Author: Michael J. Maginnis, Jose R. Cot
Date: July 1, 2001
MARINE INSURANCE AND GENERAL AVERAGE
MICHAEL J. MAGINNIS
JOSÉ R. COT
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 (5th
Cir. 1982). Cf. Aasma v. American S.S. Owners Mut. Prot. & Indem., 95 F.3d 400 (6th 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 (9th 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 (11th 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
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 (11th 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 (3rd 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 (11th
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 (3rd 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 (5th Cir. 1986) (en banc);
Rogers v. Texaco, Inc., 638 So.2d 347 (La. App. 4th 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 (5th
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 (5th Cir.) reh'g. and reh'g. en banc denied, 53 F.3d 1283 (5th
Cir. 1995). Cf. Matter of Seabulk Offshore, Ltd., 158 F.3d 897 (5th 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 (5th Cir.
1997) (Louisiana law); In Re: Talbott Big Foot, Inc., 887 F.2d 611 (5th 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 (11th 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 (6th 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
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 (5th 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)
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)  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 (5th Cir. 1995); Psarianos v. Standard Marine,
Ltd., Inc., 12 F.3d 461 (5th Cir.), cert. denied, 114 S.Ct. 2164, 511 U.S. 1142, 128 L.Ed.2d
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 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 (11th 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).
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 (9th Cir. 1998) (judgment debtor who
obtains a judgment based on an action for bodily injury can bring a direct action under
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).
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 (11th Cir. 1987) and
Steelmet, Inc. v. Caribe Towing Co., 779 F.2d 1485, 1986 AMC 1641 (11th 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 (11th 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).
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).
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 (5th 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.
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 (5th 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 (5th 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. 1st 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 (5th 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 (5th 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. 5th Cir. 1995), writ den., 666 So.2d 1098 (La.
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. 3rd Cir. 1997), writ den., 694 So.2d 252 (La. 1997).
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).
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).
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 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 (8th 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 (9th Cir.
1981). See also Wabco Trade Co. v. S.S. Inger Skov, 663 F.2d 369 (2nd 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 (2nd Cir.
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 (2nd 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 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 (1st 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 (5th Cir. 1985).
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 (5th 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 (5th 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.
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 (5th Cir. 1987).