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ROYAL EXCH. ASSUR. OF AMERICA, INC. v. SS PRESIDEN

February 27, 1981

ROYAL EXCHANGE ASSURANCE OF AMERICA, INC., and Lee Torgerson Machinery Company, Plaintiffs,
v.
SS PRESIDENT ADAMS, her engines, tackle, apparel, furniture and equipment, In Rem; and American President Lines, Ltd., In Personam, Defendants and Third Party Plaintiffs, and Port of Tacoma, a municipal corporation, Third Party Defendant



The opinion of the court was delivered by: BEEKS

MEMORANDUM OF DECISION

Torgerson Machinery Co. (Torgerson) shipped rock-crushing machinery from Karachi, Pakistan, to Tacoma, Washington, aboard the SS PRESIDENT ADAMS, owned and operated by American President Lines (APL). Torgerson had purchased the machinery at a point inland from Karachi, and the machinery was transported to Karachi by rail. While the cargo awaited loading onto the PRESIDENT ADAMS, some meetings were held between Ikramul Haq Shamin, APL's local agent, and Lee Torgerson and Richard Bergland, president and an employee of Torgerson, respectively. The topics discussed at these meetings are in dispute. A mate's receipt (Exhibit A-7) was given to the shipper upon loading on board the PRESIDENT ADAMS, and this was later exchanged for the bill of lading (Exhibit 1). The equipment was unloaded in Tacoma by longshoremen employed by APL. Port of Tacoma employees then moved the equipment to another location at the Port of Tacoma where Torgerson could take delivery.

 The equipment was received in Tacoma in an allegedly damaged condition. The deposition of the plaintiff's surveyor, Jack Skewes, indicates that a substantial portion of the damage was caused by APL's discharging stevedores. Another portion of the damage is alleged to have been caused by Port of Tacoma terminal workers.

 Torgerson was insured for damage to its cargo by Royal Exchange Assurance of America, Inc. (Royal Exchange). Royal Exchange paid Torgerson for a portion of the loss, $ 120,000, and two documents were executed by Torgerson: a "Release and Subrogation Receipt" purporting to "assign all rights and remedies in respect to the damage" to William H. McGee & Co. (unnumbered exhibit to Affidavit of David Danielson) and an "Agreement" retaining Royal Exchange's attorneys to act also as Torgerson's attorneys in pursuing Torgerson's remedies against APL, Torgerson also agreeing "not to pursue any claim against (APL's stevedores) either directly or indirectly in the course of the legal proceedings against American President Lines and others." (Exhibit A-8). Both documents are dated July 23, 1979.

 APL has liability insurance for its stevedoring operations through Marine Indemnity Insurance Company of America (Marine Indemnity). The Port of Tacoma is named as a coinsured for its terminal operations under Endorsement No. 9 to said policy (Exhibit 2, Affidavit of David Danielson).

 APL moved to dismiss the complaint of Royal Exchange and Torgerson, to amend the pretrial order, and to continue the trial which was nonetheless held on November 18, 1980, limited, however, to the subject of whether the on-deck stowage of some of the cargo amounted to a deviation. The Port of Tacoma joined in this motion and moved for an order disqualifying plaintiffs' counsel. By this opinion the court decides the motion to dismiss and the issue of deviation.

 This motion is supported by affidavits and exhibits so must be considered a motion for summary judgment under F.R.Civ.P. 56. See F.R.Civ.P. 12(b). Defendant and third party defendant assert that the complaint must be dismissed because an insurer may not subrogate against its own insured. They allege that Royal Exchange is to be considered the same entity as Marine Indemnity and that therefore Royal Exchange may not sue APL or, indirectly, the Port of Tacoma in subrogation.

 Plaintiffs do not dispute the following facts set forth by the Port of Tacoma: 1) that Marine Indemnity and Royal Exchange both have their administrative offices at 4 World Trade Center, New York, N.Y. and use the same mailing address and telephone number; 2) that the affairs of both companies are directed by William H. McGee & Company, Inc.; 3) that Marine Indemnity and Royal Exchange have the same President (Kenneth G. T. Drysdale), Vice-President (Robert Howe), Secretary (A. Robert Tremaine) and Treasurer (George Walzauck); 4) that Marine Indemnity and Royal Exchange have nine directors in common; 5) that William H. McGee & Co., Inc., has the same office, mailing address and telephone number as both Royal Exchange and Marine Indemnity; and 6) that Kenneth G. T. Drysdale is the President of William H. McGee, in addition to Royal Exchange and Marine Indemnity.

 The court also finds pertinent a letter from plaintiffs' attorneys to an official of William H. McGee & Co. (Exhibit 4, Affidavit of David Danielson) indicating that the attorneys had negotiated a settlement of the insurance claim between Torgerson and Royal Exchange, Torgerson's insurer, extracting an agreement not to sue Marine Indemnity, APL and Port of Tacoma's insurer:

 
We were successful in obtaining your assureds agreement to not pursue any possible uninsured claim against the stevedore (APL's) who is also a McGee insured. In this regard we feel that subrogation should be pursued with the understanding that we not attempt any recovery from the stevedores.

 Plaintiffs make no showing in opposition to the assertion that Royal Exchange, Marine Indemnity and McGee are one entity, and the court therefore finds no genuine issue of material fact remaining. Where there is a near identity between corporations, their separate existences can be disregarded in order to prevent injustice to a third party. Houston Oil Field Material Company v. Stuard, 406 F.2d 1052, 1054 n.1 (5th Cir. 1969).

 Treating Royal Exchange and Marine Indemnity as one, the issue remaining is whether an insurer which had paid an insured shipper on a cargo damage policy may subrogate against a carrier whose stevedoring operations it insures under an unrelated liability policy, for damage allegedly caused to the cargo in the carrier's capacity as carrier. Clearly there can be no recovery for damage caused by insured activities such as APL's stevedoring operations, and the Port of Tacoma's terminal operations. Employers of Wausau v. Purex Corp., 476 F. Supp. 140, 143 (E.D.Pa.1979) ("If Employers recovered in this subrogation action against Purex, it would be reimbursed for the loss which Purex paid it premiums to cover.")

 Plaintiff relies on two cases to support subrogation, Turner Construction Co. v. John B. Kelly Co., 442 F. Supp. 551 (E.D.Pa.1976) and Public Service Company of Oklahoma v. Black & Veatch, 328 F. Supp. 14 (N.D.Okl.1971). In both the court held that subrogation was allowed against a negligent defendant covered "as their interests may appear" by the subrogating insurer under the insured's policy for property damage. In neither case did ...


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