A collision on the Ohio River that injured a deckhand looks like a relatively straightforward marine claim. This is not the case when none of the sailor’s employer’s insurance policies provided coverage.

In Stevana Towing Inc. v. Atlantic Specialties Ins. Co., the United States Court of Appeals for the Third Circuit recently upheld a Pennsylvania district court’s ruling that none of the three policies the employer had in place covered the claim, noting the It is important for shipowners to ensure that cover is secured, particularly where arrangements are in place for the use of another vessel which is not owned by the employer.

In this case, an informal arrangement between the shipowners meant that a personal injury claim went through gaps in coverage and could have been avoided with carefully drafted contracts that would have closed those gaps. From a practical and commercial point of view for both the shipowner and the operator, this arrangement may have made sense, but ultimately it meant that there was no insurance cover. for the personal injury claim.

Stevanna Towing, Inc. (“Stevanna”) had in place three marine insurance policies: a Protection and Indemnity (“P&I”); a marine liability policy (“MGL”); and an excess liability (“deductible”) policy.

  • The P&I policy only offered cover when Stevanna acted “as owner of the vessel”. The insurance program mentioned only two vessels, but also included an automatic acquisition clause, extending coverage to any vessel that Stevanna acquired, purchased or chartered.
  • The MGL policy provided coverage to Stevana for bodily injury and property damage claims, but excluded employer liability coverage, except that it included an exclusion of that exclusion where Stevana had assumed liability under an insured contract.
  • The deductible policy provided increased limits for the P&I policy and the MGL policy.

Additionally, Stevanna also operated another tug (not on schedule) which was to be used to move barges owned by the same party as the tug which could be used for Stevana’s own purposes when not doing so. This arrangement was agreed by verbal contract, but would have been at the same times as the chartering of another vessel from the same owner which was agreed in writing.

In one collision, a deckhand alleged he fell from the tug operated by Stevana but not on schedule into an empty hopper barge. The claim was settled by Stevana, but it sought reimbursement from its insurers and other parties who had taken legal action and also filed claims against the insurers claiming additional insured status.

The P&I insurer refused coverage because the tug was not scheduled. After some procedural wrangling, the district court ultimately ruled that neither the P&I policy, MGL policy, nor franchise policy offered coverage to the employer and that this also denied the other parties’ claims for coverage. as presumed additional insureds.

The Third Circuit found that the tug in question was not included in the schedule, but also had not been “chartered” by Stevana so that the automatic acquisition clause applied, noting that “the term “charter” does not refer to all circumstances in which someone borrows a boat” and that the arrangement here was not considered a “charter”. P&I cover only applies to the liability of the insured “as owner of the vessel”. Third Circuit felt that whatever arrangement was made between Stevana and the owner of the tug, it was not a bareboat charter because the owner was still paying for the fuel, Stevana did not consider herself the owner, Stevana did not have sole control and the arrangement was terminable. at will. Finally, the court notes that a Stevana employee was not even piloting the tug at the time of the collision.

The MGL policy did not provide coverage because it excluded employer liability claims. The exclusion was inapplicable because the arrangement between Stevana and the owner of the tug was not an insured contract and did not contain an express clause assuming tort liability for injuries caused by another party. The Third Circuit noted that it is well established that a “promise to indemnify others for others’ own tort liability is an extraordinary promise, and it must be expressly and unequivocally manifested in the contract”.

The court had held that neither the P&I policy nor the MGL policy offered coverage, it was axiomatic that the excess policy did not either since that policy only increased the limits.