Court Opinion

ID: 9455097
Source: CourtListenerOpinion
Date Created: 2023-08-04 19:11:15.295932+00
Date Added: 2024-06-11T17:34:27.452394
License: Public Domain

GEWIN, Circuit Judge:
The appellee, Olympic Towing Corporation, brought this suit in the United States District Court for the Eastern District of Louisiana against the appellants — Nebel Towing Company, Inc. and Nebel’s insurer, United States Casualty Company — to recover damages occasioned by the sinking of Olympic’s vessel, the M/V CARINTHIA, allegedly resulting from the improper operation of Nebel’s vessel,1 the M/V G-H, and her tow. The suit against Nebel’s insurer was brought pursuant to Louisiana’s direct action statute.2 Nebel thereafter petitioned the district court for exoneration from liability on the ground that the G-H was not the cause of the CARIN-THIA’s sinking; alternatively, Nebel sought to limit its liability, under the *232federal Limitation of Liability Act,3 to the amount of its interest in the G-H and the freight pending (towage charges). After a full trial, the district court found, inter alia, that the G-H had caused the CARINTHIA to sink but that the owner had been without privity or knowledge of any wrongdoing; accordingly, the court held that Nebel was not entitled to be exonerated but was entitled to limit its liability. However, the court held that the Limitation Act is a personal defense available only to the vessel owner; thus the court held that Nebel’s insurer could not limit the amount recoverable in the direct actions.4 Nebel and its insurer, supported by the American Institute of Marine Underwriters as amicus curiae, appeal from the court’s rulings denying exoneration and holding limitation of liability to be a personal defense. Olympic cross-appeals from the court’s ruling allowing Nebel to limit liability. We affirm the judgment of the district court.
I
Virtually all the evidence in this case pertinent to the question of liability is disputed. However, a bare outline of the facts surrounding the central incident is discernible in the district court’s pre-trial order. Sometime about midnight on October 19, 1961, the G-H and the CARINTHIA were traveling in opposite directions in the Gulf Intracoastal Waterway, the G-H moving westward and the CARINTHIA moving eastward and each approaching Mile 120. The GH was towing five barges astern and the CARINTHIA was pushing two barges ahead. Another tug, the CEPHEUS II, was following the CARINTHIA in order to take advantage of the latter’s radar in case of dense fog. Mile 120 falls directly in the middle of two bends in the Waterway, which forms a sort of attenuated “S” at that point. Apparently because of the difficulty of navigating the double bend, the vessels communicated by radio and agreed that the G-H would “hold up” east of the bends and let the CARINTHIA pass port to port. The CARINTHIA subsequently passed the G-H somewhere in the vicinity of Mile 120. However, in the process of passing, the CARINTHIA veered out of the channel toward the south bank and struck an unidentified underwater object. She immediately began to take more water than her pumps could handle. When it became clear that efforts to keep her afloat would fail, she moved up the bank where she finally rolled over on her side. The district court found, as Olympic had contended, that the G-H had permitted her barges to swing beyond mid-channel, thus forcing the CARINTHIA to leave the channel in order to avoid collision. Therefore, the court concluded that the sinking of the CARINTHIA was attributable to the embarrassment of her navigation by the G-H.
Since all testimony directly concerning the events upon which liability hinges was admitted by way of depositions, and our ability to evaluate this evidence is comparable to that of the trial court, the application of the “clearly erroneous” standard is less stringent.5 Granting this, however, Nebel has *233gained nothing, for the fact is that we are not inclined to disturb the district court’s findings. The two witnesses who testified on behalf of Olympic — the captains of the CARINTHIA and the CEPHEUS II — described the crucial events in one light, while Nebel’s two witnesses — the captain and deckhand of the G-H — related entirely inconsistent details. The district court prefaced its findings of fact with this cogent statement:
A. K. Billiot was in control of a vessel, the CEPHEUS II, which was not directly involved with this litigation. Indeed, he occupies the position of a disinterested bystander, with no ostensible purpose for siding with the interests of the M/V CARINTHIA as against the interests of the M/V GH. Also of significance is the fact that a comprehensive statement taken from Billiot within a few days of the incident involved is part of the record and does not vary in any important detail from his subsequent statement or his deposition testimony.
The testimony of Adkinson [relief captain on the G-H] is in hopeless conflict with that of Dicks [relief captain on the CARINTHIA] on virtually every critical link in the chain of events culminating in this incident. Coulter [deckhand on the G-H] who would naturally be expected to corroborate Adkinson, does so on some points, but contradicts the testimony of his captain in many significant areas.
Therefore, in arriving at its findings the Court relied heavily on the testimony of Billiot which substantiates the account of this incident as related by Dicks. Accordingly, the credence placed in the testimony of Ad-kinson and Coulter decreased as the gap between their account and that of Dicks and Billiot widened. Libelant bore its burden of proof, establishing a prima facie case of liability, and the evidence adduced by respondent simply lacks the convincing force necessary to defeat libelant’s claim.
It may be conceded that the record before this court contains considerable evidence favorable to Nebel’s position. However, when the evidence is in complete conflict, the court must accept one version of the facts and reject the contrary version. Nebel’s argument invites us to select its version and draw inferences from ambiguities which are favorable to its position. We must decline the invitation. In the circumstances of this case, we think the district court’s approach was sound and that its findings are adequately supported.
Nebel also argues that, even if the tow of the G-H did force the CARIN-THIA out of the channel, the sinking of the CARINTHIA was not proximately caused by the G-H because the crew of the G-H could not foresee that the CA-RINTHIA would strike a submerged object. Nebel relies upon testimony to the effect that it is unusual for a vessel to suffer damage when it runs outside the channel. Nebel argues that an event is not foreseeable unless it is a probable consequence of an act.
Generally, “proximate cause” in the admiralty context is defined as “that cause which in a direct, unbroken sequence produces the injury complained of and without which such injury would not have happened.”6 This definition obviously describes a cause-in-fact principle, while proximate cause in the common law is generally a question of the extent of the tortfeasor’s duty.7 Nebel here is clearly relying upon the latter concept. However, we cannot agree with Nebel’s statement of the standard for determining proximate causation. We think that, in order for a risk to be foreseeable, “the consequences must be a normal, substantial part of the risk, which a reasonable man would recognize as fairly to be taken into account by the *234defendant at the time of his act.” 8 Under this standard, it is patent that the G-H should reasonably have foreseen that some damage might result from forcing the CARINTHIA to leave the channel.
We must also reject Olympic’s contention that Nebel should have been denied the right to limit its liability. Under the Limitation Act, a vessel owner can limit its liability only if the owner is without “privity or knowledge” of the act causing the loss.9 Olympic attempts here to marshal sufficient facts to attribute privity or knowledge to a shareholder and officer of Nebel. However, the attempt fails because, as the district court found, there is simply nothing in the record which could be considered privity or knowledge, as broad and vague as those terms are.10 Thus we think that the court below properly permitted Nebel to limit its liability. ■
II
The appellants and the amicus curiae launch a broad scale and many-faceted attack on the district court’s holding that Nebel’s insurer could not take advantage of Nebel’s right to limit its liability. When the question presented here was before this court over fifteen years ago, we held that limitation was not available to an insurer in a direct action suit.11 The Supreme Court reversed in Maryland Cas. Co. v. Cushing,12 a 4-1-4 decision which established a procedural chronology for that case and implicitly disposed of many questions raised here. Four members of the Court took the view that Louisiana’s direct action statute was in conflict with the Limitation Act and therefore that the state statute must fall before paramount federal law.13 Four other members agreed with this court, seeing no conflict whatever.14 However, neither faction carried the day, for Mr. Justice Clark did not agree entirely with either and his vote was necessary to form a majority. Justice Clark saw no reason to invalidate Louisiana’s statute because, in his view, any conflict between the state and federal statutes could be obviated by a procedural chronology; because of the deadlock in the vote, Justice Clark’s approach became the court’s disposition of the case:
Our only interest is to make certain that such [direct] actions do not interfere with the Federal Limitation proceeding. To do this we need only require that the limitation proceeding be concluded first and the owner’s liability settled under it. The petitioners could then discharge this liability, to the extent their policies covered it, by paying into the limitation proceeding the proper sum. The door would then be left open for prosecution of the direct actions against the insurance companies on the remaining coverage of the policies. Thus, whatever the insurers’ liability may be under Louisiana law in the subsequent direct actions, the [vessel] owner’s purse cannot be touched.15
As indicated by the last sentence quoted above, Mr. Justice Clark was concerned that, if the direct actions were completed prior to the limitation proceedings, the vessel owner’s insurance might be exhausted in the direct action *235suits and thus deprive the vessel owner of the benefit of his insurance in the limitation proceeding. In the present case, the direct action and the limitation proceeding were consolidated in the same court and, therefore, no problem of insurance-fund exhaustion is presented. We reject the contention of the appellants and the amicus that future cases will present the problem because the federal court in admiralty does not have power to enjoin claimants from continuing with direct actions in other forums —especially state forums — prior to the limitation proceeding. We have already held that the federal admiralty court has ample injunctive power for the purpose of insuring the orderly and effective operation of the Limitation Act.16 Thus it is clear that the court has the power— and, doubtless, the ingenuity — to devise effective procedures to protect rights under both the state and federal statutes17
The Court’s disposition in Cushing implicitly disposed of two matters which the appellants and the amicus advert to only briefly, viz., (1) the compatibility of a direct action with a concursus under the Limitation Act18 and (2) the possibility that higher premiums would result if the insurer is held liable beyond the amount of the limitation fund, thus denying the shipowner full benefit of the Limitation Act. With regard to the first matter, although four members of the Court would have voided the direct action statute because of conflict between the proceedings, five members, including Justice Clark, took a contrary position. Moreover, the right to proceed with a direct action after a limitation proceeding has been completed is an implicit holding that the policy underlying the coneursus is not so strong or pervasive as to abrogate rights under the direct action statute. We hold that any conflict between the direct action statute and the federal provision for a coneursus of claims in admiralty is so minimal as to be insignificant.
Regarding the matter of higher premiums, even if this question had not been implicitly disposed of by Cushing, we would reject the contention. To begin with, since in the vast majority of cases limitation is denied for one reason or another, it may well be questioned how significantly the possibility of limitation figures into the actuarial computation of premiums.19 Second, since the maritime industry quite often benefits from full recovery of losses, the policy underlying the Limitation Act is perfectly compatible with spreading losses through higher premiums. For example, the interest of the maritime industry in the present case is best served by *236permitting Olympic to recover its entire loss from the sinking of its vessel; the better policy would seem to favor slightly higher premiums, if really necessary, in order to avoid instances of severe loss. And finally, we do not think that the Limitation Act was intended to limit the amount of premiums paid by vessel owners on insurance. Therefore, we hold that the possibility of higher premiums is an insufficient basis for permitting an insurer to limit its liability.
The amicus also contests the jurisdiction of the district court under the proviso to subsection 1332(c) of the Judicial Code which states
[t]hat in any direct action against the insurer of a policy or contract of liability insurance, whether incorporated or unincorporated, to which action the insured is not joined as a party-defendant, such insurer shall be deemed a citizen of the State of which the insured is a citizen, as well as of any State by which the insurer has been incorporated and of the State where it has its principal place of business.20
The amicus argues that the direct action must rest upon diversity jurisdiction and that the quoted proviso destroys diversity between Olympic and Nebel’s insurer. It is not necessary for us to decide that question because the proviso was not enacted until August 14, 1964, while Olympic’s direct action was filed in the district court on January 30, 1962. Thus it is clear that the new proviso is inapplicable to this case. Neither do we decide whether suit could be filed directly against the insurance company under principles of maritime law under allegations that the insurance policy is a maritime contract.
Ill
The appellants’ remaining contentions depend upon the interpretation of Louisiana law. At the threshold, the amicus' contends that Louisiana’s direct action statute does not apply to marine insurance policies at all. This argument is made in the face of Coleman v. Jahncke Serv., Inc. where this court stated:
The direct action statute, by its terms, applies to every “policy or contract of liability insurance.” * * * “There is no indication in Sec. 655 that the Louisiana legislature intended to deny the right of direct action to persons covered by marine policies, while extending it to all others.”21
Therefore, this question is now settled until the Louisiana courts decide the matter differently.
Next, the appellants and the amicus contend that the insurance policy involved here — a Protection and Indemnity Policy — does not permit a direct action. Although the appellants quote several clauses from the policy,22 the clause primarily relied upon states in pertinent part:
In consideration of the premium and subject to the warranties, terms and conditions herein mentioned, this Company hereby undertakes to pay up *237to the amount hereby insured * * * such sums as the assured * * * shall have become legally liable to pay and shall have paid on account.
The difficulty with the argument is that the no-action clause quoted above is ineffective under Louisiana law.23 The direct action statute becomes a part of every insurance policy having effect in Louisiana as though written into the policy.24 As the court stated in Hidalgo v. Dupuy:
The statute simply voids any policy clause which conditions the right of the injured person to enforce against the insurer its contractual obligation to pay the insured’s debt upon, as prerequisite, the obtaining by the injured person of a judgment against the insured.25
Underlying this principle is the public policy of Louisiana which proclaims that liability insurance — including purported indemnity insurance — is issued primarily for the protection of the public rather than the insured.26 We think it clear, therefore, that the clause relied upon here does not preclude a direct action.
The appellants’ final contention is that the right to limit liability is not a “personal defense” under Louisiana law and, therefore, is available to Nebel’s insurer in this case. The pertinent Louisiana statute provides:
A codebtor in solido, being sued by the creditor, may plead all the exceptions resulting from the nature of the obligation, and all such as are personal to himself, as well as such as are common to all the codebtors.
He can not plead such exceptions as are merely personal to some of the other codebtors.27
Although there is no definitive holding in point by the Louisiana courts, the appellants and the amicus argue by analogy that the limitation of liability is not a defense which is “merely personal to some of the eodebtors” but rather one “resulting from the nature of the obligation.” The essence of the argument is stated with admirable conciseness in the appellants’ brief:
The shipowner’s obligation to his debtors, i. e., the claimants, for injuries to persons and property arising out of a marine disaster leading to a limitation proceeding, is limited in amount by the Limitation Statutes to the value of the vessel and pending freight. There can be no reason why such a statutory exception or exemption from liability, beyond the value of the vessel, cannot be said to result from the nature of the shipowner’s obligation under Article 2098, just as a contractual limitation in amount can be said to result from the nature of the obligation. His obligation to his debtors is fixed and limited by the law of the land — an Act of Congress. It follows then, that the defense of limitation of liability is not a personal defense.'
We are not, however, persuaded by this strained analogy. The nature of a “personal defense” under Louisiana law is explained in Judge Ellis’ excellent opinion in Alcoa Steamship Co. v. Charles Ferran & Co.28 After pointing out a number of defenses which have been held to be “personal” under Louisiana *238law — e. g., infancy,29 coverture,30 charitable immunity,31 governmental immunity,32 bankruptcy.33 Judge Ellis stated:
Amongst these apparently varied “personal” defenses, one common denominator is discernible — each person possessing a “personal” defense obtained that defense because the law granted it to all members of his class as a matter of public policy. The personal defense attaches to the status. Hence parents, children, husbands, wives, governmental units, charitable organizations, bankrupts, lunatics, interdicts, vessel owners, and the like possess a defense denied their respective insurers.34
There is no question that the Limitation Act was designed to assist the maritime industry and that it was in no way intended to benefit the insurance industry.35 Thus it is patent that statutory limitation of liability is only available to a shipowner; the status of insurer is not covered by the public policy underlying the Limitation Act. We therefore hold that limitation of liability under the federal statute is a personal defense which cannot be availed of by an insurer under Louisiana law.36
Accordingly, the judgment of the district court is affirmed in all respects.
Affirmed.

. The G-H was owned by G-H, Inc. and bareboat chartered to Nebel. For purposes of the issues in this case, a bare-boat charterer is the owner. See 46 U.S.C. § 186 (1964).

. La.R.S. 22:655 (Supp.1964). The statute was amended in 1962, subsequent to the events in this case, but the amended language does not affect any rights involved here.

. The pertinent portion of the Act provides :
The liability of the owner of any vessel * * * for any act, matter, or thing, loss, damage, or forfeiture, done, occasioned, or incurred, without the privity or knowledge of such owner or owners shall not * * * exceed the amount or value of the interest of such owner in such vessel, and her freight then pending.
46 U.S.C. § 183(a) (1964).

. The district court’s order was an interlocutory decree which left for determination the amount of the insurer’s liability. The order is appealable under 28 U.S.C. § 1292(a) (3) (1964). See Caradelis v. Refineria Panama, S.A., 384 F.2d 589, 591 n. 1 (5th Cir. 1967).

. Caradelis v. Refineria Panama, S.A., 384 F.2d 589, 593 (5th Cir. 1967) ; San Pedro Companía Armadoras, S.A. v. Yannacopoulos, 357 F.2d 737, 740 (5th Cir. 1966).

. See, e, g., Olsen v. States Line, 378 F.2d 217, 221 n. 7 (9th Cir. 1967) ; 2 Norris, Law of Seamen § 689 (1962).

. See generally Gregory, Proximate Cause in Negligence — A Retreat from Rationalization, 6 U.Chi.L.Rev. 36 (1938).

. Prosser, Law of Torts § 48 at 259 (2d ed. 1955).

. 46 U.S.C. § 183(a) (1964).

. Gilmore & Black, Law of Admiralty 695-96 (1957).

. Cushing v. Maryland Cas. Co., 198 F.2d 536 (5th Cir. 1952).

. 347 U.S. 409, 74 S.Ct. 608, 98 L.Ed. 806 (1954). See Guillot v. Cenac Towing Co., 366 F.2d 898 (5th Cir. 1966).

. 347 U.S. at 410, 74 S.Ct. 608, 98 L.Ed. at 811 (Justices Frankfurter, Reed, Jackson, and Burton).

. 347 U.S. at 427, 74 S.Ct. 608, 98 L.Ed. at 820 (Justices Black, Douglas, and Minton, and Chief Justice Warren).

. 347 U.S. at 425, 74 S.Ct. at 616, 98 L.Ed. at 819.

. Guillot v. Cenac Towing Co., 366 F.2d 898, 904 (5th Cir. 1966). Since the stay of a direct action would he in aid of the admiralty court’s jurisdiction, the appellants’ reliance on 28 U.S.C. § 2283 (1964) is misplaced.

. It may be noted that the four dissenting Justices in the Cushing case argued that the direct actions should be permitted to proceed irrespective of the limitation proceeding. We do not adopt that view because a majority of the Cushing Court thought otherwise and, therefore, Cushing is probably controlling authority on this question. We do not intend to intimate, however, that the procedural chronology is inviolable. The reason for requiring the limitation proceeding to be completed first is to permit the vessel owner to receive the benefit of his insurance. Where the same purpose can be aecom-plished otherwise — e. g., where, as in the present case, the direct action and the limitation proceding are consolidated — or where a chronology would serve no purpose — e. g., where there is only one claimant — the Cushing chronology need not be followed. See Guillot v. Cenac Towing Co., 366 F.2d 898 (5th Cir. 1966) ; Ex parte Tokio Marine & Fire Ins. Co., 322 F.2d 113 (5th Cir. 1963); Torres v. Interstate Fire & Cas. Co., 275 F.Supp. 784 (D.P.R.1967) ; In re Independent Towing Co., 242 F.Supp. 950 (E.D.La. 1965).

. Bee 46 U.S.C. § 185 (1964).

. See Note, Shipowners’ Limited Liability, 3 Colum.J.L. & Soc.Prob. 105, 114-15 (1967). See generally Comment, Limitation of Liability in Admiralty: An Anachronism from the Days of Privity, 10 Vill.L.Rev. 721 (1965).

. 28 U.S.C. § 1332(c) (1964).

. 341 F.2d 956, 960-961 (5th Cir. 1965) quoting from Cushing v. Maryland Cas. Co., 198 F.2d 536, 538 (5th Cir. 1952).

. We have considered and rejected the appellants’ construction of the other clauses which provide as follows:
It is expressly understood and agreed if and when the assured has any interest other than as a shipowner in the vessel named herein, in no event shall this Company be liable hereunder to any greater extent than if the assured were the sole owner and entitled to petition for limitation of liability in accordance with present and future law.
The assured shall at the option of this Company permit this Company to conduct, with an attorney of this Company’s selection, at this Company’s cost and expense and under its exclusive control, a proceeding in the assured’s name to limit the assured’s liability to the extent, and in the manner provided by the present and any future statutes relative to the limitation of a shipowner’s liability.

. See Ruiz v. Clancy, 182 La. 935, 162 So. 734, 735 (1935).

. Humble Oil & Refining Co. v. M/V John E. Coon, 207 F.Supp. 45, 49 (E.D. La.1962).

. 122 So.2d 639, 644-645 (La.App.1960).

. See Musmeci v. American Automobile Ins. Co., 146 So.2d 496, 501 (La.App. 1962) ; Mid-South Ins. Co. v. Lewis, 236 F.Supp. 739, 741-742 (W.D.La.1964), aff’d Jones v. Mid-South Ins. Co., 358 F.2d 887 (5th Cir. 1966).

. LSA-C.C. art. 2098 (1952). It is undisputed that Nebel and its insurer are codebtors in solido under Louisiana law.

. 251 F.Supp. 823, 831 (EJD.La.1966), aff’d, 383 F.2d 46, 56 (5th Cir. 1967).

. Rouley v. State Farm Mut. Automobile Ins. Co., 235 F.Supp. 786, 793 (W.D.La. 1964) ; LSA-R.S. 9:571.

. Edwards v. Royal Indemnity Co., 182 La. 171, 161 So. 191 (1935).

. Lusk v. United States Fid. & Guar. Co., 199 So. 666, 667 (La.App.1941).

. Brooks v. Bass, 184 So. 222, 224 (La. App.1938).

. See Simmons v. Clark, 64 So.2d 520, 523 (La.App.1953).

. 251 F.Supp. 823, 831 (E.D.La.1966).

. See Maryland Cas. Co. v. Cushing, 347 U.S. 409, 421-422, 423, 436, 74 S.Ct. 608, 98 L.Ed. 806 (1954) ; 3 Benedict on Admiralty § 598 (6th ed. 1940). See generally Note, Shipowners’ Limited Liability, 3 Colum.J.L. & Soc.Prob. 105 (1967).

. The appellants attempt to analogize the Limitation Act to the Longshoremen’s & Harbor Workers’ Compensation Act, 33 U.S.C. § 901 et seq. (1964), must fail. Since the Longshoremen’s Act destroys the right to relief outside the statutory coverage, it would follow that a claimant could not proceed against the insurer on a nonexistent right to relief. The Limitation Act merely provides a special benefit to shipowners; it does not destroy the right to relief.
The appellants also raise the question whether other limitation statutes are personal defenses. It is sufficient in this case that we find that the benefit permitted by the Limitation Act is a matter personal to the shipowner; the determination of the personal or nonpersonal nature of defenses permitted by other statutes will occur soon enough when cases involving those statutes arise.