The judges of the Second Circuit Court of Appeals have affirmed a ruling from the Southern District of New Jersey that found a shipping company failed to establish the material terms of a lost policy and that the company's claims against its former broker were time-barred. The case is called Cosmopolitan Shipping Co. v. Continental Ins. Co., 2023 U.S. App. LEXIS 2311 (2nd Cir. 2023). Please note that this opinion is unpublished and may have limited precedential value in certain jurisdictions.
Cosmopolitan is a shipping company that operated multiple types of vessels as far back as World War II. The company was one of many who aided post-war recovery efforts for the United Nations Relief and Rehabilitation Administration (UNRRA). Continental had provided the UNRRA with a maritime protection and indemnity (P&I) policy dubbed Policy C-4893. It wasn't until the 1980s that seamen who had sailed on Cosmopolitan vessels began suing the company for harm caused by asbestos exposure aboard the vessels. Those suits settled in September 2017 for nearly $4.6 million. Cosmopolitan sought coverage from Continental under Policy C-4893, claiming they were owed coverage because they had chartered their vessels on UNRRA's behalf while Policy C-4893 was effective. The trouble was, Cosmopolitan could not find a physical copy of the policy. Given that Policy C-4893 was issued during Harry Truman's first term, the difficulty in keeping track of the policy itself is understandable. But losing track of the policy also means losing track of the policy terms.
Claims Against the Company
Without the specific policy terms, there was no way for Cosmopolitan to prove they were owed coverage. They did, however, provide outside evidence that showed Continental had issued P&I coverage to UNRRA for the relevant time period, and that Policy C-4893 had covered some of the ships Cosmopolitan had chartered for UNRRA. Though the judges of the Southern District of New York agreed that Cosmopolitan's evidence showed coverage existed, it was insufficient "to establish all material terms of Policy C-4893," meaning Continental did not have the duty to indemnify the underlying settlement.
On appeal to the Second Circuit, Cosmopolitan alleged that their evidence served as "a template to ascertain the terms and conditions contained within Policy No. C-4893 issued to the UNRRA and covering the Cosmopolitan-chartered vessels and seamen in the underlying asbestos actions." Cosmopolitan relied on two other policies from Continental and one "specimen policy" from the American Institute of Marine Underwriters that their expert witness called "conclusive evidence of the operable terms and conditions" of Policy C-4893. They also pointed to expert witness testimony from Continental that P&I policies did not change quickly or without warning.
Even then, the Second Circuit disagreed, stating Cosmopolitan's evidence failed under both the "clear and convincing evidence" and the "preponderance of the evidence" standards. The policies Continental relied on were inconsistent on several key points, including policy limits, the timing for filing a claim, and the amount of premium required. The judges found no error in the district court's judgment.
Claims Against the Broker
Cosmopolitan had also made claims against Marsh USA, Inc., the company's insurance broker from the relevant time period, which the district court decided were time-barred. Cosmopolitan claimed a Marsh representative had contacted them in the 1990s regarding asbestos claim coverage even though Marsh was no longer Cosmopolitan's broker. Cosmopolitan claimed entitlement to damage because they had relied on the representative's allegedly negligent advice. The district court judges had awarded summary judgment to Marsh because, though the Marsh representative had touched base with Cosmopolitan in the late 1990s, Cosmopolitan did not reach out "to confirm insurance coverage until 2016," by which time the company said they "had no evidence of insurance coverage for the relevant time period."
Even when viewing the evidence in light most favorable to Cosmopolitan, the Second Circuit found nothing that showed the district court had erred in its decision. The statute of limitations had begun tolling in the early 2000s, and it could not be considered "reasonably diligent" that Cosmopolitan had waited more than 15 years to confirm coverage.
The district court's judgment for Continental and Marsh was affirmed.
Editor's Note: While courts may use outside evidence to interpret a missing insurance policy, they will not replace the language of the missing policy. In this case, the evidence Cosmopolitan presented showed that Policy C-4893 issued by Continental definitely existed, but neither the district court nor the Second Circuit could construe the terms of Policy C-4893 because the secondary evidence Cosmopolitan offered was policy language from "newer" policies. Even though the subject matter of the policies was substantially similar and had even been issued by the same insurer to the same insured, the existence of similar policies cannot be relied on to provide any information as to the terms and content of the missing policy.