On Appeal from the United States District Court for the District of New Jersey (D.C. Civil No. 80-0201).
Aldisert, Chief Judge, Becker, Circuit Judge and Cahn, District Judge*fn*
This litigation arises out of a February 1979 ice storm on the Delaware River at Penns Grove, New Jersey, which damaged two barges that were linked together and used as a pier. The barges were owned by appellee/cross-appellant East Coast Tender Service, Inc. ("East Coast") and were chartered to appellee/cross-appellant Robert T. Winzinger, Inc. ("Winzinger"). Appellants/cross-appellees Utah Home Fire Insurance Company, Great Atlantic Insurance Company and various other insurance underwriters ("Underwriters") had issued Hull insurance and Protection and Indemnity ("P & I") insurance on the barges, naming East Coast and Winzinger as insureds, for the period from April 1, 1978, to March 31, 1979. Although the backs of the barges were broken by the storm and they began to sink in the river within the coverage period of these insurance policies, the barges continued to be operated for profit under a state issued license long after the coverage period expired. Ultimately, the barges sank and Winzinger received formal notice to remove them.
While a number of issues are presented in these appeals, see infra pp. 5-6, we consider in detail only one of them: whether the Underwriters are liable for the costs of removing the wrecked barges under the wreck removal provisions of the P & I policy that make the Underwriters liable for the costs of wreck removal that is "compulsory by law." The district court denied recovery. Before we reach this question, however, we will set out in more detail the relevant facts and procedural history of the case, and dispose of several preliminary issues.
For the reasons that follow, we will affirm the district court's judgment in all its particulars, including its denial of liability for the removal costs, except that we will vacate its award of prejudgment interest for the period from April 1, 1979, until September 30, 1979.
In November 1976, Winzinger chartered and took possession and control of two barges owned by East Coast under a barefoot charter agreement. Winzinger then obtained a license from the New Jersey Department of Environmental Protection ("DEP"), Division of Marine Services, to operate the barges as a temporary loading facility at Penns Grove. The barges were dug into the sand on the river bank and then locked together to form a pier over which large amounts of gravel were conveyed to waiting vessels for transportation to an electric power plant under construction nearby.
In February 1979, there was a break in the ice upriver from the barges. A solid wall of ice broke loose, traveled downstream, and struck the barges.*fn1 The tremendous force of this ice caused one barge to "flop on top" of the other, breaking the backs of both barges.
Although the ice storm that damaged the barges occurred in February 1979, and the barges thereafter gradually sank into the river, Winzinger continued to operate the barges as a pier until September 11, 1979, when its contract with the United States Army Corps of Engineers for exclusive use of the Penns Grove property expired. On January 3, 1980, Winzinger cancelled its license with DEP and, on April 29, 1980, Winzinger received formal notice from the DEP to remove the barges. The sunken barges have not yet been removed.
The litigation commenced when East Coast filed suit against Winzinger for failure to pay charter hire after September 30, 1979. Winzinger then sued the Underwriters for a declaratory judgment as to the latter's obligation under the P & I policy to pay for the costs of removing the wrecked barges. Both East Coast and Winzinger asserted claims for compensatory damages against the Underwriters on the ground that, as a result of the ice storm, the barges became constructive total losses in February 1979, when the policy was still in force. They also sought punitive damages, fees, and costs. The Underwriters defended their refusal to honor the claims of East Coast and Winzinger under the policy on several grounds: (1) the barges were not vessels under the general maritime law; (2) the insureds misrepresented the use to which the barges were put, materially affecting the risk that was being underwritten; (3) the damage to the barges resulted from ordinary wear and tear was not the result of a fortuitous event or a peril of the sea; and (4) the barges did not become constructive total losses.
After a trial on the merits, the district court made the following findings with respect to these issues. First, the court found that the barges did not cease to be vessels by reason of their use as a temporary loading pier. According to the court. "[the vessels] were being utilized on only a temporary basis as docks; they had to be seaworthy to be positioned at Penns Grove and to be dismantled as a dock at the conclusion of the operation; and [East Coast] had every intention of chartering them in the future as seaworthy vessels."
Second, the court found that neither East Coast nor Winzinger materially misrepresented the nature of the risk or concealed changed circumstances from the Underwriters. According to the court, the insureds communicated the use and purpose to which the barges were being put to their broker, Adams and Porter, Inc., who relayed this information to the Underwriters of the 1976-78 policies.*fn2 One person they informed was Dale Maple of the American National General Agencies ("ANGA"), the managing general agent of appellant/cross-appellee Utah Home. The court further found that ...