United States District Court, S.D. Texas, Houston Division
H. MILLER UNITED STATES DISTRICT JUDGE
before the court are (1) a motion to dismiss or motion for
summary judgment filed by third-party defendant Continental
Insurance (“Continental”) (Dkt. 30); (2) a motion
to strike defendant and third-party plaintiff GSD Marine,
LLC's (“GSD”) surreply filed by Continental
(Dkt. 34); and (3) a motion to file a surreply filed by GSD
(Dkt. 35). Having considered the motions, related filings,
and the applicable law, the court is of the opinion that the
motion to file a surreply (Dkt. 35) should be GRANTED and the
motion to strike (Dkt. 34) should be DENIED AS MOOT.
Additionally, the motion to dismiss or motion for summary
judgment should be DENIED WITHOUT PREJUDICE.
Background and Analysis
case relates to the sinking of the Tug ANNIE MOON and the
Barge MOP 14 on October 19, 2015. Dkt. 1. Plaintiff Cedar
Bayou Limited Towing Company (“Cedar Bayou”) is
the owner of the ANNIE MOON. Id. Cedar Bayou
contends that GSD's acts or omissions proximately caused
the tug and barge to become submerged. Id. GSD had a
contract to do some construction work at a Houston Ship
Channel bulkhead. Id. The MOP 14 was an unregistered
double raked deck barge chartered by GSD. Id. GSD
and Cedar Bayou entered into an oral contract for the ANNIE
MOON to assist in moving the deck barges under GSD's
direction. Id. On the morning of the incident, the
ANNIE MOON was made up face wires to the stern of the MOP 14,
which was laden with sheet pile. Other vessels allegedly
passed by at high speeds, causing waves to wash up onto the
MOP 14 and her bow to partially sink. Id. This
caused the ANNIE MOON's stern to be lifted into the air,
causing the MOP 14 to slide into the ship channel and pull
the ANNIE MOON underwater. Id. Cedar Bayou alleges
that GSD failed to ensure that the MOP 14 was in the charge
of a watchman, that it was safely loaded and trimmed, and
that it was seaworthy. Id. Cedar Bayou contends, in
the alternative, that the incident was caused by the other
defendants who manage or operate vessels that allegedly
passed the tug and barge at excessive rates of speed causing
unusual wakes, swells, or suction. Id.
filed a third-party complaint against Continental, its
insurance company, on April 11, 2017. Dkt. 21. GSD contends
that Continental refused to provide its defense and that in
so doing Continental breached the insurance policy and
violated Chapter 542 of the Texas Insurance Code.
Id. Continental filed an answer to the third-party
complaint in which it asserted an affirmative defense that
the policy contains a seaworthiness clause and the MOP 14 was
unseaworthy as a matter of law when it was added to the
policy. Dkt. 28. Continental thus contends in its answer that
it has no duties under the policy. Id.
seaworthiness clause states:
Warranted that at the inception of this Policy the
“Vessel(s)” shall be in a seaworthy condition,
and, thereafter, during the currency of the Policy, the
Assured shall exercise due diligence to keep the
“Vessel(s)” seaworthy, and in all regards, fit,
tight, and properly manned, equipped and supplied.
See Dkt. 30, Ex. A, General Conditions.
13, 2017, Continental filed the instant motion to dismiss or
for summary judgment. Dkt. 30. It asserts that it is
undisputed that the MOP 14 was “thoroughly
unseaworthy” when it sank on October 19, 2015, and that
it was also unseaworthy when it was added to GSD's policy
four days earlier on October 15, 2015. Id.
Continental provides the affidavit from a licensed marine
surveyor who opines that certain issues led to the
vessel's watertight integrity being compromised, and the
issues were of the type that develop over months, if not
years. Id. (citing Dkt. 30, Ex. B). Continental asks
the court to either issue a judgment on the pleadings
pursuant to Federal Rule of Civil Procedure 12(c) or enter
summary judgment in its favor under Federal Rule of Civil
Procedure 56, as it had no duty to defend or indemnify
because GSD breached the seaworthiness clause in the policy.
responds that the unseaworthiness determination requires a
factual analysis that the vessel was not reasonably fit for
its intended use which has not been done by the surveyor and
is in dispute. Dkt. 31. GSD points out that the duty to
defend is determined under the eight corners of the policy
and the complaint, and Cedar Bayou's complaint clearly
alleges, in the alternative, that GSD was negligent, which is
a claim covered by the policy. Id. It notes that the
complaint does not state what the MOP 14's intended use
is, so it cannot be determined solely from the complaint that
the vessel is unseaworthy. Id.
replies that its policy only provides defense costs if a duty
to indemnify is found and that GSD's arguments regarding
the eight-corners rule are therefore misplaced. Dkt. 32. It
argues that the only relevant question is whether the MOP 14
was unseaworthy when it sank. Id. Continental points
out that Cedar Bayou alleges that the MOP 14 was unseaworthy
on the date it sank, which Continental asserts is a fact the
court must take as true under a Rule 12(c) motion.
Id. It additionally argues that its surveyor report
indisputably establishes the unseaworthiness of the vessel.
Id. Continental summarizes the report as follows:
“In other words, the MOP-14's hull was full of
holes, and, as such, was unfit for the purpose of a boat: to
stay afloat.” Id. Continental contends that
any other causes of action are irrelevant because GSD
breached the express warranty of seaworthiness resulting in
suspension of the policy. Id.
then filed a surreply, which Continental moved to strike
because GSD did not file a motion to file a surreply; GSD
subsequently filed a motion to file the surreply. Dkts.
33-35. The court finds good cause to allow the surreply and
therefore GRANTS GSD's motion to file it and DENIES
Continental's motion to strike as MOOT.
surreply, GSD argues that holes in the hull do not
automatically render the vessel unseaworthy, and it
conclusorily asserts that the vessel was afloat for days
before this happened. Dkt. 33. It then requests additional
time to depose Continental's surveyor before the court
rules on the motion for summary judgment. Id.
Continental's motion to dismiss pursuant to Rule 12(c) is
DENIED. While Continental asserts that the court must take
the facts in Cedar Bayou's complaint as true, its motion
to dismiss is a motion to dismiss the third-party complaint.
Thus, the court takes as true only the allegations in the
third-party complaint, not Cedar Bayou's complaint. The
third-party complaint discusses the allegations in Cedar
Bayou's complaint, but it does not admit that the MOP 14