Last month, the United States Court of Appeals for the Second Circuit upheld the Southern District of New York’s award of over $2 million to policyholder, Fabrique Innovations, Inc., against its ocean cargo insurance carrier, Federal Insurance Company.
Federal issued an “all-risk” ocean cargo insurance policy to Fabrique for fabric and plush merchandise “temporarily in storage” at a warehouse owed by Hancock Fabrics. Fabrique’s goods were lost when Hancock liquidated its holdings—including Fabrique’s merchandise—as part of Hancock’s bankruptcy proceedings. Following the loss, Fabrique filed a claim under its policy with Federal. Federal denied the claim, citing various exclusions, including an exclusion for “loss, damage or expense caused by or resulting from willful misconduct, fraud or deceit,” which the insurer argued was triggered due to Hancock’s sale of the goods in violation of the parties’ third-party logistics agreement.