CAL-DIVE INTERN., INC. v. Seabright Ins. Co.
2010 WL 4706221, 627 F.3d 110 (2010)
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Rule of Law:
An additional insured added to an insurance policy via an endorsement is subject to the same policy exclusions as the named insured. A specific exclusion negates coverage if its conditions are met and does not create an ambiguity with the endorsement that granted the additional insured status.
Facts:
- Coastal Catering entered into a contract to provide catering services aboard a vessel owned by Horizon.
- Pursuant to the contract, Coastal Catering sent its employee, David Brown, to work on Horizon's vessel.
- David Brown was injured while working aboard the vessel.
- At the time of the injury, Coastal Catering was the named insured on a Maritime Employer's Liability (MEL) policy with Seabright Insurance Company, which contained an 'Alternate Employment Endorsement' potentially covering Horizon.
- The Seabright policy also contained an exclusion for bodily injury to crew if the insured maintained a Protection and Indemnity (P&I) policy.
- Horizon, the vessel owner, maintained its own P&I policy with a different insurer, AEGIS, that covered injuries to its crew.
Procedural Posture:
- David Brown filed a Jones Act suit against his direct employer, Coastal Catering, and the vessel owner, Horizon.
- State National Insurance Company (SNIC), one of Coastal's insurers, defended Horizon in the lawsuit.
- Seabright Insurance Company, another of Coastal's insurers, defended Coastal.
- After the underlying suit settled, SNIC sought reimbursement from Seabright for the costs of defending Horizon, but Seabright refused.
- SNIC and Horizon sued Seabright in the U.S. District Court for the Eastern District of Louisiana to recover defense costs.
- The district court granted summary judgment for SNIC, holding that Seabright had a duty to defend Horizon and must reimburse SNIC.
- Seabright, the defendant-appellant, appealed the district court's decision to the U.S. Court of Appeals for the Fifth Circuit.
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Issue:
Does a Protection and Indemnity (P&I) exclusion in a Maritime Employer's Liability policy apply to an alternate employer who is an additional insured under an endorsement, thereby negating the insurer's duty to defend when the alternate employer has its own P&I policy?
Opinions:
Majority - Judge Davis
Yes. A Protection and Indemnity (P&I) exclusion in a Maritime Employer's Liability policy applies to an alternate employer who is an additional insured, negating the insurer's duty to defend. The court reasoned that an endorsement adding an insured makes that party subject to all policy terms, including exclusions, as if they were a named insured, especially where the policy states the endorsement applies 'as though the alternate employer is an insured.' Because Horizon had its own P&I policy, the specific P&I exclusion in Seabright's policy was triggered, unambiguously removing any potential coverage granted by the Alternate Employer Endorsement. Citing Louisiana precedent, the court found no conflict or ambiguity between the endorsement and the exclusion, as the exclusion simply defines the limits of the coverage provided by the policy as a whole.
Analysis:
This decision clarifies the relationship between coverage-granting endorsements and policy exclusions, particularly in maritime insurance law. It establishes that additional insureds effectively 'step into the shoes' of the named insured, receiving both the benefits and the limitations of the policy. The ruling prevents additional insureds from claiming coverage where it would be clearly excluded for the primary policyholder, reinforcing the principle that exclusions are limitations on coverage, not contradictions to it. This provides certainty for insurers and puts contractors on notice that their 'additional insured' status on another party's policy may be nullified by other policy terms.
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