IN THIS ISSUE
1. Court Finds Issues of Fact With Regard to Claim of Late Notice Under Bumbershoot Policy
2. Chinese Leviathan
3. Hong Kong Maritime Week: 19 to 26 November 2017
4. Europe-China Rail Link Liabilities
5. Racing the Storm: The Story of the Mobile Bay Sailing Disaster
6. People and Places
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1. Court Finds Issues of Fact With Regard to Claim of Late Notice Under Bumbershoot Policy
Jason P. Minkin and Jonathan A. Cipriani of the firm of BatesCarey in Chicago have sent in this note on the decision of the US District Court for the District of Connecticut in Tilcon N.Y., Inc., v. Indemn. Ins. Co. of N. Am., 2017 WL 1948420 (D. Conn. May 10, 2017). They write:-
Under Connecticut law, an insurer seeking to disclaim coverage based on late notice under an occurrence-based policy bears the burden of showing prejudice. A recent decision of the U.S. District Court for the District of Connecticut applied this principle, denying summary judgment to allow a factual inquiry into whether the insurer had been prejudiced, in recognition of the need to balance the interests of insurer and insured.
The Occurrence
The coverage dispute arose between Tilcon New York, Inc., a company providing road construction services, operating quarries, and producing construction materials that are transported between New York and New Jersey by truck, barge, and rail. Tilcon uses tugboats, or push boats, to maneuver barges to docks for the purpose of loading gravel and stone aggregate onto the barges for delivery to construction sites. Tilcon was insured through a primary protection and indemnity (“P&I”) policy, as well as a commercial marine bumbershoot policy issued by Indemnity Insurance Co. of North America (“IINA”).
The underlying occurrence took place in October 2004, when a Tilcon employee was allegedly injured by a snapped cable while working aboard a barge. The Tilcon employee claimed serious neurocognitive injuries, and ultimately sued Tilcon in September 2007.
The Coverage Dispute
While the case involved many disputed coverage issues, relevant to the discussion here is IINA’s defense based on late notice. The primary P&I insurer had tendered its limits towards the settlement of the underlying suit; hence, the remaining coverage dispute involved Tilcon’s bumbershoot policy, issued by IINA. The bumbershoot policy provided that Tilcon would provide notice of a claim to IINA “as soon as practicable” “whenever [Tilcon] has information from which [Tilcon] may reasonably conclude that an occurrence covered hereunder involved injuries or damages which in the event that [Tilcon] should be held liable, is likely to involve this policyā¦
In a prior ruling in the case, the court determined that Connecticut law would govern the dispute, to the extent no federal admiralty law was on point. Applying Connecticut case law, the Tilcon court noted that the duty to give notice does not arise until facts develop which suggest to a reasonably prudent person that liability may have been incurred. The insured must give notice within a reasonable time thereafter. Tilcon, 2017 WL 1948420 at *12 (citing Arrowood Indem. Co. v. King, 304 Conn. 179, 199 (2012)).
The Tilcon court concluded that IINA had made out a prima facie case that Tilcon had not complied with the notice provision. The court noted that the underlying injury occurred in the fall of 2004. By September 2006, an independent medical exam (IME) had been prepared in connection with the Tilcon employee’s workers’ compensation claim, concluding that he had suffered neurocognitive disabilities such that he could not return to his work as a barge trimmer. The employee underwent a total of five IMEs between September 2006 and December 2007, which Tilcon’s counsel had characterized in a 2009 email to Tilcon’s claims adjuster. Tilcon also had actual notice of a claim that could have given rise to liability as of the filing of the lawsuit against it in 2007. Tilcon did not report the claim to IINA until 2012. This, the court found, was a breach of the IINA policy’s notice obligation.
But despite this breach, issues of fact precluded summary judgment as to whether IINA had been prejudiced. IINA conceded that Connecticut law requires an insurer claiming notice to demonstrate prejudice by a preponderance of evidence. Tilcon offered three reasons why IINA had not been prejudiced. First, IINA did not review the claim for three months after first receiving notice in 2012. Second, IINA appointed coverage counsel but allegedly never intended to associate in defense of the underlying case. Third, IINA had denied coverage on unrelated grounds, and therefore, reporting the claim earlier would simply have resulted in Tilcon being informed of a denial earlier. In response, the employee who handled the claim for IINA testified that IINA indeed wanted to participate in the defense of the underlying suit, specifically a summary judgment motion, and would have used a different defense counsel, but was deprived of its opportunity to participate by Tilcon’s voluntary settlement of the claim over IINA’s objection.
The court found that these competing factual claims required resolution at trial. The court noted that Connecticut’s Arrowood decision shifted the burden of proof of demonstrating prejudice to the insurer, but that Connecticut law still recognizes the principle that a proper balance of the insured’s and insurer’s interests requires a factual inquiry into whether the insurer has in fact been prejudiced.
Conclusion
In Tilcon, the court employed a fact-driven, reasonably-prudent-person analysis to determine whether an occurrence-based policy’s notice provision has been breached. In the event late notice is established, the court will balance the insurer’s and insured’s interests to evaluate whether the insurer has been prejudiced. A factual record either documenting or refuting prejudice will be critical to the determination of the late notice defense.
2. Chinese Leviathan
The following story was released by Bloomberg based on data from Alphaliner:-
COSCO Shipping Holdings Ltd. has agreed to buy Orient Overseas Container Line (OOCL) for $6.3 billion in cash, creating the worldās third-largest container-shipping company as the industry shrinks after years of losses and over capacity
COSCO, Chinaās biggest container carrier, will pay shareholders of Hong Kongās No. 1 box mover HK$78.67 a share, a 31 percent premium over the stockās closing price July 7, it said in an exchange filing Sunday. The Tung family, which controls Orient Overseas, has accepted the offer that still needs regulatory approvals and consent from COSCOās investors.
The combined entity will only lag behind A.P. Moller-Maersk A/S and Mediterranean Shipping Co. by capacity as container lines from Denmark to Japan pursue acquisitions and become bigger amid a plunge in rates to move toys and computers. Too many ships and companies chasing the same trade led to a collapse in freight rates and burgeoning losses, factors that pushed Hanjin Shipping Co. into bankruptcy last year, stranding cargo ahead of the holiday season
The combined entity will operate more than 400 vessels with capacity exceeding 2.9 million twenty-foot equivalent units, including order book. COSCO currently has a market share of 8.4 percent while Orient Overseas has 3.2 percent, according to Alphaliner. Their combined 11.6 percent share would make the merged entity the third-biggest container-shipping company, overtaking CMA CGM with 11.2 percent, according to the shipping data provider.
[Back in the days when the HK shipping scene was dominated by foreign owned companies, OOCL was known as the Chinese Line and often preferred by local job applicants–ed]
Sam Chambers ponders the implications of this merger in this slightly melancholy piece here:-
http://splash247.com/reflecting-tungs-stunning-sale-oocl/
3. Hong Kong Maritime Week: 19 to 26 November 2017
A recent bulletin draws attention to the main promotional event this year for Maritime Hong Kong:-
Jointly organised by the Hong Kong Maritime and Port Board, Hong Kong Shipowners Association and Hong Kong Maritime Museum, the second edition of the Hong Kong Maritime Week (previously known as Hong Kong Maritime Industry Week) will be held from 19 to 26 November 2017 to āPropel Hong Kongā as a renowned international maritime centre.
The organisers write:-
Through an intensive week of multifarious maritime activities, we hope to unite and showcase the Hong Kong maritime industry as a strong cluster, raise the communityās awareness of the significant economic contributions of Hong Kongās maritime and port industries, and promote Hong Kong as a preferred base for operating maritime business. During the week, international and local industry luminaries and practitioners will come together for a myriad of diversified and fun-filled activities ranging from industry briefings, seminars and conferences, corporate functions, networking events to maritime-themed sports, school workshops and family fun days.
http://www.hkmw.hk/english/HKMW%20ebulletin%20no.2(Eng).html
4. Europe-China Rail Link Liabilities
Hats off to the fellows over at the TT Club. Something of the weird glamour which emanates from this industrial insurer is visible in a recent release which reaches us courtesy of Peter Owen. The story relates to āOne Belt, One Roadā policy investments aimed at developing trade via the overland route linking China and intervening regions to Europe, also sometimes referred to as the Silk Road. Part of this investment has encouraged container freight, both east and westbound onto the rail services to and from fifteen European cities and multiple Chinese locations.
Depending on the start/finish points, the 9-12,000 kilometre rail journey can take between 12 and 18 days; some thirty-five trains a week on average ran last year and carried over 150,000TEU. Estimates based on the currently committed investment levels would see nearly half a million TEU moved on over 5,000 trains in three yearsā time.
Some of the Club’s finer moments relate to work done to smooth the way for operators emerging into international containerised operations. For example, the introduction of containeresed operations on the Rivers of Europe in the early 1980s was eased by the drafting and introduction of the “floating CMR conditions” for container barge operators Another example is the International Freight Forwarding Agency Agreement developed to support Asian Members in making contracts with their customers. The agreement, offered in both English and Mandarin, stipulates the services to be performed by the operator, the liability regime in place and the responsibilities of the cargo interest.
In its latest initiative, TT Club has drafted trading conditions for use when moving freight by rail between China and Europe. These conditions aim to offer a contractual framework to meet the requirements of the ever growing trade flowing from the āOne Belt, One Roadā initiative, reviving and developing the historic overland trade links. The Rail Consignment Note is a bilingual document in English and Mandarin addressing these requirements of moving freight across two continents and through multiple jurisdictions, where a number of legal regimes may be in force. The contractual terms (in English) on the reverse side of the Rail Consignment Note regulate the operatorās liability during the transit, with a Mandarin copy of these conditions available to supplement understanding.
The work was developed in response to a specific request from one of the Club Members based in Hong Kong with extensive operations in mainland China. Work like this is every bit as important to the industry as cover for the leviathans of the box lines and terminal operations. Kudos.
5. Racing the Storm: The Story of the Mobile Bay Sailing Disaster
Courtesy of the Browser we read this absorbing account of a sailing race which went very badly wrong in 2015. The account, by Matthew Teague appears in the Smithsonian magazine. It narrates using chronology and careful evidence gathering how one of the largest yacht sailing disasters came about as a result of confused organisation, over reliance on technology and herd mentality. Liability actions are underway and the background of many small causes and mistakes rather than a single blunder help demonstrate how thin is the line between fortuity and out and out disaster. A must read for students of human fallibility.
Http://www.smithsonianmag.com/history/racing-storm-story-mobile-bay-sailing-disaster-180963686/
6. People and Places
Cunningham Lindsey has announced the appointment of Stephen Foster as Technical Director, Marine in the UK. Foster, who currently heads up the loss adjusterās marine team in Indonesia, will be relocating to the UK to take up the role from 1 August.
Stephen has spent 21 years working overseas in both Indonesia and Singapore and has extensive knowledge of the marine insurance market in the UK and Asia Pacific regions, having been involved in overseeing the development of the firmās marine operations in Asia Pacific. His primary role in the UK will be handling major and complex marine cargo losses.
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Richard Moir has written in with details of his forthcoming seminar on 13th June 2017:-
http://thewealthforums.com/event/harnessing-the-commonwealth-advantage-in-international-trade/
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Jeremy Nixon has become the highest ranked foreigner at any of the Japanese big three lines in a history that dates back to 1884. Nixon has taken the reigns as CEO of Ocean Network Express (ONE), the merged container company of Mitsui OSK Lines (MOL), Kawasaki Kisen Kaisha (K Line) and Nippon Yusen Kaisha (NYK), and will be based in Singapore.
From the Avo Archive
The website of this newsletter contains all the editorial material since the inception of the Maritime Advocate as a print based quarterly in 1997 under the founding aegis of John Guy, Chris Hewer and Manfred Arnold. Readers can go to the site and search the database on the home page in its entirety. If you are looking for an old case, an old controversy or you would just like to see how many times you and your firm have featured in our annals feel free to access the archive. It is like this e-zine, free to Readers and we always appreciate the support of advertisers and sponsors.
Many were the references to “disaster” but levity intervened in Issue 92 of 10th February, 2003:-
Diary items
HER DIARY:
ON Saturday night I thought he was acting strange. We had made plans to meet at a pub to have a drink. I was shopping with friends all day, so I thought he was upset that I was a bit late. But he made no comment. I suggested we go somewhere quiet to talk. He agreed, but he stayed silent, with an absent look in his eyes. I asked him if anything was wrong. He said ‘No’. I asked him if it was my fault that he was upset. He said it had nothing to do with me, and not to worry.
On the way home I told him I loved him. He just smiled and kept driving. I can’t explain his behaviour. I don’t know why he didn’t say he loved me. When we got home I felt as if I’d lost him, as if he wanted nothing more to do with me. He just sat there and watched television. He seemed distant and remote. Finally decided to go to bed.
About ten minutes later he came in and, to my surprise, responded to my caresses. We made love, but I still felt that he was distracted. I decided I couldn’t take it any more and that I should confront him. But he had fallen asleep. I started crying until I fell asleep too. I don’t know what to do. I’m almost sure his thoughts are with someone else. My life is a disaster.
HIS DIARY:
West Ham lost.
Number Crunching
A 54-year-old accountant leaves a letter for his wife one Friday evening that read:
“Dear Wife:
I am 54 and by the time you receive this letter I will be at the Grand Hotel with my beautiful and sexy 18 year old secretary.”
When he arrived at the hotel there was a letter waiting for him at the front desk that read as follows:
“Dear Husband:
I too am 54 and by the time you receive this letter I will be at the Breakwater Hotel with my handsome and virile 18 year old boy toy. You, being an accountant, will therefore appreciate that 18 goes into 54 many more times than 54 goes into 18.”
[Paul Dixon]
A Nurse Writes:-
I did my nurse’s training at a hospital in Liverpool, England. My fellow students and I had little money for meals, so we ate the awful food provided at the hospital complex. We often took our breaks in the kitchen, and sometimes kindly visitors would give us some of the treats they had brought for patients.
One night a woman brought a pork pie to the kitchen and said to me, “Would you eat this up, love?”
Delighted at the offer, another student and I devoured every crumb. Soon our benefactor returned, however, and asked, “Is me ‘usband’s pie ‘ot yet, dearie?”