Federal District Court Opinions

(S.D.N.Y. 2003) 249 F. Supp.2d 303 AMERICAN NATIONAL FIRE
v. MIRASCO, INC., Defendant. MIRASCO, INC., Plaintiff, v.
Civ. 12405 (RWS), 00 Civ. 5098 (RWS) United States District
Court, S.D. New York. March 10, 2003 West Page 304



Kingsley & Kingsley, Harold M. Kingsley, Hicksville, N.Y.,
American National Fire Insurance Co.

Haight Gardner Holland & Knight by John M. Toriello, James
V. Marks, New York City, for Mirasco, Inc.


ROBERT W. SWEET, United States District Judge

American National Fire Insurance Company (“American
National”) and Great American Insurance Co. (“Great
American”) (collectively the “Insurers”), the plaintiffs in
99 Civ. 12405 (the “New York Action”) and defendants in 00
Civ. 5098 (the “Georgia Action”), have moved against
Mirasco, Inc. (“Mirasco”), defendant in the New York Action
and plaintiff in the Georgia Action, for summary judgment
pursuant to Rule 56 of the Federal Rules of Civil Procedure
and Local Rule 56.1 in this dispute regarding a coverage
issue under the rejection coverage of an ocean marine
transportation policy. Mirasco has cross-moved for summary
judgment in the Georgia Action.

For the following reasons, the Insurers’ motion is granted
in part and denied in part, and Mirasco’s cross-motion is

Prior Proceedings

The Insurers commenced the New York Action on December 22,
1999, seeking a declaration that they were not obligated to
pay Mirasco’s losses under the policy. Mirasco asserted a
counterclaim against the Insurers under Georgia law for
breach of contract and bad faith.

On March 8, 2000, Mirasco commenced the Georgia Action
against the Insurers in the Superior Court of Georgia,
Fulton County, seeking compensatory and exemplary damages
under Georgia law for the Insurers’ breach of the policy
and their bad faith denial of Mirasco’s claim. The Insurers
removed to federal court. After denying Mirasco’s motion to
remand, the Northern District of Georgia transferred the
case to this Court on July 5, 2000.

The Insurers filed the instant motion on November 7, 2002.
Mirasco cross-moved on December 6, 2002. Oral argument was
held on January 15, 2003. Since that time, the parties have
submitted at least six additional letters in support of
their respective positions, the last of which was received
on February 13, 2002, at which time the motion was
considered fully submitted.


As befits a summary judgment motion, the following facts
are drawn from the parties’ Rule 56.1 statements.

The Parties

Mirasco is a Georgia corporation doing business as, inter
alia, a trader and exporter of beef products from the
United States to Egypt. Mirasco’s officers and shareholders
consist of three members of the Rizk family. Latif Rizk
owns 50 percent of the stock, and his two sons Saher and
Sami Rizk each own 25 percent of the stock. Mirasco was
formed in 1983 and has been exporting beef livers to Egypt,
as well as engaging in other business, since that time.

The Insurers are companies formed in Ohio with their
principal places of business located in Ohio.

The Policy

At the time of its formation, Mirasco retained Antonio
Palmiotto (“Palmiotto”) of International Insurance Brokers
(“IBP”) as its insurance broker and agent to procure ocean
marine transportation and rejection insurance. Initially,
Palmiotto placed the coverage with companies other than the
Insurers. In 1990, Palmiotto West Page 307 submitted the
existing policy to various insurers, including the
Insurers, who agreed to issue that policy as “Open cargo
Policy No. OMP7375220” (the “Policy”). Originally effective
March 15, 1990, it was rewritten effective March 15, 1996.
It is undisputed that the Policy was in full force and
effect at all times relevant to this action. Although the
Policy was prepared by Mirasco’s brokers, the Insurers
approved the form and content of the Policy.

Several clauses of the original policy are discussed: the
clause concerning Mirasco’s insurance broker’s roles, the
Rejection Coverage, and the Sue and Labor Clause. Each are
detailed below.

Clause 40 involved Mirasco’s insurance broker’s roles:


It is a condition of this policy and it is hereby agreed
that International Insurance Brokers, Inc. is the
Insured’s broker and shall be deemed to be exclusively the
agents of the Insured[] and not of These Insurers; any
notice in connection with affecting this insurance which
is given or delivered by or on behalf of These Insurers to
International Insurance Brokers, Inc., including notice of
cancellation, shall be deemed to have been delivered to
the Insured.

Rejection insurance protects against the risk of rejection
or condemnation of the insured goods by the government of
the country of import for failure to meet, for instance,
local health standards. E.g., Calavo Growers of California
v. Generali Belgium, 632 F.2d 963, 965 (2d Cir. 1980). The
rejection coverage included by the Policy utilizes standard
industry language and provides, in pertinent part:


A.1. Subject always to the following conditions and
exclusions this policy is extended to cover the risks of
rejection or condemnation by the government of the country
of import or of their agencies or departments during the
period of this insurance.

* * *

B. It is a condition of this insurance that:

1. The interest insured is produced, prepared and packed
in accordance with regulations of the Government of
Country of Origin and it is fit for export to the
importing country.

2. Shipments are direct or held covered at a premium to
be agreed.

C. In particular, this insurance does not cover claims
arising from:

1. Non-compliance with any of the conditions above.

2. Loss of market.

3. Misdescription of the interest insured.

4. Non-compliance with any regulations in force in
country of destination at the time interest attaches

5. Non-compliance with the labelling regulations in force
in country of destination at time interest attaches

6. Any omission or error in the contract of sale or other

7. Non-compliance with or breach of any of the provisions
or warranties set out in the terms and conditions of this

D. In the event of any embargo or prohibition being
declared or in being by importing country, no claim shall
attach hereto in respect of such embargo or prohibition on
any shipment sailing after the announcement or enforcement
of such an embargo or prohibition. In West Page 308
respect of shipments which have sailed prior to such
announcement or enforcement, this insurance is only to pay
the cost of return freight to country of export or up to
that amount in event of re-export to any substitute

The Policy also contained a Sue and Labor Clause:


In case of any imminent or actual loss or misfortune, it
shall be lawful and necessary to and for The Insured, his
or their factors, servants and assigns, to sue, labor and
travel for, in and about the defense; safeguard and
recovery of the said goods and merchandise, or any part
thereof, without prejudice to this insurance; to the
charges whereof These Insurers will contribute according
to the rate and quantity of the sum hereby insured; nor
shall the acts of The Insured or of These Insurers in
recovering, saving and preserving the property insured, in
case of disaster, be considered a waiver or an acceptance
of abandonment.

In March 1999, the Insurers added an endorsement to the
Policy that excluded rejection coverage for IBP products
shipped to Egypt. Roger Ablett, the Insurers’ underwriter,
stated that the addition of the endorsement was necessary
in order for the Insurers to exclude IBP products in Egypt
from the rejection coverage of the Policy.

Decree 465

On November 22, 1997, the Egyptian Government issued Decree
465, which, according to a translation provided by the
Insurers, provided in part:

B) packets in which products must be firmly closed and
healthy authorized. Moreover, the following information
must be written, in a fixed unerasable material, on a card
put inside the packet and also written outside it in
[A]rabic (it might be written in two languages if [A]rabic
is one):

its Certificate of Origin

product name and trade mark if exist

Importers’ name and address

the authority which supervised the slay to [I]slamic sharia
should be accredited by the trade office in the
Certificate of Origin

slaughter house name

slay date.

As a result of Decree 465’s labeling requirements, Mirasco
marked all shipments with “Mirasco Misr” (“Misr”), one of
Mirasco’s largest customers, as the importer, even though a
portion of the shipments was set aside for other customers.
Misr would receive the product, clear it and turn over to
Mirasco’s other customers their portion of the shipment.
Misr is a Proprietorship organized under the laws of the
nation of Egypt and maintains its principal place of
business in Alexandria, Egypt. Misr is managed by Dr. Fadi
Rizk, Latif Rizk’s nephew and the first cousin of Sami and
Saher Rizk. The Insurers claim, and Mirasco disputes, that
Misr is controlled by Mirasco and used to facilitate
clearing the cargo through Egyptian customs in light of
Decree 465.

Decree #6

In October 1998, the Egyptian authorities rejected a
shipment of beef livers imported by Hady Enterprises and
produced by one of Mirasco’s suppliers, Iowa Beef Products
(“IBP”), due to purported labeling irregularities in
violation of Decree 465. In a case filed in the District
Court for the Northern District of Florida by IBP against
Hady Enterprises, the court held after a bench trial that
Hady’s violation West Page 309 of Decree 465 was the sole
cause of the enactment of Decree #6.[fn1]

In late December 1998, Sami Rizk telephoned Scott Sanem
(“Sanem”) of IBP at his home in the United States to tell
him that there was a possibility of a decree going into
effect in Egypt that would ban the importation of all IBP
products into Egypt. Sanem testified that Rizk described
the decree as a “total embargo on all IBP goods into
Egypt,” and that Rizk had told him that the decree was
already drafted and awaiting the signature of a government

On January 3, 1999, the Egyptian government issued Decree
#6 (the “Decree”). The Decree became effective on January
14, 1999, when it was officially published. According to a
translation provided by the Insurers, the Decree stated
that “[a]n embargo is placed on trade with the American
company I.B.P. Corp in the United States of America as well
as with any company with which it is associated.” The Decree
did not apply to cargo shipped by Mirasco’s other supphers,
Excel Corporation (“Excel”) or Monfort, Inc. (“Monfort”).

Mirasco asserts, and the Insurers contest, that the Decree
did not apply under Egyptian law to any IBP cargo that was
shipped prior to January 14, 1999.

In an e-mail dated May 19, 1999, one of the Insurer’s
agents, Pam Kobin, the Divisional Assistant Vice-President
for Specialty Claims of Great American’s Cincinnati, Ohio
office, stated that the decree “was not an embargo [of a
ship] but it certainly was a prohibition.” Although Mirasco
asserts otherwise, Kobin has attested that she was not the
one responsible for denying Mirasco’s claim but that the
decision was made by personnel of the New York Ocean Marine
Business Unit.

The Beef Liver Shipment on the M/V Spero

Beginning in August 1998, the price of beef livers entered
a decline that lasted for approximately one year due
primarily to a collapse in the economy and currency of
Russia, a major importer of beef livers. On December 14,
1998, Sami Rizk in Egypt sent a facsimile to his brother
Saher Rizk in Atlanta, analyzing the supply and consumption
outlook for beef livers for the first five months of 1999.
He projected an oversupply by the end of May 1999 of 8900
metric tons of beef livers, calculated as the difference
between a supply of 11,000 tons and consumption of only
2,100 tons.

On December 31, 1998, stevedores hired and paid for by
Mirasco completed the loading of the M/V Spero in Houston,
Texas. The cargo consisted of 219,072 cartons of beef
liver, including 132,535 cartons of IBP products (60.5
percent of the shipment), for which Mirasco had paid
$1,081,500; 60,502 cartons of Excel products (27.6 percent
of the shipment), for which Mirasco had paid $562,570.21;
and 26,035 cartons of West Page 310 Monfort products
(11.9 percent of the shipment), for which Mirasco had paid
$285,450.[fn2] The brands were not strictly segregated into
different holds or hatches; instead, while Mirasco attempted
not to break up lots of the same product, lots from
different brands were stored together. The cartons of
frozen beef liver were hard frozen and in apparently sound
condition at the time of loading aboard the M/V Spero. In
addition, the shipment was packed and labeled solely for
Misr, but was to be sold to five customers, including Misr,
upon the shipment’s importation into Egypt.

After loading the cargo aboard M/V Spero in Houston,
Mirasco obtained fifteen (15) bills of lading for carriage
of the cargo to Alexandria, Egypt. Eight (8) bills of
lading covered the IBP cargo, and seven (7) bills of lading
covered the Monfort and Excel cargo.

The M/V Spero arrived in Alexandria on January 23, 1999.
Yossif El Menoufy (“El Menoufy”), a representative of Sea
Horse International (“Sea Horse”), which had been hired by
the Insurers to investigate and report on the shipment, was
present when the M/V Spero arrived and observed the later
inspection of the Spero.

As discussed above, Decree #6 had gone into effect after
the M/V Spero’s departure but prior to the M/V Spero’s
arrival. Thus Mirasco then unsuccessfully attempted to
convince the Egyptian authorities that the IBP cargo of the
M/V Spero should be exempted from the Decree because the
shipment sailed prior to the issuance thereof.

The Inspection

On February 16, 1999, Egyptian authorities conducted an
inspection of the M/V Spero’s cargo. The inspection
consisted of three additional inspectors than was normal,
and they spent an unusually long time on the vessel. The
Insurers allege that the inspectors did not even sample the
IBP products because of the Decree and that the inspectors
took some samples of the Monfort and Excel beef livers, but
were not able to take sufficient samples because of the
mixed stowage. In addition, the inspectors found that
discrepancies existed between the slaughter dates printed
on the inside and outside labels of the Excel cargo.

Although Mirasco asserted that it was typically permitted
to discharge from fifty to one hundred percent of its cargo
after such inspections, this time the inspectors
recommended that Mirasco be permitted to discharge 10
percent of the cargo per day for further inspection.
Mirasco did not contest the findings of the inspectors, nor
did it attempt to unload the 10 percent of cargo. Mirasco
asserts that it did not do so because it wanted to receive
the results of the laboratory analysis being conducted by
the Egyptian authorities.

The next day, on February 17, 1999, one of the Rizk
brothers telephoned J.R. Dollins (“Dollins”) of Excel and
followed up that phone conversation with a facsimile on
Mirasco stationery:

Following our telephone conversation this morning, please
note that our West Page 311 Alexandria, Egypt office has
notified us of the following observations when samples
were taken by the Egyptian authorities:

1 Excel Ft. Morgan (86R)

Scale ticket date Oct. 30; carton and insert show
October production, bags show November

Scale ticket date Nov. 13; carton and insert show
November product, bags show October

2 Excel Friona (86E)

All samples pulled showed one bag contains an
insert while the other bag does not

At the moment we do not have the full details of the
situation, and the extent of these packing mistakes. I
will keep you updated on this matter.

Please advise plants of the above issues in order to
place the necessary controls to avoid such mistakes.

The Decision to Re-Ex for the Entire Cargo

On March 4, 1999, the Insurers claim that Sami Rizk of
Mirasco wrote a letter to Mirasco’s ship broker, Van
Weelde, stating:

On January 14, 1999, a ministerial decree was issued by
the Egyptian Ministry of Trade banning the U.S. company
(IBP) from supplying Egypt.

The “Spero” contains about 1,600 tons of IBP which is
over stowing 1,200 tons of other brands. Therefore, we are
not able to discharge other brands as we are not allowed
to discharge IBP.

We should have clear direction by March 10th on the

We appreciate the patience of the ship owners and hope
that this unforeseen situation will be resolved very soon.

Mirasco states that the letter has not been authenticated
and is unsigned. That letter was followed on March 9, 1999
by a facsimile from Mirasco stating in part that “the
problem is only with the IBP product which comprises about
1600 tons on board the Spero.” Mirasco sought advice on the
possibility of utilizing another vessel to shift cargo from
the Spero to it in order to get rid of the IBP products.

On March 22, 1999, Misr sent a letter to Sea Horse. The
Insurers have provided a translation of that letter,[fn3]
which Mirasco contests, as follows:

Messrs. Sea horse co. Alexandria

Subject: Frozen beef liver consignment on M/V Spero
coming from USA which arrived on January 1/23/1999

Please be informed that up till now, the ban on the
import of IBP brand was not lifted, this ban is according
to the minister of [supply] decision No. 6/99, therefore
we will not be able to discharge this brand from the above
vessel, and it will be re-exported, we shall supply to you
with the name of the vessel and the date of reexportation,
so you can cover the return freight by the insurance.

Please acknowledge and do the necessary.

Mirasco did not advise Excel that any health or sanitary
deficiencies were found by the Egyptian authorities.

Also on March 22, 1999, Saher Rizk sent the following
facsimile to Mirasco’s insurance broker, IBP, to the
attention of Palmiotto and Cathy Pennolino (“Pennolino”):
West Page 312

After extensive attempts to have the ban on IBP brand
product lifted in Egypt to no avail, we are in a position
that we must discharge the M/V Spero and ship the IBP beef
livers to another destination.

We have located, and are booking a vessel to take product
from Alexandria, to another destination. We are evaluating
some options and as such have secured 2 different rates.

The facsimile was followed up by a telephone conference on
March 24, 1999, after which Pennolino made the following
note: “Entire load coming back even the stuff that is not
IBP. The other stuff was on the bottom and they could not
get it to unload and government would not let them
discharge and reload IBP. Will likely sell all in the

According to an unauthenticated e-mail message from Steven
Leiker (“Leiker”) of Monfort to Mirasco provided by the
Insurers, Saher Rizk informed Leiker on March 23, 1999,
that the Egyptian health authorities had rejected the
Monfort beef liver because the boxes did not have the
expiry date written in Arabic. Leiker purportedly responded
in his e-mail that Monfort would only accept the return of
any cartons that were not in fact stamped with the
requisite expiry date, and that Mirasco should seek
approval from the Egyptian government to sort the cargo

On March 24, 1999, a meeting was held at Fadi Rizk’s office
in Alexandria. Captain Elbendary (“Elbendary”) of Sea
Horse, Latif Rizk, Sami Rizk and Fadi Rizk attended. After
discussing other options, Mirasco requested the approval of
the insurers to return the vessel to the United States.
Elbendary agreed, noting that the Insurers would pay the
return freight.

The same day, IBP submitted to Great American a return
shipment contract with the owners of the M/V Spero for
approval, stating that “[a]s you know time is of the
essence as they are trying to get the vessel to sail
tomorrow. If the vessel does not sail, it will be held up
another 5 days or so.”

On March 25, 1999, Mohamed El Shafy (“El Shafy”) of Misr
claims he was told by the Egyptian authorities that the
entire shipment was rejected, but that the authorities
refused to provide rejection certificates.[fn4] El Shafy
was given, however, a certificate of re-exportation, which
states, according to a translation provided by Mirasco, that
“the shipment . . . needs to be reexported . . . due to
rejection by incoming.”[fn5] Mirasco has also presented a
translation of a supposed Egyptian customs document dated
April 15, 1999, that had been given to El Shafy, which
noted that the M/V Spero shipment had been re-exported
“because it was refused by the Public Organization for
Supervision of Imports and Exports without any
responsibility on the Customs.”

An agreement signed by Mirasco on March 25, 1999, and by
the owners of the M/V Spero on March 26, 1999, provided for
the return of the West Page 313 cargo to Houston. It
included the following recitation:


A. Pursuant to a Gencon charter party dated 9th day of
December [1998] Made between the shipowners and Mirasco,
the M/V Spero loaded at Houston, USA, a cargo of 2,780,208
net metric tons of frozen beef livers on [December 31,
1998] for Alexandria, Egypt, upon the terms and conditions
of a contract evidenced by 15 bill of lading issued at
Houston dated [December 31, 1998].

B. Upon the ship[‘]s arrival at Alexandria on [January
23, 1999], the customs authority banned discharging about
1600 metric tons shipped by an American shippher called

C. It has been agreed with the charterers and shippers to
return the entire cargo to Houston or Riga.

The Return of the Shipment

The M/V Spero sailed from Alexandria on March 26, 1999,
with all cargo still aboard.

Before the vessel arrived back in Houston, on April 15,
1999, Saher Rizk wrote to the United States government to
advise them that the livers had remained in a vessel as
shipped. No one from Mirasco ever advised the United States
government that the cargo on the M/V Spero had been
rejected for any health, sanitary or quality reasons, or for
any unwholesomeness.

When the vessel arrived back in Houston, Mirasco caused
surveys to be conducted of the cargo by Rebecca J.
Whitehead. Also present was John Zemanek, a surveyor from
Captain I.S. Derrick’s office. Whitehead inspected
Establishment 86E for missing inserts. Of 1,031 cases
inspected, six were missing one insert and one case was
missing both inserts. of the cases in Establishment 86R,
Whitehead inspected 1969 cases and found 281 had
non-matching dates, most of which were in the period of
late October to early November.

The cargo was otherwise found in sound condition except for
387 cartons that thawed during the return trip due to
stowage too close to heated fuel tanks. These cartons were
destroyed, and the Insurers paid for them in the amount of
$6,164 after the commencement of this lawsuit.

Mirasco marketed the rest of the rejected cargo to traders
and buyers. The cargo was sold in the United States in May,
June and July of 1999. Because the market had been steadily
falling since August of 1998, the prices received by
Mirasco for the M/V Spero cargo ranged as low as $0.115 per
pound although the cargo had been purchased back in the fall
of 1998 for as much as $0.34 per pound.

The Rejection Notices

On June 3, 1999, Mirasco presented Captain Elbendary with
seven “Notices of Rejection” (the “Notices”) covering the
Excel and Monfort cargoes and apparently dated March 25,
1999.[fn6] El Shafy has testified that he received the
Notices from Egyptian authorities in mid-May. According to
a translation provided by Mirasco, the following
consignments were rejected for the following reasons:

Consignment 4:

a. Monfort: health reasons; West Page 314

b. Excel: noncompliance with Ministerial Decree No. 553/98
and Egyptian Standard No. 1473/91.

Consignment 5:

a. Monfort: health reasons;

b. Excel: noncompliance with Decree 465, Ministerial Decree
No. 553/91 and Egyptian Standard No. 1473/91 (changes in

Consignment 6[fn7] :

noncompliance with Decree 465, Ministerial Decree No.
553/91 and Egyptian Standard No. 1473/91

Consignment 7:

a. Monfort: health reasons;

b. Excel: noncompliance with Ministerial Decree No. 553/98
and Egyptian Standard No. 1473/91

Consignment 8:[fn8]

noncompliance with Decree 465, Ministerial Decree No.
553/91 and Egyptian Standard No. 1473/91

Consignment 9:

a. Monfort: health reasons;

b. Excel: noncompliance with Decree 465, Ministerial Decree
No. 553/91 and Egyptian Standard No. 1473/91

Consignment 10:

a. Monfort: health reasons;

b. Excel: noncompliance with Decree 465, Ministerial Decree
No. 553/91 and Egyptian Standard No. 1473/91 (changes in

The Notices for Consignments 4 and 7 do not refer to
mislabeling in violation of Decree 465 at all. The other
five Notices refer to violations of Decree 465 in addition
to references to health and sanitary deficiencies for
rejection. None of the Notices referring to health and
sanitary deficiencies were ever delivered or described by
Mirasco to Excel or Monfort. Nor was any claim for the
alleged health and sanitary deficiencies described in the
Notices ever made by Mirasco to Excel or Monfort.

Settlements with Beef Liver Suppliers

On May 25, 1999, Mirasco filed a claim with Monfort for
“Rejected Monfort product” in the amount of $451,550,
consisting of $285,450 for the price paid to Monfort plus
extra expense. Later in May 1999, Monfort and Mirasco
arrived at a settlement figure of $115,000, pursuant to a
telephone conference between Leiker of Monfort and Sami Risk
of Mirasco. The settlement was finalized on August 10,
1999. Mirasco never advised Monfort that there had been any
rejection of the product for health or sanitary reasons or
for any unwholesomeness. Monfort requested a rejection
certificate from Mirasco, but never received one.

On June 9, 1999, Mirasco sent to IBP a statement of its
alleged losses based on the sale price to Mirasco and an
estimate of salvage. The letter reflected a loss of sales
of $1,228,000 of the product shipped on the M/V Spero.
Mirasco never advised IBP that there was any fault with the
IBP product, and IBP never offered any compensation to
Mirasco for its alleged M/V Spero losses.

On July 8, 1999, Mirasco and Excel agreed to settle the M/V
Spero claim for $175,000. Mirasco had previously sought
reimbursement for the labeling deficiencies cited by the
Egyptian authorities. The Insurers claim that Mirasco had
sought $932,000, but Mirasco contests that figure. Mirasco
never advised Excel that any of the Excel cargo aboard the
M/V West Page 315 Spero had been rejected for any health

Mirasco’s Insurance Claims

On April 6, 1999, IIB submitted a claim to Great American
for $400,000 for return freight and $101,527.77 for demur
rage. In support of its claim, Sami Rizk sent the following
chronology to Sea Horse:

1. January 14, 1999 — Written request from Mirasco
to the Chairman of the Egyptian General Organization for
Export and Import Control (GOEIC) requesting permission to
allow IBP product on board Spero to enter Egypt due to the
fact that vessel was in transit when the ban was

2. Several meetings between Mirasco staff and the U.S.
Embassy Foreign Agriculture service staff.

3. January 31, 1999 — Letter from Mirasco to the
Egyptian Minister of Trade and Supply, requesting the
exemption from the above produce from the ban.

4. February 4, 1999 — Letters from Mirasco to
(GOEIC) and Minister with copies of bills of lading
providing shipment date prior to ban.

5. February 8, 1999 — Letter from Mirasco to the
Director of Egyptian Foreign Trade Department, with copies
of bills of lading requesting entry.

6. (A) Several meetings between Mirasco and U.S. Embassy.
(B) Several meetings between U.S. Embassy and GOEIC. (C)
One meeting between U.S. Ambassador and Egyptian Minister
of Trade and Supply.

7. February 21, 1999 — IBP representative came to
Egypt held several joint meetings with U.S. Embassy, GOEIC
and Foreign Trade Department.

8. U.S. Embassy called Minister of Trade and Supply by

9. Several meetings between U.S. Embassy staff and
Minister of Trade and Foreign Commercial Representation

10. Several meetings between Mirasco staff and GOEIC,
Ministry, Foreign Trade, Commercial Representation Office.

11. March 24, [1999] — Mirasco decided to return
the goods to USA as a permission to discharge was not
likely and holidays from March 25 to 30 and April 4 would
further delay vessel.

Originally the insurance policy provided for a full premium
for rejection coverage, which would be partially refunded
in the event no claim under the rejection coverage was
submitted. To avoid sending funds back and forth, however,
the billing system was changed to allow the payment of the
lower no-claim premium to be paid in the first instance,
with the difference to be paid if and when a claim under the
rejection was paid. After Mirasco filed its claim for
return freight of $400,000, the Insurers billed Mirasco for
the rest of the full premium. Mirasco paid the additional
rejection premium. The Insurers allege and Mirasco contest
that Mirasco’s comptroller, Ibrahim Yacoub (“Yacoub”),
protested to Mirasco’s broker IIB by telephone about this
charge. The Insurers rely on a note made by Pennolino of
the conversation on April 6, 1999, stating the Yacoub had
inquired about the additional premium, stating that it was
not a rejection, and that Pennolino had informed him that
“`embargo’ coverage is part of the Rejection Wording and
the Rate Charged for Rejection is applicable to the
Rejection Section of the Coverage.” West Page 316

By letter dated May 4, 1999, the Insurers denied Mirasco’s
claim. Afterward, IBP submitted a claims statement on
behalf of Mirasco, on July 29, 1999, as follows:

Total Prorated[fn1a]

Quantity (net metric tons) 2,780.208 2,742.106

Invoice Value (CIF Alexandria) $2,777,427.79 $2,739,363.89
Insured Value (110% of Invoice) $3,065,170.57 $3,013,300.28


Return Freight $ 400,000 $ 394,513.11 Demur rage $
175,000 $ 172,601.67 Egypt re-export fee $ 27,774.29 $
27,393.65 Return unloading/storage $ 112,209.05 $
110,671.26 Return wharf age $ 7,982.20 $ 7,872.81
Handling and Labeling $ 22,884.95 $ 22,571.32 Freight Cost
$ 36,215.26 $ 35,718.94 Label printing $ 1,453.08 $
1,433.17 Travel cost $ 12,875.04 $ 12,698.59 USDA
Certification $ 659 $ 649.97 Courier $ 522.54 $ 515.38
Other expenses $ 1,400 $ 1380.81

Total expenses $ 798,975.41 $ 788,025.67

Salvage Value $ 866,916.58 $ 855,035.72 Total claim
amount $2,987,229.40 $2,946,290.23

Less payment received ($400,000) ($400,000)

Net claim balance $2,587,229.40 $2,546,290.23

The formal claim statement did not account for the $115,000
settlement from Monfort or the $175,000 settlement from
Excel for mislabeling. Mirasco states that it did not
notify the Insurers of the settlements prior to this
litigation because the Insurers had already denied all of
Mirasco’s claims, including those related to Excel and
Monfort cargo. Moreover, Mirasco’s counterclaim in this
action reflects the receipt of those amounts.

The claim was denied on September 22, 1999. The Insurers
declined to pay Mirasco for its claim on the M/V Spero
cargo except for the $400,000 for return freight under the
limited embargo coverage and $6,164 for the 347 cartons
that deteriorated during the return voyage.

The Insurers also refer at great length to a legal
proceeding allegedly initiated by Sea Horse in Alexandria
in an attempt to clarify the documentation in connection
with the return of the beef livers aboard the M/V Spero.
Because Mirasco was not a party to that proceeding nor was
it claimed to be, it cannot be estopped by any factual
findings therein.


I. Standard of Review

Rule 56(e) of the Federal Rules of Civil Procedure provides
that a court shall West Page 317 grant a motion for
summary judgment “if the pleadings, depositions, answers to
interrogatories, and admissions on file, together with
affidavits . . . show that there is no genuine issue as to
material fact and that the moving party is entitled to a
judgment as a matter of law.” Fed.R.Civ.P. 56(e); Celotex
Corp. v. Catrett, 477 U.S. 317 (1986); Silver v. City
Univ., 947 F.2d 1021, 1022 (2d Cir. 1991). “The party
seeking summary judgment bears the burden of establishing
that no genuine issue of material fact exists and that the
undisputed facts establish her right to judgment as a
matter of law.” Rodriguez v. City of New York, 72 F.3d
1051, 1060-61 (2d Cir. 1995). In determining whether a
genuine issue of material fact exists, a court must resolve
all ambiguities and draw all reasonable inferences against
the moving party. Matsushita Elec. Indus. Co. v. Zenith
Radio Corp., 475 U.S. 574, 587 (1986); Gibbs-Alfano v.
Burton, 281 F.3d 12, 18 (2d Cir. 2002)

II. A Genuine Issue of Fact Precludes Summary Judgment on
the Insurers’ Claim of Fraudulent Filing

The Insurers claim that they are entitled to judgment as a
matter of law because Mirasco filed a false claim in that
it did not reveal its settlements with Excel and Monfort
with regard to mislabeling until after the commencement of
this suit.

The knowing and willful submission of a fraudulent or false
claim with intent to defraud by an insured seeking recovery
under an insurance policy may vitiate the terms of the
policy. E.g., Fine v. Bellefonte Underwriters Ins. Co., 725
F.2d 179, 184 (2d Cir. 1984); Ingarra v. Gen. Accident/PG
Ins. Co. of New York, 273 A.D.2d 766, 768, 710 N.Y.S.2d
168, 171 (3d Dep’t 2000) (citing Saks & Co. v. Continental
Ins. Co., 23 N.Y.2d 161, 165 (1986)).[fn9]

The Formal Claim Statement submitted by Mirasco on July 29,
1999, claimed a total of more than $2.5 million in losses,
after crediting the Insurers with $40,939.20 for labeling
discrepancies on Excel cargo. No credit was given for
Monfort mislabeling. Prior to the submission of the formal
claim, Mirasco and Excel had agreed to settle the
mislabeling claim for $175,000.[fn10] Also prior to the
formal claim, Mirasco and Monfort had agreed to settle the
mislabeling claims for $115,000, although that settlement
was not finalized until August 10, 1999, after the formal
claim was filed.[fn11]

There is no dispute that the formal claim did not evidence
the pending or completed settlements totaling $190,000 and,
in fact, reflected a number ($40,939.20) that was not at
all accurate for the Excel cargo. This misstatement was
material as a matter of law to the claim. However, that
does not alone satisfy the Insurers’ burden. They must also
show that the misstatement was willful and made with the
intent to deceive the Insurers. Because the correct
settlement amounts were included in the counterclaim of
this action, they have failed to establish a dispute of
material fact as to this allegation. West Page 318

The Insurers first rely on the ipse dixit argument that “it
is difficult to imagine a more blatant case of insurance
fraud” than the facts as stated above. Given the existence
of the correct figures in the counterclaim, a jury could
not conclude that the facts above reveal a willful intent
to defraud. Next, the Insurers quote at great length from
the November 30, 2001 deposition testimony of Saher Rizk,
stating that Mirasco was attempting to conceal the full
extent of the counterclaims as late as that deposition, and
that the Insurers were “forced to subpoena supphers . . .
in order to determine the truth.” This claim is also belied
by the fact that Mirasco had already asserted in its
counterclaim the extent of the settlements as discussed
above. Further, Mirasco stated that it did not notify the
Insurers of the settlements prior to that time because they
had already denied the claim in whole. Given these facts,
the Insurers have not met their burden to show that, based
on the undisputed facts, the misstatements on the formal
claim were willful and with the intent to defraud the
Insurers. In fact, the undisputed facts reveal that such
intent could not proven.

In any case, as Mirasco points out, the cases relied upon
by the Insurers differ from that presently at bar in that
they contained undisputed, egregious actions that are not
present here. In Clerical Apparel of New York v. Valle
Forge Ins. Co., 209 F.R.D. 316 (E.D.N.Y. 2002), the court
dismissed the insured’s claim after concluding that the
insured did not file any meaningful opposition to defendant
insurer’s motion for summary judgment and effectively
admitted material statements proffered in the insurer’s
Rule 56.1 statement. Id. at 320. Further, the insured
waited nearly seven months, and less than two days before
argument on the motion, to respond to insurer’s request for
admissions regarding insured’s claim of loss. Id. at 319.
Neither of these situations is present here. Further, in
Fine, 725 F.2d 179 (2d Cir. 1984) (precluding insured from
recovering for violating the false swearing clause), the
insured’s owner and managing agent were found by the court
to have lied under oath, with such testimony standing
uncorrected throughout the proceedings. Id. at 182. There
is no claim that Mirasco lied under oath.

Because the undisputed facts reveal that the Insurers
cannot show that Mirasco had an intent to defraud them in
mis stating the amount of settlement in its formal claim,
summary judgment may not be granted on this ground, and the
claim is denied.

III. There Is No Dispute of Material Fact That the Egyptian
Authorities Rejected the Cargo

The Insurers next argue that the cargo was not rejected by
the Egyptian authorities pursuant to the terms of the
Policy. This question requires an analysis of the term
“rejection” as used in the Policy.

In interpreting contract terms, courts are to “examine the
`reasonable expectation and purpose of the ordinary
business [person] when making an ordinary business
contract.'” Michaels v. City of Buffalo, 85 N.Y.2d 754,
757, 628 N.Y.S.2d 253, 254 (1995) (quoting Bird v. St. Paul
Fire & Marine Ins. Co., 224 N.Y. 47, 51 (1918)). Although
terms must be construed as they would be by the average
person, “[w]hen interpreting a `specialized business
policy,’ . . . `the average person is not the housewife
purchasing flight insurance but the average purchaser of
broad business liability insurance. . . .'” SR Int’l Bus.
Ins. Co. v. World Trade Center Props., LLC, 222 F. Supp.2d
385, 399 (S.D.N.Y. 2002) (“Complex comprehensive general
liability policies issued to large corporate manufacturers
. . . West Page 319 should be viewed as if by a
reasonably intelligent business person who is familiar with
the industry in question. Normally the court can put itself
in this position so that expert evidence need not be
submitted.”) (citations omitted).

If there is ambiguity,[fn12] the Vargas standard applies:

[A]n ambiguous provision in an insurance policy is
construed “most favorably to the insured and most strictly
against the insurer.” . . . The insurer bears a heavy
burden of proof, for it must “`establish that the words
and expressions used (in the insurance policy) not only
are susceptible of the construction sought by (the
insurer) but that it is the only construction which may
fairly be placed on them.'” . . . The insurer is “obliged
to show (1) that it would be unreasonable for the average
man reading the policy to (construe it as the insured
does) and (2) that its own construction was the only one
that fairly could be placed on the policy.”

Vargas v. Ins. Co. of N. Am., 651 F.2d 838, 839-40 (2d Cir.
1981) (citations omitted).

The Rejection provision provides that “[s]ubject always to
the following conditions and exclusions, this policy is
extended to cover the risks of rejection or condemnation by
the government of the country of import or their agencies
or departments during the period of this insurance.”

As an initial matter, the Insurers do not appear to contest
that the 60.5 percent of the shipment that was IBP brand
was rejected and/or condemned as those words are defined
under the policy because of Decree #6 and based on the fact
that the inspectors never even sampled the IBP products.
Indeed, the Insurers provided return freight as provided for
by Clause D of the Rejection Coverage even though Mirasco
did not present any Notices of Rejection or any other
formal papers attesting to the fact that the cargo was
rejected due to Decree #6.

This fact therefore contradicts the Insurers’ contentions
that “rejection” under the Policy is defined by custom and
usage by the Egyptian government as requiring a Final
Rejection Certificate after sampling and testing and
adverse lab results, and an unsuccessful appeal. The
Insurers did not require any such documents and appeal
before sending return freight on the goods it claimed were
embargoed. Indeed, this restrictive definition would mean
that coverage would not exist if a governmental authority
arbitrarily (1) refused to sample and/or test the cargo;
(2) declined to permit and/or decide an appeal; or (3) did
not issue “final rejection certificates.” As Mirasco points
out, such restrictive definition would undermine the
purpose of rejection insurance, which is a type of
political risks insurance that insures against the
arbitrary acts of a government, including arbitrary
rejection or detention or miscarriage of administrative
determination. E.g., Berns & Koppstein, Inc. v. Orion Ins.
Co., 170 F. Supp. 707, 720 (S.D.N.Y. 1959) (“The peril
insured against West Page 320 by the rejection insurance
was not the presence of a putrid substance but the act of
the Government. Arbitrary rejection or detention,
miscarriage of administrative determination in rejecting or
detaining was just as fully covered as justified rejection
and detention. . . .”).

In any case, it is held as a matter of law that the term
“rejection” is not ambiguous and therefore can be construed
by its meaning to the ordinary business person. Webster’s
New Universal Unabridged Dictionary defines rejection as,
inter alia, the “refusal to accept or grant.” The Policy
does not define rejection, nor does it require a particular
document to have been issued or formal process to have been
conducted and completed before rejection may occur.
Therefore, Mirasco need only show that the Egyptian
authorities refused to accept the cargo for import, or to
grant its entry into Egypt.

There is no genuine dispute as to facts showing that the
cargo was rejected. Most importantly, Mirasco was given a
certificate of re-exportation, which states, according to a
translation provided by Mirasco, that “the shipment . . .
needs to be re-exported . . . due to rejection by
incoming.” This document is supported by other customs
documents stating that the cargo was rejected. This finding
is also supported by the Survey Report commissioned by the
Insurers, the testimony of El Shafy regarding his being
told that the cargo was rejected, and the fact that the
Insurers charged Mirasco an additional “rejection premium”
for the claim.

The Insurers’ unsupported allegations that the customs
documents and El Shafy’s testimony cannot be trusted or
should not be construed to support a finding of rejection
are insufficient to raise a material issue of fact.
Similarly, the fact that Mirasco was originally given the
opportunity to discharge 10 percent of the cargo per day to
segregate the mislabeled cargo does not mean the cargo was
not rejected, as discharge does not mean that the goods
were accepted for import.

As a result, there is no genuine dispute of material fact
that the M/V Spero cargo was rejected by the Egyptian
authorities as that term is defined in the Policy.

IV. Summary Judgment May Be Granted to the Insurers in
Part Based on the Exclusions

The Insurers contend that even if the cargo was rejected as
that term is defined in the Policy, Mirasco is not entitled
to coverage because of exclusions to the Rejection
Coverage, including an exclusion (1) for loss of market as
to all goods, (2) for recovery for anything but return
freight due to an embargo announced after a shipment has set
said, as against the IBP cargo, and (3) of mislabeling as
against the Excel and Monfort cargoes. Each will be
addressed in turn.

A. The Loss of Market Exclusion Does Not Apply

The Insurers point out that Mirasco was able to sell its
cargo once it returned to the United States, albeit for
drastically lower prices than they would have received in
Egypt due to the collapse of the market for beef livers. As
a result, they claim that the Policy’s loss of market
exclusion applies. Mirasco replies that what occurred in
this case was loss of market value, rather than loss of

Both parties rely on the same case arising in the Tenth
Circuit Court of Appeals, Boyd Motors, Inc. v. Employers
Ins. of Waussau, 80 F.2d 270 (10th Cir. 1989). Boyd
involved an action to recover under a commercial inland
marine policy, which included a “loss of market” exclusion,
due to diminished value of automobiles damaged West Page
321 by hail. Id. at 271. The plaintiff had already
received reimbursement for the cost of repairing the
automobiles, and sought in this action an additional
$40,609.48 based on its claim that the vehicles were worth
less after the damage. Id. The district court had held that
“the diminution [in] value which occurs after an accident,
despite repairs, clearly is defined as loss in market.” Id.
at 273. The Tenth Circuit disagreed, stating that the above
situation involved loss of market value, rather than loss of
market, and that recovery was not precluded by the
exclusion. In reaching this conclusion, the court discussed
the two concepts of loss of market and loss of market

`[M]arket’ refers collectively to matters external to any
particular product item, namely those conditions that
determine the degree to which supply of that commodity
exceeds or falls short of demand, whereas `market value’
is a function of the qualities (e.g., age, state of
repair) inherent in the individual item itself, and refers
to that price that that specific article with those
qualities would command in a given market. Thus, . . . a
market is lost when, for example, due to delay in
distribution, changes in consumer habits, etc., a certain
type of product is no longer in demand with its intended
purchasers, while what is involved in the present case, in
which particular merchandise in Boyd’s inventory has
allegedly suffered depreciation due to physical alteration
(damage and restoration), is a loss of market value.

Id. at 273.

Boyd referred to a number of cases discussing “loss of
market,” including one arising from this Circuit (albeit
more than seventy-five years ago), Dietrich v. United
States Shipping Board Emergency Fleet Corp., 9 F.2d 733,
744-45 (2d Cir. 1925). In Dietrich, plaintiff shipper
brought an action to recover damages against defendant
common carrier for damages sustained by plaintiff due to a
depreciation in value and a loss of market value of a
shipment of flour on board the steamship Panola, after a
delay in the delivery of the flour to its intended port.
While the case does not involve an exclusion such as is at
issue here, the discussion of loss of market is pertinent
toward establishing what the term “loss of market” should
mean. The Court discussed a number of cases by way of

In [Aktieselskabet Stavangeren v. Hubbard-Zemurray S.S.
Co., 250 F. 67, 162 C.C.A. 239 (5th Cir. 1918)], a cargo
of bananas and coconuts had been shipped from Omoa,
Honduras to New Orleans. The shipment did not reach its
destination at the time intended. The result was that the
shipper lost over $4,000, which represented the difference
between what the bananas and coconuts were sold for in the
New Orleans market, and what he would have received if the
advance orders, which had been given, had not been
canceled because of the delay of arrival. The court
disallowed the damages occasioned by the loss of the
market. . . .

One of the leading cases holding that a shipper cannot
recover damages for the loss of a market is that of The
Parana, 2 P.D. 118. The case was decided in 1877 in the
English Court of Appeal. The ship, which started from
Manila and was to proceed to London, was on the way from
65 to 70 days longer than the fair average time for such a
voyage. She carried, among other things, a cargo of hemp.
There had been a fall in the price of hemp between the
time when the ship ought to have arrived and the time when
she did arrive, and the hemp was finally sold at a
considerable loss. The court, unammously reversing the
judgment of the Admiralty Division, West Page 322 held
that the consignee was not entitled to recover damages
arising from the loss of the market. Mehish, L. J.,
writing for the court, said:

The question we have to decide is whether, if there is
undue delay in the carriage of goods on a long voyage by
sea, it follows as a matter of course that, if between the
time when the goods ought to have arrived and the time
when they did arrive, there has been a fall in the price
of such goods, damages can be recovered by the consignee
of the goods.

* * *

There is no case, I believe, in which it has ever been
held that damages can be recovered for delay in the
carriage of goods on a long voyage by sea, where there has
been what may be called a merely accidental fall in price
between the time when the goods ought to have arrived and
the time when they did arrive — no case that I can
discover where such damages have been recovered; and the
question is, whether we ought to hold that they ought to
be recovered. If goods are sent by a carrier, to be sold
at a particular market; if, for instance, beasts are sent
by railway to be sold at Smithfield, or fish is sent to be
sold at Billingsgate, and, by reason of delay on the part
of the carrier, they have not arrived in time for the
market, no doubt damages for the loss of market may be
recovered. So, if goods are sent for the purpose of being
sold in a particular season when they are sold at a higher
price than they are at other times, and if, by reason of
breach of contract, they do not arrive in time, damages
for loss of market may be recovered; or if it is known to
both parties that the goods will sell at a better price if
they arrive at one time than if they arrive at a later
time, that may be a ground for giving damages for their
arriving too late and selling for a lower sum.

The discussion of “loss of market” above suggests that the
loss must occur in the original market for which the goods
are intended. See also Nationwide Brokers, Inc. v. C & G
Trucking Corp., No. 87C-5770, 1988 WL 116827 (N.D. Ill.
Oct. 21, 1988) (rejecting argument that loss of market
exclusion precludes recovery where products —
outdated magazines — have no market because the
exclusion appeared to “assume actual delivery of goods”).

There is no evidence that Mirasco lost its customers in
Egypt who had already agreed to purchase a good portion of
the beef livers on the M/V Spero. As a result, and in the
absence of any legal showing to the contrary from the
Insurers, the loss of market exclusion does not apply and
the Insurers’ motion for summary judgment on this ground is

B. The IBP Cargo Was Rejected as a Result of an “Embargo,”
and Thus Mirasco Is Entitled Only to Return Freight

The Policy explicitly provides that no claim may attach
under Rejection Coverage “[i]n the event of any embargo or
prohibition being declared or in being by importing
country,” except that return freight is provided where the
embargo is announced or enforced after shipments have
sailed. Rejection Coverage, Clause D. Decree #6 was
announced after the beef liver shipment had sailed.
Therefore, if Decree #6 is an “embargo or prohibition”
under the Policy, the Insurers are West Page 323 only
responsible for paying the return freight of $400,000,
which they have already paid.

Because Clause D is an exclusion, it must be given a narrow
and strict construction. Westview Assocs. v. Guaranty Nat’l
Ins. Co., 95 N.Y.2d 334, 339, 717 N.Y.S.2d 75, 77 (2000).
The Insurers have the burden of proving that the exclusion
applies to the facts of this case by showing that it (1) is
stated in unmistakable and clear language, (2) is not
subject to another reasonable interpretation, and (3)
applies to the particular circumstances. Cougar Sport, Inc.
v. Hartford Ins. Co. of Midwest, 190 Misc.2d 91, 94, 737
N.Y.S.2d 770, 773 (N.Y.Sup. 2000) (citing Continental Cas.
Co. v. Rapid-American Corp., 80 N.Y.2d 640, 652, 593
N.Y.S.2d 966 (1993)).

As discussed above, in interpreting contract terms, courts
are to “examine the `reasonable expectations of the
ordinary business [person]’ when making an ordinary
business contract.” Michaels, 85 N.Y.2d at 757 (quoting
Bird, 224 N.Y. at 51). Also as discussed above, if there is
ambiguity, the Vargas standard applies, and the ambiguous
provision is construed most favorably to the insured and
most strictly against the insurer. Vargas, 651 F.2d at

There is nothing in Clause D to suggest that the term
“embargo” is ambiguous. Therefore, the Court will look to
the ordinary meaning of the term. According to the United
States Supreme Court,[fn14] “the ordinary meaning of
`embargo’ . . . is a governmentally imposed quantitative
restriction — of zero — on the importation of
merchandise.” K-Mart Corp. v. Cartier, Inc., 485 U.S. 176,
185, 108 S.Ct. 950, 957 (1988); see also id. at 184, 108
S.Ct. at 957 (“An embargo is a `government order
prohibiting commercial trade with individuals or businesses
of other nations.'”) (quoting Black’s Law Dictionary 468
(5th ed. 1979)).

K-Mart provided examples of other embargoes imposed by the
United States, and referred not only to the embargo on
Cuba, 22 U.S.C. § 2370(a), but also to a number of
“embargoes” imposed against general types of products. Id.
at 184, 108 S.Ct. at 957 (citing 21 U.S.C. § 381
(embargo against adulterated, misbranded or unapproved
foods, drugs and cosmetics); 15 U.S.C. § 1397
(embargo against motor vehicles that do not conform to
federal safety standards); 19 U.S.C. § 1305 (embargo
against obscene pictures, lottery tickets and articles for
causing unlawful abortion); 15 U.S.C. § 1241-44
(embargo on switchblade knives); and 19 C.F.R. §
12.60 West Page 324 (1987) (embargo on fur-seal or
sea-otter skins)).

It is true that the above examples involve embargoes
against specific products or groups of products, rather
than against products of a particular manufacturer. The
definition of “embargo” should nonetheless cover this
situation, as Egypt has imposed in Decree #6 “a
quantitative restriction of zero” on the importation of IBP

In any case, even if the word “embargo” does not stretch so
far, there is no doubt that the restriction against the
importation of all IBP goods constitutes a “prohibition”
under Clause D. “Prohibition” is defined by Black’s Law
Dictionary to be “a law or order that forbids a certain
action.” Black’s Law Dictionary 1228 (7th ed. 1999). The
dictionary definition is similar: “a declaration or
injunction forbidding some action.” Webster’s New
International Dictionary, Unabridged 1978 (2d ed. 1944).
The common understanding of the word “prohibition” has
similar connotations, with one exception. As Mirasco points
out, any governmental action — including the
rejection on which insurance coverage is based —
could potentially be deemed a prohibition under the
definitions above as a declaration forbidding the entry of
goods. Therefore, a prohibition must be qualitatively
different from a rejection. That difference is that the
prohibition occurs prior to the government’s dealing with
the specific cargo at issue and is of a more sweeping
nature than the simple administrative function performed by
customs officials determining whether or not goods should be
permitted into the country. Decree #6 is such a
prohibition, in that it was a law or declaration —
issued prior to, separate from and broader than the
Egyptian authorities’ administrative determination of
whether the M/V Spero cargo should be permitted entry
— that forbids the importation of IBP products.

Given the common understanding of the words “embargo” as
defined in Supreme Court precedent and “prohibition,” and
the applicability of those definitions in this situation,
Mirasco’s other arguments are unavailing.

Mirasco also argues in the alternative, however, that even
if Decree #6 is an embargo, Clause D does not apply because
the IBP products were not rejected as a result of the
Decree, but due to political pressure. The difficulty with
this argument is that Mirasco has not presented any
evidence that the IBP products were rejected; in fact, they
appear to have been completely ignored. The notes taken by
the inspectors and the Rejection Notices only explicitly
refer to the Excel and Monfort products. Indeed, there is
no evidence that the inspectors even sampled the IBP
products. Therefore, if the IBP products were not rejected
as a result of the embargo — a factual finding that
the Insurers appear to concede — it is unclear that
they were in fact rejected at all. If the IBP cargo was not
rejected, it is not covered by the Policy and no recovery
may be had. Therefore, Mirasco’ s argument merely escapes
one difficulty for another. In any case, Mirasco has failed
to present a material issue of fact in this regard given
the copious documents from Mirasco and its agents ascribing
the M/V Spero’s problems to Decree #6 and the lack of any
documentary evidence or testimony to the contrary.

As a result, the ban on all IBP products in Decree #6
constitutes an embargo or prohibition pursuant to Clause D,
and the embargo or prohibition was the cause of the
rejection of the goods. As a result, Mirasco is only
entitled to the return freight for the IBP products, which
constitute 60.5 percent of the claim. Because West Page
325 the Insurers have already provided such return
freight, they are entitled to judgment on their claims with
regard to the IBP products, and Mirasco’s cross-motion for
summary judgment is denied inasmuch as it relates to the
IBP products.

C. The Excel and Monfort Cargo

As an initial matter, there is no dispute that some
percentage of the Excel and Monfort Cargo was rejected
solely for mislabeling and thus falls under the exclusion
in Clause C, Part 5. What is disputed, however, is exactly
how much of the cargo falls under this exclusion. Mirasco
contends that the correct percentage is represented by the
settlements it reached with Excel and Monfort. The Insurers,
relying on Mirasco’s initial claims for complete
remuneration from Excel and Monfort, assert that all of the
Excel and Monfort cargo was mislabeled. Given this dispute,
it can only be concluded at this time that at least as much
of the cargo was mislabeled as was represented in the Excel
and Monfort settlements — and potentially more.

What remains is the portion of the cargo that was
purportedly rejected for either health and sanitary
discrepancies alone or for mislabeling and health and
sanitary violations. In seeking summary judgment against
these claims, the Insurers assert that Mirasco chose to
ship back the cargo after discovering it was rejected on
the ground of noncovered events — Decree #6 and
mislabeling — and therefore that any rejection on
the basis of health was not the proximate cause of
Mirasco’s losses.

“If a loss is proximately caused by an event covered by the
policy, the insurer is liable. If the loss is caused by an
event excluded from coverage, the insurer is not liable.”
Commodities Reserve Co. v. St. Paul Fire and Marine Ins.
Co., 879 F.2d 640, 642 (9th Cir. 1989). When, however, a
loss occurs through a concurrence of two independent
events, one covered and one excluded, the loss will be
covered. E.g., Great Northern Ins. Co. v. Dayco Corp., 637
F. Supp. 765, 779-80 (S.D.N.Y. 1986) (“Where a policy
expressly insures against direct loss and damage by one
element but excludes loss or damage caused by another
element, the coverage extends to the loss even though the
excluded element is a contributory cause.”) (quoting Essex
House v. St. Paul Fire and Marine Ins. Co., 404 F. Supp.
978, 985 (S.D. Ohio 1975)).

There is no dispute that part of the cause of the return of
the cargo was because of uncovered events. These include
the embargo or prohibition against IBP products, the
mislabeling of the goods and, practically speaking, the
stowage of the cargo that made it difficult to extract the
potentially viable cargoes of Excel and Nonfort beef livers
from beneath the banned IBP products.

Mirasco claims that, in addition to the uncovered events,
the cargo was also returned as a result of a covered event:
the Egyptian authorities’ rejection based on an arbitrary
refusal to permit the import of beef liver or,
alternatively, health and sanitary discrepancies in the
beef liver. In light of the holding above that undisputed
facts show that the cargo was rejected by the Egyptian
authorities, the small percentage of mislabeled goods, and
the Survey Report indicating that the “basic trend of the
[Egyptian authorities] to reject the liver consignment in
any way” through their “obstinacy and abuse of power”
(Survey Report, at 4), it is held that the Insurers have
failed to raise a dispute of material fact as to whether
some portion of the cargo was rejected for covered events
and that such rejection was a partial cause of the return
of the M/V Spero. What portion of the cargo was rejected
for covered West Page 326 events, however, is a question
of fact that remains to be determined.

It is true, as the Insurers point out, that the M/V Spero
cargo was, for the most part, sold as wholesome and sound
upon its return to the United States. Such sale in fact
supports Mirasco’s argument that the rejection was
arbitrary and is therefore insufficient to show that the
cargo was not rejected on health and sanitary grounds; just
because the Egyptian authorities claimed that the cargo was
unhealthful does not mean that it actually was. This is
particularly salient given the Survey Report regarding the
Egyptian authorities’ tendency to reject all liver
shipments in any way possible.

The same logic holds true for the fact that Mirasco did not
seek the full amount of loss from Excel and Monfort, but
rather only a portion representing the mislabeling claims.
Mirasco claims that it did not seek the full amount of loss
because it believed that the Egyptian authorities were
wrong in claiming health and sanitary deficiencies, and thus
based the settlement figures on the surveys completed after
the M/V Spero arrived in Houston, which showed that the
breadth of mislabeling was small, approximately 8.77
percent of the Excel cargo and a small percentage of the
Monfort cargo. This too supports the finding that Mirasco’s
losses were caused by the arbitrary denial of the goods by
the Egyptian authorities.

The Insurers have failed to establish that there is a
dispute of material fact with regard to whether Mirasco’s
losses were proximately caused, at least in part, by events
covered by the Policy. As a result, the Insurers’ motion
for summary judgment is denied. Mirasco’s motion for
summary judgment is denied because an issue of fact remains
as to what portion of the Excel and Monfort cargo, if any,
was rejected on grounds covered by the Policy.

V. Sue and Labor Clause

For the first time in their reply papers, the Insurers have
raised the defense that Mirasco failed to comply with
Clause 34 of the Policy, the “sue and labor” clause, which

In case of any imminent of actual loss or misfortune, it
shall be lawful and necessary to and for The Insured, his
or their factors, servants and assigns, to sue, labor and
travel for, in and about the defense; safeguard and
recovery of the said goods and merchandise, or any part
thereof, without prejudice to this insurance; to the
charges whereof These Insurers will contribute according
to the rate and quantity of the sum hereby insured; nor
shall the acts of The Insured or of These Insurers in
recovering, saving and preserving the property insured, in
case of disaster, be considered a waiver or an acceptance
of abandonment.

“When a policy contains a sue and labor clause, an insurer
may be able to argue that the insured has forfeited its
coverage if it does not sue and labor to minimize the
covered loss.” International Commodities Export Corp. v.
American Home Assurance Co., 701 F. Supp. 448, 452
(S.D.N.Y. 1988) (citing Integrated Container Service, Inc.
v. British Traders Ins. Co., 1 Lloyd’s Rep. 154 (C.A.
[Eng.] 1984) (assured who fails to perform its duty under
the sue and labor clause may properly be denied coverage on
an ensuing claim)).

While there is at least one case that suggests that a “sue
and labor” clause should not apply in the context of
rejection coverage, Berns & Koppstein, 170 F. Supp. at 720,
it appears that the parties have contractually agreed that
it should apply. Section 7 of Clause C of the Rejection
Coverage particularly states that the Policy does not cover
claims arising from “[n]oncompliance or breach of any of the
provisions or warranties set out in the West Page 327
terms and conditions of this policy.” As a result, if
Mirasco’s losses occurred as a result of breach of the sue
and labor clause, recovery is not available.

The Insurers claim that Mirasco should have unloaded the
cargo at the permitted 10 percent-per-day rate and
segregated the mislabeled Excel and Monfort goods from the
correctly labeled goods. Thus, they argue, the correctly
labeled goods could have been sold. There is no factual
basis for the claim, however, that the goods could have
been sold if they were, in fact, discharged and segregated.

Indeed, Mirasco contends that it did not begin unloading
because it was awaiting the lab results from the inspectors
and because of the general attitude of the Egyptian
authorities, leading Mirasco to believe that even if it did
segregate the correctly labeled cargo, the Egyptian
authorities would find another reason to reject it.[fn15] In
addition, Mirasco contends (and the Insurers dispute) that
the Insurers, through Sea Horse, ordered Mirasco to ship
the cargo back to the United States and thus was obligated
to follow that directive.[fn16]

Because the Insurers have not established a genuine dispute
with regard to whether Mirasco could have even imported the
correctly labeled Excel and Monfort products even if they
had discharged and segregated them at a rate of 10 percent
per day, their motion for summary judgment is denied.


In light of the foregoing, the Insurers’ summary judgment
motion is granted in part and denied in part, and Mirasco’s
crossmotion is granted in part and denied in part. It is
concluded that the Insurers have satisfied the coverage
requirements for 60.5% of the cargo, the IBP products, as
the are only required under Clause D of the Policy to pay
return freight and they have already done so. With regard to
the Excel and Monfort cargoes, the only issue left to be
decided is what percentage of that cargo, if any, was
rejected for a covered reason.

To the extent the above opinion alters the parties’ motions
in limine that are scheduled to be argued on March 19,
2003, the parties should submit revised papers reflecting
those changes prior to oral argument.

It is so ordered.

[fn1] The Court held:

Solely as the result of Hady Enterprises’ shipment’s
failure to conform to Decree 465, the Egyptian government
enacted [Decree No. 6] The Court makes this determination
for three reasons, each of which would alone suffice for
the Court to find causation by a preponderance of the
evidence. First, the timing of the series of events lead
the Court to find that IBP has met its burden of
establishing causation. Second, the Egyptian GAIEC
official inspection report states that GAIEC rejected the
liver shipment and, as a result of the shipment, issued
[Decree No. 6] . . . . Third, IBP’s correspondence with
[the GAIEC Director] demonstrates that the IBP ban was
based on the rejection of the IBP livers, due to improper
labeling under Decree 465, exported in September 1998 by
Hady Enterprises and imported into Egypt by Salem Abdel
Hady. . . . The Court finds that but for Hady Enterprises’
relabeling, repackaging, and exportation of the beef
livers to Egypt, Egypt would not have sanctioned IBP.

IBP, Inc. v. Hady Enterprises, Inc., No. 99 Civ. 402, slip
op. at 16 (Feb. 26, 2002).

[fn2] From October to December 1998, Mirasco had ordered the
liver from its usual supphers, IBP, Excel and Monfort.
Prices during that time fluctuated from a low of $0.275 to
a high of $0.34 per pound based on delivery to Mirasco’s
warehouse in Houston, Texas. During that time, Sami Rizk
received orders from various customers in Egypt for a
portion of the beef livers planned to be shipped on the M/V

[fn3] The translation provided in the Insurers’ Rule 56.1
statement differed slightly from the translation provided
as an exhibit to support that assertion. The following
translation was that provided as an exhibit, rather than
the one included in the Rule 56.1 statement.

[fn4] The Insurers dispute this fact but do not point to any
evidentiary support for their disagreement and therefore do
not raise a dispute of material fact.

[fn5] The Insurers dispute that this certificate means that
the cargo was rejected but do not provide any evidentiary
support for this assertion, and therefore fail to establish
a dispute of material fact. In their own Rule 56.1
Statement (though not in their response to Mirasco’s), the
Insurers point to translations of two custom documents that
do not state that the cargo was rejected. The documents do
not, however, pertimently state that the cargo was not
rejected. In the absence of such statement, the Insurers
have failed to raise a genuine dispute and, in any case,
failed to do so in the proper document, their response to
Mirasco’s Rule 56.1 statement.

[fn6] The Insurers contest the validity of this Notices,
even though their Sea Horse representative confirmed with
the Egyptian authorities that the Notices were legitimate
and without presenting in their Rule 56.1 Statement any
contradictory facts. As a result, the Insurers have failed
to present a genuine dispute of fact.

[fn7] The brands were not separately identified.

[fn8] The brands were not separately identified.

[fn1a] The prorated amount reflects a deduction of the Excel
beef livers, which [were] mislabeled. The mislabeled
quantity is approximately 38.102 net tons of product. The
original quantity shipped was 847.328 net tons.

[fn9] It has previously been held that New York law governs
this action in the Order of May 15, 2001.

[fn10] The Insurers claim that Mirasco had originally sought
$932,000 from Excel. Mirasco states that the parties
arrived upon the settlement figure based upon the survey
documenting that only a small percentage of the total cargo
was mislabeled.

[fn11] Mirasco had originally informed Monfort that the
total loss due to rejected Monfort product was $451,550.

[fn12] According to the Second Circuit:

[A]mbiguity does not exist “simply because the parties
urge different interpretations.” Rather, “the question of
whether an insurance policy is ambiguous is a matter of
law to be determined by the court.” . . . In this respect,
we have held that “an `ambiguous’ word or phrase is one
capable of more than one meaning when viewed objectively
by a reasonably intelligent person who has examined the
context of the entire integrated agreement and who is
cognizant of the customs, practices, usages and
terminology as generally understood in the particular
trade or business.”

Hugo Boss Fashions, Inc. v. Federal Insurance Co., 252 F.3d
608, 616-18 (2d Cir. 2001).

[fn13] Because of this conclusion, there is no need to
address Mirasco’s argument that the Insurers are estopped
from pursuing this claim.

[fn14] “Unless a contract provides otherwise, the law in
force at the time the agreement is entered into becomes as
much a p art of the agreement as thought it were expressed
or referred to therein, for it is presumed that the parties
had such law in contemplation when the contract was made
and the contract will be construed in the light of such
law.” Dolman v. U.S. Trust Co. of New York, 2 N.Y.2d 110,
116, 157 N.Y.S.2d 537, 541-42 (1956) (looking to
contemporary law to define term in contract); see also Hugo
Boss, 252 F.3d at 618 (“[W]here contracting parties use
terms and concepts that are firmly rooted in federal law,
and where there are no explicit signals to the contrary, we
can presume that the prevailing federal definition
controls. . . . [I]f the pertinent case law is ultimately
read as defining the term with sufficient clarity, then the
parties’ use of that term in an agreement will not be deemed
to create an ambiguity.”)

Because United States law, and more particularly New York
law, governs this action, Mirasco’s arguments regarding
whether Decree #6 is an embargo under Egyptian law are
irrelevant. In any case, the Insurers have submitted a
dueling affidavit arguing that Decree #6 is an embargo
under Egyptian law.

[fn15] Indeed, the Rejection Notices are evidence, although
disputed, that support this contention. Assuming the
Notices to be legitimate, even if Mirasco had discharged
the cargo as allowed to segregate the correctly labeled
goods, such action would have been for naught as the cargo
was rejected for health and sanitary reasons.

[fn16] This last argument is less persuasive, however, as it
does not explain why Mirasco failed to discharge the cargo
for the approximate month’s time between being informed of
the labeling difficulties and purportedly being permitted
to re-export from Egypt.