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Channel Fabrics, Inc v. Hartford Fire Insurance Company

August 13, 2012

CHANNEL FABRICS, INC.,
PLAINTIFF,
v.
HARTFORD FIRE INSURANCE COMPANY,
DEFENDANT.



The opinion of the court was delivered by: J. Paul Oetken, District Judge:

MEMORANDUM AND ORDER

Plaintiff Channel Fabrics, Inc. ("Channel Fabrics") brings this action for breach of contract and a declaratory judgment against Hartford Fire Insurance Company ("Hartford"), alleging that Hartford improperly denied Channel Fabrics' insurance claim. The parties cross-move for partial summary judgment on the issue of liability. Specifically, the parties seek a determination of whether Channel Fabrics' claim is covered, and not otherwise excluded, by the policy at issue. For the reasons that follow, Plaintiff's motion for partial summary judgment is denied, and Defendant's motion for partial summary judgment is granted in part and denied in part.

I. Factual Background

The facts in this case are undisputed, and the following factual summary is based on a stipulation entered into by the parties and the documents attached to that stipulation. (See Stipulated Statement of Material Facts for Purposes of Partial Summary Judgment, Dkt. No. 18-1 ("Stip.").)

Channel Fabrics is a New York corporation engaged in the business of textile shipping. Hartford is a foreign corporation authorized to conduct the business of insurance in New York. In 2009, Channel purchased an "All Risk" Ocean Cargo Choice insurance policy from Hartford, effective from June 9, 2009 to June 9, 2010 (the "Policy"). (See Stip. Ex. A.)

A. The Policy

Pursuant to Clause 1, entitled "Goods Insured & Interest Clause," the Policy insures "All shipments of lawful goods, freight and merchandise of every kind and description, except as excluded, vessel lost or not lost, under or on deck, for which the Assured has an insurable interest." (Policy at 19.*fn1

Clause 2 of the Policy states that "insured property is held covered when transported by the following conveyances, including connecting conveyances, within the respective geographic limitations, for which an applicable limit of insurance is stated in the Schedule for . . . metal self-propelled surface vessels/steamers between ports and/or places in the world . . . ." (Id.) The Schedule of Coverages and Limits states that Hartford's liability is limited to $300,000 with respect to property insured per any one metal self-propelled vessel. The Policy sets a deductible of $1,000 for any loss, except that this deductible is waived in the event of a total loss. (Id. at 06.)

Clause 3 of the policy, which sets forth the duration of the risk for insured property shipments, states that

This insurance attaches from the time the insured property leaves the warehouse/store or other place or origin, or is delivered alongside or on board the overseas conveyance in accordance with the obligation of the Assured under the terms of sale, for the commencement of transit, prior to expiration or cancellation of this policy, and continues until the first occurs:

(1) Insured property is delivered to the Consignee's or other final warehouse/store or place for storage at the intended destination . . .

(Id. at 19.)

The policy provides "all risk" coverage to insured property as follows.

13. PERILS, TERMS OF AVERAGE & RISKS INSURED AGAINST

The following average terms shall apply

a. All Risk: Unless otherwise specified below, this policy insures against "All Risks" of physical loss or damage from any external cause irrespective of percentage, but excluding nevertheless the risks excluded by the policy, and of War, Strikes, Riots, Seizure, Detention and other risks excluded by the Nuclear/Radioactive Contamination Exclusions Clause, the F.C. & S. (Free of Capture and Seizure) Warranty and the S.R. & C.C. (Strikes, Riots and Civil Commotions) Warranty of this policy, excepting to the extent that such risks are specifically covered by an additional coverage or endorsement. (Id. at 22.)

The Policy also sets forth certain exclusions from coverage. Relevant to this lawsuit, under the heading "Basic Exclusions," the Policy states that "[t]he following exclusions shall apply unless modified or superseded elsewhere herein or endorsed hereon. This policy does not cover: . . . . b. Loss, damage, or expense: . . . Loss of use or market, interruption or business, or consequential loss of any nature. Spoilage is not a consequential loss." (Id.)

Clause 15 of the Policy, entitled "Paramount Warranties," also excludes certain enumerated risks from the Policy's coverage. Relevant to this lawsuit, the Policy provides:

Subject to the following Paramount Warranties which shall not be modified or superseded by any other provision included herein or stamped or endorsed hereon unless such other provision refers specifically to the risks excluded by these Warranties and expressly assumes the said risks: . . .

c. Delay Warranty: Warranted free of claim for loss of market or for loss, damage, expense or deterioration arising from delay, whether caused by a peril insured against or otherwise.

(Id. at 22-23.) This "Delay Warranty" is modified by the "Transit Clause," which provides, "This insurance specially to cover the insured property during deviation, delay, forced discharge, reshipment, transshipment and any other variation of the adventure arising from the exercise of a liberty granted to the shipowner or charterer under the contract of affreightment." (Id. at 20.)

The Policy contained a clause requiring the insured party to mitigate damages from covered losses: "In the event of loss or misfortune, it is the duty of the Assured . . . to take all reasonable measures to avert or minimize loss insured against by this policy and to ensure that ...


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