Shipowner Loses Bid to Recover for Damage in Terror Attack

, New York Law Journal

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Editors' Note: This article has been updated to reflect a Correction.

The owner of a ship that was damaged in a 1997 attack by the Tamil Tigers, a Sri Lankan terrorist group, cannot recover damages in a lawsuit accusing an insurance broker of buying the wrong type of insurance for the ship, a Manhattan Commercial Division judge has ruled.

Supreme Court Justice Eileen Bransten (See Profile) ruled Monday in Sea Trade Maritime v. Marsh USA, 602648/02, that the insurance broker, Marsh USA, never had a relationship with the shipowner, Sea Trade Maritime. Even if it had such a relationship, the judge said, Marsh only renewed the ship's long-standing insurance policy and had no duty to do more.

Sea Trade owned a single ship, the M/V Athena, according to the decision. It contracted with another company, Trans-Ocean Steamship Agency Inc., to manage the Athena, which included obtaining insurance.

Trans-Ocean had been working with an insurance broker, Veit Metzroth, since the 1980s. When Trans-Ocean entered into its contract with Sea Trade, Metzroth was working for Alexander and Alexander Inc. (A&A), an insurance brokerage.

According to Sea Trade's lawsuit, Trans-Ocean asked Metzroth and A&A to obtain so-called held-covered insurance for the Athena. In maritime cases, held-covered insurance provides that a ship is covered even if it enters a dangerous area, like a war zone. Without a held-covered policy, an insured can be required to tell the insurer in advance if the ship is going to a war zone. Held-covered policies are meant to protect shipowners who may not always know in advance where their ships will end up.

Sea Trade alleges that, contrary to Trans-Ocean's request, Metzroth and A&A obtained a policy that required advance notice before entering a war zone. The policy was provided by Hellenic Mutual War Risks Association (Bermuda) Limited.

A&A also provided Trans-Ocean with a summary of the policy, which inaccurately said that notice of entering a war zone should be given "as soon as practicable" and would not affect the coverage.

In November 1992, Metzroth left A&A to join Johnson & Higgins, a brokerage that was acquired by Marsh in 1997.

In 1994, Trans-Ocean named Johnson & Higgins its new exclusive insurance broker, and asked it to renew the insurance policy for the Athena on identical terms. Johnson & Higgins did so, but unlike A&A, it gave Trans-Ocean a correct summary of the policy explaining that notice was required if the ship entered a war zone.

In 1997, a third party chartered the Athena and took it to Sri Lanka, a designated war zone. Trans-Ocean did not give notice to the insurer.

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