IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
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No. 97-31321
Summary Calendar
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AG 1824 MARINE INSURANCE,
Plaintiff-Appellant,
v.
UNITED KINGDOM MUTUAL P&I CLUB; ET AL,
Defendants,
UNITED KINGDOM MUTUAL P&I CLUB,
Defendant-Appellee.
_________________________________________________________________
Appeal from the United States District Court
for the Eastern District of Louisiana
(96-CV-3540-F)
_________________________________________________________________
August 26, 1998
Before KING, HIGGINBOTHAM, and DAVIS, Circuit Judges.
PER CURIAM:*
Plaintiff-appellant AG 1824 Marine Insurance appeals the
district court’s order dismissing its direct action claim against
the indemnity organization United Kingdom Mutual P&I Club. The
district court dismissed the claim because it found that the
Louisiana Direct Action Statute, LA. REV. STAT. ANN. § 22:655
*
Pursuant to 5TH CIRCUIT RULE 47.5, the court has determined
that this opinion should not be published and is not precedent
except under the limited circumstances set forth in 5TH CIRCUIT
RULE 47.5.4.
(West 1995), did not apply. We affirm.
I. BACKGROUND
In September 1995, a cargo of bulk sugar in good order and
condition, owned by E.D. & F. Mann Sugar (ED&F) and insured by AG
1824 Marine Insurance (AG), left Montevideo, Uruguay, bound for
New Orleans, Louisiana. The sugar was aboard the M/V
NOVODRUZHESK, a vessel owned by Baltic Shipping (Baltic).
Baltic’s insurance provider was United Kingdom Mutual P&I Club
(UK Club).
While en route to New Orleans, outside United States
territorial waters, and unbeknownst to the crew, heavy fuel oil
leaked into the hold containing the sugar. Shortly after its
arrival in New Orleans, the ship was unloaded. During the
unloading, it was discovered that a substantial quantity of the
sugar had been contaminated by the fuel oil.
ED&F had sold the sugar to Domino Sugar Company, who
exercised their right of refusal upon this discovery. ED&F filed
a claim with its underwriter, AG 1824, who paid the damages, and
together they hired a surveyor to ascertain the nature, cause,
and extent of the loss. In an attempt to mitigate the damages,
efforts were made to segregate the contaminated from the sound
sugar. It soon became apparent to ED&F, however, that the cargo
was valueless, and it abandoned the sugar to the vessel owner.
AG 1824 then filed suit against Baltic and UK Club to
recover its losses under the Louisiana Direct Action Statute
(LDAS), LA. REV. STAT. ANN. § 22:655 (West 1995). UK Club filed a
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motion to dismiss the claim against it, and the district court
granted the motion, finding that the LDAS was not applicable in
this instance.1 AG 1824 appeals.
II. STANDARD OF REVIEW
The facts in this case are undisputed, leaving only
questions of law, the district court’s resolution of which we
review de novo. See Heartland Fed. Sav. & Loan Ass’n v. Briscoe
Enters., II (In re Briscoe Enters., II), 994 F.2d 1160, 1163 (5th
Cir. 1993).
III. DISCUSSION
The LDAS allows an injured party to maintain a direct action
against an insurer for the tortious conduct of the insured
provided that any one of the following three conditions has been
satisfied: (1) the insurance policy was written in Louisiana, (2)
the insurance policy was delivered in Louisiana, or (3) the
accident or injury occurred in Louisiana. See LA. REV. STAT. ANN.
§ 22:655 (West 1995); Webb v. Zurich Ins. Co., 205 So. 2d 398,
402-07 (La. 1967); see also Landry v. Travelers Indem. Co., 890
F.2d 770, 772 (5th Cir. 1989). All parties agree that the policy
was neither written nor delivered in Louisiana and thus that the
1
The case proceeded to trial against Baltic, and Baltic
contended that ED&F and AG 1824 failed to mitigate their damages
by not selling the cargo for salvage. The district court found,
however, that the cargo was valueless and that ED&F and AG 1824
acted reasonably under the circumstances. The court therefore
entered judgment against Baltic for the fair market value of the
damaged sugar plus the survey fees and expenses involved in
attempting to salvage the cargo. Baltic claims insolvency and
has not paid any portion of the judgement.
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accident or injury must have occurred in Louisiana for the LDAS
to apply.
AG 1824 contends that the district court construed the LDAS
too narrowly, failing to permit the statute to accomplish its
intended purpose. AG 1824 argues (1) that the injury occurred in
Louisiana because Baltic breached its duty to deliver the cargo
in sound condition upon arrival in New Orleans and (2) that the
damage to the cargo had an impact in Louisiana, either of which
would satisfy the requirements for application of the LDAS.
Additionally, AG 1824 argues that the LDAS should be interpreted
as broadly as the United States Constitution allows, which would
allow this action to survive.
While it is well settled that the LDAS “is remedial and
should be liberally construed to accomplish its purpose of
affording a person suffering loss or damage a direct action
against a tortfeasor’s insurer,” Quinlan v. Liberty Bank & Trust
Co., 575 So. 2d 336, 353 (La. 1990), the limits of the LDAS are
equally well established. Courts have been given several
opportunities to extend the LDAS’s reach to the bounds of the
Constitution and have declined to do so. See, e.g., Esteve v.
Allstate Ins. Co., 351 So. 2d 117, 118, 120 (La. 1977) (rejecting
an argument for a broad interpretation of the LDAS that would
encompass accidents outside Louisiana where the policy was
neither delivered nor written in Louisiana); Kirchman v. Mikula,
258 So. 2d 701, 702-03 (La. Ct. App. 1972) (rejecting an argument
to follow New York in allowing a direct action against an insurer
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without meeting the above requirements of the LDAS); see also
Landry, 890 F.2d at 773 (rejecting an argument to extend the LDAS
to defendant insurer solely upon the basis that the necessary
minimum contacts with the forum exist to create personal
jurisdiction); Signal Oil & Gas Co. v. Barge W-701, 654 F.2d
1164, 1175 (5th Cir. Unit A Sept. 1981) (same).
The damage to the sugar caused by the leakage of fuel oil
into the hold containing the sugar did not occur in Louisiana,
and the harmful impact that this accident or injury undoubtedly
had in Louisiana is insufficient to satisfy the LDAS. See Morse
v. Hartford Cas. Ins. Co., 301 So. 2d 741, 744 (La. Ct. App.
1974) (holding that an out-of-state injury to a Louisiana
resident does not bring an action within the purview of the LDAS,
citing Grinnell v. Garrett, 295 So. 2d 496 (La. Ct. App. 1974),
and Kirchman, 258 So. 2d at 703); see also Hunter Douglas Metals,
Inc. v. New Bay Fin. Shipping Co., Civ. A. No. 88-3470, 1989 WL
237754, at *1 (E.D. La. Dec. 21, 1989) (“While the injury clearly
had an impact in Louisiana, it did not arise in Louisiana.”); cf.
Vincent v. Penrod Drilling Co., 372 So. 2d 807, 811 (La. Ct. App.
1979) (stating in a case involving an injured seaman, “To invoke
the [LDAS] in a maritime action for injuries sustained on the
high seas, the insurance policy in question must have been issued
in or delivered in Louisiana.”). Additionally, to construe the
LDAS to apply where an impact from the injury is felt in
Louisiana would be inconsistent with the decisions of the courts
of Louisiana not to extend the LDAS to the bounds of the
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Constitution.
In order to maintain its action against UK Club, AG 1824
contends that the relevant accident or injury in this case was
suffered when Baltic breached its duty to deliver the cargo in
sound condition by delivering contaminated sugar in New Orleans.
However, for the LDAS to apply, the injury occurring in Louisiana
must sound in tort. See Holland Am. Ins. Co. v. Succession of
Roy, 777 F.2d 992, 995 (5th Cir. 1985). In arguing that this
injury sounds in tort, AG 1824 cites for the first time in its
reply brief only cases determining the priority of maritime liens
and holding that damage to cargo sounds both in tort and
contract. See Associated Metals & Minerals Corp. v. Alexander’s
Unity MV, 41 F.3d 1007, 1012 (5th Cir. 1995) (citing The John G.
Stevens, 170 U.S. 113 (1898)); Oriente Commercial, Inc. v.
American Flag Vessel, M/V Floridian, 529 F.2d 221, 222-23 (4th
Cir. 1975) (same). However, these cases refer only to the
sources of the duty to carry and deliver the goods in sound
condition and do not alter the fact that the actual tort at
issue--the leakage of the fuel oil--here arose entirely outside
of Louisiana. Assuming that the breach of the duty to carry and
deliver the cargo in sound condition is tortious, the breach of
this duty occurred once the fuel oil leaked into the sugar hold
and not after the vessel arrived in port. Accord Hunter Douglas
Metals, Civ. A. No. 88-3470, 1989 WL 237754, at *1 (holding that
a loss of cargo bound for New Orleans due to a vessel sinking did
not arise in Louisiana and therefore did not fall under the
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LDAS). Therefore, no accident or injury allowing invocation of
the LDAS occurred in Louisiana.
IV. CONCLUSION
For the foregoing reasons, we AFFIRM the district court’s
order of dismissal.
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