A fruit and vegetable distributor purchased an open marine cargo insurance policy to provide protection for such goods in transit. When a shipment of sweet onions arrived, it was determined that all 17,000 cartons of the onions had decayed and could not be sold.

The insured submitted a claim for the onions to the insurer of the open marine cargo policy. The policy covered cargo in transit for risks of physical loss or damage. However, in order for decay or determination of perishable goods to be covered, the loss had to be a result of: " . . . derangement or breakdown of the refrigeration equipment . . . "

Upon inspection of the cargo and the equipment, it was determined that the loss did not occur as a result of any damaged or malfunctioning equipment; it was caused by human error because the shipper had failed to set the fresh air vents on the refrigeration units of the storage containers.

The claim that had been filed with the cargo insurer was denied. The cargo owner filed suit against the cargo insurer. In the initial trial court decision, the ruling was made in favor of the insurance company and against the insured cargo owner and was based upon federal maritime law.

The insured appealed. Part of the appeal was that the federal maritime law did not have jurisdiction; instead, California State law should apply.

In the decision rendered by the appeal court, it was decided that federal maritime law did indeed have precedence and the decision of the lower court in favor of the insurance company was affirmed.

(Suma Fruit International, Incorporated, Plaintiff-Appellant v. Albany Insurance Company, Incorporated, Defendant-Appellee. United States District Court for the Northern District of California, 9thCir. No. 96-15774. July 31, 1997. CCH 1997 Fire and Casualty Cases, Paragraph 6215.)