Royal Insurance v. Amerford Air Cargo

IBM World Trade Corporation and Semi-Alloys, Inc. (IBM) hired Amerford Air Cargo (Amerford) (defendant) to ship products worth approximately $98,000 from New York to Japan. Amerford picked up the crates from IBM’s New York facility and stored them overnight in a warehouse near the airport before their flight. However, the next morning, the crates could not be located. Amerford believed that sophisticated thieves stole the crates, but neither local nor federal law enforcement found direct evidence of what had happened to the crates. IBM made a claim to Amerford for the full loss. Because IBM had not declared any special value for the shipment on the airbill, Amerford claimed that its liability was limited under the Warsaw Convention to $20 per kilogram or $1,310 total. IBM’s insurer, Royal Insurance (Royal) (plaintiff), paid IBM for the full loss. Through the doctrine of subrogation, Royal then stepped into IBM’s shoes and sued Amerford for the full value of IBM’s loss. Royal argued that either (1) the Warsaw Convention did not apply to the loss because it happened in a warehouse and not on an aircraft or (2) Amerford had committed willful misconduct that prevented it from relying on the Warsaw Convention’s limitation-of-liability provision. Royal had no direct evidence of willful misconduct by Amerford, but, under state law, Amerford’s failure to explain the warehouse loss created a presumption that Amerford had stolen the crates. Royal and Amerford each filed motions for summary judgment.