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Maritime Update: What Does the Word "Tow" Mean?

On February 15, 2018, the U.S. Fifth Circuit Court of Appeals, in the case Continental Insurance Company v. L&L Marine Transportation, Inc., reversed a district court ruling in favor of a Protection and Indemnity insurer in a contentious insurance coverage dispute.  This case clarifies the meaning of the word "tow" in the context of a marine insurance policy.

A.  Background

Three tug boats, the M/V MISS DOROTHY, the M/V ANGELA RAE and the M/V FREEDOM, were traversing the Lower Mississippi River with the barge FSB 101 when the MISS DOROTHY allided with a bridge fender system and sank, resulting in a total loss.

Continental Insurance Company, the insurers of the MISS DOROTHY, sued the owner of the ANGELA RAE, L&L Marine Transportation, Inc. ("L&L"), and its insurers in the United States District Court for the Eastern District of Louisiana to recover its payment of the total loss. 

Both Atlantic Specialty Insurance Company ("Atlantic") and P&I Underwriters ("P&I") insured the ANGELA RAE.  The hull insurer, Atlantic, maintained it did not insure the hull of the MISS DOROTHY and P&I was solely responsible.  P&I took the position that the Atlantic policy provided coverage because at the time of the allision the MISS DOROTHY was the tow of the ANGELA RAE.

P&I argued that a tug is the dominant mind of a flotilla, with the accompanying responsibilities, and necessarily must view the flotilla as its "tow".  Plaintiff alleged the ANGELA RAE was the lead tug and responsible for the navigation of the flotilla (the tugs and tow as a unit).  P&I maintained that the MISS DOROTHY was the "tow" of the ANGELA RAE so the Atlantic policy provided coverage.  The district court agreed and rendered judgment in favor of P&I.  Atlantic appealed.

B.  Discussion

The Fifth Circuit disagreed with the district court and P&I and held that "tow" as used in the Atlantic policy is defined by its plain, ordinary meaning:  a vessel that is provided auxiliary motive power by being pushed or pulled.  The court added that a tug remains a tug when it is tugging (pushing or pulling) and a tow is a tow only when it is being towed (being pushed or pulled).  As the MISS DOROTHY was not provided any extra mode of power, it was not a tow, and the Atlantic policy did not apply.  The Fifth Circuit reversed and rendered judgment in favor of Atlantic.

C.  Why is This Important?

  1. The interpretation of an insurance contract is governed by the relevant state law.
  2. Under Louisiana law if the words of a contract "are unambiguous and the parties' intent is clear, the insurance contract will be enforced as written."
  3. Sometimes the definition applied to an ordinary term can make or break a case.

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