Insurable Interests

SMG was a frozen-poultry wholesaler, and Sanderson was one of the suppliers.

SMG contracted to sell 24 containers of frozen poultry to KVADRO, a Russian company.

The shipping terms were CIF (cost insurance and freight). In connection with the

business, SMG acquired a one-year, open-cargo insurance policy from Lloyd's.

SMG arranged for shipment to Russia through P & O Nedlloyd. In April, the

Russian government suspended all previously issued permits for the import of poultry

into Russia from the United States. Due to this and the change of the city to which the poultry was to be shipped, the shipment violated the 60-day rule and was subsequently

seized.

After the investigation ended, the shipment was released, but before it was picked

up, it was seized again, and SMG never received payment. SMG then filed a claim

against the insurance policy with Lloyd's, which was rejected. Nedlloyd and SMG then

sued each other, seeking freight charges and damages, respectively.

Nedlloyd subsequently added Lloyd's to its suit, claiming to be a third-party

beneficiary. Lloyd's moved for summary judgment 1 because Nedlloyd was not an

intended third party, SMG had no insurable interest at the time, Lloyd's policy did not

cover credit risk, and seizure by customs was excluded from the contract. A summary

judgment was issued by the district court, claiming SMG had no insurable interest and

Nedlloyd was not an intended beneficiary. The ruling was appealed by SMG.

Does SMG have an insurable interest?

Rule:

Analysis:

Public Policy (+3 bonus pts): Your opinion as to why it benefits the general public for

the court to agree with your conclusion.