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WILKER BROS. CO. v. LUMBERMANS MUT. CAS. CO.

October 26, 1981

WILKER BROTHERS COMPANY, INC., Plaintiff,
v.
LUMBERMANS MUTUAL CASUALTY COMPANY, Defendant



The opinion of the court was delivered by: BRIEANT

MEMORANDUM AND ORDER

Plaintiff in this diversity action seeks to recover the sum of $ 107,421.30 under a policy of insurance for loss of 1,990 dozen pairs of pajamas, in Nicaragua. Under circumstances detailed below, both parties seek summary judgment.

Plaintiff (hereinafter sometimes "Wilker") is a New York corporation which was engaged in the importation of pajamas to the United States, manufactured wholly or partly at the 10,000 square foot plant of Vestidos, S.A., a Nicaraguan corporation located at San Marcos, Nicaragua. San Marcos is near the Pacific Ocean coast of Nicaragua. It is located about 42 miles from Managua, the capital of Nicaragua and center of the recent political turmoil discussed below.

 The stock of Vestidos, in turn was owned one-half by principals and officers of plaintiff, and the remainder by three designees of General Anastasio Somoza Debayle ("General Somoza"), the Chief of State of Nicaragua until his resignation and flight on July 18, 1979.

 The change of administration in Nicaragua occurred as a result of a civil war or insurrection, as a result of which the Sandinistas, with a little help from their friends (in Washington, D.C. and elsewhere) procured the overthrow of the government after a considerable amount of civil commotion and street fighting.

 At some time thereafter, the new Nicaraguan Sandinista government nationalized General Somoza's private financial interests. It now owns 50% of Vestidos and controls the business, which is now inactive.

 In early 1979 Wilker began shipping cut pieces of pajamas to Vestidos at San Marcos, Nicaragua, to be sewn into finished garments by the cheaper Nicaraguan labor there available, and thereafter to be reshipped to the United States for sale here. Ownership and title of these goods remained at all times in Wilker.

 Wilker obtained a traditional open marine cargo policy of insurance from defendant to cover the value of plaintiff's goods during their movement from the United States to Nicaragua, during the return journey, and while the goods were sojourning at the Vestidos plant for purposes of processing or being held for return shipment.

 On November 12, 1979 defendant received a written notice dated November 7, 1979 from Wilker's insurance broker, that on July 31, 1979 a "theft occurred at insured's plant." By a subsequent letter, the broker advised that the loss was not a theft, but was the result of looting by a mob of local citizens on July 30, 1979.

 Although claiming that the loss was reported four months late, defendant agreed to investigate the claim under a full reservation of rights. It retained a marine surveyor who made an inquiry or investigation in Nicaragua to the best of his ability to ascertain the circumstances of the loss. Plaintiff and its officers wisely remained out of Nicaragua. In view of ongoing incidents in Iran, it doubted the ability of the American government to protect life and liberty anywhere overseas, and feared that the Sandinistas or the local people might confuse plaintiff's representatives with representatives of the hated Chief of State Somoza.

 It is undisputed that the Vestidos factory had been closed from early June 1979 until the new government in Nicaragua permitted it to reopen during October 1979. The revolutionary government prohibited representatives of Wilker or Vestidos from visiting their plant until September 1979, at which time it was under the control of armed representatives of the revolutionary government, which thereafter nationalized the 50% Somoza ownership in Vestidos.

 The local Sandanista government authorities at San Marcos furnished an official certificate that the Vestidos plant had been looted on or about July 5th, not July 31st, during and as a result of the "War of Liberation." These authorities also mentioned the fact that General Somoza's ownership interest in the plant motivated the good citizens of San Marcos to satisfy their need for pajamas at plaintiff's expense.

 Defendant denied Wilker's claim on the ground that the alleged loss was a consequence of civil war, revolution, rebellion, insurrection or civil strife arising therefrom, all perils excluded under the policy.

 Although both parties seek summary judgment, each raises the specter of "genuine disputed issues of fact." There seems to be little that a trial could add to the record already before this Court. Plaintiff has the burden here to show that the loss was within those perils insured against, reading the policy as an entirety, including the exclusion clauses. At a trial plaintiff cannot prove any additional facts, and will know no more than it knows today.

 All of the available evidence points overwhelmingly to the conclusion that Wilker's loss was a consequence of "civil war, revolution, rebellion, insurrection or civil strife arising therefrom," terms of art well known to the Court, the insurance industry and the business community, for over a century.

 Judge Milton Pollack of this Court rendered a recent opinion in Ope Shipping Ltd. v. Allstate Insurance Company, Inc., 79 Civ. 5225, dated August 31, 1981, not yet officially reported. Familiarity with Judge Pollack's opinion is assumed. As the facts relied upon by Judge Pollack are facts of a historical nature, of which a court may take judicial notice under Rule 201, F.R.Evid. there appears to be no need to relitigate the issues in this lawsuit. As Judge Pollack pointed out (Opinion, p. 5):

 
"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 ...

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