Royal Ins. Co. v. Sea-Land Service Inc.

• Decision Date: 21 March 1995
• Docket Number: SEA-LAND,No. 93-15376,93-15376
• Parties: ROYAL INSURANCE CO.; Vantare International, Inc., Plaintiffs-Appellants, v.SERVICE INCORPORATED; Container Stevedoring Company, Inc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 723

50 F.3d 723

1995 A.M.C. 1189

ROYAL INSURANCE CO.; Vantare International, Inc. Plaintiffs-Appellants, v. SEA-LAND SERVICE INCORPORATED; Container Stevedoring Company, Inc., Defendants-Appellees.

No. 93-15376.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Nov. 15, 1994.

Decided March 21, 1995.

George L. Waddell, Hancock, Rothert & Bunshoft, San Francisco, CA, for plaintiffs-appellants.

James J. Tamulski, Kay, Rose, Tamulski & Maltzman, San Francisco, CA, for defendants-appellees.

Appeal from the United States District Court for the Northern District of California.

Before: FARRIS, BOOCHEVER, and BRUNETTI, Circuit Judges.

BOOCHEVER, Circuit Judge:

Royal Insurance Company insured a yacht shipped by Vantare International, Inc., from Taiwan to Oakland, California. The yacht was shipped on a vessel owned by Sea-Land Service, Inc. The stevedore unloading the yacht, Container Stevedoring Company, dropped it on the dock in Oakland. The yacht was a total loss. The district court found that Vantare's recovery was limited to $500 under a loss limitation clause in the on-board bill of lading. Royal and Vantare appeal, and we affirm.

FACTS

Vantare International, Inc. ("Vantare") is in the business of buying yachts overseas and selling them in the United States. Its owner and president, Michael Guth, has sold 20-25 yachts since Vantare began operation in early 1987, many bought from Chung-Hwa Boat Building Company ("Chung-Hwa") in Taiwan.

In November, 1987, Vantare and other yacht importers entered into a service contract with Sea-Land Service, Inc. ("Sea-Land"), an ocean carrier, and other ocean carriers who had joined together as the "Asian North American Eastbound Rate Agreement" ("ANERA") (the "Service Contract"). Under the Service Contract, Vantare was entitled to a special reduced freight rate when it shipped on an ANERA carrier. The Service Contract also specified that the individual carrier's bill of lading would determine the terms and conditions of shipment. The tariff governing the Service Contract provided that the carrier's liability would be determined by the carrier's bill of lading. A shipper who desired a higher level of coverage had to so stipulate by showing the value of the goods on the carrier's bill of lading, and had to pay an extra 5.3% ad valorem shipping charge as well as a rate higher than that specified under the Service Contract.

In 1988, Vantare ordered a 58-foot yacht from Chung-Hwa for shipment to Oakland. Chung-Hwa completed Sea-Land's shipping order, requesting shipment under the Service Contract. The yacht was purchased through the use of a letter of credit which required, among other things, presentation of an on-board bill of lading. The yacht was delivered for carriage on March 21, 1988.

The next day, March 22, 1988, after the yacht was on board, Sea-Land issued the bill This bill of lading shall have effect subject to all the provisions of the Carriage of Goods by Sea Act of the United States of America.... The defenses and limitations of said Act shall apply to goods whether carried on or under deck....

                of lading to cover the carriage.  Item 23 on the face of the one-page bill of lading contains a blank allowing the shipper to enter a declared value and states:  "If shipper enters a value, carrier's 'package' limitation of liability does not apply and the ad valorem rate will be charged."   Vantare did not fill in the blank to declare a higher value.  On the reverse side of the bill of lading, a "Clause Paramount" states
                

Clause 17 provides:

VALUATION. In the event of loss, damage or delay to or in connection with goods exceeding in actual value the equivalent of $500 lawful money of the United States, per package, ... the value of the goods shall be deemed to be $500 per package or unit, unless the nature and higher value of goods have been declared by the shipper herein and extra charge paid as provided in Carrier's tariff.... The word "package" shall include ... cargo shipped on a ... cradle....

The bill of lading also provided in Clause 2 that if other parties, including stevedores, were found liable in tort, "the limitations of liability provided by law and by the terms of this bill of lading shall be available to such other persons."

Vantare insured the yacht under an open cover policy which automatically provided coverage when Vantare's insurance broker submitted a declaration to Royal Insurance Company ("Royal") indicating the date of shipment and the value of the yacht.

On April 6, 1988, Container Stevedoring Company ("Container Stevedoring") dropped the yacht while unloading it from the vessel. The yacht was a total loss. Royal paid Vantare $395,000 under the insurance policy.

Royal and Vantare (hereinafter referred to as Vantare) filed suit in federal district court for recovery of $600,000 in damages. Sea-Land and Container Stevedoring denied liability, and asserted that if liability were found, the terms of the bill of lading limited recovery to $500. The parties filed motions for partial summary judgment. The district court granted Sea-Land's motion, limiting recovery to $500. Sea-Land and Container Stevedoring then consented to judgment in the amount of $500, and Royal and Vantare appeal.

DISCUSSION

We review a grant of summary judgment de novo. Travelers Indem. Co. v. Vessel Sam Houston, 26 F.3d 895, 899 (9th Cir.1994).

I. Fair Opportunity

The Carriage of Goods by Sea Act ("COGSA"), 46 U.S.C. app. Secs. 1300-1315, regulates the terms of international ocean carriage covered by bills of lading. Section 4(5) of COGSA provides that a carrier's liability is limited to $500 per package:

Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the transportation of goods in an amount exceeding $500 per package ... unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading.

46 U.S.C. app. Sec. 1304(5). "The shipper may increase the carrier's liability, however, by declaring on the bill of lading the nature and value of the goods shipped and paying a higher freight rate." Travelers Indem., 26 F.3d at 898.

Sea-Land can avail itself of COGSA's $500 liability limitation only if Vantare had a "fair opportunity" to escape the limitation by paying a higher charge. Id. (citing cases). The carrier has the initial burden of producing prima facie evidence showing that it provided notice to the shipper that it could pay a higher rate and opt for a higher liability. Id. This initial burden is met if the language of Section 4(5) is printed legibly in the bill of lading, either by recitation or in language to the same effect. Id. It is not enough merely to incorporate COGSA by reference. Id.

In 1989, we decided Institute of London Underwriters v. Sea-Land Serv., Inc., 881 F.2d 761 (9th Cir.1989), a remarkably similar dropped-yacht case in which Sea-Land and Container Stevedoring were also defendants, and involving the same bill of lading used in this case. Although COGSA by its own terms does not apply to on-deck shipments such as the yacht in this case, London Underwriters held that the "Clause Paramount" of the bill of lading incorporating COGSA meant that COGSA's terms governed the shipment. Id. at 765-66. We also found that because Item 23 on the face of the bill gave the shipper the opportunity to declare a higher value for the cargo, and Clause 17 on the reverse recited the $500 limitation and the means to avoid it, the bill of lading constituted prima facie evidence that the shipper had the opportunity to avoid the $500 limitation. Id. at 766. London Underwriters also held that the shipping of a yacht in a "cradle" was included in the bill of lading's definition of "package." Id. at 768.

London Underwriters thus establishes that COGSA applies to the shipment of the yacht, and that Sea-Land made a prima facie showing that its bill of lading gave Vantare an opportunity to avoid the $500 limitation under COGSA.

Once Sea-Land established that its bill of lading was prima facie proof of Vantare's opportunity to opt out of the $500 loss limitation, the burden then shifted to Vantare to prove that it was denied such an opportunity. Id. at 766; Travelers Indem., 26 F.3d at 899. Vantare argues that because the bill of lading was issued on board, after the yacht was loaded for shipment, Vantare had insufficient notice of the $500 limitation and the means to avoid it.

Sea-Land points out that the letter of credit by which the yacht was purchased required an on-board bill of lading. Sea-Land does not, however, argue that the letter of credit estops Vantare from complaining that the bill of lading was issued after the yacht was loaded. Instead, Sea-Land notes that the district court found that Chung Hwa had shipped at least five yachts aboard Sea-Land vessels, four to Ponderosa Marine, the former company of Vantare's owner, Michael Guth. Three of those shipments had bills of lading identical to the one at issue here. Sea-Land argues that these facts, which Vantare does not dispute, show that Vantare was thus familiar as a matter of commercial practice with the terms and limitations of Sea-Land's bill of lading.

This circuit has held that actual possession of the bill of lading with the $500 liability limit is not required before a party with an economic interest in the shipped goods can be held to the limitation. In Carman Tool & Abrasives, Inc. v. Evergreen Lines, 871 F.2d 897 (9th Cir.1989), a tool company sued an ocean carrier when machines shipped on the carrier were damaged after they were unloaded. The company attempted to avoid the $500 limit by arguing that the otherwise sufficient bill of lading was presented to the manufacturer of the machines rather than to the tool company, which bore the risk of any damage to the shipped goods and which did not see a copy of the bill of lading until long...