Washington corporation,
                                                     Nos. 98-36070

                                                     D.C. No.
COMPANY, a Massachusetts
UNDERWRITERS, a Massachusetts

Appeal from the United States District Court
for the Western District of Washington
Franklin D. Burgess, District Judge, Presiding

Argued and Submitted
July 21, 2000--Seattle, Washington

Filed September 5, 2000

Before: Thomas M. Reavley,* Cynthia Holcomb Hall and
Diarmuid F. O'Scannlain, Circuit Judges.

Opinion by Judge Reavley


*The Honorable Thomas M. Reavley, Senior United States Circuit
Judge for the United States Court of Appeals, Fifth Circuit, sitting by des-


Dennis M. Moran, Le Gros, Buchanan & Paul, Seattle, Wash-
ington, for the appellants.

Charles Scott Penner (argued) and James E. Lobsenz (on the
briefs), Carney Badley Smith & Spellman, Seattle, Washing-
ton, for the appellee.



REAVLEY, Circuit Judge:

This appeal presents an insurance coverage question. Inter-
national Marine Underwriters (IMU), a division of Commer-
cial Union Insurance Company, appeals the judgment in favor
of Quigg Brothers-Schermer, Inc. (Quigg Brothers). We
reverse and render.

During a storm in November, 1995, two of the Quigg
Brothers' construction barges, the SKOOKUM and the NO. 11
SCOW, broke from their moorings near the mouth of the Quil-
layute River and were carried downstream to La Push Harbor.
The barges eventually landed on First Beach within the Quil-
eute Indian Reservation, adjoining the coastal waters within
the Olympic Coast National Marine Sanctuary. The presence
of the barges on First Beach created several liability risks,
including the possibility that the barges might wash back into
the sanctuary or discharge oil, resulting in fines for noncon-
forming use and reimbursement for government removal.
Quigg Brothers acted swiftly to secure, repair and tow the
barges back to the Quigg Brothers' yard, incurring a total cost
of $53,796.81.

Quigg Brothers obtained a marine subscription insurance
policy which included both hull insurance clauses and protec-


tion and indemnity (P & I) insurance clauses. Quigg Brothers
maintained P & I insurance on its entire fleet but maintained
hull coverage on only two vessels, electing to save on premi-
ums and bear its own hull risks on the remaining vessels,
including the SKOOKUM and the NO . 11 SCOW. IMU was the
underwriter for 75% of the Quigg Brothers' subscription pol-
icy. Quigg Brothers submitted a claim to IMU for the
expenses relating to the barges, seeking coverage under the
P & I clauses for wreck removal and fines and penalties,
which read:

      [S]ubject to the warranties, terms and conditions
      herein mentioned, this Company hereby undertakes
      to pay up to the amount hereby insured . . . such
      sums as the owner of the [vessels] shall have become
      legally liable to pay and shall have paid on account

      . . .

      Costs or expenses of, or incidental to, the removal of
      the wreck of the vessel named herein when such
      removal is compulsory by law; provided, however,
      that there shall be deducted from such claim the
      value of any salvage recovered from the wreck by
      the assured;

      Fines and penalties, including expenses reasonably
      incurred in attempting to obtain the remission or mit-
      igation of same, for the violation of any of the laws
      of the United States, or of any state thereof, or of any
      foreign country; provided, however, that this Com-
      pany shall not be liable to indemnify the assured
      against any such fines or penalties resulting directly
      or indirectly from the failure, neglect, or default of
      the assured or his managing officers or managing
      agents to exercise the highest degree of diligence to
      prevent a violation of any such laws.


The P & I clauses also contain an exclusion for expenses
recoverable under hull insurance, which reads:

      Notwithstanding the foregoing, this Company will
      not pay for:

      . . .

      Any loss, damage, expense or claim collectible
      under the American Institute Hull Clauses (6/77)
      form of policy, whether or not the vessel named
      herein is actually covered by such insurance and
      regardless of the amount thereof.

IMU obtained a survey of the barges after the recovery,
resulting in the following valuations. Value at La Push,
adjusted for estimated damage: SKOOKUM: $95,000.00; NO. 11
SCOW: $20,000.00. Value at the Quigg Brothers' yard after
repair and recovery: SKOOKUM: $80,000.00 Hull; $25,000.00
Machinery; NO. 11 SCOW: $45,000.00. In December, 1995,
shortly after recovery of the vessels, Quigg Brothers provided
a vessel schedule to their insurance broker estimating the mar-
ket values of the barges to be: SKOOKUM: $150,000.00; NO. 11
SCOW: $100,000.00.

IMU denied coverage and Quigg Brothers brought this law-
suit. The district court held a bench trial, entered findings of
fact and conclusions of law, rendered judgment for Quigg
Brothers for breach of contract and violation of the Washing-
ton Consumer Protection Act, Wash. Rev. Code S 19.86.020
(1999), and awarded damages, exemplary damages and attor-
ney's fees. With regard to the hull coverage exclusion, the
district court found:

      Reading the P & I policy as a whole and embracing
      the "four corners" of the document, as urged by the
      defendant, and, more specifically, noting


      (a) that lines 24-27 of this policy expressly disavows
      coverage for fines and penalties resulting from the
      neglect of the assured to "exercise the highest degree
      of diligence" to prevent the imposition of such fines
      and penalties; and

      (b) that the exclusion at lines 60-62 fails, within the
      "four corners" of the document, to define or elabo-
      rate upon losses covered "under the American Insti-
      tute Hull Clauses (6/77)";

      I must conclude that coverage exists under the "fines
      and penalties" provision, and because there is no evi-
      dence that the plaintiffs' repair efforts were not spe-
      cifically and minimally necessary to avoid the
      potential fines and penalties, that these expenses are
      not excluded by lines 60-62.

[1] On appeal, IMU contends, and we agree, that the
expenses incurred by Quigg Brothers qualify as sue and labor
expenses recoverable under hull insurance. Sue and labor
expenses are "sums spent by the insured or its representative
in an effort to mitigate damage and loss once an accident has
occurred; and the insurance company pays them even where
. . . the ship is ultimately declared a total loss, in order to
encourage diligence in the prevention of excessive liability or
loss."1 Quigg Brothers only purchased hull coverage for two
of its vessels and chose to bear its own hull risks with regard
to the SKOOKUM and the NO. 11 SCOW. As noted above, the
American Institute Hull Clauses (6/77) were part of the Quigg
Brothers' policy. The sue and labor provision reads:

       And in the case of any Loss or Misfortune, it shall
      be lawful and necessary for the Assured, their Fac-
      tors, Servants and Assigns, to sue, labor and travel
1 Seaboard Shipping Corp. v. Jocharanne Tugboat Corp., 461 F.2d 500,
503 (2d Cir. 1972).


      for, in and about the defense, safeguard and recovery
      of the Vessel, or any part thereof, without prejudice
      to this insurance, to the charges whereof the Under-
      writers will contribute their proportion as provided
      below. And it is expressly declared and agreed that
      no acts of the Underwriters or Assured in recovering,
      saving or preserving the Vessel shall be considered
      as a waiver or acceptance of abandonment.

       In the event of expenditure under the Sue and
      Labor clause, the Underwriters shall pay the propor-
      tion of such expenses that the amount insured here-
      under bears to the Agreed Value, or that the amount
      insured hereunder (less loss and/or damage payable
      under this Policy) bears to the actual value of the
      salved property, whichever proportion shall be less;
      provided always that their liability for such expenses
      shall not exceed their proportionate part of the
      Agreed Value.

       If claim for Total Loss is admitted under this Pol-
      icy and sue and labor expenses have been reasonably
      incurred in excess of any proceeds realized or value
      recovered, the amount payable under this Policy will
      be the proportion of such excess that the amount
      insured hereunder (without deduction for loss or
      damage) bears to the Agreed Value or to the sound
      value of the Vessel at the time of the accident,
      whichever value was greater; provided always that
      Underwriters' liability for such expenses shall not
      exceed their proportionate part of the Agreed Value.
      The foregoing shall also apply to expenses reason-
      ably incurred in salving or attempting to salve the
      Vessel and other property to the extent that such
      expenses shall be regarded as having been incurred
      in respect of the Vessel.


[2] The expenses incurred by Quigg Brothers are clearly
collectible under the hull clauses as sue and labor expenses to
safeguard and recover the barges. The exclusion is effective
with regard to all expenses collectible under hull coverage, if
obtained, and the district court erred in its refusal to apply the
hull coverage exclusion. The hull coverage exclusion is cen-
tral to the purpose of P & I insurance, which is "to insure
owners against risks outside the scope of coverage under stan-
dard hull policies."2 "As sue and labor expenses are covered
by hull policies, they normally would not be recovered from
the P & I policy underwriter."3  Both historically, and in this
case, claims which would be payable under the standard form
of hull policy are excepted from the P & I policy.4

[3] Quigg Brothers argues that it only intended to avoid lia-
bility and that the purpose of these expenses was not to repair
and recover the barges. Subjective intent does not control the
determination of coverage. It is not disputed that the expenses
were incurred to safeguard the barges, render them seaworthy,
and tow them back to the Quigg Brothers' yard. Even if the
intent were to avoid liability, the expenses are collectible as
sue and labor. Quigg Brothers has presented no evidence or
legal authority to suggest that the expenses would not qualify
as sue and labor, but has simply reiterated that the barges
posed a risk of liability and that the removal was compulsory
by law.

[4] Where all of the costs are essential to any attempt to
save the vessel, any benefit to the P & I underwriter is inci-
dental and the hull coverage exclusion is effective to avoid
P & I coverage or equitable contribution. 5 Although the recov-
ery of the barges avoided potential liability for fines and pen-
2 Insurance Co. of North America v. Board of Comm'rs of the Port of
New Orleans, 733 F.2d 1161, 1166 (5th Cir. 1984).
3 Seaboard Shipping, 461 F.2d at 505.
4 See Seaboard Shipping, 461 F.2d at 503 n. 2.
5 See Seaboard Shipping, 461 F. 2d at 504-05.


alties, the recovery expenses qualified as sue and labor, which
are excluded from the P & I policy.

[5] Because we rule that there was no coverage under the
P & I policy, there is no basis for holding IMU in violation of
Wash. Rev. Code S 19.86.020, and all other points of appeal
and cross appeal are rendered moot. We reverse the judgment
of the district court and render judgment that Quigg Brothers
take nothing by its suit.