Case Facts:
Millobar Ltd. (“the Company“), which imports, manufactures, and sells raw materials for animal feed, transported 8,337 tons of animal feed to Israel. The Company insured the cargo under a marine cargo insurance policy with Phoenix Insurance Company Ltd. (“the Insurer“).
During unloading at Haifa Port, workers discovered part of the cargo was burned or damaged. The Insurer’s appointed assessor confirmed 500 tons were unfit for use. The cargo was then split between two locations: the damaged goods went to a “Taaruvot Hatzafon” warehouse, while the remainder went to the Company’s warehouses. During the storage period in both warehouses, fires broke out that damaged the goods, and the Company was forced to sell the remaining goods at a loss.
The Company seeks compensation for losses from selling the damaged goods stored at “Taaruvot Hatzafon” warehouse. (The Company has already settled with another insurer for losses from the fire at its own warehouses.)
Parties’ Arguments:
The Company contends that the sale at a loss of damaged goods stored in the “Taaruvot Hatzafon” warehouses is covered by the Insurer’s policy , which also covers damages occurring within 180 days from the date of unloading the cargo from the ship.
The Insurer argued that there is no coverage for the damages as “Taaruvot Hatzafon” was a final destination and not a temporary warehouse while the 180-day coverage period only covers a temporary warehouse. It also claimed that the Company was not the cargo importer and that in any case, only the 500 previously damaged tons were partially damaged, and this was unrelated to the sea transport, but due to the cargo’s condition before loading onto the ship, therefore not covered by insurance.
Additionally, it was argued that the damages are not covered as they occurred due to malice or recklessness on the Company’s part, which failed to mitigate damages by not cooperating with the assessors of other parties and by not sharing samples taken from the cargo. It was further claimed that the policy does not cover indirect damages such as loss of profits, storage and transport expenses, ventilation costs, testing fees, etc..
Each party presented expert opinions, and due to the disputes between the parties’ experts, an agronomist was appointed as a court expert. The court expert determined that upon unloading hold 4 of the ship (where the 500 damaged tons were discovered), the entire mixture in hold 4 should have been declared as ‘entirely damaged,’ the 500 damaged tons should have been destroyed, and part of the material should not have been mixed in this hold with the undamaged material.
The expert determined that the material should have been stored in numerous compartments to prevent “combustion” and right after should have begun an immediate process of mixing and an emergency sale of the material. The expert determined that if hold 4 had been determined to be entirely damaged, and the materials separated, and each truck leaving the port inspected, the damage could have been contained and prevented from affecting the material stored in the Company’s warehouses (damage not claimed in this lawsuit).
Discussion and Ruling:
Firstly, the court rejected the Insurer’s argument that the cargo importer was a different entity, than “Millobar Cooperative Association,” whose name appeared on the invoice and bill of lading attached to the claim. The court found that the Company had an interest in the cargo, was the entity that entered into the insurance contract and paid the premium, and maintained a close relationship with “Millobar Cooperative Association,” being separate only for tax purposes.
The court accepted the claim and determined that the plaintiff had proved the occurrence of an insured event that affected the material covered by the policy beyond the original 500 damaged tons (for which damage was not claimed), while the defendant failed to prove any exclusion or limitation exempting it from liability.
The court ruled that the Company proved that actual damage occurred to the goods and that it was more likely that the damage occurred during the insurance period and was not pre-existing damage that was present before loading onto the ship. The court was convinced that the heating of the goods occurred on the ship and after loading, and did not accept the Insurer’s argument that the goods were supplied and loaded onto the ship already damaged.
Regarding the Insurer’s claim that the warehouses were interim storage, the court ruled that, in any case, the insured event occurred on the ship, but even if it occurred in “Taaruvot Hatzafon” warehouses, it happened during the extended policy period and therefore constitutes an event covered by the policy.
Furthermore, the court ruled that the claim that the cargo was initially supplied in a damaged state is unacceptable. The more probable possibility, according to the court, is that heating began in the cargo during the sea voyage, which lasted almost a month in the hot weather conditions during August 2015, rather than the possibility that despite the bill of lading and proper cargo inspections before shipment, the cargo was already damaged then.
As for the Insurer’s claim that the Company acted with malice, recklessness, or lack of cooperation – the court rejected these arguments and ruled that under the circumstances, it cannot be argued that the Company failed to mitigate damages or acted with gross negligence, recklessness, indifference, etc.: After discovering the 500 damaged tons, the Company divided the cargo and transferred part to its warehouses and part to Taaruvot Hatzafon warehouses; in Taaruvot Hatzafon, the cargo was stored in flat warehouses which, according to the Insurer’s own assessor, were better for preventing heating; not only did the Company divide the cargo between its warehouses and Taaruvot Hatzafon’s, but it also further divided the goods transferred to Taaruvot Hatzafon into three compartments; as soon as suspicion arose, the Company took action to circulate the material; the Company also acted throughout in accordance with the instructions and guidelines provided by the Insurer’s own assessor..
In light of all the above, the court ruled that the Insurer must pay the Company NIS 1,810,362 plus VAT. Given that the claim was filed almost three years after the event, the court decided not to add linkage and interest from the date of the event, but only from the date of filing the claim.
[Civil Case (Haifa) 58465-08-18 Millobar Central Institute for Mixtures Ltd. v. Phoenix Insurance Company Ltd., rendered on March 29, 2023, by the Honorable Judge Rivka Eisenberg].
The content is provided for informational purposes only and is not intended to be comprehensive. It does not serve to replace professional legal advice required on a case by case basis.
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