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3rd Circuit Affirms P&I Club Not Negligent in Failing to Notify Insured of Foreign Lawsuit

In Industrial Maritime Carriers (Bahamas) v. Thomas Miller (Americas), the Third Circuit Court of Appeals held that Industrial Maritime Carriers (IMB) failed to establish that Thomas Miller (Americas) (TMA) was negligent or breached a fiduciary duty by failing to notify IMB of the pending lawsuit against them in Turkey. The Court held that the link between the failure of a P&I Club to notify IMB was too attenuated and speculative to constitute the cause for their injury.

In June 1997 and July 1997, IMB was hired by Daewoo Corporation to transport cargo between Korea and Turkey aboard the M/V INDUSTRIAL BRIDGE and AMDERMA. M/V INDUSTRIAL BRIDGE was entered into a German P & I Club, Trampfahrt, and AMDERMA was entered into the UK Club. When the cargo arrived in Turkey, IMB released the cargo from both ships without requiring the receivers of the cargo to present the original bills of lading. The cargo was incorrectly released to the wrong party by the Turkish Customs Authority.   In July 1998, IMB learned of the misdelivery and requested TMA provide legal assistance in Turkey. TMA later appointed an attorney on behalf of IMB to contest Daewoos request for compensation for the misdelivery of the cargo aboard the INDUSTRIAL BRIDGE. 

In October 1998, Daewoo filed suit in Turkish Court against IMB for the alleged misdelivery of cargoes aboard the INDUSTRIAL BRIDE and the AMDERMA. TMA subsequently learned that the INDUSTRIAL BRIDGE was not entered into the UK Club. IMB claimed that they were unaware of the pending lawsuit filed by Daewoo in Turkey with regards to the misdelivery for both the INDUSTRIAL BRIDGE and the AMDERMA until November 2002.

IMB commenced an action in the District of New Jersey asserting claims against TMA for negligence and breach of fiduciary duty. IMB alleged that TMA had a duty and obligation to notify IMB of the existence of the AMDERMA lawsuit in a timely manner so that an effective defense could be presented. IMB claimed that the attorney appointed by TMA failed to raise preliminary defenses on its behalf, and had those defenses been raised the claims against IMB would have been dismissed. In order for a party to sustain a cause of action for negligence a plaintiff must prove that they were owed a duty of care, that duty was breached, the breach of the duty caused injury to the plaintiff and that there were actual damages. A fiduciary is charged with a duty of loyalty and a duty to exercise reasonable skill and care on behalf of the person to whose benefit the fiduciary acts.

The District Court held, and the Third Circuit affirmed, that even if TMA had a duty to notify IMB of the AMDERMA lawsuit, IMB still failed to make out a case that this failure actually caused injury to IMB. In so holding, the court noted that IMB had requested that TMA provide an attorney in connection with the INDUSTRIAL BRIDGE misdelivery and voiced no objected to the attorney appointed at the time. IMB offered no explanation as to how TMA's failure to notify them regarding the AMDERMA litigation caused the appointed attorney to not raise preliminary defenses that IMB would have raised that could have changed the outcome of the litigation had they been aware of the case from the beginning.

Read a copy of the Third Circuit Court of Appeals decision

For more information concerning this decision, please call on us at info@chaloslaw.com

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