IN THIS ISSUE
1. Known Loss Doctrine Precludes Insurance for Hijacked Cargo Shipment
2. Maritime Pilotage – Public danger – Public fraud
3. Containers Lost at Sea
4. R.M.S Lusitania & Modern Safety of Life at Sea
5. Handel’s Water Music is 300
6. People and Places
FOB Network News
During the rest of 2017 the Publishers are looking to raise some external finance in order to take our efforts to the next level by supporting more marketing and programming people.
Some FOB Groups already have sponsors – for example JLT (P&I), Bloomfield Law (West Africa Maritime), Chalos (Criminalisation). the Publishers are also looking for sponsors for existing Groups for example Hull & Machinery, Salvage, Piracy, Maritime Singapore/Cyprus/Norway, Superyachts, Surveyors and Major Casualty Investigation.
In addition there is plenty of scope for possible new Groups such as War Risks, Multi-Modal Insurance, Energy Insurance and many geographical areas eg Maritime New Zealand/Germany to name but a few.
1. Please join FOB, and
2. Let us know if you would like a quote for sponsoring a Group
1. Known Loss Doctrine Precludes Insurance for Hijacked Cargo Shipment
Jason P. Minkin and Brian J. Watson of BatesCarey LLP in Chicago write:-
Courts in a number of states, including Florida, have declined to award insurance coverage to a policyholder who, at the time it purchased the policy, knew a loss had occurred or knew there was a probability the loss would occur. This is often referred to as the known loss doctrine. In I.T.N. Consolidators, Inc. v. Northern Marine Underwriters Ltd., 2017 WL 2804888 (11th Cir. June 28, 2017), the U.S. Court of Appeals for the Eleventh Circuit, applied the known loss doctrine to deny coverage for a hijacked cargo shipment that was known by the policyholder to be lost prior to purchasing the insurance coverage.
Northern Marine Underwriters Ltd. (“Northern Marine”) sold an open cover policy to a freight forwarding company, I.T.N. Consolidators, Inc. (“ITN”). Under the policy, ITN could insure as many or as few cargo shipments as it chose. In November 2007, ITN learned that it failed to obtain insurance coverage for a shipment that had been hijacked. After the hijacking, ITN filed a standard form to obtain coverage for the shipment under the open policy, and then filed a claim for coverage which Northern Marine denied. In response, ITN filed suit against Northern Marine in federal court in Florida.
The district court granted summary judgment to Northern Marine, holding that the open cover policy did not cover known losses, such as the one at issue here. ITN appealed. On initial review, the appellate court agreed that the open cover policy did not cover known losses, but remanded the case to the district court to consider whether a new contract had been formed whereby Northern Marine agreed to insure the known loss in exchange for some new consideration (e.g., furtherance of the relationship with ITN or encouraging a policy of insuring all shipments). On remand, the district court entered summary judgment for ITN, finding that ITN’s payment of premium after it learned of the hijacking constituted an offer to enter a new insurance contract that covered the known loss, which Northern Marine accepted by retaining the premium and continuing to do business with ITN after the claim. Northern Marine then appealed.
In its appeal, Northern Marine argued that, under new case law reflecting a change in Florida law prohibiting coverage for known losses as against public policy, there was no coverage for the hijacked shipment. The appellate court agreed, explaining that insurance necessarily involves contingencies such that the payment of a non-contingent loss is contrary to the very concept of insurance. The appellate court explained that there is a public policy of protecting the public from insolvent insurers, and that the rule against insuring a known loss is part and parcel of that public policy because such insurance contracts risk the solvency of the insurer. Contracts to insure against the known loss are, according to the appellate court, against public policy regardless of whether an insurer knows about the loss before it agrees to the contract. Accordingly, the appellate court concluded that the insurance policy that ITN purchased from Northern Marine to insure the hijacked shipment was unenforceable as a matter of Florida public policy.
The court in I.T.N. Consolidators applied the known loss doctrine to preclude coverage where, as was the case here, the policyholder was aware of the lost cargo prior to obtaining the insurance coverage for it. The holding is consistent with the rule applied in Florida and elsewhere that insurance is intended to protect against fortuitous events, as opposed to a loss that the policyholder knew already occurred.
2. Maritime Pilotage – Public danger – Public fraud
Barrie Youde a maritime lawyer and former pilot has been tireless in his efforts to ensure that pilotage standards around the waters of this country are not allowed to slide. He writes:-
A case presently before the Independent Police Complaints Commission (IPCC Ref: 2017/085649) accuses the Metropolitan Police of having failed to take adequate steps in a case of public corruption in the matter of maritime pilotage, where compulsory pilotage is imposed upon shipping which navigates in the many ports and harbours of the United Kingdom.
A report was sent to the Director of Public Prosecutions in July 2015 showing that at a port where compulsory pilotage is imposed, regulated standards had been abandoned by the harbour authority for its own benefit on its own averment. Thus, shipping at that port remains not only obliged to engage sub-standard pilots but also to trust them and to pay for their services. Regulatory law as determined in accordance with the Pilotage Act 1987 has been freely broken for the open benefit of the harbour authority. There appears to be a case both of public danger and public fraud. This follows similar cases at two other ports in recent years. All three cases have been reported to the Department for Transport, which as yet has taken no action whatsoever to uphold the law.
In the present case the Director of Public Prosecutions referred the case to the Metropolitan Police in November 2015. In July 2016 the Metropolitan Police opened a criminal investigation (Ref: 6530204/16) naming a Crown minister in the Department for Transport as a suspect in the matter of misconduct in public office, but has taken no further step.
On 25th April 2017 the Office of the Prime Minister directed that the matter should be looked into “in further detail”. On 25th May 2017 the Department for Transport, in defiance of the Prime Minister’s directive, stated that it would not reconsider anything; and there is thus something very seriously at fault in pilotage administration in the United Kingdom. There is no such thing as a legal power to impose a compulsion without strict compliance with existing law. The findings of the IPCC are awaited.
3. Containers Lost at Sea
Anne Marie Kappel the Vice President of the World Shipping Council in Washington D.C. writes:-
The World Shipping Council (WSC)has released an update to its survey and estimate of containers lost at sea. WSC undertook the first survey of its member companies in 2011, with updates in 2014 and 2017.
Based on the most recent survey results, WSC estimates that for the combined nine year period from 2008 to 2016, on average, there were 568 containers lost at sea each year, not counting catastrophic events, and 1,582 containers lost at sea each year including catastrophic events. On average, 64% of containers lost during this period were attributed to a catastrophic event.
4. R.M.S Lusitania & Modern Safety of Life at Sea
Maritime lawyer Michael Kingston is giving a talk on 25th July at the Rochestown Park Hotel in aid of the new Irish Community Air Ambulance – to be based at Cork Airport.
The talk is about the Lusitania, modern safety at sea (lessons to be learnt from the tragedy – the importance of implementing safety of life at sea regulations, keeping on top of the rules of engagement in war, and the duty to rescue), and Cork’s prominence and potential in maritime affairs.
It is also about our close bond in Cork / Ireland with the United States and the importance of the tragedy in changing US history, ultimately bringing the US into World War One and becoming the interventionist country in foreign affairs that we see today. Following work with the United States and relationships built the talk is being supported by Captain John Mauger, Commanding Officer of the United States Coastguard Maritime Safety Centre HQ, Washington D.C, and Dana Edisness, Head of North Atlantic and Arctic markets for the State of Maine. Dana is flying in on the Norwegian flight from Boston to Cork to highlight it. Here is a recent article in the Southern Star.
The talk will be dedicated to Rescue 116 and is in aid of the very important Irish Air Community Ambulance.
The tickets are on Eventbrite (search Lusitania / Michael T Kingston)
There are some fantastic prizes in the raffle:
2 Return tickets Cork – Boston with Norwegian;
2 return tickets to Airport of choice, London, courtesy of Cork Airport;
Copy of Lloyd’s of London ‘Wreck Removal Report’;
Copy Lloyd’s List’s historic book ‘The future of shipping since 1734’; and
A signed copy of Stanley Johnson’s Brexit Thriller, Kompromat- just launched on Thursday (13th July) – in which he highlights Ireland, Co Cork, and the village of Goleen – and our maritime work .
Here is Kingston’s radio interview on Cork Today from Thursday 13th in Mallow.
https://soundcloud.com/cork103/michael-kingston-podcast
5. Handel’s Water Music is 300
Amusing take on the Anniversary of the first performance of a non Brexit kind of music:-
http://tinyurl.com/HandelsWaterMusic
6. People and Places
P&I Club’s Centennial Dinner
Celebrating 100 years of operations, the American Club’s Board and Managers welcomed shipowner members, business contacts and rival clubs to its Centennial Reception at Cipriani in New York on June 22nd, altogether 500 guests..
The American Club was founded in 1917 as a result of British sanctions during the First World War that prevented neutral ships trading with Germany. Requisition of vessels by the US government during both the First and Second World Wars ensured that for a time the American Club was the world’s biggest P&I club.
Watch a video on The American P&I Club past and present here:-
http://www.american-club.com/video.html
———-
A Director of the OW Bunker Singapore subsidiary has been charged with a $122.9 million fraud by Denmark’s general prosecutor.The decision of Denmark’s general prosecutor to bring the case to court follows the filing of criminal charges against a number of senior OW managers last March, including Lars Møller, the former CEO of Dynamic Oil Trading in Singapore. The charge against the former director of DOT is that $122.9 million in unauthorised credit was extended to a Singapore-based bunker firm (Tankoil).
———
Digital data and compliance firm ChartCo has appointed Hans Gieskes as Chairman.
In addition to chairing a range of companies, including the AXIO Data Group, Mr Gieskes has been CEO and President of organisations such as Cision – a provider of cloud-based software and services for PR professionals, and LexisNexis – a supplier of online information and services for legal and risk-management industries. Almost all of his career has been associated with digital technology businesses.
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.
Looking around for known loss cases, we turned up this highly readable item by Keith W Heard of New York-based Burke & Parsons looking at the legal issues involved in the use of email in shipping. It appeared in Back Issue 13 of November 2000:-
E-vidence of change
CONCERNS about the authenticity and reliability of shipping contracts have existed for centuries. Indeed, the very phrase carta partita, from which charter party is derived, is Latin for ‘divided document’, referring to the medieval practice of writing contract terms in duplicate on a single sheet which was then divided up so that each part fitted the other. The requirement that the two sheets match up presumably prevented either owner or charterer from altering the terms or challenging the authenticity of the document.
Although the days of the divided document are long gone, the need for authentication and integrity with respect to commercial contracts has remained. In the latter part of the century just ended, these needs were largely satisfied by telex and fax. Twenty years ago, owners, charterers and their brokers used telex on a daily basis to negotiate charters and to fix ships. The telephone was faster, but failed to provide a written record of who said what to whom, leaving the door open for disputes about whether a contract had been agreed and, if so, what its terms were. Telex, on the other hand, provided a written record, complete with the date and time of transmission and proof of receipt by the intended recipient in the form of an answerback.
Nevertheless, the telex was not foolproof. In 1983, a US bank’s London office reportedly transferred $13.5m in Colombian government funds on the basis of telexes that turned out to be fraudulent. The telexes bore the correct answerback for the Colombian central bank, but lacked a cryptographic test key. The US bank apparently did not always demand test keys for such transfers and, in this case, fell victim to a scam. The thieves absconded with the money, and a subsequent investigation showed that an answerback could be forged.
Telex was routinely used for contract negotiations and other vital correspondence. The decline in its use undoubtedly had less to do with concerns about the integrity of answerbacks than with the growing use of a convenient alternative.
As the 1980s developed, the use of fax machines encroached on the dominance of telex, leading to a hybrid situation where some companies or brokers preferred fax, while others refused to give up on telex. The cost of fax transmission was generally cheaper and the need to have a full-time operator for a telex machine was eliminated because, with a little instruction, anyone in the office could send a fax, without having to retype documents. But fax raised issues about authenticity and reliability, from a legal standpoint.
It is sometimes difficult to tell whether fax transmissions are complete. If the receiving machine is configured to have a high tolerance of errors, lines in a document can be corrupted or dropped entirely, with no tell-tale sign at either end. One can imagine the problems that could result from the unknown loss of one or more lines of text from a fax sent during the heat of contractual negotiations.
Questions of authenticity can also arise with fax transmissions. The header at the top of a transmitted fax is supposed to indicate the identity of the sender (by name, fax number, or both) but this information can easily be falsified.
Despite these drawbacks, the convenience of fax enabled it to gain wide acceptance as a means of commercial correspondence. However, the pace of technological change and the need for even more speed in communications has dealt a blow to the primacy of fax. Just as telex gave way to fax, it is now apparent that fax has lost major ground to electronic mail.
Unlike telex or fax transmissions, an email message can be sent without any use of paper. The message is typed into a computer and sent electronically to another computer, where it appears on-screen. Only if the sender or recipient wants to preserve the message as a document does it actually need to be printed on paper. This aspect of e-mail may affect how it is viewed by the courts in certain situations.
The legal issues presented for decision depend on what is disputed by the parties. If neither side challenges the existence of a contract, judges and arbitrators will not need to determine whether an agreement formed by an exchange of email messages is legally enforceable.
Interesting issues are presented, however, if one party contends that an agreement based on an exchange of such messages is not legally enforceable. The legal analysis may vary, depending on when the challenge to enforceability is made. For example, if Party A materially changes its position (i.e., relies to its detriment) on promises made in emails sent by Party B, the tribunal could conclude that an enforceable contract exists on the basis of promissory estoppel, without even considering whether email can be the basis of a binding contract.
The more fundamental issue is presented by a party which challenges the existence of a contract after negotiations have been concluded but before performance has begun. Can it be validly argued that, because the communications between the parties consist only of emails, a legally enforceable contract was not created?
Before recent legislation, this issue could have been troublesome for courts or arbitrators deciding cases governed by state law in the US. Nearly all states have a statute of frauds requiring that certain types of contracts be in writing and signed to be legally enforceable. Contracts governed by the statute of frauds include contracts that cannot be performed in less than a year, surety ship agreements and contracts for the sale of goods worth $500 or more.
Does an email contract satisfy the requirements of the statute of frauds? Is it in writing and signed? Courts and arbitrators applying state law would have been confronted with this issue. However, many states have enacted legislation – in some states based on the Uniform Electronic Transactions Act – designed to overcome problems with the enforceability of contracts agreed electronically, including problems related to the statute of frauds.
Further action by the states may not be necessary since a new federal statute, the Electronic Signatures in Global and National Commerce Act, took effect on October 1 this year. The federal statute provides that a contract ‘may not be denied legal effect, validity, or enforcement solely because it is in electronic form’ and appears designed to overcome the obstacle presented by the statute of frauds on a national level.
Aside from concerns about the statute of frauds, it is difficult to see that there is anything inherent in the nature of an email contract that would render it unenforceable. There have apparently been no court cases in the US that have dealt directly with the enforceability of a contract consisting solely of emails. But in one case, Barman v Union Oil Company, a federal court in Oregon ruled that a proposed written agreement “together with . . . numerous email messages and memoranda” was a contract for purposes of the state’s declaratory judgment statute.
Would the same result have been reached if all communications in the case had been email messages. It is difficult to predict the outcome of cases in new areas of the law, but there is no clear reason, apart from the statute of frauds, why such communications could not form a contract, assuming that all the usual elements of a contract (e.g., offer, acceptance and consideration) were present.
Concerns about the lack of a signed writing should not exist in maritime disputes in the US since, except for newbuilding contracts, shipping contracts are not governed by the statute of frauds. Indeed, it is a longstanding rule of US maritime law that even oral contracts are enforceable. Accordingly, there should be fewer concerns about the legal validity of email contracts in maritime law, at least in the US, than with non-maritime contracts.
However, we should not confuse legal enforceability with authenticity and reliability. Like telex and fax transmissions, email can be falsified or spoofed. With respect to authenticity, header information can be forged and the originator of an email message can make it appear that the transmission came from another source. With respect to reliability, it can be difficult for one sending an email to prove that it was actually received by the intended recipient. Senders believes they have transmitted their message, and indeed, they have, but for a variety of reasons it may never be received by the intended recipient. If this message is the acceptance of an offer otherwise supported by (legal) consideration, senders will believe they have performed the final act needed to create a contract, while intended recipients will believe their offer was quietly rejected or is still under consideration.
Despite the recent legislation, the mere fact that email was the method of communication does not necessarily mean a contract was formed. The proponent of the agreement must still prove that the evidence of the contract (e.g., the printed email messages) is both authentic and reliable.
The fact that email transmissions can be spoofed, falsified or misdirected does not mean tribunals should adopt a rule that email agreements are unenforceable per se. Similar concerns exist about telex and fax. Judges and arbitrators should not impede the use of technical innovations by rejecting agreements based on new means of communications. But they should make sure that, if challenged, such agreements pass muster under traditional rules of evidence and contract law.
Bankers
A rancher applied for a loan at a bank.
“How much do you want to borrow?” asked the loan interviewer.
“Twenty-five thousand dollars.”
“All right, but you’ll have to show security. How many bulls do you have on your ranch?”
“Two hundred.”
“That should be enough security. The loan is approved.”
Several months later the rancher returned to the bank to repay the loan.
“Here’s your money,” he declared, peeling off bills from a huge bankroll.
“Well, sir, let me congratulate you on your sudden prosperity,” said the interviewer, eying the bankroll. “And for safety’s sake, may I suggest you deposit that extra money in our bank?”
Staring at him coldly, the rancher asked, “How many bulls do you have?”
You Know You Are Living in 2017 When:-
1. You have 10 passwords, but can only remember one.
2. You haven’t played solitaire with real cards in years.
3. You have a list of 15 phone numbers to reach your family of three.
4. You e-mail your buddy who works at the desk next to you.
5. Your reason for not staying in touch with friends is that they do not have e-mail addresses.
6. When you go home after a long day at work you still answer the phone in a business manner.
7. When you make phone calls from home, you accidentally insert a “9” to get an outside line.
8. You’ve sat at the same desk for four years and worked for three different companies.
9. Your company’s welcome sign is attached with Velcro.
10. Your resume is on a flash drive in your pocket.
11. You can only write on ‘sticky pads’.
12. Your biggest loss from a system crash was when you lost all of your best jokes.
13. Your supervisor doesn’t have the ability to do your job.
14. Contractors outnumber permanent staff and are more likely to get long-service awards.
15. Board members salaries are higher than all the Third World countries annual budgets combined.
16. Interviewees, despite not having relevant knowledge or experience, terminate the interview when told of the starting salary.
17. Free food left over from meetings is your staple diet.
18. Your supervisor gets a brand-new state-of-the-art laptop with all the latest features, while you have time to go for lunch while yours boots up.
19. Being sick is defined as you can’t walk or you’re in hospital.
20. There’s no money in the budget for the five permanent staff your department desperately needs, but they can afford four full-time management consultants advising your boss’s boss on strategy.
21. Your relatives and family describe your job as “works with computers.”
22. You read this entire list, and kept nodding and smiling.
23. As you read this list, you THINK about forwarding it to your “friends.”
[Jokes Courtesy of Paul Dixon’s Joke-of-the-Day Zine]