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Category: Maritime

  • Underwater Collision Sparks Legal Battle: Shell Offshore vs. Tesla and International

    In the depths of the Gulf of Mexico, a seemingly minor incident set off a chain of legal events that reverberated through the maritime industry. An underwater sonar device, or towfish, collided with the mooring line of a Shell Offshore drilling rig, causing significant damage. The resulting legal battle involved Shell, the company operating the sonar device (Tesla Offshore), and the vessel’s owner (International Offshore Services). This blog post explores the key issues of the case, the court’s rulings, and the implications for maritime operations.

    The Incident:

    Tesla Offshore was conducting an archaeological survey of the ocean floor using a towfish pulled by a vessel chartered from International Offshore Services. Despite having prior information about the location of Shell’s drilling rig, Tesla failed to share this with the vessel’s crew. The towfish struck one of the rig’s mooring lines, causing damage and disrupting Shell’s operations.

    The Legal Proceedings:

    Shell sued both Tesla and International for damages. A jury found Tesla 75% at fault and International 25% at fault. While the appeal was pending, Tesla settled with Shell. The district court then determined that Tesla was entitled to contribution from International toward the settlement.

    Key Legal Issues:

    • Towing Vessel Status: International disputed the court’s classification of its vessel as a “towing vessel,” which would require the captain to hold a specific license. The court upheld this classification, emphasizing that the vessel’s primary function was to pull the towfish.

    • Allocation of Fault: Tesla challenged the jury’s allocation of fault, arguing it should have been at least 50/50. The court rejected this, stating there was sufficient evidence to support the jury’s decision.

    • Contribution Calculation: Tesla also challenged the calculation of International’s contribution to the settlement, particularly regarding a previous payment International had made to Shell. The court upheld the calculation, giving International credit for the earlier payment.

    Implications:

    This case serves as a reminder of the importance of clear communication and adherence to regulations in maritime operations. It also highlights the potential legal complexities that can arise from seemingly straightforward incidents. Companies involved in offshore activities must ensure they have proper licenses and share relevant information to avoid costly legal battles and disruptions to operations

    Additional Sources: SHELL OFFSHORE, INCORPORATED, Plaintiff v. TESLA OFFSHORE, L.L.C., Defendant – Appellee Cross-Appellant v. INTERNATIONAL OFFSHORE SERVICES, L.L.C.; INTERNATIONAL MARINE, L.L.C.,

    Written by Berniard Law Firm

    Other Berniard Law Firm Articles on Maritime Law Issues: Navigating the Waters of Maritime Contracts: An Indemnity Puzzle and Seaman or Not? Court Reverses Summary Judgment in Deepwater Horizon Cleanup Worker Injury Case

  • Lafourche Parish Court Demonstrates the Importance of Employee-Employer Relationship in Workers’ Compensation Cases

    Unfortunately, accidents in the workplace are not uncommon. What happens, however, if you unknowingly signed an agreement making your employer immune from a liability claim? The following Lafourche Parish case outlines this predicament. 

    In September 2013, Neville Patterson signed multiple documents with Raceland Raw Sugar, LLC (RRS) and Raceland Equipment Company, LLC (REC) to haul sugar cane for the former. Included in this paperwork was an indemnification agreement identifying Patterson as the contractor and RES and RRS as statutory employers. 

    Two months later, Patterson created N-A-N Trucking, LLC (N-A-N) and started to operate his truck. Following this development, RRS began making checks from hauls payable to N-A-N. These checks were endorsed by Patterson, who continued to receive driver wages from REC. 

    The following month, Patterson was unloading the trailer at the RRS mill when a cable broke, forcing the trailer to fall on the truck and injure his back and neck. Patterson then filed a claim for damages, naming REC and RRS as defendants, asserting he was an employee of N-A-N, and claiming the accident that caused his injuries resulted from RRS’ and REC’s negligence. RRS and REC responded by claiming that Patterson was REC’s direct employee and RRS’ statutory employee, barring his claims via the Louisiana Workers’ Compensation Act. 

    The 17th Judicial District Court for the Parish of Lafourche denied the motion submitted by RRS and REC, noting conflicting evidence on whether Patterson was a direct employee of REC and inconsistent evidence on whether the indemnification agreement showed that he was N-A-N’s employee or a contractor with REC and RRS. REC and RRS then renewed their motion for summary judgment. 

    In their renewal, RRS and REC claimed that Patterson was an independent contractor of both companies via a written agreement compliant with Louisiana law, conveying statutory employer status on RRS and REC and making them immune from civil tort liability. Patterson then argued that he was an employee of N-A-N and no contract existed between RRS and N-A-N. 

    The District Court then dismissed Patterson’s claims and granted summary judgment, finding the indemnification agreement signed by Patterson demonstrated a rebuttable presumption of a statutory employment relationship. The court also found Patterson, who had the burden of proving the relationship was severed when he formed N-A-N, failed to deliver any proof the contract was revoked under law. Patterson then filed an appeal with the Louisiana First Circuit Court of Appeal. 

    Under La. R.S.23:1061, a statutory employer relationship does not exist unless a written contract between the principal and a contractor recognizes the principal as the statutory employer. Additionally, the contractually recognized relationship can be overcome by showing the work performed was not an integral or essential part of the generation of the principal’s goods, products, or services. Further, the employer seeking to avail itself of tort immunity holds the burden of proving it. See Fleming v. JE Merit Constructors, Inc.

    The Court of Appeal found that Patterson entered into an indemnification agreement in his capacity, which listed him as a contractor. Additionally, because the agreement recognized RRS and REC as statutory employers and Patterson as an owner/operator, the Court of Appeal found it was unnecessary to enter into an additional contract following the formation of N-A-N. Next, as the court found the agreement between Patterson and RRS and REC conveyed a statutory employer status, there existed a rebuttable presumption of a statutory employer relationship. The Court of Appeal found Patterson failed to deliver proof to rebut this presumption by showing that hauling sugar cane to a sugar mill was not crucial to the ability of the principal to produce its products, goods, or services. As such, the District Court’s judgment was affirmed. 

    This case shows the importance of hiring an experienced attorney to review all employee-employer documents before signing them, as you may be entering into a relationship agreement that would bar you from receiving compensation in the case of an accident. The right attorney can also help you provide the evidence necessary to prove your lawsuit.  

    Additional Sources: NEVILLE PATTERSON VERSUS RACELAND EQUIPMENT COMPANY, LLC AND RACELAND RAW SUGAR LLC D/B/A RACELAND SUGAR MILL

    Written by Berniard Law Firm Blog Writer: Samantha Calhoun

    Additional Berniard Law Firm Articles on the Importance of Evidence in Workers’ Compensation Lawsuit: Workers’ Compensation Lawsuits and the Battle for Evidence — Louisiana Personal Injury Lawyer Blog

  • Navigating the Waters of Maritime Contracts: An Indemnity Puzzle

    In contractual agreements, the validity of indemnity provisions can become a subject of contention between parties. But what happens when determining a contract’s maritime nature becomes pivotal in a case involving specialty services for drilling or production in navigable waters? As discussed below, this issue was scrutinized in a maritime appeal action filed with the United States Court of Appeals for the Fifth Circuit. 

    Apache Corporation (“Apache”) had a blanket master services contract (“MSC”) with Specialty Rental Tools & Supply, L.L.P. (“STS”). This MSC Had an indemnity provision that ran in favor of Apache and its contractors. The work order didn’t require a vessel, nor was it anticipated that it would be needed to perform the job. Apache contracted with Larry Doiron, Inc.
    (“LDI”), to provide a crane barge that was needed for the operation. Unfortunately, a member of the STS crew was injured by LDI operators during crane usage, prompting LDI to file a limitation of liability proceeding as the crane’s owner and a complaint against STS to seek indemnity as per the MSC.

    The pivotal question was whether the MSC should be classified as a maritime contract. If deemed maritime, the general maritime law would govern the enforceability of the indemnity provision. The District Court ruled in favor of maritime law and granted indemnity to LDI from STS. That ruling was appealed. 

    The appellate court examined whether they should apply the maritime or Louisiana law to determine if the indemnity provision should be allowed in the MSC. The Court explained that they had originally used a six-factor test per the court in Davis & Sons, Inc. v. Gulf Oil Corp. (“Davis & Sons”). The appellate court opined that most of the prongs of the test were unnecessary and excessively complicated the determination of whether the contract does fall within maritime law. Instead, the appellate court relied on Norfolk Southern Railway Co. v. Kirby and a simpler two-prong factor test, which is more straightforward.

    The appellate court adopted this Kirby test which just looked to two factors only (1) the contract and services related to maritime activities and (2) if the answer is “yes,” does the contract provide or do the parties expect that a vessel will play a substantial role in the completion of the contract? If so, the contract is considered to be of a maritime nature.

    The Court concluded that because the Kirby test focuses on the contract itself and the parties’ expectations, this was the proper approach, although some of the Davis & Sons factors can still be relevant. 

    Ultimately, the court concluded that the MSC in question was nonmaritime. The work commenced before the need for a vessel arose, and its involvement was minimal, unrelated to the anticipated scope of work. Therefore, the contract fell under the governance of Louisiana law, highlighting the significance of accurately determining maritime activities.

    While the definition of maritime activities may remain uncertain, this case offers a more streamlined approach to such determinations. Engaging the expertise of an experienced attorney becomes crucial when navigating the complexities of litigation, ensuring proper guidance in understanding which claims may prevail under Louisiana law.

    Additional Sources: LARRY DOIRON, INC. VS. SPECIALTY RENTAL TOOLS & SUPPLY, L.L.P.; OIL STATES ENERGY SERVICES, L.L.C.; ZURICH AMERICAN INSURANCE COMPANY

    Written by Berniard Law Firm Writer Brianna Saroli

    Additional Berniard Law Firm Articles on Maritime Law: Injured on a Boat on Land, Can you File a Lawsuit with Maritime Claims? Admiralty/Maritime

  • Can I Recover under the Jones Act if Rough Seas Cause a Back Injury

    Large waves and rough seas make boat travel a harrowing experience. But what happens if you are at work and fall out of bed during those stormy seas? Is the captain or company you work for liable under the Jones Act?  The following case out of Louisiana helps answer the question; can I recover under the Jones Act if rough seas cause my back injury? 

    Richard Bosarge sued Cheramie Marine LLC (“Cheramie”) under the Jones Act after he allegedly suffered injuries aboard one of its utility vessels. See 46 U.S.C. § 30101. Before starting work, he had to complete a physical. During the physical, Bosarge responded he did not have any prior back pain or injuries, even though he had previously received medical care for his back pain. Nonetheless, Cheramie hired Bosarge to work as a relief captain. 

    Bosarge claimed he was injured due to the captain’s decision to travel through rough seas. He alleged the captain’s path caused him to come out of bed and get slammed down. Cheramie argued the waves were not that big, and Bosarge had not reported having an accident. The jury found Bosarge had not suffered an accident. Further, the jury also found Bosarge misrepresented or concealed facts during his pre-employment physical. 

    Bosarge appealed, arguing there was insufficient evidence to support the jury’s verdict. However, because Bosarge did not move for a directed verdict, new trial, or judgment notwithstanding the evidence, the appellate court could not review whether sufficient evidence existed. See OneBeacon Ins. Co. v. T. Wade Welch & Assocs.

    On appeal, Bosarge also argued the district court had confused the jury with the word “accident” in the jury instructions. He claimed the word “accident” suggests the incident occurred without fault. The appellate court found the verdict did not need to be overturned solely because the district court judge had not exactly followed the Pattern Jury Instructions provided by the Fifth Circuit. The appellate court pointed to the definition of “accident” in the dictionary, which states the event can result from carelessness or ignorance. Additionally, Bosarge did not provide any evidence that an ordinary person’s use of the word “accident” assumes that no one is at fault. Therefore, in light of the district court’s broad discretion with respect to jury instructions, the appellate court ruled there was no error requiring the case to be reversed. 

    Bosarge also argued the district court should not have allowed Cheramie’s expert to opine about an MRI film from before the accident because he had not received this record before the trial. The appellate court ruled the district court did not err in allowing this evidence because the expert report had been disclosed months earlier. The district court also ruled the MRI films could not be admitted into evidence. 

    This case shows one can recover for injuries sustained during rough seas if one can prove the captain or company’s negligence. Unfortunately for Bosarge, he couldn’t convince the jury Cheramie’s captain was negligent in his actions. He also wasn’t successful in his attempt to overturn the jury’s decision through the appeal. With better facts or evidence, perhaps he could have prevailed. A good lawyer can help advise you on what you need to do prior to and during a trial to preserve possible arguments for appeal. For example, they can help you move for a directed verdict or judgment notwithstanding the evidence. They can also help advise you on appropriate jury instructions and admissible evidence. 

    Additional Sources: Bosarge v. Cheramie Marine, LLC

    Written by Berniard Law Firm

    Additional Berniard Law Firm Article on the Jones Act: Personal Injury Case in Louisiana Appellate Court Examines Jones Act Seaman Status

  • An Examination of Interlocutory Appeals and Collateral Order Doctrine

    In April 2010, an offshore drilling rig, the Deepwater Horizon, exploded and sank into the Gulf of Mexico. Eleven workers died and crude oil from the well spilled into the Gulf for months after the accident. The result was a mass of litigation involving multiple defendants. In order to deal with the extensive facts and individuals involved in this case, like many other cases, the parties can appeal just one issue of the case if the lower court denies or grants a judgment on that particular issue.

    Normally, a decision must be a final one in order to be appealed. That generally means that the case has concluded and the lower court has rendered a judgment. That way, the appeals court considers all of the facts involved, but can still allow the lower court to do most of the fact analysis. However, there are some occasions where an appeal on just one issue is allowed. This is known as an interlocutory appeal, and it falls under the collateral order doctrine. The collateral order doctrine assumes that some decisions are “final in effect although they do not dispose of the litigation.”

    In order to use the collateral order doctrine, the lower court must have 1) conclusively determined the disputed question, 2) resolved an important issue that is completely separate from the final decision in the case, and 3) the issue must also be effectively unreviewable on appeal in a final judgment. “Effectively unreviewable” means that the court of appeals will have no way to review the decision of the lower court once the lower court makes a decision on this particular issue. Generally, if the decision could be appealed in some other way than the interlocutory appeal, then the court will not use the interlocutory appeal.

    In the oil spill case, parties assumed that one worker in particular held a great deal of information because he was the BP Well Site Leader on duty aboard the rig at the time of the accident. However, the Site Leader had an undisclosed medical condition that prohibited him from testifying or answering written questions. The Site Leader explained his medical condition to the judge on two separate occasions, but did not disclose the information to the parties.

    Since the parties believed that he was such a valuable witness, they really wanted to obtain information from him. As such, another judge ordered an independent doctor to examine him and ordered the Site Leader to produce his medical records to the independent doctor. The Site Leader protested because he was concerned about sharing his personal information. This order is a discovery decision, and discovery decisions are appealable after the final decision of the court based on the use of inadmissible evidence.

    One of the Site Leader’s major arguments, however, was that releasing his personal medical information would cause a great deal of harm to him personally, and there is no method on appeal to reverse that type of harm. Nonetheless, the court determined that district courts can “burden litigants in ways that are only imperfectly reparable by appellate reversal of the final district court judgment.” Therefore, even though there may be harm that cannot be reversed for the Site Leader, the court will still allow the medical information to come in because the final verdict could change on appeal if the information is removed later. To use another example, the court explains that even if the information is privileged, that does not make it appropriate for an interlocutory appeal.

    The court only briefly considered the rights of the Site Leader and his concern about protecting his personal information. In that discussion, they explain that they weighed the costs of sharing his information with the benefits of having his testimony at trial and determined that the benefits outweighed the costs.

    As result, the court determined that it could not use the collateral order doctrine and that the interlocutory appeal was inappropriate. Therefore, the court dismissed the appeal and allowed the bulk of the case to continue in the lower court.

    Civil procedure issues can be a delicate balance between protecting the case and protecting the individuals involved in the case.

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  • Louisiana’s Act 312 and its Impact on the Environment and Oil Exploration

    La. R.S. 30:29 (“Act 312”) was in enacted in 2006 and became effective in June of that year. Act 312 provides a procedure for the remediation of oil field sites as well as oil exploration and production sites. Generally, remediation is “the action of remedying something, in particular of reversing or stopping environmental change.” Before the Louisiana legislature enacted Act 312, most remediation requirements were through private party contracts; therefore, Act 312 did not change the normal trial procedures established by the Louisiana Code of Civil Procedure.

    The Louisiana Supreme Court recently discussed Act 312 at length, explaining what it did change, in a case involving the Vermilion Parish School Board. The Court explained that Act 312 was enacted because of serious concerns with the state of the land and ground water after an area was used for oil exploration and production. Parties would use the land and ground water under a mineral lease for several years, and leave the property in terrible shape by the time that they were done. Mineral leases allow the parties to contract for only the minerals or the potential oil that is located on that property. The party with the mineral lease, then, does not rent the entire property, but just the ability to find minerals or oil within or upon that property.

    Before Act 312, parties could still sue if one party left the land in terrible shape. Occasionally, however, it does not make sense economically to force a party to fix the land they damaged. Instead, the renting party would have to give the “landlord” the difference between the value of the land when they received it and the value of the land when it was returned after the lease, under a tort law theory. However, the person who owned the land, the “landlord,” was not required to use the funds to fix damage done to the land. As a result, property that had serious environmental problems often went without remediation because the landlord was not required to fix it. This creates health and safety concerns for the general public.

    When parties file under Act 312, a notice is sent to the Louisiana Department of Natural Resources, Commissioner of Conservation (“DNR”) and the attorney general. The court cannot issue a judgment unless this notice is filed. After the notice is filed, the DNR and the attorney general can intervene in the case if they so choose; they also retain the ability to bring an independent action through civil or administrative means. Then, the matter proceeds to trial as any normal case would.

    At the trial, the fact finder will determine if there actually is any environmental damage and whether the defendant or defendants were responsible for that damage. If the fact finder finds that there is environmental damage and the defendant is responsible, then the defendant is required to form a “remediation plan.” The remediation plan is submitted to the court for approval; the plaintiff is allowed to submit a suggested remediation plan to the court as well.

    Then, the DNR will hold a public hearing on the submitted remediation plans. The DNR will then determine the most feasible plan to accomplish the remediation of the environmental damage, keeping the health, safety, and welfare of the public at large in mind. After they approve the plan, the plan is sent to the court for further review. Within a certain time frame, parties can submit alternations, comments, or new plans to the court during this time as well. Unless the parties prove that another plan is more feasible, the court will allow the plan approved by the DNR to move forward. In addition, the court will determine how much of the damages amount will be required to be used exclusively for remediation. Then, the legally responsible parties will deposit funds into the court’s registry for remediation purposes.

    One of the many issues in the case involving the Vermilion Parish School Board was whether private parties could seek additional damages apart from the required remediation funds. The Court determined that Act 312 specifically provided that private parties would not be limited by the remediation plan. That is, if they wanted to seek damages beyond what would be required to correct the environmental damages, such as punitive damages (damages that are meant to punish the offending party), then Act 312 did not limit them from doing that.

    The Berniard Law Firm specializes in oil claims, including their effects on the environment. If you have questions about Act 312 or think your mineral lease has been violated, contact The Berniard Law Firm today.

  • Environmental Damage Appeal Focuses on Mineral Lease, Oil

    In January, the Louisiana Supreme Court considered an appeal from the Vermilion Parish School Board. The appeal centered on environmental damage to land that was subject to a mineral lease. The mineral lease allowed those leasing the land to look for and remove any mineral, including oil, that they found on the land. However, once they did this, they left the land in a state that was environmentally hazardous.

    Louisiana has special procedures for dealing with restoring land so that we do not harm the environment, specifically when removing oil. The remediation of the land, this restoring process, was one of the major issues in the Vermilion Parish case. The defendants included Union Oil Company of California, Union Exploration Partners, Carrollton Resources, LLC, Chevron USA, Inc., and Chevron Midcontinent, L.P.

    The Court faced two major issues in this case. The first was whether the parties could receive damages in excess of the amount it would take to restore the property, thereby correcting the environmental damage. The Court determined that the language of the legislation (La. R.S. 30:29) was clear and that the parties could receive a larger amount.

    Under Louisiana law, when a case arises where a party is required to correct an environmental wrong, the funds are deposited into the court’s registry. The court will then disperse the funds to repair the land. This is a relatively new development because this act was put into effect in 2006. The legislature was concerned that parties who received funds to help correct the damage done to their land would not use it for that purpose if they were not so required. Leaving property that is damaged could create serious issues for the health, safety, and welfare of the surrounding population.

    The legislation focuses on the role of the fact finder in determining whether there was environmental damage, and how much that environmental damage will cost to fix. As such, the court determined that the case should continue so that the fact finder could make those determinations.

    The second issue was whether Chevron should be dismissed from the case. According to the facts, Union Oil had the mineral lease first, but Chevron subsequently acquired Union Oil and all of their assets, including the lease. As such, Chevron became responsible for any environmental damage that Union Oil may have caused. Chevron admitted responsibility initially, but then denied that they should be legally responsible later.

    Chevron explained that while Chevron Corp. owns both Chevron USA and Union Oil Company of California, the two sections do not overlap. That is, Union Oil had $18 billion in assets, and should they be found liable for environmental damage, the amount that they will pay will come from their assets and not Chevron’s. Chevron explained that those assets were never transferred out of Union Oil, so Union Oil remained somewhat independent even after Chevron acquired them.

    Therefore, Chevron argued that Chevron USA should be removed from the case so that those assets are not adversely affected. Nonetheless, Frank Soler, the senior liaison in the subsidiary governance unit of the corporate governance department for Chevron Corp. admitted that Union Oil does not have any employees and there may be service agreements between the two sections for day-to-day activities.

    The Plaintiffs in the case were only allowed to discover a very limited amount of information from Chevron regarding this case. The court restricted the information until they determined whether or not Chevron should remain in the case a defendant. As such, many facts remained unknown regarding the relationship between Chevron and Union Oil. Therefore, the court determined that Plaintiffs should be allowed to gather more information and the case should continue.

    Both of these issues failed the summary judgment test. The test is whether there is an absence of material facts in the case. If there is such an absence, then the court will only determine the questions of law and one side will receive a summary judgment. In this case, however, the court determined that there may be facts in dispute because they did not have enough information; therefore, the case continued.

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  • Boat Injury Case Highlights Watercraft and Coverage Exclusions (Pt 2)

    In 2008, three men were passengers on a chartered fishing boat that collided with a utility boat. The fishing boat’s insurance company was St. Paul Fire and the utility boat’s insurance company was Steadfast. Harvest Oil owned the utility boat. Normally, the insurance companies would fight about who was at fault and may eventually make it to court. However, this case was more complicated because the men in the fishing boat did not own the boat, and the owner of the utility boat filed for bankruptcy shortly after the passengers drug them into the lawsuit as a third party. The issue of waiver of a coverage defense while the insured is in a bankruptcy proceeding is one that has not been considered in Louisiana previously.

    Harvest filed for bankruptcy in 2009 and the passengers in the accident filed in its bankruptcy proceeding as a creditor for “an amount to be determined.” Where an insured filed for bankruptcy, it was very smart of the injured party to file as a creditor because that helps protect their interest if the insurance company refuses to pay Harvest’s liability coverage.

    When an individual or company files for bankruptcy, federal law provides an automatic stay on any other litigation proceedings. That means that all other litigation involving the debtor must be paused until the bankruptcy proceeding is closed. Therefore, Harvest dropped out of the insurance lawsuit, and the passengers had to sue the insurance company alone.

    As a result, when Steadfast asserted the watercraft exclusion, that meant that the passengers could no longer sue the insurance company and had to sue the insured himself. Since the insured was in bankruptcy proceedings, there was not only a delay in the litigation because of the stay, but there was also a very real chance that the injured parties may not get any money.

    When an individual goes into a bankruptcy proceeding, they have to pay off their creditors in a certain order. First, the secured creditors will receive payment. A secured creditor has something that they use as collateral for the loan or credit that they extended to the debtor. For example, if you have an automotive loan, your car is likely your collateral or security. If you file bankruptcy and cannot pay for your car loan, then, with a few exceptions, they will likely come take your car. When a creditor is unsecured, however, they cannot take anything and must share with all of your other unsecured creditors. That likely means that they will not get paid the entire debt that they are owed, and will usually only receive a small portion of their money back.

    A judgment is an unsecured debt, and because the passengers filed so late, they are likely at the back end of the line of creditors in the bankruptcy proceeding. Louisiana law allows those with liability coverage to sue the insurer directly when the insured has been removed for bankruptcy proceedings under the Louisiana Direct Action statute. So, if the insurance company would have covered the accident, then the insurance company would have paid them directly instead of going through the insured. This is because liability coverage in Louisiana is not the property of the insured; it is the property of whoever the injured party was. Other types of insurance coverage, such as collision, for example, would still be the property of the insured and would be included in the bankruptcy proceedings. Where the insurance coverage would be a property of the estate, then the stay that applies to the insured would also apply to the insurer. However, that is not the case here because the liability coverage is not property of the insured.

    Once the court decided the reservation of rights and waiver issues, then it questioned how those decisions were affect the bankruptcy proceeding. The court considered claim and issue preclusion. Preclusion in civil cases is a lot like the rule against double jeopardy in criminal cases; the idea is that you cannot keep taking someone back to court for the same offenses over and over again.

    Claim preclusion does not allow the same parties or parities that are in privity, or connected in some way, to try the same claim or cause of action after a court of competent jurisdiction has rendered a final verdict. If the claim was litigated to completion, then it cannot be litigated again. It is sometimes difficult to determine if parties are in privity, however. Usually these relationships are based on a connection so strong that liability of one would normally be the liability of another such as in employee and employer relationships. An insurance company sued under the Louisiana Direct Action statute could be an example, but only if the insured’s and the insurer’s interests are aligned. In this case, because the insurer is asserting a coverage defense, then their interests are not aligned and they are not in privity. Therefore, claim preclusion does not affect the bankruptcy suit.

    Issue preclusion is virtually the same as claim preclusion except that it applies to only one issue in the lawsuit instead of the entire case. The issue still needs to be completely decided by a court of competent jurisdiction, however. It also requires that the parties be the same, but there is no privity exception. Since the parties will not be the same in the bankruptcy proceeding, issue preclusion has no effect on the bankruptcy proceeding either.

    The law overlaps occasionally and can result in some confusing and interesting results. You need an experienced attorney to help you navigate the legal waters.

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  • Boat Injury Case Highlights Watercraft and Coverage Exclusions (Pt 1)

    In 2008, three men were passengers on a chartered fishing boat that collided with a utility boat. The fishing boat’s insurance company was St. Paul Fire and the utility boat’s insurance company was Steadfast. Harvest Oil owned the utility boat. Normally, the insurance companies would fight about who was at fault and may eventually make it to court. However, this case was more complicated because the men in the fishing boat did not own the boat, and the owner of the utility boat filed for bankruptcy shortly after the passengers drug them into the lawsuit as a third party. The issue of waiver of a coverage defense while the insured is in a bankruptcy proceeding is one that has not been considered in Louisiana previously.

    Harvest received a letter from their insurance company shortly the parties filed suit. The letter explained that the insurance company was “reserving their rights,” but it was signed by Zurich American Insurance Company, Harvest’s automotive insurance provider. Zurich North America owned both Steadfast and Zurich American Insurance Company, and Harvest had insurance policies with both of these carriers. Despite the fact that Zurich American Insurance Company signed the letter, the Steadfast policy was mentioned by name and policy number in the letter. In fact, the letter quoted a portion of the Steadfast policy that excluded watercrafts such as the one that was involved in the accident in 2008. The letter explained that the insurance company would be investigating the case, but reserved all of its rights in action. Essentially, when an insurance company reserves its rights, it means that wants the option of asserting a defense that may not be in the insured interests.

    When the passengers sued the insurance company their initial answer did not mention that Steadfast had a watercraft exclusion. When the passengers asked to review the relevant insurance policies, Steadfast gave them copies of their standard primary and umbrella policies. Three separate insurance claims agents thought that Harvest’s claim would be covered because they overlooked the watercraft exclusion. Finally, in 2011, an insurance adjustor finally noticed the exclusion. As a result, Steadfast changed their defenses and asserted that they would not cover Harvest’s claim because of the watercraft exclusion. Steadfast also, understandably, changed their attorneys shortly after this discovery.

    The passengers argued that Steadfast could not assert this defense so late in the litigation. They argued that Steadfast waived their coverage defense by proceeding with the lawsuit, and even if they did not waive the defense, they did not assert that right to begin with. The court in this case explained that the insurance company needed to have reserved their right to use this defense at the beginning of the litigation, so they analyzed the initial letter that Harvest received at the beginning of the lawsuit.

    The passengers argued that Steadfast did not reserve its rights through the letter because the letter was very confusing. It was signed by another insurance company and confused the insured. The insured thought that Zurich, their automotive insurance company, was asserting its rights; not that Steadfast was asserting its rights. In addition, the letter only referred to investigation and did not mention anything relating to a defense.

    Generally, if the insurance company assumes a defense of the insured without first reserving its rights, that constitutes a waiver. However, the court found that Steadfast did reserve its rights in the letter sent to Harvest. The court points out that the letter specifically referred to the policy with Steadfast and quotes language from it. The fact that the insured did not read the letter carefully, the court concluded, should not inhibit Steadfast from reserving its rights. Since Louisiana does not require technical language to reserve its rights to a defense, the insurance company was not required to describe which rights in particular they were reserving.

    However, the insurance company can still waive their rights even where they have reserved their rights. The court pointed out that under Louisiana law, an insurance company can waive any provision of an insurance contract, even if that waiver has the effect of extending coverage. Waiver requires misleading conduct on the part of the insurer and a prejudice to the insured.

    Louisiana law requires that the insurance company induce their insured to belief that they were waiving their rights. In this case, although Steadfast mistakenly thought that Harvest was covered, they did not communicate that mistake to Harvest. Steadfast did not act with the intention of misleading their insured; they acted because of a mistake regarding coverage, so Steadfast did not deliberately mislead Harvest.

    Waiver also requires that the insured be harmed because of the misleading conduct. Due to the bankruptcy proceedings, Harvest was not harmed by the delay and confusion because they were not actually a party in the case involving the passengers. The court explained that they could not have been harmed in a case where they were not a party.

    As a result, the court concluded that Steadfast asserted and reserved their rights properly and did not waive their coverage defense. But, how does that affect the bankruptcy proceeding? Look for part two to find out.

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  • Louisiana and Fifth Circuit Reaffirm the Necessity of Personal Jurisdiction

    The “New York Convention” (9 U.S.C. §§ 201 et seq.) gives a U.S. court the ability to enforce a foreign arbitration award if there is personal jurisdiction over the defendant. Personal jurisdiction is when the defendant can expect to appear in a foreign country’s court because the defendant has minimum contacts with the country. First Inv. Corp. v. Fujian Mawei Shipbuilding, Ltd. reaffirms that personal jurisdiction is necessary when a plaintiff is trying to confirm an arbitration award.

    In First Inv. Corp., a Marshall Islands corporation and Chinese shipbuilding company entered into a contract that had an arbitration clause. The Marshall Islands is a presidential republic of the United States. The U.S. provides defense, funding, social services, and its currency for use to the republic. The arbitration clause required all disputes to be resolved in neutral territory under the London Maritime Arbitrators Association rules. The English arbitration panel found for the Marshall Islands corporation, but China refused to enforce the award against the defendant because not all the arbitrators on the panel had seen the final draft of the decision. Instead of resolving the matter in either the country of arbitration or the defendant’s country, First Inv. Corp. commenced action in the U.S. District Court for the Eastern District of Louisiana. The case eventually appeared before the Fifth Circuit Court of Appeals.

    The Fifth Circuit affirmed the district court’s decision that the U.S. lacks personal jurisdiction over a Chinese shipbuilding company that has no contacts with the U.S. The Chinese company did not distribute products, conduct any transactions, or maintain property on American soil. However, the Marshall Islands plaintiff argued that since the defendant did not have any contacts with the U.S., the defendant should not be afforded the right of due process stemming from personal jurisdiction. The Fourteenth Amendment of the U.S. Constitution forbids states from depriving “any person of life, liberty, or property, without due process.” In the district court trial, the plaintiff argued that as a corporation controlled by the Chinese government, the defendant was not entitled to due process. Ultimately, the trial court rejected the plaintiff’s argument because it would undermine the “minimum contacts” test set by the U.S. Supreme Court because a confirmation of the award would suggest that a court can exercise personal jurisdiction over a defendant with no contacts in the U.S. The Fifth Circuit followed up by citing cases affirming due process protection for foreign corporations.

    The plaintiff then argued that a confirmation of the arbitration would not affect the defendant’s “substantive rights” or fundamental protections afforded by the U.S. Constitution. The Fifth Circuit disagreed because a confirmation of the arbitration award would allow the plaintiff to enforce the judgment in Britain.

    First Inv. Corp. shows how significant it is for parties to understand U.S. legal procedures when seeking to enforce foreign arbitration awards.

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