## Facts

- Mirasco, Inc., a Georgia exporter of beef products, shipped frozen beef livers to Egypt aboard the M/V Spero, which sailed December 31, 1998.
- While the cargo was in transit, Egypt’s Ministry of Trade issued Decree No. 6 (Jan. 3, 1999), barring importation of IBP products.
- When the vessel arrived (Jan. 23, 1999), Egyptian authorities refused entry for portions of the shipment.
- Cargo associated with IBP was treated as barred under the decree; other cargo (from Excel and Monfort) was rejected on asserted health/sanitary grounds, though the insurers contended the causes were mislabeling and other non-covered reasons.
- The goods were returned to the United States and resold at lower prices than expected in the Egyptian market.
- Mirasco held an ocean marine cargo policy providing “rejection coverage” for goods condemned or rejected by the importing country’s governmental authorities, subject to exclusions/limitations including embargo or prohibition, loss of market, and mislabeling-type defects.
- The insurers paid return freight for some IBP cargo but denied broader indemnity for most claimed losses.
- The insurers filed a New York declaratory-judgment action seeking a declaration of no coverage; Mirasco filed a Georgia action for breach and bad-faith denial (later removed, transferred to S.D.N.Y., and consolidated).
- On cross-motions for summary judgment, the court addressed whether coverage existed and whether defenses and extra-contractual claims could be resolved as a matter of law.

## Issues

1. Whether Egyptian authorities’ actions constituted a “rejection” within the policy’s rejection coverage.
2. Whether Decree No. 6 was an “embargo” or “prohibition” under the policy and, if so, whether coverage for affected cargo was limited to return freight.
3. Whether exclusions (including mislabeling and loss-of-market provisions) barred coverage for Excel and Monfort cargo.
4. Whether the insurers could void or defeat coverage at summary judgment based on alleged fraud or misrepresentation in claim presentation.
5. Whether either party was entitled to summary judgment on Georgia bad-faith and punitive/extra-contractual claims while coverage and causation remained disputed.

## Decision

- The court granted the insurers’ motion in part and denied it in part, and denied Mirasco’s cross-motion.
- The court held Decree No. 6 was an embargo/prohibition as to IBP cargo, limiting the insurers’ obligation to return freight already paid; Mirasco could not recover additional IBP-related losses.
- The court found “rejection” ambiguous in the policy and construed it in favor of the insured, allowing that Egyptian authorities’ refusal of entry could qualify as a covered “rejection.”
- As to Excel and Monfort cargo, the court held factual disputes existed over the reasons for rejection and proximate cause (covered health/sanitary reasons versus excluded mislabeling/other causes), precluding summary judgment on the extent of coverage.
- The court rejected, at the summary-judgment stage, the insurers’ fraud/concealment defense due to insufficient evidence of willful intent to deceive.
- The court declined to grant Mirasco summary judgment on bad-faith claims and did not dispose of all extra-contractual issues, given unresolved coverage and causation questions.

## Legal Principles

- Ambiguous insurance-policy terms are construed against the insurer and in favor of coverage.
- An exclusion or limitation for governmental embargo/prohibition may restrict recovery where a decree bars importation irrespective of any shipment-specific defect.
- Insurers bear the burden to establish the applicability of policy exclusions on summary judgment.
- Summary judgment is inappropriate where the record permits competing inferences on proximate cause and mixed covered and excluded causes.
- Avoidance of coverage for fraud in claim presentation requires proof of material falsity and willful intent to deceive; disclosure in pleadings and an undeveloped intent record may defeat summary adjudication.
- Bad-faith and extra-contractual liability typically cannot be resolved in the insured’s favor as a matter of law while contractual coverage remains genuinely disputed.

## Conclusion

The court enforced the policy’s embargo/prohibition limitation to confine IBP-related recovery to return freight, construed the ambiguous “rejection” term to permit potential coverage for governmental refusal of entry, and required trial-level factfinding on causation and exclusions for non-IBP cargo, while declining to invalidate the policy for fraud and leaving bad-faith issues dependent on unresolved coverage disputes.


American Nat'l Fire Ins. Co. v. Mirasco, Inc., 249 F. Supp. 2d 303 (S.D.N.Y. 2003)