MICHAEL J. MAGINNIS

NEW ORLEANS

JOSÉ R. COT

NEW ORLEANS

Chapter 23

DIRECT ACTION STATUTES

AND P & I INSURANCE

I. THE RIGHT OF DIRECT ACTION

Federal maritime law neither authorizes nor forecloses a third party's right to directly sue an insurance company. Continental Oil Co. v. Bonanza Corp., 677 F.2d 455 (5^th Cir. 1982). Cf. Aasma v. American S.S. Owners Mut. Prot. & Indem., 95 F.3d 400 (6^th Cir. 1996) (fashioning a federal right of direct action in admiralty, but declining to set aside a "pay first" provision in the policy) and Kiernan v. Zurich Companies, 150 F.3d 1120, 1998 AMC 2533 (9^th Cir. 1998) (declining to fashion a federal rule that would prohibit third parties from bringing direct actions against indemnity insurers, but recognizing that such actions are permitted if provided by state law). Therefore, the right of direct action exists only by virtue of enabling legislation, i.e., state law. A state may create a direct action against a marine insurer, at least where the state action is not in conflict with any feature of substantive admiralty law or any remedy peculiar to admiralty jurisdiction. Steelmet, Inc. v. Caribe Towing Corp., 779 F.2d 1485 (11^th Cir. 1986); Maryland Casualty v. Cushing, 347 U.S. 409, 74 S.Ct. 608, 98 L.Ed. 806 (1954) (Louisiana direct action statute was permissible as valid regulation of insurance). See Ancona, "The Price of Uniformity: Aasma v. American Steamship Owners Mutual Protection & Indemnity Association," 21 Tul.Mar.L.J. 593 (Summer 1997).

State law governs the question of direct action against marine insurers. Maryland Casualty Co. v. Cushing, 347 U.S. 409, 74 S.Ct. 608, 98 L.Ed. 806, 1954 AMC 837 (1954). A direct action suit against a marine insurer is a suit on a contract of insurance within admiralty jurisdiction. Morewitz v. West of England Ship Owners Mut. Protection and Indemnity Ass'n., 896 F.2d 495, 1990 AMC 1507 (11^th Cir. 1990).

Louisiana, Puerto Rico and several other United States jurisdictions permit an injured person to name an alleged tortfeasor's insurer as a direct defendant in a lawsuit based upon the insured's tortious conduct. See, e.g., Louisiana, La. Rev. Stat. 22:655; Puerto Rico, 26 LPRA §2003; California, Cal. Ins. Code §11580(a) & (b); Rhode Island, R.I. Gen. Laws §27-7-1, 27-7-2; Wisconsin, Wis. Stat. Ann. 632.24; Guam, Guam Gov'g. Code §18305; Arkansas, Ark. Code Ann. § 23-79-210, 23-89-102; Vermont, Vt. Stat. Ann. Titl. 8, § 4203; New York, N.Y. Ins. Law § 3420; Maryland, Md. Code Anno., Ins. § 19-102. See also Schoenbaum, Admiralty and Maritime Law, §19-13 (2d Ed. 1994 and Supp.). Analogous to Louisiana and Puerto Rico's direct action statutes, most direct action statutes provide that actions are subject to all of the lawful conditions of the policy and the defenses that could be urged by the insurer in an action brought by the insured. However, unlike the Louisiana and Puerto Rico statutes, the recovery of a judgment against the insured is a condition precedent to the bringing of a direct action in most jurisdictions. For a comprehensive discussion of substantive and procedural aspects of direct action claims, see 7 Couch on Insurance, ch. 104-107 (3^rd Ed.).

For a discussion of direct actions and P&I insurance, see generally Foster, "Marine Insurance: Direct Action Statutes and Related Issues," 11 U.S.F. Mar.L.J. 261 (1998-1999), Houdlett, "Direct Action Statutes and Marine P&I Insurance," 3 J.Mar.L. & Com. 559 (1972), Crais, "Direct Actions in Marine Insurance: A Jurisprudential Overview," 1 Mar.L. 63 (1975) and Kierr, "The Effect of Direct Action Statutes on P&I Insurance, on Various Other Insurances of Maritime Liabilities, and on Limitation of Shipowners' Liability," 43 Tul.L.Rev. 638 (1969).

Direct action statutes mandate a direct action provision into every insurance contract and create a method of executing upon the proceeds of the insurance policy. Direct action statues are procedural and remedial in character, rather than substantive. Morewitz v. West of England Ship Owners Mut. Protection and Indemnity Ass'n., 62 F.3d 1356 (11^th Cir. 1995). Direct action statutes do not create an independent cause of action against the insurer, but merely grant a procedural right of action against the insurer where the plaintiff has a substantive cause of action against the insured. P.S. International, Ltd. v. Caribbean Sealift, Ltd., 1977 WL 256652 (E.D. La. 1997) (citing Descant v. The Administrators of Tulane Education Fund, 639 So.2d 246 (La. 1994)). The public policy behind such statutes is that liability insurance is for the benefit of the injured party rather than for the protection of the insured. See Buglass, Marine Insurance and General Average in the United States, pp. 434-436 (3^rd Ed. 1991).

II. DIRECT ACTIONS AND LIMITATION OF LIABILITY

Protection and indemnity insurer sued under the Louisiana Direct Action Statute could invoke the benefits of the Limitation of Liability Act when the P&I policy by its terms, limits the insurer's liability to the amount which the insured vessel owner may be legally obligated to pay by reason of liability imposed by law. Crown Zellerbach Corporation v. Ingram Industries, 783 F.2d 1296, 1986 AMC 1471 (5^th Cir. 1986) (en banc); Rogers v. Texaco, Inc., 638 So.2d 347 (La. App. 4^th Cir. 1994). See also Gates, "Crown Zellerbach Dethrones Nebel Towing: Shipowner's Limitation of Liability is Available to Insurers," 62 Tul.L.Rev. 615 (February, 1988).

P&I insurer's right to benefit from the limitation proceeding is only derivative. A liability-limiting term in a marine insurance policy does not give the insurer standing under the Limitation of Liability Act to assert limitation defensively; it merely bolsters the insurer's right to benefit from its insured's successful invocation of the Limitation of Liability Act. Magnolia Marine Transport v. LaPlace Towing Corp., 964 F.2d 1575, 1994 AMC 303 (5^th Cir. 1992). See also Hooper, "Limitation of Liability and the Direct Action Statute: A Troubled Marriage," 55 La.L.Rev. 843 (1995).

The stay in a limitation action may extend to a shipowner's insurer. Texaco, Inc. v. Williams, 47 F.3d 765 (5^th Cir.) reh'g. and reh'g. en banc denied, 53 F.3d 1283 (5^th Cir. 1995). Cf. Matter of Seabulk Offshore, Ltd., 158 F.3d 897 (5^th Cir. 1998) (there is no ironclad rule requiring stay of a direct action lawsuit against shipowner's insurers provided that the approach followed by the district court achieves the equivalent result of including insurers in the stay order).

In contrast to Louisiana, under the Puerto Rico direct action statute, limitation proceedings need not be stayed so that a direct action and a suit against an insured seeking limitation can proceed simultaneously. Ema v. Compagnie Generale Transatlantique, 353 F.Supp. 1286, 1974 AMC 2498 (D.P.R. 1972).

III. DIRECT ACTIONS AND ARBITRATION

The Federal Arbitration Act (FAA) does not require plaintiffs bringing direct actions against insurer under direct action statute to arbitrate or to stay their lawsuits during arbitration. Zimmerman v. International Cos. and Consulting, Inc., 107 F.3d 344 (5^th Cir. 1997) (Louisiana law); In Re: Talbott Big Foot, Inc., 887 F.2d 611 (5^th Cir. 1989) (Louisiana law); Ocean Eagle - Limitation Proceedings, 1974 AMC 1629 (D. P.R. 1974) (Puerto Rico law); Morewitz v. West of England Ship Owners Mut. Protection & Indemnity Ass'n., 62 F.3d 1356 (11^th Cir. 1995) (Alabama law) and Montauk Oil Transp. v. Steamship Mut. Underwriting, 859 F.Supp. 669 (S.D.N.Y. 1994) (New York law). However, when plaintiff bases his right to sue on the policy itself, not upon a statute or some other basis outside of the policy, a provision requiring arbitration must be enforced. Aasma v. American S.S. Owners Mut. Prot. & Indem., 95 F.3d 400 (6^th Cir. 1996). See also Heikkila v. Sphere Drake Ins. Underwriting Management, Ltd., 1997 AMC 2975 (D. Guam 1997) (under English law, federal maritime law and Guamanian law, a third-party direct action against an insurer is subject to all the terms of the policy, including its arbitration clause, and must be referred to arbitration).

IV. DIRECT ACTIONS AND CERCLA

The Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) does not allow direct action to recover clean-up costs against insurer of responsible party. City of New Orleans v. Kernan, 933 F.Supp. 565 (E.D. La. 1996); Allied Corp. v. Environmental Purification Advancement Corp., 848 F.Supp. 67 (M.D. La. 1994). Louisiana Direct Action Statute does not apply to CERCLA contribution claim against responsible party's insurer. Port Allen Marine Services, Inc. v. Chotin, 765 F.Supp. 887 (M.D. La. 1991).

V. DIRECT ACTIONS AND OCSLA

The Louisiana Direct Action Statute does not apply to case arising out of allision between vessel and fixed platform on the Outer-Continental Shelf. There were no gaps in federal law which would necessitate adoption of Louisiana's Direct Action Statute as applicable under the Outer-Continental Shelf Lands Act (OCSLA), and traditional laws of admiralty provided sufficient remedies without the additional means to sue the insurers directly. Matter of Tidewater, Inc., 883 F.Supp. 105 (W.D. La. 1994).

Owner of offshore fixed drilling platform did not have right of direct action against contractor's insurer under the Louisiana Direct Action Statute following injury to contractor's employee on the platform. Nesom v. Chevron U.S.A., Inc., 633 F.Supp. 55 (E.D. La. 1984); Nations v. Morris, 483 F.2d 577 (5^th Cir. 1973). See also Watson, "Louisiana Direct Action Statute Inapplicable in Outer Continental Shelf Lands Act Case," 5 J.Mar.L. & Com. 135 (October, 1973) (case note). However, in Moody v. Callon Petroleum Operating Co., 37 F.Supp.2d 805 (E.D. La. 1999), the district court held that the location of the injury on a fixed drilling platform located on the Outer Continental Shelf did not foreclose a direct action against the insurers in the absence of some applicable independent federal law, such as the LHWCA. See also Freeport McMoran Resource Partners v. Kremco, Inc., 1992 WL 84312 (E.D. La. 1992) (Livaudais, J.).

VI. DIRECT ACTIONS AND ARGENTINE LAW

Although Argentina does not have a statute that provides for a third party's rights against P&I insurers, the federal appellate court of Argentina has held that when a tortfeasor cannot pay a third-party claim due to insolvency, the judgment against the tortfeasor can be executed against the P&I insurer, notwithstanding that the policy contains a "pay to be paid" (or "pay-first") clause. See Compañia de Seguros La Franco Argentina, S.A., CNA Civ. y Com. Fed., 12.383/94 (1996). See also Rosas, "Argentina: A New Development in Direct Actions Against Indemnity Insurers," 22 Tul.Mar.L.J. 191 (1997) (case note).

VII. DIRECT ACTIONS AND ENGLISH LAW

The Third Parties (Rights Against Insurers) Act of 1930 provides a right of direct action for third parties against insurance companies where the insured is bankrupt. However, under English law, when the terms of an insurance policy require the insured to pay its obligation before it may collect against the insurer, the insured must pay before any other party can sue on the contract. Firma C-Trade S.A. v. Newcastle Protection and Indemnity Association (The "Fanti") and Socony Mobil Oil Company, Inc. v. West of England Shipowners Mutual Insurance Association (London) Ltd. (The "Padre Island") (No. 2) [1990] Lloyd's Rep. Vol. 2, 199 (HL 1990) (P&I clubs are not subject to direct liability to third parties under English law). See also Morewitz v. West of England Ship Owners Mut. Protection & Indemnity Ass'n., 62 F.3d 1356 (5^th Cir. 1995); Psarianos v. Standard Marine, Ltd., Inc., 12 F.3d 461 (5^th Cir.), cert. denied, 114 S.Ct. 2164, 511 U.S. 1142, 128 L.Ed.2d 887 (1994).

For a discussion of direct actions under English law, see Tilley, "Protection and Indemnity Club Rules and Direct Actions by Third Parties," 17 J.Mar.L. & Com. 427 (July, 1986) and Dougherty, "The Impact of a Member's Insolvency or Bankruptcy on a Protection & Indemnity Club," 59 Tul.L.Rev. 1466 (June, 1985).

XIII. DIRECT ACTIONS AND AMERICAN LAW

ALABAMA

Alabama law recognizes a direct action claim as a method of executing upon the proceeds of the insurance policy. However, unlike the Louisiana and Puerto Rico statutes, the recovery of a judgment against the insured is a condition precedent to the bringing of a direct action claim against the insurer under Alabama law. Morewitz v. West of England Ship Owner's Mut. Protection & Indemnity Ass'n., 62 F.3d 1356 (11^th Cir. 1995) (Alabama statute that allows direct action against insurers, rather than English bankruptcy law that prohibits such actions, applied to a P&I policy in a marine wrongful death action).

CALIFORNIA

Under California law, a direct action was available against a vessel operator's P&I insurer by an injured person who had obtained a judgment against the insured. Williams v. Steamship Mut. Underwriting Ass'n., Ltd., 273 P.2d 803, 1954 AMC 2006 (Wash. 1954); see also Kiernan v. Zurich Companies, 150 F.3d 1120 (9^th Cir. 1998) (judgment debtor who obtains a judgment based on an action for bodily injury can bring a direct action under California law).

CONNECTICUT

Connecticut's Direct Action Statute, Conn. Gen. Stat. § 38-175 (1989), permitting judgment creditor to sue insurer of judgment debtor, may be applied in maritime cases; however, it is subject to federal choice of law rules. State Trading Corp. of India, Ltd. v. Assuranceforeningen Skuld, 921 F.2d 409 (2d Cir. 1990) (finding insufficient contacts between vessel's sinking and Connecticut); see also Cowan v. Continental Insurance Company, 86 A.D.2d 646, 446 N.Y.S.2d 412 (Conn. 1982) (Connecticut direct action statute did not authorize declaratory judgment action in New York following the time plaintiff's decedent perished aboard a tug which was covered by P&I policy where plaintiff had obtained no judgment against employer at the time the action was instituted).

FLORIDA

Under Florida law, a third party cannot maintain a direct action against a marine liability insurer for actions accruing after October 1, 1982, the effective date of Florida legislation prohibiting direct actions by third-parties against liability insurers that had been available under the doctrine of Shingleton v. Bussey, 223 So.2d 713 (Fla. 1969) and DaCosta v. General Guaranty Ins. Co., 226 So.2d 104 (Fla. 1969). See National Corporacion Venezolana, S.A., v. M/V MANAURE V, 826 F.2d 6 (11^th Cir. 1987) and Steelmet, Inc. v. Caribe Towing Co., 779 F.2d 1485, 1986 AMC 1641 (11^th Cir. 1986).

Protection and indemnity policy issued to vessel owner was indemnity policy not liability policy, so that no direct action could lie against the insurer in his capacity as marine indemnity insurer under former Florida law. Weeks v. Beryl Shipping, Inc., 845 F.2d 304 (11^th Cir. 1988).

Under Florida law, a cargo owner could not maintain a direct action against a legal liability insurer based on lost cargo. In Re: Litigation Involving Alleged Loss of Cargo from Tug ATLANTIC SEAHORSE, SEA BARGE 101, 772 F.Supp. 707 (D. P.R. 1991).

GUAM

In a suit in Guam by a Croatian seaman for injury on a fishing vessel on the high seas against the P&I insurer of his insolvent employer under the Guamanian Direct Action Statute, the place of negotiation, contracting and performance in England and inclusion of a choice of English law outweigh the interests of Guam or Croatia, and determine that English law governs the contract, under which the policy's clause for arbitration in England will be enforced. TCB Special Credits v. F/V CHLOE Z, 1998 AMC 750 (D. Guam 1997).

LOUISIANA

Under Louisiana law, a direct action claim may be brought against an insurer in only three limited instances: if the accident occurred in Louisiana; if the policy was written in Louisiana; or if the policy was delivered in Louisiana. Landry v. Travelers Indem. Co., 890 F.2d 770 (5^th Cir. 1989). See also Johnson, "The Louisiana Direct Action Statute," 43 La.L.Rev. 1455 (July, 1983).

To invoke the Louisiana Direct Action Statute in maritime action for injury sustained on the high seas, the insurance policy in question must have been issued, or delivered, in Louisiana. Miller v. Griffin-Alexander Drilling Co., 715 F.Supp. 164 (W.D. La. 1989).

Louisiana Direct Action Statute did not apply despite claim that policy was "constructively delivered" in Louisiana; nothing in the Louisiana Direct Action Statute precluded a business decision to accept delivery of the policy outside of the state so as to avoid application of the statute to accidents occurring outside of Louisiana. Id. See also Signal Oil & Gas Co. v. Barge W-701, 654 F.2d 1164 (5^th Cir. 1981), cert. denied, 455 U.S. 944, 102 S.Ct. 1440, 71 L.Ed.2d 565 (1982); Grubbs v. Gulf Intern. Marine, Inc., 13 F.2d 168 (5^th Cir. 1994) (recognizing possibility of "constructive delivery") and Continental Ins. Co. V. Jantran, Inc., 906 F.Supp. 362 (E.D. La. 1995). Cf. Schexnider v. McDermott, Inc., 688 F.Supp. 234 (W.D. La. 1988) (finding "constructive delivery" in Louisiana) and Heaton v. Gulf International Marine, Inc., 536 So.2d 622 (La. App. 1^st Cir. 1988) (seaman was entitled to maintain direct action against insurer where, although it was undisputed that seaman's injury occurred offshore beyond territorial limits of Louisiana, record did not establish where insurance policy was written or to whom it was delivered). The Fifth Circuit has noted that the Louisiana Supreme Court has "strongly suggested that when an insurer fraudulently refuses to deliver a policy in Louisiana for the purposes of evading the Direct Action Statute, the policy will be considered delivered in Louisiana for purposes of the Direct Action Statute." 13 F.3d at 171. See also Temple v. J&L Marine, Inc., 1997 WL 204921 (E.D. La. 1997) and Aggregate Barges, Inc. v. Gulf Marine Towing, Inc., 1995 WL 96624 (E.D. La. 1995).

Louisiana Direct Action Statute permits injured party to maintain direct action against marine protection and indemnity insurer, even though part of insurance code containing statute specifically states that its provisions apply to insurance other than ocean marine insurance, and even though P&I insurance might be considered ocean marine insurance within the meaning of the exclusion. Grubbs v. Gulf Intern. Marine, Inc., 625 So.2d 495, 1994 AMC 244 (La. 1993); Westinghouse Credit Corp. v. M/V NEW ORLEANS, 39 F.3d 553 (5th Cir. 1994). See also Elmer, "Marine P&I Insurers No Longer Safe from the Louisiana Direct Action Statute (If They Ever Were): Grubbs v. Gulf International Marine, Inc.," 18 Tul.Mar.L.J. 371 (Summer 1994) and Shariff, "Grubbs v. Gulf International Co.: The Louisiana Supreme Court Declares the Direct Action Statute Applicable to Marine P&I Insurance," 68 Tul.L.Rev. 1653 (June, 1994).

The Louisiana Direct Action Statute grants personal injury claimant a right of direct action against the tortfeasor's insurer regardless of any provision in the policy forbidding immediate direct action; terms and conditions of the policy that have the effect of defeating the purpose of the direct action statute, such as "no action" clauses, are annulled or superceded by the statute. Zimmerman v. International Cos. and Consulting, Inc., 107 F.3d 344 (5^th Cir. 1997).

Protection and indemnity insurer's contractual right to have coverage disputes with its insured employer submitted to arbitration did not entitle insurer to stay of the injured workers' suits against the insurer, which were brought under Louisiana's Direct Action Statute during insurer's arbitration with employer. Id.

The Louisiana Direct Action Statute allows action against marine insurer of insolvent towage company even though company has not paid its deductible under the policy. Albany Ins. Co. v. Bengal Marine, Inc., 857 F.2d 250 (5^th Cir. 1988).

Under the Louisiana Direct Action Statute, P&I insurers are not entitled to cancellation of coverage or set off against personal injury plaintiff's judgment because of the shipowner-insured's failure to pay prior release calls on account of insolvency. Weiland v. Pyramid Ventures Group, 511 F.Supp. 1034 (M.D. La. 1981).

Under Louisiana law, settlement agreement between injured party and tortfeasor does not limit or bar injured party's right of direct action against non-settling insurer, particularly where injured party specifically reserved rights in settlement agreement. In Re: Combustion, Inc., 960 F.Supp. 1051 (W.D. La. 1994).

Under Louisiana law, excess marine employer's liability (MEL) insurers lacked standing to assert protection and indemnity (P&I) insurer's waiver of defense that P&I insurance policy was void ab initio for material misrepresentations; excess insurers were strangers to the policy relationship between the P&I insurer and the insured, paid nothing on behalf of the insured, and were not injured third-parties within the meaning of Louisiana's Direct Action Statute. Insurance Company of North America v. West of England Ship Owner's Mut. Insurance Ass'n., 890 F.Supp. 1296 (E.D. La. 1995).

Tort victim's claim against insurer can be maintained despite insured's failure to notify insurer of filing of claim unless the insurer proves sufficient prejudice to defeat the claim; protection and indemnity insurer showed sufficient prejudice arising from the insured's failure to notify it of suit to defeat tort victim's attempt to enforce the judgment taken against the insured; insurer did not receive notification from the insured of suit, nor did it receive notification from the third party; had it known of case, it would have presented defense, given its active involvement in earlier settlement negotiations. Elrod v. P. J. St. Pierre Marine, Inc., 663 So.2d 859 (La. App. 5^th Cir. 1995), writ den., 666 So.2d 1098 (La. 1996).

Res judicata barred a wrongful death claim brought under the Louisiana Direct Action Statute against the insurers of a vessel whose owner was exonerated from liability in federal limitation of liability proceeding, notwithstanding contention that the cases did not involve the same parties; the insured and insurers not only shared the same qualities as parties, but their identities virtually merged into one, to the extent of policy limits, and permitting plaintiffs to proceed against the insurers under the Louisiana Direct Action Statute would result in litigating issues of shipowner's liability for the accident. Arthur v. Zapata Haynie Corp., 690 So.2d 86 (La. App. 3^rd Cir. 1997), writ den., 694 So.2d 252 (La. 1997).

MAINE

Maine's "Reach and Apply" Statute, 24-A M.R.S.A. § 2904, permits a judgment creditor to proceed directly against a judgment debtor's insurer, provided the insurer is subject to personal jurisdiction. Sparkowich v. American Steamship Owners' Mut. Protection & Indemnity Ass'n., Inc., 687 F.Supp. 695, 1988 AMC 2182 (D. Me. 1988) (no personal jurisdiction over marine insurer because of lack of minimum contacts).

MASSACHUSETTS

Under Massachusetts law, personal injury plaintiff may bring direct action against tortfeasor's protection and indemnity insurer only after judgment had been obtained against tortfeasor. Szafarowicz v. Gotterup, 68 F.Supp.2d 38 (D. Mass. 1999).

MICHIGAN

Marine insurance which provided coverage for liability resulting from personal injury was "casualty insurance" for purposes of Michigan statute prohibiting direct actions against an insurer; therefore, injured crew member could not bring suit against insurer of vessel owner under Michigan's third-party beneficiary statute. Itrich v. Huron Cement Div. Of Nat. Gypsum Co., 670 F.Supp. 199 (E.D. Mich. 1987).

NEW YORK

New York law provides for a direct action against insurers on both liability and indemnity policies, but no direct action is allowed on any marine insurance policy. This exception was designed to eliminate a perceived competitive disadvantage to which New York marine insurers were placed by the direct action statute. See Alexander, "Admiralty, Federalism, and the New York Direct Action Statute: Seamen's Rights to Enforce Jones Act Judgments," 49 Brook. L. Rev. 179 (Winter, 1983).

New York's Direct Action Statute excludes certain kinds of marine insurance, including P&I insurance, in connection with oceangoing vessels. Royal Ins. Co. of America v. A & C Ship Fueling Corp., 1992 AMC 1686 (E.D. N.Y. 1992).

In a case involving a tug/barge grounding off the Massachusetts coast, the Eighth Circuit held that the law of New York, the place of contracting, negotiating, and performing the marine policy, governed and prohibited a direct action lawsuit. American Home Assurance Co. v. L&L Marine Serv., Inc., 153 F.3d 616 (8^th Cir. 1998).

The New York Direct Action Statute, applicable only in the event of insolvency of the insured and available for both liability and indemnity policies, excludes direct actions on any marine insurance policy. Miller v. American S.S. Owners Mutual Protection & Indemnity Ass'n., 509 F.Supp. 1047 (S.D. N.Y. 1981).

Under New York Direct Action Statute, P&I underwriters were not directly liable to judgment creditor of bankrupt insured. Cucurillo v. American S.S. Owners P&I Ass'n., 1969 AMC 2334 (N.Y. Sup. Ct. 1969); Ahmed v. American S.S. Owners P&I Ass'n., 444 F.Supp. 569 (N.D. Calif. 1978), aff'd in part and remanded in part, 640 F.2d 993 (9^th Cir. 1981). See also Wabco Trade Co. v. S.S. Inger Skov, 663 F.2d 369 (2^nd Cir. 1981) and Hughes v. Prudential Lines, Inc., 624 A.2d 1063, 1993 AMC 2179 (Sup.Ct. Pa. 1993) (applying New York law).

New York doctrine barring direct actions by claimants against marine indemnity insurers prohibited use of recycling arrangement to evade "pay first" provision of debtor-shipping lines' marine protection and indemnity policies. In Re Prudential Lines, Inc., 158 F.3d 65 (2ⁿ Cir. 1998). Cf. Liman v. American Steamship Owners Mutual Protection & Indemnity Ass'n, 299 F.Supp. 106 (S.D.N.Y.), aff'd., 417 F.2d 627 (2^nd Cir. 1969).

New York law precludes direct action by cargo shippers against the liability insurers of a charterer who loses the shippers' goods. WABCO Trade Co. v. S.S. Inger Skou, 663 F.2d 369 (2^nd Cir. 1981).

Cf. Carribe Carriers, Ltd. v. C.E. Heath & Co., 784 F.Supp. 1119 (S.D. N.Y. 1992) (New York's Direct Action Statute did not prohibit action against underwriters of marine hull and machinery insurance policies by assignee of insurance claim for repairs).

PUERTO RICO

Puerto Rico law permits direct action suits against ocean marine insurers, including marine protection and indemnity insurers. Reifer-Mapp v. 7 Maris, Inc., 830 F.Supp. 72, 1994 AMC 1215 (D. P.R. 1993); Gonzalez v. Caribbean Carriers, Ltd., 379 F.Supp. 634 (D. P.R. 1974).

Puerto Rico's direct action statute did not permit injured longshoremen to sue their employer's insurer when workers' compensation statute prohibited them from bringing same tort action against their employer; under Puerto Rico's direct action statute, insurer's legal liability can be no greater than the extent of its underlying contractual undertaking with its insured. Ruiz-Rodriguez v. Litton Indus. Leasing Corp., 574 F.2d 44 (1^st Cir. 1978).

Marine cargo inspector injured aboard vessel could maintain a direct action against a vessel's protection and indemnity underwriter pursuant to the Puerto Rico Direct Action Statute, regardless of contrary provisions contained in protection and indemnity policy purportedly establishing that underwriter was not liable unless its insured became obligated to pay by final judgment or in fact paid. Morales-Melendez v. Steamship Mut. Underwriting Assn. (Bermuda), Ltd., 763 F.Supp. 1174, 1991 AMC 2475 (D. P.R. 1991).

Indemnification claims by tug bareboat charterer, which in turn time chartered tug, arose from breach of contractual obligations by time charterer and its affiliated cargo carriers to hold tug and its owner harmless from cargo claims, and not from tortious activity; therefore, bareboat charterer could not proceed directly against underwriters under the Puerto Rico Direct Action Statute. Complaint of Admiralty Towing and Barge Company, 767 F.2d 243 (5^th Cir. 1985).

TEXAS

Texas law does not allow direct actions against insurers, unless injured party was made a beneficiary of the insurance contract by statute. Matter of Edgeworth, 993 F.2d 51 (5^th Cir. 1993).

Under Texas law, plaintiffs who recovered a judgment against a vessel owner in a personal injury and wrongful death action had no cause of action directly against the vessel's protection and indemnity insurer, in the absence of any special relationship between the plaintiffs and the insurer. Psarianos v. Standard Marine, Ltd., Inc., 12 F.3d 461 (5^th Cir.), cert. den., 114 S.Ct. 2164, 511 U.S. 1142, 128 L.Ed.2d 887 (1994).

Under Texas law, plaintiff is barred from bringing tort suit directly against tortfeasor's insurer; non-party to insurance contract may bring suit against insurer to enforce insurance agreement only if non-party is legal beneficiary of contract or judgment creditor of insured. Essex, Inc., Co. v. Bayou Concession Salvage, Inc., 942 F.Supp. 258 (E.D. La. 1996).

Under Texas law, time charterer of owner insured's vessel lacked standing as third-party beneficiary so as to maintain direct action against insurer to enforce policy indemnity provisions to recover costs of removing sunken vessel from property leased by charterer, notwithstanding insurer's purported assignment to charterer of any insurance proceeds; policy specifically barred third-party suit, and contained unambiguous "no assignment" clause, which was enforceable under state law. Conoco, Inc. v. Republic Ins. Co., 819 F.2d 120 (5^th Cir. 1987).