This is an action to enforce an insurance contract between plaintiff Lovell Manufacturing Company ("Lovell"), the manufacturer of washing machine parts, and defendants Export-Import Bank of the United States ("Eximbank") and Foreign Credit Insurance Association ("FCIA"), who issued and reissued an insurance policy to cover certain relevant shipments of washing machine Parts to Menaca, a Venezuelan corporation. The essential facts of this case are not in dispute, and are set forth in the Joint Partial Stipulation of Fact as well as in affidavits separately filed. Procedurally, this case has taken a circuitous route to get to its present position having been subject to two prior summary judgment motions and an appeal. The case is now before us on remand from the Third Circuit, and the parties have filed cross-motions for summary judgment. These motions have been fully briefed and are ready for our consideration.
Two legal issues remain in dispute. The first requires us to determine whether FCIA, the sole insurer with respect to the "Commercial Credit risks" insurance coverage applicable herein, either waived a condition precedent to this coverage or is now estopped from asserting such a condition.
The condition precedent which FCIA is attempting to enforce is the requirement that Lovell obtain an unconditional guarantee of Menaca's indebtedness from Cetico, a large Venezuelan corporation of which Menaca was a wholly owned subsidiary. Plaintiff argues that FCIA's actions in accepting Lovell's insurance application and supporting information, and in thereafter issuing an insurance policy and accepting Lovell's premiums, constituted an implied waiver of the right to enforce the condition precedent.
The parties have placed before the court numerous exhibits, an extensive "partial" stipulation of facts, as well as separately filed affidavits providing a detailed and somewhat complicated factual situation. We do not intend to recite every fact that the parties have included in the record for our consideration, but we find certain facts are central to an understanding of our decision. We will therefore attempt to state them in as simple a manner as possible.
Prior to 1980, Lovell sold washing machine parts to Menaca on ninety- day credit terms. In mid-1980, Lovell's competitors offered Menaca 180-day credit terms on such sales. Lovell wanted to remain competitive, but was concerned about assuming the added risk that such an extension of unsecured debt would entail. Therefore, Lovell approached Ceteco, Menaca's parent corporation, for a guarantee of Menaca's debts. Ceteco sent Lovell a letter dated July 25, 1980 in which it extended a guarantee.
Lovell intended that this guarantee would provide it with some security on an interim basis until it could obtain export credit insurance. Subsequently, Lovell applied for such insurance from FCIA and Eximbank.
FCIA issued a "Master Export Credit Insurance Policy", number SD-1538, on December 22, 1980, with effective dates of December 10, 1980, through December 31, 1981. On December 22, 1981, FCIA issued a renewal effective January 1, 1982, through December 31, 1982. Lovell paid the required premiums. Prior to December 10, 1980, Lovell had never been insured under any foreign credit insurance policy.
The Master Policy covered certain limited enumerated risks of non-payment from Lovell's foreign customers under a discretionary credit limit in amounts up to either $20,000 or $30,000 per transaction depending on the payment terms. During the renewal period from January 1, 1982, through December 31, 1982, the policy's aggregate limit of coverage for all transactions was raised from $500,000, the original limit, to $750,000. The master policy included a provision that a condition precedent to the insurer's liability was full compliance with all terms. See article X. The policy also contains a provision which essentially prohibits anything but a written waiver of compliance with all conditions. See article XI.I.
The problem with the master policy was that it didn't really meet Lovell's needs in terms of foreign credit insurance unless Lovell could also obtain what was referred to as a Special Buyer Credit Limit. Lovell's estimated volume of sales to Menaca, which was Lovell's only foreign customer at the time, were expected to be greatly in excess of the master policy's $30,000 and $20,000 discretionary credit limit per transaction. Before applying for insurance, Lovell informed FCIA of the fact that Lovell wanted the insurance in question only if it could obtain the special buyer credit limit. FCIA informed Lovell that the master policy had to be issued first before Lovell could apply for the special buyer credit limit. Lovell complied with this requirement and subsequently made application for the special buyer credit limit, including with the application its backup documentation and the July 25, 1980, Ceteco guarantee. The application was initially declined by FCIA which indicated that "current financial statements on the buyer and the guarantor (were needed) in order to reconsider . . ." Lovell resubmitted its application with a financial statement on Ceteco and a reference to other information already in FCIA's files. FCIA issued the Special Buyer Credit Limit on May 21, 1981 covering sales from Lovell to Menaca in amounts up to $500,000 on 180-day open account payment terms. The original special buyer credit limit covered eligible shipments made between April 1, 1981, and April 30, 1982.
Lovell's special buyer credit limit lapsed on May 1, 1982. Nonetheless, between May 1, 1982 and December 27, 1982, Lovell made shipments to Menaca with a gross invoice value of $592,336.66.
At the time of these shipments, Lovell's only coverage in effect was the discretionary credit limit of the master policy. Lovell belatedly made application for a second special buyer credit limit to cover these shipments on December 28, 1982. On January 18, 1983, Lovell received notification that FCIA had issued a second special buyer credit limit, which FCIA approved retroactively to cover the period from May 1, 1982 through April 30, 1983, in amounts up to $750,000.
The condition precedent was included in the "Notification, Special Buyer Credit Limit" issued by FCIA on May 21, 1981, as well as in the second notification of the Amended Special Buyer Credit Limit received on January 10, 1983. These notifications indicated in relevant part as follows:
Coverage under this Special Buyer Credit Limit is conditioned upon the insured's obtaining and maintaining as valid and enforceable the unconditional and irrevocable guarantee of Ceteco de Caracas, S.A., of Venezuela.