Crew Sublimit of Protection and Indemnity Policy Unambiguously Applied to Loss

Case: United Specialty Ins. Co. v. Porto Castelo, Inc.
Federal District Court, Southern District of Texas
No. H-15-1036, 2016 U.S. Dist. LEXIS 59715 (May 5, 2016)

On December 1, 2014, an explosion and fire occurred on board the MISS EVA, a vessel owned and/or operated by Porto Castelo, Inc. (“Porto”) and Trident Circle, Inc. (“Trident”), while it was in the Gulf of Mexico in route to Morgan City, Louisiana with four crewmen aboard. As a result of the explosion, the MISS EVA sank, and an oil pollution incident occurred. The four crewman also suffered bodily injury.

United Specialty Insurance Company issued a package policy insuring Porto, Trident, and the MISS EVA. The declarations page of the policy stated that the MISS EVA was insured in the amount of $550,000, with a protection and indemnity limit of $500,000, and a crew sublimit of $100,000.

United paid the full limit under the Hull Section of the Policy, or $550,000, and the parties agreed no further amounts were due under that Section of the Policy. United then issued a reservation of rights letter to Porto and Trident, acknowledging coverage under the P&I Section of the Policy for the injured crewmembers, but noting the $100,000 sublimit applied and was the total amount of coverage for all claims by these men for injuries arising out of the single occurrence. Furthermore, United noted the crew sublimit was reduced by United’s payment of loss, damage, costs, fees and expenses associated with the crew members’ claims.

Porto and Trident, on the other hand, contended that the $100,000 crew sublimit should provide up to $100,000 of coverage per crew member per occurrence. United thus initiated a declaratory judgment action in federal court to determine applicability of the sublimit.

In response to United’s summary judgment motion seeking a ruling that a single $100,000 was available for all crewmember injuries, the insureds argued the Policy did not explain how the $100,000 crew sublimit reconciled with the applicability of the $500,000 Protection & Indemnity limit in the Policy, such that it was ambiguous. Porto and Trident also argued in light of the high premiums they paid, i.e., $2500 for each crew member for crew coverage and $12,000 for the $500,000 Protection and Indemnity coverage, they believed they were buying crew coverage of up to $100,000 per crew member per occurrence. Alternatively, the insureds maintained, because “crew” was not defined in the Policy, and since the injured parties were not identified as crew in the Policy, their damages were not limited in any way by the crew sublimit.

On rebuttal, United maintained the $100,000 crew sublimit was unambiguous on its face and that it was subject to only one reasonable interpretation, i.e., that it applied to damages to the crew as a whole. United pointed to the dictionary definition of “crew,” which included “the whole company belonging to a ship,” and noted the court should reject the insureds’ attempts to modify the plain term “crew sublimit” to “crewmember sublimit.”

The Court, in granting United’ summary judgment motion, simply noted it “agrees with United that the language of the policy, including the crew sublimit, is clear and unambiguous on its face and should be enforced.”