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HAMILTON BANK v. EXPORT-IMPORT BANK OF THE UNITED

April 28, 1986

HAMILTON BANK
v.
EXPORT-IMPORT BANK OF THE UNITED STATES and FOREIGN CREDIT INSURANCE ASSOCIATION



The opinion of the court was delivered by: TROUTMAN

 TROUTMAN, S.J.

 This action resulted from the default by a number of Mexican companies in repayment of loans extended by the plaintiff. Hamilton Bank seeks to recoup the resulting losses from defendants Export-Import Bank of the United States (Eximbank) and the Foreign Credit Insurance Association (FCIA) pursuant to certain insurance contracts issued to plaintiff allegedly insuring it against the losses suffered from the defaults.

 An understanding of this action requires an understanding of the relationship between the two defendants. Congress created Eximbank in 1945 to serve as, inter alia, a medium for encouraging American lending institutions to extend credit to foreign entities which, in turn, would be required to use the loans to purchase goods manufactured in the United States. As an incentive to commercial lenders to extend such credit, Eximbank, pursuant to its statutory authority, organized the FCIA, an association of the nation's leading commercial insurers, to facilitate a supply to meet the demand for insurance against the risk of foreign debtors defaulting on loans extended pursuant to this scheme. Eximbank's authorizing statute, 12 U.S.C. § 635, et seq., provides that the Bank itself may issue such insurance or may utilize insurance companies or groups of insurance companies, i.e., FCIA, as its agent in the issuance of such insurance and the processing of claims. 12 U.S.C. § 635(c)(2).

 Hamilton Bank, as part of this scenario, advanced loans to a number of Mexican companies which, as stated earlier, defaulted in the repayment of the loans when the Mexican government prohibited Mexican nationals from repaying such debts in United States dollars. *fn1" Following the defaults, the plaintiff presented to FCIA, pursuant to certain policies for export credit insurance it had purchased from the defendants, notices of claims and proofs of losses, seeking recovery of the unpaid balances on the defaulted loans. Since the losses resulted from an occurrence within the political risk provisions of the policies, Eximbank serves as the actual insurer of any covered losses. (Charamella Affidavit, Ex. B-1, Coverage B, and Ex. B-2, Coverage B). *fn2"

 Eximbank, through FCIA, initially paid one of the claims; however, it subsequently denied that Hamilton Bank had suffered any covered losses regarding any of the sixteen (16) claims involved. The defendants denied the plaintiff's claims for the reason that the bills of lading and airway bills presented by Hamilton Bank as proof of shipment were fraudulent. It is undisputed that the bills of lading and airway bills were fraudulent. It is also undisputed that Hamilton Bank had no knowledge that the bills were fraudulent. It presented the documents to FCIA in complete good faith.

 The plaintiff states three (3) causes of action against the defendants. Count I states a cause of action for breach of contract. Count II states a cause of action for intentional misrepresentation. Count III appears to state a cause of action for "bad faith denial" or, in the alternative, is an extension of the plaintiff's claim stated in Count II to include a demand for punitive damages. The defendants have filed no answer to the plaintiff's complaint and discovery has yet to be taken. The action comes before us for consideration of the defendants' motion for summary judgment. *fn3"

 A. The insurance contracts.

 The defendants issued two types of insurance policies to Hamilton Bank. Claims 1 through 12 are controlled by the provisions of the "Short Term-Comprehensive Export Credit Insurance Policy", (Charamella affidavit, Ex. B-1). Claims 13 through 16 are controlled by the provisions of the "Master Export Credit Insurance Policy", (Charamella affidavit, Ex. B-2). Both policies contain similar, if not identical, language regarding "insured" risks. The Short Term policy under Coverage B - Political Risks provides, "Eximbank will indemnify the insured . . . in connection with eligible shipments. . ." (Emphasis added). "Eligible shipments" are defined as:

 
. . . all shipments of products stated in the application made a part hereof which products are: 1. shipped from the United States during the policy period specified in the declarations ; and . . . 5. shipped to buyers in the countries listed on the Countries Limitation Schedule. . . (Emphasis added).

 (Charamella affidavit, Ex. B-1). The Short Term policy further provides that, "An eligible shipment begins when the products in question are shipped en route to the buyer on the order of the insured or any of its agents". Id. Regarding presentment of the proof of loss, the Short Term policy provides Eximbank "will make payment within three months after the submission by the Insured of the best evidence reasonably available to it" that a loss covered by the political risk provisions of the policy has occurred.

 The Master policy provides that under Coverage B- Political Risks, "The Insurer will indemnify the Insured . . . with respect to the financed portion of an insured transaction. . ." (Emphasis added). (Charamella ...


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