbeck had standing; district court properly ruled on the counterclaim |
| Whether National must pay the damages and defense costs under the policy | National must cover all sums for which R&R is obligated (up to policy limits) | Only up to policy limits; defense costs may or may not be recoverable; timing of final judgment considered | Damage award capped at $1,000,000; defense costs recoverable under Texas law; final judgment timing satisfied |
| Whether interest on the judgment was properly awarded at 18% or another rate | 18% interest under Texas Insurance Code Section 542.060 applied | Marine insurance exempt from 542.060; rate should be different and judgment totaled properly | Interest reduced to 6.0% pre-judgment; 18% rate inappropriate due to marine insurance exemption |
Key Cases Cited
- Bertucci Contracting Corp. v. M/V Antwerpen, 465 F.3d 254 (5th Cir.2006) (clarifies standard of review for district court factual findings)
- Stolt Achievement, Ltd. v. Dredge B.E. LINDHOLM, 447 F.3d 360 (5th Cir.2006) (precedent on appellate review of factual determinations)
- Dairyland Cnty. Mut. Ins. Co. of Tex. v. Childress, 650 S.W.2d 770 (Tex.1983) (standing and attorney's fees under Texas law; third-party beneficiaries)
- Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938) (basic bailment law and duty of care in possession/control)
- Ischy v. Twin City Fire Ins. Co., 718 S.W.2d 885 (Tex.App.-Austin 1986) (third-party beneficiary concept for attorney's fees under insurance contracts)