International Multifoods v. Commercial Union Ins.

• Decision Date: 22 October 2001
• Docket Number: No. 98 CIV. 4469(AKH).,98 CIV. 4469(AKH).
• Citation: 178 F.Supp.2d 346
• Parties: INTERNATIONAL MULTIFOODS CORPORATION, Plaintiff, v. COMMERCIAL UNION INSURANCE COMPANY and INSURANCE COMPANY OF NORTH AMERICA Defendants.
• Court: U.S. District Court — Southern District of New York

178 F.Supp.2d 346

INTERNATIONAL MULTIFOODS CORPORATION, Plaintiff, v. COMMERCIAL UNION INSURANCE COMPANY and INSURANCE COMPANY OF NORTH AMERICA Defendants.

No. 98 CIV. 4469(AKH).

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

October 22, 2001.

White & Case LLP by Paul D. Friedland, Robert E. Tiedemann, New York City, for Plaintiff International Multifoods Corporation.

Bigham Englar Jones & Houston by George R. Daly, Eric D. Suben, New York City, for Defendants/Third-Party Plaintiff Commercial Union Insurance Company,

MEMORANDUM AND ORDER GRANTING SUMMARY JUDGMENT

HELLERSTEIN, District Judge.

Pursuant to Rule 56 of the Federal Rules of Civil Procedure, Plaintiff International Multifoods Corporation ("Multifoods") moves for summary judgment against Defendant Commercial Union Insurance Company ("Commercial Union"). The issue is whether or not a loss suffered by Multifoods, as an accredited indorsee of an "All Risk" policy written by Commercial Union, was covered by the policy. I hold that the loss was a covered loss, that the policy exclusions do not bar coverage, and that there are no triable issues of fact. Accordingly, I grant Multifoods' motion for summary judgment, and instruct the Clerk to enter judgment in favor of Multifoods and against Commercial Union in the amount of $6,662,557.43, plus interest at the rate of 9% per annum from March 25, 1998 to the date of Judgment.

I. The Undisputed Facts.

In September, 1997, Plaintiff Multifoods, a Delaware corporation principally located in Minnesota, shipped a cargo of frozen meat and foodstuff, from Pascagoula, Mississippi to St. Petersburg, Russia aboard the M/V Ozark, at the order and pursuant to a contract with ASCOP Corporation ("ASCOP"), a New York corporation. Upon satisfactory discharge to the consignee in St. Petersburg, ASCOP was to pay Multifoods $6,056,870.39, the balance remaining after a down payment of $465,802.21.

The ship arrived in St. Petersburg on September 14, 1997, but was unable to discharge Multifoods' cargo. Russian police authorities arrested the ship and its cargo, over Multifoods' objection and incident to a criminal investigation involving a different shipper. Multifoods was not able to recover the cargo or salvage, and made claim against Commercial Union under the policy obtained by ASCOP and indorsed to Multifoods.

A. Commercial Union's All-Risk Policy

The All-Risk Policy, procured by ASCOP from Commercial Union and certified by Commercial Union to Multifoods, comprised 71 pages. Its insuring clauses, exceptions and exclusions were repetitive and inconsistent. The cross-referencing of clauses, from and to indorsements, special indorsements, specimen clauses and appendices increased the difficulty.

The insurance covered Multifoods' shipment from "U.S. Gulf or East Coast Port ...to safe release of tackle at ... St. Petersburg Russia ...." An endorsement extended the coverage to "further transit or period of storage whether prior to, intervening or subsequent thereto," and including "risks whilst in the care, custody or control of ... warehousemen or others ... whether prior to loading and/or after discharge from overseas vessel ...."

This insurance covers the subject matter insured hereby during the whole of the period covered by the duration provisions of the insuring clauses applicable and any further transit or period of storage whether prior to, intervening or subsequent thereto for which provision is made under this contract and irrespective of whether the interest of the Assured is as principals, bailees or agents in any other capacity.

Including risks whilst in the care, custody or control of freight forwarders, consolidators, truckers, warehousemen or others for the purpose of storage, consolidation, decontainerization, distribution redistribution [sic], packing, repacking or otherwise whether prior to loading and/or after discharge from overseas vessel or at any transshipment point. Coverage after discharge from ocean vessel shall terminate on completion of discharge overside from the oversea vessel of the goods insured under this contract to any one port at that port.

The coverage was to remain in force despite delays, "deviation, forced discharge, reshipment or transshipment ... until delivery to final destination as eventually established."

Insurance hereunder remains in force during delay beyond the control of the Assured, any deviation, forced discharge, reshipment or transshipment whether beyond the control of the Assured or otherwise and during any variation of the adventure arising from the exercise of a liberty granted to shipowners or charterers under the contract of the affreightment.

Where after the attachment of this insurance, the destination is changed by the Assured insurance hereunder shall continue in accordance with the terms of this contract until delivery to final destination as eventually established.

If the assured or consignee refused or was unable to accept delivery, coverage under the Policy continued in effect during delay or return, until "otherwise disposed of."

In the event of refusal or inability of the Assured or other consignee to accept delivery of the subject matter insured hereunder this contract is extended to cover such goods during delay and/or return and/or otherwise disposed of subject to an additional premium if required. ...

Further, by an indorsement covering "inland transit", the coverage extended for the property insured "until delivered to the warehouse or store at destination."

Thus, the coverage insured Multifoods against risk of loss to its cargo, not only during the ocean voyage, but continued until delivery at final destination, including delays, deviations and forced discharges.

In case of covered loss, the insured goods were to be valued at "cost and freight plus 10% advance."

The coverage was made subject to conditions, those specifically incorporated from a set of specimen clauses in an annex, "[London] Institute Frozen Meat Clauses (A) — 24 Hours Breakdown Cl. 324 (1.1.86)." "All risks of loss of or damage to the subject matter insured," were to be covered, subject only to specific exceptions, those specifically excluded from coverage by "Clauses 4, 5, 6 and 7" of the "Frozen Meat Clauses." As stated in the policy:

This insurance covers, except as provided in Clauses 4, 5, 6 and 7 below, all risks of loss of or damage to the subject-matter insured, other than loss or damage resulting from any variation in temperature howsoever caused.

Clause 4 excluded from coverage risks arising from the assured's "wilful misconduct," and deterioration and inherent defects in the insured goods or their handling. Clause 5 excluded risks attributable to unseaworthiness. Clause 6 excluded war-risks, a clause that I examined closely in an earlier decision, holding that it did not apply to the conditions at hand, a police action in time of peace. See International Multifoods Corp. v. Commercial Union Ins. Co., 98 F.Supp.2d 498 (S.D.N.Y.2000). Clause 7 excluded losses resulting from strikes and lockouts. Thus, clauses 4, 5, 6 and 7 are not applicable to International Multifoods' loss, and none, therefore, qualifies as an exception to the insuring agreement of the Commercial Union All-Risk policy.

The London Institute Frozen Meats Annex contains additional "specimen" clauses, numbered 8 to 20, relating to, among other matters, duration of coverage, termination of voyage at an unscheduled port, deviation of voyage, conditions of making claims, etc. For the most part, the subjects of these "specimens" are covered by specific clauses of the Policy. Except as thereby covered, the "specimen" clauses are not incorporated into the Policy by any referencing or incorporating clause, and appear not to be part of the Policy. The Annex also contains, appended to the "specimen" clauses, a "Note" and a "Special Note", the former emphasizing that the Assured should give prompt notice upon becoming aware of a covered event, a subject already covered by the Policy, and the latter providing that "this insurance does not cover loss damage or expense caused by embargo, or by rejection prohibition or detention by the government of the country of import or their agencies or departments ...."

"Special Note:-

This insurance does not cover loss damage or expense caused by embargo, or by rejection prohibition or detention by the government of the country of import or their agencies or departments, but does not exclude loss of or damage to the subject-matter insured caused by risks insured hereunder and sustained prior to any such embargo rejection prohibition or detention."

The Special Note is not incorporated into the Policy, or mentioned in any of its clauses.

B. Indorsement to Multifoods.

The Commercial Union policy contemplated that ASCOP could indorse coverage to its shippers, by Special Indorsements to the Policy. The Special Indorsement that extended coverage to Multifoods was effective as to all risks attaching on and after June 15, 1985.

C. The Events of Loss.

The M/V Ozark, having arrived in St. Petersburg on September 14, 1997, discharged the cargo in its "A" hold between September 19 and 24, 1997, belonging to a different shipper. On September 24 and 27, 1997, pursuant to order of the Ministry of Internal Affairs of the Russian Federation, discharge was ordered to stop, and the M/V Ozark and all tangible assets on board were arrested. The Order provided:

Authorized Operative Representative of the Second Department of the ORU of the Northern-Western UVDT of the Ministry of Internal Affairs of the Russian Federation, Captain of the Militia N.B. Urazalin, having reviewed the materials of the criminal case No. 33052 regarding the filing of false documents for the cargo of 8 thousand tons of meat products which arrived to the non-existing firm "ROKS" on board of the m/v "Ozark" without payment of the appropriate customs duties, and taking into consideration that the part of...