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International Marine, L.L.C. v. Integrity Fisheries, Inc.

United States Court of Appeals, Fifth Circuit

June 21, 2017


         Appeals from the United States District Court for the Eastern District of Louisiana

          Before SMITH, ELROD, and HAYNES, Circuit Judges.

          HAYNES, Circuit Judge.

         International Marine, L.L.C., International Offshore Services, L.L.C. (collectively "International"), and Tesla Offshore, L.L.C. ("Tesla"), appeal the district court's grant of summary judgment dismissing their indemnity and insurance claims.[1] For the reasons explained below, we AFFIRM in part and VACATE and REMAND in part.

         I. Background

         This case involves an allision in the Gulf of Mexico causing significant damage to a submerged mooring line for the M/V NAUTILUS (the "NAUTILUS"), a mobile offshore drilling unit used by Shell Offshore, Inc. ("Shell"), to conduct drilling operations. The principal dispute before this court concerns whether third parties are contractually obligated to pay for that damage.

         Tesla, an offshore survey company, was tasked with performing an archaeological sonar survey in the Gulf of Mexico. To perform this survey, Tesla required two vessels: a larger vessel, called the "tow vessel, " and a smaller vessel, called the "chase vessel." Tesla contracted with International to provide and operate the tow vessel, called the M/V INTERNATIONAL THUNDER (the "THUNDER"). As to the chase vessel, Tesla initially contracted with Integrity Fishers, Inc. ("Integrity"), but after Integrity's vessel developed mechanical issues, Integrity substituted a different chase vessel owned and operated by Sea Eagle Fisheries, Inc. ("Sea Eagle"), called the F/V LADY JOANNA (the "JOANNA").[2]

         The THUNDER traveled along a survey grid while towing a "towfish, " owned by Tesla. The towfish was attached to a cable, nearly two miles long, and was towed close to the bottom of the ocean, where it emitted sonar signals and transmitted the echo of those signals to Tesla equipment on the chase vessel. Tesla personnel, rather than the crew of the chase vessel, operated the Tesla equipment. At the time of the allision, the chase vessel was the JOANNA. According to Tesla's party chief aboard the JOANNA, the Tesla tracking equipment was "our responsibility, " whereas the crew of the JOANNA was responsible for "driving the vessel and staying within . . . a radius of a tow fish." The Tesla equipment automatically relayed the sonar signals to the THUNDER, which allowed the Tesla survey team to monitor the towfish and maintain the proper towfish position above the ocean bottom and in relation to the survey grid.

         The precipitating incident for this litigation was an allision between the towfish cable and a submerged mooring line for the NAUTILUS. Prior to the allision, the towfish had experienced technical problems, forcing Tesla to reel it onto the THUNDER for repairs. The THUNDER and the JOANNA temporarily went off the grid toward the south until the towfish was repaired and redeployed, at which point the THUNDER turned north, back toward the grid, followed by the JOANNA. According to International, this turn toward the north put both vessels on a course that brought them closer to the NAUTILUS. The JOANNA's captain informed Tesla's party chief, who was occupied with the Tesla equipment, that the THUNDER was getting too close to the NAUTILUS. The party chief then radioed the THUNDER to warn of the danger, but his warning was met with assurances that everything was okay. The party chief testified that about thirty to forty-five minutes later the towfish cable allided with the mooring line of the NAUTILUS. The JOANNA was over the towfish and the Tesla equipment was sending sonar signals to the THUNDER immediately prior to the allision.

         Shell, which was using the NAUTILUS for drilling operations when the allision occurred, sued Tesla and International for negligence.[3] In the Shell v. Tesla negligence litigation, a jury awarded damages to Shell and determined that Tesla was 75% at fault and International was 25% at fault. In the present action before this court, Tesla and International claim they are entitled to indemnity from Integrity and Sea Eagle because the allision related to the operation of the JOANNA. Tesla and International additionally claim that they are entitled to insurance coverage because they were added as additional insureds on Integrity's and Sea Eagle's insurance policies with Atlantic Specialty Insurance Company/One Beacon Insurance Company ("One Beacon") and New York Marine & General Insurance Company ("NY MAGIC").[4]

         The contractual relationships between Tesla, Integrity, and Sea Eagle were set out in two master service agreements ("MSAs"). The parties agree that the MSAs were identical in all relevant respects, and this litigation focuses on two articles, Article 9 and Article 11. Article 9 provides, in relevant part, that the indemnitors (here, Integrity or Sea Eagle) are liable to Tesla and its contractors for damage to third party property "arising out of or related in any way to the operation of any vessel owned . . . by [Integrity or Sea Eagle] . . . to perform work under this agreement except to the extent such loss, harm, infringement, destruction, or damages is caused by [Tesla's or its contractor's] gross negligence or willful misconduct." This obligation is owed "regardless of cause including who may be at fault or otherwise responsible under any contract, statute, rule or theory of law." Article 11 requires, in relevant part, that Sea Eagle and Integrity provide insurance coverage for "third party claims arising out of or connected with the performance of Service hereunder, " and name Tesla and its contractors as additional insureds. The insurance obligations purchased under the MSAs were required to be "independent of the indemnity obligations contained in the contract/agreement and [to] apply regardless of whether the indemnity provisions contained in the contract/agreement are enforceable."

         The insurers filed three motions to dismiss. The district court, however, never explicitly decided these motions. While they were still pending, Integrity and Sea Eagle filed motions for summary judgment. Tesla and International responded with their own cross-motions for summary judgment. The district court granted Integrity's and Sea Eagle's motions and denied Tesla's and International's motions, concluding that "Shell's claims for damages based on the M/V NAUTILUS incident did not arise out of, and are not related to, the operation of the F/V LADY JOANNA." Furthermore, because it found that there was no indemnity obligation, the district court also concluded that the insurers did not have any obligations to Tesla or International, and it dismissed all claims against the insurers. Tesla and International timely appealed.[5]

         II. Standard of Review

         We review a grant of summary judgment de novo. Int'l Marine, L.L.C. v. Delta Towing, L.L.C., 704 F.3d 350, 354 (5th Cir. 2013). "Summary judgment is appropriate when 'there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.'" Id. (quoting ...

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