Stoneline Group, LLC v. Liberty Mutual Insurance Company

Background

Stoneline Group, LLC imported natural stone and purchased 4,183 crates from Yaman Maden for $1,806,281.33, excluding shipping and insurance. Liberty Mutual issued Stoneline a marine cargo insurance policy effective August 15, 2022, through August 15, 2023. The policy covered insured shipments during that period against physical loss or damage from external causes and included a warehouse-to-warehouse and marine extension clause. It also contained exclusions and a $2 million liability limit for “any one vessel, connecting conveyance, or in any one place at any one time.”

The cargo was transported by truck within Turkey before being loaded onto the M/V Canny Caroline. The vessel left Turkey during the policy period and arrived at Port Everglades, Florida, where it encountered Hurricane Ian before unloading. The cargo was found to have sustained substantial physical damage, and additional damage allegedly occurred during unloading and reloading. The United States Department of Agriculture later issued an Emergency Action Notification requiring the shipment to be re-exported or destroyed because live pests were found. Stoneline transported the cargo to the Dominican Republic for fumigation and later concluded that the shipment was a total loss.

Stoneline asserted a breach-of-contract claim and a claim for a declaratory judgment. Liberty moved for summary judgment, arguing that the policy did not cover the losses. Stoneline agreed that its declaratory-judgment claim should be dismissed but opposed summary judgment on the breach-of-contract claim.

Rulings on Coverage Arguments

The court applied federal maritime law and, where no controlling federal maritime rule existed, New York law under the policy’s choice-of-law provision.

The court denied summary judgment based on Liberty’s argument that coverage never attached because parts of the cargo traveled by truck before August 15, 2022. The court held that the warehouse-to-warehouse clause extended coverage rather than excluded it. The vessel departed Turkey during the policy period, and Stoneline was not seeking coverage for damage occurring during the earlier truck transportation. Liberty therefore could not obtain judgment by treating the extension clause as an exclusion.

The court also denied summary judgment based on Liberty’s argument that the cargo lacked physical damage because the evidence did not show that the snails caused the damage. The court stated that New York law requires tangible physical damage, but found no dispute that the cargo suffered major, tangible damage, including natural stone reduced to debris. The court explained that Liberty’s argument about the snails did not establish that Liberty was entitled to judgment on the breach-of-contract claim.

The court denied summary judgment based on alleged insufficient packaging. The policy did not define proper packaging or require that the cargo be placed in containers. The record contained conflicting evidence about whether the cargo was properly packaged, including evidence that the packaging was standard for exporting natural stone and evidence from the vessel’s master that the cargo had been properly stowed. The court also declined to consider a packaging expert report submitted with Liberty’s reply brief because Stoneline had not had an opportunity to respond to it.

The court further denied summary judgment under the policy’s Free of Capture and Seizure Warranty. That provision excluded losses connected to capture, seizure, arrest, restraint, detainment, confiscation, and similar actions. The court concluded that the government notification requiring the cargo to be re-exported or destroyed did not clearly fit those terms because it did not require the cargo to be held. Even if the warranty applied, the court found a factual dispute about whether the notification was the direct cause of the losses Stoneline sought, particularly because Stoneline claimed physical damage during transportation and reloading.

Liability Limit

The court denied Liberty’s request for partial summary judgment declaring that the policy imposed a maximum recovery of $2 million. Stoneline argued that the two voyages involving the M/V Canny Caroline could be treated as separate shipments. Because the policy language and the evidence, including separate bills of lading, left a factual issue about whether the case involved one vessel for purposes of the limit, the court held that a jury must decide the issue.

Declaratory-Judgment Claim and Disposition

The court granted Liberty’s motion for summary judgment on Stoneline’s declaratory-judgment claim. Both parties agreed that the claim duplicated the breach-of-contract claim, and the court concluded that resolving the contract claim would address the same issues. The declaratory-judgment claim was therefore dismissed.

The court denied Liberty’s motion for summary judgment as to Stoneline’s breach-of-contract claim and granted the motion as to the declaratory-judgment claim. The court stated that it would separately issue an order scheduling a jury trial.