Big Lift Shipping Co. v. Bellefonte Ins. Co.

Decision Date09 October 1984
Docket NumberNo. 83 Civ. 4655(MP).,83 Civ. 4655(MP).
Citation594 F. Supp. 701,1985 AMC 1201
PartiesBIG LIFT SHIPPING COMPANY (N.A.) INC., Plaintiff, v. BELLEFONTE INSURANCE CO., Midland Insurance Co., Pennsylvania Lumbermens Mutual Insurance Co., The Lumbermens Mutual Insurance Company, Ranger Insurance Co., and Republic Insurance Co., Defendants.
CourtU.S. District Court — Southern District of New York

Burlingham, Underwood & Lord by Terry L. Stoltz, Richard J. Reisert, New York City, for plaintiff.

Bigham, Englar, Jones & Houston by Donald T. Rave, Jr., Donald F. Connors, New York City, for defendants.

DECISION AND OPINION

MILTON POLLACK, Senior District Judge.

Plaintiff sues to recover for damages arising from a marine casualty to a vessel insured under a policy of insurance issued through the New York Marine Managers, Inc. ("New York Marine") as agent and marine manager on behalf of the defendant insurance companies named herein. Jurisdiction of the Court is based on the Court's Admiralty and Marine Jurisdiction, 28 U.S.C. § 1333 (1982), the claim being within the meaning of Rule 9(h), Federal Rules of Civil Procedure. Liability was denied for failure to give timely notice of the casualty to the assurers. The matter was presented to the Court at a Bench Trial.

After taking the proofs and hearing counsel, and upon due deliberation, the Court determines that the plaintiff is barred from recovering herein because it breached the conditions of the insurance requiring that notice of the ocurrence which resulted in loss, damage and expense be given as soon as practicable, and that process, pleading and papers relating thereto be forwarded promptly, as required by the policy, to the assurers.

FACTS

Big Lift Shipping Company (N.A.) Inc. (hereafter Big Lift), a wholly owned subsidiary of Holland Amerika Lines, entered into a time charter of the M/V DANAOS with the owner of the latter on December 7, 1977.

On December 23, 1977, while under the charter, DANAOS suffered a casualty to a winch block resulting in damage to its cargo and to the vessel's crane.

Big Lift claimed that it had no office or employees in the U.S.A. — that it had agents in Houston, Texas, where William Hepburn was the Operations Manager.

The insurance coverage required by the charter party was split; one policy covered liability in connection with the cargo, and another policy covered damages to the vessel under charter. The policies were issued by two different groups of insurance underwriters. The insurance on the cargo was issued by the Standard Steamship Owners Protection and Indemnity Association (Standard Club), represented in New York by Lamorte Burns & Co., Inc.

Big Lift's parent company, through its insurance department, arranged the vessel insurance required under the charter party with New York Marine representing the underwriters through Johnson & Higgins acting for Holland Amerika.

The policy on which this suit is brought was executed in New York, having been drafted, prepared and submitted to New York Marine in New York by Johnson & Higgins, and became effective June 8, 1977. New York Marine bound the defendant insurers in stated shares to a policy of Charterers Legal Liability Insurance, reciting that it was made for Holland Amerika Holding N.V. Rotterdam and/or Big Lift N.V. and/or Affiliated Companies. The plaintiff is such an "affiliated company." The insurance coverage was for damage occurring to the vessel while under the charter.

The policy's notice of loss requirement reads as follows:

2. It is understood and agreed by the assured that in the event of any occurrence which may result in loss, damage and/or expense for which these Assurers are or may become liable under this insurance, notice thereof shall be given to these Assurers as soon as practicable and any and every process, pleading, and paper of any kind relating to such occurrence shall be forwarded promptly to these Assurers.

Holland Amerika failed to notify its Houston agents that the insurance covering the cargo and the vessel was split between two companies, and no copy of the policy was furnished to the U.S.A. agents. The only document which the agents had in their files was a book of the Rules of the Standard Club which they had received a number of years earlier.

Plaintiff, through error for which it and its parent company alone are responsible, failed to comply with the Notice of Loss requirement of the policy sued on, and did not notify defendants of the accident until August 1, 1980, some 31 months after the occurrence.

Plaintiff's Operations Manager in the U.S.A., on learning of the casualty, promptly went to view the vessel and then called his office in Houston to inquire who the underwriter of insurance was, and was told that it was Lamorte Burns. The Operations Manager then notified Lamorte Burns of the casualty and the latter arranged for an immediate survey and appearance of counsel on behalf of the plaintiff, and the Standard Club. However, neither plaintiff nor its parent notified the defendants or their representatives of the occurrence until nearly three years later.

On January 16, 1978, the U.S.A. agents for plaintiff, by Telex, notified Holland Amerika of the casualty and the name of the agent for the underwriters who was notified thereof, viz., that the incident had been reported immediately to Mr. A. Burns of Lamorte Burns. At the time, and indeed up until a week or so prior to this trial in 1984, the plaintiff's Operations Manager and the President of Big Lift were both unaware that Holland Amerika had split the insurance and placed the cargo coverage with one underwriter and the vessel insurance with the defendants. The Operations Manager neither had a copy of the policy in suit nor sought to examine a copy of the contract or knew the scope of the coverage obtained from the Standard Club or that the latter was limited to cargo. Holland Amerika's insurance department took no steps to inform its U.S.A. Operations Office that the Standard Club's insurance coverage was limited to cargo damage or that the vessel was insured by other underwriters, namely, the defendants, through New York Marine.

Merely assuming without checking with Holland Amerika, or seeking to obtain and read the insurance coverage from the Standard Club, the only notice given at the time of the occurrence of the casualty loss, was given by the plaintiff's Operations Manager to the Standard Club through Lamorte Burns. It was not until April 21, 1980 that Lamorte Burns happened to notify Big Lift that the Standard Club only covered liability of Big Lift on cargo and not for physical damage to the vessel. It was then that plaintiff consulted with Holland Amerika, which had placed the liability insurance covering the vessel, that plaintiff became aware that liability for vessel damage was insured by defendants who were then, after 100 days, for the first time, placed on notice of the loss by letter from Holland Amerika's brokers, Johnson & Higgins, under date of August 1, 1980. In explanation for the delayed notice Johnson & Higgins wrote that "Apparently this matter was originally reported to the assured's P & I Club under the mistaken impression that their coverage included damage to the vessel."

New York Marine, on behalf of the defendants, responded to Holland Amerika's broker that the first notice to it of the accident was two and three-quarter years later, and that this certainly would not appear to be notice as soon as practicable as required by the policy, and New York Marine reserved all of defendants' rights and notified Johnson & Higgins that its comments in the letter were strictly without prejudice to the terms and conditions of the policy and without waiving any rights or defense which they might have under the policy.

At the time of the first notice to the defendants of the occurrence, plaintiff was in arbitration proceedings in London with the vessel owner concerning damage to the vessel and liability for unpaid hire claimed by the owner, the arbitration having been commenced in January, 1978. In October, 1978 the shipper of the damaged cargo sued in the Southern District of New York against DANAOS and Big Lift for damages; that suit was settled by payment of $10,000 to the shipper. The vessel owner thereupon added the amount of the settlement as a claim against Big Lift, the charterer, in the London arbitration proceedings.

In April, 1982, while the arbitration was still undetermined, representatives of Big Lift and Holland Amerika held a meeting with representatives of the defendants who were...

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