## Facts

- Crown Zellerbach Corp. owned a water-intake structure on the Mississippi River near Baton Rouge, Louisiana.
- In February 1979, Ingram Industries, Inc.’s tug F.R. BIGELOW, pushing a tow of loaded barges in heavy fog and rain, allided with the structure.
- Crown Zellerbach began repairs, which were later interrupted when a different tug allided with the structure in May 1979.
- Ingram carried layered marine protection and indemnity (P&I) insurance: a $1 million primary P&I policy and an excess P&I policy issued by London Steam-Ship Owners’ Mutual Insurance Association, Ltd.
- The excess P&I policy included a clause (Rule 8(i)) limiting the underwriter’s maximum liability to the shipowner’s judicially declared limitation of liability.
- Ingram filed a Limitation of Liability Act proceeding; the district court granted limitation and set the limitation fund at $2,134,918.88.
- Crown Zellerbach’s damages exceeded the limitation fund and it sued Ingram’s insurers directly under Louisiana’s Direct Action Statute, seeking recovery beyond Ingram’s limited liability.

## Issues

1. Whether a marine P&I policy clause that caps the insurer’s liability at the shipowner’s judicially determined limitation of liability is valid and enforceable under federal maritime law.
2. Whether Louisiana’s Direct Action Statute permits a claimant to recover from a P&I underwriter amounts exceeding the shipowner’s limitation fund despite such a policy cap.
3. Whether prior circuit precedent allowing insurer liability beyond the shipowner’s limitation should remain controlling.

## Decision

- The en banc Fifth Circuit held the policy clause capping the excess P&I underwriter’s liability at the shipowner’s judicially declared limitation of liability was valid and enforceable.
- The court held the P&I underwriter was not liable for damages exceeding the shipowner’s limitation fund when the policy expressly limited coverage to that amount.
- The court rejected the argument that Louisiana’s Direct Action Statute could expand the underwriter’s contractual obligation beyond the policy’s cap.
- The court overruled prior circuit precedent to the extent it permitted direct-action recovery against P&I insurers beyond the shipowner’s limitation despite a contractual cap.
- The court reversed the judgment imposing excess liability on the excess P&I underwriter beyond the limitation amount, while leaving undisturbed the determinations on limitation, valuation, damages, and prejudgment interest.

## Legal Principles

- Under federal maritime law, a P&I insurer may contractually limit its indemnity obligation to the shipowner’s judicially established limitation of liability, and such a limitation is enforceable when clearly stated in the policy.
- A direct-action claimant proceeds derivatively against the insurer and generally cannot obtain greater rights than the insured possesses under the insurance contract; a direct-action statute does not, by itself, enlarge coverage beyond policy terms.
- The Limitation of Liability Act’s allocation of exposure is not defeated by imposing insurer liability beyond the shipowner’s limitation where the insurance contract ties coverage to the limitation fund.
- Circuit precedent inconsistent with enforcing a P&I policy cap linked to the shipowner’s limitation is subject to overruling in favor of enforcing the parties’ contractual allocation of risk.

## Conclusion

The en banc Fifth Circuit enforced an excess P&I policy provision tying the underwriter’s maximum liability to the shipowner’s judicially declared limitation of liability, holding that Louisiana’s direct action remedy could not be used to recover beyond that contractual cap, and reversing any award imposing insurer liability in excess of the limitation fund.


Crown Zellerbach Corp. v. Ingram Indus., Inc., 783 F.2d 1296 (5th Cir. 1986) (en banc)