Morrison Grain Co., Inc. v. Utica Mut. Ins. Co.

• Decision Date: 23 February 1978
• Docket Number: No. 75-834 Civ. T-K and 76-122 Civ. T-K.,75-834 Civ. T-K and 76-122 Civ. T-K.
• Citation: 446 F. Supp. 415
• Parties: MORRISON GRAIN COMPANY, INC., a corporation, Plaintiff, v. UTICA MUTUAL INSURANCE COMPANY, a corporation, and Kearney Chemicals, Inc., a corporation, Defendants.
• Court: U.S. District Court — Middle District of Florida

446 F. Supp. 415

MORRISON GRAIN COMPANY, INC., a corporation, Plaintiff, v. UTICA MUTUAL INSURANCE COMPANY, a corporation, and Kearney Chemicals, Inc., a corporation, Defendants.

Nos. 75-834 Civ. T-K and 76-122 Civ. T-K.

United States District Court, M. D. Florida, Tampa Division.

December 22, 1977.

Supplemental Findings of Fact February 23, 1978.

David G. Hanlon, Shackleford, Farrior, Stallings & Evans, Tampa, Fla., for plaintiff.

Nathaniel G. W. Pieper, Fowler, White, Gillen, Boggs, Villareal & Banker, Tampa, Fla., for Kearney Chemicals, Inc.

Jack C. Rinard, Macfarlane, Ferguson, Allison & Kelly, Tampa, Fla., for Utica Mutual Ins. Co.

KRENTZMAN, District Judge.

These admiralty cases were consolidated and tried to the Court.

In No. 75-834 Civ. T-K Morrison Grain Company, Inc. (Morrison) sues Utica Mutual Insurance Company (Utica) for damages resulting from Utica's alleged breach of its contract of insurance on certain bagged urea, and Morrison sues Kearney Chemicals, Inc. (Kearney) for breach of a warranty of fitness of the bagged urea for shipment, and a breach of the obligation to provide all risk insurance coverage on the bagged urea.

Utica contends that the cause of the injury or damage sustained by Morrison was the insufficiency of the bags in which the urea was shipped, alleges that Kearney misrepresented the quality of the bag to be used and denies liability either to Morrison or Kearney.

In No. 76-122 Civ. T-K Kearney sues International Affiliates, Inc., (International), Cambridge Shipping Co., Inc., Ltd. (Cambridge), and M/S Aida, in rem and in personam for contract and cargo damage.

The Court has considered the matters in the file, including the pretrial stipulation, the evidence submitted and received at trial, and the post trial memoranda and proposed findings submitted by counsel, and being advised, finds as follows:

FINDINGS OF FACT

1. That at all material times, Morrison Grain Company, Inc. was and is a corporation organized and existing under the laws of the State of Kansas with its principal office and place of business at the Board of Trade Building, Salina, Kansas.

2. That at all material times defendant Kearney Chemicals, Inc. was and is a corporation organized and existing under the laws of the State of Delaware, licensed to do business in the State of Florida and having offices in the City of Tampa, Florida.

3. That at all material times defendant Utica Mutual Insurance Company was and is a corporation organized and existing under the laws of the State of New York with its principal office in the City of Utica, New York.

4. During all the times herein mentioned International Affiliates, Inc. was and is a corporation with a principal office and place of business at 147 West 35th Street, New York, New York.

5. During all the times herein mentioned Cambridge Shipping Co. Ltd. was and is a corporation with no office or place of business within this district.

6. Both were the owners and operators of the M/S Aida and acted as common carriers by water of the goods hereafter referred to which were received by them and the vessel for shipment on said vessel.

7. This Court's jurisdiction is based upon diversity of citizenship and the fact that the matter in controversy exceeds the sum of $10,000, exclusive of interest and costs, and is within the admiralty and maritime jurisdiction of this Court.

8. Kearney International desired to obtain broad insurance protection to cover its activities in international trading and in August/September of 1973 went to Richard Hummel of Fairfield and Ellis, an independent insurance broker. An all risk policy was sought.

9. Fairfield and Ellis developed an insurance package using a Utica Mutual/Mutual Marine Office form, which open cargo Policy MMO-7340 provides for all risk coverage in the following terms:

"7. Insuring Conditions

All goods are insured against:

All risks of physical loss or damage from any external cause whatsoever . ."

10. Utica Mutual Insurance Co. was at all times represented by Mutual Marine Office and its employees Brice Leon, Steven Timo, and Mike Fischetti. Mutual Marine Office is the underwriting manager for Utica.

11. A binder was executed by Mutual Marine Office effecting insurance on September 21, 1973. The open cargo policy, although dated April 24, 1974, was effective as of the binder date. The binder was to detail the essential conditions of the policy to be issued. The policy was delivered to insured Kearney International in Tampa, and describes the insured as "Kearney International Chemicals, Inc., 100 West Kennedy Boulevard, Tampa, Florida".

12. On October 26, 1973 Kearney Chemicals, Inc. contracted to sell a quantity of bagged urea to Morrison Grain Company, Inc. For purposes of this case, Morrison Grain Company and Agro Marketing Co. will be treated or referred to as a single entity as the evidence shows all to be related commercially and involved in this transaction. Terms were amended as to price, quantity and container prior to delivery at Gulfport, Mississippi, and Morrison paid Kearney for 5,500 net metric tons of urea in accordance with Kearney's invoices.

13. The terms of this agreement were C.I.F. (i. e. Kearney Chemicals to provide cargo, insurance and freight).

14. Subsequent to the initial intent letter and initial agreement, Kearney and Morrison Grain agreed on numerous changes involving price, quantity, freight, size of bag, and imprint on bag. This included changing the description of the bags to "50 kilo bags of polyethylene about 0.3MM thickness."

15. Kearney Chemicals, Inc. bought the cargo to be supplied under its contract to Morrison from International Affiliates, Inc. which in turn purchased the urea from Azoexport Bucharest, Romania.

16. Morrison Grain Company, Inc., Cropland Chemical Co., Inc. and Morrison Grain Company, Inc. were joint venturers in importing a shipload of the urea from Constantza, Romania.

17. To insure this transaction, Kearney was named an additional insured under the Utica open cargo policy and Mutual Marine Office issued a special marine policy.

18. The Mutual Marine Office form special marine policy provides that "Kearney Chemicals, Inc." is the assured, that the policy is subject to the "conditions of Open Policy MMO-7340", and the cargo insured is described as "5500 metric tons 46% urea packaged in 50 kilo polyethylene bags." Any loss was payable to assured or order. The special marine policy is to indemnify the insured or his consignee for any loss under the policy. It is an all risk policy.

Special policy # 1 is on a printed form containing a conventional "perils of the sea" clause.

Policy MMO-7340 contains no terms or conditions which limit or qualify the "all risks" clause of special marine policy # 1.

19. The special marine policy was delivered to Kearney at its Tampa, Florida office.

20. Utica has offered evidence that various representations were made by Richard Hummel of Fairfield and Ellis about the bags to be used for the shipment. However, the special marine policy on the Mutual Marine Office form prepared for Utica and signed by Steven Timo, vice president in charge of underwriting of Mutual Marine Office contains no description or specifications for the bags. Indeed, as stated by MMO's Timo:

"If you wrote a policy conditioned on a specific thickness of bags, or conditioned on any problem on container, it is normally included in the policy."

21. Timo admits the special marine policy in question contains no language specifying the strength or thickness of the bags nor any warranty by the insured that the bags will be of a given thickness or strength.

22. Mutual Marine Office reinsured 50% of the risk with another reinsurance broker and the reinsurer was given no information by MMO about the fitness or strength of the bags and merely describes the commodity as "5500 metric tons urea packed in 50 kilo polyethylene bags."

23. Kearney paid a premium of $8,244.

24. To transport the cargo, International Affiliates, Inc. chartered the M/V Aida and the ship went to load in Constantza, Romania.

25. 5500 metric tons of urea granules packaged in 50 kilo net bags of polyethylene about .3MM thickness were supplied by Azoexport Bucharest, Romania and were loaded aboard the M/V Aida by the shipper in early March, 1974.

26. A clean on board bill of lading was signed by the master showing the cargo to be urea granules in "110,000 polyethylene bags about 0.3MM thickness of 50 kilo net." The stowage plan shows 110,000 bags on board.

27. The vessel sailed for Gulfport and encountered heavy weather.

28. In the meantime, Kearney endorsed the special marine policy and the bill of lading to Morrison and funds were transferred from Morrison's bank to the account of Kearney Chemicals, Inc. in payment of the cargo purchase.

29. The letter of credit is dated October 31, 1973. The letter of credit was amended on January 23, 1974 to describe the cargo exactly as was delivered by Kearney to Morrison.

30. The vessel Aida sailed to Gulfport, Mississippi, as directed by Morrison, arriving on April 9, 1974, Ryan-Walsh Stevedoring Company commenced discharge on that date and it was discovered that the cargo and its containers were damaged. Discharge was completed April 19, 1974.

31. Many of the bags were ruptured, distorted and damaged. There was loose, caked and partially dissolved urea between, among and on top of the layers of bags in several holds, and many of the bags were wet and slippery, thus causing additional damage upon unloading when the bags were dropped or slid off of the unloading pallets. A large quantity of cargo in the # 4 hold had dissolved and simply melted away.

32. The evidence established that the damage resulted from the following:

(A) During loading, spillage of urea granules was left between the layers of bags, causing bags to be wet at discharge due to the hydroscopic nature of the urea granules;

(B) Improper stowage permitted the

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