Ferro Union v. m/v Tamamonta

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Ferro Union Inc. v. M/V Tamamonta
United States of America: Federal Court for the Southern District of New York: Judge: Victor Marrero: 7 May 2004
Damages: burden of proof: fair market value: market price: insurance recovery: Carriage of Goods by Sea Act ("COGSA")
The United Stated District Court for the Southern District of New York granted defendant’s motion for summary judgment, holding a plaintiff cargo-owner could not recover against a defendant carrier for claimed cargo damage where the plaintiff’s only evidence of the proper measure of damage was its subrogated insurer’s payment under a cargo insurance policy.

DMC Category: Developed

Case Note contributed Brian P. Devine, an attorney with the firm of Healy & Baillie, LLP, New York. Healy & Baillie are the International Contributors to this website for the United States

Plaintiff, Ferro Union, Inc. brought an action for sea water rust damage to a cargo of steel pipes it purchased and shipped from China to the United States. Plaintiff alleged the pipes were shipped under clean bills of lading but arrived in Puerto Rico with rust damage. Plaintiff’s insurance company agreed to pay Plaintiff a settlement representing a twenty five percent depreciation in the value of the pipes (in exchange for subrogation rights), based on a surveyor’s preliminary estimate of damage to the pipes.

Subrogated to the cargo interests’ rights, the insurer then pursued recovery against the carrier.

Relying on the decision in Weirton Steel Co. v. Isbrandtsen-Moller Co., 126 F.2d 593 (2nd Cir. 1942), the Court denied recovery, holding that proof of payment under a policy of insurance, without more, is insufficient to prove damages against a carrier. Under the Carriage of Goods by Sea Act, the general measure of damages is the difference between the fair market value of the goods at their destination in the condition in which they should have arrived and the fair market value of the goods in the condition in which they actually did arrive. Plaintiff could not make such a showing.

The court also rejected plaintiff’s alternative calculation of damages based on a survey report, which purported to estimate the proper depreciation value to be applied to the shipment. The court held that since the survey report lacked specificity or detail, the surveyor’s conclusions constituted little more than speculation about the quantum of damages. Under the ordinary damage formulation, the market price of the damaged goods may be measured by either an actual sale price or by a readily discernable market price for the damaged goods. Plaintiff could not show the damaged steel was sold at a discount, nor could it demonstrate a discernable market price, since the damaged goods were never segregated from non-damaged pipes before being sold. The court concluded that the survey report was the product of guesswork and provided insufficient evidence to meet plaintiff’s burden of establishing damages with reasonable certainty.


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