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Hamdi & Ibrahim Mango Co. v. Reliance Insurance Co.

April 27, 1961


Author: Lumbard

Before LUMBARD, Chief Judge, and SWAN and WATERMAN, Circuit Judges.

LUMBARD, Chief Judge.

This case turns on the construction of several contracts of insurance issued for the benefit of the plaintiff, a Jordanian merchant company (hereinafter Mango), by the predecessor in interest of the defendant, Reliance Insurance Co., a Pennsylvania corporation engaged in the business of marine and war risk insurance.

In 1947 Mango, which had recently become a Chrysler dealer for what was then Transjordan, contracted with the Export Division of the Chrysler Corporation for the purchase of certain cars, trucks and parts. These goods were to be transported from Detroit to New York City and Baltimore, and from there by sea to the port of Haifa in Palestine and then overland to Amman. Title to the goods was to pass to Mango when payment was made in New York through the Ottoman Bank upon presentation to the bank's New York correspondent of documents evidencing title. The freight forwarders procured for Mango certificates of insurance on the goods under an open policy (No. OP 939-N) issued to Chrysler in 1945, loss being payable to Chrysler until title and risk of loss passed to Mango, and it is the construction of several of these certificates which is in issue in this case. The insurance contracts were issued by the Fire Association of Philadelphia, to whose interest the Reliance Insurance Co. succeeded in 1958.

The goods were paid for, and transported from the United States in eighteen shipments under bills of lading dated between December 9, 1947, and March 25, 1948. All were landed in Haifa or Tel Aviv, pursuant to the instructions in the bills of lading which directed that the goods be unloaded at Haifa, or, if "discharging cannot be commenced immediately upon arrival and continued normally owing to interdict of * * * congestion," then at the nearest safe and convenient port. In the meantime, however, hostilities had broken out in Palestine between the Israelis and the Arabs after the resolution of partition adopted by the General Assembly of the United Nations on November 24, 1947. The planned course of travel for the goods - overland from Haifa to Amman - was no longer feasible because passage was dangerous due to hostilities, and Mango decided to ship them by sea from Haifa or Tel Aviv to Beirut, whence they could be safely transported overland to Amman.

There were eighteen shipments in all. Fourteen were unloaded in Haifa. Seven of these, along with thirty-four cases from another shipment consisting of forty cases in all, reached Amman safely by way of Beirut. The other six cases in the eighth shipment had been stolen from the port area where they were stored, and the loss was discovered when arrangements for delivery to Beirut were being made on April 19, 1948. Of the six shipments which were delivered to Haifa and never arrived in Beirut, the evidence presented at the trial established that two shipments were destroyed by mortar fire during the clash between the Israelis and the Arabs in Haifa on April 21-22, 1948, and the other four disappeared from Haifa sometime between that date and June 24, 1948. Four shipments were unloaded in Tel Aviv, and all of these were requisitioned by the Israeli government in June and August 1948. Chrysler Corporation presented a claim to the Israeli government for one of these shipments since, due to a technical flaw in the transmission of documents, title had not passed to Mango. Partial payment was made to Chrysler, which then credited the receipts to Mango's account. Reimbursement for the other requisitioned shipments was not available since they had been seized as enemy property.

In a telegram dated March 14, 1948, and a letter dated March 15, 1948, Mango notified the Chrysler Corporation of the changed route, and requested Chrysler to arrange amendments of the insurance certificates. Another letter to the same effect, dated March 15, 1948, was addressed to the insurer, and requested amendment of thirteen specified certificates of insurance so "as to cover the route from Haifa to Beirut over sea and from Beirut in transit to Amman on land," and to "extend the validity of these certificates to such a time as may be sufficient for the merchandise to take until it reaches Amman via Beirut." In a letter of March 26, 1948, Chrysler requested the insurance agency through whom the certificates had been issued to arrange "proper insurance coverage" and obtain assurances from the insurer "that full protection will be extended in terms of the policy contract." On April 1, 1948, the insurer replied directly to Mango advising "that we are willing to extend the validity of these certificates subject to policy terms and conditions and additional premiums to be determined when full facts are known." Subsequently, the insurer issued seven endorsements to various of the certificates of insurance covering goods which had safely reached Amman, and extending the policy, "subject to all its terms and conditions," to include, "storage while awaiting transshipment, and during transshipment via Beirut, Syria."

The focus of inquiry in this case is whether the goods destroyed or lost in Haifa and those seized in Tel Aviv were covered by the terms of the insurance policies. Mango also demands reimbursement for its expenses in rerouting the seven-and-a-fraction shipments to Beirut under the clause of the insurance policy which obligates the insured to "sue, labor, and travel for, in and about the defense, safeguard and recovery of the * * * goods," and which grants a right of action against the insurer for such costs. Finally, Mango demands return of the premiums paid for the seven endorsements issued by the defendant on the ground that the endorsements granted no coverage beyond that provided by the certificates themselves, and that payment was made under mistake or duress.


The open policy issued to the Chrysler Corporation by the Fire Association of Philadelpha undertook to insure merchandise shipped by Chrysler, loss to be payable to Chrysler or to its order. Under this open policy, certificates of insurance were issued payable to Chrysler or to the Ottoman Bank to cover specific shipments. Chrysler endorsed its policies to the order of Mango. The certificates listed certain special conditions which, under the open policy's provision for written amendments, became terms of the contract of insurance. These conditions subjected the insurance relation to four specific standard clauses issued by the American Institute of Marine Underwriters: Amended F.C. & S. (Free of Capture and Seizure) Warranty (July 1945), Marine Extension Clauses (April 1943), S.R. & C.C. (Strikes, Riots and Civil Commotions) Endorsement Form No. 5-A (Feb. 1941), and War Risk Insurance Form 3-M (April 1947). The body of the certificates, all of which carried identical terms, provided that the insurance attach "from the time the goods leave the Warehouse and/or Store at the place named in the policy for the commencement of the transit * * * until the goods are discharged overside from the overseas vessel at the final port. Thereafter the insurance continues whilst the goods are in transit and/or awaiting transit until delivered to final warehouse at the destination named in the policy or until the expiry of 15 days (or 30 days if the destination to which the goods are insured is outside the limits of the port) whichever shall first occur * * * Held covered at a premium to be arranged in the event of transshipment, if any, other than as above and/or in the event of delay in excess of the above time limits arising from circumstances beyond the control of the Assured."

Excluded from coverage under the policy were all the risks listed in the Amended F.C. & S. Warranty (July 1945), reproduced in the margin,*fn1 except to the extent that some "other provision refers specifically to the risks excluded" by the F.C. & S. Warranty. Since the warranty extended to "requisition or nationalization" and to "consequences of hostilities or warlike operations," the damage caused by the seizure in Tel Aviv or the bombardment in Haifa, if the latter amounted to a "warlike operation," would be covered only if expressly reassumed by some other clause. This was done by the War Risk Insurance Form which "separately insured" the shipments described in the certificates against "capture, seizure, destruction or damage by men-of-war * * * and other warlike operations * * * in prosecution of hostilities." The form provides that "insurance attaches only as the goods are first loaded on lighter, craft or vessel * * * and ceases to attach as the goods are finally landed from the vessel, craft or lighter at the final port or place of discharge." However, it "includes transshipment and intermediate overland transit, if any." Expressly denied coverage is "commandeering, preemption, requisition or nationalization by the government (de facto or otherwise) of the country to or from which the goods are insured." All insurance other than that provided by the War Risk Form was warehouse-to-warehouse coverage; war risks were covered only from the port of shipment to the port of discharge. All the certificates (except one which covered goods which arrived in Amman) described the shipments as traveling from Detroit to Amman via Haifa and New York.

The trial judge held that the goods stolen from the Haifa pier before the outbreak of hostilities were insured by reason of the warehouse-to-warehouse coverage of the open policy since the goods had not arrived at Amman, "the final warehouse at the destination named in the policy," and the loss was not due to warlike operations. On this appeal the defendant concedes liability for the value of these goods.

The trial judge further held that the correspondence between Mango and the insurer constituted an amendment of the destination as specified in the certificates of insurance from "Amman via Haifa and New York" to "Amman via Beirut and New York." He held that the activity in Haifa on April 21-22, 1948, amounted to "warlike operations," so that coverage was provided under the War Risk Form as to the enumerated certificates until the goods reached Beirut, the port of discharge under the amended certificates. As a result of the amendment, the court held, the "country to * * * which the goods are insured" under the War Risk Form became Syria (Lebanon) instead of Palestine. Thus, the seizure in Tel Aviv was not within the clause which denied coverage to requisitions by the country of destination. In sum, the district court granted a recovery for those goods covered by certificates enumerated in Mango's letter of March 15, 1948, which were lost or destroyed in Haifa or requisitioned in Tel Aviv. We agree with this construction of the correspondence and affirm that portion of the judgment of the district court which granted a recovery to the plaintiff.

Judge Sugarman found that a state of war existed in Haifa on April 21-22, 1948, when the goods stored at the Haifa port were destroyed. This finding is supported by the record and is a reasonable inference from the testimony adduced at the trial. Mango's right to recover for losses in Haifa therefore depends on the duration of coverage under the ...

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