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LARSEN v. INSURANCE CO. OF NORTH AMERICA

July 30, 1965

Alf LARSEN, Plaintiff,
v.
INSURANCE COMPANY OF NORTH AMERICA, Defendant



The opinion of the court was delivered by: TAVARES

 This case was originally commenced in the King County Superior Court of the State of Washington by Alf Larsen, a resident and citizen of the State of Washington, against Insurance Company of North America, a corporation qualified to do, and doing business in the State of Washington, but having its principal office in and being a citizen of the State of Pennsylvania. It was duly removed by the Defendant to the United States District Court for the Western District of Washington, Northern Division.

 On July 23, 1965, having duly heard oral argument on the Motion, after reading the extensive briefs of counsel for each party, and having orally indicated its ruling sustaining the main grounds stated in the Defendant's Motion, the Court announced that in view of its rulings on the main contentions, the Court would also consider the Defendant's Motion to Strike as a Motion for Summary Judgment, dispositive of the entire case. However, the Court at the same time required of the Plaintiff an offer of proof as to the remaining minor issues of fact, if any, considered by Plaintiff essential to a complete and final determination of the entire action. Plaintiff's counsel having responded and stated what he would expect to be able to offer as to the few minor factual issues remaining undisposed of, and as to what might be established by those facts alone in the light of rulings of the Court on other facts and on Plaintiff's other contentions, the Court thereupon announced its intention to dismiss the action as upon Motion for a Summary Judgment, and its intention to file a written decision along the lines of the Court's oral remarks. The following is the Court's formal decision upon said Motion to Strike and Motion for Summary Judgment.

 Jurisdiction by virtue of citizenship and by reason of the amount in controversy exceeding $10,000 is vested in this Court pursuant to 28 U.S.C.A., Section 1332. On May 3, 1962, the Defendant issued to Ray Furfiord and Point Chehalis Packers, Inc. its marine open cargo policy of insurance, insuring said assureds on shipments of cargo to be thereafter made against the perils, and in accordance with the terms and provisions, set forth in the policy.

 This type of marine open cargo policy is designed to continue indefinitely until cancelled by either party, and coverage of various vessels and cargos and additional assureds from time to time thereafter is effected by adding riders and/or making additional endorsements which are attached to, and/or written and/or stamped upon the policy.

 The policy was issued through an independent insurance brokerage firm or agent, LaBow Haynes Company, Inc., Agents. The policy itself purports to state, in paragraph 42 on page 8 thereof,

 
"42. It is a condition of this Policy, and it is hereby agreed that the Assured's brokers, LaBOW, HAYNES COMPANY, Dexter Horton Building, Seattle, Washington, or any substituted brokers, shall be deemed to be exclusively the agents of the Assured and not of this Company in any and all matters relating to, connected with or affecting this insurance. Any notice given or mailed by or on behalf of this Company to the said brokers in connection with or affecting this insurance, or its cancellation, shall be deemed to have been delivered to the Assured."

 The policy among other things initially insured the original assureds upon shipment of lawful goods and/or merchandise consisting of canned and/or frozen salmon and crab meat, and cannery supplies and materials, made by or to the assured for their own account as principals or as agents for others, etc. The type of conveyance to which this insurance attached included conveyance by metal self-propelled vessels and connecting conveyances and fishing vessels, and the area of the voyages covered included places at and from Puget Sound ports and/or places to ports and/or places in Alaska and vice versa. It was stated that cannery supplies and materials would be valued at amount of invoice including all charges therein stated plus ten percent, and "Processed CRAB MEAT AND SALMON valued at Seattle, Washington market value on date of shipment."

  To this policy, as contemplated by the terms thereof, there were apparently added from time to time notations and additional pages or stickers in chronological order commencing June 6, 1962, which will be hereinafter more particularly noticed. The last two of these addenda to the policy apparently were made on April 28, 1964, "Effective May 1, 1964," and on May 15, 1964 "Effective May 13, 1964," respectively, the former insuring the original assureds in respect of the D/V "Aleutian Reefer," and the latter naming Plaintiff Alf Larsen as an additional assured with respect to cargo aboard that vessel. This diesel powered vessel was operated by Roy Furfiord and Harry Furford, copartners doing business as Polar Fisheries, as a refrigerated motor vessel employed in the procuring, freezing and transporting of salmon in and from Alaska to the State of Washington. On July 10, 1964, Yukon King, Inc., a processor and packer of mildcured salmon, near the mouth of the Yukon River, Alaska, shipped twenty-one tierces (large barrels) of mild-cured salmon aboard the D/V Aleutian Reefer for delivery in Seattle, Washington, to the Plaintiff, Alf Larsen. Upon arrival of the vessel at Seattle, the twenty-one tierces of mild-cured salmon were discharged from the vessel, but when they were opened, it was found that the contents of eleven of the twenty-one tierces were so spoiled as to be condemned by the health authorities as unfit for human consumption, and were a total loss except for the proceeds of salvage, amounting to $43.00. These twenty-one tierces were owned by Yukon King, Inc., but subject to a security interest in Alf Larsen, Plaintiff, for the amount of his financing of the fishing and packing operations of Yukon King, Inc., and Plaintiff also had the exclusive right to sell this pack as a fish broker and acted as agent for Yukon King, Inc. These twenty-one tierces of salmon had been packed on various dates between and including June 28 and July 5, 1964, and had been transported from the fishing camp of Yukon King, Inc., to the location of the Aleutian Reefer at Sunshine Bay on an unrefrigerated power scow, the trip taking approximately seven hours, from which they were loaded on to the Aleutian Reefer on July 10. The twenty-one tierces were stored, as per agreement with Plaintiff at the time he arranged for the shipment, in the No. 1 hold of the Aleutian Reefer, with instructions to the officers of the vessel to carry the mild-cured salmon at not above 40 degrees Fahrenheit, and apparently the Captain or Master of the vessel so instructed the Chief Engineer.

 The No. 1 hold of the vessel was equipped with refrigeration machinery, the refrigeration plant for this hold being independent of the main engines of the vessel, so that the stopping of the main engines would not require shutting down the refrigeration machinery for the No. 1 hold.

 The shipment of the twenty-one tierces was declared to the defendant insurance company by LaBow Haynes Company, Inc., on August 6, 1964, and the premium for such shipment was paid to the Defendant. A copy of the insurance policy with all attached addenda or riders was attached to the Pretrial Order as Exhibit 1, and a copy of the declaration was attached to the Pretrial Order as Exhibit 2, and in addition the Court has had the benefit of examining a duplicate original of the policy showing the actual attachments, writings, notations, etc., including clauses stamped in red ink, and typewritten and handwritten notations in ink, which are not clearly indicated in the photographic copy of the policy attached to the Pretrial Order. Some of these attachments, notations or stamped portions, etc. will be specifically discussed later, indicating their significance.

 It was also stipulated that:

 
"16. Mild-cured salmon packed in the lower Yukon River has frequently been shipped from the lower Yukon River to Seattle without refrigeration and has arrived in good and unsoured condition. Mild-cured salmon which has been properly processed and cured may be stored and kept up to at least three (3) years without spoilage, provided proper cool temperatures are maintained. Delay, alone, in the southbound voyage of the ALEUTIAN REEFER would not cause spoilage of the 11 tierces of salmon."

 Before taking on the cargo of 21 tierces on July 10, 1964, the Aleutian Reefer departed Seattle for the Yukon on May 19, 1964; on May 22 one of its propellers struck a log, causing engine and/or tail shaft vibration; on June 15 the vessel anchored in Sunshine Bay inside the mouth of the Yukon and commenced processing fish and continued to do so until June 29, on which date a fire occurred in the engine room of the vessel. On July 11, 1964, the vessel departed Sunshine Bay and arrived at Seattle on September 4, 1964. During the south-bound voyage of the vessel, the following events occurred:

 
"(a) The ALEUTIAN REEFER stranded on a sand bar off Munson Island in the mouth of the Yukon River at 2:10 P.M. July 13, 1964. At 6:00 A.M. on July 14th, the vessel floated free of the sand bar on the morning high tide.
 
"(b) Plaintiff arranged for shipment of 108 half tierces of hardsalt King Salmon aboard the ALEUTIAN REEFER, which were loaded aboard the vessel while in the Yukon River, and some of which were loaded aboard the vessel in the Number One hold after departing Sunshine Bay. These tierces are not involved in this lawsuit.
 
"(c) The ALEUTIAN REEFER cleared the Yukon River bar July 15th and arrived at Sand Point, Alaska, on July 20, 1964. The vessel departed Sand Point for Kodiak on July 20th and arrived in Kodiak on July 23rd. The vessel experienced difficulty with the engines during this portion of the voyage and on July 21st, the port main engine was shut down and the vessel thereafter proceeded on its voyage running on one of its two main engines.
 
"(d) The ALEUTIAN REEFER remained at Kodiak from July 23rd until August 19th, when it departed for Seattle.
 
"(e) On August 24, when the vessel was nearing Ketchikan, Alaska, a sea suction pipe dropped off. As a result of this, sea water entered the bilges of the vessel and the Number One hold in which the tierces of mild-cured salmon were stowed. The water was thereafter pumped out of the vessel, and the sea suction pipe was repaired at Ketchikan on August 25th. The sea water did not itself penetrate through the tierces into the mild-cured salmon.
 
"(f) The ALEUTIAN REEFER departed Ketchikan on August 26th but returned to Ketchikan for repairs to the reduction gear. The vessel again left Ketchikan for Seattle on August 28.
 
"(g) The starboard main engine quit operating on August 31. The port main engine was started up but it quit operating on September 2, when the vessel was in the Georgia Straights. The vessel was then towed to Anacordes, Washington, arriving on September 2, and was thereafter towed to Seattle, arriving on September 4. The refrigeration plant for the No. 1 hold operated independently of the main engines of the vessel, and the stopping of the main engines do not require shutting down the refrigeration machinery for the No. 1 hold."

 The sound market value in Seattle of Number One (highest grade) tierces of Yukon River mild-cured King Salmon was $800.00 per tierce at the time of shipment on July 10, 1964, and at the time Plaintiff's 11 damaged tierces of salmon were condemned after discharge from the vessel in September, 1964.

 On October 29, 1964, Plaintiff submitted to LaBow, Haynes Company, Inc., Plaintiff's insurance broker, and on November 3, 1964 LaBow, Haynes Company, Inc. submitted to Defendant, a written claim under Defendant's policy above mentioned for loss of the 11 tierces of mild-cured salmon at $800 per tierce or $8,800.00, less salvage of $43.00, for a net claim of $8,757.00. Plaintiff's written claim of October 29, 1964, on the insurance policy did not contain a copy of any written claim by Plaintiff against the ocean carrier (D/V Aleutian Reefer and owners) nor, after receiving the claim on the policy did Defendant request Plaintiff to make written claim against the owners.

 On December 11, 1964, Plaintiff filed suit against the ocean carrier to recover for the loss of Plaintiff's 11 tierces of salmon, by way of a counter-claim in King County, Cause No. 632192, in an original action brought by this ocean carrier against Plaintiff in the State Superior Court. Plaintiff did not give notice of said action or request Defendant to participate therein or pay Plaintiff's expenses of such claim against the carrier, until Plaintiff's present action against Defendant was commenced about January 25, 1965.

 Under the heading "Disputed Facts," the Plaintiff's contentions are set out in the Pretrial order, and are quoted in the margin *fn1" in order to render more readily understandable the various contentions in the above mentioned Defendant's motion to strike and motion for summary judgment.

  The first ground of Paragraph 1 of Defendant's Motion to Strike seeks to strike Plaintiff's "contention of recovery" based upon negligence of the crew in failing to maintain proper temperatures (Plaintiff's contentions Nos. 1(a), (b) and 11). *fn2" Defendant contends that negligence of the vessel's crew in failing to maintain proper temperatures in the cargo holds below 40 degrees Fahrenheit does not constitute "faults or errors in the navigation and/or management of the vessel " by the Master, mariners, engineers or pilots within the meaning of Clause 24 (Inchmaree clause) *fn3" of the policy.

 The Court holds, in agreement with Defendant's contention, that the term "faults or errors in the navigation and/or management of the vessel by the Master, mariners, mates, engineers or pilots," as used in this clause 24 of the policy and relied on by Plaintiff in his contentions 1(a) and 1(b) and 11 is a term of art derived from the Harter Act, *fn4" and the Carriage of Goods by Sea Act (hereinafter called COGSA), *fn5" which acts deal with the rights, liabilities and immunities of ocean carriers for cargo loss and damage, and ...


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