Continental Cameras Co., Inc. v. Foa & Son Corp.

• Decision Date: 29 April 1987
• Docket Number: No. 86 Civ 6985 (LBS).,86 Civ 6985 (LBS).
• Citation: 658 F. Supp. 287
• Parties: CONTINENTAL CAMERAS CO., INC. and Metropolitan Bank & Trust Co., Plaintiffs, v. FOA & SON CORPORATION, Defendant.
• Court: U.S. District Court — Southern District of New York

658 F. Supp. 287

CONTINENTAL CAMERAS CO., INC. and Metropolitan Bank & Trust Co., Plaintiffs, v. FOA & SON CORPORATION, Defendant.

No. 86 Civ 6985 (LBS).

United States District Court, S.D. New York.

April 29, 1987.

Ben-Veniste & Shernoff, Washington, D.C., Thomas J. Fitzpatrick, New York City (Peter D. Isakoff, Washington, D.C., of counsel), for plaintiffs.

Rivkin, Radler, Dunne & Bayh, Uniondale, N.Y. (Howard J. Newman, Frank J. Giliberti, of counsel), for defendant.

SAND, District Judge.

Defendant FOA & Son Corporation ("FOA") moves to dismiss the complaint pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure on the grounds that the Court lacks subject matter jurisdiction. The motion, which arises from a dispute between an insured party and its insurance broker, requires an analysis of the somewhat blurred contours of admiralty jurisdiction. For the reasons explained, the motion to dismiss is granted.

Background

The present action was filed on behalf of Continental Cameras Co., Inc. ("Continental") and one of its secured creditors, Metropolitan Bank & Trust Co. ("Metropolitan"), against FOA, which at relevant times was Continental's insurance broker. It appears that FOA, on behalf of Continental, had procured an ocean marine cargo policy with St. Paul Fire & Marine Insurance Co. ("St. Paul") which became effective December 21, 1983 (the "Policy"). The Policy, which included insurance on inventory stored in certain domestic warehouses, was subject to cancellation upon notice by any party. In mid-December 1984, St. Paul's representative advised FOA that there were certain overdue premiums on the Policy and that the Policy would be cancelled unless the premiums were received by December 21, 1984. Continental alleges that prior to that date it paid FOA the premiums due and that FOA deposited the Continental premium check in FOA's account. FOA failed, Continental claims, to forward the insurance premiums to St. Paul prior to the December 21, 1984 deadline.

On December 27, 1984, it appears that St. Paul's representative advised FOA that Continental's Policy would be cancelled effective January 7, 1985. A notice of cancellation to that effect was sent to FOA. Continental alleges, inter alia, that FOA negligently failed to advise Continental of the cancellation and to procure alternative insurance coverage. Complaint ¶ 11.

Subsequently, a fire ensued in a New Jersey warehouse in which goods which had been covered by the cancelled Policy were destroyed. Continental and Metropolitan filed suit in federal court, asserting admiralty jurisdiction, to recover from FOA the damages sustained as a result of the fire.

Discussion

FOA argues that Continental has not sustained its burden of demonstrating that the complaint states a claim that is within the admiralty jurisdiction of a federal court. We agree.

Continental, attempting to invoke admiralty jurisdiction, seeks to rely on the principle that a contract for marine insurance is maritime. See CTI-Container Leasing v. Oceanic Operations, 682 F.2d 377, 380 n. 4 (2d Cir.1980). Specifically, Continental claims that FOA was obligated under the Policy to perform certain tasks for Continental. Complaint ¶ 7. Therefore, according to Continental, the suit against FOA arises under the Policy and is an admiralty action.

FOA contends, inter alia, that it was not a party to the insurance contract between St. Paul and Continental and that its work in connection with the Continental — St. Paul transaction was solely as an agent for Continental in the procurement of insurance. FOA argues that since it is not a party bound under the Policy, a suit against it cannot be based on the Policy and, thus, invocation of admiralty jurisdiction on the grounds that the suit is one on a marine insurance policy is improper.

It has been widely recognized that "neither the Constitution nor applicable statutes lay down the criteria for drawing the boundary between maritime and non-maritime jurisdiction." Peralta Shipping Corp. v. Smith & Johnson (Shipping), 739 F.2d 798, 800 (2d Cir.1984). The "broad guiding principles have proven difficult to apply." Peralta, 739 F.2d at 801. To achieve a consistent and predictable body of law, courts have accorded "special deference" to precedent even though the justification for such deference sometimes lies less in logic than in the need for clear lines of demarcation. Peralta, 739 F.2d at 801.

In the Court's view, FOA never became a party to the marine insurance contract which St. Paul issued to Continental. It appears true, as Continental points out, that FOA executed Policy binders and served as Continental's designated recipient of Policy notices. The printed form contract contains at paragraph 49 a "Brokers Clause," which refers to the fact that there is an "intermediary" broker who "shall be deemed to be exclusively the agents of the Assured and not of the Company." Paragraph 49 further states that "any notice given or mailed by or on behalf of the Company to the said brokers in connection with or affecting this insurance, or its cancellation, shall be deemed to have been delivered to the Assured." The fact that the Policy contains an agreement between St. Paul and Continental that notice to a broker-intermediary is deemed notice to Continental does not make the broker a party to the contract. Rather, reference to the principal/agency relationship between Continental and FOA operates to establish certain of the rules of the relationship between Continental and St. Paul.

As the agent for Continental in the procurement of the Policy, FOA acted on behalf of a disclosed principal. An agent which makes a contract for a disclosed principal does not become a party to the contract. Seguros Banvenez, S.A. v. S/S Oliver Drescher, 761 F.2d 855, 860 (2d Cir. 1985). Thus, while Continental may well have a valid claim against FOA, the claim does not arise under the Policy. Continental's argument that the Policy envisions that an "intermediary" would transmit notices to Continental does not change the conclusion. Continental may be correct in asserting that FOA had such an obligation; nevertheless, the obligation does not flow from the Policy but from the relationship among the parties with respect to the Policy.

The conclusion that FOA is not a party to the insurance contract renders inapplicable the principle that contracts for marine insurance are maritime.¹ We turn, then, to whether an action which arises from a principal/agency relationship between a shipper and its insurance broker is one which falls within our admiralty jurisdiction...