Insurers, Importers Seek Cargo Ship as Collateral in District Court in NY for Goods Lost, Damaged at Sea

A group of insurers and importers filed a lawsuit in the U.S. District Court for the Southern District of New York looking to seize a vessel as collateral for losses north of $39 million after thousands of shipping containers went overboard during a November 2020 voyage. Filing a five-count complaint at the district court, the plaintiffs said that the court should issue a warrant for the arrest of the vessel and its cargo given a group of shipping companies' damage to the cargo and breach of contract, among other violations (Mitsui Sumitomo Insurance Company of America v. M/V One Apus, S.D.N.Y. #22-08233).

The plaintiffs, which included uninsured companies Nokia, Motool, Rooms to Go and Flextronics, along with insurance companies such as Continental Insurance Co. and Allianz, either insured for or had goods loaded onto the vessel from several foreign ports in China to be sent to California. The complaint said the defendants -- Chidori Ship Holding, Jessica Ship Holding, NYK Ship Management, Ocean Network Express, Hapag-Lloyd, Yang Ming Marine Transport Corp. and HMM Co. -- entered clean bills of lading or contracts for the shipments.

On Nov. 30, 2020, during the voyage to the U.S., around 1,800 containers broke free and fell into the Pacific Ocean, damaging hundreds more in the process. The vessel diverted to Japan, undergoing repairs for four months. The ship then completed its voyage, unloading the remaining goods in April 2021 in "bad order and condition."

The plaintiffs then filed suit at the Manhattan federal district court, arguing that given the breach of contract, among other violations, the court should issue a warrant for the vessel as collateral for the losses incurred on the lost and damaged shipments. Under the first count, the plaintiffs said that the defendants did not deliver the shipments in good order, condition and quantity as received in violation of the agreements and their duties as common carriers of goods by sea for hire, in violation of the Carriage of Goods by Sea Act. Failing the claims per the Carriage of Goods by Sea Act, the plaintiffs said that the vessel should be forfeited, given violations of the Harter Act.

The complaint said the vessel should be seized given the breach of contract. "In breach of said contract, the Carrier Defendants and the Vessel Defendants did not deliver the shipments in the same good order, condition, and quantity as when received. To the contrary, the shipments were lost overboard and/or damaged during the ocean carriage," the complaint said. "By reason of the Carrier Defendants’ and the Vessel Defendants’ failure to deliver the shipments in the same good order and condition as received, each defendant has caused a loss to the Cargo Plaintiff ... no part of which have been paid by any defendant, though duly demanded." A similar claim was made according to the defendants breach of bailment.

The fifth claim vied for seizure of the vessel given the defendants' general maritime law negligence. "Thereafter, in breach of and in violation of said agreements and their obligations to own and/or operate and/or charter and/or manage the vessel in a safe, nonnegligent, seaworthy and cargo-worthy manner, the Carrier Defendants and the Vessel Defendants negligently owned and/or operated and/or chartered and/or managed said vessel, resulting in either a complete failure to deliver some of the shipments, or in delivering other of the shipments in a damaged condition," the brief said.