## Facts

- Twenty Grand Offshore, Inc. owned the tug **EL MULO GRANDE**.
- West India Carriers, Inc. was the demise charterer of the barge **WISCO RANGER** under a bareboat charter.
- The parties entered a towage contract requiring each side to:
  - maintain insurance on its own vessel,
  - name the other party as an additional insured, and
  - obtain a waiver of subrogation in the other party’s favor.
- On October 30, 1969, while towing about four miles off Hollywood, Florida, the vessels encountered heavy weather; the towing hawser parted and the barge stranded on the beach, causing damage.
- In a limitation-of-liability proceeding, the district court found negligent towage with privity, denied exoneration and limitation, and awarded damages to the barge interests.
- The district court also held the insurance/waiver provisions unenforceable as exculpatory under the public policy of **Bisso**.
- On appeal, the tug owner did not challenge the negligence finding; it appealed only the invalidation of the insurance/waiver provisions.

## Issues

1. Whether a towage contract’s mutual insurance, additional-insured, and waiver-of-subrogation provisions are invalid as exculpatory clauses barred by public policy under **Bisso**.
2. Whether such provisions are enforceable as contractual risk-allocation devices even when the tug is found negligent.

## Decision

- The Fifth Circuit reversed the district court’s ruling that invalidated the insurance/waiver provisions and remanded.
- The court held the provisions were valid and enforceable and did not violate **Bisso**’s prohibition on contractual exemptions from a tug’s negligence.
- The negligence finding and denial of limitation were left undisturbed; the appeal concerned only allocation of the financial consequences of the loss under the contract.

## Legal Principles

- **Bisso** bars towage clauses that directly exempt a tug from liability for its own negligence; it does not necessarily bar mutual insurance arrangements that allocate risk through insurance.
- Contract terms requiring each party to insure its own vessel, name the other as an additional insured, and waive subrogation may function as permissible risk allocation rather than impermissible negation of liability.
- Where sophisticated maritime parties adopt reciprocal insurance and subrogation-waiver provisions, courts may enforce them absent an express contractual release from negligence liability.

## Conclusion

The Fifth Circuit enforced reciprocal insurance and waiver-of-subrogation provisions in a towage contract, treating them as a lawful allocation of risk through insurance rather than an unlawful exculpatory clause, and remanded for proceedings consistent with that enforcement.


Complaint of Twenty Grand Offshore, Inc. v. West India Carriers, Inc., 492 F.2d 679 (5th Cir. 1974)