IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

No. 99-30985

CERTAIN UNDERWRITERS AT LLOYD’S, Etc.; ET AL.,

Plaintiffs,

CERTAIN UNDERWRITERS AT LLOYD’S, LONDON, subscribing to Renewal Certificate No. VV111280Q,

Plaintiff - Appellant-Cross-Appellee,

versus

MICHAEL T. GRAY; ERIC V. GRAY,

Defendants - Appellees-Cross-Appellants.

-------------------- Appeal from the United States District Court for the Eastern District of Louisiana 97-CV-1290-E -------------------- March 26, 2001

Before, KING, Chief Judge, ALDISERT* and BENAVIDES, Circuit Judges.

PER CURIAM:**

Certain Underwriters at Lloyd’s of London (the Underwriters)

appeal from a district court’s conclusion that the Inchmaree

Clause of a marine hull insurance policy issued by the

Underwriters to Michael and Eric Gray (the Grays) covered a loss

* Circuit Judge of the Third Circuit, sitting by designation. ** Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5TH CIR. R. 47.5.4. sustained due to a defect in the hull of the PEREGRINE, a yacht

jointly owned by the Grays. At issue is not the existence of a

hull defect, but (1) whether the defect was “latent,” and (2)

whether the loss should have been attributed to the Grays’

failure to detect the defect through reasonable due diligence.

In a cross-appeal, the Grays argue that the district court

improperly granted summary judgment on their claim for attorney’s

fees. See LA. REV. STAT. ANN., §§ 22:658, 22:1220.

Having reviewed the briefs, record, and arguments on appeal,

we reject the Underwriters’ arguments that the district court

erred in resolving the coverage issues presented in this case.

The district court defined a latent defect as a condition which

“could not have been discovered by someone of competent skill

using ordinary means.” Contrary to the Underwriters’ contention,

this definition does not depart from the objective standard

traditionally used by this Circuit to describe latent defects.

See Tropical Marine Products, Inc. v. Birmingham Fire Insurance

Co.,

, 121 n.11 (5th Cir. 1957). At any rate, the

district court explained that it would reach the same result

“under any reasonable definition of ‘latent defect’ used by

various courts.” Gray v. Certain Underwriters at Lloyd's London,

NO. CIV. A. 97-1130, CIV. A. 97-1290,

, *6 n.10

(E.D.La., Jan 15, 1999)(emphasis in original).

We also reject the Underwriters’ argument that the district

court misapplied the latency standard to the facts of this case.

The district court found insufficient basis in the record to

conclude that the Grays should have discovered the defect in the

2 hull of the PEREGRINE. Specifically, the court rejected the

Underwriters’ attempt to link what expert independent contractors

perhaps could have discovered about the PEREGRINE’s hull, and

what the Grays reasonably should have discovered or investigated

as “Sunday skippers.” Additionally, the court found that

reasonable owners would not have conducted additional diligence

work on the hull of the PEREGRINE that would have detected the

defect prior to January 1997 when the PEREGRINE capsized. The

record clearly supports the district court’s findings.

Accordingly, we affirm the district court’s conclusion that the

hull defect within the PEREGRINE was latent and covered by the

Inchmaree Clause of the marine hull policy.

Finally, we find no error in the district court’s denial of

the Grays’ claim for attorneys’ fees. On the unique and unusual

circumstances of this case, the district court did not err in

concluding that the Underwriters’ decision to deny coverage both

on the P&I and hull policies, although ultimately flawed, was not

taken in bad faith. The court’s specific findings adequately

support this determination.

For these reasons, we AFFIRM the judgment of the district

court in all respects.

AFFIRMED

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