UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

__________________

No. 95-60552

__________________

CRADDOCK INTERNATIONAL INCORPORATED; PESQUERA MALLA, S.A.,

Plaintiffs-AppelleesCross-Appellants.

versus

W.K.P. WILSON & SON, INC. ET AL.,

Defendants,

W.K.P. WILSON & SON, INC.,

Defendant-AppellantCross-Appellee.

______________________________________________

Appeals from the United States District Court for the

Southern District of Mississippi

______________________________________________

June 26, 1997

Before BARKSDALE, EMILIO M. GARZA, and BENAVIDES, Circuit Judges.

BENAVIDES, Circuit Judge:

The M/V Scotia Seahorse

, a 176-foot o ffshore supply vessel,

sank off the Venezuelan coast en route to Pisco, Peru. A fish meal

processing plant worth approximately $1.7 million sank with the

vessel. Through a remarkable chain of events, the loss of the

plant was entirely uninsured. The vessel owner and the cargo owner

brought suit against W .K.P. Wilson & Son, Inc. (“Wilson”), an

Alabama marine insurance broker, alleging that the loss was1 Cradock is misspelled as “Craddock” in the caption of the

plaintiffs’ complaint as well as in the caption on appeal.

2 uninsured because of Wilson’s negligence. This appeal requires us

to decide the basis and the extent of Wi lson’s liability to the

vessel owner and the cargo owner. To facilitate an understanding

of the legal issues presented on appeal, we provide a detailed

history of the unusual underlying facts.

I.

F ACTS

Cradock International, Inc. (“Cradock”), 1 purchased the M/V

Scotia Seahorse from Marinsa Miami Comp any (“Marinsa”), a marine

equipment supplier. Cradock, a Panamanian corporation, had two

stockholders: Manuel Cabada Celorrio (“Cabada”) and Milan Orlic.

Cabada and Orlic formed Cradock to purchase a coastal transport

vessel to transport oil and other liquids along the coast of Peru.

Cabada and Orlic are also shareholders in a Peruvian company called

Pesquera Malla, S.A. (“PMSA”). PMSA operates a fleet of sardine

fishing boats. Cabada testified that the plan to purchase a

coastal transport vessel solidified when PMSA decided to purchase

a fish meal processing plant, which PMSA wanted to transport from

Carupano, Venezuela to Pisco, Peru.

Ueli Walchli, the majority owner and operator of Marinsa,

located the Scotia Seah orse in Pascagoula, Mississippi. Marinsa

purchased the Scotia Seahorse and the n sold it to Cradock. The

first order of business was getting the vessel to Venezuela to pick

up the fish meal processing plant. Acting on Cradock’s behalf,

Walchli hired Richard Sassman to captain the vessel from Pascagoula3

to Venezuela; Captain Sassman in turn hired the crew.

Before the Scotia Seahorse left Pascagoula, she was inspected

by Jack Bolding, a marine surveyor

. He did ultrasound testing of

the vessel’s hull, which showed that the steel plating was close to

its original thickness. Even so, the vessel needed a good deal of

cleaning and repair before departure. Bolding inspected the vessel

again after the r epairs were completed. In a written report, he

recommended that another inspection be conducted upon the vessel’s

arrival in Carupano. He also noted in his written report that the

vessel would be scrapped upon arrival in Peru. This notation

apparently resulted from a miscommunication; Cradock plann ed to

s crap the vessel only if it was unable to obtain the permits

necessary to use it as a coastal transport vessel in Peru.

The vessel left Pascagoula for Venezuela in e arly September

1989. The trip to Venezuela was not without its difficulties. The

Scotia Seahorse ’s hydraulic steering motors failed, the compressors

required repair, and the vess el lost generator power. The

generator problems required a stopover in the Cayman Islands for

three or four days. Despite these problems, the S cotia Seahorse

arrived safely in Carupano on September 15th or 16th, 1989, where

she was moored at a large cement dock. Cabada was waiting for the

Scotia Seahorse when she arrived.

Workers began to load PMSA’s fish meal processing plant onto

the vessel. Cabada helped oversee the loading. Many pieces of

equipment were so large that a crane was required to load them.

Captain Sassman testified that he expressed concerns to Cabada that4

they were loading too much cargo and that it was not being loaded

properly. Captain Sassman testified that there were two cargo

containers and “hundreds” of individual items on the deck of the

vessel.

Carupano is an open port, unprotected from the ocean by levies

or seawalls. As fate would have it, the effects of Hurricane Hugo

were being felt i n Carupano at that time. Swells created by the

hurricane caused the Scotia Seahorse to work against the dock, and

steel lines that moored her began to break. Captain Sassman

recommended that Cabada postpone loading the rest of the equipment

until the swells subsided. Although Cabada did not accede

immediately, the Scotia Seahorse was eventually unmoored and put to

sea for a day or so to avoid damage to the vessel and the dock. At

trial Sassman, his memory refreshed by a memorandum from Cabada to

an insurance agent, recalled that he had detected a starboard side

shell ind entation before departure, although he had seen no

indication of any fracture. He also testified that a portion of

the vessel’s starboard side rub rail had collapsed.

A surveyor for Lloyd’s of London conducted an inspection on

behalf of the hull insurance underwri ters immediately before the

Scotia Seahorse left Carupano. The hull underwriters requested the

additional inspection because Bol ding had recommended it and

because the underwriters knew that cargo would be loaded onto the

vessel in Carupano. The notation in Bolding’s report that the

vessel would be scrapped upon arrival in Peru also appears to have

heightened the underwriters’ concerns. According to Sassman and5

Cabada, the Lloyd’s surveyor did not inspect the hull but instead

examined how the cargo was loaded.

Although Captain Sass man had originally agreed to serve as

captain only on the trip from Pascagoula to Carupano, Cabada asked

him to stay o n for the voyage to Peru. At Cabada’s request,

Consulmar, a maritime agent, assembled a Venezuelan crew to replace

the American crew. Consulmar also prepared the bills of lading for

the transport of PMSA’s plant.

The Scotia Seahorse left Carupano at 9:30 on Sunday morning,

September 24, 1989. The weather was fair and clear. Cabada

recalled watching the Scotia Seahorse as she disappeared over the

horiz on. Cabada then flew to Caracas, Venezuela to take care of

business there. The next morning, Cabada called Domingo Barbiere,

who was the n the general manager of PMSA, to tell him that the

vessel had left Carupano.

Unbeknownst to Cabada, twelve hours after the Scotia Seahorse

left Carupano, her main engines had come to a dead stop. Captain

Sa ssman’s immediate concern was to secure loose acetylene tanks

that were working back and forth on deck. As Captain Sassman and

the crew attempted to secure the tanks, the vessel began to list.

Although he was able to start the port engine, the list worsened.

The crew attempted to pump the water from the bilge, but the main

bilge pump worked only intermittently. Although Sassman revived

the starboard engine at 4:30 a.m., his efforts were t o no avail.

Around 9: 15 a.m. on Monday, September 25th, the S cotia Seahorse

rolled over and sank to the bottom of the sea.2 Wilson since has merged with Corroon & Black to become

Willis Corroon.

3 Kulisic was educated in the United States. Because Barbiere

did not speak English well, if at all, Kulisic often served as an

intermediary and a translator of written correspondence for PMSA.

6 Captain Sassman jumped from the vessel as she rolled over.

The crew had abandoned ship less than an hour before. A Venezuelan

naval frigate, the General Subelet

, was standing by to take Captain

Sassman and the crew to Puerto La Cruz, Venezuela.

Behind-the-scenes efforts to obtain marine insurance were

almost as ill-fated as the voyage itself. Walchli agreed to help

Cabada obtain insurance in the United States, although this was not

normally a service provided by his marine equipment supply company,

Marinsa. Walchli contacted W.K.P. Wilson & Son, Inc., an insurance

broker in Mobile, Alabama, 2 on the recommendation of the marine

surveyor Jeff Bolding. Frank Wayne Hall, Sr., an account executive

at Wilson, was in charge of the Cradock account. Cabada never

spoke with Hall or anyone else at Wilson directly; all

communication s between Cabada and Wilson were through Walchli or

Zarko Kulisic. 3 Kulisic is a shareholder in PMSA and at the time

of trial was the general manager of PMSA.

Through Wilson, Walchli obtained for Cradock a $350,000 hull

insurance policy with various Lloyd’s of London underwriters and a

$1 million protection and indemnity (“P &I”) policy with West of

England Ship Owners Mutual Insurance Association’s fixed premium

facility. Generally speaking, hull insurance covers the loss or

damage of the vessel and its equipment. S ee Raymond P. Hayden &4 First-party cargo insurance protects the cargo owner

against loss or damage of the cargo.

7 Sanford E. Balick, Marine Insurance: Varieties, Combinations, and

Coverages

, 66 T UL

. L. R EV

. 311, 315 (1991). P&I insurance covers

shipowners, charterers, and the similar individuals for liabilities

to third parties arising out of the operation of the vessel. Id.

at 327.

Wilson arranged to add PMSA as an additional assured on both

the hull and the P&I policies. Whether Hall was told only to add

PMSA on the hull policy or on b oth policies was a matter hotly

disputed at trial. The district court resolved this disputed fact

issue in the plaintiffs’ favor, concluding that Hall was asked only

to add PMSA as an additional assured on the hull policy and was not

asked to add PMSA as an additional assured on the P&I policy.

PMSA did not obtain first-party cargo insurance 4 for the fish

meal processing plant before the Scotia Seahorse sank. Cabada

originally informed Wilson, through Walchli, that PMS A would

arrange for first-party c argo insurance through Napoleon De La

Colina, a Peruvian insurance broker. When De La Colina was unable

to obtain cargo coverage, he contacted Wilson to ask for

a ssistance. The next day PMSA’s Barbiere asked Hall to obtain a

quote for cargo insurance. He told Hall that the Scotia Seahorse

would be ready to depart Carupano in two days. Hall sent a fax to

Bain Clarkson Limited, a London insurance bro kerage firm, asking

for a quote for cargo coverage in the amount of $1,700,000, the

value of the cargo to be insured. A fax from Hall to Barbiere on8

Sep tember 21 indicated that the underwriters were “working on a

[q]uote for c argo . . . ,” but that Hall was still unable to

confirm cargo coverage. Hall was out of the office on Friday,

September 22, and left the matter in the hands of another Wilson

employee. He testified that she knew of the urgency of obtaining

the cargo insurance quote. Hall did not know whether she attempted

to contact Bain Clarkson that Friday or whether anyone from PMSA or

Cradock contacted his office that day.

The district court found that in the meantime there was a

“fatal communications breakdown” between PMSA and Cradock. Cabada

apparently thought that the inspection conducted by the Ll oyd’s

surveyor in Carupano was for the purpose of securin g cargo

coverage. Once the inspection was completed, he believed that the

Scotia Seahorse was free to go with first-party cargo insurance in

place. Similarly, Kulisic testified that he did not know that the

inspection in Carupano was required by the hull insure rs rather

than the cargo insurers. Kulisic conceded, however, that he did

not have confirmation of cargo coverage before the Scotia Seahorse

set sail from Carupano. On September 26th, Hall obtained a quote

from Bain Clarkson for the cargo coverage. Unaware that the S cotia

Seahorse had sunk the day before, Hall faxed the quote to Barbiere

in Peru.

When Kulisic and Barbiere learned that the Scotia Seahorse had

sunk, they asked Walchli to inform Wilson of the loss and to remit

any unpaid premiums. Walchli testified that Hall told him that

Cradock should pay the outstanding premium on the hull and P&I5 Kulisic’s testimony flatly contradicted Hall’s.

9 policies, but that no premium should be remitted by PMSA for firstparty cargo coverage because cargo insurance had not been placed

before the Scotia Seahorse sank.

When the S cotia Seahorse sank, the outstanding unearn e d

premium for t he rest of the year on Cradock’s P&I policy was

approximately $39,000. Hall testified that Kulisic was adamant

that Cradock expected no claims under the P&I policy. Kulisic’s

p rimary concern, according to Hall, was getting the Londo n

underwriters to consider a claim under the hull policy. The hull

policy contained a clause under which the full annual premium was

deemed due in the event of total loss. Thus, before the hull

underwriters would even consider a claim under the hull policy,

Cradock was required to pay the full annual premium.

As a cost-saving measure, Hall suggested that the P&I policy

could be canceled retroactively as of the date of the sinking.

Hall said that Kulisi c had informed him that no crew members had

made any clai ms, that they would not have to move the vessel

because it rested in deep waters, and that Cradock foresaw no

claims against the P&I policy. 5

Bain Clarkson arranged the retroactive cancellation with West

of England on the condition that Cradock stipulate that there would

be no claims against the P&I policy. Hall claims that he tried to

negotiate a milder stipulation, but the underwriters would settle

for no less. Hall never told Cradock of his efforts to “soften the

blow” of the stip ulation demanded by the underwriters. He6 At the time of trial, that suit had not been resolved. The

district court proceeded on the assumption that Crado ck would be

held liable to PMSA for the entire value of the lost cargo. Wilson

does not challenge the assumption that Cradock would have some amount of liability to PMSA but does argue that the Cradock would

not be liable to PMSA for the full amount of the loss. See infra

Part III.C.

10 testified that the stipulation was cons i stent with his

conversations with Kulisic and Walchl i and claimed to have

discussed the consequences of cancellation with both men.

Hall insisted that there was no indication at the time the P&I

policy was canceled that there might be a third-party cargo legal

liability claim by PMSA against Cradock and that he became aware of

this possibility only when PMSA made a formal claim against

Cradock. On the advice of its attorney, PMSA made a formal claim

on Cradock in January of 1990, and filed a lawsuit against it in

Peru on August 15, 1990. 6

When Hall learned of the PMSA claim, he forwarded this

information to Bain Clarkson. Bain Clarkson reminded Hall that the

P&I policy had been canceled at the assured’s request, but

suggested that if Cradock paid a reinstatement premium of

approximately $39,000, there was a good chance that the

underwriters would reinstate the canceled P&I coverage. In a

letter dated March 22, 1990, Hall informed Cradock that the P&I

policy could be reinstated for $39,000. Hall repeatedly reminded

Cradock that to seek reinstatement of the P&I policy, it would need

to pay the full reinstatement premium. A year and a few months

after Hall first suggested the possibility of reinsta tement,

Cradock remitted the premium. By that time, West of England had11

abandoned the underwriting function of its fixed premium facility,

which had originally underwritten Cradoc k’s P&I policy, and was

performing only a claims resolution function. Accordingly, West of

England was unwilling to reinstate the policy when Cradock finally

remitted to the premium to Wilson.

II.

P ROCEDURAL H ISTORY

The case was tried to the bench. Cradock and PMSA advanced

several theorie s of liability against Wilson: that Wilson

negligently added PMSA as an additional assured on both the P&I

policy and the hull policy; that Wilson neglige ntly canceled the

assureds’ P&I policy without adequately consulting them about the

consequences of doing so; that Wilson faile d to recommend an

ad equate policy limit for the P&I policy; and that Wilson

n egligently delayed in obtaining first-party cargo insurance fo r

PMSA.

The district court found that Wilson negligently arranged for

PMSA to be added as an additional assured o n both Cradock’s hull

and P&I policies, although it had been asked only to add PMSA as an

additional assured on the hull policy. The district court also

found that Wilson had breached its duty by canceling the P&I policy

without adequately consulting the assureds about the terms of the

cancellation. The district court, however, concluded that the

breach of duty result ing from the cancellation was not

“prejudicial.” Phrased in negligence terms, the district court

concluded that Wilson’s breach of duty was not the proximate cause

of any damage to the plaintiffs. The district court concluded that7 Cradock and PMSA also list the district court’s failure to

award prejudgment interest as a point of error, but fail to provide

any argument or authority to support this point. Consequently,

that point has been abandoned. J ustiss Oil Co. v. Kerr-McGee Ref.

Corp.

, 75 F.3d 1057, 1067 (5th Cir. 1996) (citing Gann v. Fruehauf

Corp.

, 52 F.3d 1320, 1328 (5th Cir. 1995); G reen v. State Bar of

Texas

, 27 F.3d 1083, 1089 (5th Cir. 1994)). At oral argument,

counsel for Cradock and PMSA acknowledged that this point of error

had been abandoned.

12 by adding PMSA as an additional assured on the P&I policy, Wilson

abrogated Cradock’s legal liability coverage for the loss of PMSA’s

cargo because of a limitation on coverage of the “Assured’s own

cargo.” Thus, in the district court’s view, even if the P&I policy

had not been canceled, it would not have covere d Cradock’s

liability for the loss of PMSA’s cargo because PMSA had been added

as an additional assured on the P&I policy. The district court

found against Cradock and PMSA on the other two theories of

negligence advanced.

The district court awarded PMSA and Cradock $1 million, the

coverage that the district court concluded that Cradock would have

had under the policy, but for Wi lson’s breach of duty. 7 Wilson

chal lenges the amount of the award, claiming that Cradock’s

coverage under the P&I policy was subject to a limitation-ofcoverage clause in the policy. Wilson also argues that Cradock’s

liability to PMSA was limited by a limitation-of-liability clause

in the bill of lading, which in turn would have limited West of

England’s indemnity obligation.

The district court determined that Alabama law should govern,

but that Miss issippi would apply its own comparative negligence

scheme because Alabama’s contributory negligence bar offended13

Mis sissippi’s public policy. None of the parties challenge the

district court’s choice-of-law determinations. We review de novo

the district court’s resolution of legal issues, including issues

of contractual interpretation, and review the district court’s

factual findings for clear error. Ham Marine, Inc. v. Dresser

Indus., Inc. , 72 F.3d 454, 458-59 & n.3 (5th Cir. 1995).

III.

D ISCUSSION

A.

The district co u rt concluded that Wilson’s negligence in

adding PMSA as an additional a ssured under the P&I policy

eliminated Cradock’s coverage for the loss of PMSA’s cargo. As a

result, the district co urt concluded that PMSA’s and Cradock’s

damages flowed from the negligent addition of PMSA rather than from

Wilson’s negligent cancellation of the P&I policy. Under the

district court’s reading of the policy, Wilson’s negligent

cancellation of Cradock’s P&I policy did not harm Cradock or PMSA:

even if the policy had remained in effect, Cradock would not have

been covered for the loss of PMSA’s cargo because of a provision in

the P&I policy that limits coverage for the loss or damage of the

assured’s own car go. By way of cross appeal, PMSA and Cradock

contend that the district court erroneously concluded that adding

PMSA as an additional assured on the P&I policy eliminated

Cradock’s coverage for the loss of PMSA’s cargo.8 Cargo legal liability coverage insures against liability

for the loss of another’s cargo.

14 Cradock’s P&I policy with West of England included cargo legal

liability coverage. 8 The policy was based on Form SP-23, a common

marine insurance form P&I policy, as modified by West of England’s

standard P&I clauses. Clause 8 of Form SP-23 provides cargo legal

liability coverage:

The As surer hereby undertakes to make good to the

Assured

. . . all such loss

. . . as the Assured shall as

owners of the vessel named herein have become liable to

pay and shall pay on account of the liabilities, risks,

events and/or happenings herein set forth:

. . . (8) Liabi lity for loss of, or damage to, or in

connection with car go . . . to be carried,

carried, or which has been carried on board

the vessel named herein . . . .

Although West of England’s standard P&I clauses exclude Clause 8,

the cover note indi cates that cargo legal liability coverage is

included, if required. As the district court explained, cargo

legal liability coverage was included in Form SP-23, excluded by

the West of England standard P&I clauses, and then reinstated as

indicated by the cover note. Despite the district court’s

conclusion that Clause 8 would have applied as written had the

policy not been canceled, the court determined that any coverage

provided by the P&I policy’s cargo legal liability clause for PMSA

would have been effec tively eliminated by Clause 8(cc). That

clause drastically limits coverage for the “Assured’s own cargo”:

Assured’s

own cargo (cc) Where cargo on board the vessel named herein is the

property of the Assured, such cargo shall be deemed

to be carried und er a contract containing the

protective clauses described in the preceding15 pa ragraph, and such cargo shall be deemed to be

fully insured under the usual form of cargo policy,

and in case of loss thereof or damage thereto the

Assured shall be insured hereunde r in respect of

such loss or damage only to the ext ent that they

would have been covered if said cargo had belonged

to another, but only in the event and to the extent

that the loss or damage would not be reco verable

under a cargo policy as hereinbefore specified.

The district court reasoned that PMSA’s cargo was “the property of

the Assured” because PMSA was an additional assured on the P&I

policy. As “property of the Assured,” the cargo would be deemed to

be fully covered by a first-party cargo insurance policy.

Accordingly, the district court concluded, the underwriters would

have had no obligation to indemni fy Cradock for Cradock’s thirdparty liability to PMSA for the loss of its cargo even if the

policy had remained in effect. We disagree.

The issue is what “assured” means in Clause 8(cc) when one

assured asserts coverage under the policy for its liability for the

loss of another assured’s cargo. It is important to bear in mind

that the issue is not PMSA’s coverage under the policy for the loss

of its own cargo. Rather the issue is Cradock’s third-party

coverage under the policy for its liability to PMSA for the loss of

PMSA’s cargo. That PMSA, as an additional assured, is not insured

d irectly under the policy for loss of its own cargo d oes not

necessarily mean that the policy does not cov er Cradock’s thirdparty liability to PMSA.9 Technically, this provision does not “exclude” coverage,

but limits coverage to any amount not recoverable under a standard

first-party cargo policy. We use the term “exclude” as shorthand

for the limiting function of the clause.

16 The Assured’s Own Cargo clause can be construed in at least

two ways. The clause can be construed to exclude 9 coverage if the

lost or damaged cargo is the property of “any assured” regardless

of which assured is asserting coverag e under the policy.

Alternatively, the clause can be construed to exclude coverage if

the lost or damaged cargo is the property of the assured asserting

coverage under the policy.

We conclude that the more reasonable and consistent reading of

the P&I policy as a whole is that it insures Cradock for Cradock’s

third-party liability for the loss of another person’s cargo,

including PMSA’s. As the marginal note indicates, the exclusion

applies to the “Assured’s own cargo.” Clause 8(cc) limits only

PMSA’s coverage under the policy for the loss of PMSA’s own cargo,

and Cradock’s coverage under the policy for the loss of Cradock’s

own cargo. Choosing this interpretation comports with the

fundamental principle that an ambiguous insurance contract

provision must be construed against the insurer who drafted it.

Employers Ins. of Wausau v. Trotter Towing Corp.

, 834 F.2d 1206,

1210 (5th Cir. 1988); see also Lynd v. Reliance Standard Life Ins.

Co.

, 94 F.3d 979, 986 (5th Cir. 1996)(Dennis, J., dissenting)

(noting that “according to the law of every state and the District

of Columbia, ambiguities in insurance contracts must be construed

against the insurer”) (citations omitted).17

The parties have not cited, nor has our res earch uncovered,

any precedent construing Form SP-23's Assured’s O wn Cargo

limitation of coverage. But the courts have addressed an analogous

dilemma: whether a clause excluding coverage for injuries suffered

by an “employee of the insured” excludes coverage of one insured’s

liability for an injury to an employee of ano ther insured. Most

courts addressing the issue have concluded that the employee

exclusion should be construed to exclude coverage on ly if the

claimant is the employee of the insured who is asserting coverage

under the policy. S ee, e.g.

, United States v. Transport Indem.

Co., 544 F.2d 393, 39 5 (9th Cir. 1976); F loat-Away Door Co. v.

Continental Cas. Co. , 372 F.2d 701, 708-09 (5th Cir. 1966), cert.

denied

, 389 U.S. 823, 88 S. Ct. 58, 19 L.Ed.2d 76 (1967); Wilson v.

State Farm Mut. Auto. Ins. Co.

, 540 So.2d 749, 751-52 (Ala. 1989);

Employers Mut. Li ab. Ins. Co. v. Farm Bureau Mut. Ins. Co. , 549

S.W.2d 267, 268 (Ark. 1977); U nited States Fid. & Guar. Co. v.

Globe Indem. Co.

, 327 N.E.2d 321, 323 (Ill. 1975); Pullen v.

Em ployers’ Liab. Assurance Corp

. , 89 So.2d 373, 377 (La. 1956);

United States Fidelity & Guar. Co. v. PBC Prods., Inc.

, 451 N.W.2d

778, 779-80 (Wis. App. 1989); Pa cific Indem. Co. v. Transport

Indem. Co.

, 146 Cal. Rptr. 648, 650-61 (Cal. App. 1978). But see,

e.g.

, Desrosiers v. Royal Ins. Co.

, 468 N.E.2d 625, 628 (Mass.

1984); P referred Risk Mut. Ins. Co. v. Poole

, 411 F. Supp. 42 9

,

433-34 (N.D. Miss.), aff’d

, 539 F.2d 574 (5th Cir. 1976)

(Mississippi law). Although none of these cases control the issue

before us, we find the majority view persuasive. Indeed, in F loat-18

Away Door

, this circuit concluded that “[t]he better reasoned cases

adopt a restrictive interpret ation of ‘the insured’ as referring

only to the party seeking coverage under the policy.” 372 F.2d at

708 (citing Maryland Cas. Co. v. American Fidelity and Cas. Co.

,

217 F. Supp. 688 (E.D. Tenn. 1963)). We explained that the purpose

of the employee exclusion is not advanced by applying it to exclude

coverage when the insured is not the employer of the injured party:

The primary objective of such exclusionary clauses is to

avoid duplication of coverage with respect to

compensation insurance. With that purpose in mind, there

seems to be no reason why an insured should not be

indemnified against the claim of an employee outside of

that insured’s employment.

372 F.2d at 708-09.

Similarly, our interpretation comports with the underlying

purposes of the Assured’s Own Cargo limitation. Clause 8(cc)

appears to serve two primary purposes. First, it prevents the

assured from using the P&I policy a s a form of first-party cargo

insurance and thus creates an incentive for P&I assureds to

purchase first- party insurance for their own cargo. Second, it

prevents duplicative coverage. An assured who loses its own cargo,

which by industry custom s hould be insured by first-party cargo

insurance, is not covered under both its P&I policy and its firstparty cargo policy. P&I coverage under the vessel owner’s policy

is not intended to be the primary method of insuring against cargo

loss.

If Clause 8(cc) is applie d to limit Cradock’s coverage for

PMSA’s cargo-loss claims, its aims are not fulfilled. If PMSA had

obtained first-party cargo insurance, that woul d not have helped19

Cradock one w hit with respect to its liability for the loss of

PMSA’s cargo. Even if PMSA’s cargo had been covered by first-party

cargo insuranc e, that would not have insulated Cradock from its

liability for the loss; PMSA’s first-party cargo insurer would have

had subro gation rights against Cradock. S ee Michael F. Sturley,

The Fair Opportunity Requirement under COGSA Section 4(5) , 19 J.

M AR

. L. & C OM

. 157, 180 (1988). Thus, Cradock’s need for coverage

of its liability to PMSA does not vary depending on whether PMSA,

an additional assured under its P&I policy, has first-party cargo

insurance.

Instead of preventing duplicative coverage, the district

court’s interpretation creates a gaping hole in Cradock’s liability

coverage under the P&I policy. In this case, it eliminates thirdparty cargo liability for the only cargo loss for which Cradock

conceivably could have needed cargo legal liability coverage.

For these reasons, we conclude that the term “assured” in the

Assured’s Own Cargo clause should be construed to mean the party

as serting coverage under the policy. Accordingly, each assured

would have liability coverage for the loss of another’s cargo,

including another assured, but would not have coverage for the loss

of its own cargo.

Because we conclude that Cradock’s P&I policy would have

covered its liability to PMSA for the loss of PMSA’s cargo, the

cancellation of the policy was a cause of PMSA’s and Cradock’s

damages. By the same token, adding PMSA as an additional assured

was not prejudicial. Thus, we need not consider the issues raised1 0 Wilson argued that the district court erred in finding that

it was negligent for adding PMSA as an additional assured because

the district court’s finding was not supported by expert testimony,

becau se it used hindsight rather than foresight to evaluate

Wilson’s conduct, and because its finding that Wilson was

instructed only to add PMSA on the hull policy was clearly

erroneous.

Wilson’s complaint on appeal that the district court’s

negligence finding was not supported by exper t testimony was not

directed toward the finding that Wilson breached a duty by

canceling the P&I policy without adequately counseling his

assureds. Even if the argument applied to the district court’s

negligent cancellation finding, the testimony of plaintiffs’

expert, Robert Breeden, supports the district court’s finding that

Wilson’s conduct in connection with the cancellation was in breach

of its duties as a broker. We express no opinion regarding whether

Alabama law would require expert testimony in a lawsuit against an insurance agent or broker.

20 by Wilson challenging t h e district court’s determination that

Wilson was negligent in adding PMSA as an additional assured on the

P&I policy. 10

B.

The district court’s decision that the cancella tion of the

policy was not prejudicial pretermitted its considera tion of

whether Cradock o r PMSA negligently notified Wilson that Cradock

expected no claims under the P&I policy, thus arguably contributing

to Wilson’s negligent cancellation of the P&I policy. The district

court also had no occasio n to consider whether Cradock was

comparatively negligent by delaying to pay a premium to reinstate

the P&I policy when informed that it could do so. Accordingly, we

will remand to allow the district court an opportunity to make

comparative negligence findings.

The district court correctl y declined to make a comparative

negligence finding with respect to PMSA’s failure to obtain first-1 1 Indeed, if Cradock had exercised due diligence in making the

vessel was seaworthy, it is likely that no indemnity obligation

would have arisen under t he P&I policy. Under Clause 8(bb), the

bill of lading was deemed to have a clause that would have exempted

C radock from liability if Cradock had exercised due diligence in

ensuring that the vessel was seaworthy.

21 party cargo insurance before the vessel left port. PMSA’s

negligence in this regard, if any, did not contribute to the loss

of Cradock’s third-party li ability coverage, which is the only

basis upon which damages were awarded by the district court.

The district court also noted that Cradock “did not exercise

due diligence to ensure that the vessel was seaworthy prior to

departure.” Wilson argues that the district court should have

reduced Cradock’s recovery because of Cradock’s failure to exercise

due diligence. We disagree. There is no indication that the P&I

policy would not have provided coverage if the loss resulted from

the assured’s failure to exercise due diligence. 11 An insurance

broke r who negligently cancels liability coverage cannot claim a

reduction of damages if the underlying loss was caused by an

insured event, even if that event was caused by the assured’s lack

of due diligence. Thus, the district court properly declined to

reduce Cradock’s and PMSA’s damages to reflect any negligence that

contributed to the sinking of the Scotia Seahorse

.

We remand to the district court to make comparative negligence

findings not inconsistent with this opinion.

C.

The district court awarded PMSA and C radock $1 million, the

limits of Cradock’s P&I policy. This award represents the amount1 2 The district court made no explicit finding that the

customary freight unit in this case was the entire fish meal

processing plant, but its discussion clearly supports an implicit

finding to that effect. The court cites with approval authority

holding that if the freight charg e is a “lump sum,” then the

relevant customary frei ght unit is the entire shipment. The

district court then found that the relevant bills of lading show

that the plant was shipped based on a lump-sum basis.

22 of coverage that the district court concluded that Cradoc k would

have had under its P&I policy but for Wilson’s negligence. For the

purpose of analyzing damages, we necessarily consider the coverage

to which Cradock would have been entitled had the P&I policy

remained in effect.

Cradock’s P&I policy contains a limitation-of-coverage clause

that purports to limit the insurer’s indemnification obligation to

$250 per c ustomary freight unit. The district court implicitly

held that the “customary freight unit” in this case was the entire

shipment. 12 Thus, the clause, if applicable, would limit Cradock’s

liability to $250. The district court, however, concluded that

Wilson was prevented from invoking this limitation-of-coverage

clause because PMSA had not been given a “fair opportunity” to

avoid the limitation under the Carriage of Goods by Sea Act

(“COGSA”), 46 U.S.C. § 1300 et seq. On appeal, Wilson reasserts

the policy’s limitation of coverage and also attempts to rely on a

limitation-of-liability clause in the bills of lading between PMSA

and Cradock.

1.

The bills of lading issued by Cradock to PMSA provide that any

terms not stated explicitly in the bills of lading are governed by23

the Brussels Convention of August 25, 1924, commonly referred to as

the “Hague Rules.” See Associated Metals & Minerals Corp. v.

Alexander’s Unity MV

, 41 F.3d 1007, 1015 (5th Cir. 1995). The

bills of lading do not state a limit for the carrier’s (here,

Cradock’s) liability. Under article 4(5) of the Hague Rules,

however, the carrier’s liability is limited to £ 100 sterling per

unit or package. S ee Brussels Convention for the Unification of

Certain Rules of Law Relating to Bills of Lading, Aug. 25, 1924, 51

Stat. 233, 120 L.N.T.S. 155. Wilson asserts for the first time on

appeal that Cradock’s liability to PMSA is limited to £ 100

sterling unde r the Hague Rules, that West of England’s

indemnification obligation in turn would have been so limited, and

accordingly that Wilson’s liability should be limited as well.

We conclude that Wilson forfeited this argument by failing to

raise it in the court below. To prevail on an issue raised for the

first time on appeal, an appellant must show a plain (clear or

obvious) error that affects substantial rights. D ouglass v. United

Servs. Auto. Ass’n , 79 F.3d 1415, 1423 (5th Cir. 1996) (en banc);

see also Highla nds Ins. Co. v. National Union Fire Ins. Co. of

Pittsburg , 27 F.3d 1027, 1032 (5th Cir. 1994) (applying the plain

error standard to a party’s failure to challenge a jury charge in

the district court), cert. denied , 513 U.S. 1112, 115 S. Ct. 903,

130 L.Ed.2d 786 (1995). If the trial court committed a plain error

that affects a party’s substantial rights, we may correct the error

only if it “seriously aff ects the fairness, integrity, or public

reputation of judicial proceedings.” United States v. Olano , 5071 3 Wilson also claims that this issue was preserved for appeal

because Wilson listed th e “nature and extent of plaintiffs’

damages, if any” as a disputed issue in the pretrial order. We are

not persuaded that this oblique reference to damages in the

pretrial order preserved the issue for our review.

24 U.S. 725, 736, 113 S. C t. 1770, 1779, 123 L.Ed.2d 508 (1993),

quoted in Dou glas , 79 F.3d at 1424. Wilson has not made the

requisite showings in this case.

Without citation, Wilson also argues that it had no burden to

raise this issue in the district court because the limitation-ofliability clause was a matter that Cradock and PMSA were obligated

to negate in the course of proving damages. 13 We disagree. A

limitation of liability is, in general, a defensive matter that

must be raised in the trial court by the party seeking to benefit

from the limitation. C f. Ingraham v. United States

, 808 F.2d 1075,

1078 (5th Cir. 1987)(holding that a stat utory limitation of

liability is an affirmative defense); Manion v. Pan American World

Airways, Inc.

, 434 N.E.2d 1060, 1062 (N.Y. 1982)(holding that

limitation of liability under the Warsaw Convention is an

affirmative defense); see H AWKLAND ET AL

., UCC S E RIES § 7-309:08

(1986)(“A contractual limitation-of-liability clause is an

affirmative defense and the carrier has the burden to establish

that the limitation is in effect.”). We conclude that Wilson

forfeited the argument that its liability is limited by the Hague

Rules because it failed to raise this argument in the court below.

2.

Wilson also contends that the district court should have given

effect to Clause 8(bb) of Cradock’s P&I policy, which represents an1 4 The balance of the paragraph lists other specific clauses

that are deemed to be in the assured’s bill of lading:

. . .a clause exempting the Assured and the vessel named

herein from liability for losses arising from

unseaworthiness, even though existing at the beginning of

the voyage, provided that due diligence shall have been

exercised to make the vess e l seaworthy and properly

manned, equipped, and supplied; a clause providing that

the carrier shall not be liable for claims in respect of

cargo unl ess notice of claim is given within the time

limited in such Bill of Lading an d suit is brought

thereon within the limited time prescribed therein; and

such other protective clauses as are commonly in use in

the particular trade; provided the incorporation of such

clauses is not contrary to law.

25 attempt to limit West of England’s indemnification obligation. The

relevant paragraphs of the clause provide:

When cargo is carried by the vessel named herein under a

bill of ladin g . . . subject or made subject to the

Carriage of Goods by Sea Act, April 16, 1936, liability

hereunder shall be limited to such as is imposed by said

Act, and if the Assured or the ve ssel named herein

assumes any greater liability or obli gation than the

minimum liabilities and obligations imposed by said Act,

such greater liability or obligation shall not be covered

hereunder.

When cargo is carried by the vessel named herein under a . . . bill of lading ... not subject or made subject to

the Carriage of Goods by Sea Act, April 16, 1936,

liability hereunder shall be limited to suc h as would

exist if said . . . bill of lading . . . contained the

following clauses: a clause limiting the Assured’s

l iability for total loss or damage to goods shipped to

Two Hundred and Fifty ($250) Dollars per package, or in

case of goo ds not shipped in packages, per customary

freight unit . . . . 14

The district court declined to limit Wilson’s indemni f ication

obligation under either of these paragraphs. Instead, it held that

Clause 8(bb) “activated” COGSA and that COGSA’s judicially created

fair opportunity doctrine barred Wilson’s reliance on the

limitation because Wilson failed to show that PMSA had been given1 5 Cradock and PMSA argue that Wilson’s position on appeal

with respect to COGSA’s fair opportunity doctrine is inconsistent

with its position in the district court. As Cradock and PMSA point

out, language in Wilson’s supplemental post-trial brief was quite

broad. In that brief, Wilson stated that “[i]t is obvious that

this section seeks to incorporate the rights and liab ilities

outlined in COGSA § 4(5 ), as the exact language of COGSA is

mirrored in Section 8(bb).” However, we conclude that Wilson’s

position on appeal is not inconsistent with its position in the

court below. Read in context, the sentence highlighted by PMSA and

Cradock was directed only to asking the district court to apply

COGSA precedent to ascertain the meaning of “customary freight

unit.” Cradock’s and PMSA’s reply to Wilson’s supplemental posttrial brief contains the first reference in the record to the fair

opportunity doctrine. Thereafter, Wilson maintained that the fair

opportunity doctrine should not vitiate the limitation-of-liability

clause in the P&I policy or alternatively that PMSA had been given

a fair opportunity. In its order on Wilson’s motion to alter or

amend the judgment, the district court acknowledged and rejected

Wilson’s argument that the fair opportunity doctrine should not

apply. We conclude that Wilson is not foreclosed from arguing that

the district court should not have applied the fair opportunity

doctrine.

26 a “ fair opportunity” to avoid the limitation. Wilson maintains

that the district court erron eously applied the fair opportunity

doctrine to prevent Wilson from invoking the P&I policy’s

limitation-of-coverage clause. 15

COGSA is the United States’ “statutory codifica tion of the

Hague Rules.” Associated Metals & Minerals Corp.

, 41 F.3d at 1016;

see also W ILLIAM T ETLEY

, M ARINE C ARGO C LAIMS 1102 (1988)(noting that

COGSA “incorporates the Hague Rules 1924 with some changes”).

Under COGSA, a carrier’s liability is limited to $500 per package

or, if the goods are not shipped in packages, per customary freight

unit. S ee 46 App. U.S.C. § 1304(5). American courts have given a

common-law gloss to COGSA, however, and required that before a

car rier can benefit from COGSA’s limitation of liability or a

contractual one, the cargo owner must be given a “fair opportunity”1 6 We note also that COGSA’s fair opportunity doctrine has

never been applied to a limitation-of-coverage clause in the marine

ins urance context. C f. Crown Zellerbach Corp. v. Ingram Indus.,

Inc. , 783 F.2d 1296, 1297 (5th Cir.) (en banc)(upholding a clause

that limited a P&I insure r’s liability to the “shipowner’s

judicially declared limit ation of liability”), c ert. denied

, 479

U.S . 821, 107 S. Ct. 87, 93 L.Ed.2d 40 (1986). The fair

opportunity doctrine has been applied to nullify only limitations

of liability as between carriers and shippers.

27 to avoid the limitation. S ee, e.g.

, Couthino, Caro & Co. v. M/V

Sava

, 849 F.2d 166, 169 (5th Cir. 1988); Brown & Root, Inc. v. M/V

P eisander

, 648 F.2d 415, 420 n.11 (5th Cir. 1981). The fair

opportunity doctrine appears to be unique to the Un ited States’

interpretation of the Hague Rules. S ee Carman Tool & Abrasives,

Inc. v. Evergreen Lines , 871 F.2d 897, 900 n.7 (9th Cir. 1989)

(discussing Sturley, supra at 165).

We hold that COGSA’s fair opportunity doctrine does not

overcome the P&I policy’s limitation of coverag e for two simple

reasons: COGSA does not govern th e contract between PMSA and

Cradock by its own force or by agreement, and the insurance policy

does not “activate” COGSA. 16

The first quoted paragraph of Claus e 8(bb) applies only to

contracts that are “subject or made subject to” COGSA. COGSA

governs “contracts for carriage of goods by sea to or from ports of

the United States in foreign trade.” 46 App. U.S.C. §§ 1300, 1312.

In this case, the underlying contracts between Cradock and PMSA did

not involve or contemplate shipments to or from the United States;

the bills of lading governed the transport of cargo from Venezuela

to Peru. Accordingly, COGSA did not govern the underlying bills of

lading by operation of law. In re Isbrandtsen Co. , 201 F.2d 281,1 7 The clause is applicable only “[w]hen cargo is carried .

. . under a

. . . bill of lading

. . . not subject or made subject

to the Carriage of Goods by Sea Act. . . .”

28 285 (2d Cir. 1953). Even so, Cradock and PMSA could have agreed to

incorporate COGSA in the bills of lading. See 46 Ap p. U.S.C. §

1312. But they did not. The bills of lading in this case

designate the Hague Rules (as adopted at the Brussels Convention of

1924) to fill in any gaps in the contract . Paragraph 2 of the

bills of lading states: “Regarding whatever terms are not here

stated explicitly[,] the Brussels Co nvention of August 25, 1924

shall apply in regard to certain clauses concerning the Bills of

Lading. ” Because the bills of lading are not “subject or made

subject to” COGSA, the first paragraph of Clause 8(bb) of the P&I

policy does not apply.

The district court nevertheless concluded that the P&I policy

activated COGSA, apparently because the second quoted paragraph of

Clause 8(bb) contains language and concepts borrowed from COGSA,

such as “customary freight unit,” notice requirem ents similar to

those under COGSA, and the due diligence defense. It is difficult

to see how the second paragraph — which explicitly states that it

applies when COGSA does not 17 — can be interpreted to “activate”

COGSA.

Even if the second quoted paragraph of Clause 8(bb) is

construed to “incorporate” fully certain COGSA concepts, that does

not mean that COGSA in its entirety, along with the judicially

created fair opportunity doctrine, applies through the policy. S ee

Croft & Scully Co. v. M/V Skulptor Vuchetich , 664 F.2d 1277, 128029

(5th Cir. 1982) (“[W]hen COGSA does not apply of its own force but

is incorporated into a maritime contract by reference, it does not

have ‘statute rank’; rather, it is merely a part of the contract,

a term like any other

. . . .”) (quoting Commonwealth

Petrochemicals, Inc. v. S/S Puerto Rico

, 607 F.2d 322, 325 (4th

Cir. 1979)) (internal citations omitted). It is well established

that parties who are not subject to a statute may choose to use

parts of the statute to define their relationship without bringing

the full force of the statute to bear. R alston Purina Co. v. Barge

Juneau & Gulf Carib. Marine Lines

, 619 F.2d 3 74, 376 (5th Cir.

1980) (“There can be no doubt that if they had wanted to, the

drafters of this contract could have identified specific provisions

or sections of COGSA and incorporated them by individual reference.

Surely no one could then argue that by doing so all the provisions

of COGSA would apply.”).

The stated limitation of co verage, $250 per package or

customary freight unit, provides yet another indication t hat the

parties did not intend to import COGSA wholesale. As previously

mentioned, $500 is the minimum limitation of liability per

customary fre ight unit under COGSA. 46 App. U.S.C. § 1304(5).

The plain language of the clause lim its the insurer’s

indemnification obligation to the liability that “would exist” if

Cradock had inclu ded a clause in the bill of lading limiting its

liability to $250 per customary freight unit. The practical effect

of this clause is that if COGSA does not apply, and if the law

g overning the shipping contract does not provide a limitation of1 8 If the cargo owner/shipper were to opt to avoid the

limitation of liability (either a statutory limitation or one in a

bill of lading or contract) by declaring a higher value and paying

additional freight, nothing would prevent the shipowner/carrier

from negotiating with the insurance company for additional coverage under the P&I policy. In fact, the policy specifically provides:

“The foregoing provisions as to the contents of the Bill of Lading

and the limitation of the Assurer’s liability may . . . be waived

or altered by the Assurers on terms agreed, in writing.”

30 liability, the carrier must limit its liability contractu ally to

$250 per pack age or customary freight unit or risk incurring

liabilities for which it will not be entitled to indemnity. Under

the plain language of the contract, an insurer is not required to

indemnify the assured for liability exceeding $250 per customary

freight unit, regardless of whether the assured has in fact limited

its own liability to a potential claimant. 18

Because COGSA does not apply to the underlying bills of lading

either by its own force or by contract and because the P&I policy

does not activate COGSA, COGSA’s fair opportunity doctrine would

not have prevented West of England from invokin g the policy’s

limitation-of-coverage provision. Accordingly, we conclude that

the district court erred in awarding Cradock and PMSA the limits of

the P&I policy. We turn now to determining the extent to which the

limitation-of-coverage provision would have limited Cradock’s

coverage.

D.

Clause 8(bb) of the P&I policy limits coverage under the P&I

policy to the liability that would exis t if the bills of lading

between Cradock and PMSA had contained a clause limiting liability

to $250 p er package or customary freight unit. According to the31

unappealed findings of the distri ct court, the cargo was not

shipped in “packages.” Thus, to determine the coverage to which

Cradock would have been entitled under the P&I policy, we must

determine what constituted the “custo mary freight unit” for this

shipment.

Although COGSA does not govern the parties’ relationship, we

look to COGSA cases for guidance in interpreting the term

“customary freight unit” because this term is evidently unique to

COGSA. S ee T ETLEY

, supra at 1102. Indeed, the cases relied upon by

the parties to interpret the phrase “customary freight unit” were

all governed by COGSA.

This circuit has interpreted the term “customary freight unit”

to mean “the unit of quantity, weight or measurement of the cargo

customarily used as the basis for the calculation of the freight

rat e to be charged.” C roft & Scully Co., 664 F.2d at 1281

(emphasis in original)(quoting Waterman S.S. Corp. v. United States

S.R. & M. Co.

, 155 F.2d 687, 693 (5th Cir.), cert. denied

, 329 U.S.

761, 67 S. Ct. 115, 91 L.Ed. 656 (1946)). Customary freight unit

“refers to the unit upon which the charge for freight is computed

and not to the physical shipping unit.” Id. (quoting Caterpillar

Americas Co. v. S/S Sea Roads , 231 F. Supp. 647 (S.D. Fla. 1964),

aff’d

, 364 F.2d 829 (5th Cir. 1966))(emphasis omitted). To

determine the customary freight unit for a particular shipping

contract, we look to the parties’ intent “as expressed in the Bill

of Lading, applicable tariff, and perhaps elsewhere.” I d. W hat

constitutes the “customary freight unit” is a question of fact, and32

a district court’s findings are reviewed for clear error. Id. ; F MC

Corp. v. S.S. Marjorie Lykes , 851 F.2d 78, 80 (2d Cir. 1988).

PMSA and Cradock argue that the district court erred in

concluding that the plant was shipped on a lump-sum freight charge.

The freight charge, they claim, was not a lump sum, but was based

on 4% of the shipped cargo’s value. Consequently, they argue, the

United States dollar is the customary freight unit. They rely on

Allied Chemical International Corp. v. Companhia de Navegacao Lloyd

Brasileiro

, in which the Second Circuit held that COGSA’s

limitation of liabili ty would not apply because the parties had

based the freight charge on the value of the goods. 775 F.2d 476,

485-86 (2d Cir. 1985), cert. denied

, 475 U.S. 1099, 106 S. Ct.

1502, 89 L.Ed.2d 903 (1986). The court explained, “Having paid a

freight charge based on the value of the goods, Allied could

reasonably have expected to recover their value if they were lost.”

Id. at 486. The district court in this case rejected the

application of Allied Chemical not because it disagreed w ith its

reasoning, but rather because it concluded as a factual matter that

the freight charge was made on a lump-sum basis, rather than on a

value-of-goods basis.

Decisions from other circuits support the conclusion that, if

the f reight charge was a lump sum, the entire shipment was the

customary freight unit. See Henley Drilling Co. v. McGee

, 36 F.3d

143, 150 (1st Cir. 1994); General Motors Corp. v. Moore-McCormack

Lines , 451 F.2d 24, 26 (2d Cir. 1971); Ulrich Ammann Bldg. Equip.

Ltd. v. M/V Monsun , 609 F. Supp. 87, 91 (S.D. N.Y. 1985); General33

Motors Corp. v. S/S Mormacoak , 327 F. Supp. 666, 669 (S.D. N.Y.),

aff’d

, 451 F.2d 24 (2d Cir. 1971) (holdi ng that an entire power

plant was the customary freight unit), cited with approval in Croft

& Scully , 664 F.2d at 1281.

In Henley Drilling Co. v. McGee

, the First Circuit upheld a

summary judgment that a “huge drill ing rig” was the customary

freight unit because the owner had paid a lump sum to ship it. The

court relied on the bill of lading and also on deposition testimony

indicating that the charge was based on the projected cost to the

c arrier. Finding “no competent evidence that the freight charge

was based on anything other than a lump sum,” the court held that

the “drilling rig itself” was the customary freight unit. H enley

,

36 F.3d at 150 (citations omitted). Thus, even though McGee lost

Henley’s drilling rig, valued at $629,000, it was liable for only

$500. Id. a t 144, 150; see also Moore-McCormack Lines

, 451 F.2d at

25 (holding that a power plant shipped by GM was the customary

freight unit because GM had paid a lump-sum freight charge for the

shipment of the entire plant and the cargo was described as a

single unit on the bill of lading ). PMSA and Cradock do not

challenge the soundness of these decisions, only their

applicabi lity to the facts of this case. They maintain that the

district court clearly erred in finding that the plant was shipped

on a lump-sum basis.

We conclude that the district court’s finding that the plant

was shipped on a lump-sum basis was not clearly erroneous . We

first look to the bills of lading under which the plant was1 9 Although the bills of lading show the weight of the cargo,

there is no indication that the freight charge was calculated based

on the weight of the cargo nor do Cradock and PMSA raise an argument that kilograms are the customary freight unit.

2 0 One of the bills of lading in fact contains a freight charge

that when divided into value of the goods (culled from the invoices

for the purchase of the plant’s components) is 2% rather than 4% of

the value of the goods. Cabada testified that this must have been

a mistake.

34 shipped. Each bill lists certain components of the plant and then

states a lump-sum freight charge at the bottom. Unlike the bills

of lading in Allied Chemical

, the bills of lading in this case do

not reflect the value of the goods sh ipped, nor do they give any

other indication that the freight charge was based on the value of

the goods. 19 Similarly, the initial letter agreement between PMSA

and Cradock states that the “total charge” for shipping the plant

is $80,000, and does not show t hat the charge was based on the

goods’ value. Although the charge may have constituted 4% of the

value of the cargo, 20 the relevant documents do not demonstrate that

the freight charge was based on a percentage of the cargo’s value.

The freight charge, ho wever calculated, will always be some

percentage of the cargo’s value. On this record, we are not “left

with the definite and firm conviction that a mistake has been

committed." United States v. United States Gypsum Co. , 333 U.S.

364, 395, 68 S. Ct. 525, 542, 92 L.Ed. 746 (1948). Accordingly, we

affirm the district court’s finding that the cargo was shipped on

a lump-sum basis and its implied finding that the entire shipment

was the customary freight unit.35

We recognize that the applic ation of the limitation-ofcoverage clause in this case is striking: Cradock would have been

i ndemnified under the policy for only $250, when its lack of due

diligence caused the loss of a $1.7 million fish meal processing

plant. A district court once commented that it would find that a

tractor was a customary freight unit “regardless of the harshness

or seeming illogic of such a result.” C aterpillar Americas, 231 F.

Supp. at 650. Here, however, the harshness may be more apparent

than real. Cradock’s liability to PMSA may be limited as

drastically as Cradock’s coverage is limited. Although Wilson

forfeited the right to rely on the Hague Rules’ limitation-ofliability provision in this suit, Cradock may yet be able to invoke

that l imitation as a defense in the lawsuit filed against it by

PMSA in Peru. The unfortunate fact that PMSA may not be made whole

is a result of its own failure to obtain first-party cargo

insurance; under the unappealed findings of the district court,

PMSA’s lack of first-party insurance is not attributable to Wilson.

For the foregoing reasons, the judgment of the district court

is AFFIRMED as modified, the damage award is VACATED, and the cause

is REMANDED for the district court to make comparative negligence

findings and to render a judgment not inconsistent wi th this

opinion.