The opinion of the court was delivered by: SPRIZZO
Plaintiff, Howard Fuel Corporation ("Howard Fuel"), command this action pursuant to the admiralty and maritime jurisdiction of the United States, 28 U.S.C. § 1333 (1982), seeking to recover damages from its cargo insurance underwriters, Lloyd's Underwriters, et al. (hereinafter collectively referred to as "Lloyd's"). The case was tried before this Court, and the parties have submitted post-trial memoranda and proposed findings of fact and conclusions of law.
In 1972, plaintiff engaged Newport Brokerage Corporation ("Newport"), a domestic insurance broker, to secure marine insurance covering, among other things, cargo risks. Newport, acting on plaitiff's behalf, then contacted a London-based broker, Hinton, Hills and Coles Limited ("Hinton"), which in turn contacted Seascope Insurance Services Limited ("Seascope"), a "Lloyd's broker."
Seascope placed the cargo risk with Lloyd's. On December 7, 1982, Lloyd's issued an open cargo insurance policy covering, inter alia, plaintiff's fuel oil shipments. Exhibit ("Exh.") 1. The policy took effect on June 15, 1972 and continued until January 1, 1974.
On November 26, 1973, the M/T "Manuella" suffered a boiler explosion while carrying a cargo of plaintiff's fuel oil from Priolo, Italy to the Port of New York. The vessel was towed to a New York shipyard for repairs on November 28, 1973. The shipowners declared general average on November 30, 1973, and the voyage was terminated.
Howard Fuel's cargo remained on board until February 1974, when plaintiff began to discharge the fuel oil into barges for delivery to plaintiff's nearby terminal in Bayonne, New Jersey.
The discharge operation began on February 4, 1974 and continued until March 5, 1974. A survey conducted during the discharge operation revealed an 8,260.75 barrel shortage and water contamination in the fuel oil.
Although Howard Fuel first became aware of the basis for its claim against Lloyd's while the cargo was being discharged in February and March of 1974, it apparently did not notify its United States broker, Newport, of its loss until September 1974, approximately seven months later. See Litvack Deposition at 19-28. Newport then advised Hinton, by letter dated September 11, 1974, that the cargo had been damaged. Exh. 12a. Hinton forwarded Newport's letter to Seascope on September 17, 1974.
Exh. 24, Appendix B, documents ## 1-2. Lloyd's itself did not have notice until at least two years later.
When presented with plaintiff's claim for cargo shortage and other expenses,
Lloyd's refused to pay and this action ensued. Lloyd's argues that Howard Fuel may not recover its loss because: (1) it failed to provide immediate notice of the loss; (2) it failed to request that it be "held covered" under the policy after the voyage was terminated; (3) it failed to protect Lloyd's subrogation rights; and (4) it failed to prove its damages.
Lloyd's argues that Howard Fuel is barred from recovering because it breached the provision of the policy requiring immediate notice of loss.
Under New York law,
noncompliance with a notice provision in an insurance policy bars the claim unless the insured can demonstrate that it was not reasonably possible to give notice within the prescribed time and that notice was provided as soon as was reasonably possible. Baltic Shipping Co. v. Maher Terminals, Inc., 1980 A.M.C. 410, 414 (S.D.N.Y. 1979); Deso v. London & Lancashire Indemnity Company of America, 3 N.Y.2d 127, 130, 143 N.E.2d 889, 891, 164 N.Y.S.2d 689, 691 (1957); see Neptune Lines, Inc. v. Hudson Valley Lightweight Aggregate Corp., 1973 A.M.C. 125, 134 (S.D.N.Y. 1972). Moreover, the claim is barred regardless of whether or not the insurer has been prejudiced by the failure to give timely notice.
Security Mutual Insurance Co. v. Acker-Fitzsimons Corp., 31 N.Y.2d 436, 440, 293 N.E.2d 76, 78, 340 N.Y.S.2d 902, 905 (1972); see Baltic Shipping Co. v. Maher Terminals, Inc., 1980 A.M.C. at 414.
Howard Fuel has failed to demonstrate that it was not reasonably possible to provide Lloyd's with notice immediately upon learning of its cargo loss, or that notice was provided as soon as was reasonably possible. Indeed, plaintiff learned of its claim in February or March 1974 and Lloyd's was not notified until at least two years later. It follows that plaintiff's claim is and should be barred.
Plaintiff contends, however, that Lloyd's had actual notice of plaintiff's cargo losses because it knew of the boiler explosion and the subsequent declaration of general average.
That contention is not supported by the evidence. The fact that an engine room casualty had occurred and that the voyage was being terminated did not afford Lloyd's with actual notice that cargo damage had been sustained.
Howard Fuel also argues that Lloyd's received notice of its loss under the policy when it was notified, in January 1974, that the fuel oil was a "solid mass" and was being heated to a suitable discharge temperature. That claim is untenable. Nothing in plaintiff's communication to Lloyd's indicated that the cargo was damaged. See Froude Deposition at 24-27. Furthermore, plaintiff's letter was sent prior to the commencement of the discharge operations, before Howard Fuel itself discovered any loss or damage to the fuel oil. It is ...