U.S. District Court for the Southern District of New York, January 22, 2021
This case is an insurance coverage dispute between plaintiff Cosmopolitan Shipping Co., Inc. and defendant Continental Insurance Company regarding claims made against Cosmopolitan by seamen exposed to asbestos on its ships in the 1940s. The policy at issue was unable to be located, apart from three endorsements. An evidentiary hearing was conducted to determine whether the policy provided coverage and what the terms of coverage were.
In September 2017, Cosmopolitan settled 47 marine asbestos complaints for injuries sustained by seamen who sustained injuries aboard war-built vessels chartered by Cosmopolitan between May 1946 and December 1948 by agreeing to the entry of a consent judgment of over $4.5 million. Cosmopolitan asserted that it was entitled to coverage for all claims under a policy issued to the United Nations Relief and Rehabilitation Administration, an international social welfare program that distributed aid to nations affected by World War II. CIC argued that it was not liable because Cosmopolitan had failed to prove the existence and terms of the Policy which would provide coverage.
The court held that Cosmopolitan’s search for the policy was sufficiently diligent, as evidenced by the decade of searching and the three endorsements to the policy which were located, as well as the fact that the policy was issued to UNRRA and Cosmopolitan was not a party to the contract.
The court declined to determine the burden of proof in a “lost policy” case under New York law because Cosmopolitan failed to prove the terms of the policy even under the lesser, preponderance of the evidence, standard.
The court found that CIC had provided P&I coverage for vessels sailing on behalf of UNRRA, as evidenced by the fact that one endorsement indicated that it should be attached to Policy C-4893 of the Continental Insurance Company issued to the UNRRA. Other endorsements indicated that the coverage was open cover P&I. Evidence also showed that the terms of the P&I policy was at least from May 1946 to August 1, 1947, evidenced by language in the endorsements, and that CIC was the sole provider of P&I insurance to UNRRA beginning May 1, 1946.
With respect to the underlying asbestos claims, the court found that Cosmopolitan showed sufficient evidence that it had chartered ships on behalf of UNRRA, including the five named, and that UNRRA provided insurance for vessels operating on its behalf. Further, the asbestos plaintiffs were able to show vessel status cards which credibly linked them to the Cosmopolitan vessels in which they sailed, however only four of those plaintiffs were aboard ships that were demonstrably chartered by UNRRA. Although Cosmopolitan argued that all 22 of its ships were chartered, the only evidence was an application for charter, which the court held was an insufficient connection.
Despite the foregoing, the court ultimately concluded that the policy was unenforceable because the material terms of the policy were unable to be established. The court acknowledged that in other lost policy cases, courts have found terms to be established by clear and convincing evidence that the policy adhered to typical policy terms, however, in this case, many critical terms were missing, including the limit of insurance and the time limitation for reporting claims. Additionally, the two examples submitted by Cosmopolitan were inconsistent in their material terms and evidence suggested that the policy at issue did not “default to boilerplate language.” This was particularly exemplified by the fact that CIC’s expert testified that in his nearly forty years of experience, he had never heard of an “Open P&I” policy, which the policy at issue purported to be. As such, the court held the policy did not afford coverage to Cosmopolitan for the underlying asbestos claim.