UNITED STATES COURT OF APPEALS
For the Fifth Circuit
No. 98-30875
STEVEN HENRY ADAMS, for Himself and as Representative of Certain
Underwriters at Lloyd's; INDEMNITY MARINE ASSURANCE COMPANY LTD;
THE YORKSHIRE INSURANCE COMPANY LIMITED; COMMERCIAL UNION ASSURANCE
COMPANY PLC; PHOENIX ASSURANCE PLC; CORNHILL INSURANCE PLC; NORWICH
UNION FIRE INSURANCE SOCIETY LTD; MARITIME INSURANCE COMPANY LTD;
THE NORTHERN ASSURANCE CO, LTD; SKANDIA UK INSURANCE PLC; OCEAN
MARINE INSURANCE COMPANY; FOLKSAM INTERNATIONAL INSURANCE COMPANY
(U.K.) LTD; SCOTTISH LION INSURANCE COMPANY LTD; WURTTEMBERGISCHE
FEUERVERSICHERUNG AG; SPHERE DRAKE INSURANCE PLC; DAI-TOKYO
INSURANCE COMPANY (U.K.) LTD
Plaintiffs - Appellees - Appellants -
Cross Appellants - Cross Appellees
VERSUS
UNIONE MEDITERRANEA DI SICURTA; ET AL
Defendants
AMERICAN EAGLE MARINE, INC
Defendant - Appellee - Appellant -
Cross Appellant - Cross Appellee
VERSUS
AK STEEL CORPORATION, formerly know as, Armco Steel Company, L P
Defendant - Appellee - Cross Appellant
VERSUS
UMS GENERALI MARINE S.P.A., formerly known as Union Mediterranea
Di Sicurta'
Defendant - Appellant - Cross Appellee
VERSUS
BRITAMCO UNDERWRITERS, INC
Defendant - Appellee - Appellant -
Cross Appellant - Cross Appellee
Appeals from the United States District Court
For the Eastern District of Louisiana
August 14, 2000
Before JONES, DUHÉ, and WIENER, Circuit Judges.
DUHÉ, Circuit Judge:
This appeal involves two causes of action arising out of the
sinking of a cargo of 158 steel slabs in the Mississippi River.
The first cause of action is a dispute between two insurers of the
cargo, Steve Henry Adams, et. al. (“the Plaintiffs”) and U.M.S.
Generali Marine S.P.A. (“UMS”), over whether the non-paying co-
insurer (UMS) should be required to contribute to the payment of
loss. The second action is a claim by the Plaintiffs for
conversion of the cargo against a voluntary salvor, American Eagle
Marine, Inc. (“American Eagle”), and the subsequent purchaser of
2
the salvaged cargo, A.K. Steel Corp. (“A.K. Steel”).
Regarding the dispute between the insurers, we conclude that
UMS did not waive its personal jurisdiction defense, and we reverse
and remand for the district court to determine jurisdiction. We do
not decide the other issues UMS and the Plaintiffs raise on appeal
against each other. As to the conversion dispute, we affirm on all
grounds except one. We reverse and vacate the district court's
determination that American Eagle's general liability insurance
policy with Britamco Underwriters, Inc. (“Britamco”) provided
coverage for American Eagle's negligent conversion. We do not
decide whether UMS may subrogate against American Eagle and A.K.
Steel.
BACKGROUND
I. Factual Background
While en route from New Orleans to Cincinnati, Canal Barge
Company (“Canal Barge”) barges CBX 207 and 214 sank in the
Mississippi River. This case involves a dispute over the 158 slabs
of steel cargo carried to the riverbed aboard those two barges.
A.K. Steel of Middletown, Ohio, had originally agreed to purchase
the steel slabs from Duferco, S.A (“Duferco”), a Swiss Company.
The Plaintiffs and UMS concurrently insured the cargo under
open marine cargo policies. Duferco had an open cargo policy with
UMS, an Italian insurance company, which was written and issued in
Italy and delivered to Duferco in Switzerland. Canal Barge had an
3
open cargo/shippers’ interest insurance policy with the Plaintiffs,
on which Duferco was named as an additional insured.
After the accident, Duferco made a claim with UMS. Duferco,
through its agent, the Italian Claims Agency (“ICA”), awarded a
salvage contract to American Eagle to raise the cargo. The
contract provided that it could be canceled with notice and that
American Eagle did not have to perform salvage until the river
gauge at Vicksburg fell below 20 feet, the depth at which salvage
could be prudently performed. UMS advanced to Duferco $191,000 in
sue-and-labor costs for the salvage effort. In March 1994, UMS
denied the claim primarily because Duferco failed to warrant proper
loading of the cargo. In the meantime, A.K. Steel (the original
intended purchaser) confirmed that it did not own the cargo and
assigned any and all of its rights to Duferco.
The salvage contract remained in effect until July 6, 1994,
when ICA wrote American Eagle advising that Duferco was canceling
the contract. In the letter, an ICA representative wrote that the
cargo “had been abandoned.” The parties greatly dispute the
meaning of this letter and the circumstances surrounding it. From
July 6, 1994 until it mobilized its voluntary effort near the end
of January 1995, American Eagle did not salvage the steel, although
the river gauges suggested that the months of September, October
and November of 1994, presented optimum times for salvage because
of the low water depths. On February 18, 1995, with the river
gauge just below the minimum depth for prudent operations, American
4
Eagle voluntarily undertook salvage of the steel.
American Eagle did not negotiate with potential buyers for the
steel before commencing the salvage operation. While it made some
attempt to discover the chemical composition of the steel, it
abandoned those efforts, thereby lowering the potential market
value for the steel. American Eagle first contacted A.K. Steel on
January 7, 1995. A.K. Steel offered to purchase what it described
as the “Duferco Steel, that had sunk in the Mississippi.” American
Eagle was unaware that A.K. Steel was the original intended
purchaser of the steel. A.K. Steel did not advise the Plaintiffs
or other interested parties of its negotiations with American Eagle
to purchase the steel.
In negotiations, American Eagle refused to warrant title to
the steel as insisted by A.K. Steel. During the salvage operation,
American Eagle also refused to sell the steel to another buyer
because this purchaser demanded that American Eagle warrant title.
Instead, it would only warrant abandonment for salvage, a demand to
which A.K. Steel eventually acceded. On March 8, 1995, American
Eagle sold all its rights in the cargo retrieved to A.K. Steel. In
the purchase agreement, American Eagle sold to A.K. Steel its
“rights, and possession in salvage and title rights, if any.”
Salvage operations commenced on February 21, 1995, and
continued through April 26, 1995. American Eagle successfully
salvaged 127 steel slabs, relinquishing them to A.K. Steel as they
were placed aboard barges in the river. Pursuant to their
5
contract, A.K. Steel paid American Eagle $525,424.32. The
Plaintiffs did not assert an ownership interest in the steel until
after the salvage operation was completed.
The Plaintiffs were made aware of the salvage operation in
April 1995 by Canal Barge’s counsel, who advised Plaintiffs'
counsel that Douglas Adams of American Eagle had inquired about
salvaging the cargo. When the Plaintiffs advised American Eagle
and A.K. Steel that the cargo was theirs and that the salvage
should cease, they both refused. American Eagle and A.K. Steel
initially argued that they owned the steel. Later American Eagle
and A.K. Steel asserted defenses based on the laws of salvage.
II. Procedural History
The Plaintiffs brought this case originally as an action for
declaratory relief to ascertain the proper party to pay the
constructive total loss of cargo under the insurance policy they
issued to Canal Barge. They also sought to determined whether UMS,
which also issued Duferco a similar policy insuring the same cargo,
was obligated to contribute to the payment. Plaintiffs named as
defendants Ilva, the manufacturer of the steel; Duferco; Canal
Barge; UMS; and Duferco Steel, Inc., an American sister company to
Duferco. The court voluntarily dismissed Ilva, Duferco, Duferco
Steel, Inc., Canal Barge and A.K. Steel from this initial action at
various times. The Plaintiffs later made A.K. Steel a co-defendant
in the action for conversion of the steel.
In the initial declaratory relief action, the district court
6
held that Duferco was entitled to recover its loss from either
Plaintiffs or UMS. Since Duferco made demands on the Plaintiffs
first, the Plaintiffs were obliged to pay Duferco before seeking
contribution from UMS. Pursuant to this ruling, the Plaintiffs
paid Duferco $986,352.41 in exchange for an assignment of Duferco's
rights, if any, against UMS. Plaintiffs refused Duferco’s claim
for payment of approximately $191,000 in sue and labor expenses
(specifically, investigation expenses, survey costs, and attorney’s
fees) advanced by UMS during the preliminary loss investigation.
The district court voluntarily dismissed A.K. Steel, which had
relinquished any claim it may have had, from the suit prior to
payment of the Duferco claim.
The Plaintiffs then discovered the salvage effort and demanded
that American Eagle and A.K. Steel return the cargo or pay its
value. When American Eagle and A.K. Steel refused, the Plaintiffs
filed an amended declaratory judgment action, which asserted a
claim to recover the value of the steel from American Eagle and
A.K. Steel. UMS then filed a cross-claim against A.K. Steel and
American Eagle.
At trial on the amended declaratory action, it was determined
that although UMS had initially agreed to pay Duferco’s claim, UMS
denied coverage after learning Canal Barge had additional coverage.
The district court rejected every coverage defense raised by UMS.1
1
The district court earlier had granted the Plaintiffs' motion
to compel substitution of real party in interest. This motion
7
In rejecting these defenses, the district court found that UMS was
obliged under its policy with Duferco to contribute to the loss in
proportion to the amount its coverage bore to the total amount of
insurance (80 percent of the loss). The district court awarded the
Plaintiffs $789,081.93 against UMS or 80 percent of $986,352.41.
In the conversion action, the district court found that
American Eagle and A.K. Steel had, albeit in good faith,
negligently converted the steel.2 The court held that the
Plaintiffs had not abandoned the cargo. The court awarded
$190,975.68 for the conversion, which it divided on an eighty-
twenty basis between UMS ($152,780.55) and Plaintiffs ($38,195.13).
The district court entered judgment against American Eagle and A.K.
Steel in favor of UMS and the Plaintiffs for these amounts.
Finally, the court held that American Eagle’s liability for
negligent conversion was covered by its general liability insurance
policy with Britamco.3
In calculating the judgment, the district court determined
that the cargo’s value, after applying a 20 percent discount based
requested the district court to make UMS an involuntary Plaintiff
in Duferco’s cross-claim against Canal Barge.
2
The district court and the parties treat both American Eagle
and A.K. Steel as salvors. For this reason, we likewise do so in
certain portions of our opinion.
3
During the course of this litigation, American Eagle filed for
bankruptcy. The court then ordered an automatic stay. The court
lifted the stay and substituted Britamco as the real party in
interest.
8
on the unavailability of the steel’s chemistries to Plaintiffs, was
$716,400.4 The court then offset the value of the sunken steel by
$525,424.32, American Eagle’s salvage expenses. The district court
held that American Eagle’s and A.K. Steel’s right to assert a
salvage claim against the Plaintiffs had lapsed with the passage of
the two-year prescriptive period, but the right could nonetheless
be asserted as an affirmative defense. The $190,975.68 is then the
difference between the discounted value of the cargo and the
salvage expense.
No party is happy with the district court rulings. On appeal,
UMS has dropped all coverage defenses. UMS appeals the district
court rulings concerning personal jurisdiction over it, venue, and
the allocation of the loss between insurers. The Plaintiffs
contend that UMS should be barred from receiving any money judgment
from A.K. Steel and American Eagle until it pays them its pro-rata
share of the constructive loss. Plaintiffs also argue that the
district court abused its discretion in not allowing them to
recover attorney’s fees and expenses from UMS.
Regarding the conversion litigation, American Eagle and A.K.
Steel appeal the district court’s finding of negligent conversion,
arguing that the cargo was abandoned. American Eagle also appeals
the district court’s ruling on negligent conversion, arguing that
4
The district court reached this amount by reducing the per net
ton of the steel from $300 to $240 and then presumably multiplying
that figure by the tonnage of the salvaged steel.
9
it only transferred its possessory interest and salvage claim to
A.K. Steel. In addition, A.K. Steel appeals the district court’s
holdings that it was not protected by the voidable title doctrine,
that UMS could subrogate against it, and the court’s exercise of
subject matter jurisdiction. Plaintiffs cross-appeal the district
court’s ruling that American Eagle and A.K. Steel could assert the
right to a salvage claim as an affirmative defense, its ruling that
they acted in good faith, and its calculating the steel's value and
the salvage award. Finally, American Eagle’s insurer, Britamco,
alleges that the district court erred in concluding that its policy
covered American Eagle’s negligent conversion.
DISCUSSION
I. Personal Jurisdiction over UMS
We review de novo the district court's determination that its
exercise of personal jurisdiction over a non-resident defendant is
proper when the relevant facts are not in dispute. Wilson v. Belin,
20 F.3d 644, 647-48 (5th Cir. 1994). When a nonresident defendant
timely questions a federal district court's jurisdiction over it,
the plaintiff bears the burden of establishing jurisdiction. Id.
at 648; Travelers Indem. Co. v. Calvert Fire Ins. Co., 798 F.2d 826,
831 (5th Cir. 1986). In determining personal jurisdiction, a court
is not restricted to a review of the plaintiff's pleadings. It may
resolve a jurisdictional issue by receiving affidavits,
interrogatories, depositions, oral testimony, or any recognized form
10
of discovery. Jobe v. ATR Marketing, Inc., 87 F.3d 751, 753 (5th
Cir. 1996).
In admiralty cases, a federal court may exercise personal
jurisdiction over a foreign defendant, such as UMS, when (1)
Louisiana could have acquired personal jurisdiction over the
defendant on the same cause of action; and (2) the exercise of
jurisdiction comports with the Due Process Clause of the Fourteenth
Amendment. Asarco, Inc. v. Glenara, Ltd., 912 F.2d 784, 786 (5th
Cir. 1990). In this case, these two inquiries merge into one
because Louisiana's long-arm statute permits jurisdiction
coterminous with the scope of the Due Process Clause. Id. See La.
Rev. Stat. Ann. § 13:3201 (West 1991).
Additionally, a defendant may waive its personal jurisdiction
defense, thereby consenting to jurisdiction. See Travelers Indem.
Co., 798 F.2d at 834. (“Clearly parties can waive lack of personal
jurisdiction.”). Usually a party waives personal jurisdiction by
failing to raise the issue when filing a responsive pleading or
making a general appearance. Fed R. Civ. P. 12(h). In rarer
circumstances, a defendant may waive personal jurisdiction if it
authorized another to appear or act on its behalf in court.
Reynolds v. International Amateur Athletic Fed'n, 23 F.3d 1110, 1121
(6th Cir. 1994)(citing Federal Deposit Ins. Corp. v. Oaklawn Apts.,
959 F.2d 170, 175 (10th Cir. 1992)).
The district court concluded that UMS waived personal
11
jurisdiction because it authorized Duferco to appear on its behalf.5
The court first determined that the legal representations of UMS and
Duferco were intimately intertwined. The court examined Statements
for Professional Services Rendered submitted by various law firms
involved in this litigation. The court found that those documents
indicated that at the time Duferco filed its answer to the
Plaintiffs' complaint, the same attorneys represented UMS and
Duferco. In addition, UMS paid Duferco's legal bills during 1994
and 1995; and a law firm representing Duferco had represented UMS
on other occasions.
The Court also concluded that not only was the legal
representation intertwined, but the claims were as well:
UMS' attempt to shield itself from the jurisdiction of this
court by relying on Duferco's ostensible obligation to
reimburse them is disingenuous, at best. Indeed, UMS
continually argues that Duferco must reimburse them for the
fees expended during the salvage attempt. However, Duferco
has paid UMS nothing despite that the loss occurred over two
years ago. Nor has the Court been given any proof that UMS
has instituted suit against Duferco in Italy for this money.
The court found that UMS attempted to insulate itself from the
court's jurisdiction by hiding behind Duferco. “Duferco is truly
acting for UMS. Thus, this Court finds that UMS has waived its
personal jurisdiction defense through the actions of Duferco.”
Citing Reynolds, 23 F.3d at 1121. Because of this finding, it was
5
The court denied UMS' motion to dismiss for lack of
jurisdiction and later denied UMS' motion to reconsider and order
seeking certification pursuant to 28 U.S.C. § 1292(b). The court
denied UMS' motion to reconsider for the same reasons stated in its
earlier order.
12
unnecessary for the court to consider whether it had specific or
general personal jurisdiction over UMS.
On appeal, UMS raises some legitimate questions regarding the
district court's findings regarding the relationship between UMS and
Duferco. As to the court's determination that UMS had not sought
reimbursement for the sue-and-labor costs from Duferco for nearly
two years, UMS contends that such action was not necessary because
UMS already had a less formal but equally effective means to enforce
Duferco's obligation to pay. A Duferco director testified in a
deposition that on July 3, 1995 UMS entered a debit of $191,000 on
Duferco's open account.6 (R. at 3689-3691). This amount was
subtracted from a total premium refund of $574,342, which was paid
to Duferco when the accounting for the 1993-1994 policy year was
completed. (See UMS Bench Book of Exhibits 16).
UMS also claims that the District Court misapplied Reynolds in
holding that UMS authorized Duferco's actions. In Reynolds, the
Sixth Circuit reversed the lower court's holding that the
International Amateur Athletic Federation (“IAAF”) had waived its
jurisdictional defenses by reason of a Federation member's
intervention in a lawsuit filed against the IAAF by a disgruntled
athlete. The Sixth Circuit determined that the member was carrying
out a statutory duty when it intervened, and noted that there was
6
The Plaintiffs contend that this deposition only reinforces
the district court conclusion. The director testified that he did
not regard the expenses to be owed by Duferco. Instead, he
expected full recovery of its losses and expenses from UMS.
13
no evidence indicating the IAAF authorized the member to do so.
Reynolds, 23 F.3d at 1121. To some extent, this case is similar to
Reynolds. Duferco had an obligation under Italian law to reimburse
the expenses to UMS. Italian Civil Code, Article 2041 (Mario
Betramo, et. al., trans.) (1991) (“General cause of action for
unjust enrichment. A person who has enriched himself without cause
at the expense of another shall, to the extent of the enrichment,
indemnify the other for his correlative financial loss.”)7
UMS makes a strong showing that it has been reimbursed, but we
are still left with undisputed evidence that the legal
representations of UMS and Duferco were intimately intertwined. UMS
contends that even this evidence does not amount to consent to
personal jurisdiction.
Cases dealing with this factual scenario are few and far
between. Travelers Indem. Co., 798 F.2d at 832-35, involved a
dispute over defendant insurer London Club's indemnity obligations
arising from a maritime collision. In the suit, counsel selected
by London Club had consented, on behalf of the shipowner, to
transfer the case to Louisiana. The Plaintiffs argued that this
consent amounted to a waiver of London Club's personal jurisdiction
defenses in federal court in Louisiana. We held that the consent
to transfer did not result in London Club's waiver of its personal
7
Plaintiffs contend that this argument rings hollow in light
of UMS' failure for nearly two years to attempt to recover the
expenses from Duferco in an Italian forum.
14
jurisdiction defenses. Id.
One federal district court has rejected the contention that a
foreign defendant waives jurisdiction when it has a controlling
interest in ongoing litigation in the United States. Complaint of
Kreta Shipping, S.A., No. 96 Civ. 1137, 1998 WL 173167 (S.D.N.Y.
Jan. 29, 1998), arose out of the abandonment of the M/V AMPHION,
which resulted in damage to a cargo of steel laden on board. Kreta,
the owner of the vessel, commenced a limitation action in federal
court seeking exoneration from or limitation of liability with
respect to losses connected with the AMPHION's voyage.
Kreta had hired Astron Maritime Company to provide management
services for the vessel in accordance with a standard managing and
agency agreement, which was signed and negotiated in Greece.
Claimants in the limitation proceeding filed actions in federal
court against Astron, which sought to dismiss these claims for lack
of personal jurisdiction. The claimants did not contend that any
of the facts presented to the district court subjected Astron to
personal jurisdiction. Rather, they took the position that
jurisdiction came from Astron's conduct in the Kreta Shipping
litigation. They specifically alleged that Astron, rather than
Kreta, made the decision to file the limitation action and had
“power over litigation conferred by the ship management contract.”
Id. at *3.
The district court rejected this theory and concluded that
Astron did not consent to personal jurisdiction through its
15
involvement in the Kreta Shipping litigation.
The fact that Astron may be the party ultimately liable and
that Astron may have directed the decision-making behind this
lawsuit does not result in Astron having consented to the
Court's jurisdiction. These facts make Astron no different
than the typical maritime (or other) insurer - an insurer will
often be the party ultimately financially liable, may provide
for the insured's legal representation and legal strategy, and
often effectively controls the conduct of the lawsuit.
Insurers do not, however, consent to personal jurisdiction
through such activities (absent state “direct action” or
similar insurance legislation).8
The district court's reasoning in Kreta Shipping is compelling;
in particular the court's recognition that insurers often must take
an active role in an insured's legal problems.9 UMS has continually
argued that it is accepted industry custom world-wide for an insurer
to retain the same attorneys to act for itself and its insured when
investigating loss. While UMS' actions may be somewhat suspect, the
evidence does not support a finding that UMS has relied on these
tactics to insulate itself from jurisdiction of the district court.
The evidence equally supports a finding that UMS acted like any
other insurer would when its insured faces legal liability. In
8
Id. at *7 (internal citations omitted). The direct action
statute in Louisiana is not a legislative assertion of jurisdiction
over insurance companies. McKeithen v. M/T FROSTA, 435 F. Supp.
584, 586 n.6 (E.D. La. 1977).
9
The Plaintiffs argue that the factual circumstances in Kreta
Shipping are critically different from those in this case because
the shipping agent in Kreta Shipping was not attempting to assert
a cause of action for funds owed to the agent. Whereas, UMS was
asserting its claim disguised as Duferco. The Plaintiffs, however,
do not dispute the central holding of Kreta Shipping. Moreover,
based on the analysis above, it is impossible to discern what
motives, if any, UMS had as to the funds in question.
16
addition, our standard of review places the burden on the plaintiff,
and not the defendant, to support finding personal jurisdiction.
See also C. Wright & A. Miller, Federal Practice and Procedure §
3522 at 60 (1984) (“It is a principle of first importance that the
federal courts are courts of limited jurisdiction.”).
For these reasons, we conclude that UMS did not waive its
personal jurisdiction defenses and we reverse the district court.
Because of its decision on waiver, the district court did not decide
whether it had specific or general jurisdiction over UMS.10 Since
the parties dispute whether the district court has jurisdiction over
UMS, we remand the case for a further determination of jurisdiction.
Because jurisdiction over UMS is unresolved, we do not address the
other issues the Plaintiffs and UMS raise on appeal: The Plaintiffs
claim attempting to block UMS from receiving its money judgment and
their claim seeking attorney's fees and expenses from UMS; and UMS
claims of improper venue and improper allocation of loss between
insurers. We also do not address whether UMS may subrogate against
American Eagle and A.K. Steel.
II. Salvage and Title Dispute
A. Abandonment of the Cargo
We review findings of fact for clear error and legal
10
The parties submitted motions to the court addressing the
personal jurisdiction/minimal contacts inquiry and the district
court conducted a hearing, but ruled only on the waiver issue.
17
conclusions de novo. Ivy v. Jones, 192 F.3d 514, 516 (5th Cir.
1999). Under the clearly erroneous standard, we look first to
whether there is substantial evidence supporting the findings. We
will not set aside the district court's factual findings when they
are supported by substantial evidence, unless, after a review of the
record as a whole, we are left with the unyielding belief that a
mistake has been made. Anderson v. Bessemer City, 470 U.S. 564, 573
(1985).
The district court held that the Plaintiffs had title to the
salvaged steel. The court determined that the law of salvage
applied to this case, rather than the law of finds. Therefore, A.K.
Steel did not possess title to the salvaged steel, which it acquired
from American Eagle. On appeal, American Eagle and A.K. Steel
contend that title to the cargo was abandoned pursuant to the law
of finds, therefore, American Eagle and subsequently A.K. Steel
should be considered the rightful titleholders.
We review whether the sunken cargo comes within the law of
salvage or the law of finds.11 One commentator has noted that
11
A.K. Steel argues that the trial court incorrectly determined
that it had admiralty jurisdiction over the title issue and state
law should apply because the steel slabs were abandoned and
embedded in the river bed. It contends that this case does not
come within the jurisdiction of federal courts under the Abandoned
Shipwrecks Act. In California v. Deep Sea Research Inc., 118 S.Ct.
1464, 1473 (1998), the Supreme Court held that the Eleventh
Amendment does not bar federal jurisdiction to adjudicate the
status of a wreck under the Abandoned Shipwrecks Act, 43 U.S.C. §§
2101-2106. In addition, the Abandoned Shipwrecks Act does not
govern this case. As a rule, claims arising out of salvage
operations are within the admiralty jurisdiction of federal courts.
18
“[t]here appears to be no clear line of demarcation between property
that is 'salvaged' and 'finds.'” Frank L. Maraist, Admiralty in a
Nut Shell 130 (West 3d ed. 1996). Generally speaking, “[m]arine
salvage occurs when marine property is successfully saved by a
volunteer from marine peril. By performing a voluntary and
successful act, the salvor obtains a maritime lien on the salved
property, which he can enforce in rem in an admiralty court.”
Martin J. Norris, Benedict on Admiralty § 802[A] at 8-4 (1998).
The owner of the distressed goods on navigable waters does not
lose title even though the property may become the subject of
salvage services. Id. § 150 at 11-1.12 “The salvor obtains a right
of possession; he does not acquire ownership or title to the salved
property.” Id. § 150 at 11-1 to 11-2. The maritime lien allows the
salvor to secure compensation for his voluntary services. “All that
the salvor can do is to enforce his lien by making his claim to an
award. He thus has a lien and he has the right of possession. He
also has the duty of properly caring for the property while it is
in his possession.” Id. at 11-2.
A find, on the other hand, differs from salvage in that the
property has either been abandoned (as further defined below) or
Treasure Salvors, Inc. v. The Unidentified Wrecked and Abandoned
Sailing Vessel, 640 F.2d 560, 566 (5th Cir. 1981).
12
“When articles are lost at sea the title of the owner in them
remains, even if they are found floating on the surface or after
being cast upon the shore. Should a vessel be abandoned without
hope of recovery or return, the right of property still remains in
her owner.” Benedict on Admiralty § 150 at 11-1.
19
never owned by any person. The property belongs to the finder.
Benedict on Admiralty notes:
The common law of finds treats property that is abandoned as
returned to the state of nature and thus equivalent to
property, such as fish or ocean plants, with no prior owner.
. . . Admiralty favors the law of salvage over the law of
finds because salvage law's aims, assumptions, and rules are
more consonant with the needs of maritime activity and because
salvage law encourages less competitive and secretive forms of
conduct than finds law. . . . [A] finding that title to such
property has been lost requires strong proof, such as the
owner's express declaration abandoning title.” Id. § 158 at
11-16 (quoting Hener v United States, 525 F. Supp. 350 (S. D.
N. Y. 1981) (emphasis added)).
Several courts favor salvage instead of finds, and have
applied the law of finds only when supported by strong evidence.
The Fifth Circuit has noted that even when a vessel is abandoned the
original owner is not divested of title “except in extraordinary
cases. . . where the property has been lost or abandoned for a very
long period.” Treasure Salvors, Inc. v. The Unidentified Wrecked
and Abandoned Sailing Vessel, 640 F.2d 560, 567 (5th Cir. 1981).
The more important question, however, is what must an owner do
to affirmatively release title to the property - forever abandoning
it under the law of finds. As the Fourth Circuit has noted there
are only a handful of cases applying the law of finds. These cases
fit into two categories. “First, there are cases where owners have
expressly and publically abandoned their property. In the second
type of case, items are recovered from ancient shipwrecks and no
owner appears in court to claim them.” Columbus-America Discovery
Group v. Atlantic Mutual Ins. Co., 974 F.2d 450, 461 (4th Cir. 1992)
20
(internal citations omitted). In the first context, a party may
show abandonment only by a clear and unmistakable affirmative act
indicating a purpose to repudiate ownership. Id. A federal
district court has said that abandonment under the law of finds must
be proven by “clear and convincing evidence,” such as the owner's
express declaration abandoning title. Falgout Brothers, Inc. v. S/V
Pangaea, 966 F. Supp. 1143, 1145 (S.D. Ala. 1997) (citing Columbus-
America Discovery Group, 974 F.2d at 461) (emphasis added).
Therefore, we must apply the law of salvage unless American
Eagle and A.K. Steel demonstrate through clear and convincing
evidence that the owner of the steel, Duferco or later the
Plaintiffs, made an express declaration abandoning title. We now
review the pertinent facts.
On July 6, 1994, ICA Representative Victor Bruzzone (Duferco's
agent) wrote a letter to American Eagle stating, “[w]ith reference
to the aforementioned salvage contract and in conformity with
paragraph 6, we are instructed by Duferco, S.A., to cancel said
contract of salvage as cargo has been abandoned.” Duferco then
sent a letter on July 28, 1994 to Canal Barge saying:
We hereby advise you and your cargo underwriters that the
'steel slabs' in question have been abandoned by us. It has
been our understanding for some time that you and
representatives of your cargo underwriters were aware that the
salvage of the cargo in question was impossible due to river
conditions, and that the cost of possible salvage operations
would exceed the possible market value for the steel commodity
in question. We immediately request that you put your cargo
underwriters on formal notice of our abandonment of the cargo.
21
Both sides dispute the meaning of these letters. Bruzzone
testified that he was instructed to cancel the salvage contract so
that Duferco could declare the cargo a constructive total loss.
Bruzzone said that Duferco had not told him they were “abandoning”
the cargo; rather Bruzzone picked up the term “abandon” from a
Duferco attorney. Bruzzone claimed the purpose of the letter was
to cancel the salvage contract. American Eagle contends that
Plaintiffs' witness Michael Garin testified that the Plaintiffs
considered Duferco's abandonment to be a total abandonment to the
world, and the Plaintiffs had no intent of salvaging the cargo or
asserting ownership until it did so in April 1995.
Based on the above letters the district court concluded that
Duferco had abandoned the cargo on July 28, 1994. The Plaintiffs
refused to accept the abandonment in August 1994. Then, in response
to the court's declaratory judgment ruling, the Plaintiffs made a
partial payment to Duferco in the amount of $986,352.41 in exchange
for an assignment of Duferco's rights, if any, against UMS. On
February 1, 1995, Plaintiffs and Duferco executed an Assignment and
Subrogation Receipt in return for payment on the claim. The
Assignment and Subrogation Receipt provided that, “[the Plaintiffs]
are entitled at [their] option to take over [Duferco's] interest in
whatever may remain of goods, it being understood that delivery to
[the Plaintiffs] of the document of title relating to goods shall
not be construed as an exercise of such option.”
Based on this agreement, the court concluded that Plaintiffs
22
had title to the steel. It held that, even though the Plaintiffs
initially rejected the abandonment, they subsequently obtained title
to the cargo pursuant to the Assignment and Subrogation Receipt.
The court found that there was no “clear and convincing” proof
presented at trial that the Plaintiffs expressly abandoned title.
On appeal, American Eagle and A.K. Steel focus on the district
court's finding that the Assignment and Subrogation Receipt
transferred title to the Plaintiffs. A.K. Steel argues that because
Duferco abandoned the steel in July 1994 it no longer had ownership
rights which it could transfer to the Plaintiffs on February 1,
1995.13 Both A.K. Steel and American Eagle note that the Assignment
only gave the Plaintiffs an option to take control of the sunken
steel. However, the Plaintiffs did not attempt to exercise the
option until it learned of the salvage in late April 1995.
Even though the transfer of title from Duferco to the
Plaintiffs is not entirely clear, we agree with the district court
that there is no clear and convincing evidence that Duferco
expressly abandoned title to the cargo before the Assignment to the
Plaintiffs. The district court did not commit clear error in its
factual findings that Duferco maintained title to the cargo until
the Plaintiffs entered into the Assignment and Subrogation Receipt
13
A.K. Steel notes that the Plaintiffs failure to accept the
abandonment in August 1994 resulted in titled not passing to them.
See Jones Towing, Inc. v. United States, 277 F. Supp. 839, 849 (E.
D. La. 1967). Nevertheless, this argument does not defeat the
presumption that Duferco retained title.
23
with Duferco. We agree that A.K. Steel did not receive title to the
steel slabs when it purchased the salvaged cargo from American
Eagle.14
B. Conversion by American Eagle and A.K. Steel
The district court concluded that American Eagle and A.K. Steel
were liable for negligent conversion of the cargo because they
exercised control by sale, purchase and consumption of the steel.
These acts totally interfered with the Plaintiffs' right to the
steel. American Eagle argues that it should not be held liable for
conversion because it had the right to transfer its possessory right
and salvage interest to A.K. Steel. Again, we review the district
court's findings of fact for clear error and legal conclusions de
novo.
American Eagle correctly states that through a successful
salvage effort it obtained a right of possession in the steel. To
support this proposition, American Eagle suggests that “[o]ne so
appropriating abandoned property, or any third person whom he may
allow to take it, has a right to the property superior even to that
of the former owner, and may hold it against him.” Wiggins v. 1100
Tons, More or Less, of Italian Marble, 186 F. Supp. 452, 456 (E.D.
Va. 1960). American Eagle concludes that it had the right to
transfer its possessory right and salvage interest to A.K. Steel,
14
We find no basis for A.K. Steel's claim that under choice of
law rules the Plaintiffs' assertion of title should be governed by
the laws of the United Kingdom.
24
which it did on April 26, 1995.
The district court properly concluded that American Eagle and
A.K. Steel committed negligent conversion. As already noted, the
Plaintiffs maintained ownership and title over the steel under the
law of salvage. The law of salvage prescribes how American Eagle
must act as salvor of the Plaintiffs' steel. “Salvage law specifies
the circumstances under which a party may be said to have acquired,
not title, but the right to take possession of property (e.g.,
vessels, equipment, and cargo) for the purposes of saving it from
destruction, damage, or loss, and to retain it until proper
compensation has been paid.” Columbus-America Discovery Group, 974
F.2d at 460 (quoting Benedict on Admiralty § 158 at 11-15 to 11-
16.).
While American Eagle had a right of possession, it did not
become the owner of the salved property by virtue of its services
and could not transfer title to it. American Eagle “merely has a
maritime lien granted by the general maritime law to ensure that
[its] reward for saving property will be satisfied out of the
property saved.” Benedict on Admiralty § 157 at 11-13. Therefore,
the district court's conclusion that American Eagle and A.K. Steel
were liable for negligent conversion is correct. American Eagle and
A.K. Steel had the duty to protect the salved property for the owner
and the right to assert a claim against it for the cost of the
25
salvage.15
C. Issues Raised by A.K. Steel on Appeal
1. Choice of law regarding the contract
A.K. Steel argues that the trial court erred by failing to
perform an adequate choice of law analysis to determine what law
should govern the contract between American Eagle and A.K. Steel.
A.K. Steel asserts that Ohio law should govern because Louisiana
conflicts of law analysis requires that a contractual choice of law
provision be given effect unless there is statutory or
jurisprudential law to the contrary. Delhomme Industries, Inc. v.
Houston Beechcraft, Inc., 669 F.2d 1049, 1058 (5th Cir. 1982)
(quoting Associated Press v. Toledo Investors, 389 So.2d 752, 754
(La. App. 3d Cir. 1980)). It contends that as a purchaser of
salvaged goods, and not the salvor, maritime law should not apply.
We review choice of law questions de novo. Woodfield v.
Bowman, 193 F.3d 354, 358 (5th Cir. 1999). Claims arising out of
salvage operations are clearly within the admiralty jurisdiction of
the federal courts. Treasure Salvors, Inc., 640 F.2d at 566. We
have noted that “[d]isputes concerning the surveillance and sale
of cargo are subject to being treated in admiralty.” Coastal
(Bermuda) Ltd. v. E.W. Saybolt & Co. Inc., 761 F.2d 198, 202 n.4
(5th Cir. 1985). Therefore, since the criteria for admiralty
15
American Eagle's citation to Wiggins, 186 F. Supp. at 456, is
unpersuasive as that case concerned property whose owners had
abandoned title. In this case, the court properly found that the
cargo was only abandoned for salvage purposes.
26
jurisdiction are met, we must apply federal admiralty and maritime
laws and not state law.
2. Ohio Voidable Title Doctrine
A.K. Steel argues that the district court erred when it held
that A.K. Steel had no claim or defense pursuant to the Ohio
voidable title doctrine. However, because admiralty jurisdiction
includes issues related to the sale of cargo, we apply federal
admiralty law and not the Ohio voidable title doctrine in reviewing
American Eagle's sale of the cargo to A.K. Steel.
Even if Ohio law did apply, A.K. Steel does not make a valid
claim. The district court found that pursuant to a purchase order,
American Eagle sold its possession and salvage interests to A.K.
Steel and only warranted documentation of abandonment by owners to
underwriters. The court said “American Eagle neither possessed nor
transferred nor warranted title to the salvaged slabs to A.K.
Steel.”
The court then noted that the Ohio Voidable Title Doctrine
could not apply in this case. The statute provides that: “A
purchaser of goods acquires all title which his transferor had or
had power to transfer. . . . A person with voidable title has power
to transfer good title to a good faith purchaser for value.” Ohio
Rev. Code § 1302.44(A). Because American Eagle did not purport to
transfer title of any kind, the court found the statute to be
inapplicable.
We review the court's factual findings under a clearly
27
erroneous standard and its legal conclusions de novo. American
Eagle never had title to the salvaged steel. Therefore, it could
neither transfer nor warrant title to A.K. Steel. In addition,
American Eagle never purported to transfer title. American Eagle's
agreement with A.K. Steel transferred rights, interest, and
possession of slabs retrieved to A.K. Steel, including “rights, and
possession in salvage and title rights, if any.” The agreement
included a warranty which provided “that the slabs have been
abandoned for salvage by the owners/underwriters.” Under the terms
of this agreement, A.K. Steel should have expected to possess the
steel but not receive title to it. Therefore, we agree that the
voidable title doctrine is inapplicable.
3. Breach of warranty
A.K. Steel next argues that American Eagle breached its
expressed warranty with A.K. Steel. A.K. Steel says that American
Eagle warranted that the owners/underwriters had abandoned title to
the steel allowing it to transfer full title to A.K. Steel, when in
fact the steel had only been abandoned for salvage, thus American
Eagle could not transfer title. A.K. Steel contends that under Ohio
law a purchaser that relies on the express warranty of a seller of
goods and suffers injury may sue to recover damages for breach of
express warranty. Plastic Moldings Corp. v. Park Sherman Co., 606
F.2d 117 (6th Cir. 1979). Again, because this issue involves the
sale of marine cargo, we must apply federal admiralty law and not
state law.
28
Even if state law did apply, we conclude that there was no
breach of warranty. First, American Eagle stated in its purchase
order that it was selling “possession in salvage and title rights,
if any” and that the “slabs had been abandoned for salvage.” In
addition, American Eagle refused to sell the steel to a buyer that
demanded warranty of title, even though that buyer offered to pay
more for the steel. Because American Eagle did not purport to
transfer anything but the rights it had “if any,” it likewise did
not expressly warrant to A.K. Steel that it was transferring title.
Moreover, A.K. Steel, as the original purchaser, knew that the steel
belonged to Duferco. Therefore, American Eagle cannot be liable for
breach of warranty.
D. Issues Raised by Plaintiffs on Appeal
1. The salvage claim
The Plaintiffs first argue that the district court erred in
finding that American Eagle and A.K. Steel possessed a valid salvage
claim. With this valid claim, the district court subsequently
granted American Eagle and A.K. Steel an award for salvaging the
steel slabs, which was offset by the conversion judgment.
Plaintiffs contend that American Eagle and A.K. Steel performed
neither of the requirements to establish the right to a claim. They
neither filed for a salvage lien nor returned the cargo to the
owners. Since they failed to preserve the right to a claim, the
right never existed.
The Plaintiffs do not dispute the court's finding that an
29
initial salvage claim existed. A salvage claim exists when there
is: (1) a maritime peril to the property; (2) voluntary service by
the salvor; and (3) the salvage effort is successful in whole or in
part. Schoenbaum, Admiralty and Maritime Law § 16-1 at 324.
However, Plaintiffs correctly point out that the two defendants
failed to preserve the right to the salvage claim within the two-
year statute of limitations period.
Although the statute of limitations period for filing a salvage
claim had passed, the district court concluded that A.K. Steel and
American Eagle were entitled to assert a salvage claim as an
affirmative defense and as a basis for recoupment in response to
Plaintiffs' claim to quiet title. Citing Basic Boats, Inc. v.
United States, 311 F. Supp. 596, 597 (E.D. Va. 1970), the court
noted that “there is ample authority to the effect that the
counterclaim should be treated as an affirmative defense by way of
recoupment, and this is true even though as an affirmative cause of
action it may be barred by limitation.”
Plaintiffs argue that the district court misapplied Basic Boats
because in that case the U.S. Navy defended against a damage claim
with the shield of an expired salvage claim because it preserved the
salvage right by returning the vessel to its owners. American Eagle
and A.K. Steel, however, did not return the salvaged property to its
owners.
We conclude that the court did not err in relying on Basic
Boats. Although the two defendants did not preserve a salvage claim
30
in the traditional manner, they did properly assert such a right as
an affirmative defense and recoupment to Plaintiffs' claims. We
must now determine whether or not A.K. Steel and American Eagle
should receive a salvage award for their efforts. This question
turns on a determination whether or not they acted in good or bad
faith during the salvage and subsequent transfer of the steel.
2. Did American Eagle and A.K. Steel act in good faith?
A salvor has an obligation to bring aided property to a safe
place for the eventual return to the owner. A salvor may not keep
the salved property and, if she did so, would become liable for
conversion. Benedict on Admiralty § 157 at 11-13. Justice Story
noted that “[i]n cases of salvage, the party founds himself upon a
meritorious service, and upon the implied understanding, that he
brings before the court, for its final award, all the property saved
with the entire good faith; and he asks a compensation for the
restitution of the uninjured, and unembezzled by him.” The Boston,
3. F.Cas. 932, 937 (1833).
A salvor obviously will not receive an award if he loses the
property or acts in bad faith. But it is not entirely clear what
constitutes bad faith. Storey noted that embezzlement by salvors
must be punished by forfeiture of the salvage claim. Id. More
recently this Circuit has said that admiralty courts must be
vigilant in protecting mariners from unscrupulous and dishonest
salvors. “[T]he law cannot tolerate salvors [sic] dishonesty,
corruption, fraud, falsehood, either in rendering service, or in
31
their proceedings to recover the salvage.” Jackson Marine Corp. v.
Blue Fox, 845 F.2d 1307, 1309 (5th Cir. 1988) (citing Church v.
Seventeen Hundred and Twelve Dollars, 5 F.Cas. 669 (S.D. Fla.
1853)). In addition, a salvor forfeits any award where he is guilty
of gross negligence, looting or spoilage of the salved property.
Admiralty and Maritime Law 16-4 at 329.
Based in part on these legal standards the district court found
no bad faith on the part of American Eagle or A.K. Steel for
salvaging and transferring the steel:
First, [Douglas] Adams' testimony confirms that he knew that
the salvaged steel had been abandoned by Duferco in July 1994.
Adams knew that if he salvaged the steel he could claim a
possessory right of salvage only since he did not own the
steel. Adams specifically chose the one purchaser who agreed
to this term, namely that American Eagle only warrant
abandonment of the cargo but not warrant title. Adams
accepted a significantly lower bid in order to obtain this
term because the higher bidder insisted on warranty of title,
which Adams knew he could not do. Likewise, A.K. Steel
purchased the salvaged steel without warranty of title,
assuming the risk that its title to the steel could be
challenged by plaintiffs.
The Court is critically aware that the cargo would not have
been salvaged but for the efforts of American Eagle and the
American Eagle would not have bothered to salvage the cargo
were it unable to line up an acceptable purchaser in advance
of its efforts. American Eagle successfully salvaged 128
slabs of steel, and did so in good faith, notwithstanding
American Eagle's failure to halt delivery of the salvaged
steel to plaintiffs on April 27, 1995, upon their assertion of
ownership. A.K. Steel purchased the salvaged steel in good
faith without warranty of title and immediately consumed the
steel into production.
The Court finds no 'bad faith' on either American Eagle or
A.K. Steel based on their unresponsiveness to plaintiffs'
demand that sale, delivery and consumption of the salvaged
steel should halt at the instant it asserted its ownership
interest. The letter of July 6, 1994, stated that the cargo
32
was abandoned. Significantly, the letter did not provide that
the cargo was abandoned to the underwriters or anyone else.
The Plaintiffs argue that the court erred in these conclusions.
Plaintiffs reiterate many of their earlier arguments against
American Eagle and A.K. Steel, which Plaintiffs suggest all point
to bad faith. First, American Eagle attempted to sell the steel
even though it knew it did not have title. American Eagle and A.K.
Steel were both knowledgeable salvors and should have known that the
cargo belonged to someone else. They bought and sold property that
was not theirs even after the Plaintiffs wrote them insisting that
they cease salvaging the cargo. Finally, the district court
concluded that American Eagle and A.K. Steel were liable for
negligent conversion. These acts, the Plaintiffs argue, all point
to bad faith.
We review the district court's factual findings for clear
error. The record reveals that American Eagle and A.K. Steel may
not have acted entirely in good faith. Perhaps, they did not act
in good faith when they ignored the Plaintiffs' request that they
halt the sale, delivery and consumption of the salvaged steel.
Nevertheless, the district court did not commit clear error in
determining that American Eagle and A.K. Steel did not act in bad
faith nor commit gross negligence, embezzlement, fraud, or
corruption. Until the April 1995 letter from the Plaintiffs asking
them to cease the sale of the cargo, the only other communication
regarding the cargo stated that it had been “abandoned.” As
33
discussed above, the purpose of ICA's abandonment letter was not
crystal clear. American Eagle had some basis to believe it could
salvage the steel and at least transfer a possessory interest.
Consequently, A.K. Steel could expect to receive a possessory
interest in the steel. American Eagle knew that it did not have
title to the steel and never attempted to transfer title. We agree
with the district court that American Eagle and A.K. Steel acted
negligently but their behavior did not rise to bad faith under the
law.
3. The 20 percent discount
The district court reduced the cargo's value by 20 percent
because the steel was salvaged, which would cause concern about
possible damage from submergence, and because American Eagle did not
have the steel's chemistries. The Plaintiffs contend that it was
clearly erroneous for the district court to apply this discount, and
this court should reverse and amend the judgment to reflect the
steel's true value of $895,000.16
The court applied this discount based on the testimony of
Plaintiffs' value expert George Hynson. He testified that if the
chemistries of the steel were unavailable the price could be reduced
by 5 to 20 percent. Hynson testified that the discount was based
on the seller not possessing the composition chemistries of the
16
This figure is based on a $300 per net tonnage for the steel
multiplied by the total tonnage of the steel. The district court
reduced this figure by 20 percent to $240, thereby arriving at the
$716,400 value.
34
steel, which placed the seller at a disadvantage in negotiations to
sell the cargo. However, Plaintiffs argue that they had the
chemistries to the steel.
The district court reduced the spot market price of the steel
not only because a purchaser would not have the chemistries; but in
addition, because a purchaser would be concerned about the possible
damage from submergence or salvage. This is a realistic concern.
Therefore, we conclude that the court did not commit clear error in
reducing the price of the steel.
4. The sunken tug
Plaintiffs also argue that the district court committed clear
error in not permitting testimony on whether the salvage claim
should be reduced by the cost of an additional salvage recovery
during the salvage operation. The court refused to permit the
Plaintiffs to cross-examine Douglas Adams on the additional $66,000
salvage award he received for raising a tug sunk during the salvage
operation. Plaintiffs argue that this amount should be deducted
from the court's salvage award of $525,424.32 in order to mitigate
damages. We conclude that the court did not err. The Plaintiffs
and American Eagle stipulated to a dollar amount for salvage
services. This stipulated amount controls.
E. Coverage Under Britamco's Insurance Policy
Britamco argues that the district court erred as a matter of
law in holding that the general liability insurance policy issued
by Britamco to American Eagle covered American Eagle's negligent
35
conversion. The court concluded that the policy's exclusion from
coverage for “property damage expected or intended from the
standpoint of the insured” did not apply to American Eagle. The
court said that there was no evidence that American Eagle intended
to deprive the Plaintiffs of their property. Subsequently, the
court entered a judgment for the Plaintiffs against Britamco.
We review a district court's interpretation of an insurance
policy de novo. FDIC v. Mijalis, 15 F.3d 1314, 1319 (5th Cir.
1994). We interpret the provisions in this insurance policy under
Louisiana law since the contract was delivered in Louisiana. The
extent of coverage is determined by the words of the policy. We
construe the policy's words and phrases using their plain, ordinary
and generally prevailing meaning, unless the words have acquired a
technical meaning. When the language is clear, the agreement must
be enforced as written. Reynolds v. Select Properties, Ltd., 634
So.2d 1180, 1183 (La. 1994).
The policy's coverage provision states, “[i]nsurers agree to
pay those sums that the Insured becomes legally obligated to pay as
damages because of . . . 'property damage' to which this insurance
applies. . . . The . . . 'property damage' must be caused by an
'occurrence.'” (Emphasis added). The policy defines 'occurrence'
as: “an accident including continuous or repeated exposure to
substantially the same general conditions, which first take place
during the policy period.” (Emphasis added).
36
We look first to see if the events constituting conversion are
within the coverage clause of this policy. Only if they are, do we
consider the exclusionary provisions. We note that to have coverage
the conversion of the steel must be an occurrence and to be an
occurrence under this policy it must be an accident.
Black's Law Dictionary 15 (6th ed. 1990) defines an accident
as “a fortuitous circumstance, event, or happening; an event
happening without any human agency, or if happening wholly or partly
through human agency, an event which under the circumstances is
unusual and unexpected by the person to whom it happens . . . .“
As a salvor, American Eagle had the right to possess the steel and
the duty to either return the steel to the Plaintiffs or file a
salvage lien to obtain compensation. American Eagle did not do
that. Instead, American Eagle intentionally transferred possession
of the steel to A.K. Steel, who subsequently consumed the steel.
This transfer, purchase and consumption negligently interfered with
the Plaintiffs' ownership of the steel. Therefore, American Eagle
and A.K. Steel committed negligent conversion.
This act was not an accident or a fortuitous event. American
Eagle's and A.K. Steel's interference constituted more than an
accidental or unexpected event. A reasonable person would not
transfer, purchase and consume the steel without regard for the true
owner's interest. Given the facts of this case, we conclude that
American Eagle's and A.K. Steel's negligent conversion was not an
accident, and thus is not covered by Britamco's insurance policy.
37
A.K. Steel contends that we should interpret American Eagle's
negligent conversion pursuant to the policy's first exclusion to
coverage, which provides that insurance does not apply to “'Property
Damage' expected or intended from the standpoint of the insured.”
(Emphasis added). A.K. Steel notes that under some Louisiana law
an occurrence clause includes intentional acts when the results of
the acts are unintended or unexpected. The Alert Centre, Inc. v.
Alarm Protective Services, Inc., 967 F.2d 161, 164 (5th Cir. 1992).
Therefore, it argues, the policy covers American Eagle's unintended
negligent conversion. This argument is unpersuasive. First,
because we concluded that negligent conversion was not an occurrence
under the policy's coverage section, there is no need to apply the
policy's exclusions. There is no coverage in the first place.
Second, A.K. Steel cites case law which concerns policies having a
broader definition of occurrence than Britamco's policy. See Id.;
Auster Oil & Gas, Inc. v. Stream, 891 F.2d 570, 580 (5th Cir. 1990).
We reverse the district court and find no coverage under the
Britamco policy. We therefore vacate the Plaintiffs' judgment
against Britamco.
CONCLUSION
For the foregoing reasons, we affirm in part, reverse and
remand in part, and reverse and vacate in part.
38
39