Cosmopolitan Shipping CO., Inc. v. Continental Insurance Company

Background

Cosmopolitan seeks to establish insurance coverage by using secondary evidence, meaning evidence other than the insurance policy itself. The policy at issue could not be found, except for three endorsements. The court applied New York law because the parties relied on it.

Under New York law, an insured may use secondary evidence to prove the existence and terms of a missing insurance policy only after showing that it made a diligent but unsuccessful search for the policy. The court described this diligence requirement as a preliminary question about whether the evidence may be admitted under the federal best-evidence rule.

Searches and Arguments

Cosmopolitan submitted an affidavit from Granville T. Conway, who was the son of Cosmopolitan’s former president and a former shareholder and employee. The affidavit stated that Cosmopolitan began investigating in 1995 for insurance policies relevant to claims by former seamen, conducted another search nearly a decade later, and found no relevant policies. Around 2016, Cosmopolitan’s counsel subpoenaed insurance companies believed to have records of lost Cosmopolitan policies, including the Fulton Syndicate, Continental Insurance Company, the American Club, and the Fireman’s Fund. Those subpoenas produced no relevant policy. Cosmopolitan also searched various archives without success.

Continental argued that Cosmopolitan’s search was insufficiently diligent because Cosmopolitan did not ask the four subpoenaed entities to search for policies issued to the United Nations Relief and Rehabilitation Administration, did not subpoena possible foreign insurers, and did not have its expert conduct an independent search.

Court’s Action

The court found that Continental had shown it conducted a diligent search for policies issued to Continental. The court also found that Continental had not yet shown that it conducted a diligent search for Policy C-4893 issued to the United Nations Relief and Rehabilitation Administration, apart from the three endorsements before the court.

The court stated that the three endorsements supplied many important policy terms but omitted other important terms that would have to be proved, if at all, through secondary evidence. Judge Lorna G. Schofield ordered Continental to file a letter by January 5, 2021, proposing how it intended to show that it had conducted or would conduct a diligent search for the remaining portions of Policy C-4893 and explaining why it should be permitted to do so. Continental was ordered to file a response to any opposing letter by January 12, 2021. The order did not decide whether insurance coverage existed or whether the secondary evidence would ultimately be admitted.