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KNIGHT v. U.S. FIRE INS. CO.

February 10, 1986

FREDERICK W. A. KNIGHT, Plaintiff against U.S. FIRE INSURANCE COMPANY, INSURANCE COMPANY OF NORTH AMERICA, CENTENNIAL INSURANCE COMPANY, RELIANCE INSURANCE COMPANY, FEDERAL INSURANCE COMPANY, ROYAL INSURANCE COMPANY OF AMERICA, NORTHWESTERN NATIONAL INSURANCE COMPANY, HIGHLANDS INSURANCE COMPANY and CONTINENTAL INSURANCE COMPANY, Defendants


The opinion of the court was delivered by: MOTLEY

CONSTANCE BAKER MOTLEY, CHIEF JUDGE

In late 1982 plaintiff Frederick Knight obtained a policy of insurance worth over thirty million dollars for a collection of Thai statuary which he was planning to ship from Singapore to Piraeus, Greece. After the vessel sank in transit, plaintiff attempted to collect on the insurance but was refused by defendants herein, the policy's underwriters. Defendants claim they were entitled to void the insurance ab initio, and have done so, because of plaintiff's alleged material non-disclosures and misrepresentations. Plaintiff, accordingly, commenced this law suit.

 Defendants have now moved for summary judgment on the grounds that no material fact exists as to their right to have cancelled plaintiff's policy and that, therefore, plaintiff may not collect under it. For the reasons that follow, defendants' motion is granted and this case dismissed.

 FACTS

 Plaintiff is a citizen of Holland who had moved to Bangkok, Thailand in the 1970's and who continues to reside there. Between 1976 and 1979 plaintiff obtained 222 antique stone and bronze statutes of Buddhas and fable gods for an aggregate price of approximately $65,000. In 1980 an appraiser in Bangkok, hired by plaintiff, placed a value of $20,205,000 on the statuary. The next year, in April 1981, this same appraiser revised his estimate for the collection to $27,000,000, and then later that year, in the beginning of September, to $30,307,500. Meanwhile, at some time between 1980 and summer 1981, the 222 pieces of sculpture were shipped in various lots from Bangkok to Singapore.

 Claiming that he was planning to sell the Buddhas and fable gods to a European collector, in February 1981 plaintiff contacted the London brokerage firm of Hogg Robinson to arrange for insurance. He requested coverage of $20,205,000 to insure the collection during a sea shipment from Singapore to The Netherlands. The insurance was successfully placed on the London market. In May of 1981, pursuant to the increased valuation of his Bangkok appraiser, plaintiff requested and obtained through Hogg Robinson an additional $10,000,000 coverage for the voyage.

 All did not proceed smoothly, however. In June of 1981, Mr. Robert Jensen, plaintiff's broker at Hogg Robinson, received two anonymous phone messages from callers who said they had a score to settle with plaintiff. Knight, they informed the broker, was about to perpetrate a fraud with his shipment of Buddhas and fable gods. Jensen conveyed this information to the lead London underwriters of plaintiff's policy who, in turn, expeditiously ordered an independent appraisal of the statues which were still awaiting shipment in Singapore. A few days later, plaintiff received a telex from Jensen in London. It informed him that the London underwriters had voided his policy, having concluded that plaintiff was guilty of material non-disclosures and misrepresentations in his insurance application. The telex from Jensen further relayed to plaintiff the underwriters' opinion that the statues were "grossly over-valued," "and in some, if not all cases, replicas," the evidence having suggested that the "proper value of the consignment [was] nominal only (possibly approximately 1 pct of the value declared)."

 About a year passed before any additional events relevant to this law suit occurred. In spring of 1982, plaintiff made a completely new attempt to obtain insurance for his shipment of Buddhas and fable gods from Asia to Europe. This time he approached a New York brokerage firm, H.E. Yerkes & Associates ["Yerkes & Associates"] which successfully placed the over thirty million dollars risk with several American insurance companies, the defendants in the present suit. This first New York policy was for a voyage from Singapore to Marseilles, and thence to Paris, where a prospective buyer for the collection, allegedly interested in it to the tune of thirty million dollars, wished is sent. When the collection was not shipped from Singapore within the time period of the coverage, this first New York policy was cancelled.

 Plaintiff received a letter at this time from a Mr. Howland Keller, a vice president of Yerkes & Associates, detailing the background of this initial cancellation resulting from the delay in shipment date. In this May 1982 letter Keller also reiterated the "underwriting position" of one of the main underwriters, INA [Insurance Company of North America]. "Please understand," Keller wrote,

 
"that the risk as originally presented to INA was that of a sold shipment, i.e., a completed sale, conditional only upon the buyer's approval when it arrived in Paris. "The value was established by an appraisal and by a letter from the buyer (we have copies of both)." (emphasis added).

 The appraisal referred to was that of plaintiff's expert in Bangkok. The "letter from the buyer," a certain Egyptian living in Alexandria, stated that he was interested in purchasing the entire collection for a sum not exceeding thirty million dollars.

 A few months later, in October of 1982, plaintiff made a second application to his New York broker for voyage insurance to cover the 222 Buddhas and fable gods. By a telex dated October 17, plaintiff informed Yerkes & Associates that he had found a wealthy Greek shipowner by the name of George Papalios who was interested in the collection and was prepared to negotiate for its purchase at a price of around thirty million dollars Accordingly, plaintiff wished to reinstate insurance for a voyage from Singapore to Europe, but this time with a Piraeus, Greece destination.

 Plaintiff's telex also represented that storage and guards at a bonded warehouse in Piraeus had been arranged, and that $30,000,000 in fire and theft insurance for the port to warehouse transit in Greece had been obtained. Furthermore, continued the telex message, as to the voyage itself, plaintiff's agent in Greece was arranging for the hire of a first class vessel from Singapore to Piraeus with a captain who would be willing to supervise loading and stowage of the antiques.

 Shortly thereafter, Yerkes & Associates successfully placed a new risk of $30,630,750 for this projected voyage with the defendant insurance companies. This group was substantially the same as that which had insured the projected Singapore to Marseilles voyage earlier in the year. Although these underwriters were apprised of plaintiff's October 17 telex detailing the proposed voyage to Greece, none was informed that the London insurance market had previously voided a policy with plaintiff for shipment of the same 222 Buddhas and fable gods for the reasons stated above. Moreover, with the possible exception of INA, one of the main underwriters, none of these American underwriters had been apprised of plaintiff's ...


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