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Marine insurer wins appeal over hijacked cargo claim

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A marine insurer does not have to pay a Florida freight company for a hijacked cargo shipment that it neglected to notify the insurer about, a federal appeals court ruled Wednesday, overturning a lower court decision.

The United States Court of Appeals for the Eleventh Circuit in Atlanta ruled that Florida public policy precluded the insurer from covering a known loss in I.T.N. Consolidators Inc. v. Northern Marine Underwriters Ltd.

The claim was filed several months after hijackers intercepted and stole a shipment that Miami-based ITN was making to Ciudad del Este, Paraguay, in November 2007.

After learning that the shipment had been stolen, ITN reviewed its records and realized that it had failed to obtain a certificate of insurance for the shipment under its open cover policy with Northern Marine, a unit of Munich Reinsurance Co.’s Lloyd’s of London business.

ITN used an online form to obtain a certificate of insurance and remit the premium to the broker who handled billing for Northern Marine. The broker later remitted these funds to Northern Marine, which received the funds on February 12, 2008. Northern Marine denied the claim on February 15, 2008.

After several previous proceedings and rulings, a district court found that ITN’s payment of a premium occurring as it did after it learned of the hijacking, constituted an offer to enter into a new insurance contract that covered the known loss, which Northern Marine accepted by retaining the premium.

Northern Marine appealed the district court’s ruling, arguing that the hypothetical new contract was void as against public policy barring coverage of known losses, as established by other rulings in Florida.

The appeals court agreed.

“Any new contract would be unenforceable as a matter of Florida public policy. The failure of this new contract theory eliminates the last remaining basis for recovery by ITN,” the appeals court ruled.