U.S. United Ocean Services, LLC (“United”) entered into a General Services Agreement (“the Agreement”) with Buck Kreihs Company, Inc. (“BK”) whereby BK would perform ship-repair work for United. BK agreed to indemnity United for all liabilities arising out of or related to any way to the work or services performed by BK or to BK’s presence on United’s property, even if the liability at issue was partially caused by United’s fault or negligence. The Agreement did not apply to liability caused solely by United’s fault or negligence. The Agreement also required BK to procure a general liability policy and to name United as an additional insured under that policy. Pursuant to the same, St. Paul issued a general marine liability policy in which BK was the Named Insured and United was an additional insured under the policy.
One of BK’s employees was injured removing a gangway that led from BK’s dock to a barge owned and operated by United. The injured employee sued United, who made a demand against St. Paul as an additional insured. United and the injured employee settled. St. Paul denied coverage to United on the ground that the policy’s Watercraft Exclusion excluded coverage. The District Court granted summary judgment to St. Paul and United appealed.
On appeal, the Fifth Circuit noted Section 905(b) of the Longshore and Harbor Workers’ Compensation Act voids BK’s agreement to indemnify United under the Agreement. Section 905(b) states, in pertinent part, in the event of injury to a person covered by the Longshore and Harbor Workers Compensation Act caused by the negligence of a vessel, then such person, or anyone otherwise entitled to recover damages by reason thereof, may bring an action against such vessel as a third party, and the employer shall not be liable to the vessel for such damages directly or indirectly and any agreements or warranties to the contrary shall be void. 33 U.S.C. §905(b).
The general insuring clause of the policy extended coverage only to those obligations that the insured was “legally obligated to pay.” Since BK could not, as a matter of law under Section 905(b), be “legally obligated to pay” injured employee’s claim against United, the policy’s coverage provision did not encompass BK’s attempted assumption of liability as to the claim. The Fifth Circuit, therefore, affirmed the District Court’s grant of summary judgment in favor of St. Paul and against United, holding there was no coverage pursuant to the Agreement between BK and United and as a matter of law.
Paul Holden, et al. v. U.S. United Ocean Services, LLC, et al., 2:09-CV-3670 (5th Cir. 08/19/2014)