Calmar Steamship Corp. v. Scott

Background

A U.S.-chartered cargo ship, the Portmar, left San Francisco in late 1941 carrying military supplies. After Pearl Harbor, naval authorities diverted and repeatedly ordered her movements in Australian waters. While at anchor at Darwin in February 1942, Japanese aircraft bombed and damaged the ship, forcing abandonment. The shipowner sued British underwriters under a war-risk policy; lower courts disagreed about whether the policy still covered the loss after Allied control and apparent detention.

Reasoning

The Court examined the policy’s layered clauses: a basic clause that would cover the damage, a capture-and-seizure warranty that would exclude it, and a war-risk rider with a saving clause that appeared to reinstate coverage for losses caused by implements of war so long as the vessel was not condemned. The Court read the saving clause to keep coverage in force unless there was an unambiguous, objectively provable decision by the requisitioning sovereign to abandon the voyage. Because no such clear decision appeared before the damage, the policy still covered the loss and the Court reversed the appeals court judgment and remanded the case.

Real world impact

The ruling means war-risk insurance bought to cover losses from wartime detainments cannot be defeated merely by showing Allied control or the likelihood of prolonged use. Insurers will need clear evidence of a sovereign decision that ends the voyage to deny coverage. The Court remanded subsidiary questions, such as constructive total loss and abandonment, back to the lower court for further proceedings.

Dissents or concurrances

Justices Douglas and the Chief Justice would have dismissed the case as improvidently granted and would leave the factual weighing to the experienced lower admiralty judges; Justice Minton joined an opinion favoring the appeals court.