Insurance Policies Must Be Read as They are Written: 'Arise out of ' or 'Relate in Any Way'.

Author:Zalma, Barry
Position:[ON MY RADAR]

* People who write contracts with conditions requiring that one party provides insurance protection for another must be able to read and understand all of the terms, conditions and limitations of a policy of insurance. Failure to do so will usually result in litigation that is, more often than not, unsuccessful.

In International Marine, L.L.C.; Et Al., Tesla Offshore, L.L.C. V. Atlantic Specialty Insurance Company; New York Marine & General Insurance Company, Tesla Offshore, L.L.C. v. Atlantic Specialty Insurance Company; One Beacon Insurance Company; New York Marine And General Insurance Company, No. 18-30392, United States Court of Appeals for the Fifth Circuit (February 12, 2019) the Fifth Circuit resolved an insurance coverage dispute stemming from an allision (the running of one ship upon another ship that is stationary) during a sonar survey by Tesla Offshore, L.L.C. ("Tesla"). Tesla seeks insurance coverage for its liability from the allision under two policies taken out on a vessel it chartered. The district court granted the insurers' motions for summary judgment and dismissed Tesla's claims with prejudice. Tesla appealed.

Previously, in International Marine, L.L.C. v. Integrity Fisheries, Inc., 860 F.3d 754 (5th Cir. 2017) the Fifth Circuit noted that Tesla was conducting an archaeological sonar survey using two chartered vessels. The first--the "tow vessel"--was the M/V International Thunder ("Thunder") owned by International Marine, L.L.C, and International Offshore Services, L.L.C. (jointly, "International"). The second--the "chase vessel"--was the F/V Lady Joanna ("Joanna") owned by Sea Eagle, Inc. ("Sea Eagle").


To perform the survey, the Thunder traveled along a grid pulling a "towfish" attached to a lengthy cable. The Joanna followed to track the towfish and receive sonar signals it emitted. At one point, the Thunder reeled in the towfish to make some repairs. After the towfish was redeployed, its cable allided with the mooring line of a mobile offshore drilling unit ("MODU") used by Shell Offshore, Inc. ("Shell"). The allision severely damaged the MODU, and Shell sued Tesla and International for negligence. A jury awarded Shell over $9 million in damages and determined that Tesla was 75% at fault, International 25%.

Following that verdict, Tesla and International sought indemnity from Sea Eagle, owner of the Joanna. Tesla and International also sued two of Sea Eagle's insurers, claiming that they had been "added as...

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