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August 31, 1981

OPE SHIPPING, LTD., and El Porvenir Shipping Co., Inc., Plaintiffs,
ALLSTATE INSURANCE COMPANY, INC., United States Fidelity & Guaranty Companies, Inc., Various British Underwriters and Underwriters at Lloyds, Defendants. VADOR SHIPPING, LTD., and Cia De Navagacion La Libertad, S. A., Plaintiffs, v. ALLSTATE INSURANCE COMPANY, INC., et al., Defendants. AGUA SHIPPING, LTD., and Cia De Navagacion Corinto, S. A., Plaintiffs, v. ALLSTATE INSURANCE COMPANY, INC., et al., Defendants. DURAS SHIPPING, LTD., and Marina Mercante Nicaraguense, S. A., Plaintiffs, v. ALLSTATE INSURANCE COMPANY, INC., et al., Defendants

The opinion of the court was delivered by: POLLACK


These are admiralty actions seeking recovery from "Marine" and "War Risk" underwriters of the agreed insured value of four commercial vessels which plaintiffs contend and defendants dispute were lost as the result of perils covered by the policies of insurance issued on those vessels. The case was tried to the Court at a Bench trial.

 The vessels belonged to General Anastasio Somoza Debayle who carried the title thereto in the names of three wholly-owned Panamanian and one Nicaraguan corporation; all were registered under the Nicaraguan flag until about July 10, 1979. On or about that date Somoza caused the transfer of the nominal title from the three Panamanian and the Nicaraguan corporations to four corporations chartered in the Cayman Islands. The Panamanian, Nicaraguan and Cayman Islands corporate title holders to the vessels respectively are plaintiffs herein.

 The defendants are two separate groups of underwriters. The "Marine Risk" underwriters are Allstate Insurance Company, Inc. (50%); United States Fidelity and Guarantee Company, Inc. (25%); and Various Underwriters at Lloyd's and British Companies (25%); and the "War Risk" underwriters are described herein as Various Underwriters at Lloyds (100%).

 Both the marine and war risk policies commenced on May 15, 1979 and were to run for one year. The Allstate policy terminated on July 6, 1979 for non-payment of premiums. The other marine risk policies terminated on July 10, 1979 because of the transfer of the corporate title to the ships. The war risk insurers authorized the assignment of the war risk policy to the Cayman Islands corporations holding the title to the ships. The Cayman Islands corporations were not named in any marine policy issued by any of the defendants. Each vessel was insured at an agreed value of $ 1,000,000.

 The plaintiffs rely on "barratry" in June 1979 as the casualty which overtook the vessels and contend that this is a covered event under the marine policy. Alternatively, plaintiffs contend that the proximate cause of their loss was the Sandinista insurrection and rebellion which plaintiffs contend is a covered event under the war risk policy. All four of the ships were taken by members of their crews and diverted to countries friendly with the Sandinistas (the Nicaraguan revolutionary group) in June 1979, before the incorporation and purported transfer of title to the Cayman Islands corporations named herein as plaintiffs.

 The evidence convincingly establishes that the proximate cause of loss under the marine policy was the ongoing civil war in Nicaragua, a peril excepted by that insurance. Furthermore, the evidence showed that the property of Somoza and his family, including these vessels, was confiscated by Nicaragua in July 1979, a peril excepted by the war risk insurance. It was those events, not barratry on the part of the crews of the ships, that were the proximate causes of the casualties involved and consequently the plaintiffs herein are not entitled to any recovery from any of the defendants for the reasons more fully stated hereafter.


 It will aid understanding of the somewhat complicated facts to set forth initially a summary statement of the facts which will then be followed by the facts in more detail.

 Civil war raged in Nicaragua during 1978 through about July 20, 1979, aimed at deposing the Somoza regime. General Somoza, the dictator of Nicaragua during that period, was the owner of four vessels registered under the Nicaraguan flag which were seized by revolutionaries among the members of the crews during June 1979 and then later turned over to and confiscated by the revolutionary government which came into power in Nicaragua on or about July 20, 1979.

 The vessels were taken over by the Sandinista crew members thereof on direct orders from Sandinista authorities as agents of the insurrection and rebellion in Nicaragua against Somoza and the Somoza government. The vessels were then detained and held by Cuba and Panama by way of aiding and abetting the Sandinista crew members and their Sandinista principals in Nicaragua in furtherance of the goals and in support of the interests of the Sandinistas and were ultimately returned and delivered by such crew members to Nicaragua.

 In this lawsuit, the Somoza interests are claiming the insurance under Marine and War Risk policies that were issued covering these vessels.

 In June and July 1979 it became increasingly apparent to Somoza that the efforts to drive him from office might succeed. Therefore, although the four vessels were already in hostile hands and beyond Somoza's control, and just before he officially abdicated on July 17, 1979 (but after he had announced that he was quitting), he caused the creation of four Cayman Islands corporations and instructed that the title of the vessels be transferred to them and that the vessels be registered under the flag of the Cayman Islands, a British entity. Through a charade of paper transactions attempting to create the semblance of a "sale" of the vessels to the Cayman Islands corporations, there was a purported transfer of the nominal title and registration of the vessels from the Panamanian and Nicaraguan corporate titles and registrations to the Cayman Islands corporate titles and registrations. No money or other consideration passed and the purpose clearly was to impede and frustrate the inevitable confiscation of the vessels by the revolutionaries. The transfer was a paper sham to hide the continuing Somoza ownership from the revolutionaries and the new government of Nicaragua which contended that Somoza had plundered the government treasury and that Somoza's assets were forfeit to Nicaragua.

 Having seemingly assured himself that the purported transfer and other arrangements that he made of his interests were attended to, Somoza stepped down officially from office and fled from Nicaragua. The Junta, the new revolutionary government which took over, promptly passed laws forfeiting Somoza's goods to the State.*

 The history of the last seven week period of civil war prior to Somoza's abdication was detailed in the world press. That history is referred to hereafter but only for the chronology as a backdrop to better understanding of the evidentiary data in the trial record a chronology from sources whose accuracy so far as set forth herein cannot reasonably be questioned. See Rule 201, Federal Rules of Evidence.

 According to the New York Times (N. Y. Times Index, Nicaragua 1978, 1979, pp. 764-767; 932-35):

 1. A so-called Sandinista National Liberation Front undertook activities during 1978 to oust General Somoza; he refused to resign.

 2. There was civil strife during most of 1978 in Nicaragua seeking Somoza's resignation, continuing into 1979.

 3. On June 1, 1979 a communique to Nicaraguans broadcast by Sandinistas from Costa Rica announced that "The hour for overthrow of President Somoza has arrived" and in connection therewith the Sandinistas called a nationwide (Nicaraguan) strike beginning June 4, 1979 with insurrection to follow soon after. (Je 1, 7:6)

 4. On June 4, 1979 Nicaraguans began the general strike aimed at deposing Somoza called by the Sandinist National Liberation Front. Cities not under fire were paralyzed by the general strike aimed at overthrowing Somoza. (Je 4, 7:4; Je 6, 13:3)

 5. On June 7, 1979 President Somoza declared a state of siege to help combat the general strike and guerilla war. (Je 7, 3:2)

 6. June 14, 1979 Americans were evacuated from Managua to Panama. (Je 14, 1:5)

 7. June 18, 1979 the Sandinistas name a provisional government of five leaders (a Junta). (Je 18, 1:3)

 8. June 22, 1979, American Department of State Secretary Cyrus Vance, at an emergency meeting of the Organization of American States calls for replacement of the Somoza regime; Panama recognizes the provisional government named by the Sandinistas. (Je 22, 1:6)

 9. June 24, 1979, the OAS calls for the immediate and definitive replacement in Nicaragua for President ...

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