Ingersoll Mill. Mach. Co. v. M/V Bodena

Decision Date14 September 1987
Docket NumberNos. 219-221 and 311,D,s. 219-221 and 311
Citation1988 A.M.C. 223,829 F.2d 293
PartiesThe INGERSOLL MILLING MACHINE CO., Plaintiff-Appellee in 85-7941, 85-7945, and 86-7405, Plaintiff-Appellant in 86-7413, Plaintiff-Cross-Appellant in 86-7413 re: 85-7941, 85-7945, and 86-7405, v. M/V BODENA, her engines, boilers, etc., Excellent Marine, Inc., Taiwan International Line Limited, J.E. Bernard & Co., and Fireman's Fund Insurance Co., Defendants, Excellent Marine, Inc., Defendant-Appellee in 86-7413, Taiwan International Line Limited, Defendant-Third Party Plaintiff-Appellee in 85-7941, Defendant-Appellant in 86-7405, Defendant-Cross-Appellant in 86-7405 re: 85-7941, Defendant-Cross-Appellee in 86-7413, J.E. Bernard & Co., Defendant-Third Party Defendant-Appellant in 85-7941, Defendant-Cross-Appellee in 86-7405 and 86-7413, Fireman's Fund Insurance Co., Defendant-Appellee in 85-7941 and 86-7405, Defendant-Appellant in 86-7945, Defendant-Cross-Appellee in 86-7413. ockets 85-7941, 85-7945, 86-7405 and 86-7413.
CourtU.S. Court of Appeals — Second Circuit

Thomas L. Tisdale, New York City (Vincent J. Barra, Dougherty, Ryan, Mahoney, Pellegrino, Giuffra & Zambito, New York City, of counsel), for Taiwan Intern. Line Ltd.

Susan L. Walker, Chicago, Ill. (H. Roderic Heard, Carol J. Gerner, Wildman, Harrold, Allen & Dixon, Chicago, Ill., Thomas M. Geisler, Jr., Shearman & Sterling, New York City, of counsel), for J.E. Bernard & Co.

Warren J. Marwedel, Chicago, Ill. (Stephen C. Veltman, Dion J. Sartorio, Tribler & Marwedel, P.C., Chicago, Ill., of counsel), for Fireman's Fund Ins. Co.

(Joseph J. Magrath, 3rd, Douglas A. Jacobsen, Donald T. Rowe, Jr., Bigham, Englar, Jones & Houston, New York City, of counsel), for amicus curiae American Institute of Marine Underwriters.

Before CARDAMONE and PIERCE, Circuit Judges, and BONSAL, Senior District Judge. *

PIERCE, Circuit Judge:

These appeals are from a final judgment filed in the United States District Court for the Southern District of New York on April 28, 1986, following a bench trial before Judge Robert L. Carter. The judgment (1) awarded plaintiff-appellee The Ingersoll Milling Machine Co. ("Ingersoll") damages and prejudgment interest against defendants-appellants Taiwan International Line Ltd. ("Taiwan"), J.E. Bernard & Co. ("Bernard"), and Fireman's Fund Insurance Co. ("Fireman's Fund" or the "Fund") jointly and severally, (2) awarded Ingersoll attorney's fees and litigation expenses against Fireman's Fund, (3) awarded Fireman's Fund a right of subrogation against Taiwan and Bernard, and (4) dismissed claims of Taiwan and Bernard against each other.

Ingersoll cross-appeals seeking to increase its award of damages and prejudgment interest.

Appellants each raise a number of issues on appeal. We consider them seriatim, and we affirm the determinations of the district court except with regard to the award of attorney's fees and litigation expenses.

BACKGROUND

This case arises from the shipment of certain cargo from the United States to South Korea. The cargo, which was insured, and consisted of 20 packages, 18 of which were stowed on the deck of the ship, was damaged in transit. Simply stated, we must determine whether the district court properly decided who is responsible for the damage and that the insurer improperly refused to cover the loss. We set forth the essential evidence in this section, as found by the district court, 619 F.Supp. 493 (S.D.N.Y.1985), with details to be provided later as necessary.

In January 1978, Waldrich Siegen, GmbH ("Waldrich") of West Germany contracted to sell heavy, specially designed machines to Hyundai International, Inc., in Korea. Waldrich engaged its affiliate, Ingersoll, a manufacturer of special design machinery, as a subcontractor to manufacture Shop Order 24441 ("Order # 24441") and to arrange for its shipment to Korea. Order # 24441 consisted of a ram type, horizontal spindle, traveling column machinery center, and was valued in excess of $2 million.

In the summer of 1979, Ingersoll, located in Rockford, Illinois, contacted Gryphon Shipping Service, Inc. ("Gryphon"), a broker and steamship agent in Chicago, to arrange for shipment of Order # 24441 to In connection with the shipment, Ingersoll also retained Bernard, a freight forwarder doing business in Elk Grove Village, Illinois, to perform various freight forwarding tasks. In addition to other duties to be performed by Bernard, Ingersoll, by letter dated September 10, 1979, requested that Bernard secure "three originals and four copies of clean on-board bills of lading" (emphasis added). In response to this letter, Bernard prepared two master ditto forms of the bill of lading and also the shipper's export declaration. One of the master ditto forms was sent to Mid-Gulf Shipping, Inc. ("Mid-Gulf"), Taiwan's agent in New Orleans, to be used in the preparation of the original bills of lading; the other was sent to Gryphon. In addition, the master ditto was used to prepare an advance notice of shipment which was sent by Bernard to Ingersoll on September 25, 1979. Neither the master ditto nor the advance notice contained any notation as to stowage. Ingersoll informed Bernard that all the information on the advance notice was correct except that the port of discharge should be changed.

                Korea. 1   Gryphon, in turn, contacted Taiwan, which had time chartered the M/V Bodena from its owner Excellent Marine, Inc.  ("Excellent Marine").  Gryphon arranged with Taiwan in August 1979 for the cargo to be shipped in September 1979 from New Orleans aboard the M/V Bodena.  A contract of carriage arose between Ingersoll and Taiwan in August 1979 when Ingersoll accepted the terms arranged by Gryphon and informed Gryphon that the shipment of Order # 24441 would be in twenty boxes.  The district court found that, at the time of booking, there was no evidence that Ingersoll had agreed to on deck stowage.  Gryphon's commission was to be paid by Taiwan, and Gryphon was found by the district court to be Taiwan's agent
                

The Ingersoll cargo, which had arrived in New Orleans from Illinois by truck and rail, was loaded on board the M/V Bodena on September 26 and 27, 1979. Of the twenty boxes which comprised Order # 24441, eighteen were initially stowed on deck and two were stowed below deck. Mid-Gulf, Taiwan's agent, was responsible for the issuance of bills of lading. Prior to sailing, Mid-Gulf took the ditto form supplied by Bernard and added the phrase "on deck shipper's risk" to its face. Mid-Gulf then used the altered ditto to run off three original bills of lading and mailed the originals with thirteen copies to Gryphon in Chicago.

Ingersoll received the originals and four copies on October 1, 1979. Fred Woywod, Ingersoll's contract administrator, saw the documents that day but either did not notice the addition of the words "on deck shipper's risk" or if he did notice them, did not understand their legal significance. Bernard, too, received copies of the bills of lading on October 1 but failed to examine the issued bills to determine whether they were in fact clean, and, consequently, failed to inform Ingersoll that Taiwan had not followed the instructions to issue clean bills of lading.

The M/V Bodena, which had made several intermediate stops at various East Coast ports, set sail from Savannah, Georgia, for Korea on October 14, 1979. At the time of sailing, seventeen of Ingersoll's boxes were stowed on deck, one of the boxes initially stowed on deck having been moved below deck. The voyage to Korea lasted more than one month and was beset with storms, heavy seas, and high winds. As a result of heavy rolling and pitching during the voyage, the seventeen boxes on the deck were severely damaged. Some boxes were broken; others were thoroughly soaked by sea water. Because of the damage, Order # 24441 had to be sent from Korea to Waldrich in Germany for repair. None of the three boxes stowed under deck was damaged.

Ingersoll maintained an all risk insurance policy with Fireman's Fund. That policy had been issued as an open cargo policy, designed to cover all of Ingersoll's shipments. In other words, a particular shipment would become covered under the policy The particular policy in question contained separate clauses for insuring under deck shipments and on deck shipments. 2 Clause 17(a) insured under deck shipments and specifically contained broader terms of coverage. Those terms provided coverage against all risks of physical loss or damage. Clause 17(b), which did not contain broader terms, provided coverage for on deck shipments known as free of particular average ("FPA"). FPA coverage does not cover a partial loss of the subject matter insured unless certain contingencies not relevant herein occur. Another provision of the policy, clause 8(B)(2), limited coverage to $175,000 for shipments subject to an on deck bill of lading or shipments stowed on deck with the consent of the insured. 3

either when Ingersoll filled out and sent to Fireman's Fund a certificate of insurance for each shipment, indicating the contents, value, destination, and carrier of the cargo, or when Ingersoll sent to the Fund a monthly declaration of shipments. As testified to by Fireman's Fund officials, such a policy was designed to provide automatic coverage such that even if the certificate or monthly declaration was sent after a loss had occurred, the shipment would nevertheless be covered.

In August 1979, Ingersoll sent to Fireman's Fund a certificate of insurance to cover Order # 24441. The certificate, which took effect before the boxes were actually loaded aboard the M/V Bodena, stated that the machinery was laden under deck. When Ingersoll learned of the damage to the cargo in December 1979, it notified Fireman's Fund of its loss. After an...

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