Shaver Transportation Co. v. Travelers Indemnity Co.
481 F. Supp. 892, 1980 A.M.C. 393, 1979 U.S. Dist. LEXIS 7769 (1979)
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Rule of Law:
Contamination of cargo resulting from the carrier's failure to properly clean its vessel's equipment is not a covered peril under standard marine cargo insurance clauses. Such a loss arises from a fault in the care and custody of the cargo, not from a peril of the sea, an error in the management of the vessel, or another covered event.
Facts:
- Shaver Transportation Company (Shaver) contracted with Weyerhaeuser Company (Weyerhaeuser) to transport caustic soda to a buyer, GATX.
- Shaver procured a marine cargo insurance policy from The Travelers Indemnity Company (Travelers) but rejected a more expensive coverage option that specifically covered the risk of contamination.
- A Shaver barge, which had previously carried a load of tallow, was used for the caustic soda shipment.
- While loading the caustic soda, it became contaminated with tallow because Shaver had failed to thoroughly clean the barge's input lines.
- Upon arrival, the buyer, GATX, discovered the contamination and refused to accept delivery of the caustic soda.
- The contaminated cargo was returned, and Shaver and Weyerhaeuser incurred significant expenses for storage, heating to prevent solidification, and eventual disposal of the product.
- Shaver and Weyerhaeuser filed a claim with Travelers to recover their losses, but Travelers denied liability under the policy.
Procedural Posture:
- Shaver Transportation Company and Weyerhaeuser Company filed an action against The Travelers Indemnity Company in federal district court to recover losses under a marine cargo policy.
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Issue:
Do losses resulting from cargo contamination, caused by the carrier's failure to properly clean its barge's loading equipment, constitute a recoverable event under a standard marine cargo insurance policy's 'perils of the sea,' 'Inchmaree,' 'negligence,' or 'general average' clauses?
Opinions:
Majority - Skopil, Circuit Judge
No, losses from cargo contamination caused by the carrier's own negligent cleaning do not constitute a recoverable event under the standard policy clauses. The court rejected the plaintiffs' various theories for recovery, finding that the contamination was not a peril insured against. The court reasoned that 'jettison' under the Perils clause involves throwing cargo overboard in extreme danger, not the orderly disposal of already-damaged goods. The Inchmaree clause, which covers errors in the 'management of the vessel,' does not apply because failing to clean the cargo lines is a fault in the 'care and custody of the cargo.' Similarly, the Negligence clause was inapplicable because although the unclean barge was technically 'unseaworthy' for its cargo, the resulting loss (contamination) was not one of the enumerated perils, such as sinking or fire. Finally, a 'general average' situation did not exist because there was no 'real and substantial peril' to the entire venture; the slow corrosion of the barge was too remote to qualify. The court also highlighted that Shaver had explicitly rejected specific contamination coverage, indicating an understanding that the standard policy did not cover such a risk.
Analysis:
This decision reinforces the fundamental principle that standard marine insurance policies cover fortuitous, external risks ('perils'), not losses stemming directly from the insured's own operational negligence in handling cargo. By strictly interpreting the scope of clauses like 'Inchmaree' and 'general average,' the court maintains a clear distinction between errors in vessel management and faults in cargo care. This precedent limits the ability of insured parties to shift the cost of their own poor cargo handling onto their insurers under a standard policy, thereby underscoring the importance of securing specific coverage (like contamination riders) for particular, known operational risks.
