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BACCHUS ASSOCIATES v. HARTFORD FIRE INS.

April 12, 1991

BACCHUS ASSOCIATES, PLAINTIFF,
v.
HARTFORD FIRE INSURANCE COMPANY AND A.B. GUARI, INC., DEFENDANTS.



The opinion of the court was delivered by: Kram, District Judge.

MEMORANDUM OPINION AND ORDER AND ORDER

This marine insurance case arises from the destruction of several large shipments of fruit as a result of a United States and Canadian government embargo of fruit from Chile. The question presented is whether defendant insurer may deny coverage based on certain exclusions that were named but not set forth in the policy issued to the insured.

BACKGROUND

Plaintiff Bacchus Associates ("Bacchus") imports fresh produce into the United States and Canada on a consignment basis. On March 16, 1987 it purchased an all-risk policy of marine insurance (the "Policy") from defendant Hartford Fire Insurance Company ("Hartford"). Bacchus' principal, John Mangia, procured that Policy through an insurance broker, defendant A.B. Guari (hereinafter "Guari"). Coverage commenced on February 14, 1987 and was to run continuously thereafter.

During the period February 19 through March 10, 1989, Bacchus shipped from Chile to Philadelphia, Pennsylvania approximately $1 million worth of honeydew melons, grapes, peaches, pears, nectarines, plums, and Granny Smith apples. On or about March 13, 1989, the United States Food and Drug Administration issued orders detaining and embargoing Chilean fruit as a result of a finding that certain fruit from that country had been tampered with.*fn1 The government then directed that all such fruit then in the hands of importers, wholesalers and retailers would be destroyed. Although no Bacchus product was found to contain cyanide, all of the fruit it had in transit to the United States at that time either decayed or had to be dumped under the terms of the embargo.

Bacchus made a claim under the Hartford policy to recover damages for the fruit that spoiled or had to be destroyed. Hartford denied reimbursement under the policy, on the basis that three provisions in Clause 9 of the policy operated to exclude coverage of such losses as occurred here. Those provisions are entitled "Free of Capture and Seizure Warranty," (hereinafter "F.C. & S."), "Endorsement for Open Policies (Cargo) Strikes, Riots & Civil Commotions" (the "S.R. & C.C. Endorsement"), and "Delay Warranty."

The general risk provision of the policy affords insurance for

  Fruits and Produce, shipped under deck . . .
  against all risks of Physical Loss or damage from
  any external cause, excluding loss damage or
  expense caused by or resulting from Decay,
  deterioration, and/or spoilage of the goods, and
  excepting such risks as are excluded by the F.C. &
  S. and Strike Clauses.

Marine Open Cargo Policy, attached as Exhibit G to Affidavit of Helen M. Benzie, dated September 14, 1990 (hereinafter "Benzie Aff."), at ¶ 5(d).

The F.C. & S. Clause provides in relevant part:

  Notwithstanding anything herein contained to the
  contrary this insurance is warranted free from:
    (a) capture, seizure, arrest, restraint,
    detainment, confiscation, preemption,
    requisition or nationalization, and the
    consequences thereof or any attempt thereat,
    whether in time of peace or war and whether
    lawful or otherwise. . . .

Policy, ¶ 9(M)(I). The S.R. & C.C. warranty provides that:

  Notwithstanding anything herein contained to the
  contrary this insurance is warranted free from
  loss, damage or expense caused by or resulting
  from:
  (b) vandalism, sabotage or malicious act, which
  shall be deemed also to encompass the act or acts
  of one or more persons, whether or not agents of a
  sovereign power, carried out for political,
  terroristic or ideological purposes and whether
  any loss, damage or expense resulting therefrom is
  accidental or intentional.

Id. at ¶ 9(M)(II). This provision is also subject to an S.R. & C.C. Endorsement. That endorsement reads in relevant part:

This insurance also covers:

  (2) destruction of, or damage to, the property
  insured directly caused by vandalism, sabotage or
  malicious act, which shall be deemed also to
  encompass the act or acts of one or more persons,
  whether or not agents of a sovereign power,
  carried out for political, terroristic or
  ideological purposes and whether any loss, damage
  or expense resulting therefrom is accidental or
  intentional; PROVIDED that any claim to be
  recoverable under this subsection (2) be not
  excluded by the FC & S warranty in the policy to
  which this endorsement is attached.
    Nothing in this endorsement shall be construed
  to include or cover any loss, damage,
  deterioration or expense ...

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