Who Pays Who? Important Distinctions in Defining Insurance Terms

tug_boat_barge_towing-1024x681The language used in insurance policies can hold immense significance when determining the resulting coverage and payouts. In a compelling case involving three tug boats, the M/V Miss Dorothy, the M/V Angela Rae, and the M/V Freedom, an unfortunate collision prompted a dispute over insurance claims. As insurers of the Miss Dorothy sought compensation from the owners of the Angela Rae, the crux of the matter revolved around the interpretation of key terms within the insurance policies. The court’s analysis focused on the definition of “tow” and the parties’ intent, underscoring the critical role that precise language plays in insurance contracts. This case serves as a powerful reminder to both drafters and signers of insurance policies that every word holds weight and can shape the outcome of a claim.

Three tug boats, the M/V Miss Dorothy, the M/V Angela Rae, and the M/V Freedom, plied the Mississippi River with a barge boat in tow. The Angela Rae and the Freedom were positioned behind the barge, and the Miss Dorothy was positioned in front. The Angela Rae was designated as the ‘lead tug’, with the other boats acting as ‘assisting tugs.’ 

In an unfortunate turn of events, the Miss Dorothy collided with a portion of the Sunshine Bridge’s fender. The Miss Dorothy subsequently sank, resulting in a total loss of the ship and its machinery on board. In the ensuing dispute over insurance claims, the insurers of the Miss Dorothy sued the owners of the Angela Rae in its capacity as the lead tug. The two insurers of the Angela Rae, Atlantic Specialty Insurance Company (“Atlantic Specialty”) and P & I Underwriters (“P & I”), both filed motions averring the insurance responsibility to the other, claiming that the other’s policy should be paid out instead of their own. 

The dispute essentially boils down to the language in the insurance policies. The Atlantic Special policy covers collisions of the Angela Rae and any damage done to its ‘tow.’ P & I’s policy broadly covers damage to Angela Rae and any other vessel or property damaged by it. However, P & I’s policy included a clause that it would not be payable if it were payable under the other insurance agreement. Thus, if Atlantic Special must pay out under its insurance policy, P & I need not pay out its policy. In starker terms, if the Miss Dorothy was the ‘tow’ of the Angela Rae, Atlantic Special’s policy governs. If the Miss Dorothy was not the ‘tow’ of the Angela Rae, P & I’s policy takes effect. 

When defining the terms of a contract, like an insurance policy, the courts look to the parties intent. Gabarick v. Laurin Maritime. When defining a specific word in that contract, the courts look to the generally prevailing meaning or, in instances of technical matters, the technical definition. LA. CIV. CODE ANN. art. 2047; see also Naquin v. Elevating Boats

In this case, the court first examined the prevailing meaning of the word ‘tow.’ The prevailing case law and dictionary definitions indicate that a vessel is “towing” another vessel when it provides it power to move, push, or pull it in any way.  The court found that under this definition, as the Angela Rae was neither moving, pushing, nor pulling the Miss Dorothy, it was not towing it along.

P & I, however, contends that ‘tow’ should be defined in a technical manner under tort law, arguing that the Angela Rae was the ‘dominant mind’ of the vessels and thus responsible for ‘towing’ the others safely. The court remained unconvinced. Firstly, there is no clear connection between the contract dispute at hand. Tort law represents duties required between parties, largely separate from the duties created by binding contracts. In turn, ‘tow’ already has an unambiguous and widely understood meaning, as discussed above, whereas the technical application used by P & I requires specific knowledge of a doctrine tort law. Thus, using the technical definition would only further complicate the application of the insurance policy contract. Regardless, the court also recognizes that the ‘dominant mind’ theory does not convey sole responsibility for safe navigation to the lead tug. 

With the word ‘tow’ defined in its widely understood meaning, the court ruled that the Andrea Rae was not towing the Miss Dorothy at the time of the collision and wreckage. Therefore, Atlantic Specialty’s policy would not be triggered, and instead, P & I’s policy would be responsible for compensation. 

This case highlights the crucial importance of precise language in insurance contracts. As insurers engaged in a dispute over responsibility, the court’s interpretation of the term “tow” became pivotal in determining which insurance policy would provide compensation. The court underscored the significance of clear and widely understood definitions by examining prevailing meanings and rejecting technical tort law applications. 

This case also serves as a poignant reminder that insurance agreements are not merely a matter of intent but also a careful consideration of the specific words used. It emphasizes the need for insurers and policyholders to pay meticulous attention to the language within insurance policies, as these words can shape the outcome of coverage and claims.

Additional Sources: CONTINENTAL INSURANCE COMPANY, Plaintiff, versus L&L MARINE TRANSPORTATION, INCORPORATED, Defendant. * * * * * P & I UNDERWRITERS, Subscribing to Policy Number B0507M13PP07280, Plaintiff–Appellee, versus ATLANTIC SPECIALTY INSURANCE COMPANY, Defendant–Appellant.

Author: Colin McGinness

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