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Industrial Waxes Inc. v. Brown

decided.: July 31, 1958.


Author: Moore

Before LUMBARD, WATERMAN and MOORE, Circuit Judges.

MOORE, Circuit Judge.

This is an appeal by defendant Brown, a subject and resident of Great Britain, from a final judgment in a diversity action entered in favor of the plaintiff, an Ohio corporation, for $43,803 plus interest and costs.

The facts dispositive of the appeal are not in dispute. The plaintiff, Industrial Waxes, Inc., is engaged in exporting petroleum waxes to South America. These shipments are covered by marine insurance issued by a group of English underwriters, of which the defendant is a member, doing business under the name of Lloyd's.

In 1951 plaintiff made a contract to sell to Nacional De Velas, S.A. of Santiago, Chile 500 tons of semi-refined paraffin wax, $7.80 per 100 lbs., FAS New Orleans, CIF Valparaiso, documents at sight through the Bank of Chile. In fulfillment of this contract it undertook to effect five shipments of waxes from Tulsa, Oklahoma to Santiago via New Orleans, La. as port of exit and Valparaiso, Chile as port of entry. The first three shipments apparently arrived without incident. The final two shipments, having a combined declared value of $43,803, on about April 9, 1951 and June 13, 1951, respectively, were transported by steamer to Valparaiso, arriving there for reshipment inland on May 3, 1951 and July 6, 1951. Upon arrival each shipment was placed in the Customs' warehouse at the waterfront and remained in storage there awaiting the procurement by the purchaser of the requisite amount of United States dollars to meet the sight documents.

On October 5, 1951, more than five months after the arrival of the next to last shipment and three months after the final shipment, the waxes were still in the Customs' warehouse on the Valparaiso waterfront. The undisputed finding of the trial court was that "a delay of this length in a customs' warehouse pending entry was neither unusual nor unexpected and was long a matter of a common knowledge to exporters to the West Coast of South America." On the evening of October 5, 1951 a fire ravaged the warehouse and destroyed the waxes.

To insure its merchandise plaintiff obtained from Lloyd's an annual open cover of insurance for its foreign shipments. The open cover set forth the voyages covered ("To, from and/or between places Anywhere in the World"), the types of merchandise covered, the applicable rates, and the general terms of the conditions of insurance. The rates relevant here are those applicable to general merchandise shipped under deck from the Gulf Coast, U.S.A. to the West Coast South America, Interior at .78625% of declared value and from the Gulf Coast to West Coast South America Ports at .68%. Of special significance is the warehouse extension clause which contains the following rate:

"Each thrity (30) days, or part thereof, in excess of the first thirty (30) days 0.125%"

Attached to and made a part of the open cover is a series of printed clauses entitled "Institute Cargo Clauses (W.A.)." The actual insurance on specific shipments was obtained by the issuance of individual certificates of insurance under the open cover.

At the bottom of the printed page of Institute Cargo Clauses attached to the open cover the following caveat appears in bold type:

"Note - It is necessary for the assured to give prompt notice to Underwriters when they become aware of an event for which they are 'held covered' under this policy and the right to such cover is dependent on compliance with this obligation."

Clause 1 of the Institure Cargo Clauses is a warehouse to warehouse clause under which the insurance on a shipment would have expired thirty days after arrival at the port of discharge (Valparaiso). However, the trial court found, and the appellant does not dispute the fact, that this clause was superseded by the warehouse to warehouse clause contained in the certificates of insurance.

Upon issuing the open cover Lloyd's agent at Montreal would furnish plaintiff with a pad of printed certificates of insurance. To insure a shipment, the plaintiff would fill out on a certificate the shipping data, the declared value, and any additional conditions authorized by the certificate, and attach it to the shipping documents, sending a duplicate to Lloyd's Montreal agent for billing purposes. Except for the shipping data, the two certificates involved here are identical.

The caveat "Note" contained in the open cover is repeated in bold face type at the bottom of each certificate. This warning is reinforced by Clause ...

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