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THEBES SHIPPING, INC. v. ASSICURAZIONI AUSONIA SPA

August 2, 1984

THEBES SHIPPING, INC., as Owner and ARMCO FINANCIAL CORPORATION AG., as Mortgagee of S.T. ARGO MERCHANT, Plaintiffs, against ASSICURAZIONI AUSONIA SPA, Defendant; THESSALY SHIPPING, INC. and SPARTAN SHIPPING INC., as Owners of M/V ARGO POLLUX and M/T ARGO TRADER, respectively, and ARMCO FINANCIAL CORPORATION AG., as Mortgagee of the Vessels, Plaintiffs, against ASSICURAZIONI AUSONIA SPA, Defendant.


The opinion of the court was delivered by: WYATT

WYATT, District Judge

This is the decision in these two actions, tried to the Court without a jury. The two actions are by owners and a mortgagee of three ships, to recover on policies of marine insurance for damage to those ships. The first action was commenced on March 16, 1978, the second on August 30, 1978. They were first assigned to Judge Frankel, then on October 25, 1978, they were reassigned to Judge Owen, then on December 17, 1982, they were reassigned to me.

 In action 78 Civ. 1186, plaintiffs are Thebes Shipping, Inc. ("Thebes"), a Liberian corporation, and Armco Financial Corporation AG ("Armco"; AG is understood to be an abbreviation for a German word or words meaning "incorporated"), a Swiss corporation. Thebes is the owner and Armco the mortgagee of the ship "Argo Merchant" ("Merchant"). Defendant is Assicurazioni Ausonia SPA ("Ausonia"; SPA is understood to be an abbreviation for Italian words meaning "incorporated"), an Italian insurance corporation, which issued policies insuring the ship Merchant for the period 1300 hours Greenwich Mean Time ("GMT") October 8, 1976 to 1300 hours GMT October 8, 1977.

 In action 78 Civ. 4099, plaintiffs are Thessaly Shipping, Inc. ("Thessaly"), a Liberian corporation, Spartan Shipping, Inc. ("Spartan"), also a Liberian corporation, and Armco. Thessaly is the owner and Armco the mortgagee of the ship "Argo Pollux" ("Pollux"). Spartan is the owner and Armco the mortgagee of the ship "Argo Trader" ("Trader"). Defendant is Ausonia which issued policies insuring the ships Pollux and Trader for the period 1300 hours GMT October 8, 1976 to 1300 hours GMT October 8, 1977.

 There was a joint trial of the two actions in accordance with a pretrial order filed March 8, 1983 (PTO 2; PTO references are to paragraphs of that pretrial order), to which the parties consented. (The pretrial order recites that the parties "agreed that the trial of these actions shall be joint and consolidated", but the actions have not been consolidated. Fed. R. Civ. P. 42(a)).

 Each of the two actions is within the admiralty and maritime jurisdiction of this Court. 28 U.S.C. § 1333.

 It is not disputed by defendant (Post-Trial Memorandum of Law, p. 2) that, if the policies of insurance on which these actions were brought are valid obligations of Ausonia, the evidence would lead to judgments against Ausonia in favor of plaintiffs.

 The trial was concerned with issues related to certain affirmative defenses raised first by defendant Ausonia in its answer filed in action 78 Civ. 1186. The pleadings, however, have little value in defining these issues and no answer appears to have been filed in action 78 Civ. 4099. But by the pre-trial order (PTO 1) the pleadings were agreed to be deemed amended in accordance with the framing of the issues in paragraph 10 of that order. The trial was almost entirely concerned with issues formulated by defendant Ausonia in the pre-trial order (PTO 10(b)). In summary, defendant Ausonia asserts these defenses:

 (a) that the insureds and their representatives failed to disclose to Ausonia facts material to the risk;

 (b) that a representative of the insureds misrepresented to Ausonia the true loss figures for the year October 8, 1975 - October 8, 1976, of the insurers of the Fleet of which the ships Merchant, Pollux and Trader were a part;

 (c) that a representative of the insureds fraudulently represented to Ausonia that the loss figures for the Fleet, excluding Argo Leader, for the year October 8, 1975 - October 8, 1976, showed a 72.27% credit balance in favor of the insurers when, in fact, the true loss figures showed a substantial debit balance against the insurers; and

 (d) that the insureds failed to pay the insurance premiums as they became due.

 The evidence abundantly establishes the defenses summarized in (a), (b), and (c) above and, as a matter of law, the conclusion follows that the insurer Ausonia is justly entitled to avoid the insurance contracts. Thus, it is not necessary to reach and decide the many fact and law contentions made for and against the defense summarized in (d) above.

 Judgment in each action must be in favor of defendant Ausonia.

 1.

 The three ships, for damage to which these actions are brought, were at all material times part of the Amership Fleet ("the Fleet"). The other ships in the Fleet were Stolt Argo, Argo Castor, Argo Leader, and Stolt Argobay. Argo Leader was sold on August 11, 1976. Coral Arcadia became a ship of the Fleet at the beginning of the 76/77 year. The insurable year for the Fleet begins on October 8. The "76/77 year" refers to the insurable year beginning October 8, 1976; this form of reference will sometimes be used hereafter.

 The Fleet was "operated" (by which is understood managed) from an office in New York by Amership Agency, Inc. ("Amership"), a New York corporation (PTO 3(iv)).

 It may be safely assumed, and appears to be taken for granted by all concerned, that the ships in the Fleet were owned by Greek interests; as Skarvelis, President of Amership, testified (by deposition, Ex. HV, p.7) Amership "represented owners that were managed and operated by Triship Agency in Greece".

 2.

 The language used in the London insurance business, to judge by the examples in evidence here, is often puzzling to outsiders.It may throw some light on the meaning of the documents if notice is first taken of underwriting customs and practices in London. These are well described in Edinburgh Assurance Co. v. R.L. Burns Corp., 479 F. Supp. 138, 144-146 (C.D. Cal. 1979), affirmed except as to interest, 669 F.2d 1259 (9th Cir. 1982).

 In the marine insurance industry in London, Lloyd's and the Institute of London Underwriters ("ILU") have the highest reputation and prestige. ILU is a membership group of insurance companies. The "fringe market" is made up of those insurance companies that are not members of ILU. the "continental market" is made up of insurance companies on the European continent, some of which have offices in London. The "overseas market" is made up of underwriters, principally insurance companies, outside England and Scotland.

 Lloyd's is in substance a membership corporation, its members being individual underwriters. Lloyd's does not itself sell insurance but provides a building with appropriate facilities where its member underwriters sell insurance. Lloyd's has a policy preparation office which prepares policies for its members reflecting the terms of insurance sold. Lloyd's has an office for passing on claims made under policies issued by its members. Lloyd's also has a group which passes upon approval of brokers to deal at Lloyd's, for only an approved broker may place insurance with underwriter members of Lloyd's. The administration of Lloyd's is by its elected Committee.

 The members of Lloyd's are organized into syndicates of from a few to several hundred members resident in England and all over the world (called "names" in the syndicate). The syndicates are the entities which sell insurance on the floor at Lloyd's from a desk or "box" where a representative negotiates and decides on proposed insurance risks brought by brokers to the syndicate. If agreement on terms is reached, the representative subscribes on behalf of the syndicate to cover with insurance the risk or (generally) a percentage part of the risk.

 An insurance broker is an agent for the insured (in marine insurance, the shipowner). The representative of the underwriter is usually called an "underwriter's agent" or sometimes "underwriter's broker".

 The placement of insurance at Lloyd's was explained in the Edinburgh Assurance opinion as follows (479 F. Supp. at 145-146):

 The underwriter agent, or underwriter, sits in his box on the floor waiting for brokers to approach him with possible insurance risks. The broker provides for the underwriter's consideration a document known as a broker's slip, which contains the details of the risk which the broker is trying to insure. The broker negotiates with the underwriter to obtain the latter's agreement to both the insurance terms and the rate of premium. The underwriter who structures the transaction with the broker and settles on terms becomes known as the lead underwriter. The lead underwriter's syndicate is called the market lead or leader of the market for that particular risk. The lead underwriter then subscribes his syndicate to a particular percentage of the risk, for example, five percent. The underwriter places his initials on the broker's slip together with the particular percentage to which he is subscribing. . . .

 The broker, having obtained the agreement of one underwriter to terms and premium, as well as a subscription to a percentage of the risk, retains the slip and approaches other syndicates or insurance companies both on the floor at Lloyd's and in the outside offices of insurance companies. The broker presents the slip to them for them to consider whether they desire to subscribe to the agreement as constituted between the broker and the lead underwriter. Each subsequent underwriter may express no interest, may agree to the terms on the same premium rate, require a higher premium rate, or require different terms. In the last two cases, underwriters who had already subscribed would be informed of new terms and their obligations normally amended to conform. In any event, the underwriter who agrees to subscribe his syndicate places his syndicate initials and the percentage of risk he desires to cover on the slip, and the broker moves on to other underwriters. In this manner the broker moves around the insurance market, both at Lloyd's and among the insurance companies, until he has obtained underwriters' commitments subscribing to one hundred percent of the risk on the slip. At that stage, the broker can confirm to the applicant for insurance or his contact with the applicant that the risk is fully subscribed, or "completed."

 Once the broker has succeeded in completing the slip, that is, has obtained one hundred percent coverage, he retains the slip and returns it to his office. Participating underwriters on the risk receive a copy of that part of the slip containing terms and conditions for their files.

 When the insurance has been fully placed, the broker prepares a "cover note" which summarizes the terms of the insurance as placed. The broker sends the cover note to the insured.

 The broker then prepares a paper called "closing instructions" which is sent to the insurer (or its agent) as a guide for the preparation of the policies of insurance.

 The final step is for the insurer, or often the broker, to prepare the insurance contracts, the policies of insurance, and after execution to deliver them to the insured, generally through the insured's broker.

 If, during the term of the insurance, a claim arises under a policy, the broker for the insured usually acts to help with the preparation of the claim and its processing. An important step in the claims procedure is the "survey" - an examination of the damage by experts to determine its cause, its extent, and what repairs are necessary. In this connection, the Salvage Association (("SA") frequently appears and this institution should be noted.

 The SA is a non-profit organization with headquarters in London and offices all over the world. Its purpose is to make damage surveys of merchant ships in connection with claims against underwriters; SA acts largely on behalf of underwriters in the London market. A damage survey of a marine casualty is normally made by SA acting for the insurers and a surveyor acting for the shipowner.

 The expert witness for defendant (Dyos), whose testimony was impressive and is accepted, testified that over a long period of time the Joint Hull Committee in London, composed of representatives of Lloyd's and of ILU, had indicated that in considering an insurance risk there is a standard for the loss statistics to be disclosed. "This standard is they require the loss record on the current year plus the three previous years" (T365; "T" references are to pages of the stenographic transcript of the trial). The witness did not cite anything in writing from the Joint Hull Committee but said the standard is "very well known in the trade" (T 366). There is no contradictory testimony or at least none is remembered or found in the record.

 3.

 Marine insurance on all the ships in the Fleet was placed by Amership at one time and for one-year periods. The total insurance desired was divided among a number of underwriters (the terms "underwriters" and "insurers" are synonymous and are used interchangeably), each taking a percentage of the risk. Each ship was separately insured and each insurer issued a separate policy on each ship for the percentage of risk accepted.

 Beginning with the insurable year October 8, 1972-October 8, 1973 Amership acted in ship insurance matters through Thomas E. Leeds Company, Inc. ("Leeds"), a New York corporation, an insurance broker and adjuster in New York City. Thomas E. Leeds was the head of Leeds; he will be referred to sometimes as "Leeds" but the context will indicate whether the reference is to Mr. Leeds personally or to the organization.

 Leeds had asked for insurance placing business from Amership "if we could come in better than our competition"; Amership gave Leeds a chance to obtain a favorable premium rate; Leeds put this in the hands of Robert Bradford Hobbs Savill ("Bradford"), a Lloyd's insurance broker in London; Bradford was able to place the Fleet insurance at a favorable rate; and thus Leeds got the first insurance order from Amership. (Ex. IB, pp.5-7)

 Leeds placed marine insurance for the Fleet through London brokers because they "seem to have a greater feel for the worldwide market", because if you "have a Lloyd's lead, it's not very difficult for a London broker to get it followed by throughout the world", and because lower premium rates resulted. (Ex. IB, p.4)

 4.

 The loss record of the Fleet after October 8, 1972 was very bad in that paid claims and outstanding claims against the insurers far exceeded the premiums.

 Leeds went to London in August 1975, principally to talk to Bradford in anticipation of a difficult renewal of the Fleet insurance for the year to commence on October 8, 1975. Bradford did not give Leeds the time he felt necessary to go over the matter in the face of the loss record but on Thursday, August 28, 1975, told him that they were finding time to see the lead underwriter at Lloyd's. The next day Leeds talked to Bradford again, when they told him they could not "hold out much hope", that a "vast rise" in premium rates appeared likely because of the "loss record" which was "quite high", and, as Leeds was going to Greece, they would send a cable there giving him more information about the renewal. (Ex. IB, pp.8-10)

 Leeds went to Athens on Saturday, August 30, and to the Athens Hilton Hotel. There he received a telex (Ex. Q) from Bradford in the early part of the week beginning September 1, 1975. Bradford reported the very hard terms demanded by insurers for renewal and that Bradford felt "horrified" at having to send "the worst message". Bradford reminded Leeds of the "pretty horrible" underwriting results of the Fleet and gave the following figures for 1973-75: premiums paid, $1,132,796; claims paid $1,790,460; claims outstanding approximately $900,000. This indicates a loss to the insurers in two years of $1,557,664. Bradford believed "some savings can be made" on the renewal terms demanded, but not much.

 Leeds telephoned Bradford from Athens, saying that the conditions for renewal were "ridiculous" and that Bradford was not doing a good job (Ex. IB, p.10). Leeds then had the idea that Crowe, Dalton and Lambert ("CDL"), another Lloyd's broker in London, might be able to place the Fleet insurance better than Bradford. CDL had a branch office in Athens, to which Leeds telephoned and found that Don Lambert himself was shortly arriving in Athens.

 Leeds then saw Lambert at the hotel in Athens in early September, 1975. He had known Lambert for many years. He showed Lambert the telex from Bradford and went over the renewal difficulties, that the renewal terms from Bradford were a 50% increase in premiums and an increase in deductibles "[b]ecause of the loss record of the fleet" (T 91-92). He offered Lambert the placement of the Fleet renewal to begin October 8, 1975. Lambert believed he could do it but said that, because of the losses, there would have to be a premium increase. Lambert also proposed the the renewal be attempted by trying a different market than they had with Bradford - that they go "outside the Lloyd's market" (T 89), meaning, as the events showed, the overseas market primarily.Leeds asked him to see if the premium increase on renewal could be held to 10%. From that time forward CDL was the placing broker for the Fleet and Bradford was asked to stop its efforts.

 The evidence as to the beginning of the placing of insurance for the Fleet through CDL strongly suggests a planned strategy by CDL to obtain renewal of the insurance by seeking out new insurers in the market outside England and diverting their attention from the losses suffered by the Fleet in the past. In view of subsequent events which caused the cases at bar to be brought, some of the deposition testimony by Lambert is most revealing. When asked what he said to Leeds in Athens, Lambert gave this answer (Ex. HZ, p.15):

 Well, I looked at the placing. Knowing it was 100% in the Lloyd's and ILU market, it meant that all the outside markets had not suffered any losses, were not involved with the fleet, and therefore were open to negotiation; and I suggested that if he wanted the maximum cover available the only way we could do this would be to obtain a small lead in the London market and to place the business around the world.

 After the Leeds-Lambert discussion in Athens, Leeds returned to New York and Lambert remained a few days in Athens. They spoke on the telephone. Lambert was asked what Leeds told him by telephone "about the casualty rate" (Ex. HZ, p.17). Lambert gave this answer:

 Nothing specific, because it didn't really bother me too much, the casualty position, because I wasn't placing it in the same market that it had been in before. In other words, I was approaching underwriters who had not had any casualties. Therefore, it became a completely new risk to that market.

 The object of Lambert seems evident: to place the Fleet insurance with underwriters who had not done business with the Fleet before and did not know its loss record. This is consistent with Lambert's practice not to describe the loss record to the underwriters he "contacted" (T 105) and not voluntarily to disclose the loss record of a fleet to prospective insurers (T 106, 108). After the Leeds-Lambert telephone conversations, Leeds sent to Lambert by telex on September 15, 1975, the details of the bad loss record of the Fleet from October 8, 1972 through August 12, 1975, as follows (Ex. C): Year Net Premiums Claims Paid Claims Outstanding 10/8/72-10/8/73 $ 527,000 $ 754,659 $ 517,500 10/8/73-10/8/74 $ 491,369 $ 959,129 $ 595,000 10/8/74-8/12/75 $ 654,129 $ 840,000 $ 975,000 $1,672,498 $2,553,788 $2,087,500

 These figures show a substantial excess over premiums of claims paid and outstanding in each of the three consecutive years. The total amount of this excess was $2,968,790, an indicated loss to the insurers of that amount or, as often expressed in the insurance business, a debit balance of 178%.

 5.

 Lambert believed, after consulting with other brokers, that with a premium increase the renewal insurance might be obtained in the overseas market. The premium increase was submitted to Leeds in New York, approved by him and Amership, and the campaign began. The exact amount of increase has not been found in the record, but is believed to have been 10%; Leeds had asked Lambert to try not to exceed this figure.

 CDL, as a first step in the effort, obtained as lead underwriter at Lloyd's H.L. Quartermaine ("HLQ"), described by Lambert as "a recognized Lloyd's leader" but "not necessarily on Greek-American ships" (Ex. HZ, p.30). HLQ agreed to take .25% or 1/4 of 1% of the risk. This is a very small percentage of the risk for a lead underwriter to take (5-7 1/2% is normally taken by the lead; T 600) and indicates that HLQ did not have a very favorable opinion of the risk. The well-informed expert witness for defendant (Dyos) testified that a lead Lloyd's underwriter would normally take at least 5% of the risk (T 462). It was unusual, to say the least, for CDL to select as a lead a Lloyd's insurer who was willing to take no more than 1/4 of 1% of the risk and unusual for a Lloyd's insurer to consent to be the lead underwriter with so small a risk. So questionable was the practice that a member of the Committee of Lloyd's later told Lambert, among other things, that they objected to the practice, that "they were after stamping it out", and not do it (Ex. HZ, pp. 28-30; the incident which brought on this censure was the use of a lead Lloyd's insurer who took 1/2 of 1% of the risk or twice the risk taken by HLQ in 1975). Lambert must himself have recognized that the practice was wrong because he testified that he stopped using the practice three weeks after the Amership placement of October 8, 1976 (T 162).

 It can only be concluded that CDL arranged for a lead underwriter at Lloyd's, who accepted only 1/4 of 1% of the risk, in order to secure the prestige of Lloyd's in selling the renewal risk in the overseas market. To enjoy this advantage, however, it was necessary that the prospective insurers of the Fleet should not learn the small percentage of risk taken by the lead insurer at Lloyd's (indeed, only one underwriter at Lloyd's other than HLQ took any of the risk and that for 2%, for a total placement at Lloyd's of only 2 1/4% (T 156; Ex. F)). This is because, as the expert witness testified, if the prospects learned that the broker cannot place more than a small percentage at Lloyd's, "they must think there is something wrong with the risk" (T 477).

 6.

 During the renewal effort for the 75/76 insurable year, part of the risk was accepted by Stewart Wrightson, an underwriters' agent in London, through whom the Amership Fleet came to the notice of Roland Pardo, an underwriters agent, principally in Milan and from time to time in London. Pardo will figure significantly in the later events here in suit, and some of his earlier activities should at this point be explained.

 The Pardo family had at all relevant times a family insurance business in Milan called Adolphe Pardo Associates ("APA"), an Italian corporation (Ex. 51, p.3), acting primarily as an agent for Continental underwriters, including defendant Ausonia. Roland Pardo was important in the business, as was his older brother David. APA had no offices outside of Milan, but Roland Pardo was from time to time in London and when there sometimes used the offices of London & Continental, a company connected with the Pardo family. Neither APA nor Ausonia had offices in London (T 608).

 In early October 1975, Cantouris, a senior marine broker at Wrightson, telephoned Roland Pardo in Milan offering him reinsurance business (T 576). Pardo asked for the proposal in writing and Cantouris, on October 6, 1975, sent Pardo in Milan a telex message with an Amership reinsurance proposal (Ex. HA, p.A). Pardo had some questions about the proposal and replied to Cantouris by a telex on the same day putting these questions to him (Ex. HA, p.B). One of these questions was whether "five years statistics" could be supplied. Cantouris replied to this question by telex on the same day that only three-year figures were available "which show premium dlrs 1,600,000 against claims dlrs 2,500,000 (of which dlrs 1,000,000 casualties)" (Ex. HA, p.C). It is not surprising that Pardo found this answer hard to understand, because claims represent insured damage caused by accidents to ships; Cantouris, however, was reporting that there were "claims" of $2,500,000 but only $1,000,000 of "casualties". Pardo testified at trial that he spoke to Cantouris by telephone and "asked him if he could clarify the statistical exhibit he was indicating in his telex message to me because it was ambiguous" (T 579), and that Cantouris "indicated that he was not very clear himself as to what those figures meant, but assured me that the fleet was showing a profit" (T 588). This testimony of Pardo (as with his other testimony) is accepted by the Court as credible; moreover, it is in no way contradicted in the record.

 The plaintiffs contend (Main Brief, pp.30-31) that Pardo was advised by Wrightson, before the 75/76 year, that for the three prior years Amership Fleet suffered casualties of approximately $2,500,000 against premiums of $1,600,000. It is found that Pardo was not so advised by Wrightson; that Wrightson advised Pardo that for the three years prior to the October 8, 1975 - October 8, 1976 insurable year the Amership Fleet against $1,600,000 in premiums had claims of $2,500,000 of which $1,000,000 were casualties (meaning damage covered by insurance); and that Wrightson, through Cantouris, assured Roland Pardo that Amership Fleet was showing a profit to its insurers.

 7.

 In September and early October 1975, CDL worked to place the renewal insurance on the Fleet and was finally able to do so. It was a hard task, however, because of the losses to Fleet underwriters in the past. It was not until October 7, 1975 that it was completed; this was only hours before expiration of the then existing policies. CDL advised Leeds of the completion on October 7, 1975 by telex (Exs. F,G).The difficulty of the placement can be seen by Lambert's expressive description in the telex: "hell, it was close". It is further evidenced by Lambert's comment to Leeds in the same telex in giving the list of renewal underwriters: "hope there are not too many objections as feel it highly unlikely that we shall be able to replace any lines."

 8.

 Doubtless the underwriters who accepted the Fleet risk for the year to commence October 8, 1975, regretted that they had ever done so. The risk turned out to bring substantial losses. This was the 75/76 insurable year, just before the insurable year for which Ausonia issued its policies to plaintiffs. The claims which arose from Fleet damage in that prior year must therefore be examined in some detail.

 8a.

 Argo Castor

 Argo Castor, a ship of the Fleet, sustained severe damage from very heavy weather encountered May 3-6, 1976 on a voyage from Australia to Holland. The voyage was completed. The ship then went for repairs to Palermo, Sicily, where she arrived on June 5, 1976.

 On June 6, 1976, Leeds notified CDL by telex referring to "our claim 1719" (the number assigned by Leeds to heavy weather damage to Castor, see Ex. EN for example) that Castor was at Palermo having reported engine damage, asked CDL to advise underwriters and to arrange for Salvage Association survey attendance, and informed CDL that a survey had also been arranged of March 1975 ice damage to Castor in the prior policy year (Ex. EL).

 On June 7, 1976, Castor entered drydock at Palermo and repairs commenced. Repairs for the ice damage and the heavy weather damage were done at the same time. The Salvage Association was instructed on June 7, 1976 to survey for underwriters as to ice damage and on June 8, 1976 to survey as to heavy weather damage.

 Stamatiadi, a surveyor from Amership in New York, was at the drydock June 5-November 1, 1976 (Ex. FN, p.168). Counsel for plaintiffs agreed that the owners knew exactly what repairs were being made (T 401). Beginning June 5, 1976, Stamatiadi reported to Armership about the repairs to Castor "giving them weekly or ten days reports on the status of repairs" (Ex. IC, p.46).

 The expert witness (Dyos) testified, from examining all relevant documents in evidence, that it could be determined what damage to Castor was from ice in March 1975 and what from heavy weather in May 1976 (T 402-04).

 In the summer of 1976 the owner of Castor was arranging to borrow money from Bank of America in New York and was preparing to assign to that Bank all claims against underwriters for "ice damage" (called "claim 1653") and "heavy weather" damage (called "claim 1719"). (Ex. EN) There was a "commitment letter" from Bank of America, dated June 29, 1976 (Ex. EO), by the terms of which the Bank was entitled to "full documents to collect the claims".On August 31, 1976, Leeds wrote to Bank of America representing that the ice and heavy weather claims on Castor "based on the information to date, will be in excess of $1,500,000" (Ex. EN).

 The insurers were responsible for claims for damages to Castor, whether caused by ice or by heavy weather. Both were insurable events.The ice damage was payable by the insurers in the 74/75 year, the heavy weather damage was payable by the insurers in the 75/76 year. Both were part of the loss record of the Fleet. (T 406-07).

 On September 17, 1976, Leeds wrote to Bank of America (copy to Amership) about "ice damage" and "heavy weather" damage to Castor and making representations to the Bank about the insurance claims for that damage.Among the representations was: "Ice damage and Heavy weather are perils covered against under the applicable policies of Hull & Machinery, etc." (Ex. ES).

 On September 10 and 17, 1976, Leeds and counsel arranged in New York for the owner of Castor to execute payment orders directing the underwriters for the 74/75 year to pay to Bradford the amount due under the policies in respect of "ice damage-March 1975" and directing the underwriters for the 75/76 year to pay to CDL the amount due under the policies in respect of "heavy weather-May 3/6, 1976" (Ex. EU: Exs. EP, EQ, ER).

 The repairs to Castor at Palermo were completed on September 30, 1976 (Ex. FG, p.38). While the exact amount of the insurance claim may not have been known at that time, the approximate amount was certainly then known and known to be a large amount; on August 31, it had been estimated by Leeds as in excess of $1,500,000.

 The expert witness (Dyos) testified (T 418) that, from his study of the files, "well before the October 1976 date [October 4, 1976 in the question] the owners or Amership and certainly Thomas E. Leeds must have known that there was a substantial claim for heavy weather damage".

 It turned out that the insurance claim for heavy weather damage in May 1976 was $1,278,496.36 (Ex. FN, p.177) and for ice damage in March 1975 $1,204,368 (Ex. FN, p.3 of ...


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