## Facts

- Shared Imaging, Inc. purchased a Siemens Harmony 1.0 Tesla mobile MRI system from Neuromed Medical Systems & Support GmbH, a German seller.
- The contract required shipment “CIF” to New York City; Shared Imaging would handle customs clearance and transport to Calumet City, Illinois.
- The contract provided German law as governing law.
- Payment terms required final payment upon acceptance in Illinois; Neuromed retained title until final payment, and acceptance was noted as “subject to inspection.”
- The MRI was loaded onto the vessel at the German port allegedly undamaged and in good working order.
- By the time the MRI arrived in Calumet City, it was damaged and required extensive repairs; the insurers (St. Paul and Travelers) paid Shared Imaging about $285,000 and sued Neuromed as subrogees.
- Neuromed moved to dismiss; an earlier order rejected a forum-selection argument and allowed submissions on German law before deciding the Rule 12(b)(6) motion.

## Issues

1. Under German law, including the CISG, did the contract’s CIF term transfer risk of loss to Shared Imaging when the MRI was handed to the carrier at the port of shipment?
2. Did the contract’s title-retention clause, payment-upon-acceptance term, and “subject to inspection” notation keep risk of loss with Neuromed through delivery and inspection in Illinois?

## Decision

- The court granted Neuromed’s Rule 12(b)(6) motion and dismissed the complaint.
- Applying German law and the CISG, the court held the CIF term shifted risk of loss to Shared Imaging at the port of shipment when the MRI was delivered to the carrier.
- The court held that the title-retention, payment, and inspection provisions did not override the CIF risk allocation.
- Because the MRI was undisputedly undamaged at loading and was damaged later in transit, Neuromed was not liable for the loss.

## Legal Principles

- Where the CISG applies and the contract involves carriage, risk of loss generally passes to the buyer when the seller hands the goods to the first carrier, absent a contrary agreement (CISG art. 67(1)).
- A CIF trade term presumptively allocates risk to the buyer upon shipment, so long as the seller performs the CIF obligations (including contracting for carriage and providing required documents/insurance).
- Under the CISG, risk of loss is distinct from passage of title; a retention-of-title clause functions as security and does not, without explicit linkage, control risk allocation.
- Contractual provisions about timing of payment, acceptance, or inspection do not displace an agreed trade-term allocation of risk unless they clearly reassign risk.

## Conclusion

The court held that, under German law incorporating the CISG, the parties’ CIF term transferred risk of loss to the buyer at shipment; title-retention and acceptance/inspection-related terms did not shift risk back to the seller, so the insurers’ subrogation claim failed as a matter of law.


St. Paul Guardian Ins. Co. v. Neuromed Med. Sys. & Support GmbH, No. 00 Civ. 9344 (SHS), 2002 WL 465312 (S.D.N.Y. Mar. 26, 2002)