Let’s pretend this never happened

LetÆs pretend this never happened       In January this column described a September 2009 decision by Judge Douglas Eaton in which he dismissed a complaint about damage to a printer that had been shipped by air and truck ('Prompt inspection matters,' January American Shipper, page 44, or online at www.AmericanShipper.com/links).
      Eaton ruled that notations made by a truck driver who picked up the cargo were not sufficient to count as a complaint of cargo damage under Article 31 of the Montreal Convention.
      Now, following a settlement agreement between the insurer and the non-vessel-operating common carrier that handled the shipment, Judge James Cott of the same court (he replaced Easton who retired in January) has agreed to vacate the original opinion. (American Home Assurance Co. v. Kuehne + Nagel. 06-Civ. 6389. SDNY. May 7, 21)
      American had appealed the case to the Second Circuit in November, but it and Kuehne + Nagel, the NVO that arranged the printer shipment, agreed to a settlement in April without a determination of the merits of their positions by the Second Circuit Court of Appeals. But they made their settlement dependent on obtaining an 'order of vacatur' from the district court.
      Such orders are fairly unusual, said attorney Charles E. Schmidt, who represented American, the insurer for Germany's Oce Printing Systems, whose electronic printer was damaged while being shipped to Caterpillar in Illinois. 'This is the first time I've done it in 30 years,' he said.
      'My client was not interested in allowing that opinion to stand. It was fully prepared to take the case through the full appeal process, and we were quite confident that our position was going to be sustained and that the notations that had been made at the time of the delivery would have been found to constitute a proper fulfillment of the requirement to make a complaint in writing at the time of delivery. American Home just did not want that opinion around' because it had the potential to affect its ability not only in this case but generally to recover from responsible parties when cargo was damaged.
      Traditionally the burden on a party under Article 31 of the Montreal Convention to make such a complaint has been light. 'A simple notation indicating some sort of damage generally satisfies practitioners on both sides of the fence,' he explained. 'I know that there are some people that have advocated the view that if you say the box is scuffed, that is not a notation sufficient to connote damage to the cargo, but ' obviously if you have something that on its face is a sensitive cargo and the box is crushed ' this being an example of that.
      'Other things that are less sensitive might require a bit more of a notation. But my general view is that if you have complained about the cargo ' the cargo includes the packaging ' and if you say something is wrong, that should satisfy a requirement that there be a complaint in writing at the time of delivery by the person entitled to receive the goods.'
      Had Eaton's decision stood, the well-oiled machinery of air cargo logistics might get gummed up.
      Schmidt said cargo interests might seek to 'undertake a whole lot more inspections than has typically been the norm as part of the routine delivery operation when an air carrier is making a delivery to its customer's trucker at an airport or off-airport freight facility.'

Insurer must provide coverage
      When you hear a tale about highway banditry in the American Southwest, you may not be expecting the loot to consist of frozen seafood. But it was the disappearance of 600 cartons of block frozen shrimp that set this case in motion. (Ocean Garden Products Inc. et al. v. Northfield Insurance Co. et al. S.D. Texas, H-08-3210, April 21).
      Ocean Garden Products contracted with a broker to move the shrimp from Sierra Refrigerating Co. in Nogales, Ariz., to an Ocean Garden facility in Newark, N.J., and the broker hired Loga Transport Inc. to do the trucking. The theft occurred when a trailer was parked in El Paso, Texas, in September 2007.
      Under the Carmack Amendment, as well as common-law bailment, Loga was liable for the loss, said the court, as the shrimp were delivered to Loga in good condition and never redelivered to Ocean Garden.
      Loga reported the loss to its insurer, Northfield, which sent a representative to investigate the claim and interview a Loga employee. Northfield also spoke to Ocean Garden about the claim.
      In the following months, Loga repeatedly told Northfield that Ocean Garden was demanding payment.
      Ocean's cargo insurer paid it $101,000 for the shrimp on Nov. 12, 2007, and Ocean paid a deductable.
      ACE USA, representing Ocean's subrogated claim, repeatedly contacted Northfield in February, March and July 2008 about reimbursement, but Northfield 'closed its file' in April 2008, without denying coverage.
      Ocean sued Loga in October 2008, but the trucking company never appeared in court and the court said it 'collapsed' and never notified Northfield of the lawsuit. Ocean notified Northfield of the lawsuit in December 2008 and sent it copies of the complaint and proof of service, with a warning it would soon be moving for a default judgment against Loga for $126,000.
      The court issued a default judgment against Loga for $126,000 on Feb. 23, 2009, and on June 22 added Northfield as a defendant.
      Northfield argued Loga voided coverage by not notifying it of the lawsuit and refusing to cooperate in the investigation, but the court said in order to avoid liability Northfield had to show that it was prejudiced by Loga's breach of policy.
      That wasn't the case here, the court decided, finding that Northfield was given notice multiple times of the loss and the lawsuit, and abreast of the case's progress.
      'The facts are simple and strong that Northfield was not prejudiced as a matter of law by Loga's failure to report directly Ocean's lawsuit,' the court said. 'Northfield was immediately aware of the loss and promptly investigated, but it has been unable to show facts it has or could have discovered that would have excused it from payment. It knew from the beginning that Ocean demanded payment, and when told of the impeding default, it chose not to appear or even negotiate with Ocean.'
      The court said Loga has not voided coverage by refusing to submit to an examination under oath or furnish documents. The court said Loga collapsed and the principals disappeared, but that Northfield did not demonstrate what it would or could have learned from the examination or documents that would release it from its responsibility to pay the claim. It said Ocean would take $98,000 from Northfield, the policy limit less the deductible, plus reasonable attorneys fees.