The court determined that an additional insured was not entitled to coverage despite an exception to the watercraft exclusion. Holden v. U.S. United Ocean Serv., LLC, 2014 U.S. App. LEXIS 15954 (5th Cir. Aug. 19, 2014).
United entered a contract with Buck Kreihs Company, Inc. under which Buck Kreihs would perform ship-repair work for United. Under the contract, Buck Kreihs would indemnify United for all liabilities arising out of the work or services performed by Buck Kreihs for United. The contract further provided that Buck Kreihs was to procure general liability coverage and name United as an additional insured. Buck Kreihs did so under a policy issued by St. Paul.
Holden, an employee of Buck Kreihs, was injured while preparing to remove a gangway that led from a dock at Buck Kreihs's facility to a barge owned by United. Holden sued United, which tendered to St. Paul as an additional insured. St. Paul denied coverage under the policy's watercraft exclusion. Holden and United settled. United pursued its third party suit against St. Paul. The district court granted summary judgment to St. Paul.
The watercraft exclusion barred coverage for bodily injury arising out of the ownership of any watercraft owned by an insured. The exception stated the exclusion did not apply to "liability assumed under an 'insured contract', but only that portion of the 'insured contract' under which the 'Named Insured' assumes the tort liability of another party."
The Fifth Circuit determined that the exception only applied to liability that the named insured (Buck Kreihs) assumed under an insured contract. The exception did not apply here because United did not seek coverage as an injured claimant against Buck Kreihs who was insured under the policy for "liability assumed under an 'insured contract.'" Rather, United sought coverage as an additional insured directly under the policy for its own liability to Holden. In other words, the exclusion plainly applied to a specific type of liability, which Untied was not subject to and was not seeking coverage for under the policy. Additionally, United was not the named insured, and the exception clearly applied only to liability that "the 'Named Insured' assumes."
Since United in its role as an additional insured, did not seek coverage for liability assumed under an insured contract by the named insured, it did not meet its burden of showing that the exception to the watercraft exclusion applied.
