New York Marine & Gen. Ins. v. Tradeline

• Decision Date: 01 August 2000
• Docket Number: SECOND-THIRD-PARTY-PLAINTIFF-APPELLEE-,CROSS-APPELLANT,Docket Nos. 00-7825,THIRD-PARTY-PLAINTIFF-APPELLEE-CROSS-APPELLANT,SECOND-THIRD-PARTY-DEFENDANT-APPELLEE-,PLAINTIFF-APPELLEE-CROSS-APPELLEE-CROSS-APPELLANT,DEFENDANT-APPELLEE-CROSS-APPELLANT-CROSS-APPELLEE,DEFENDANT-APPELLANT-CROSS-APPELLEE,THIRD-PARTY-DEFENDANT-APPELLEE-CROSS-APPELLEE
• Citation: 266 F.3d 112
• Parties: (2nd Cir. 2001) NEW YORK MARINE & GENERAL INSURANCE COMPANY,, v. TRADELINE (L.L.C.),, DEEPAK FERTILISERS AND PETROCHEMICALS CORP., LTD., TRADELINE (L.L.C.),, v. MUTUAL MARINE OFFICE, INC., NEW YORK MARINE & GENERAL INSURANCE COMPANY,, v. FRENKEL & CO., INC.,. (L), 00-7855(XAP), 00-7903(XAP), 00-7933(XAP)
• Court: U.S. Court of Appeals — Second Circuit

Page 112

266 F.3d 112 (2nd Cir. 2001)

NEW YORK MARINE & GENERAL INSURANCE COMPANY, PLAINTIFF-APPELLEE-CROSS-APPELLEE-CROSS-APPELLANT, v. TRADELINE (L.L.C.), DEFENDANT-APPELLEE-CROSS-APPELLANT-CROSS-APPELLEE, DEEPAK FERTILISERS AND PETROCHEMICALS CORP., LTD., DEFENDANT-APPELLANT-CROSS-APPELLEE.

TRADELINE (L.L.C.), THIRD-PARTY-PLAINTIFF-APPELLEE-CROSS-APPELLANT, v. MUTUAL MARINE OFFICE, INC., THIRD-PARTY-DEFENDANT-APPELLEE-CROSS-APPELLEE.

NEW YORK MARINE & GENERAL INSURANCE COMPANY, SECOND-THIRD-PARTY-PLAINTIFF-APPELLEE- CROSS-APPELLANT, v. FRENKEL & CO., INC., SECOND-THIRD-PARTY-DEFENDANT-APPELLEE- CROSS-APPELLANT.

Docket Nos. 00-7825(L), 00-7855(XAP), 00-7903(XAP), 00-7933(XAP)

August Term, 2000

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

Argued: February 21, 2001

Decided September 27, 2001

Appeal and cross-appeals from the judgment of the United States District Court for the Southern District of New York (Harold Baer, Jr., Judge) entered on June 29, 2000, following a bench trial, principally concluding that Plaintiff-Appellee-Cross-Appellee-Cross-Appellant New York Marine & General Insurance Company was partially liable under a marine insurance policy to Defendant-Appellant-Cross-Appellee Deepak Fertilisers and Petrochemicals Corporation, Ltd. for loss sustained to its shipment of diammonium phosphate from Mexico to India.

AFFIRMED in part, REVERSED and REMANDED in part.

[Copyrighted Material Omitted]

[Copyrighted Material Omitted]

[Copyrighted Material Omitted] John A.V. Nicoletti, Nicoletti, Hornig, Campise & Sweeney, New York, New York, for Defendant-Appellant-Cross-Appellee Deepak Fertilisers and Petrochemicals Corp., Ltd.

Timothy G. Hourican, Brown Gavalas & Fromm Llp, New York, New York (David H. Fromm, on the brief), for Plaintiff-Appellee-Cross-Appellee-Cross-Appellant New York Marine & General Insurance Company and Third-Party-Defendant-Appellee-Cross-Appellee Mutual Marine Office, Inc.

Anthony J. Pruzinsky, Hill Rivkins & Hayden Llp, New York, New York, for Defendant-Appellee-Cross-Appellant-Cross-Appellee Tradeline (l.l.c.).

Barbara A. Sheehan, Peterson & Ross, New York, New York, for Second-Third-Party-Defendant-Appellee-Cross-Appellant Frenkel & Co., Inc.

Before: Meskill, Parker, and Katzmann, Circuit Judges.

Parker, Circuit Judge

This admiralty case requires us to interpret a marine insurance policy, Open Cargo Policy No. 10490MC594 ("the Policy") issued by Mutual Marine Office, Inc. ("MMO") for New York Marine & General Insurance Company ("New York Marine") and certificates of insurance, Special Marine Policies ("SMPs"), issued under the Policy by Tradeline (L.L.C.) ("Tradeline") to Deepak Fertilisers and Petrochemicals Corp., Ltd. ("Deepak") to cover two shipments of diammonium phosphate ("DAP") aboard the M/V Sea Guardian. Deepak incurred a loss when a cyclone struck the port of Kandla, India, during the discharge of the DAP in early June 1998.

Plaintiff New York Marine brought suit, seeking to disclaim liability under the Policy for any of Deepak's loss. On June 29, 2000, the district court awarded Deepak partial recovery. For the reasons set forth below, we affirm in part, and reverse and remand in part.

I. BACKGROUND

A. The Parties

New York Marine & General Insurance Company is an insurance company that does business in New York through its managing general agent, Mutual Marine Office, Inc. MMO issued to Tradeline the marine insurance policy at issue in this litigation. Tradeline is a United Arab Emirates corporation engaged in the business of supplying and shipping various commodities. Frenkel & Co. ("Frenkel"), an insurance broker with an office in New York, acted as an intermediary for Tradeline in obtaining the insurance policy by negotiating with New York Marine through MMO. Frenkel, however, is not an agent of either New York Marine or MMO.

Deepak Fertilisers and Petrochemicals Corp., Ltd. is a corporation organized under the laws of India, engaged in importing fertilizer for sale in the Indian market.

B. The Policy

In May 1994, MMO, on behalf of New York Marine, issued to Tradeline Open Cargo Policy No. 10490MC594, effective May 9, 1994 ("the Policy"). The Policy remained in effect until it was canceled around November 1, 1998, and therefore was in effect during the incidents giving rise to this litigation. The Policy contained 50 typed or manuscripted clauses, several typed endorsements, and several attached pre-printed forms, including the industry standard Institute Cargo Clauses (C) ("ICC(C)"),¹ which were referenced in the typed clauses or endorsements. Tradeline is the named insured under the Policy.

Clause 43 of the Policy authorized Tradeline to issue to its customers "evidence of insurance" in the form of Certificates or Special Policies of Insurance. This clause provides that "[t]he clauses appearing in this form shall be deemed to be included in Certificates and/or Special Policies of Insurance when issued under the authority granted in this clause." These Certificates or Special Policies were intended to provide Tradeline's customers with a way to make direct claims against New York Marine for loss or damage to insured cargo. Shortly after the Policy became effective, MMO forwarded to Tradeline pre-printed Certificates for issuance to its customers.

C. The Tradeline-Deepak Contract

In April 1998, Deepak purchased two shipments of diammonium phosphate from Tradeline, in the amounts of 28,000 metric tons ("MT") and 21,509.155 MT. Both shipments were to be carried from Mexico to the sole port of discharge at Kandla, India aboard the M/V Sea Guardian, a vessel chartered by Tradeline.

The DAP was purchased on "CIF" (cost, insurance and freight) terms for $220 per metric ton, for a total price of $10,892,014.10. Tradeline was bound by the terms of its contract with Deepak to maintain insurance on the cargo on a warehouse to warehouse basis and to sell insurance to Deepak for the risks associated with the transit. Therefore, Tradeline delivered to Deepak Special Marine Policies ("SMPs") 367 and 368 as evidence of the insurance on the DAP shipments, issued pursuant to its power under Clause 43 of the Policy. In addition to the preprinted provisions, both SMPs contained a typed provision that stated, "[n]otwithstanding anything contained herein to the contrary: Average Terms & Conditions: London ICC Clauses (C), London War Clauses (cargo), London Strikes Clauses (cargo)." Deepak fulfilled its obligation to Tradeline under the contract, having paid to Tradeline the full purchase price of the DAP.

D. The Voyage and Request for Rainwater Coverage

On or about April 18, 1998, the two shipments of DAP were loaded aboard the M/V Sea Guardian at the port of Lazaro Cardenas, Mexico, under two Bills of Lading. The port of Kandla, India was agreed upon by Deepak and Tradeline as the sole port of discharge.

On May 28 or 29, 1998, the M/V Sea Guardian arrived at the Port of Kandla, and, because of draft restrictions at the berth, began to load the DAP onto lightering barges for transit to the wharf at Kandla. The lightering process continued through June 8, 1998, and the offloaded DAP was located on the wharf or at other locations within the port trust area, where the DAP was being bagged by Rishi Shipping ("Rishi"), Deepak's handling and forwarding agent.

Meanwhile, on May 28, 1998, Deepak was informed by Rishi that "weather is cloudy and we shouldn't take risk of rain." The next day, Rishi again informed Deepak by facsimile that insurance for rain was necessary. Deepak forwarded this fax to Tradeline on that same day, with a handwritten note, "please do the needful immediately." Deepak advised Tradeline, shortly after this communication, that it did not wish to insure for the more expensive all risks coverage under Institute Cargo Clauses (A) ("ICC(A)"), but rather wished to add rainwater coverage to the existing coverage. Deepak also wished only to cover 21,000 MT of the entire shipment.

On June 1, 1998, Tradeline inquired of Frenkel whether it could obtain an upgrade to include the risk of rainwater. Specifically, Tradeline asked if ICC(A) terms covering only rainwater damage could be obtained, whether rainwater coverage could be added to the existing ICC(C) coverage, and whether rainwater damage could be obtained for only part of the total DAP shipment. On June 5, 1998, after various communications between Tradeline and Frenkel, and Frenkel and MMO, MMO set the rate for an upgrade of ICC(C) coverage to include risk of rainwater damage at 1.5 cents per $100 of insured value. On June 8, 1998, Deepak informed Tradeline that it accepted these quoted terms and Tradeline issued new SMPs shortly thereafter. The new SMPs contained a revised typewritten provision stating:

Notwithstanding anything contained herein to the contrary: Average terms & conditions:

London ICC clauses (C)

London War Clauses (cargo)

London Strike Clauses (cargo) including risks of rainwater damages, with effect from 5th June 1998.

Claims payable in India.

Frenkel approved these SMPs 377 and 378 to replace SMPs 367 and 368, with the new coverage to be effective June 5, 1998. Tradeline wrote "cancelled" on SMPs 367 and 368.

On June 9, 1998, while the DAP was still being discharged, a cyclone struck the port of Kandla, involving cyclonic wind and rain forces, tidal waves and rising waters. When the cyclone struck, approximately 12,500 MT had been offloaded from the M/V Sea Guardian. About 5,000 MT were already bagged and transported to other inland locations. The M/V Sea Guardian, with approximately 36,500 MT of DAP still on board, was diverted from the port of Kandla, which was closed due to the cyclone, to the distress port of JNPT, India.

On June 12, 1998, Deepak gave notice of loss stemming from the cyclone to New York Marine through Frenkel. Shortly thereafter, MMO, on behalf of New York Marine, retained Tata Marine Services, who in turn hired J.B. Boda Surveyors Ltd....