Armada Supply Inc. v. Wright
| Decision Date | 22 September 1988 |
| Docket Number | D,No. CS,Nos. 565,645,GB-C,CS,s. 565 |
| Parties | ARMADA SUPPLY INCORPORATED, Plaintiff-Appellee-Cross-Appellant, v. Philip Gaybell WRIGHT, individually and on behalf of all other Underwriters at Lloyd's and New Hampshire Insurance Co., Ltd., Individually and on behalf of all other insurance companies, subscribing to policies of Marine Insurance set forth in Willis Faber & Dumas, Ltd., Cover note5527, Defendants-Appellees, Banorte Seguradora S.A., Itau Seguradora S.A., Atlantica Cia. Nacional de Seguros, Bamerindus Cia. de Seguros, Sul America Terrestres, Maritimos E Acidentes Cia. de Seguros, Sul America Cia. Nacional de Seguros, Cia. de Seguros Alianca da Bahia, Nacional Companhia de Seguros, Cia. Internacional de Seguros, Comind Companhia de Seguros, Brasil Cia. de Seguros Gerais, Cia. Bandeirante de Seguros Gerais, Companhia Paulista de Seguros, Patria-Cia. Brasileira de Seguros Gerais, Boavista Cia. de Seguros de Vida E Acidentes, Sasse Cia. Nacional de Seguros Gerais, Cia. de Seguros do Estado de Sao Paulo, Vera Cruz Seguradora S.A., Skandia-Boavista Cia. Brasileira de Seguros, Unibaco Seguradora S.A., Yorkshire-Corcovado Cia. de Seguros, Cia. Real Brasileira de Seguros, Cia. Uniao de Seguros Gerais, Cia. de Seguros Minas Brasil, Generali do Brasil Cia. Nacional de Seguros, Seguradora Brasileira Motor Union Americana S.A., Porto Segura Cia. de Seguros Gerais, Interamericana Cia. de Seguros Gerais, Bemge Cia. de Seguros de Minas Gerais, Cia. de Seguros da Bahia, America Latina Cia. de Seguros, Cia. de Seguros America, do Sul Yasuda, Cia. Uniao Continental de Seguros, Allianzultramar Cia. Brasileira de Seguros, Real Seguradora S.A., Sao Paolo Cia. Nacional de Seguros, Fortaleza Cia. Nacional de Seguros, Banerj Seguros, S.A., Novo Hamburgo Cia. de Seguros Gerais, Phoenix Brasiliera Cia. de Seguros Gerais, Argos Companhia de Seguros, Compemi Seguradora S.A.-Capesa, Ajax Cia. Nacional de Seguros, Finasa Segurandora S.A., Farroupilha Cia. Nacional de Seguros, Santa Cruz Cia. de Seguros Gerais, Cia. Colina de Seguro |
| Court | U.S. Court of Appeals — Second Circuit |
Francis R. Matera, New York City, for defendant-appellant-cross-appellee Banorte Seguradora S.A.
George L. Graff, New York City (Nancy L. Savitt, Milgrim Thomajan & Lee, New York City, of counsel), for plaintiff-appellee-cross-appellant Armada Supply Inc.
Richard G. Ashworth, New York City (Michael L. Sommer, Haight, Gardner, Poor & Havens, New York City, of counsel), for defendants-appellees Philip Gaybell Wright, et al.
Before TIMBERS, WINTER and ALTIMARI, Circuit Judges.
This appeal and cross-appeal concern claims under two insurance policies for losses incurred by Armada Supply Incorporated ("Armada") arising out of a shipment of fuel oil from Rio de Janeiro to New York. Following a bench trial, Judge Griesa awarded Armada $1,462,722.64, plus interest at the three month rate for Treasury bills, against the lead underwriter, Banorte Seguradora, S.A. ("Banorte"), individually and on behalf of the other Brazilian underwriters. He further ruled that Philip Gaybell Wright and the other participating underwriters at Lloyd's and elsewhere in London (the "London underwriters") were liable for $85,808.34. 1 Judge Griesa's opinion is reported at 665 F.Supp. 1047 (S.D.N.Y.1987).
Banorte has appealed from the judgment, contending that the district court lacked personal jurisdiction over it or, alternatively, that certain shortage losses, contamination losses, and "sue and labor" expenses incurred in reconditioning a shipment of contaminated oil allowed by the district court, should be disallowed and/or reduced. Armada has cross-appealed, claiming that the London underwriters, who insured Armada under an open-cover marine policy, were liable for that portion of Armada's loss on its contract to sell the oil to Sun Oil Trading Co. ("Sun") not covered by Banorte ($1,298,813.03) and, at least contingently, for the same losses--an amount alleged on appeal to be $2,794,315.35--insured by Banorte. Armada also disputes the district court's calculation of contamination loss, shortage loss, and sue and labor expenses.
We hold that the district court had personal jurisdiction over Banorte, and that the increased-value clause of Armada's open policy of marine insurance with the London underwriters insured cargo loss and damage, but not the loss of Armada's profitable contract with Sun. We further hold that the contingency-cover clause of the London policy was not applicable on these facts, that the London underwriters did not waive their position that this clause was inapplicable, and that the district court correctly calculated most of Armada's losses. However, we reverse on the cross-appeal as to some of the sue and labor claims.
The facts are relatively straightforward. Armada, a Texas corporation, entered a contract in April 1982 to purchase four shiploads of oil from Petrobras, a Brazilian oil company, to be delivered over a period of four months. The sales were to be C.I.F. (cost, insurance, freight) port of delivery, meaning that Armada would take title in Rio de Janeiro but Petrobras would pay freight to New York (or Rotterdam) and purchase marine insurance. The contract provided that the price would be based on the spot oil price at the point and time of delivery.
The cargo at issue here was the last shipment under the April 1982 contract. On November 16, 1982, it was onloaded to the AGIOS NIKOLAS at Rio de Janeiro. The bill of lading specified that 348,000 barrels (52,066 metric tons) were to be onloaded, although only 340,000 barrels were actually onloaded. At some point during the voyage to New York, the crew of the AGIOS NIKOLAS apparently used part of the cargo for fuel and then pumped sea water into the cargo tanks, thereby contaminating the fuel tanks and creating a shortfall of oil. The vessel arrived in New York on December 9, 1982, but shortly thereafter left temporarily to evade legal process. After the conclusion of complex negotiations among the parties in which Armada agreed to pay the freight and not to arrest the vessel, the vessel returned. Armada has since obtained a damage award, uncollectable to date, against the ship's owners for $4,130,900. See Armada Supply, Inc. v. S/T Agios Nikolas, 613 F.Supp. 1459 (S.D.N.Y.1985).
On October 29, 1982, prior to the AGIOS NIKOLAS's departure from Rio de Janeiro, Armada entered into a contract with Sun Oil providing for a sale of approximately 330,000 barrels (49,000 metric tons), plus or minus ten percent at Armada's option. This sale was to be on a delivered basis, meaning that until Sun took title in New York, the oil would be at Armada's risk. Since the contract price was fixed at $30.55 per barrel, Armada would earn a substantial profit if oil prices fell before the oil reached New York. As it turned out, the New York spot oil price had fallen to $25.70 per barrel when the AGIOS NIKOLAS arrived in New York. Due to the contamination, however, Sun refused to accept the oil. Sun later agreed to buy only 49,000 barrels at $27.40 per barrel. If the Sun contract had not been lost, Armada would have made $4.85 per barrel or a total profit of approximately $1.6 million. Instead, Armada had to recondition the oil and then try to sell it. Armada eventually made six separate sales, the last on March 16, 1983, to various oil companies.
Petrobras had an open marine-insurance policy with Banorte and ninety-four other Brazilian underwriters covering the oil. Open marine policies are widely used in the United States. See L. Buglass, Marine Insurance and General Average in the United States 10 (2d ed. 1981). Under such policies, the assured has automatic coverage subject to the terms set forth in the cover letter. Id. The Brazilian policy was subject to the London Institute Cargo Clauses (All-Risks), and thus covered the shortage and contamination losses involved in the instant case. The amount of coverage was equal to $28.27 per barrel ($25.70 New York spot price on date of shipment plus ten percent). Total coverage was $9,855,333.
Armada also had an open policy of marine insurance with the London underwriters for the period April 20, 1982 to April 19, 1983. This insurance was purchased through Johnson & Higgins ("J & H"), a...
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