Second Circuit to Consider Shipper’s Lost Policy Dispute

Law360 Insurance Authority / Shane Dilworth

  • January 10, 2023

The Second Circuit on Wednesday will tackle whether a charter shipping company that entered into a $4.6 million settlement to resolve asbestos injury claims produced enough evidence to sufficiently show that terms of a lost policy entitle it to coverage from a CNA unit.

Cosmopolitan Shipping Co. is hoping to convince a panel that the terms of a missing Continental Insurance Co. protection and indemnity, or P&I, policy provide coverage for the settlement of the claims brought by 47 seamen. Additionally, the shipping company contends that it sufficiently showed that broker Marsh USA Inc. negligently advised it about coverage available under the policy.

Here, Law360 breaks down the case in advance of the hearing.

Raymond A. Mascia Jr., a shareholder at Anderson Kill PC's insurance recovery group who represents policyholders, told Law360 that the dispute showcases the disparity between the parties' respective burdens of proof when a policy is lost or missing.

Mascia, who was recognized as a Rising Star in insurance by Law360 in 2020, pointed out that policyholders such as Cosmopolitan have the initial burden of proving that a policy was purchased and in place.

After the insured has met that threshold, Mascia said, the burden should shilt to the carrier.

Insurers, he explained, then have the burden to prove the amount of coverage provided by the policy and the existence of any exclusions or limitations that would relieve them of any coverage obligation.

Mascia said that insurers, as the sellers of coverage, should bear more responsibility for maintaining policies.

"I think that is particularly pertinent in a case like this, where the policyholder not only proved, and the court found, that the missing policies did in fact exist," Mascia said. "The policyholder also came forward with significant evidence about what the terms and the limits of the policy were."

. . .

Anderson Kill's Mascia said this decision was erroneous because Cosmopolitan completed a "Herculean task" by providing enough evidence to convince Judge Schofield that the United Nations Relief and Rehabilitation Administration obtained a P&I policy from Continental.

He went on to say that the judge should have given more consideration to the time that has passed since the policy was purchased.

"When you're talking about policies that were issued in the 1940s, it's a very difficult thing to try to prove for a policyholder," Mascia said. "I think in this case, Cosmopolitan did a pretty good job of producing significant evidence of the terms and the limits of the policy."

Mascia said the amount of evidence produced by Cosmopolitan could be enough to persuade the appeals court panel to overturn Judge Schofield's ruling and remand the case for further evaluation.

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