Third party not bound by agreement between carrier and its insured
A company that arranged to have wood chips hauled for an affiliate in the lumber and pulpwood business contracted with a marine towing firm to tow seven hopper barges to Williamston, N.C., from Mobile, Ala. At the time, the company was negotiating to buy the barges, which were 20 to 25 years old, from a third party. As part of the negotiations, the company arranged for insurance on the barges.

In connection with the insurance transaction, the company had a marine surveyor look at the barges. The surveyor reported that the barges leaked and needed repairs. The report indicated that certain repairs were “considered compulsory for insurance underwriting purposes.” After reviewing a draft of the report, a principal of the company asked the surveyor if certain repairs could be deferred until the barges' next scheduled maintenance. The surveyor said they could but advised certain other repairs should be made immediately. The surveyor then amended the report to state that certain of the repairs discussed “should be completed at the next regular servicing/maintenance period.” In the report's conclusion, the surveyor stated that “in the opinion of this undersigned, subject vessel is considered suitable for its intended purpose and a satisfactory risk for interested underwriters…. In accepting this report it is understood that this survey was performed for condition and valuation purposes only and that no warranty as to the condition, seaworthiness or marketability of subject vessel is expressed or implied.”

The company subsequently asked its insurance broker to arrange coverage for the barges. The broker had several conversations with an underwriter regarding coverage for the barges for their trip from Alabama to their final destination. The broker gave the underwriter a copy of a letter from his client indicating “all repairs necessary to make the vessels seaworthy have been performed.”