Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

AMERICAN DREDGING CO. v. FEDERAL INS. CO.

February 24, 1970

AMERICAN DREDGING COMPANY, Plaintiff,
v.
FEDERAL INSURANCE COMPANY, Fireman's Fund Insurance Co., the Home Insurance Company, St. Paul Fire & Marine Insurance Co., Boston Insurance Company, Insurance Company of North America, the American Insurance Company and United States Fire Insurance Company, Defendants


Frederick Van Pelt Bryan, District Judge.


The opinion of the court was delivered by: BRYAN

FREDERICK VAN PELT BRYAN, District Judge.

Plaintiff sues on a maritime claim to recover upon a policy of insurance. Defendant insurers move pursuant to Rule 56 F.R. Civ. P. for summary judgment dismissing the complaint or, in the alternative, for transfer of the action to the United States District Court for the Eastern District of Pennsylvania pursuant to 28 U.S.C. § 1404(a).

 It appears that in September 1964 plaintiff was engaged in the construction of a pipeline crossing under the Delaware River 8 miles south of Philadelphia for the Colonial Pipeline Company (Colonial). On the night of September 1, 1964, when the pipeline was in place, the S.S. Bristol City, inbound for Philadelphia, fouled its anchor on the pipeline and did extensive damage. Under its contract with Colonial, plaintiff was obligated to repair the damage.

 Plaintiff was insured by London Underwriters (London) against loss or damage to the pipeline during construction. It was also an additional assured under a policy issued to Colonial by defendant insurance companies covering, among other things, substantially the same risks.

 After attempts to repair the damage, plaintiff advised Colonial that repair was impractical and that a new pipeline would have to be installed in the existing trench. After negotiations with Colonial and the defendant insurers, Colonial agreed to the proposal. Defendant insurers, however, claim that they did not assent to this proposal, but expressly rejected it as unreasonable. Though not expressly spelled out in the record before me, it may fairly be inferred that defendant companies rejected plaintiff's claim for expenses of this installation.

 Plaintiff proceeded to install the new pipeline at a claimed expense of $471,866.86. It submitted a claim for this amount to London. London paid to plaintiff the full amount of this claim under a memorandum of settlement. The memorandum stated that the payment was "without prejudice, as a loan." It was understood, however, that in consideration of the payment by London, plaintiff was to institute suit against the defendant insurers here to recover the amount of its claimed damages; that the expenses of the suit were to be borne by London; that the plaintiff would pay to London any sum recovered from the defendant insurers in full satisfaction of the so-called loan; but that if no recovery was had against the defendant insurers, plaintiff was to be under no obligation to repay London and if recovery was less than the amount paid only the amount recovered need be repaid.

 On February 10, 1966, plaintiff commenced an action in the United States District Court for the Eastern District of Pennsylvania against the "Bristol City" and the Bristol City Line of Steamships, Ltd. to recover for the damage allegedly caused to the pipeline by the vessel. That action is pending.

 On June 25, 1968, plaintiff commenced the suit at bar against the defendant insurers in this Court. The suit was filed by counsel who were the New York agents of London as attorneys for plaintiff. The suit is brought upon the policy issued by defendant insurers insuring against damage or loss to the pipeline being constructed by plaintiff for Colonial on which plaintiff was an insured party. Plaintiff seeks to recover the sum of $471,866.86, the precise amount advanced to it by London as the amount of its loss recoverable under the policy.

 Defendants contend that on the facts presented, plaintiff is not entitled to recover on the policy of insurance which they issued and thus the claim for relief alleged in the complaint must fall. Their argument runs this way: The payment to the plaintiff of $471,866.86 by London was not, in fact, a loan but constituted payment of loss under the London policy. Plaintiff, having been paid for its loss in full by one insurer, may not thereafter recover the same loss from other insurers. The only viable right which remains after payment of the loss to the assured is the right of London to contribution from the defendants as co-insurers. The present action, though purportedly based on the policy issued by defendants, is in reality brought on behalf of London, the real party in interest. The action is merely a device to obtain for London complete reimbursement from the co-insurers for the loss which London paid. Plaintiff, having been paid for its loss, has no right to recover the same loss a second time from these defendants.

 Defendants also assert that plaintiff's claim of $471,866.86 is highly inflated and exaggerated and far exceeds the actual damage to the pipeline.

 Plaintiff, on the other hand, contends that it is entitled to recover on defendants' policy the full amount of its expenses in repairing the damage despite the fact that it has already received an equivalent amount from London. Plaintiff urges that the amount received from London did not constitute payment by London of the loss but was merely a loan arrangement of a kind common in the insurance industry, that the payment made as a loan did not extinguish its rights to recover on the defendants' policy and that its right to recover the loss from any of the insurers whom it chose to sue remains unimpaired. Therefore, says the plaintiff, this suit has nothing to do with any rights of contribution there may be as between London and defendant insurers, stands entirely on its own feet and may be maintained in plaintiff's own name.

 Plaintiff also asserts that Colonial is making a claim against it for an additional $69,917.21 in damages arising out of the pipeline occurrence over and above the amount paid to plaintiff by London. Plaintiff claims that this claim is covered by defendants' policy and that it was not covered by the payment from London. It therefore says that, in any event, it is entitled to maintain this suit on the defendants' policy on that claim in its own name, apart from any interest which London may have in the recovery of the amount which it paid to plaintiff by way of loan.

 Loan arrangements whereby an insurer advances the amount of the loss to the assured as a loan repayable only out of the proceeds of a suit brought by the assured in its own name to recover the loss from those legally responsible therefor are common in the insurance field. Luckenbach v. W.J. McCahan Sugar Co., 248 U.S. 139, 39 S. Ct. 53, 63 L. Ed. 170 (1918); Augusta Broadcasting Co. v. United States, 170 F.2d 199 (5th Cir. 1948); Dixey v. Federal Compress & Warehouse Co., 132 F.2d 275 (8th Cir. 1942); The Plow City, 122 F.2d 816 (3rd Cir. 1941).

 As the Court said in Luckenbach, such agreements "supply the shipper promptly with money to the full extent of the indemnity or compensation to which he is entitled on account of the loss; and they preserve to the insurers the claim against the carrier to which by the general law of insurance, independently of special agreement, they would ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.