Standard Oil Co. of NJ v. United States

Background

A shipowner sued the United States under two government-issued war-risk insurance policies after the steamship Llama was stopped, boarded, and put under the control of a British warship, then struck a rock and was lost. The District Court awarded the owner damages, the Circuit Court of Appeals reversed that award, and the Supreme Court agreed to decide whether the loss was covered.

Reasoning

The key question was whether the sinking counted as a loss caused by a seizure or as a separate marine accident not covered by the policies. The Court found that the British lieutenant had assumed ultimate control of the ship after boarding and that the vessel was effectively seized before the accident. The Court reasoned that losses that happen while a ship is held by a hostile or controlling power fall within insurance against seizure, so the owner was entitled to recovery. The Court modified the District Court’s decree to add interest and specific sums, reversed the appeals court, and affirmed the District Court as modified.

Real world impact

The decision means owners whose ships are taken or controlled by an enemy or foreign naval power can claim under similar war-risk policies for losses occurring during that control. It also enforces contractual payment terms, awarding interest from a stated date after proofs were filed. Insurers and government bureaus issuing such policies must treat seizures and detentions as covered events when control caused the loss.

Dissents or concurrances

One Justice disagreed and would have affirmed the Circuit Court of Appeals, opposing the majority’s view that the seizure made the loss an insured event.