putting this together." John Norrod was the vice president at the time who
dealt directly with Duffy at Scott in negotiating the COA and Glen Oxton
was McAllister's attorney responsible for drawing up the COA. Reilly
testified that her involvement was not just with finance but also
insurance, and she had been involved with insurance on and off since the
time she came with McAllister in 1974. Tr. Trans. at 36.
The Court finds that Reilly had sufficient personal knowledge to
testify with respect to the COA and the obligations the COA placed on the
parties with respect to obtaining insurance to cover third party cargo.
She credibly testified that under the COA, since Scott arranged to
transport the cargo of Metal Processing, Scott should have arranged to
get insurance coverage for the cargo. Tr. Trans. at 83.
c. McAllister's Shifting Trial Tactics
Scott asks the Court to consider McAllister's shifting trial tactics
and failure to comply with court orders in assessing the credibility of
McAllister's witnesses. First, Scott notes that at the outset of the
litigation McAllister brought a cross claim against Scott seeking damages
to the hull of the Barge ATLANTIC TRADER. When Scott filed a motion for
summary judgment, McAllister submitted the affidavit of John F. Lowe,
which stated that the COA did not apply with respect to the voyage from
New Jersey to Puerto Rico. The evidence of this affidavit required that
the Court deny Scott's motion. After two years of discovery, Scott again
moved for summary judgment, and for the first time McAllister reversed
positions and conceded that there was no claim against Scott for hull
damages. Later, McAllister submitted the declaration of Lawrence Chan,
Executive Vice President, the import of which was diametrically opposed
to the Lowe Affidavit. The Court on March 27, 1998 dismissed the cross
claim for hull damages as to McAllister and French Hull Underwriters.
McAllister has now stipulated that the COA governs the rights of the
parties with respect to this cargo loss.
Scott is certainly justified in its frustration with McAllister's
shifting moves.*fn7 While the Court does not countenance such
maneuvers, it cannot, however, draw from them the adverse inference that
Scott suggests in view of the Court's determination of the credibility of
the witnesses at trial and its own independent examination of the COA.
The Court therefore declines to find McAllister's witnesses, specifically
Reilly, not credible as a result of McAllister's trial tactics.
2. McAllister's Position
In support of its position that the COA requires Scott to be
responsible for paying all cargo claims arising out of the COA,
McAllister points to Section 15.*fn8 Scott argues that Section 13 of the
COA defeats McAllister's claim.
Of course the starting point in determining whether Scott is required
to indemnify McAllister is for the Court to ascertain the intent of the
parties as expressed in the COA. Dome Petroleum Ltd. v. Employers Mutual
Liability Insurance Co., 767 F.2d 43, 47 (3d Cir. 1985). There is nothing
ambiguous in the language of Section 15: "Neither MCALLISTER . . . nor
the underwriters . . . shall have any responsibility or liability for any
claim involving damage to or loss of any cargo . . . carried by the
Vessels. . . ." Nor is there anything ambiguous in the language of the
last sentence of this paragraph: "[i]t is expressly understood that Scott
shall insure its obligations assumed under this paragraph."
Like any contract, the COA should be interpreted to give effect to the
intent of the parties and to all provisions of the agreement. Siegel
Transfer, Inc. v. Carrier
Express, Inc., 54 F.3d 1125 (3d Cir. 1995). The Court concludes that the
parties intended that Scott be responsible for all cargo loss whether the
cargo was its own or that of a third party. Scott was responsible for
insuring its own cargo under Section 10 and for insuring its
indemnification of McAllister for any third party cargo loss under
Section 15. The insurance provisions under Section 13 required McAllister
to insure against loss or damage to its vessels but did not require
McAllister to insure cargo — either Scott's or that of a third
party. Nothing in the COA indicates an intent that McAllister was to
insure the cargo that it was transporting for Scott.
There is no ambiguity on the face of the document. If there is any
ambiguity, it arises from argument of counsel and not from the language
of the COA. To the extent that there is any ambiguity the COA should be
interpreted so that effect is given to all provisions of the agreement.
Siegel Transfer, Inc. v. Carrier Express. Inc., 54 F.3d 1125 (3d.Cir.
1995). If McAllister were obliged to include Scott as an additional
assured for cargo damage under its hull insurance and P & I policies,
Scott's responsibility under the COA for indemnification and insurance
for cargo loss becomes redundant. Scott's interpretation would require
McAllister to insure the very claims for which Scott agreed to indemnify
McAllister. Such an absurd result convinces the Court that it is not what
the parties intended. If there is a conflict between Sections 13 and 15,
and the Court is not convinced that there is, the only interpretation
that gives effect to both sections is that McAllister's obligation to
provide hull and P & I insurance was never intended to encompass cargo
claims. See Fontenot v. Mesa Petroleum Co., 791 F.2d 1207 (5th Cir.
1986); City of Columbia v. Paul N. Howard Co., 707 F.2d 338 (8th Cir.),
cert. denied, 464 U.S. 893, 104 S.Ct. 238, 78 L.Ed.2d 229 (1983).
A reading of the entire COA leads the Court to the conclusion that
under all circumstances McAllister was responsible for loss to the
vessels while Scott was to remain responsible for loss of the cargo.
Since it was not the intent of the parties that McAllister provide in any
form cargo insurance for Scott, Scott's theories of liability must fall.
Even if McAllister did breach its obligation to provide insurance for
Scott, since its obligation did not extend to cargo insurance, its
indemnity claim is not precluded. By the same reasoning, McAllister's
insurers are also not precluded from enforcing the provisions of the
indemnity agreement, under which Scott agreed that McAllister's
underwriters would have no liability for any claim for cargo loss.
E. Is Scott an Additional Assured under McAllister's Policies, and are
McAllister's Underwriters Therefore Precluded from Pursuing this
Scott also raises the alternative argument that Scott is an additional
assured under McAllister's policies and therefore cannot be sued by the
1. McAllister's Admission of Scott as an Assured
Scott argues that Scott either is or should be deemed to be an
additional assured in McAllister's policies. If that is so, Scott
argues, then McAllister's underwriters may not recover against Scott
since no right of subrogation can rise in favor of the insurer against
its own insured. 16 COUCH ON INSURANCE § 61:136.
Scott argues that "McAllister has admitted that Scott should have been
named under the terms and conditions of the contract as an `additional
assured' with a `waiver of subrogation' on the P & I policy and the
Tower's Liability policies of insurance." Post-trial Br. at 32. The Court
was not provided with this admission; it is apparently ambiguous as the
Pretrial Order does not include such an admission. Instead the Pretrial
Order raises this as
an issue to be decided by the Court.*fn9 The uncertainty about what
McAllister admitted makes the "admission" useless. The Court does suspect
that McAllister admitted that it should have named Scott as an additional
assured on its Towers Liability and P & I policies. This is consistent
with the trial testimony of Reilly that McAllister was to name Scott as
an additional assured, with a waiver of subrogation, on both the P & I
and Tower's Liability policies. Tr. Trans. at 25, 64. Reilly, however,
was simply parsing the requirements of the COA. The COA required
McAllister to get insurance for hull, tower's liability and P & I. It did
not require McAllister to get insurance to cover cargo damage. Reilly
admitted that Scott had been named as an additional assured with waiver
of subrogation on the tower's liability policy, but testified that a
mistake had been made and when the McAllister Sisters was put into
service, Scott wasn't included as an additional assured. Tr.Trans. at
64-65. Reilly's testimony contradicts Scott's unsupported assertion that
Scott was an additional assured at the time of the accident, and the
Court finds her testimony to be credible.*fn10 McAllister's underwriters
are therefore not prevented from filing a claim for indemnity.
2. The Effect of McAllister's Failures to Comply With the Pretrial
Order and Discovery Orders
Scott also argues that McAllister's failure to comply with discovery
orders and to name the subrogated insurers in the Pretrial Order has
irreparably prejudiced Scott in this litigation. McAllister ignored the
directives of Magistrate Judge Cavanaugh, which required that all
insurance policies and documentation be provided to all parties in the
litigation. After discovery had been completed and expert witnesses
deposed, Scott moved to preclude testimony and evidence with respect to
the P & I policy. Magistrate Judge Cavanaugh filed an opinion on December
19, 1997, later affirmed by this Court, that granted Scott's request and
precluded McAllister from offering into evidence the P & I insurance
policy and "any testimony as to the terms and conditions of the Protection
and Indemnity policy, coverages or other related issues on the basis that
the policy was never produced, pursuant to the order of this Court."
Scott also legitimately complains about McAllister's refusal to provide
copies of exhibits listed in the Pretrial Order by McAllister and to
provide production of the Tower's Liability policy.