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Friday, November 18, 2011

POLA Sees Major Surge in Exports

The Port of Los Angeles saw a 28 percent increase in loaded outbound cargo containers in October over the same month last year, according to new data. Imports also rose last month, increasing by five percent compared with October 2010.

Broken down, the number of full containers exported was 193,547, an increase of almost 42,500 over October 2010. The number of loaded inbound containers last month was 368,842, an increase of about 19,300, or 5.5 percent, over the same month last year.

The complete number of loaded containers imported and exported during the month was 562,390, a 12.3 percent increase over October 2010. The number of empty containers however, fell to 150,195 last month from 181,790 during the same month last year, a decrease of over 17 percent.

Total container traffic during the month amounted to a 4.4 percent year-over-year rise, to 712,586 TEUs from October 2010’s 682,384.

During the first 10 months of the calendar year, TEU traffic has risen at the Port of LA by just 44,653 containers, or 0.6 percent.

Although the import numbers remain weak, the port’s October exports total was the highest of the calendar year so far. It’s being attributed in part to an increase in demand of a number of products that California is known for growing, manufacturing and exporting, such as agricultural goods, raw metals, electrical equipment and computers.

Hainan Announces New Trans-Pacific Service

Defying a carrier trend of decreasing service to the North American West Coast, Hainan P O Shipping says it’s expanding its trans-Pacific service next month by adding a route between central and north China and two California ports.

Direct calls on the new service include: three ports in China plus Busan, South Korea and the ports of Long Beach and Oakland. The line expansion begins in December, according to the Shanghai-based company. The additions will supplement the carrier’s weekly service between south China and Long Beach.

Hainan, which was established in 2009 and saw its inaugural vessel sail in August 2010, also offers intermodal service to inland U.S. destinations from Long Beach and Oakland.

The increase is contrary to what’s occurred throughout 2011, as five shipping lines that operate vessels with about 3,000-TEU capacity have announced they were discontinuing trans-Pacific service from China to the Los Angeles-Long Beach port complex due to weakened U.S. imports.

San Diego Harbor Police Seize Weapons Cache

Officers with the Port of San Diego's Harbor Police arrested a 58-year-old San Diego man after seizing numerous firearms and explosive devices from where he was living on the San Diego Bay.

On Nov. 9, the Harbor Police removed 18 rifles, 14 unregistered handguns, a fully automatic submachine gun, four explosive devices and over 4,000 rounds of ammunition from the suspect’s residence within the port’s jurisdiction.

Harbor Police Sergeant Mike Rich obtained a warrant to search the home after being called to the residence to investigate a possible theft, according to the port.

Fred Seeber was arrested on several charges, including illegal possession of an automatic weapon and possession of explosive devices, and booked into the San Diego County Jail, with bail set at $100,000.

The weapons were impounded at the San Diego Police Department and will most likely be destroyed if the suspect’s convicted, police said.

“The main thing is that all of those guns are off the street,” Harbor Police Lieutenant James Jordan said. “Who knows where these guns could have ended up?”
The Harbor Police, which patrols the Point Loma area where the arrest occurred, is the port’s law enforcement arm and patrol’s the port’s dominion, including two maritime cargo terminals, two cruise ship terminals, 17 public parks and over 600 tenant and sub-tenant businesses around San Diego Bay.

Port of Seattle Commissioners Win Reelection

Despite a controversy over improper usage of official credit cards that emerged in the weeks before the election, incumbent Port of Seattle commissioners Bill Bryant and Gael Tarleton have both easily won reelection to the five-member board.

The results of the Nov. 8 election show that Bryant and Tarleton, who were first elected to the commission in the fall of 2007, defeated challengers Dean Willard and Richard Pope, respectively, by wide margins to receive second four-year terms.

This was despite an internal investigation by the port that found that all five commissioners had been found to have improperly spent port funds on travel and personal expenses.

In a 31-page report given to the commission in October, the Seabold Group, an investigative service retained by the port, said that about $3,000 in improper expenses had been charged to port credit cards. All the money was eventually repaid, including $115 by Bryant for meals, and $941 by Tarleton for mostly airfare expenses.
Port of Seattle commissioners, who serve part-time, are paid $6,000 annually, and can be reimbursed for up to $12,000 a year in legitimate expenses.

Both Bryant and Tarleton originally took their seats on the commission in January 2008, during a time when the port was attempting to recover from a financial investigation that led to the firing or discipline of nine managers.

Tuesday, November 15, 2011

Don’t Overlook Warranties In Hull and P & I Policies

By Marilyn Raia
marilyn.raia@bullivant.com

A warranty in a marine insurance policy is a promise by the insured about something that will be done or something that will not be done. It may also be a promise about a particular condition that exists or will exist, or a condition that does not nor will not exist.

Two Types of Warranties
There are two types of warranties that may be found in hull and P & I policies: implied and express. An implied warranty of seaworthiness is a part of every time hull policy. It means when the coverage attaches, the vessel is fit for its intended purpose under the anticipated conditions. The implied warranty of seaworthiness does not mean the vessel can withstand all conditions. Thereafter, there is a continuing implied warranty that the insured will not knowingly send the insured vessel to sea in an unseaworthy condition.

Hull and P & I policies also frequently contain one or more express warranties. Express warranties might address the areas in which the vessel can operate, the type of operation the vessel can engage in, the particulars of the crew members, the equipment to be aboard the vessel or other factors material to the risk. This article focuses on the express warranties in hull and P & I policies.

The Consequences of a Breach of Warranty Depend on the Applicable Law
As discussed in a prior article, there are several instances in which federal and state law may lead to different results under the same set of facts or under the same contract. The effect of a breach of an express warranty in a hull or P & I policy is another of those instances. Sometimes the breach of a warranty in a hull or P & I policy results in the voiding of the policy. Other times, the breach has no effect on coverage. Whether the policy is void depends on what law applies. How the courts decide what law applies has its origin in the United States Supreme Court case of Wilburn Boat v. Fireman’s Fund Ins. Co. 348 U.S. 310 (1955).

Wilburn Boat involved an insurance policy insuring a small houseboat against the risk of fire and other perils. The Wilburns bought the boat for the commercial carriage of passengers on an artificial inland lake between Texas and Oklahoma. While moored on the lake, the boat caught fire and was destroyed. The insurer, Fireman’s Fund, denied coverage for the loss because of the breach of two express policy warranties: 1) the boat would not be transferred without the insurer’s consent; and 2) the boat would be used only for pleasure purposes, i.e., not for commercial passenger-carrying purposes.

The Wilburns sued Fireman’s Fund for coverage. The district court entered judgment for Fireman’s Fund holding there was no coverage because of the unapproved transfer of the boat to the Wilburns and their use of the boat for commercial purposes. The district court applied the federal “literal performance” rule and held there was no coverage. That rule requires strict compliance with every warranty in the policy, and voids of coverage when a warranty is breached, whether or not the breach was causally connected to the loss. The court of appeals affirmed. The US Supreme Court reversed. It considered two questions: 1) whether there was an established federal admiralty law about the effect of the breach of the particular warranties in the Wilburns’ policy; and if not, 2) whether it should fashion one. It answered both questions “no”. It held if there is no well-established federal law on whether the breach of a particular policy warranty voids coverage, state law will govern. The Supreme Court then sent the case back to the district court to determine which state’s law would apply.

Federal law is well established with respect to certain types of warranties such as a trading/navigation warranty and requires strict compliance to prevent voiding of coverage. For example, Port Lynch, Inc. v. New England International Assurety of America, Inc. 754 F.Supp.816 (W.D.Wash. 1991) involved a hull policy on a commercial fishing vessel. The policy contained an express warranty that the insured vessel would be at anchor in southeast Alaska, processing shrimp. While the vessel was in the Bering Sea crabbing, a fire occurred causing the total loss of the vessel. The insured sued its insurer to recover for its loss. The court recognized the well-established federal admiralty law on the strict construction of navigation and trading warranties. It held there was no coverage because of the breach of those warranties when the vessel was in the Bering Sea crabbing instead of at anchor in southeast Alaska processing shrimp, even if compliance with the warranties would not have avoided the loss.

Other types of warranties are not so firmly entrenched in federal maritime law and the courts look to state law to determine the effect of their breach. The law in most states is consistent with the federal admiralty rule that a policy is void if a warranty is breached even if the breach was not causally related to the casualty. The reason for the rule is the practical difficulty faced by insurers in assessing a risk on a vessel. However, the law in a few states requires a connection between the breach of warranty and the loss, for coverage to be void.

For example, in Insurance Company of North America v. San Juan Excursions, Inc. 2006 AMC 2758 (W.D.Wash. 2006) the policy covered a whale-watching vessel and contained a lay-up warranty requiring the vessel to be laid up afloat from January 1 to April 14. In mid March the vessel sailed from its home berth of Friday Harbor to a shipyard in Port Angeles. Thereafter, a shipyard worker was injured aboard the vessel. The insurer filed a lawsuit against the vessel owner and the injured worker seeking a judgment of no coverage because of the breach of the policy’s lay-up warranty. Following the Wilburn Boat decision, the district court first considered whether there was any well-established federal admiralty law about strict compliance with a lay- up warranty. The court noted: 1) very few courts had addressed whether a lay-up warranty requires strict compliance under federal admiralty law; and 2) no court had concluded there was an established federal admiralty rule on the issue. Because the court felt no need to fashion a federal admiralty rule about lay-up warranties, it held Washington state law applied to determine the effect of the breach of the lay-up warranty. Under Washington law, a breach of an express warranty in a policy does not void coverage unless the breach contributed to the loss or increased the risk of the type of loss sustained. In that case, there were disputed issues of fact on whether the breach of the lay-up warranty contributed to the loss or increased the risk of loss, which disputes precluded the court from deciding, without a trial, whether coverage was void.


Breach of Warranty Excused
There are circumstances under which a breach of an express policy warranty may be excused so that coverage is not void. The breach may be excused and not void coverage if it occurs to save a life. Also, if the breach of warranty is caused by a peril covered under the policy, the breach will not void coverage. For example, in US Fire Ins. Co. v. Cavanaugh 732 F.2d 832 (11th Cir. 1984), the captain of a fishing vessel took the vessel outside of the geographical limits in the policy contrary to the orders of the vessel owner. While outside the geographical limits, the vessel was lost due to stranding. The court held the efficient proximate cause of the loss was barratry by the captain, which caused the vessel to breach the navigation warranty in the policy. Under those circumstances, the policy was not void.


Breach of Warranty Endorsement
When the purchase of a vessel is financed, the financing agreement often requires the purchaser to obtain a hull policy with a breach of warranty endorsement in it. Under such endorsement, if the insured purchaser breaches a warranty and voids coverage for a loss, the bank or other financial institution is still entitled to payment under the policy to the extent of its interest.
Hull and P & I Policy Warranties Summarized

Hull and P & I policies frequently contain warranties. Under federal law and the law of most states, a breach of those warranties results in the voiding of coverage under the policy, even if the breach of warranty is not related to the casualty for which coverage is sought. Only a few states require a causal connection between the breach of a policy warranty and a loss, to void coverage. A vessel owner should not overlook warranties in a hull or P & I policy. Doing so may result in coverage not being available when it is needed.

Marilyn Raia is Of Counsel in the San Francisco office of Bullivant Houser Bailey. She specializes in maritime and transportation matters and can be reached at marilyn.raia@bullivant.com.

Smuggling Ring Busted in Vancouver

An organized crime ring that allegedly conspired to ship counterfeit cigarettes and ingredients to make illegal drugs to the Port of Vancouver, Canada from Asia has been shut down, British Columbia police say.

During the course of a two-year investigation, which ended in early November, 11 containers were seized, seven in Vancouver and four in Toronto, containing a total of 583,600 cartons of cigarettes and 6,270 kilograms of the liquid chemical phenyl-2-propanone, which can be used as an ingredient in the manufacture of methamphetamines, authorities say.

In late October, eight people were arrested on smuggling and conspiracy charges as part of the investigation. A handful more are still being sought, including two Vancouver-area residents.

The investigation began in 2009 after the Canada Border Services Agency intercepted a container at the Port of Vancouver containing unstamped counterfeit cigarettes destined for Toronto.

After the CBSA shared the information with the Royal Canadian Mounted Police, the two agencies then worked with other Canadian and international agencies to identify and shut down the responsible parties.

Port of Long Beach Confirms New Executive Director

As expected, the Port of Long Beach has officially confirmed Chris Lytle as its new executive director. The port’s Board of Harbor Commissioners voted 4-0 on Nov. 14 to appoint Lytle to the position.

He replaces Dick Steinke, who announced his retirement in April after having been executive director since 1997.

“I’m excited about the opportunity to move things forward,” Lytle said after being confirmed. “I think we have the opportunity now to take a little bit different look, a fresh look at a couple things. Not that we’re going to do anything drastically different than what Dick has established.”

Lytle, who’s held the position of deputy executive director since 2008, joined the port as a managing director in 2006. He holds a master’s degree in business administration from the University of Puget Sound and a bachelor’s degree in business administration from Central Washington University.

He’s a former vice president with the French shipping line CMA CGM and also previously held executive-level positions with P&O Ports North America, Sea-Land Service Inc. and APM Terminals.

Harbor Commission President Susan E. Anderson Wise said that Lytle was chosen after an extensive, nationwide search and that his experience in both the public and private sectors is what made him the ideal choice.

Steinke, who originally planned to retire in September, has agreed to stay on until the end of the year.

Winged Sculpture Under Consideration for San Diego Waterfront

The Port of San Diego is weighing a proposal to build a 500-foot sculpture that resembles a pair of wings on the waterfront. The sculpture would be part of a $68 million pier development project proposed by the USS Midway Museum.

The design for the “Wings of Freedom” sculpture, which also bears a resemblance to two sails full of wind, has so far received a $35 million pledge from local entrepreneur and philanthropist Denny Sandford.

Proponents say the structure would be on par with other iconic sculptures around the world, such as Seattle’s Space Needle, the Statue of Liberty in New York City and St. Louis Arch. Local critics, however, have already called the design “hideous” and “ridiculous,” among other things.

Town hall discussions on the proposal are scheduled for Nov. 29, Dec. 6 and Dec. 10 at the port. A report on the public’s input is scheduled to be presented to port commissioners on Dec. 13.

POLB Dedicates Shore Power Project

The shipping container facility operated by SSA Terminals and Matson Navigation at the Port of Long Beach’s Pier C has become the fourth terminal at the port to be equipped with shore power.

The infrastructure project, which cost an estimated $6.4 million, allows ships at berth to shut down their diesel engines and plug into electricity in order to reduce air pollution.

During a Nov. 15 dedication ceremony at the terminal, state and local leaders, including Long Beach Mayor Bob Foster, state Sen. Alan Lowenthal and his former wife, Assemblywoman Bonnie Lowenthal joined port staff in marking the event.

“Together with our industry partners, we have shown the world that it is possible to move more cargo and reduce emissions at the same time,” harbor commission President Susan Wise said during the dedication ceremony.

Matson and the port committed to the project in 2006 as part of a new lease outlining major environmental improvements at Pier C. In the time since, the California Air Resources Board has made shore power a state requirement, and under current state regulations, half of all containership visits must use shore power by 2014.