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Ope Shipping v. Allstate Insurance Co.

decided: August 30, 1982.

OPE SHIPPING, LTD. AND EL PORVENIR SHIPPING COMPANY, INC., PLAINTIFFS-APPELLANTS,
v.
ALLSTATE INSURANCE COMPANY, INC., UNITED STATES FIDELITY & GUARANTY COMPANIES, INC., VARIOUS BRITISH UNDERWRITERS AND UNDERWRITERS AT LLOYDS, DEFENDANTS-APPELLEES; VADOR SHIPPING, LTD., AND CIA. DE NAVEGACION LA LIBERTAD, S.A., PLAINTIFFS-APPELLANTS, V. ALLSTATE INSURANCE COMPANY, INC., UNITED STATES FIDELITY & GUARANTY COMPANIES, INC., VARIOUS BRITISH UNDERWRITERS AND UNDERWRITERS AT LLOYDS, DEFENDANTS-APPELLEES; AGUA SHIPPING, LTD., AND CIA. DE NAVEGACION CORINTO, S.A., PLAINTIFFS-APPELLANTS, V. ALLSTATE INSURANCE COMPANY, INC., UNITED STATES FIDELITY & GUARANTY COMPANIES, INC., VARIOUS BRITISH UNDERWRITERS AND UNDERWRITERS AT LLOYDS, DEFENDANTS-APPELLEES; DURAS SHIPPING, LTD., AND NICARAGUENSE, S.A., PLAINTIFFS-APPELLANTS, V. ALLSTATE INSURANCE COMPANY, INC., UNITED STATES FIDELITY & GUARANTY COMPANIES, INC., VARIOUS BRITISH UNDERWRITERS AND UNDERWRITERS AT LLOYDS, DEFENDANTS-APPELLEES



Appeal from a judgment of the United States District Court for the Southern District of New York, following a non-jury trial before Judge Milton Pollack, which denied plaintiffs recovery of the insured value of four ships. Affirmed in part and reversed in part.

Waterman, Van Graafeiland and Meskill, Circuit Judges.

Author: Van Graafeiland

VAN GRAAFEILAND, Circuit Judge:

Plaintiffs appeal from orders and a judgment of the United States District Court for the Southern District of New York, 521 F. Supp. 342, Pollack, J., denying them recovery of the insured value of four ships. We affirm in part and reverse in part.

In June, 1979, the El Salvador, the Hope, the Managua and the Honduras were owned respectively by three Panamanian corporations and one Nicaraguan corporation, all apparently under the control of General Anastasio Somoza. The ships were registered under the Nicaraguan flag. The four vessels were lost to their owners during the 1979 Nicaraguan revolution which resulted in the overthrow of the Somoza government by Sandinista forces. The chronology of events leading to the demise of the Somoza regime is set forth in the opinion of the court below, reported in 521 F. Supp. at 342.

On June 17, 1979, the Hope was taken over by four armed crew members who identified themselves as Sandinistas and ordered the ship's captain to proceed to Cuba. In Puerto Nuevita, Cuba, Cuban authorities came aboard the Hope and sailed it to Mariel, Cuba, where it remained until it was returned to Nicaragua.

On June 22, the El Salvador was removed from the Canal Zone to Panamanian waters while its captain was ashore. The chief mate stated that five armed crew members, who identified themselves as Sandinistas, ordered the transfer and hoisted the Sandinista flag. The Panamanian Maritime National Guard took control of the ship. The Honduras and the Managua suffered similar fates around June 22. The Honduras was taken from the Canal Zone into Panamanian waters, while the Managua slipped out of El Salvador in contravention of orders and also was taken to Panama.

On June 24 and 28, 1979, Somoza informed his longtime business associate Joseph Baittiner about the fate of the ships. At Somoza's request, Baittiner then undertook to transfer title of the ships to Cayman Islands corporations. On July 9, papers were executed for the transfer of the Hope from El Porvenir Shipping Co., Inc. to OPE Shipping, Ltd., the El Salvador from Cia. de Navegacion La Libertad, S.A., to Vador Shipping, Ltd., the Honduras from Marina Mercante Nicaraguense, S.A. to Duras Shipping, Ltd. and the Managua from Cia. de Navegacion Corinto, S.A. to Agua Shipping, Ltd.

On or before July 10, the marine risk coverage on the ships was cancelled, either for non-payment of premiums or because of the change in ownership. On July 11, the war risk insurers authorized the assignment of their policy to the Cayman Islands corporations. On July 13, the vessels were registered under the British flag in the Cayman Islands.

The ships remained in Cuba and Panama until after the Sandinistas gained complete control of the Nicaraguan government. The vessels were returned to Nicaragua in August, 1979, and on September 28, 1979, plaintiffs sued in the court below to recover their insured value.

In the summer of 1980, the Empresa Nacional de Puertos, an agency of the Sandinista government, commenced actions in the First District Court of Managua, Nicaragua, to recover port charges for the four ships which had accrued while they were laid up in Corinto, Nicaragua. The ships were attached pursuant to judicial orders, and, following the entry of judgments, were offered for sale at public auction and purchased by Empresa for the amount of the charges owed.

Plaintiffs claimed that their losses were covered by both the marine risk and war risk policies. The district court held that they were covered by neither. For the reasons discussed below, we affirm as to the marine risk but reverse as to the war risk.

THE MARINE RISK POLICIES

At the time the ships were diverted from their courses, the marine risk insurance was in effect. The marine policy covered loss due to barratry of the master and mariners and other like perils, but specifically excluded loss resulting from civil war, revolution, rebellion, insurrection or civil strife arising therefrom, ...


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