Petition for Writ of Certiorari — Foreign Credit Insurance v. Nu-Air Manufacturing Co.
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8? 1070 FILED
26 JEC
No. 87-
heaaesteme amet
IN THE
Supreme Court of the United States
October Term, 1987
FOREIGN CREDIT INSURANCE ASSOCIATION,
Petitioner,
Nu-AIR MANUFACTURING COMPANY,
Respondent.
PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
HENRY A. HUBSCHMAN
(Counsel of Record)
ELLIOT E. POLEBAUM
ROBERT P. PARKER
MIRA N. MARSHALI
FRIED, FRANK, HARRIS,
SHRIVER & JACOBSON
(A Partnership Including
Professional Corporations )
1001 Pennsylvania Avenue, N.W.
Suite 800
Washington, D.C. 20004-2505
(202) 639-7000
Attorneys for Petitioner
-j-
QUESTIONS PRESENTED
1. Whether the doctrines of official immunity and derivative
sovereign immunity bar negligent misrepresentation suits against
an association of private insurers serving as the Federal Govern-
ment’s agent under the congressionally mandated export credit
insurance program.
2. Whether contract suits on insurance policies issued pursu-
ant to the Federal Government’s export credit insurance program
are governed by a uniform body of federal law, or by the particu-
larized laws of the 50 States and the District of Columbia.
-ii-
PARTIES TO THE PROCEEDING AND RULE 28.1 LIST
In addition to the petitioner and respondent named in the
caption, Frank B. Hall & Co. of New York d/b/a Intercredit
Agency was a defendant in the district court and an appellee in
the court of appeals.
Pursuant to Supreme Court Rule 28.1, petitioner Foreign
Credit Insurance Association (“FCIA”) has set forth in the
appendix at 5la, a list of FCIA’s members at the time respondent
filed this suit. These entities were named defendants in the dis-
trict court and appellees in the court of appeals. However, by
virtue of an agreement between FCIA and the Export-Import
Bank of the United States entered into prior to the initiation of
this lawsuit, FCIA’s members have no financial interest in the
outcome of this case. Pursuant to Rule 19.6, petitioner has
informed the Clerk of the Court of its belief that FCIA’s individ-
ual members have no interest in the outcome of this petition and
will not participate in this proceeding.
2 a
TABLE OF CONTENTS
RRP REMe RUPEMED WORMIESES BESO) 5.5 cccccececcncsosscccccsssocensece
PARTIES TO THE PROCEEDING AND RULE
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REASONS FOR GRANTING THE WRIT ...........
A. This Court Should Review The Eleventh Cir-
cuit’s Decision To Clarify The Immunity From
Non-Constitutional Tort Liability Of Private
Participants In Federal Government Insurance
SLES SEER A ee
1. Two Courts of Appeals Have Recognized
the Immunity of Private Participants in
Federal-Government Insurance Programs .
2. The Decision Below Conflicts With Appel-
late Decisions On Both Official Immunity
and Derivative Sovereign Immunity .........
3. The Court Below Was Wrong in Determin-
ing That Eximbank Does Not Enjoy Sover-
eign Immunity from Negligent Misrepre-
A
PAGE
13
16
-iv-
PAGE
B. The Court Should Review The Eleventh Cir-
cuit’s Decision To Settle Whether State Or Fed-
eral Law Applies To Insurance Contracts Issued
Jointly By Public And Private Entities Pursuant
To Federal Government Insurance Programs .. 17
1. The Decision Below Undermines Uniformi-
ty of Decision in the Export Credit Insur-
RINGD TIN | cinccitidatccendsnamnennianmsiiaijanionies 18
Nw
The Decision Below Requires Eximbank
and FCIA to Guess at the Law Applicable
to the Export Credit Insurance Program .. 18
3. The Decision Below Conflicts With the De-
cisions of This Court and of at Least Three
OFS. COMsRS.OT ARGRES nccccccsciccccccncesssssesee 20
CREO aJSEIOT ‘Secricuistilnidueaatinissmmcadsescdabtancdanbintbensonautes 23
-V-
TABLE OF AUTHORITIES
Anderson v. Occidental Life Insurance Co., 727 F.2d
855 (9th Cir. 1984) (per curiam) .................e
Atlas Pallet, Inc. v. Gallagher, 725 F.2d 131 (1st Cir.
STI cikanecdichddesdedisthsexéaretegilieebesnpiidleiinddchabadiidinenadakdleldinnanee
RE TE eer USAT ae eee, Ra a I
Barr v. Matteo, 360 U.S. 564 (1959) 0... cceeeeeeeeeeeee
Becker v. Philco Corp., 372 F.2d 771 (4th Cir.), cert.
CA, Fe a Fe CRED. cecetatintnceentntbtintinnnssinness
Beverly v. Macy, 702 F.2d 931 (11th Cir. 1983) .....
Bor-Son Bldg. Corp. v. Heller, 572 F.2d 174 (8th Cir.
RRNA EE SCR RN Rare
Bradley v. Computer Sciences Corp., 643 F.2d 1029
(4th Cir.), cert. denied, 454 U.S. 940 (1981) ......
Brazil v. Giuffrida, 763 F.2d 1072 (9th Cir. 1985) ..
Bushman v. Seiler, 755 F.2d 653 (8th Cir. 1985) ...
Butz v. Economou, 438 U.S. 478 (1978) ...............0
Claus v. Gyorkey, 674 F.2d 427 (Sth Cir. 1982) .....
Clearfield Trust Co. v. United States, 318 U.S. 363
ERENT, aieanciseinissasntndiadiadmasthdbeidaseniiabessoulanniiiebiobeizas
Commonwealth of Pennsylvania v. National Ass'n of
Flood Insurers, 520 F.2d 11 (3d Cir. 1975) .........
Davis v. Scherer, 468 U.S. 183 (1984) 00.0.0...
Edelman v. Federal Housing Administration, 382
Ft & Fe Le 5 GREE
Federal Crop Insurance Corp. v. Merrill, 332 U.S. 380
EPI EP idasteusiia scot DeatindinsieenhibanstitecAislampehentbatieseasiaie Suisiniadas
Fine Wear Mfg. Co. v. Giuffrida, 580 F. Supp. 472
EA 8 0 ERR eee ee
Harlow vy. Fitzgerald, 457 U.S. 800 (1982). .............
Holmes v. Eddy, 341 F.2d 477 (4th Cir.) (per
curiam), cert. denied, 382 U.S. 892 (1965) .........
Lovell Mfg. v. Export-Import Bank, 777 F.2d 894 (3d
RRR PEAR NS at RS EE ea
21,22
4,21
4,13
17,18
12,16
PAGE
Matranga v. Travelers Insurance Co., 563 F.2d 677
CSUR Civ. 1977) (ROE CUTER) cccecscccccccscoccsesecescscecee 14
Norton v. McShane, 332 F.2d 855 (Sth Cir. 1964),
cert. denied, 380 U.S. 981 (1965) ......ccccceceeeeees 16
Oyler v. National Guard Ass'n, 743 F.2d 545 (7th Cir.
PUTIPIPE > seccahaseianuidedidihcncddsdslanmpenasenetatinienpnsasqsnsentensesensccsece 15
Peterson v. Weinberger, 508 F.2d 45 (Sth Cir.), cert.
SOUR, GES GAs GE TDESD cecccscscscnescvececcsossecseeeses 14
Potter v. Giuffrida, 635 F. Supp. 99 (S.D. Ohio 1986) . 21
Ricci v. Key Bancshares of Maine, Inc., 768 F.2d 456
I a i a resnentmebnnonte 16
Schell v. National Flood Insurers Ass'n, 520 F. Supp.
Sr CU IEE: SITET cadcenesceotsitdeciastsnesackeumercasatetesesns 21
United States v. County of Allegheny, 322 U.S. 174
EP IPUED cisceaindacdsdioedsnsaiaidnncaistionediadbgenbdantaaseapinnniesenbaeessnesee 17
United States v. Parish of St. Bernard, 756 F.2d 1116
(Sth Cir. 1985), cert. denied, 474 U.S. 1070 (1986) . 4.21
United States v. Seckinger, 397 U.S. 203 (1970) .... 17
West v. Harris, 573 F.2d 873 (Sth Cir. 1978), cert.
Gene, GHD TEE, SOR CASED cnnssitssinernetinteenescne 4,11,21
Westfall v. Erwin, 785 F.2d 1551 (11th Cir. 1986)
(per curiam), cert. granted, 107 S.Ct. 1346 (1987). 12
Williamson v. United States, 815 F.2d 368 (Sth Cir.
RAR Ae Nae SOBA ia cee 20 are eae 15
Statutes
ee aa isha sindaereaticiineneenienbonilianendin s
ay ie NE hid esiipesos dicinetanacanesnenebdsinpinnsunendarseeecenees passim
FF er es Oe I NC UED scccctcccaccnconetsessssoussteestecsen 10
Bk Si ies We PIPE, sanicsccsscacecvossenenses PRP R ET a S
Oe en I ils sda aetenagiastangnsernemnnetonnes 2
Federal Tort Claims Act, 28 U.S.C. §§ 1346(b), 2671
OE UU. -sicaiadiissdcdiselacdiceabtanidlicidnastdanennunsncacasinctinnenenecsniences 17
Federal Tort Claims Act, 28 U.S.C. § 2680(h) ........ 7,17
42 U.S.C. §§ 1395h, 4001, 4051, 4081-82-00. 8,10
PTE Toke fy 0”, , eee enee eee 8
Oe SF A, Fe Sis EE weircicccescctniientacesteveatecnenserts s
-Vii-
Legislative Materials
H. Rep. No. 1476, 90th Cong., 2d Sess (1968) .......
H. Rep. No. 1126, 87th Cong., Ist Sess. (1961) ......
H. Rep. No. 92-303, 92d Cong., Ist Sess. (1971) ....
H. Rep. No. 95-235, 95th Cong., Ist Sess. (1977) ..
H. Rep. No. 320, 83d Cong., Ist Sess. (1953) .........
Miscellaneous
General Accounting Office, Export Credit Insurance:
Assessment of Export Import Bank’s Role, No.
GAO/NSIAD-87-189 (September 1987) ..............
— --- ~~ —oowen a
No. 87-
IN THE
Supreme Court of the United States
October Term, 1987
FOREIGN CREDIT INSURANCE ASSOCIATION,
Petitioner,
-
Nu-AIR MANUFACTURING COMPANY,
Respondent.
PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
Petitioner Foreign Credit Insurance Association (“FCIA”)
respectfully prays that a writ of certiorari issue to review the
judgment and opinion of the United States Court of Appeals for
the Eleventh Circuit, entered in the above-captioned proceeding
on July 24, 1987.
OPINIONS BELOW
The opinion of the Court of Appeals for the Eleventh Circuit is
reported at 822 F.2d 987, and is reprinted in the appendix hereto
at la.
The memorandum decision of the United States District Court
for the Middle District of Florida ( Kovachevich, J.) has not been
reported. It is reprinted in the appendix hereto at 24a.
JURISDICTION
The court of appeals entered its judgment and order remanding
this case to the district court on July 24, 1987. See 22a-23a.
FCIA filed a timely petition for rehearing or rehearing by the
court of appeals en banc. The court of appeals denied FCIA’s
petition on August 31, 1987. See 21a.
aa i
On November 10, 1987, Justice O'Connor ordered that the
time for filing this petition for a writ of certiorari be extended to
and including December 29, 1987.
The jurisdiction of this Court to review the judgment of the
Eleventh Circuit is invoked under 28 U.S.C. § 1254(1).
STATUTE INVOLVED
12 U.S.C. § 635 provides:
(a)(1) There is created a corporation with the name
Export-Import Bank of the United States, which shall be
an agency of the United States of America. The objects
and purposes of the bank shall be to aid in financing and to
facilitate exports and imports and the exchange of com-
modities and services between the United States or any of
its Territories or insular possessions and any foreign coun-
try or the agencies or nationals thereof. In connection
with and in furtherance of its objects and purposes, the
bank is authorized and empowered to ... guarantee,
insure, coinsure, and reinsure against political and credit
risks of loss ....
* * *
(b)(1)(A) It is the policy of the United States to foster
expansion of exports of manufactured goods, agricultural
products, and other goods and services, thereby contribut-
ing to the promotion and maintenance of high levels of
employment and real income and to the increased develop-
ment of the productive resources of the United States. To
meet this objective in all its programs, the Export-Import
Bank is directed, in the exercise of its functions, to provide
guarantees, insurance, and extensions of credit at rates
and on terms and other conditions which are fully compet-
itive with the Government-supported rates and terms and
other conditions available for the financing of exports of
goods and services from the principal countries whose
exporters compete with United States exporters ....
* * *
(c)(2) The bank may issue such guarantees, insurance,
coinsurance, and reinsurance to or with exporters, insur-
ance companies, financial institutions, or others, or groups
Pion!
3
thereof, and where appropriate may employ any of the
same to act as its agent in the issuance and servicing of
such guarantees, insurance, coinsurance, and reinsurance,
and the adjustment of claims arising thereunder.
STATEMENT OF THE CASE
The Export-Import Bank of the United States (“Eximbank”),
an agency of the United States government, directs our country’s
export credit insurance program. Pursuant to statutory author-
ity, 12 U.S.C. § 635(c)(2), Eximbank in 1961 encouraged pri-
vate insurers to form an unincorporated association, known as the
FCIA,’ to serve as Eximbank’s agent in marketing, issuing and
servicing export credit insurance policies. Eximbank has, since
1962, continuously appointed FCIA as its agent to market, issue
and service export credit insurance policies designed and
approved by Eximbank in order to fulfill the congressional man-
date to expand U.S. exports. These policies protect U.S. export-
ers against the risk that foreign buyers of American goods or
services will not pay due to either commercial or specified politi-
cal reasons.” Under a single, unified insurance policy which con-
tains one set of definitions, one set of exclusions, one set of
agreements of the insured, and one set of other applicable terms
and conditions, Eximbank is the insurer of the political risks of
loss and FCIA’s members are the named insurers of the commer-
cial risks. Eximbank has always reinsured FCIA’s members for
losses arising out of commercial claims above certain agreed-
upon levels. Since 1983, Eximbank has reinsured FCIA’s mem-
bers for all claims under the commercia! risk coverage. See 12a.
Federal Government control of the export credit insurance
program is complete: Eximbank exercises ultimate authority over
the issuance of policies, the terms thereof, the premiums therefor,
1. FCIA is an unincorporated association of insurance companies.
2. The political risk provisions cover the foreign buyer’s nonpayment as a
result of such events as war, riot, nationalization of the buyer’s business, or the
buyer’s inability to obtain dollars in a lawful market to satisfy a U.S. dollar
obligation. The commercial risk provisions provide coverage against the
buyer’s default on its obligation to pay the policyholder for reasons other than
those set forth in the political risk provisions.
ey
4
and the acceptance or denial of political and significant commer-
cial claims thereunder. The premiums set by Eximbank are
subsidized by the Federal Government in accordance with the
congressional directive that Eximbank provide insurance “at
rates and on terms and other conditions which are fully competi-
tive with the Government-supported rates and terms and other
conditions available for the financing of exports of goods and
services from the principal countries whose exporters compete
with United States exporters.” 12 U.S.C. § 635(b)(1)(A).
The Federal Government’s export credit insurance program is
part of the national commitment to increasing exports. 12 U.S.C.
§ 635(a)(1), and is an area of quintessential federal interest. In
a period of skyrocketing trade deficits and international financial
turmoil, the ability of U.S. companies to increase exports of U.S.
goods and services abroad is all the more critical.
Notwithstanding these important national concerns, the Court
of Appeals for the Eleventh Circuit struck two blows at the foun-
dations of the Federal Government's export credit insurance pro-
gram. In conflict with the decisions of other circuit courts of
appeals regarding Federal Government insurance programs,’ the
Eleventh Circuit held that FCIA is not immune from suit for
negligent misrepresentations committed in its role as the mar-
keter and servicer of policies issued under the Federal Govern-
ment’s export credit insurance program. The court of appeals
went on to attack Eximbank’s status directly, concluding that
Eximbank itself is not entitled to sovereign immunity from negli-
gent misrepresentation suits despite the contrary directive of the
Federal Tort Claims Act. The court of appeals compounded its
divergence from the decisions of other courts of appeals‘ by fur-
ther holding that state rather than federal law governs the rights
\ .
3. Bushman v. Seiler, 755 F.2d 653 (8th Cir. 1985): Anderson v. Occiden-
tal Life Insurance Co., 727 F.2d 855 (9th Cir. 1984).
4. Brazil v. Giuffrida, 763 F.2d 1072 (9th Cir. 1985): United States v.
Parish of St. Bernard, 756 F.2d 1116 (Sth Cir. 1985), cert. denied. 474 US.
1070 (1986) ; Atlas Pallet, Inc. v. Gallagher, 725 F.2d 131 (1st Cir. 1984):
West v. Harris, 573 F.2d 873 (Sth Cir. 1978), cert. denied. 440 U.S. 946
(1979).
and duties of private participants in Federal Government insur-
ance programs such as the export credit insurance program.
The decision below is a frontal assault on the Federal Govern-
ment’s export credit insurance program, and raises important
questions of immunity from non-constitutional tort liability and
of the applicability of state rather than federal law for all Federal
Government insurance programs.
A. Factual Background
In early 1982, Nu-Air Manufacturing Company (“Nu-Air”)
applied to FCIA for an export credit insurance policy that would
provide Nu-Air with political and commercial risk coverage for
its export transactions. Concurrently, Nu-Air also applied for a
special endorsement to the policy that would extend the policy’s
basic coverage to a large sale that Nu-Air contemplated making
to a Nigerian buyer. Nu-Air understood that it needed the spe-
cial endorsement, known as a Special Buyer Credit Limit
(“SBCL”), to secure coverage under the policy for the large
Nigerian transaction. In March 1982, FCIA, in its capacity as
Eximbank’s agent, issued a quotation for the policy, which Nu-
Air accepted. Subsequently, FCIA rejected Nu-Air’s applica-
tion for an SBCL endorsement because of a virtual economic
collapse in Nigeria at that time.
Before FCIA rejected Nu-Air’s SBCL application, Nu-Air’s
insurance broker apparently informed Nu-Air that Nu-Air could
begin shipping to its Nigerian buyer. Nu-Air did so, and alleg-
edly suffered a loss of $311,846.32 as a result of the Nigerian
buyer's subsequent default. Nu-Air filed a claim with FCIA
under the commercial risk coverage of its policy, which FCIA
rejected on the ground that Nu-Air had no SBCL endorsement
covering the Nigerian transaction.
5. Basic coverage under export credit insurance policies typically permits
insureds to make small sales up to a specified dollar amount per buyer (the
“Discretionary Credit Limit”), subject to an aggregate for all buyers, without
further review by Eximbank and FCIA. If the insured will have receivables in
excess of the Discretionary Credit Limit, it needs to obtains an SBCL endorse-
ment to insure the transaction.
6
Soon thereafter, Nu-Air filed its complaint in the district court.
The complaint contains two counts against FCIA.* In the first
count, Nu-Air alleges that 2 valid and binding insurance contract
between FCIA and Nu-Air covered Nu-Air’s loss in the Nigerian
transaction. The second count alleges that FCIA negligently
misrepresented to Nu-Air’s broker, and through the broker to
Nu-Air, that FCIA had approved the issuance of an SBCL cover-
ing Nu-Air’s shipments to Nigeria.
Upon completion of discovery, FCIA, Nu-Air and Nu-Air’s
broker entered into a pre-trial order which included 143 stipula-
tions of fact. Among other things, the parties stipulated that
FCIA had acted as the agent of Eximbank within the scope of its
authority, see 32a, and that Nu-Air had breached several of the
terms and provisions of the policy, see 29a.’ On the basis of these
stipulated facts, FCIA moved the district court for summary
judgment. Among the grounds urged by FCIA in support of its
motion were: (1) as the agent of Eximbank, FCIA is immune
from suits, such as Nu-Air’s negligent misrepresentation claim,
sounding in common-law tort; and (2) federal common law gov-
erns the rights and liabilities of parties to an insurance contract
issued under a Federal Government insurance program, so that
Nu-Air’s failure to obtain and preserve coverage in accordance
with the terms and provisions of its policy bars its recovery.
B. Opinions Below
The district court granted FCIA’s motion for summary judg-
ment. In pertinent part, the district court ruled:
(G) FCIA was acting within its authority as the agent of
the Export-Import Bank of the United States, and is
6. Nu-Air also sued its broker for breach of contract, negligence and negli-
gent misrepresentation.
7. The only remaining disputed issue of fact in this case is whether FCIA
advised Nu-Air’s broker that FCIA had approved the SBCL endorsement or
rather, as FCIA believes, whether Nu-Air’s broker erroneously and unreasona-
bly assumed FCIA had approved the SBCL endorsement when FCIA advised
the broker it was issuing a policy quote.
7
immune from suit under Nu-Air’s negligent misrepresen-
tation claim.
See 49a. The court further held that Nu-Air’s conceded viola-
tions of the policy terms barred its recovery.’
On appeal, the Eleventh Circuit reversed, rejecting application
to FCIA of the doctrine of official immunity and the applicability
of federal rather than state law to the Federal Government's
export credit insurance program. With respect to official immu-
nity, the court held that FCIA was subject to suit for its alleged
negligent misrepresentations to Nu-Air, and specifically declined
to follow other cases recognizing the immunity of private agents
in Federal Government insurance programs. The court con-
cluded that these cases recognizing immunity for private agents
apply only to activity which furthers “paramount governmental
objectives.” See 14a. The court then held that immunizing
FCIA from the tort alleged in Nu-Air’s complaint would not
serve any “worthwhile” purpose. See id.
In rejecting immunity for FCIA, the court further concluded
that Eximbank itself, though an agency of the United States,
would not be entitled to immunity from a negligent misrepresen-
tation suit. Overlooking the immunity of federal agencies such
as Eximbank from negligent misrepresentation suits as explicitly
preserved in the Federal Tort Claims Act, 28 U.S.C. 2680(h), the
court of appeals rested its conclusion on two grounds: (1)
Eximbank’s “entr[y] [into] the commercial sphere” by the issu-
ance of insurance policies covering commercial ventures, and (2)
the “sue and be sued” clause in Eximbank’s enabling statute.
8. The district court concluded:
(F) Nu-Air’s failure, until February 1983, to report to FCIA [the
Nigerian buyer’s}] default ... bars Nu-Air from recovering against
FCIA where Nu-Air was aware on or about August 31, 1982, that [the
buyer] had defaulted on its obligation to make payment....
* * *
(H) Nu-Air’s failure to mail, prior to April 11, 1983, a Proof of Loss/
Notice of Claim form, which FCIA received on April 18, 1983, bars Nu-
Air’s recovery here.
49a-S0a.
8
Having determined that Eximbank would not be entitled to sover-
eign immunity from negligent misrepresentation suits, the court
further found that FCIA was not entitled to derive immunity
from Nu-Air’s tort claim based on Eximbank’s sovereign status.
Concerning the applicability of federal common law, the court
of appeals rejected FCIA’s reliance on both Federal Crop Insur-
ance Corp. v. Merrill, 332 U.S. 380 (1947), and the decisions of
federal courts of appeals recognizing the applicability of federal
law to Federal Government insurance programs which include
private participation. On the basis of its perception that this case
involves “private contractual arrangements between private liti-
gants,” 12a, rather than the rights and duties of Eximbank’s
agent in connection with the marketing, issuance and servicing of
an export credit insurance policy and the insuring of commercial
risks under a single policy issued jointly on behalf of Eximbank
and FCIA, the court of appeals applied state law to reverse the
district court.
REASONS FOR GRANTING THE WRIT.
The Eleventh Circuit’s decision adversely affects two important
aspects of the Federal Government’s export credit insurance pro-
gram. First, by refusing to recognize FCIA’s immunity, the
decision below has impaired FCIA’s status as Eximbank’s agent,
and has called into question the status of all private entities which
play critical roles in a variety of Federal Government insurance
programs as intermediaries for or agents of the Federal Govern-
ment.” The decision below, if allowed to stand, would undermine
the proper functioning of the export credit insurance program. If
every misunderstanding between FCIA and prospective insureds,
9. Currently, in addition to Eximbank’s export-credit insurance program,
federal agencies possess the statutory authority or mandate to engage private
insurers as partners, agents or intermediaries in connection with federal health
insurance (42 U.S.C. § 1395h), flood insurance (42 U.S.C. §§ 4001, 4051,
4081-82), crime insurance (12 U.S.C. § 1749bbb-12), war risk insurance (46
U.S.C. §§ 1287, 1289(d) ), crop insurance (7 U.S.C. § 1507(c)), and oil pollu-
tion insurance (43 U.S.C. § 1817(g)(2)).
9
policyholders and brokers could potentially develop into a negli-
gent misrepresentation suit not subject to early termination
through the immunity defense, the disincentives to effective mar-
keting and servicing of policies would be overwhelming. Without
immunity from common law tort suits, one of two undesirable
outcomes would ensue. Either FCIA’s marketing and servicing
duties would be restructured to avoid all risks, private sector
participation in the program envisaged by Congress would be
increasingly less viable,'’ and exports ultimately would decrease,
or in light of the below-market premium rates set by Eximbank,
12 US.C. §635(b)(1)(A), Eximbank would be forced to
increase premiums or provide greater subsidies. In the end, the
effectiveness of the Federal Government’s export credit insurance
program in achieving the congressional mandate to promote US.
exports would be undermined.
Second, the court of appeals’ decision, in an abrupt departure
from consistent federal appellate precedent, throws into confu-
sion the question of which body of law governs the rights and
duties of all participants in the export credit insurance program,
as well as all other Federal Government insurance programs.
Under the Eleventh Circuit’s decision, Eximbank and FCIA are
left in the impossible position of having to divine the body of law
which might apply to claims filed years after liability-affecting
decisions are made. The potential application of the laws of more
than 50 jurisdictions to a government program would result in
identically situated U.S. exporters receiving disparate treatment
under a national program, would increase costs and premiums
(ultimately reducing exports), and would undermine the viability
of the congressionally mandated private sector role in this govern-
ment program. In short, the Federal Government’s export credit
10. Following large losses on claims arising out of the third world debt crisis
in the early 1980's, private sector participation in the program was reduced toa
historic low. Efforts to enhance private sector participation in this congressio-
nally established program, see General Accounting Office, Export Credit Insur-
ance: Assessment of Export Import Bank’s Role, at 20-21, No. GAO/NSIAD-
87-189) (September 1987) (“GAO Report”), would be frustrated in the
absence of immunity from common law tort suits.
aia ai i ial Wie
10
insurance program cannot operate effectively and fulfill the con-
gressional mandate to increase U.S. exports where the governing
legal frarnework is uncertain.
The Federal Government’s export credit insurance program, in
this time of international financial instability and trade tension, is
vitally important to our country.'' It has long been national
policy for Eximbank, through its various programs including
export credit insurance, to promote exports of U.S. goods and
services.'* Congress authorized the export credit insurance pro-
gram, among other reasons, because of its concern that, in the
absence of a government program, the private sector would not,
as it theretofore had not, fill the national need for export credit
insurance.’ Congress authorized the participation of private
insurers and expressed the hope that they would be extensively
‘used in delivering export credit insurance, recognizing that, in
11. Eximbank is a member of the International Union of Credit and Invest-
ment Insurers, a consortium of similar institutions from 32 countries which
seeks cooperation on the terms on which governments offer export credit insur-
ance so as to reduce predatory trade practices in this area. See GAO Report
supra at 12-13.
12. 12 U.S.C. § 635(a)(1): H. Rep. No. 95-235, at 2-3, 95th Cong., Ist
Sess., 1977 U.S. Code Cong. & Ad. News 3126-27; H. Rep. No. 92-303, 92d
Cong., Ist Sess., 1971 U.S. Code Cong. & Ad. News 1417. In extending and
amending the Eximbank legislation in 1977, Congress expressed concern with
burgeoning trade deficits. In figures that seem quaint by comparison to today’s
levels, the House Committee which oversees Eximbank’s insurance program
fretted that the “U.S. trade balance was in deficit by $5.9 billion in 1976....
Current estimates call for an overall trade deficit in 1977 of as much as $15
billion.”. H. Rep. No. 95-235, supra, at 3.
13. H. Rep. No. 1126, 87th Cong., Ist Sess., 1961 U.S. Code Cong. & Ad.
News 3005-3007. Congress has authorized other federal insurance programs to
fill a private sector vacuum. See, e.g., 42 U.S.C. § 4001(b) (“The Congress
also finds that (1) many factors have made it uneconomic for the private
insurance industry alone to make flood insurance available to those in need of
such protection on reasonable terms and conditions; but (2) a program of flood
insurance with large scale participation of the Federal Government and carried
out to the maximum extent practicable by the private insurance industry is
feasible and can be initiated.”); 12 U.S.C. § 1749bbb-10a(b) (“Upon deter-
mining ... that. . . a critical market unavailability situation for crime insurance
then exists in any State . . . the Director is authorized to make crime insurance
available at affordable rates within such State through the facilities of the
Federal Government.” ).
1]
order for the Federal Government’s export credit insurance pro-
gram to be effective, it would have to rely on the private sector’s
experience and marketing talent.'' Congress never suggested,
however, that the participation of such parties meant that the
export credit insurance program was not a program of national
interest requiring the uniformity of interpretation and the consis-
tency and predictability of outcome attendant to federal
programs.
In a further reflection of the program’s economic and political
importance to the nation, Congress and Eximbank have retained
strict control over the program. Congress has established the
criteria (1) for setting the premiums to be charged, (2) the
products and services to be insured, and (3) the countries to
whom exporters may make insured shipments. See 12 U.S.C.
§ 635(b)."° To ensure that the program promotes the policy
choices made by Congress, Eximbank has always exercised ulti-
mate authority over all decisions on the issuance of policies, the
terms of coverage, and the evaluation of political claims and those
commercial claims above a specified dollar amount. In addition,
Eximbank has always borne substantial financial responsibility
for the program.’® Since October 1, 1983, under an agreement
between Eximbank and FCIA, Eximbank has assumed even
greater financial responsibility for the program. For commercial
14. GAO Report, supra at 2; H. Rep. No. 1126, supra at 3007. Congress
had previously authorized the participation of private insurers in an early
Eximbank program providing war risk coverage as a cost-saving measure,
because the expense of private participation “would be less than . . . if the bank
itself were to assume entire operational responsibility for the program.” H.
Rep. No. 320, 83d Cong., Ist Sess., 1953 U.S. Code Cong.& Ad. News 1643,
1648.
15. See H. Rep. No. 1476, 90th Cong., 2d Sess., 1968 U.S. Code Cong. &
Ad. News 2541, 2546. (“The intention of the legislation is to authorize the
Bank to foster the foreign_trade and long-term commercial interests of the
United States by supporting transactions which may involve somewhat greater
risks than those traditionally taken by the Bank under its basic charter.” ).
16. Compare West v. Harris, supra, 573 F.2d at 881, where the Fifth Circuit
rested its decision to apply federal law to the flood insurance program in sub-
stantial measure on the fact that “the federal government participates exten-
sively in the program both in a supervisory capacity and financially... .
12
claims where FCIA is the nominal insurer, Eximbank is finan-
cially at risk because, under the agreement, it is obligated to
indemnify FCIA in respect of claims paid.
The export credit insurance program is, therefore, a creature of
Congress administered by Eximbank, and, like other Federal
Government insurance programs, is designed to achieve impor-
tant national objectives. However, the program’s ability to
achieve congressional policy is undermined when a previously
uniform recognition of immunity from common law tort suits for
private agents in Federal Government insurance programs is dis-
turbed. Moreover, the program cannot function properly and
achieve congressional goals unless Eximbank and FCIA are able
to discern the legal standards applicable to them. This Court
therefore should review the Eleventh Circuit’s decision to resolve
two crucial issues: (1) the immunity of FCIA from common-law
tort liability,"’ and (2) the law, whether federal or state, applica-
ble to the Federal Government’s export credit insurance program.
A. This Court Should Review The Eleventh Circuit’s Decision
To Clarify The Immunity From Non-Constitutional Tort
Liability Of Private Participants In Federal Government
Insurance Programs
In a series of modern decisions beginning with Barr v. Matteo,
360 U.S. 564 (1959), this Court has reaffirmed the immunity of
federal officials from suits sounding in non-constitutional tort
arising from conduct within the scope of the official’s authority.
See Harlow v. Fitzgerald, 457 U.S. 800, 807-08 (1982); Butz v.
Economou, 438 U.S. 478, 494 & n.21 (1978). The underpin-
ning of the official immunity doctrine is “the need to protect
officials who are required to exercise their discretion and the
related public interest in encouraging the vigorous exercise of
official authority.” Harlow v. Fitzgerald, supra, 457 U.S. at 807,
quoting Butz v. Economou, supra, 438 U.S. at 506. The Court
17. Now pending before this Court is a case involving the scope of the
official immunity doctrine. Westfall v. Erwin, 785 F.2d 1551 (1 hth Cir. 1986)
(per curiam), cert. granted, 107 S.Ct. 1346 (1987)
en
13
has also identified several “social costs” from lawsuits against
government officials which justify the immunity: “These social
costs include the expenses of litigation, the diversion of official
energy from pressing public issues, and the deterrence of able
citizens from acceptance of public office.” 457 U.S. at 814.
Furthermore, the Court has recognized that “officials can act
without fear of harrassing litigation only if they reasonably can
anticipate when their conduct may give rise to liability for dam-
ages....” Davis v. Scherer, 468 U.S. 183, 195 (1984).
In accordance with these principles, each circuit that has
reviewed the issue, except the Eleventh Circuit, has proscribed
non-constitutional tort claims against private participants acting
as the government's agent in connection with Federal Govern-
ment insurance programs. The Eighth Circuit has held that the
principles of official immunity established in Barr, Butz and
Harlow prohibit such suits against private participants in federal
insurance programs. The Ninth Circuit derives the private
insurer's immunity from the immunity of its governmental princi-
pal; this court analyzed the tort claim under the doctrine of
sovereign immunity. The Eleventh Circuit in its decision in this
case stands alone in rejecting each line of authority.
1. Two Courts of Appeals Have Recognized the Immunity
of Private Participants in Federal Government Insurance
Programs.
The Eighth Circuit has drawn on official immunity principles
to affirm the dismissal of a tort claim against the consultant to a
private insurer which acted as an intermediary in the federal
health insurance program. Bushman v. Seiler, 755 F.2d 653,
655-56 (8th Cir. 1985). Although noting that the defendant's
“link to the government [was] indirect,” 755 F.2d at 655, the
court in Bushman concluded that the policies underlying the
official immunity doctrine as enunciated in Butz compelled the
14
doctrine’s application to federal insurance intermediaries. /d. at
656."
The Ninth Circuit has adopted a different approach to uphold
the private participant's immunity from common law tort liabil-
ity. In Anderson v. Occidental Life Insurance Co., 727 F.2d 855
(9th Cir. 1984) (per curiam), the court held that the private
participant's immunity is derived from the government's sover-
cign immunity.” The court reasoned that, in light of the agency
relationship governing the private party's conduct, the United
States is the real party in interest in lawsuits raising tort claims
against the private insurer. “Accordingly, [under the sovereign
immunity doctrine] the United States cannot be sued without its
consent,” and such claims are barred. Anderson, supra, 727 F.2d
at 856.
2. The Decision Below Conflicts With Appellate Decisions
On Both Official Immunity and Derivative Sovereign
Immunity.
The Eleventh Circuit has now rejected the approaches of the
Eighth Circuit (official immunity) and of the Ninth Circuit
(derivative sovereign immunity). With respect to official immu-
nity, the court below developed an analysis based on the nature of
the activity engaged in by the government agent. Noting that
some of the immunity decisions on which FCIA relied involved a
defamation action by the subject of a government agent's investi-
gative report, the court concluded that such government reports
18. The Fourth Circuit has not addressed the issue in the insurance arena,
but it has drawn identical conclusions in the parallel context involving the
liability of government contractors for actions taken pursuant to their delegated
authority. Bradley v. Computer Sciences Corp., 643 F.2d 1029 (4th Cir.), cert
denied, 454 U.S. 940 (1981): Becker v. Phileo Corp., 372 F.2d 771 (4th Cir),
cert. denied, 389 US. 979 (1967)
19. Several panels of the Fifth Circuit have analyzed the lability of private
insurers under the rubric of sovereign immunity, although their reasoning sug-
gests that they relied on the official immunity doctrine, viz. an insurer acting as
the government's agent is immune from tort suits arising out of official conduct
Matranga v. Travelers Insurance Co., 563 F.2d 677 (Sth Cir. 1977) (per
curiam): Peterson v. Weinberger, S08 F.2d 45 (Sth Cir.). cert. denied, 423.US
830 (1975)
15
are more worthy of protection than what the court disparagingly
referred to as “misrepresentations [by FCIA] to its customers.”
14a.
The Eleventh Circuit's comparison is fundamentally mislead-
ing. The court purported to compare government activity
directed at uncovering fraud with alleged tortious activity by
FCIA. An appropriate comparison would have been to compare
government activity aimed at uncovering fraud with FCIA’s gov-
ernment conferred mission as Eximbank’s agent in the marketing,
issuance and servicing of Eximbank/FCIA insurance coverage
for an international commercial transaction, which coverage has
been authorized by the Congress to help achieve national eco-
nomic policy. See lla,n.22. Depriving FCIA of immunity from
negligent misrepresentation suits would, for the reasons discussed
above, supra at 9, undermine that mission, impair the FCIA’s
national marketing efforts and run counter to express congres-
sional policy favoring the private sector’s involvement as
Eximbank’s agent.
In making the comparison that it did, the court of appeals
concluded either that the uncovering of fraud is a more worth-
while governmental effort than the congressional policy of pro-
moting U.S. exports or that defamation is more defensible than
negligent misrepresentation. The court is ill-situated to make
the former judgment in the teeth of express congressional policy
favoring increased U.S. exports, and the latter distinction
between types of common law torts is contradicted by prevailing
case law. The courts of appeals uniformly have concluded that
the immunity recognized in Barr is available in connection with
all types of state law tort claims, from negligence actions to
actions seeking damages for intentional torts.” In Harlow v.
20. See Williamson vy. United States, 815 F.2d 368 (Sth Cir. 1987) (tor-
tious interference with property, misrepresentation); Augustine v. McDonald,
770 F.2d 1442 (9th Cir. 1985) (abuse of process); Ricci v. Key Bancshares of
Maine, Inc, 768 F.2d 456 (ist Cir. 1985) (misrepresentation, negligence,
defamation, intentional infliction of emotional distress); Ovler v. National
Guard Ass'n, 743 F.2d 545 (7th Cir. 1984) (conspiracy to defraud); Claus v
Gyorkey .674 F.2d 427 (Sth Cir. 1982) (misrepresentation ); see also Norton v
16
Fitzgerald, supra, this Court described the official immunity doc-
trine as an “absolute immunity from suits at common law.” 457
U.S. 807-08 (emphasis added). Clarification by this Court of
the standard governing official immunity from tort liability for
private participants in Federal Government insurance programs
is necessary to eliminate the threat from the decision below to the
effective functioning of the Federal Government’s export credit
insurance program.
The Eleventh Circuit’s derivative sovereign immunity holding
equally threatens the effectiveness of the export credit insurance
program. The court of appeals disabled itself from following the
Ninth Circuit’s analysis in Anderson, supra, when the court
below erroneously concluded that “in the present case
Eximbank and the United States are not financially at risk.”
15a. In fact, Eximbank was at risk on the policy issued to Nu-
Air as it has been on every policy ever issued under the export
credit insurance program. With respect to Nu-Air’s claim,
Eximbank would bear the financial impact of any judgment that
Nu-Air might recover against FCIA by virtue of the October |,
1983 agreement between Eximbank and FCIA.
3. The Court Below Was Wrong in Determining That
Eximbank Does Not Enjoy Sovereign Immunity
from Negligent Misrepresentation Suits.
The Eleventh Circuit’s determination that FCIA is not immune
from negligent misrepresentation suits also rested on the errone-
ous premise that FCIA’s principal, Eximbank, an agency of the
United States, is not entitled to sovereign immunity from negli-
gent misrepresentation suits. This conclusion is also worthy of
review by this Court. In deciding that Eximbank would not be
entitled to sovereign immunity in the circumstances of this case,”
the Eleventh Circuit relied on the “sue and be sued” clause in
McShane, 332 F.2d 855, 859-60 & n.S (Sth Cir. 1964), cert. denied, 380 U.S.
981 (1965).
21. Inits complaint, Nu-Air alsosued Eximbank. Early in the proceedings,
Nu-Air dismissed its claims against Eximbank, and Eximbank has not directly
participated in the litigation since that time.
17
Eximbank’s enabling statute.” The court of appeals dently
overlooked the provision of the Federal Tort Claims Act which
preserves the immunity of federal agencies such as Eximbank—
from negligent misrepresentation suits despite such “sue and be
sued” clauses.** The court of appeals’ startling conclusion in an
area as sensitive as the government’s entitlement to sovereign
immunity deserves review by this Court.
B. This Court Should Review The Eleventh Circuit’s Decision
To Settle Whether State Or Federal Law Applies To Insur-
ance Contracts Issued Jointly By Public And Private Enti-
ties Pursuant to Federal Government Insurance Programs
This Court has ruled in connection with the Federal Govern-
ment’s nationwide programs that federal common law should
provide the rule of decision so as to avoid “the great diversity in
results [that would arise from] making identical transactions
subject to the vagaries of the laws of the several states.”
Clearfield Trust Co. v. United States, 318 U.S. 363, 367 (1943).
Specifically, this Court has held that “[t]he validity and con-
struction of contracts through which the United States is exercis-
ing its constitutional functions, [and] their consequences on the
rights and obligations of the parties, ... present questions of
federal law not controlled by the law of any state.” United States
v. County of Allegheny, 322 U.S. 174, 183 (1944); accord,
United States v. Seckinger, 397 U.S. 203, 209 (1970).
22. 12 U.S.C. 635(a)(1) provides, as do the enabling statutes of many
federal agencies, that Eximbank may “sue and be sued.”
23. See 28 U.S.C. § 2679(a) (“The authority of any federal agency to sue
and be sued in its own name shall not be construed to authorize suits against
such federal agency cognizable under [the Federal Tort Claims Act], and the
remedies provided by [the Federal Tort Claims Act] in such cases shall be
exclusive.”). The courts of appeals have uniformly held that misrepresentation
claims are “cognizable” under the Federal Tort Claims Act, but are barred by it
under 28 U.S.C. § 2680(h). See, e.g., Bor-Son Bldg. Corp. v. Heller, 572 F.2d
174 (8th Cir. 1978); Edelman v. Federal Housing Administration, 382 F.2d
594 (2d Cir. 1967); Holmes v. Eddy, 341 F.2d 477 (4th Cir.) (per curiam),
cert. denied, 382 U.S. 892 (1965).
18
1. The Decision Below Undermines Uniformity of
Decision in the Export Credit Insurance Program.
The Eleventh Circuit’s decision that state law rather than fed-
eral law applies in this case raises the very spectre anticipated by
the Clearfield Trust line of cases. According to the Eleventh
Circuit, the terms on which an insured acquires a policy issued
under a Federal Government insurance program are governed by
the vagaries of state insurance practice. Under the Eleventh
Circuit’s decision, the Federal Government’s export credit insur-
ance program, which reflects a national policy adopted by the
Congress to promote U.S. exports, would be governed by over
fifty sets of rules, procedures, statutes and regulations regarding
the rights and obligations of insurers and insureds. Subjecting
the program “to the vagaries of the laws of the several states,”
Clearfield Trust, supra, 318 U.S. at 367, would impose unantici-
pated costs and other burdens on the program, impede the con-
gressional objective of promoting U.S. exports, and result in
divergent treatment of similarly situated U.S. exporters under a
national program. In legislating the use of private insurers in
furtherance of the export credit insurance program, Congress
never envisaged a program lacking in uniformity, certainty and
predictability that application of state law would engender.
2. The Decision Below Requires Eximbank and FCIA
to Guess at the Law Applicable to the Export
Credit Insurance Program.
In deciding whether to apply federal or state law, the Eleventh
Circuit artificially divided the export credit insurance program
and the policies issued thereunder into supposed public and pri-
vate components. It then held that state law governs FCIA’s
rights and obligations, while purportedly leaving “open the ques-
tion of the extent to which federal law governs insurance con-
tracts issued on behalf of Eximbank.” 13a, n.24.** No court has
24. The court of appeals plainly failed to understand that the insurance
policy issued to Nu-Air was in fact a single policy “issued on behalf of
Eximbank.” Indeed, every policy ever issued pursuant to the export credit
insurance program has been a policy “issued on behalf of Eximbank.”
19
ever drawn such a distinction for other Federal Government
insurance programs,” and the distinction makes no sense in the
export credit insurance arena.
If state law governs the rights and obligations of Eximbank,
then under the court of appeals’ decision, an entire federal pro-
gram would be governed by state law. If, by contrast, federal law
governs only Eximbank’s rights and obligations, then the same
definitions, conditions, exclusions and terms which are embodied
in a single insurance policy and which apply equally to Eximbank
and FCIA would be subject to different interpretations depending
on whether events occurring years after a policy is issued give rise
to a claim for political coverage (Eximbank’s risk) or commercial
coverage (FCIA’s nominal risk).2° Thus, whether a foreign
buyer fails to pay the U.S. exporter because of an expropriation
(politica! risk) rather than an insolvency (commercial risk)
would dictate which body of law applies to actions taken years
earlier, for example when a policy was issued, a premium
accepted or some other liability-affecting step taken.” As a
result, none of the parties to the policy—Eximbank, FCIA, and
insured—would be able to discern whether fundamental policy
25. In other federal insurance programs, private participants have also
borne an underwriting risk. See, e.g, Commonwealth of Pennsylvania v.
National Ass'n of Flood Insurers, 520 F.2d 11, 16-17 (3d Cir. 1975).
26. In Lovell Mfg. v. Export-Import Bank, 777 F.2d 894 (3d Cir. 1985),
cited by the Eleventh Circuit, the court held only that government estoppel
standards did not prevent assertion of a claim against FCIA for commercial risk
coverage, and that ordinary estoppel standards would apply. The court did not
decide whether those ordinary estoppel standards would be drawn from federal
law or state law. Nonetheless, the decision in Lovell suffers from one of the
same infirmities afflicting the Eleventh Circuit's opinion: decision-making by
Eximbank and FCIA must be made in a legal vacuum.
27. The instant case presents an example of the absurd position the Federal
Government faces as a result of this bifurcated approach. The Eleventh Circuit
held that FCIA’s acceptance of Nu-Air’s premium estopped FCIA under Flor-
ida law from denying the claim. In the event Nu-Air had presented a political,
rather than commercial claim, then under Federal Crop Insurance Corp., supra,
an estoppel claim could not lie. At the time the premium was accepted, how-
ever, neither Eximbank nor FCIA knew whether any claim which might in the
future be presented would be under the policy's commercial coverage or its
political coverage.
20
provisions governing, for example, the filing of shipment reports,
overdue account forms and claims will be interpreted in accord-
ance with a uniform body of federal law, or rather will be subject
to diverse state law.
In either situation—the application of state law to an entire
federal program, or the unpredictable and capricious application
of federal law in some instances and state law in others—the
outcome is untenable, and the untenable outcomes are driven by
the Eleventh Circuit’s conclusion that FCIA’s rights and obliga-
tions under the nation’s export credit insurance program are sub-
ject to state law. It is inconceivable that Congress intended the
Federal Government’s export credit insurance program to be sub-
ject, either entirely or in substantial part, to divergent and incon-
sistent interpretation. Indeed, there is not a shred of evidence in
the legislative history surrounding this program that Congress
was doing anything less than defining paramount federal interests
and the mechanism by which those interests would be advanced.
Accordingly, review by this Court is essential at this time to
determine whether federal law or state law applies to the Federal
Government’s export credit insurance program. Absent a deci-
sion by this Court, public and private participants in both the
export credit insurance program and other Federal Government
insurance programs will be deprived of the opportunity to con-
form their conduct to a body of law that is discernible at the time
actions must be taken. commitments fixed or other decisions
made.
3. The Decision Below Conflicts With the Decisions of
This Court and of at Least Three U.S. Courts of
Appeals.
The Eleventh Circuit’s decision draws into question the contin-
ued validity of the uniform body of federal appellate precedent
holding that, for the reasons expressed in Clearfield Trust, fed-
eral law must control in determining the rights and liabilities of
the parties to insurance policies issued pursuant to Federal Gov-
ernment insurance programs. To date, except for the Eleventh
Circuit, all courts of appeals which have considered the issue,
21
including courts in the First, Fifth and Ninth Circuits, have
concluded that federal common law governs the rights and liabili-
ties of the parties to an insurance contract issued under a Federal
Government insurance program, notwithstanding the active par-
ticipation of private insurers. See Brazil v. Giuffrida, 763 F.2d
1072, 1075 (9th Cir. 1985); United States v. Parish of St. Ber-
nard, 756 F.2d 1116, 1121 (Sth Cir. 1985), cert. denied, 474 U.S.
1070 (1986); Atlas Paliet, Inc. v. Gailagher, 725 F.2d 131, 138
(Ist Cir. 1984); Beverly v. Macy, 702 F.2d 931, 935-36 (11th
Cir. 1983); West v. Harris , 373 F.2d 873, 880-82 (Sth Cir.
1978), cert. denied, 440 U.S. 946 (1979) .*8
In West v. Harris, for example, a case involving the federal
flood insurance program, the National Flood Insurers Associa-
tion, an organization whose role was identical in all material
respects to FCIA’s, was a named defendant.”” The court of
appeals held that the Federal Government's interests in the pro-
gram mandated the application of uniform principles of federal
law:
Since the flood insurance program is a child of Congress,
conceived to achieve policies which are national in scope,
and since the federa! government participates extensively
in the program both in a supervisory capacity and finan-
cially, it is clear that the interest in uniformity of decision
present in this case mandates the application of federal
law.
28. The idiosyncratic nature of the Eleventh Circuit's decision is further
highlighted by the multitude of district court decisions consistently holding that
uniform federal law must govern Federal Government insurance programs.
E.g., Potter v. Giuffrida, 635 F. Supp. 99 (S.D. Ohio 1986) (crime insurance):
Fine Wear Mfg. Co. v. Giuffrida, 580 F. Supp. 472 (E.D.N.Y. 1984) (crime
insurance); Schell v. National Flood Insurers Ass'n, 520 F. Supp. 150 (D. Colo.
1981) (flood insurance).
29. In West v. Harris, the court stated that the “change in parties [from
private insurers to the federal government] has no effect on the rights of these
plaintiffs under the policies issued to them.” 573 F.2d at 875 n.1. Thus the
court specifically held that federal law applied with regard to both the public and
private participants in the program.
22
573 F.2d at 881. This description and reasoning applies with
equal force to the export credit insurance program.” Because the
Eleventh Circuit’s decision in this case is both unfaithful to
Clearfield Trust and in conflict with decisions in several courts of
appeals, review by this Court is now appropriate.
30. The Eleventh Circuit is at odds with its own prior decision on the issue of
applicable law. The decisions in this case and in Beverly v. Macy, supra, which
applied federal law to the national flood insurance program, highlight the confu-
sion created by the ruling below.
23
CONCLUSION
For the foregoing reasons, a writ of certiorari should issue to
the Eleventh Circuit to review the decision in this case.
Dated:
Respectfully submitted,
Henry A. Hubschman
(Counsel of Record)
Elliot E. Polebaum
Robert P. Parker
Mira N. Marshall
FRIED, FRANK, HARRIS,
SHRIVER & JACOBSON
(A Partnership Including
Professional Corporations )
1001 Pennsylvania Avenue, N.W.
Suite 800
Washington, D.C. 20004-2505
(202) 639-7000
Attorneys for Petitioner
December 29, 1987
APPENDIX
la
Nu-AIR MANUFACTURING COMPANY,
a Florida Corporation,
Plaintiff-Appellant,
Vv.
FRANK B. HALL & Co. OF NEW YORK, a corporation
incorporated under the laws of the State of New York,
‘doing business as Intercredit Agency, Aetna Casualty
and Surety Company, Inc., ef a/.,
Defendants-Appellees.
No. 86-3359
United States Court of Appeals,
Eleventh Circuit
July 24, 1987
Rehearing and Rehearing En Banc
Denied Aug. 31, 1987
Before TJOFLAT and VANCE, Circuit Judges, and
ATKINS,*- Senior District Judge.
VANCE, Circuit Judge:
This appeal arises out of a manufacturer's suit against its
insurer and insurance broker for misrepresentation, negligence,
and breach of contract. The district court granted summary
judgment for defendants on all claims. We reverse on all counts.
I. Facts and Procedural History
Nu-Air Manufacturing Co. (hereinafter “Nu-Air”) is a Flor-
ida Corporation engaged in the business of assembling aluminum
goods. In early 1982, Nu-Air negotiated with a Nigerian buyer
for the sale of 12 containers of custom-made doors and windows.
The Nigerian buyer was to pay half the price by letter of credit
and the other half by sight draft upon delivery.
*Honorable C. Clyde Atkins, Senior U.S. District Judge for the Southern
District of Florida, sitting by designation
2a
Because of the large size of the order and Nu-Air’s unfamiliar-
ity with Nigerian practices, Nu-Air would not accept the order
without first obtaining export insurance to cover that portion of
the purchase price left unsecured by the letter of credit. Accord-
ingly, Nu-Air designated Intercredit Agency (hereinafter “Inter-
credit”) as its broker.’ Intercredit, in turn, contacted an export
insurer, Foreign Credit Insurance Association (hereinafter
“FCIA”).?
The standard FCIA master policy provides $200,000 in cover-
age. In order to insure a specific transaction beyond this stan-
dard coverage, FCIA will issue a Special Buyer Credit Limit
(hereinafter “SBCL”). Nu-Air completed an application for an
SBCL in order to increase the $200,000 limit to $371,530.49.
Jane Ferry, Intercredit’s senior vice president, submitted to FCIA
both an application for a master policy and an application for an
SBCL.
FCIA frequently approves the master policy and SBCL
together because the insured would not want to subscribe to the
master policy without the SBCL. Jane Ferry testified that she
marked the SBCL application “approved per Michele” after
Michele Milone, an FCIA sales representative, telephoned on
March 3, 1982 FCIA’s approval of both the master policy and
SBCL applications. Milone agrees that she telephoned Ferry
with a quotation for a master policy, but denies that she commu-
nicated FCIA’S approval of the SBCL.’ That same day, Ferry
informed Nu-Air that both the master policy and the SBCL had
been approved. Nu-Air immediately accepted the Nigerian
order, relying on Intercredit’s word that insurance coverage was
in place. In fact, FCIA had not yet completed the paperwork for
1. Intercredit, a division of one of the nation’s largest insurance brokerage
firms, specializes in the business of selling export credit insurance.
2. FCIA isan association of private insurance companies. FCIA was estab-
lished in 1961 at the encouragement of the United States Export-Import Bank
See generally Lovell Mfg. v. Export-Import Bank of the United States, 777
F.2d 894, 895 (3rd Cir. 1985)
3. Ferry has dealt with FCIA on a daily basis for approximately 20 years
At the time of this transaction, Milone had only six months experience with
FCIA in export credit insurance sales
A ail Oa Ae
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es EE Ry ee
3a
the SBCL and had only processed the standard $200,000 master
policy.
On March 4, 1982, FCIA delivered to Intercredit a document
containing a quotation for a master policy. This document speci-
fied a $200,000 limit and made no reference to the SBCL applica-
tion. One week later, Intercredit forwarded the document to Nu-
Air. Jack Healey, Nu-Air’s comptroller, reviewed the quotation
and executed the document, assuming that FCIA would increase
the $200,000 limit to match the $371,530.49 SBCL, which,
according to Intercredit, FCIA had already approved.‘ Soon
afterwards, Intercredit returned the signed quotation to FCIA,
along with Nu-Air’s initial deposit towards the premiums. On
March 24, 1982, Nu-Air received an FCIA policy. Nu-Air’s
policy did not include an SBCL endorsement.’
Because of import restrictions imposed by the Nigerian govern-
ment, FCIA concluded that it could not issue Nu-Air an SBCL.
On March 19, 1982, FCIA orally informed Intercredit, Nu-Air’s
broker, that FCIA had decided to withdraw Nu-Air’s SBCL
application. On April 2, 1982, FCIA mailed written confirma-
tion of this decision to Nu-Air. Nu-Air did not receive this
confirmation until April 12, 1982." On March 16, 1982, Nu-Air
had begun shipping the order to Jacksonville, Florida, the point of
departure for Nigeria. By the time Nu-Air received the notice of
cancellation, eight of the twelve containers had already been
shipped to Jacksonville and Nu-Air had fabricated almost all of
the remaining four.
Immediately after learning that FCIA would not issue an
SBCL, Nu-Air contacted Ferry at Intercredit. Ferry informed
4. Neither Intercredit nor FCIA delivered paperwork concerning the
SBCI
5. Ferry testified that she did not notice the disparity between the
$371,530.49 SBCL for which Nu-Air applied and the $200,000 limit specified
by Nu-Air’s policy until the date of her deposition, a year and a half later.
Ferry was not alarmed that she had not received SBCL paperwork because she
was under the impression that FCIA had already approved SBCL coverage.
6. Nu-Air did not receive any warning that there were problems with the
SBCL. before this date
4a
Healey, the Nu-Air officer responsible for obtaining the insur-
ance, that FCIA had not issued an SBCL and that Nu-Air would
not have insurance coverage for the transaction.’ Ferry advised
Healey not to make the shipments. Nevertheless, Nu-Air contin-
ued to ship the containers to Jacksonville, and on April 30, 1982,
Nu-Air shipped the entire order to Nigeria.” On August 15,
1982, the Nigerian buyer defaulted on the sight draft. Subse-
quent demands for payment met with no success.
In early 1983, Nu-Air notified FCIA of the overdue account
and filed a claim under the SBCL. FCIA denied the claim,
alleging that no coverage existed. FCIA now contends that Nu-
Air failed to give notice or pay premiums within the time restric-
tions of the policy.
On January 30, 1984, Nu-Air filed this lawsuit against Inter-
credit and FCIA. Counts I and II of Nu-Air’s complaint stated
claims against FCIA for breach of insurance contract and negli-
gent misrepresentation. Cuvounts III, lV and V stated three sepa-
rate claims against Intercredit. Count III alleged that
Intercredit breached its oral agreement to procure and maintain
insurance. Count IV alleged that Intercredit negligently failed
to maintain coverage. Count V alleged that Intercredit negli-
gently misrepresented the existence of coverage. The district
court granted the defendants’ motion for summary judgment on
all counts.’ We reverse on all counts.
II. The Breach of Contract Claim Against FCIA
We begin by noting that Florida recognizes oral insurance
contracts. Collins v. Aetna Ins. Co., 103 Fla. 848, 138 So. 369,
7. Neither party suggests in their briefs why no coverage was in place.
Since it is undisputed that FCIA approved the $200,000 master policy, it
appears to this court that at least $200,000 of coverage was in place at the time.
8. Pursuant to the terms of the contract, Nu-Air had to ship the entire order
representing a sale price of $630,137.20 in order to collect the 50% portion of the
sale covered by the letter of credit. Nu-Air claims that the shipment had little
salvage value because it was custom-made to Nigerian specifications.
9. The district judge cited no legal authority of any kind to support her
conclusions. None of the conclusions of law in the judge’s opinion refer to Nu-
Air's claims by count number.
Sa
370 (1931); Monogram Products, Inc. v. Berkowitz, 392 So.2d
1353, 1355 (Fla. Dist. Ct. App. 1980); Burns v. Consolidated
Am. Ins. Co., 359 So.2d 1203, 1207 (Fla. Dist. Ct. App. 1978);
State Farm Fire & Casualty Co. v. Hicks, 184 So.2d 685, 686
(Fla. Dist. Ct. App.), cert. denied, 189 So.2d 634 (1966). Such
a contract, like any other contract, results from an offer and an
acceptance of that offer. Rosin v. Peninsular Life Ins. Co., 116
So.2d 798, 801 (Fla. Dist. Ct. App. 1960). To be enforceable, the
agreement must encompass the following essential terms: sub-
ject-matter, risk, amount of insurance, premium, duration of risk
and identity of parties. Collins v. Aetna Ins. Co., 138 So. at 370;
State Farm Fire & Casualty Co. v. Hicks, 184 So.2d at 686.
Michele Milone relayed to Jane Ferry a policy quotation incor-
porating all of these essential terms.’® A jury could find that this
oral communication constituted an offer to enter into an insur-
ance contract"’ despite the fact that the parties dispute the term in
this offer specifying the amount of insurance."* Nu-Air contends
that it manifested its assent on March 10, 1982 by sending FCIA
10. According to Ferry, FCIA would customarily telephone Intercredit with
the disposition of an SBCL application. If FCIA decided to accept the applica-
tion, its representative would customarily communicate the details of the policy
quotation during this phone call. Ferry and Milone both agree that Milone
stated the parameters of the Nu-Air policy quotation during the course of the
March 3 telephone conversation. Ferry testified that she jotted down these
parameters, and Nu-Air has offered this notation as an exhibit.
11. While a “quotation” is usually considered to invite an offer rather than
to make one, Restatement (Second) of Contracts § 26 comment c, Ferry’s
testimony that Milone’s communication included all essential elements of an
insurance contract and that the policy had been “approved” raises a jury ques-
tion as to whether Nu-Air had reason to believe that the quotation was intended
as an offer. /d.; see E. Farnsworth, Contracts § 3.10 at 126-27 (1982).
12. Florida follows the general rule that a broker engaged to procure insur-
ance is the agent of the insured rather than the agent of the insurer. See Empire
Fire and Marine Ins. Co. v. Koven, 402 So.2d 1352, 1353 (Fla. Dist. Ct. App.
1981); AMI Ins. Agency v. Elie, 394 So.2d 1061, 1062 (Fla. Dist. Ct. App.
1981); Auto-Owners Ins. Co. v. Yates, 368 So.2d 634, 636 (Fla. Dist. Ct. App.),
cert. denied, 378 So.2d 351 (1979); 3 Couch on Insurance 2d § 25.95 (Rev. ed.
1984); 43 AmJur2d /nsurance 113 (1982). Communicating an offer to Inter-
eredit would therefore be tantamount to making the offer directly to Nu-Air.
Ferry immediately communicated the parameters of the quotation to Jack
Healey at Nu-Air.
6a
an executed document specifying the policy quotation.’* Nu-Air
also sent FCIA an initial deposit on the premiums." Thus a jury
could find that a contract was made on that date. See 1 S.
Williston, A Treatise On The Law of Contracts section 66 (3d ed.
1957 & Supp. 1986); E. Farnsworth, Contracts, 136 (1982)."°
To be sure, the parties dispute an important factual question:
whether Michele Milone communicated FCIA’s approval of Nu-
Air’s SBCL application at the same time she gave Jane Ferry the
quotation on the master policy. A jury must decide whether
FCIA offered to provide the full $371,530.49 in requested cover-
age or only the $200,000 in coverage that is standard for an FCIA
master policy. If the jury believes Michele Milone, it may find
that the final contractual term specifying the amount of insurance
corresponded to the $200,000 limit that is standard for an FCIA
master policy. Alternatively, if the jury believes Jane Ferry, it
may find that this term corresponded to the amount specified in
Nu-Air’s SBCL application. This dispute does not alter our
conclusion that a jury could find that a contract was entered into
on March 10, 1982.
13. Though this document specified the standard $200,000 aggregate limit,
the SBCL would supersede this figure.
14. It is stipulated that Intercredit forwarded these materials to FCIA and
that FCIA retained the premium deposit. Under Florida law, an acceptance
becomes binding when it is communicated to the offeror. See Mintzberg v.
Golestaneh, 390 So.2d 759, 760 (Fla. Dist. Ct. App. 1980); Kendel v. Pntious,
244 So.2d 543, 544 (Fla. Dist. Ct. App. 1971), cert. discharged, 261 So.2d 167
(1972).
15. The formation of a contract “depends not upon an actual meeting of the
minds, but merely upon manifestations of assent....” 1S. Williston, A Trea-
tise on the Law of Contracts, § 66 (3d ed. 1957); See also E. Farnsworth,
Contracts § 3.6 at 114 (1982) (test is whether offeree’s actions, judged by a
standard of reasonableness, manifest an intention to accept).
16. Even if the policy quotation did not constitute an offer, under an alter-
nate form of analysis a jury could find that FCIA’s failure to notify Nu-Air that
FCIA did not intend to accept Nu-Air’s application constituted acceptance.
See Restatement (Second) of Contracts §69(1)(c). In any event, FCIA’s
retention of Nu-Air’s initial deposit raises an issue of fact as to whether FCIA
accepted Nu-Air’s offer. See Restatement (Second) of Contracts § 69(2); see,
e.g., Empire Machine Co. v. Litton Business Telephone Sys., 115 Ariz. 568, 566
P.2d 1044 (1977).
Ta
Courts must determine the terms of a contract by ascertaining
the intent of the parties at the time they enter into the agreement.
See, e.g., J&S Coin Operated Machines, Inc. v. Gottlieb, 362
So.2d 38, 39 (Fla. Dist. Ct. App. 1978). The lower court, never-
theless, held that an agreement to provide the full $371,530.49 in
requested coverage would be unenforceable because the master
policy contemplated that FCIA would approve the SBCL “by
written notification.”'"’ Although Nu-Air did not receive the final
version of the master policy until March 24, the parties may have
negotiated with this document in mind. Nevertheless, if FCIA
informed Nu-Air that SBCL coverage had already been
approved, this understanding became part of the final contract.
Florida law requires that we resolve a conflict between the
provisions of an insurance contract so as to afford maximum
coverage to the policyholder. See Dyer v. Nationwide Mut. Fire
Ins. Co., 276 So.2d 6, 8 (Fla. 1973); Oliver v. United States
Fidelity & Guar. Co., 309 So.2d 237, 238 (Fla. Dist. Ct. App.),
cert. denied, 322 So.2d 913 (1975). This principle applies with
even greater force when the draftsman of a form policy relies on
inconspicuous language to defeat the very purpose for which the
policy was procured. See Braley v. American Home Assurance
Co., 354 So.2d 904, 906 (Fla. Dist. Ct. App.), cert. denied, 359
So.2d 1210 (1978); Roberson v. United Services Auto. Ass'n,
330 So.2d 745, 746 (Fla. Dist. Ct. App. 1976), cert. denied, 342
So.2d 1104 (1976). Accordingly, if FCIA offered to provide full
coverage, it may not rely on language in the master policy to
defeat Nu-Air’s legitimate expectation of full coverage. See
Braley, 354 So.2d at 906.
To rehabilitate the lower court’s reasoning, FCIA argues that
the parties intended that the oral agreement would not become
binding until reduced to a writing. If this was the intention of the
17. Article 1V.B. of the master policy provides: “The amount of the credit
limit for any particular buyer shall be:
1. The amount of the Discretionary Credit Limit Authorized in the
declarations, or
2. Such other amount as the Insurers shall approve by written notifica-
tion to the Insured of a Special Buyer Credit Limit.”
8a
parties, we would give it effect. See Club Eden Roc, Inc. v.
Tripmasters, Inc., 471 So.2d 1322, 1323-24 (Fla. Dist. Ct. App.
1985) (memorandum clearly stated that no rights or obligations
will arise until the execution of a formal agreement), review
denied, 482 So.2d 350 (Fla. 1986); Shipley v. Ohio Nat'l Life
Ins. Co., 199 F. Supp. 782, 783 (W.D. Pa. 1961) (insurance
application required final contract to be in writing), aff'd on other
grounds, 296 F.2d 728 (3rd Cir. 1961). The mere fact that the
parties contemplated future writings does not evince this intent,
however, and FCIA does not point to a whit of convincing evi-
dence. See Collins v. Aetna Ins. Co., 103 Fla. 848, 138 So. 369,
370 (Fla. 1931); Restatement (Second) of Contracts § 27
(1981).
If anything, the record shows that FCIA is notoriously slow in
processing its paperwork. Nu-Air could accept the Nigerian con-
tract and begin manufacturing containers only by relying upon its
understanding that insurance coverage was in place. The fabric
of commerce depends upon interlocking strands of contractual
agreements. This fabric would unravel if the creation of contract
rights and obligations depended solely upon the flow of paper.
The lower court also held that FCIA had properly withdrawn
coverage pursuant to a termination clause in the master policy.
The termination clause, however, provided that FCIA could only
terminate coverage “upon thirty days prior written notice.”"*
“Shipments” made before the effective date of termination would
remain covered.”® In the present case, all goods left the United
18. Article X1.J.2. provides:
The policy may be terminated by the Insurers or the Insured upon 30
days prior written notice by either to the other. In the event of termina-
tion, the Insured shall not be liable for payment of any premium for any
shipment made after the effective date of termination and the Insurers
shall not be liable for any loss arising from any shipment made subse-
quent to such date.
We assume arguendo that this termination provision became part of the oral
contract.
19. The parties vigorously dispute the meaning of the term “shipment.”
Nu-Air contends that “shipment” began on the date when the goods left Nu-
Air’s Tampa factory. Support for this construction comes directly from the
policy which defines the “insured transaction” as a sale of products “shipped
LABLE COPY
9a
States for Nigeria on April 30, 1982. Nu-Air-had no warning
that there were problems with its insurance coverage until April
12. On that date, Nu-Air received written confirmation of
FCIA’s decision to withdraw the SBCL application.” Clearly,
the April 12 communication did not give the requisite thirty days
notice and therefore could not effectively terminate insurance
coverage.
FCIA argues that Nu-Air received effective notice on March
19 when the insurance company informed Intercredit that Nu-—
Air’s SBCL application had been rejected. We disagree for two
reasons. First, the termination clause requires “written notice,”
whereas the March 19 communication was oral. If FCIA
chooses to invoke such clauses, it must abide by their explicit
terms. See Graves v. lowa Mut. Ins. Co., 132 So.2d 393, 395
(Fla. 1961). Second, Florida adheres to the generally accepted
rule that-notice to the insured’s broker does not terminate cover-
age unless the broker procures a substitute policy of like amount.
See generally Cat ’N Fiddle, Inc. v. Century Ins. Co., 213 So.2d
701, 704 (Fla. 1968); 45 C.J.S. § 450(2) (1946).” This rule
from the United States . . . such shipment to begin when the products are placed
en route to the buyer... .” An accompanying FCIA publication explains that
coverage begins “when the goods leave the factory.” On the other hand, FCIA
and the district court take the position that shipment occurred on April 30,
when the goods left the United States. Florida law requires that courts construe
insurance policies so as to provide the broadest possible coverage to the insured.
See, e.g. Hulse v. Blue Cross/Blue Shield of Florida, Inc., 424 So.2d 191, 192
(Fla. Dist. Ct. App. 1983); Davis v. Crown Life Ins. Co., 696 F.2d 1343, 1345
(11th Cir. 1983). Adopting Nu-Air’s construction of the term “shipment,” we
note that 8 of the 12 containers left Tampa by April 14. Even if effective notice
ri were received on March 19, it would not take effect for 30 days and therefore
would only terminate coverage on the 4 remaining containers.
20. “Where a policy provides for written notice of cancellation, but does not
specify the method of giving the written notice, and the notice is given by mail,
the effective date of cancellation generally is to be determined based on the date
of receipt of the notice by the insured.” Aetna Ins. Co. v. Settembrino, 324
So.2d 113, 114 (Fla. Dist. Ct. App. 1975). In fact, Nu-Air would be completely
covered even if the effective date of termination is calculated from the date
FCIA mailed this notice of withdrawal, April 2.
21. Florida recognizes an exception to this rule where the agency relation-
ship “was essentially unlimited, that for all intents and purposes [the broker]
was the alter ego of the [the insured] in handling the latter’s insurance matters,
10a
takes root from an important policy. Notice must clearly convey
to the insured the fact of termination so that he may obtain other
insurance and avoid being subjected to risk without coverage.
See Cat 'N Fiddle, Inc., 213 So.2d at 704; Graves, 132 So.2d at
394-95. As the facts of the present case well demonstrate, notice
to a broker is a most precarious means of securing this goal.
Finally, the lower court concluded that Nu-Air lost its ability
to recover under the policy because Nu-Air failed to provide
timely notice of loss and delayed paying premiums. This was also
error. The only reason FCIA ever articulated in rejecting Nu-
Air’s claim was an unconditional denial that the coverage had
ever been in force. Where an insurer unconditionally denies
liability, it waives all policy provisions governing notification of
loss, proof of loss, and payment of premiums:
[A]s a matter of law, the effect of the thus-found-to-be-
improper repudiation of coverage was to waive any right to
insist upon the insureds’ necessarily-thus-futile compli-
ance with the various conditions to recovery—including
notice....
Wegener v. International Bankers Insurance Co., 494 So.2d
259 (Fla. Dist. Ct. App. 1986), review denied, 504 So.2d 767
(Fla. 1987); see, e.g., Hartford Accident & Indem. Co. v. Phelps,
294 So.2d 362, 365 (Fla. Dist. Ct. App. 1974); American Ins. Co.
of Newark, N.J. v. Burson, 213 F.2d 487, 490 (Sth Cir. 1954).
The lower court’s conclusion was erroneous for the additional
reason that FCIA accepted the delinquent premiums. An
insurer cannot retain past-due premiums and at the same time
claim that a forfeiture of the policy has occurred. Travelers
Indem. Co. v. Dana, 434 So.2d 48 (Fla. Dist. Ct. App. 1983);
Mixson v. Allstate Ins. Co., 388 So.2d 608, 609 (Fla. Dist. Ct.
App. 1980), review denied, 397 So.2d 777 (1981): Meeks v.
State Farm Mut. Auto. Ins. Co., 460 F.2d 776, 778 n.3 (Sth Cir.
1972).
including the exercise of discretion encompassing an increased risk of loss to
{the insured].” Cat 'N Fiddle Inc. v. Century Ins. Co., 213 So.2d at 707.
a Cie "
a ee) reed» bdee 26 tend) he TO wa nodal A
lla
FCIA suggests that it stands above these general principles of
waiver and estoppel because it issues insurance on behalf of a
United States government agency, the Export-Import Bank of the
United States (hereinafter “Eximbank”). Specifically, FCIA
argues that a failure to strictly comply with policy provisions bars
recovery whenever the insurer acts as an agent of the United
States government.“ This bold supposition apparently derives
from a leading Supreme Court case, Federal Crop Insurance
Corp. v. Merrill, 332 U.S. 380, 68 S.Ct. 1, 92 L.Ed. 10 (1947).
A brief summary of that opinion, however, demonstrates that
FCIA’s reading is too broad.
In Federal Crop Insurance Corp. v. Merrill, a farmer had
insured reseeded wheat contrary to Federal Crop Insurance Cor-
poration regulations. /d., at 382, 68 S.Ct. at 2. Though the
farmer had no knowledge of the regulations and was in fact
misled by the government agent, the Supreme Court refused to
apply notions of waiver and estoppel. /d. Instead, the Court
reasoned that Congress had expressly delegated its rule-making
22. Congress created Eximbank to provide, among other things, export _
insurance to American exporters. We assume arguendo that FCIA acted as
Eximbank’s agent with respect to the disputed coverage. In fact, this matter is
not free from doubt. According to the policy, Eximbank insures “political risks
and no other.” FCIA insures “commercial risks,” which include “failure of the
buyer to pay to the Insured within six months after due date of payment, the
amount due for products delyere? to and accepted by the buyer.” Even though
Eximbank reinsures commercial risk, this may not be enough to establish an
agency relationship. The reinsurance agreements only run between Eximbank
and FCIA.
23. FCIA also cites district court cases. All involve governmental defend-
ants and ultimately rely—directly or indirectly—upon Federal Crop Insurance
Corp. v. Merrill. See, e.g., Victoria Camera, Inc. v. Giuffrida, 566 F. Supp.
796, 798 (S.D.N.Y. 1983): Pavone, Inc. v. Secretary of H.U.D., 547 F. Supp.
230, 232 (D.Conn. 1982); Klein v. Pierce, 554 F. Supp. 18, 20 (S.D.N.Y.
1982): Cross Queen, Inc. v. Director, Fed. Emergency Management Agency,
516 F. Supp. 806, 809 (D.V.1. 1980). While some lower courts have extracted
a broad principle from the original Supreme Court opinion, we do not find these
decisions persuasive.
12a
power to the administrative agency, and as a result, the adminis-
trative regulations limited the government’s liability in the same
way as legislation enacted directly by Congress:
[This result] merely expresses the duty of all courts to
observe the conditions defined by Congress for charging
the public treasury. The “terms and conditions” defined
by the Corporation, under authority of Congress, for cre-
ating liability on the part of the Government preclude
recovery for the loss of the reseeded wheat no matter with
what good reason the respondents thought they had
obtained insurance from the Government.
Id., at 385, 68 S.Ct. at 3.
The entire logic of Federal Crop Insurance Corp. v. Merrill,
boils down to the proposition that a plaintiff who contracts with a
governmental defendant “[assumes] the risk of having accu-
rately ascertained that he who purports to act for the Government
stays within the bounds of his authority.” Jd. at 384, 68 S.Ct. at 3.
We find nothing in the Supreme Court’s reasoning that bears any
application to private contractual arrangements between private
litigants.
The present case is further distinguished from Federal Crop
Insurance Corp. v. Merrill because, under the specific terms of
the policy, FCIA remains the sole insurer. Though FCIA may
recoup its losses under a separate agreement between FCIA and
Eximbank, Nu-Air is not a party to that arrangement. Therefore,
unlike the farmer in Federal Crop Insurance Corp. v. Merrill,
Nu-Air’s claim is not directed toward the public treasury:
[Rather], it is FCIA’s potential claim against the govern-
ment under the reinsurance agreements, and not [the
insured’s], which is directed toward the public fisc; this is
not the case before us.
13a
Lovell Mfg.v. Export-Import Bank of United States, 777 F.2d
894, 901 (3d Cir. 1985). Weconciude that traditional equitable
principles of waiver and estoppel apply. /d.***
III. The Misrepresentation Claim against FCIA
FCIA also relies upon its relationship with Eximbank to assert
“official immunity” from Nu-Air’s misrepresentation claim. We
conclude that the lower court erred in granting this immunity.
The official immunity doctrine, largely judge-made, is not a
rigid rule of decisionmaking. Rather, the Supreme Court has
advised “a discerning inquiry into whether the contributions of
immunity to effective government in particular contexts outweigh
the perhaps recurring harm to individual citizens.” Doe v.
McMillan, 412 U.S. 306, 320, 93 S.Ct. 2018, 2028, 36 L.Ed.2d
912 (1973). Courts extend official immunity where the threat of
liability “might appreciably inhibit the fearless, vigorous, and
effective administration of policies of government.” Barr v. Mat-
teo, 360 U.S. 564, 571, 79 S.Ct. 1335, 1339, 3 L.Ed.2d 1434
(1959).*%* Not surprisingly, this concern arises most frequently
when the defendant is an individual in public service. See, e.g.,
Doe v. McMillan, 412 U.S. 306, 93 S.Ct. 2018, 36 L.Ed.2d 912
(U.S. Public Printer and Superintendent of Documents); Barr v.
Matteo, 360 U.S. 564, 79 S.Ct. 1335, 3 L.Ed.2d 1434 (Director
24. We leave open the question of the extent to which federal law governs
insurance contracts issued on behalf of Eximbank.
25. The district court held that Nu-Air failed to mitigate damages when
Nu-Air pressed forward with the Nigerian transaction after discovering the
FCIA had repudiated coverage. Though the district court assumed that Nu-
Air could renegotiate the Nigerian contract, the defendants present no evidence
that such was the case. Whether or not Nu-Air acted reasonably to limit its
losses is a question of fact for the jury.
26. There are other less frequently articulated reasons for affording official
immunity; the deterrent effect of liability on those who might enter public
service; the drain of litigation on government time and resources; the inequity of
liability for the acts of subordinates; the notion that public servants owe a duty
to the public, not the individual; and the notion that civil suits are an inappropri-
ate method of enforcing official accountability. Gray v. Bell, 712 F.2d 490,
496-97 (D.C. Cir. 1983), cert. denied, 465 U.S. 1100 (1984). These additional
justifications most certainly do not apply where the defendant is a private
insurance company.
l4a
of Rent Stabilization Office); Claus v. Gyorkey, 674 F.2d 427
(Sth Cir. 1982) (VA Hospital Chief of Lab Services); Evans v.
Wright, 582 F.2d 20 (Sth Cir. 1978) (H.E.W. employees).
The justifications for immunity will seldom be present, how-
ever, when the defendant’s connection with government is limited
to a business relationship. Once shielded from tort liability,
there is always the danger that a private enterprise will become
too fearless, too vigorous and too effective. Thus, courts have only
extended official immunity to the private sector on those rare
occasions when the need is pressing. Two cases upon which
FCIA relies prove the point. Both are defamation actions result-
ing from reports prepared by private industry for government
agencies. See Bushman v. Seiler, 755 F.2d 653 (8th Cir. 1985)
(consultant to insurance carrier investigating medicare fraud);
Becker v. Philco Corp., 372 F.2d 771 (4th Cir.), cert. denied, 389
U.S. 979, 88 S.Ct. 408, 19 L.Ed.2d 473 (1967) (defense contrac-
tor preparing security reports on employees). Clearly, exposing
informants to this kind of liability frustrates paramount govern-
ment objectives such as uncovering fraud in government pro-
grams and protecting national security. Immunity under these
circumstances serves an obvious governmental purpose:
Applying immunity here is consistent with protecting
“officials who are required to exercise their discretion”,
and promoting the “public interest in encouraging the
vigorous exercise of official authority.”
Bushman, 755 F.2d at 656 (quoting Butz v. Economou, 438 U.S.
478, 506, 98 S.Ct. 2894, 2911, 57 L.Ed.2d 895 (1978)).” In
contrast, FCIA does not identify how immunizing misrepresenta-
tions to its Customers serves an equivalent purpose or, for that
matter, any worthwhile purpose.
The remaining cases advanced by FCIA do not deal with offi-
cial immunity at all, but center upon an altogether different
27. In fact, the common law arrives at this same result by affording such
defendants a “qualified privilege.” See generally W. Prosser, The Law of Torts,
§ 115 (4th ed. 1971); see, e.g., Bradley v. Computer Sciences Corp., 643 F.2d
1029, 1032 (4th Cir.), cert. denied, 454 U.S. 940, 102 S.Ct. 476, 70 L.Ed.2d
248 (1981).
1Sa
concept—sovereign immunity. In Matranga v. Travelers Ins.
Co., 563 F.2d 677 (Sth Cir. 1977) and Peterson v. Weinberger,
508 F.2d 45 (Sth Cir.), cert. denied, 423 U.S. 830, 96 S.Ct. 50,
46 L.Ed.2d 47 (1975), we dealt with actions against insurance
companies for improperly withholding payments due on medicare
claims. These insurance carriers were medicare fiscal
intermediaries; the United States government provided the funds.
In addition, Department of Health, Education and Welfare regu-
lations explicitly state that “[t]he Secretary .. . is the real party
in interest in the administration of the program.” 20 C.F.R.
§ 405.670 (1973). As a result, we concluded that these suits were
barred because they were actually directed against the United
States government. See Matranga, 563 F.2d at 677-78; Peter-
son, 508 F.2d at 51-52. Wholly different considerations operate
in the present case because Eximbank and the United States are
not financially at risk.
Finally, we cannot ignore the language in the legislation creat-
ing Eximbank: “[T]he bank is authorized and empowered . . . to
sue and be sued, to complain and to defend in any court of
competent jurisdiction.” 12 U.S.C. § 635(a). Immunity is not
favored when a government agency enters the commercial sphere:
[W]hen Congress establishes such an agency, authorizes
it to engage in commercial and business transactions with
the public, and permits it to ‘sue and be sued,’ it cannot be
lightly assumed that restrictions on that authority are to
be implied. Rather if the general authority to ‘sue and be
sued’ is to be delimited by implied exceptions, it must be
clearly shown that certain types of suits are not consistent
with the statutory or constitutional scheme, that an
implied restriction of the general authority is necessary to
avoid grave interference with the performance of a govern-
mental function, or that for other reasons it was plainly the
purpose of Congress to use the ‘sue and be sued’ clause in a
narrow sense.... [I]t must be presumed that when
Congress launched a government agency into the commer-
cial world and endowed it with authority to “sue or be
sued,” that agency is not less amenable to judicial process
than a private enterprise under like circumstances would
be.
l6a
Franchise Tax Bd. of California v. United States Postal Serv.,
467 U.S. 512, 104 S.Ct. 2549, 81 L.Ed.2d 446 (1984) (quoting
FHA v. Burr, 309 U.S. 242, 245, 60 S.Ct. 488, 490, 84 L.Ed. 724
(1940) ); see also Brady v. Roosevelt Steamship Co., 317 US.
575, 581, 63 S.Ct. 425, 428, 87 L.Ed. 471 (1943); Rochester
Methodist Hosp. v. Travelers Ins. Co., 728 F.2d 1006, 1012-16
(8th Cir. 1984). Since there is no reason to think that Eximbank
would be immune from suit, see, e.g., Enterprise Tools, Inc. v.
Export-Import Bank of the U.S., 564 F. Supp. 761, 763 (E.D.
Ark. 1983), FCIA cannot derive immunity as Eximbank’s agent.
Accordingly, we hoid that Nu-Air should have the opportunity to
present its tort claim against FCIA to a jury.”
IV. Nu-Air’s Claims Against Intercredit
The district court rejected Nu-Air’s entire cause of action
against Intercredit. We conclude that the district court reached
this surprising result by misapplying the law to key issues, which
were actually questions of fact for the jury. In order to more
fully explain our holding, we must briefly set forth the relevant
law governing the relationship between Intercredit and Nu-Air.
When a broker agrees to obtain insurance for a client, the
broker becomes the client’s agent. See, e.g., Bennett v. Berk, 400
So.2d 484, 485 (Fla. Dist. Ct. App. 1981); First Nat'l Ins.
Agency v. Leesburg Transfer & Storage, Inc., 139 So.2d 476, 479
(Fla. Dist. Ct. App. 1962). As agent, the broker owes his client a
duty of care and a duty to exercise the skill he holds himself out as
having. Restatement (Second) of Agency § 379 and comment c
(1957); see, e.g., Klanis ex rel. Consolidated Am. Ins. Co. v.
Armstrong, 436 So.2d 213, 217 (Fla. Dist. Ct. App. 1983),
28. Although the lower court came to a contrary conclusion, the record does
not sufficiently show for purposes of summary judgment that Nu-Air unjustifi-
ably relied on the alleged misrepresentations or negligently failed to ascertain
the facts. See McCurley v. Auto-Owners Ins. Co., 356 So.2d 68, 69 ( Fla. Dist.
Ct. App. 1978). Whether FCIA and Intercredit negligently made false state-
ments to Nu-Air and whether Nu-Air reasonably relied on the misrepresenta-
tions to its detriment are questions for a jury to determine. Horn v. First
Orlando Realty Management Corp., 483 So.2d 80 (Fla. Dist. Ct. App. 1986).
ee rns
17a
review denied, 449 So.2d 264 (1984); Sheridan v. Greenberg, 391
So.2d 234, 236 (Fla. Dist. Ct. app. 1980); Butler v. Scott, 417
F.2d 471, 473 (10th Cir. 1969). A breach of these duties may
subject the broker to liability in both contract and tort. Mono-
gram Products, Inc. v. Berkowitz, 392 So.2d 1353, 1355 (Fla.
Dist. Ct. App. 1980); First Nat'l Ins. Agency v. Leesburg Trans-
fer & Storage, Inc., 139 So.2d 476, 479 (Fla. Dist. Ct. App.
1962); Restatement (Second) of Agency § 401 comment a
(1957). In addition, if a broker falsely represents that a policy
has been approved, he may become liable for negligent misrepre-
sentation. See, e.g., Meltsner v. Aetna Casualty & Ins. Co., 177
So.2d 43 (Fla. Dist. Ct. App. 1965), cert. denied, 184 So.2d 886
(1966).
Intercredit successfully argued before the district court that it
had discharged its duties as broker when FCIA agreed to insure
Nu-Air under the master policy. We disagree. As a profes-
sional, a broker “is charged with the ability to do more than
simply fill out application forms.” Bell v. O'Leary, 744 F.2d
1370, 1373 (8th Cir. 1984). A broker must take all reasonable
steps necessary to ensure that insurance is in place. See Sheri-
dan v. Greenberg, 391 So.2d at 236; Haeuber v. Can-Do, Inc. I1.,
666 F.2d 275, 280 (Sth Cir. Unit A 1982). Regardless of
whether the jury believes Michelle Milone or Jane Ferry, there is
sufficient evidence to support a finding that Intercredit breached
its duty to Nu-Air.
If Michele Milone is testifying truthfully, Intercredit incor-
rectly informed Nu-Air that SBCL coverage was in place. A
jury could find that this misrepresentation and Intercredit’s sub-
sequent failure to correct its initial error amounted to a negligent
breach of Intercredit’s duty to Nu-Air. A jury could also hold
Intercredit liable for the tort of negligent misrepresentation.
While it is true that Jane Ferry denied that there was a misrep-
resentation, the jury could nevertheless find a breach of duty even
if it accepts her testimony as truthful. Most of the communica-
tions between Nu-Air and FCIA passed through Intercredit as
intermediary, yet, Intercredit remained blissfully unaware of the
18a
impending crisis. A broker must possess a reasonable knowledge
of its business and a reasonable familiarity with the paperwork.
See Seascape of Hickory Point Condominium Ass'n v. Associ-
ated Ins. Services, 443 So.2d 488 (Fla. Dist. Ct. App. 1984). In
fact, Jane Ferry testified that she did not notice the disparity
between the requested coverage and the $200,000 limit recited by
the relevant documents until the time of her deposition. A jury
could find that Intercredit breached its duty to Nu-Air when the
broker failed to detect the problems with its client’s insurance
coverage at an eailier date.
Intercredit must also account for its failure to inform Nu-Air
that FCIA had withdrawn Nu-Air’s SBCL application.” Three
weeks elapsed between the time FCIA informed Intercredit and
the date when Nu-Air finally received notice from FCIA. An
agent is subject to the duty to keep his principal informed. This
duty exists when the agent learns facts the principal would desire
to know. See Restatement (Second) of Agency § 381 and.com-
ment a (1957). Accordingly, a broker, who is not to blame for
the failure to obtain coverage, may become liable for damages if
he fails to inform his principal that the requested insurance has
not been procured. DeMarlor v. Foley Carter Ins. Co., 386
So.2d 22, 23 (Fla. Dist. Ct. App. 1980); Cat 'N Fiddle, Inc. v.
Century Ins. Co., 200 So.2d 208, 211 (Fla. Dist. Ct. App. 1967),
vacated on other grounds, 213 So.2d 701 (Fla. 1968). Whena
broker learns his client’s insurance has been cancelled, this same
duty requires the broker to notify the insured within a reasonable
period of time. Johnson v. Aetna Casualty & Surety Co., 448
So.2d 1056, 1058 (Fla. Dist. Ct. App.), review denied, 458 So.2d
273 (Fla. 1984); Cat 'N Fiddle v. Century Ins. Co., 200 So.2d at
211. A jury could find that Intercredit breached this duty to Nu-
Air when the broker failed to warn its client that FCIA would not
supply the requested insurance.”
29. It is undisputed that Intercredit never communicated this fact to Nu-
Air.
30. Intercredit is therefore wrong to suggest that it could not be liable if
CIA properly availed itself of policy provisions which gave FCIA the right to
withdraw coverage.
19a
Nevertheiess, the district court reasoned that any negligence on
the part of Intercredit was unimportant because it was unreason-
able for Nu-Air to believe its broker.*' The district court
advanced two reasons why Nu-Air unjustifiably relied upon
Intercredit’s representations that coverage was in place. First,
the master policy gave FCIA the right to withdraw coverage at
the insurer’s discretion. Second, Nu-Air executed a document
which specified a $200,000 aggregate limit and made no provision
for SBCL coverage.
The thrust of the district court’s argument appears to be that a
broker cannot be held accountable for its misrepresentations so
long as the customer has been exposed to the same technical
policy information as the broker.” Such reasoning misperceives
the fundamental nature of the broker-client relationship. This
relationship arises from “trust and confidence consensually
placed in the superior knowledge, skill and judgment of [the
broker].” Butler v. Scott, 417 F.2d 471, 473 (10th Cir. 1969)
(citation omitted). While there is a point at which this trust
becomes unreasonable, this determination should not be made on
a motion for summary judgment. See, e.g., McCurley v. Auto-
31. Ruling that Nu-Air’s reliance was unjustified allowed the court to fur-
ther rule that Nu-Air acted unreasonably in not taking more appropriate mea-
sures to protect itself. These two rulings, if allowed to stand, would severely
compromise Nu-Air’s cause of action. Under Florida law, an insured’s failure
to mitigate damages may operate as a waiver and estoppel against the right to
assert claims arising from the broker-client relationship. Keller Indus. v.
Bellefonte Ins. Co., 412 So.2d 899 (Fla. Dist. Ct. App. 1982) (quoting Burns v.
Consolidated Am. Ins. Co., 359 So.2d 1203, 1206 (Fla. Dist. Ct. App. 1978)).
Nu-Air’s negligent misrepresentation claim would also fail because justifiable
reliance is a key element of that tort. See, e.g., Bruce v. American Dev. Corp.,
408 So.2d 857 (Fla. Dist. Ct. App. 1982).
The lower court advances an additional reason why Nu-Air acted unreasona-
bly. Apparently, the lower court concluded that Nu-Air should have purchased
pre-shipment insurance to protect itself against the risk that FCIA would
wrongly repudiate the post-shipment insurance before the goods were actually
shipped. This is error. Nu-Air had the right to assume that its insurer would
act in good faith.
32. The parties dispute how much of this technical information Intercredit
passed on to Nu-Air.
20a
Owners Ins. Co., 356 So.2d 68 (Fla. Dist. Ct. App. 1978).*
Thus, we remand Nu-Air’s tort and contract claims against Inter-
credit for trial before a jury.
REVERSED and REMANDED.
33. See supra note 28.
2la
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
Nu-AIR MANUFACTURING COMPANY,
A Florida Corporation,
Plaintiff-Appellant,
V.
FRANK B. HALL & CO. OF NEW YORK, A Corporation
incorporated under the laws of the State of New York, doing
business as Intercredit Agency, AETNA CASUALTY AND
SURETY COMPANY, INC., ET AL.,
Defendants-Appellees.
No. 86-3359
Appeal from the United States District Court
for the Middle District of Florida
ON PETITION(S) FOR REHEARING AND
SUGGESTION(S) OF REHEARING IN BANC
(Opinion July 24, 1987, 11 Cir., 198, F.2d ).
(August 31, 1987)
Before: TJOFLAT and VANCE, Circuit Judges, and
ATKINS’, Senior District Judge
PER CURIAM:
The Petition(s) for Rehearing are DENIED and no member of
this panel nor other Judge in regular active service on the Court
having requested that the Court be polled on rehearing in banc
(Rule 35, Federal Rules of Appellate Procedure; Eleventh Cir-
cuit Rule 35-5), the Suggestion(s) of Rehearing In Banc are
DENIED.
ENTERED FOR THE COURT:
eee eee eee eee eee eee eee ee eee ee ee eee eee eee eee eee
United States Circuit Judge
1. Honorable C. Clyde Atkins, Senior U.S. District Judge for the Southern
District of Florida, sitting by designation.
22a
UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
No. 86-3359
D.C. Docket No. 84-109-17
Nu-AIR MANUFACTURING COMPANY,
A Florida Corporation,
Plaintiff-Appellant,
versus
FRANK B. HALL & CO. OF NEW YORK, A Corporation
incorporated under the laws of the State of New York, doing
business as Intercredit Agency, AETNA CASUALTY AND
SURETY COMPANY, INC., ET AL.,
Defendants-Appellees.
Appeal from the United States District Court
for the Middle District of Florida
Before TJOFLAT and VANCE, Circuit Judges, and ATKINS’,
Senior District Judge.
JUDGMENT
This cause came on to be heard on the transcript of the record
from the United States District Court for the Middle District of
Florida, and was argued by counsel;
ON CONSIDERATION WHEREOF, it is now here ordered
and adjudged by this Court that the judgment of the said District
Court in this cause be and the same is hereby, REVERSED; and
that this cause be and the same is hereby, REMANDED to said
District Court for further proceedings in accordance with the
opinion of this Court;
1. Honorable C. Clyde Atkins, Senior U.S. District Judge for the Southern
District of Florida, sitting by designation.
23a
It is further ordered that defendants-appellees pay to plaintiff-
appellant, the costs of appeal to be taxed by the Clerk of this
Court.
Entered: July 24, 1987
For the Court: Miguel J. Cortez, Clerk
Deputy Clerk
ISSUED AS MANDATE: Oct. 15, 1987
et ade
24a
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
.
Nu-AIR MANUFACTURING COMPANY,
Plaintiff (s),
vs. | CASS NO. 84-109-
CIV-T-17
FRANK B. HALL & COMPANY OF
New YORK, et al.,
Defendant(s).
MEMORANDUM OPINION
This cause is before the Court on Defendant’s, Frank B. Hall &
Company of New York, hereinafter Frank B. Hall, motion to
strike attorney’s fees from Count’s III, IV, and V, filed with this
Court April 17, 1984; Defendants’, Foreign Credit Insurance
Association and its member companies, collectively FCIA,
motion for summary judgment, filed with this Court January 29,
1985; and Defendant’s, Frank B. Hall & Company of New York,
d/b/a Intercredit Agency, motion for summary judgment filed
with this Court March 4, 1985.
JURISDICTION
The basis of federal jurisdiction is 28 U.S.C. § 1332. Plaintiff,
Nu-Air Manufacturing Company (Nu-Air), a Florida corpora-
tion, is suing Defendants Frank B. Hall & Company of New
York, d/b/a/ Intercredit Agency (Intercredit), New York Cor-
poration, and the Foreign Credit Insurance Company (FCIA),
an unincorporated association of insurance companies which is
headquartered in New York.
SUMMARY JUDGMENT STANDARD
This circuit clearly holds that summary judgment should only
be entered when the moving party has sustained its burden of
25a
showing the absence of a genuine issuc as to any material fact
when all the evidence is viewed in the light most favorable to the
nonmoving party. Sweat v. The Miller Brewing Co. 708 F.2d
655 (11th Cir. 1983). All doubt as to the existence of a genuine
issue of material fact must be resolved against the moving party,
not assessing the probative value of any evidence. Hayden v.
First National Bank of Mt. Pleasant, 595 F.2d 994, 996-97 (Sth
Cir. 1979), quoting Gross v. Southern Railroad Co., 414 F.2d
292 (Sth Cir. 1969).
STATEMENT OF THE CASE
This action concerns an export credit insurance policy issued to
Plaintiff Nu-Air by Defendant Foreign Credit Insurance Associa-
tion (FCIA). Defendant Intercredit acted as broker in connec-
tion with the policy, including the application for the policy. Nu-
Air’s claims [sic] that Intercredit advised Nu-Air that FCIA had
agreed not only to issue to Nu-Air the export credit insurance
policy, but also that FCIA had agreed to provide Nu-Air, through
an endorsement to the policy commonly known as a Special Buyer
Credit Limit (“SBCL”), with specific coverage against the risk
that Nu-Air’s Nigerian customer, Dukans, would not make pay-
ment in connection with Nu-Air’s proposed shipment of alumi-
num windows and doors to Dukans in Nigeria.
Nu-Air claims that as a result of this representation from
Intercredit, FCIA is liable to Nu-Air as a matter of contract law
when Dukans, in fact, failed to make full payment to Nu-Air for
the shipment of windows and doors. FCIA disputes that it ever
represented to Intercredit that it would approve the Special Buyer
Credit Limit. Intercredit insists that FCIA made this represen-
tation. Defendants FCIA and Intercredit, in response to Nu-
Air’s claims, also have asserted various affirmative defenses.
Nu-Air alternatively claims that, even assuming FCIA is not
liable to Nu-Air as a matter of contract law because FCIA, in
fact, never advised Intercredit that it would approve the SBCL,
FCIA still is liable to Nu-Air because Intercredit was acting as
FCIA’s agent when it represented to Nu-Air that FCIA would
26a
issue the SBCL, because Intercredit’s representations were negli-
gent, and because Plaintiff relied on these negligent misrepresen-
tations to its detriment by manufacturing the windows and doors
and ultimately shipping them to Dukans.
Nu-Air also claims that Intercredit is liable to Nu-Air because
Intercredit breached its contract with Nu-Air by which Inter-
credit agreed to secure export credit insurance coverage for Nu-
Air’s proposed transaction with Dukans. Alternatively, Nu-Air
claims that Intercredit is liable to Nu-Air because Intercredit
negligently failed to maintain export credit insurance for Nu-Air
transaction [sic]. Finally, Nu-Air also claims that Intercredit is
liable to Nu-Air because Intercredit negligently misrepresented
to Nu-Air that FCIA would provide coverage for Nu-Air’s trans-
action with Dukans and that Nu-Air relied on this representation
to its detriment.
As cross-claimant, FCIA seeks indemnification from Inter-
credit based on the principle that FCIA is liable at all [sic], is
only vicariously liable to Nu-Air because of the negligent repre-
sentation of its purported agent, Intercredit. Alternatively,
FCIA seeks contribution from Intercredit based on the principle
that if FCIA is liable to Nu-Air, Intercredit must contribute to
Nu-Air’s recovery because its actions also contributed te Nu-
Air’s injuries.
STATEMENT OF THE FACTS
Plaintiff, a Florida Window and door manufacturer, in early
1982, submitted applications to Frank B. Hall, d/b/a Intercredit
Agency (Intercredit), an insurance agency representing Foreign
Credit Insurance Association (FCIA) a group of insurers who
issue export credit insurance for a master credit insurance policy
and a special buyer’s credit limit (SBCL). The SBCL was a
request to insure against nonpayment, one-half of a specific pro-
posed order for $740,000 of windows and doors from a Nigerian
company (Dukans).
In January and February of 1982, Frank B. Hall d/b/a Inter-
credit Agency (hereinafter known as “Intercredit”), acting on
27a
the request of Nu-Air through its Treasurer, John J. Healey,
applied for a Master Export Credit Insurance Policy on behalf of
Nu-Air through FCIA and also requested an SBCL for Dukans
in the amount of $371,530.49. FCIA insurance protects an
exporter against various defined commercial and political risks
that the foreign insurer will not make payment for goods shipped
as a part of an FCIA eligible transaction. For an additional
premium payment, FCIA also makes available to certain
insureds, pre-shipment coverage which protects the insured
against various pre-shipment risks, including the risk that FCIA
will withdraw coverage for a specific shipment before shipment
has been made. Absent a pre-shipment endorsement to a stan-
dard FCIA policy, only losses occurring after shipment are cov-
ered under the standard FCIA policy.
In February, 1982, Intercredit forwarded the applications to
FCIA and on March 3, 1982, Jane Ferry, Senior Vice President
of Intercredit, while acting within the scope of her authority and
as agent for FCIA, allegedly advised Plaintiff that FCIA had
approved the issuance of a master export credit insurance policy
and the Dukans SBCL. Ferry claims that she was advised by
Michele Milone, FCIA Sales Assistant, that Nu-Air’s application
for the Master Export Credit Insurance Policy and the SBCL for
Dukans in the amount of $371,530.49 were approved. Ferry
(Intercredit) notified Healey (Nu-Air) of such approval. Inter-
credit, on March 3, 1982, allegedly quoted a rate for the policy,
with aggregate limit of $200,000, which Plaintiff accepted and
subsequently paid. Moreover, no terms or conditions of the
SBCL were provided.
Plaintiff alleges that after securing the Dukans SBCL, Plaintiff
advised Dukans that it could now accept their order and immedi-
ately began the assembly of the doors and windows, which con-
sisted of twelve (12) shipping containers.
On April 12, 1982, Plaintiff received a letter from FCIA stat-
ing that the Dukans SBCL was not approved and was considered
withdrawn because of the Nigerian Government’s ban on
imports. FCIA would not reconsider approval. At this time,
aaa
28a
Plantiff [sic] had already fabricated most of the order and had
transported 8 of the 12 shipping containers from its factory in
Tampa to Jacksonville, Florida for ocean shipment to Nigeria
scheduled to occur on April 30, 1982. Despite Nu-Air’s knowl-
edge that no coverage was in effect, and despite advice allegedly
from Intercredit not to ship without coverage, Nu- Air shipped its
products to Dukans in Nigeria.
When notified of the FCIA action, Plaintiff advised Intercredit
that it had no choice except to ship the entire order because the
windows and doors could not be resold or otherwise disposed of
without sustaining an enormous loss.
Plaintiff then shipped the entire order which was received by
Dukans in July, 1982. Plaintiff made repeated demands for
payment of the remaining balance of approximately $311,846.
However, Dukans refused to pay.
Plaintiff, on April 11, 1983, filed a proof of claim with FCIA
for the insured loss. FCIA, on May 18, 1983, rejected Plaintiff's
Claim, stating that Plaintiff's SBCL was declined prior to ship-
ment and that no coverage existed under NU-Air’s [sic] discre-
tionary credit limit.
This action was filed on January 24, 1984, against Defendants
seeking the recovery of $280,661.68, representing 90% of the
unpaid account balance, plus interest, attorney's fees and costs.
DISCUSSION
Nu-Air had considerable prior experience in business dealings
with Intercredit and FCIA. There are only two facts in dispute
in this case, neither or which, however, can be material in light of
the remaining facts which have been conceded and the well-
established principles of law which must be applied to the undis-
puted facts. With regard to the narrow issue of whether FCIA
approved Nu-Air’s application for a Special Buyer Credit Limit,
or so advised Intercredit, FCIA never approved Nu-Air’s applica-
tion for a Special Buyer Credit Limit to cover the Dukans trans-
action. The factual dispute as to whether FCIA ever advised
Intercredit, or anyone else, that it had approved Nu-Air’s SBCL
29a
application, is immaterial since FCIA and Nu-Air never entered
into an enforceable insurance contract regarding the SBCL.
However, it is significant that even if the trier of fact accepts
Intercredit’s assertion that FCIA advised Intercredit that FCIA
had approved Nu-Air’s SBCL, it is undisputed that, prior to Nu-
Air’s shipment of the goods from the United States on or about
April 30, 1982, FCIA notified Intercredit, on March 19, 1982,
and Nu-Air, that it was withdrawing the SBCL application, as
permitted by the policy’s terms. Even if this oral notice of with-
drawal is disputed, the admitted facts demonstrate chat Plaintiff
received written notification April 12, 1982. The policy FCIA
issued to Nu-Air provided Nu-Air with the option to protect itself
against various pre-shipment risks, including pre-shipment with-
drawal by FCIA. Although Nu-Air’s broker, Intercredit, was
aware that FCIA could, in fact, withdraw coverage, Nu-Air con-
sciously chose not to select FCIA pre-shipment coverage.
Even if the trier of fact finds that FCIA, on March 3, 1982,
advised Intercredit that FCIA had approved Nu-Air’s SBCL,
FCIA exercised its right to withdraw coverage without liability.
If only the written withdrawal notification of April 12th is effec-
tive, and not the alleged oral withdrawal notification of March
19th, then the lack of written notification of SBCL coverage
precludes there ever being such coverage. Finally, even if FCIA
did not withdraw the SECL before Nu-Air’s rights vested under
the policy, Nu-Air still is barred from recovering under the policy
because it is undisputed that Nu-Air failed to file with FCIA, ina
timely fashion, various reports required by the policy, including
notice of Dukans’ default and Nu-Air’s Proof of Loss Form.
Plaintiff's filed claim February, 1985 [sic], five months later
wherein the insurance policy presented a 90 day limit. Plaintiff's
“proof of loss” states the shipping date as April 30th. Further-
more, Plaintiff paid the premium May 15th, wherein the policy
requires payment within fifteen days of the shipment. If ship-
ment were to be construed as before April 30th, then Nu-Air
sii
30a
clearly defaulted as to payment of premium. The insured’s fail-
ure to comply with its obligation to file timely notices and proof of
iuss, bar the insured from recovery under the policy.
With regard to Nu-Air’s negligence count, Intercredit never
acted as FCIA’s agent in connection with the Nu-Air transaction.
Nu-Air designated Intercredit to act on Nu-Air’s behalf as Nu-
Air’s broker; all parties considered Nu-Air to be Intercredit’s
client; Nu-Air authorized Intercredit to act on its behalf; and
Intercredit had no authority to issue an FCIA policy, any
endorsements to an FCIA policy, or approve an SBCL applica-
tion. Thus, under well-established agency law, Intercredit was
Nu-Air’s agent and FCIA cannot be vicariously liable for Inter-
credit’s acts.
Moreover, because it also is undisputed that FCIA acted at all
times as an agent of the Export-Import Bank of the United
States, an agency of the United States Government, FCIA, thus,
is immune from Nu-Air’s negligent misrepresentation claim by
the doctrine of official immunity, which prohibits suits against
government agents, including those in the private sector, for non-
constitutional torts.
FCIA also cannot be held liable on Nu-Air’s misrepresentation
claim because Nu-Air’s reliance, if any, on Intercredit’s represen-
tation was, as a matter of law, unreasonable. Both Nu-Air and
Intercredit were aware that the insurers’ total! liability under the
policy issued to Nu-Air could not exceed $200,000; thus, neither
Nu-Air nor its agent, Intercredit, acted reasonably, as a matter of
law, when they both allegedly believed that FCIA had approved
Nu-Air’s request for the separate $371,530.49 SBCL. Further-
more, because Nu-Air, on its own or through its agent Intercredit,
knew, or should have known, that it had the option to select pre-
shipment coverage and knew, or should have known, that FCIA
could withdraw coverage prior to Nu-Air’s shipment of the goods
from the United States without incurring any liability, Nu-Air
did not rely reasonably on Intercredit’s representations regarding
FCIA approval of the Nu-Air SBCL. Nu-Air also cannot
recover here because it failed to satisfy its common law and
3la
contractual obligations to mitigate its damages when it proceeded
with the sale to its Nigerian purchaser in the face of FCIA’s clear
and unequivocal declaration that it would not provide the
requested coverage without making any effort to renegotiate with
Dukans.
FINDINGS OF FACT
The statement of facts following is admitted by the parties in
the pre-trial stipulation.
bs
Plaintiff Nu-Air Manufacturing Co. (“Nu-Air”) is a
Florida corporation engaged in the business of assem-
bling aluminum windows and doors. Its principal place
of business is in Tampa, Florida.
Defendant Frank B. Hall & Co. (“Frank B. Hall”) is a
New York corporation engaged principally in the insur-
ance brokerage business. Intercredit Agency (“Inter-
credit”) is an unincorporated division of Frank B. Hall
engaged in the brokerage of export credit insurance.
Frank B. Hall and Intercredit each has its principal
place of business in New York, N.Y. Intercredit bro-
kers insurance policies issued by FCIA and by various
other export credit insurance companies.
Defendant Foreign Credit Insurance Association
(“FCIA”) is an unincorporated association of insurance
companies with its principal place of business in New
York, N.Y.
The remaining defendants (“the Companies”) are pri-
vate insurance companies which are members of FCIA.
None of the companies is incorporated in or has its
principal place of business in Florida.
The Export-Import Bank of the United States
(“Eximbank”) is a United States government agency
created by Act of Congress to provide, inter alia, export
credit insurance to American exporters.
In 1961, with the express encouragement of Eximbank,
FCIA was formed to act as Eximbank’s agent in provid-
ing insurance protection against certain commercial and
political risks to which United States exporters are
exposed.
10.
11.
12.
32a
For over twenty years, pursuant to authority granted by
12 U.S.C. § 635(c)(2), Eximbank has entered into a
series of agency agreements under which Eximbank con-
tinually has appointed and reappointed FCIA as
Eximbank’s agent in connection with the marketing,
issuance, administration, and servicing of all export
credit insurance policies issued by FCIA and Eximbank.
Under the agency agreement between FCIA and
Eximbank, FCIA’s authority in connection with the
export credit insurance program is delegated to it by
Eximbank and is subject to supervision and control of
Eximbank officials.
Among other things, the agency agreement between
Eximbank and FCIA specifically grants authority to
FCIA to issue quotations and insurance policies on
behalf of Eximbank; administer and service matters
relating to such policies; collect all premiums for
Eximbank for insurance issued by FCIA; and “take all
other action which may be required under the circum-
stances in order to exercise the authority delegated to
[FCIA]” under the agency agreement.
Under the FCIA-Eximbank agency agreement,
Eximbank has authority over all significant decisions
surrounding the issuance of export credit insurance.
Eximbank also has the sole authority to determine the
FCIA policy premium rates. Eximbank establishes pre-
mium rates at such levels that the insurance is widely
available to United States exporters, both large and
small.
In the fall of 1981. Nu-Air and Dukans Alliance Inter-
national Co. (“Dukans”) of Nigeria entered into negoti-
ations for the sale by Nu-Air to Dukans of aluminum
doors and windows.
On January 29, 1982, Nu-Air forwarded to Intercredit
for submission to FCIA on Nu-Air’s behalf an applica-
tion for an FCIA export credit insurance policy request-
ing an aggregate limit of coverage under that policy of
$50,000.
Nu-Air, on or about February 10, 1982, mailed to Inter-
credit for Intercredit to submit to FCIA on Nu-Air’s
behalf, a cover letter and an application for the issuance
ee
33a
of a Master Export Credit Insurance Policy and a Spe-
cial Buyer Credit Limit, hereinafter referred to as
“SBCL” in the amount of $65,000 for Dukans.
14. Nu-Air, on or about February 10, 1982, mailed another
application to Intercredit for Intercredit to submit to
FCIA on Nu-Air’s behalf requesting FCIA’s approval
of a larger SBCL for Dukans insuring against the non-
payment by Dukans of the sum of $371,530.49, repre-
senting approximately one-half of the value of a
proposed shipment of custom made aluminum windows
and doors in the amount of $630,137.20 ordered by
Dukans.
15. On or about February 17, 1982, Jane L. Ferry, Senior
Vice President of Intercredit, processed Nu-Air’s appli-
cation for the SBCL for Dukans on Nu-Air’s behalf in
the amount of $371,530.49, and forwarded required
reports, credit checks, and financial statements to FCIA,
according to the letter.
16. Onor about February 17, 1982, Intercredit submitted to
FCIA, on behalf of Nu-Air, an application for an FCIA
standard multibuyer export credit insurance policy (a
“Master Policy”).
17. QOnor about February 17, 1982, Intercredit submitted to
FCIA on behalf of Nu-Air an application for an FCIA
Special Buyer Credit Limit in the amount of
$371,530.49 to cover that portion of the purchase price
which Dukans allegedly would pay Nu-Air by sight
draft.
18. An FCIA Special Buyer Credit Limit [SBCL] is an
endorsement to an FCIA policy in which FCIA agrees,
subject to certain terms and conditions, to insure a spe-
cific transaction otherwise outside the policy’s coverage,
either because the amount of the transaction exceeds the
discretionary credit limit or the terms of the transaction
are not otherwise permitted under the standard terms
and conditions of the policy.
19. FCIA acted within the scope of the authority delegated
to it by its agency agreement with Eximbank during the
processing of Nu-Air’s policy and SBCL applications.
34a
20. John Healey is treasurer and comptroller of Nu-Air. He
has been treasurer and comptroller of Nu-Air since
1979.
21. Healey had primary responsibility at Nu-Air for the
procurement of FCIA export credit insurance.
22. Healey was the only person at Nu-Air who had contact
with Intercredit regarding procurement of FCIA insur-
ance coverage.
23. Prior to his employment with Nu-Air, Healey was trea-
surer of the Farrel Corporation in Ansonia, Connecticut.
24. As treasurer of Farrel, Healey participated in and
became familiar with FCIA export credit insurance. In
connection with his employment at Farrel, Healey had
prior contact and involvement with Intercredit which
had served as Farrel’s broker in connection with Farrel’s
FCIA insurance policies.
25. In its application, Healey, on behalf of Nu-Air, desig-
nated Intercredit as Nu-Air’s broker in connection with
the procurement of FCIA export credit insurance.
26. Healey specifically requested that Intercredit act as Nu-
Air’s broker in connection with Nu-Air’s application for
an FCIA short-term Master Policy and an SBCL cover-
ing Nu-Air’s proposed transaction with Dukans.
27. Nu-Airs understanding in March 1982 was that Inter-
credit had no authority to issue a policy quote on beha!f
of FCIA.
28. Nu-Air’s understanding in March 1982 was that Inter-
credit had no authority to issue a policy on behalf of
FCIA, or any endorsement thereto, including an SBCL.
29. In March and April, 1982, Intercredit’s understanding
was that it was representing Nu-Air in the procurement
of export credit insurance from FCIA.
30. Intercredit never informed Nu-Air that Intercredit was
in any way acting on behalf of FCIA.
31. Neither Healey nor anyone else at Nu-Air ever con-
tacted FCIA directly regarding Nu-Air’s acquisition of
export credit insurance. All communications with
FCIA by or on behalf of Nu-Air were made through its
broker, Intercredit.
32.
ad.
34.
35.
36.
34.
38.
a.
40.
4}.
35a
Nu-Air's application for an FCIA Master Policy was
considered by FCIA’s Marketing Department. Consid-
eration by FCIA of an application for an FCIA Master
Policy involves an evaluation by FCIA of the credit
worthiness of the proposed Insured.
Nu-Air’s application for an SBCL was considered by
FCIA’s Underwriting Department, which evaluates the
creditworthiness of the proposed buyer.
FCIA’s custom and practice in March 1982 was to con-
sider a prospective customer’s application for a Master
Policy first, and then, if (1) FCIA issues a quotation toa
prospective customer and (2) the prospective customer
agrees to the terms and conditions of the quotation and
submits the required premium check to FCIA, consider
the customer’s application for an SBCL, if any.
Jane Ferry was the employee at Intercredit primarily
responsible for procuring FCIA export credit insurance
for Nu-Ajir.
Ferry is Senior Vice President of Intercredit. She has
been an employee of Intercredit for 25 years. For over 6
years, she has been responsible for procuring export
credit insurance for Intercredit clients.
Ferry knew on March 3, 1982 that FCIA’s Underwrit-
ing Department was responsible for approving all SBCL
applications. Ferry also knew that FCIA’s Marketing
Department had no responsibility for the approval of
SBCL applications.
Intercredit’s custom and practice in March 1982 was to
deal only with FCIA’s Marketing Department regard-
ing matters relating to the issuance of a Master Policy.
Intercredit’s custom and practice in March 1982 was to
deal only with FCIA’s Underwriting Department
regarding matters relating to the issuance of an SBCL.
Paul Garrigue is President of Intercredit and a member
of the board of directors of Frank B. Hall. He has been
with Intercredit since 1959.
Garrigue understood in March 1982 that FCIA’s cus-
tom and practice was to consider a Master Policy appli-
cation first and, upon issuance of the quotation and
36a
acceptance by the customer, then to consider an SBCL
application.
42. Both Nu-Air and Intercredit understood as of March 3,
1982 that an FCIA policy’s aggregate limit was the total
Or maximum liability of the insurers thereunder. Nu-
Air assumed as of that date that the aggregate limit
under its proposed FCIA policy would be increased to an
amount at least equal to the size of the SBCL Nu-Air
was seeking.
43. “Article V of the Policy provides as follows:
“The Insurer shall not be liable for any loss;
* * *
J. Under Coverage A-Commercial Credit Risks...
for which written claim is not made, on the Proof of
Loss Form prescribed by the Insurer within eight
months from the date of default.”
44. FCIA’s custom and practice in March 1982 was to
inform the prospective insured’s broker verbally of the
material terms of a policy quotation, including, among
other things, the discretionary credit limit, the aggre-
gate limit of liability, the premium rate, and any special
terms or conditions and, thereafter, to send to the pro-
spective insured’s broker a written quotation.
45. Intercredit has never had any authority to issue policy
quotations on behalf of FCIA, approve policy applica-
tions for FCIA insurance, or approve applications for
SBCL’s under FCIA policies.
46. Michele Milone in March 1982 was a sales representa-
tive in FCIA’s Marketing Department. She began her
employment at FCIA in 1979.
47. Michele Milone was the sales representative at FCIA
responsible for processing Nu-Air’s application for a
Master Policy. Ms. Milone had no authority to approve
the issuance of a policy quotation. Ms. Milone also had
no authority whatsoever with regard to the processing of
an SBCL application.
48. On or about March 3, 1982, Milone notified Ferry by
telephone that FCIA intended to issue to Nu-Air a quo-
tation for an FCIA Master Policy.
49.
50.
51.
9 2
53.
54.
ao.
37a
In March 1982, Intercredit’s custom and practice when
it was advised by FCIA that FCIA would issue a quota-
tion for an FCIA policy was to ask FCIA about any
special terms and conditions which FICA intended to
include in the quotation, including, among other things,
aggregate limit of liability, discretionary credit limit and
premium rate.
In their March 3, 1982 telephone conversation, Milone
informed Ferry of the material terms that would be
included in FCIA’s quote for Nu-Air’s proposed policy,
including the premium rate, discretionary credit limit,
and aggregate limit of liability.
In their March 3, 1982 telephone conversation, Ms.
Milone advised Ms. Ferry that the quote FCIA would
issue to Nu-Air would include the following terms:
a. A $20,000 discretionary credit limit.
b. A $200,000 aggregate credit limit.
c. A premium rate of $1 per $100 of coverage.
In March 1982, FCIA’s custom and practice was to have
a representative of FCIA’s Underwriting Department
inform brokers or insureds of FCIA’s final decision on
an SBCL application.
On March 3, 1982, Intercredit advised Nu-Air that
FCIA would issue a quotation for a Master Policy.
Intercredit on March 3, 1982 also informed Nu-Air that
its SBCL application under the Master Policy had been
approved.
Nu-Air, upon receiving notification from Intercredit
that the SBCL for © *skans had been approved by FCIA,
on or about March 3, 1982, advised Dukans of FCIA’s
approval, and based on Nu-Air’s understanding that
FCIA had approved the SBCL, accepted the order for
custom made aluminum windows and doors in the
amount of $630,137.20 from Dukans; payable one-half
by letter of credit, and the remaining one-half by sight
draft.
Nu-Air immediately proceeded to assemble the
aforedescribed order for Dukans and started shipping
containers of finished windows and doors to the Port of
Jacksonville, Florida, on March 16, 1982. Subsequent
eieeiaiaed
38a
containers of materials were shipped to Jacksonvilie on
March 18, 1982, March 22, 1982, March 26, 1982 (2
containers), April 1, 1982, April 5, 1982, April 7, 1982,
April 14, 1982 (2 containers), April 20, 1982 and April
26, 1982.
56. On March 3, 1982, Healey requested that Ferry ask
FCIA to reconsider its quoted premium rate.
57. On or about March 3, 1982, Ferry, pursuant to instruc-
tions from Nu-Air, requested that FCIA reconsider its
quotation regarding the premium rate set forth on the
policy quote.
58. On March 3, 1982, Intercredit understood that FCIA
had the right, under the terms of Nu-Air’s Master Pol-
icy, to cancel an SBCL without any coverage responsi-
bility prior to shipment of the merchandise unless the
insured had selected pre-shipment coverage.
59. On March 3, 1982, Ferry understood that the aggregate
policy limit was the total liability of the insurer.
60. On March 3, 1982, Ferry understood that, without an
increase by FCIA in the aggregate limit of Nu-Air’s
Master Policy, Nu-Air’s coverage under its policy would
not exceed $200,000.
61. The amount of coverage which Nu-Air requested on its
SBCL application exceeded the amount of the aggregate
credit limit in Nu-Air’s Master Policy.
62. FCIA refused Intercredit’s request to lower the pre-
mium rate which it had quoted to Intercredit for Nu-
Air’s Master Policy.
63. On or about March 4, 1982, FCIA forwarded to Inter-
credit a written quote for Nu-Air’s proposed Master
Policy, which included an aggregate policy limit of
$200,000.
64. In March 1982, Healey understood that FCIA’s custom
and practice was to issue written documentation evi-
dencing approval of an insurance application and an
SBCL application.
65. Neither Nu-Air nor Intercredit ever applied to FCIA for
an increase in the Nu-Air policy aggregate limit. FCIA
never approved an increase in the aggregate limit set
forth in the Nu-Air Master Policy. FCIA never told
39a
anyone at Nu-Air or Intercredit that it would increase
the aggregate limit above $200,000.
66. On March 5, 1982, Intercredit forwarded to Nu-Air a
copy of FCIA’s quote for a Master Policy for Nu-Air.
67. On or about March 10, 1982, Nu-Air received FCIA’s
policy quotation from Intercredit.
68. On or about March 10, 1982, Healey reviewed the quo-
tation for a Master Policy which he received from
FCIA.
69. At the time Healey reviewed the policy quotation, he
was aware that the proposed policy’s aggregate limit was
$200,000.
70. On or about March 10, 1982, Healey, on behalf of Nu-
Air, signed FCIA’s quote for a Master Policy and for-
warded it to Intercredit for transmittal to FCIA.
71. On or about March 10, 1982, Nu-Air submitted to
Intercredit for transmittal to FCIA a check payable to
FCIA in the amount of $500.00 as a premium deposit in
connection with the policy’s issuance.
72. Intercredit, on behalf of Nu-Air, forwarded to FCIA
both the quote for a Master Policy which Nu-Air had
executed and Nu-Air’s $500.00 premium deposit.
73. On March 16, 1982, Intercredit submitted to FCIA a
Dunn & Bradstreet report on Dukans in support of Nu-
Air’s SBCL application.
74. Healey understood as of March 1982, that FCIA
reserved the right to withdraw or cancel the Master
Policy or an SBCL at any time.
75. Healey understood in March 1982 that FCIA. in its
quote to Nu-Air for a Master Policy, offered Nu-Air the
opportunity to select pre-shipment insurance coverage
for its transaction.
76. FCIA’s pre-shipment insurance coverage, subject to its
terms and its conditions, protects the insured, among
other things, against FCIA’s withdrawal of an SBCL
prior to shipment from the United States.
77. Nu-Air elected not to purchase pre-shipment coverage
ir connection with the Dukans transaction because Mr.
Healey deemed Nu-Air’s pre-shipment risks to be small.
| |
78.
79.
80.
81.
83.
40a
On or about March 24, 1982, Nu-Air received the FCIA
Master Policy with Declarations and Endorsements.
The policy did not include an SBCL endorsement.
The Declarations portion of Nu-Air’s Master Policy
contains in Item No. 3 a $20,000 discretionary credit
limit. Under the policy, the Insured is authorized to
enter into transactions not exceeding the amount of the
discretionary credit limit pursuant to such terms as are
required by the policy.
Item No. 7 of the Declarations in Nu-Air’s Master Pol-
icy provides for a $200,000 aggregate limit of liability
under the Master Policy. Article IV.C. of Nu-Air’s
Master Policy, which is specifically incorporated by ref-
erence in Item No. 7 of the Declarations, provides in
pertinent part: “[T]he total liability of the Insurers
under this policy shall not exceed the aggregate limit
authorized in the Declarations.” Article XI.B. of the
policy provides, inter alia: “Issuance by the Insurers of
notification of a Special Buyer Credit Limit shall, as of
its effective date, operate to replace the Discretionary
Credit Limit pertaining to insured transactions thereaf-
ter made to the buyer designated in the notification of a
Special Buyer Credit Limit.”
The terms of the Master Policy which FCIA, on or
about March 19, 1982, issued to Nu-Air included,
among other things:
a. A discretionary credit limit of $20,000 subject to
certain conditions.
b. An aggregate limit of $200,000.
A premium rate of one dollar per $100 of
coverage.
Nu-Air’s application for an SBCL in the amount of
$371,530.49 exceeded the aggregate limit of the Master
Policy which FCIA issued to Nu-Air.
Article X1.B. of Nu-Air’s Master Policy provides, inter
alia:
The Insurers shall have the right at any time to add
to, delete, or amend any limitation, condition, or
credit limit including the right to withdraw coverage
with respect to any country or buyer... Any
4la
change, whether by endorsement or otherwise, shall
apply only to transactions which would otherwise be
insured transactions made on or after the effective
date of such change.
84. Mohammed Aslam is a financial analyst in FCIA’s
Underwriting Department. He has been employed at
FCIA since 1971. His duties include conducting the
buyer analysis involved in processing SBCL
applications.
85. Smeraldo Torchia is Assistant Vice President of Inter-
credit. He has been employed at Intercredit since 1981.
Prior to that time, he worked at FCIA as an
underwriter.
86. On or about March 17, 1982, FCIA’s Underwriting
Department received and logged in Nu-Air’s SBCL
application.
87. Onor about March 19, 1982, Aslam processed Nu-Air’s
SBCL application.
88. Onor about March 19, 1982, Aslam concluded that Nu-
Air’s application should be withdrawn because of his
understanding that there was a Nigerian government
ban on imports.
89. Onor about March 19, 1982, Aslam verbally informed
Torchia of Intercredit that FCIA was withdrawing Nu-
Air’s SBCL application.
90. Intercredit’s custom and practice in March 1982, was to
inform a client immediately upon receipt of any written
or verbal information from FCIA regarding withdrawal
or cancellation of the client’s SBCL.
91. Torchia’s custom and practice in March 1982 was to
communicate to the client immediately any information
which he received from an insurance company regarding
the client’s application or policy.
92. Torchia advised Aslam on or about March 11, 1982 that
he (Torchia) would notify Nu-Air that FCIA had
rejected Nu-Air’s SBCL application.
93. On April 2, 1982, FCIA issued written notification to
Nu-Air and Intercredit that Nu-Air’s application for an
SBCL was considered withdrawn because of import
restrictions imposed by the Nigerian government.
aac
94.
95.
96.
97.
98.
99.
42a
Following receipt of written notification from FCIA that
Nu-Air’s SBCL application had been withdrawn, Inter-
credit asked FCIA to review Nu-Air’s application.
On or about April 12, 1982, Nu-Air received FCIA’s
written notification that Nu-Air’s SBCL application
had been withdrawn.
Nu-Air telephoned Intercredit immediately upon get-
ting the notice of rejection from FCIA and advised
Intercredit that (a) the order for custom made windows
from Dukans was accepted solely on the strength of
FCIA’s approval of Nu-Air’s SBCL application for
Dukans, insuring approximately one-half of the value of
the order; (b) Dukans had been advised by Nu-Air on or
about March 3, 1982, that the order for custom made
aluminum windows and doors in the amount of
$630,137.20 was accepted and would be fabricated.
placed in containers and loaded for shipment on or about
April 30, 1982, to Nigeria; (c) the payment terms of the
order were 50% letter of credit and 50% sight draft, with
the FCIA credit insurance covering the sight draft part
of the order, and that Nu-Air had to ship the entire
order in the amount of $630,137.20 in order to collect
the 50% portion of the sale covered by the letter of
credit; (d) a substantial part of the order had already
been manufactured, and 8 containers out of a total of 12
had already been transported to Jacksonville, Florida,
where arrangements had been made to ship the material
on the “Seki Rolette” vessel on or about April 30, 1982;
and (¢) the order was custom made to Dukans’ specifi-
cations and had little salvage value.
On or about April 12, 1982, Ferry verbally asked FCIA
to reconsider Nu-Air’s SBCL application because Nu-
Air had satisfied Nigerian import requirements.
On April 12, 1982 Ferry told Healey that she was
already aware of FCIA’s refusal to issue an SBCL to
cover the Nu-Air sale to Dukans.
On or about April 12, 1982, Ferry informed Nu-Air that
any shipments which Nu-Air made to Dukans would not
be covered by FCIA insurance.
100.
101.
102.
103.
104.
105.
106.
107.
108.
109.
43a
On or about April 12, 1982, in response to Ferry’s
request that FCIA review Nu-Air’s SBCL application,
FCIA reviewed its underwriting analysis of Dukans.
On or about April 13, 1982, FCIA verbally informed
Intercredit of its decision to reject Nu-Air’s SBCL
application.
On or about April 15, 1982, FCIA Underwriting Man-
ager, Eric Krauss, sent Ferry a written explanation
regarding FCIA’s denial of Nu-Air’s SBCL’s applica-
tion for its transaction with Dukans.
Between April 12 and April 30, 1982, Ferry and Healey
had at least one conversation in which Ferry advised
Healey of Ferry’s position that Nu-Air did not have
coverage for its transaction with Dukans, that FCIA had
the right to withdraw coverage prior to shipment from
the United States and that Nu-Air should not ship to
Dukans.
Nu-Air, on or about April 30, 1982, shipped from the
United States the goods that it had sold to Dukans.
Nu-Air, on May 11, 1982, wrote Intercredit that the
complete order for Dukans was completed and loaded on
April 30, 1982, which was within the time frame of the
original Form M (Import Permit). Nu-Air further
advised Intercredit that payment of the premium due for
this shipment would be made on the statement due May
15, 1982.
On or about May 18, 1982, Nu-Air forwarded FCIA its
check in the amount of $3,128.15, along with a shipping
report which included the aforedescribed-Dukans ship-
ment insuring the amount of $311,910.00.
Dukans, on or about July 13, 1982, advised Nu-Air by
letter that the aforedescribed shipment arrived and the
material was in good order.
Prior to September 1984, Healey never saw the April 15,
1982 letter from Krauss to Ferry.
The sight drafts issued by Dukans to pay for 50% of its
order from Nu-Air became due no earlier than August
2, 1982, but no later than August 15, 1982. Dukans’
failure to make payment to Nu-Air by the August 1982
110.
112.
113.
114.
115.
116.
117.
44a
due date of the sight drafts constituted a default under
the FCIA Master Poiic.
Nu-Air, on or about August 24, 1982, cabled Dukans
requesting the status of the sight drafts and on Septem-
ber 15, 1982, requested payment of the sight drafts,
which were due no earlier than August 2, 1982, but no
later than August 15, 1982. Nu-Air thereafter made
numerous demands for payment from Dukans, who
repreatedly promised to pay Nu-Air, but failed to do so.
On or about April 11, 1983, Nu-Air mailed to FCIA a
Notice of Claim and Proof of Loss form alleging that
Dukans had failed to make payment under the sight
draft for the windows and doors Nu-Air had shipped to
Dukans, which documents FCIA received April 18,
1983.
In its Notice of Claim and Proof of Loss form, Nu-Air
alleged that Dukans owed $311,846.32 to Nu-Air stem-
ming from Dukans’ default on its sight drafts.
On or about May 18, 1983, FCIA denied Nu-Air’s
claim.
The phrase “insured transaction” is defined in Article
IIl of Nu-Air’s Master Policy, in pertinent part, as “a
sale or sales approved by the Insurers on the conditions
specified in the declarations, provided the products sold
are: 1. shipped from the United States during the
policy period specified in the declarations such shipment
to begin when the products in question are placed en
route to the buyer on the order of the Insured or any of
its agents.”
The sales contract entered into by Nu-Air and Dukans
does not mention Nu-Air’s acquisition of FCIA export
credit insurance as a condition of the sale.
Nu-Air and Dukans never entered into any written
agreement that a condition of the sale of aluminum
windows and doors to Dukans was conditioned upon Nu-
Air’s receipt of FCIA export credit insurance.
The cost of the raw materials required to manufacture
the Dukans order equalled approximately 60% of the
purchase price.
118.
119.
120.
121.
122.
123.
124.
125.
126.
1a?
128.
45a
The cost of the labor required to manufacture the
Dukans order equalled approximately 10% of the
purchase price.
Nu-Air made no effort to sell the goods manufactured
for the Dukans order to another purchaser after Inter-
credit informed Healey that FCIA had withdrawn its
SBCL policy application.
Nu-Air at the time it received cancellation of the cover-
age from FCIA: (a) had finished manufacturing a sub-
stantial portion of the aforedescribed order and had
already shipped 8 out of the total 12 containers to the
Port of Jacksonville, Florida; and (b) would have lost
the opportunity of receiving the sum of $318,290.88,
which represented that part of the order secured by
Letters of Credit if the order was not shipped.
Nu-Air never attempted to renegotiate its sales agree-
ment with Dukans after it received notification that
FCIA had withdrawn Nu-Air’s SBCL application.
Nu-Air’s custom and practice in March 1982 was to
order raw materials automatically when inventory
dropped below a set level for each item.
Nu-Air, both prior to and subsequent to March 4, 1982,
made purchases of the same raw materials which it used
in connection with the Dukans order.
All of the products which Nu-Air sold to Dukans are
listed in Nu-Air’s product catalogue, and were sold in
1982 in the normal course of Nu-Air’s business.
Subsequent to Nu-Air’s sale to Dukans, Nu-Air
received orders for windows and doors identical to some
of those which were involved in the Dukans transaction.
Nu-Air’s Master Policy provides in Article VI.F ‘at
the Insured agrees “to use all reasonable measures to
prevent or minimize /oss hereunder and take all reason-
able steps to effect recoveries” [emphasis in original}.
Dukans in February 1984 made payments against four
of its drafts by depositing Nigerian currency equivalent
at the time to $101,566.51 in Nu-Air’s account at Nu-
Air’s Nigerian correspondent bank.
Dukans informed Nu-Air in March 1984 that it had
made payment in Nigerian currency to Nu-Air against
129.
130.
131.
132.
133.
134.
46a
four additional drafts by depositing the monies in Nu-
Air’s account at Nu-Air’s Nigerian correspondent bank.
First National Bank of Florida has informed Nu-Air
that Nigerian currency covering eight of the invoices
involved in the Dukans sale has been deposited in a
Nigerian bank.
Article VI.C. of the Master Policy provides:
The insured agrees:
* * *
B. tonotify the Insurers in writing, within 15 calen-
dar days of actual knowledge thereof, of financial
difficulty of any buyer rendered an insured transac-
tion, or of the occurrence of any risks enumerated in
Article II hereof likely to cause a Joss hereunder with
respect to such buyer. [Emphasis in original and
indicates terms defined elsewhere in the policy. ]
Until Nu-Air filed in February 1983 its Overdue
Accounts Report for January 1983, Nu-Air had not
notified FCIA that Dukans had defaulted in August
1982 on Dukans [sic] obligation under the sight drafts.
Article V.D. of Nu-Air’s Master Policy provides that the
insured agrees:
D. To record on the Overdue Accounts Report
Form all amounts due the Insured from buyers which
at the end of the previous month were wholly or partly
unpaid for more than 90 days from the due date
(whether or not previously reported as overdue) and
to record each month thereafter all amounts which
continue to be wholly or partly unpaid, unless and
until a claim is filed in connection with such unpaid
amounts [Emphasis in original. ]
Nu-Air reported to FCIA Dukans’ default on the sight
drafts in Nu-Air’s Overdue Accounts Report dated Feb-
ruary 12, 1983 covering the reporting period for January
1983.
Article VI. of the policy provides, inter alia, that
“The Insured agrees;
E. touse all reasonable measures to prevent or min-
imize /oss hereunder and take all reasonable
136.
137.
138.
139.
a ne
47a
steps to effect recoveries including, if required by
and at the expense of the Insurers (subject to the
provision of Article X), enforcement of any
security and institution of legal proceedings in
the name of the Insured against either the buyer
or any guarantor or both.”
Article XI. provides as follows:
“I. Compliance by Insured
Failure by the Insured to comply with any term or
condition of this policy shall not be deemed to have
been excused or accepted by the Insurers unless the
same is specifically so excused or accepted by an
officer of the Insurer in writing.”
Nu-Air was compelled to and did employ David Hyman,
P.A., to institute this action to collect $280,661.68 plus
interest, costs and attorney’s fees for said loss and has
agreed to pay its attorney a reasonable fee for said
services.
Article VI. of the policy provides, inter alia, that
“The Insured agrees:
A. to pay the premiums in the amounts specified in
the declarations in accordance with the terms set
forth therein;”
Article XI.C.1. of Nu-Air’s policy provides that,
“The Insured shall declare the gross invoice value of
all shipments under insured transactions on the
applicable report form provided by the Insurers and
shall submit the premium for such shipments on or
before the 15th day of the month following each
reporting period. The Insured agrees to submit such
report form even if no shipments under insured trans-
actions are made during any reporting period.”
[Emphasis in original. ]
Item No. 8.3 of Nu-Air’s policy provides,
“The Insured shall declare the gross invoice value of
all shipments under insured transactions on the
applicable report form provided by the Insurers and
shall submit the premium for such shipments on or
48a
before the 15th day of the month following each
reporting period. The Insured agrees to submit such
report form even if no shipments under insured trans-
actions are made during any reporting period.”
{Emphasis in original. ]
140. Item No. 9 of Nu-Air’s policy provides,
“All shipments of all products stated in the applica-
tion made a part hereof which qualify as insured
transactions shall be declared and the appropriate
premium paid thereon.” [Emphasis in original. ]
141. Article V. of the policy provides that,
“The Insureds shall not be liable for any loss:
* * *
L. if the Insured has failed to compy with any term
and condition of the Application, Declarations or
Policy including Endorsements and Special
Conditions;”
142. Article XI.J. of the policy provides that,
“1. If the Insured fails to file any shipment report,
to declare any shipment, or to pay any premium
when due, the Insurers may at their option:
a) terminate the policy as of the date such ship-
ment report, or declaration, or premium
payment was due by giving the Insured writ-
ten notice of such termination; or
b) continue the policy in force for the remain-
der of the policy period, or any part thereof
and hold the Insured liable for payment of
premium to the end of the policy period or to
any earlier date elected by the Insurers.”
143. Article IV.B. of the policy provides that,
“B. The amount of the credit limit for any particu-
lar buyer shall be:
1. The amount of the Discretionary Credit
Limit authorized in the declarations; or
2. such other amount as the Insurers shall
approve by written notification to the
Insured of a Special Buyer Credit Limit.”
49a
CONCLUSIONS OF LAW
A) Whether or not FCIA advised intercredit, on March 3, 1982,
orally, that FCIA had approved Nu-Air’s application for an
SBCL, and/or orally advised said parties of the withdrawal of the
alleged coverage prior to the written notification of April 12,
1982, the clear language of the policy enabled FCIA to withdraw
said coverage. Furthermore, the explicit requirements for writ-
ten notification preclude this Court’s holding that the SBCL was
approved.
B) FCIA’s liability under the policy it issued to Nu-Air, in the
event of non-payment by Dukans, did not accrue prior to FCIA’s
withdrawal of coverage for the Dukans transaction.
C) Nu-Air did not have coverage under its policy for the eight
containers shipped to Jacksonville prior to April 12, 1982, or
thereafter.
D) Nu-Air’s reliance on Intercredit’s alleged March 3, 1982
statement that FCIA had approved Nu-Air’s application for an
SBCL was not reasonable where Nu-Air knew that FCIA’s
aggregate limit of liability under the policy was $200,000.
E) Assuming FCIA advised Intercredit on or about March 3,
1982, that FCIA had apprpved [sic] Nu-Air’s application for an
SBCL for the Dukans transaction, Intercredit’s reliance on
FCIA’s statement was not reasonable where Intercredit was
aware that the policy’s aggregate limit was $200,000.
F) Nu-Air’s failure, until February 1983, to report to FCIA
Dukans’ default on an FCIA Overdue Accounts Report, or other-
wise, bars Nu-Air from recovering against FCIA under the policy
where Nu-Air was aware on or about August 31, 1982, that
Dukans had defaulted on its obligation to make payment to Nu-
Air on the sight drafts, no earlier than August 2, 1982, but no
later than August 15, 1982.
G) FCIA was acting within its authority as the agent of the
Export-Import Bank of the United States, and is immune from
suit under Nu-Air’s negligent misrepresentation claim.
50a
H)Nu-Air’s failure to mail, prior to April 11, 1983, a Proof of
Loss/Notice of Claim form, which FCIA received on April 18,
1983, bars Nu-Air’s recovery here.
I) Intercredit had no authority to secure or maintain export
credit insurance. It clearly had authority to act only as Nu-Air’s
broker.
J) Even if Intercredit did orally advise Nu-Air that said SBCL
would be approved, said representation would not be negligent
where Nu-Air received oral notification of policy limits so as to
negate said coverage, and said policy clearly did not provide such
coverage and clearly contained a provise [sic] to withdraw said
coverage prior to shipment, and Nu-Air clearly elected not to
have pre-shipment coverage.
Accordingly, it is
ORDERED that the motions for summary judgment be, and
hereby are, granted. The Clerk of this Court is directed to enter
judgment in accord with this Order; entering judgment in favor of
FCIA and Intercredit, and against Nu-Air. The motion to strike
is rendered moot by this determination.
DONE and ORDERED in Chambers, in Tampa, Florida, this
20th day of December, 1985.
eee eee eee eee eee eee eee eee eee eee eee eee eee eee eee ee eee
ELIZABETH A.
KOVACHEVICH
United States District Judge
Copies to:
All parties and counsel of record
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Rule 28.1 List
The foilowing is a list of the member companies of FCIA,
named defendants herein, during the time period relevant to this
dispute.
Aetna Casualty and Surety Co., Inc.
Aetna Insurance Co.
American Home Insurance Co.
American Mutual Liberty Insurance Co.
Atlantic Mutual Insurance Co.
Commercial Union Insurance Co.
Continental Casualty Co.
The Continental Insurance Company
Employers Mutual Insurance Co. of Wisconsin
Federal Insurance Co.
Fireman’s Fund Insurance Co.
The Hanover Insurance Co.
Hartford Accident and Indemnity Co.
The Home Insurance Co.
Insurance Co. of North America
Liberty Mutual Insurance Co.
Lumbermens Mutual Casualty Co.
Reliance Insurance Co.
Royal Indemnity Co.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.