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10/31/97 PEOPLE EX REL. ILLINOIS HISTORIC

October 31, 1997

THE PEOPLE EX REL. ILLINOIS HISTORIC PRESERVATION AGENCY AND DEPARTMENT OF TRANSPORTATION, PLAINTIFF-APPELLANT,
v.
HARRY ZYCH, D/B/A AMERICAN DIVING AND SALVAGE COMPANY; LADY ELGIN FOUNDATION, INC.; AND CIGNA PROPERTY CASUALTY INSURANCE COMPANY, DEFENDANTS-APPELLEES.



Appeal from the. Circuit Court of Cook County. Honorable. Margaret Stanton McBride, Judge Presiding.

Rehearing Denied November 19, 1997. Released for Publication December 5, 1997.

Presiding Justice Greiman delivered the opinion of the court. Quinn, J., concurs in all of the above except neither concurs nor dissents from the last paragraph thereof. Zwick, J., concurs in part and dissents in part.

The opinion of the court was delivered by: Greiman

PRESIDING JUSTICE GREIMAN delivered the opinion of the court:

In 1860, a ship named the Lady Elgin sank in Lake Michigan following a collision with the schooner Augusta. In 1989, 129 years later, defendant Harry Zych discovered the shipwreck. The instant action concerns competing claims to the ownership of the wreckage.

Plaintiff, the State of Illinois ex rel. Illinois Historic Preservation Agency and Department of Transportation (the State), claims title to the Lady Elgin shipwreck under the Federal Abandoned Shipwreck Act of 1987 (the Act) (43 U.S.C. secs. 2101 through 2106 (1988)).

Defendants CIGNA Property and Casualty Insurance Company (CIGNA) and the Lady Elgin Foundation, Inc. (the Foundation) claim that they jointly hold title. Defendant Harry Zych (Zych) created the Foundation and located the shipwreck. CIGNA is the successor in interest to the Aetna Insurance Company (Aetna), which insured the Lady Elgin and its cargo in 1860. CIGNA assigned a portion of its interest in the shipwreck to the Foundation.

Following a bench trial, defendants were awarded title based on the determination that (1) Aetna became the owner of the wreck and its contents when it paid off claims in 1860; and (2) Aetna had not abandoned its ownership interest in the intervening 129 years.

This appeal raises three issues: (1) whether Aetna, the predecessor of CIGNA, acquired title to the Lady Elgin when it paid the insurance claims to the ship's owner; (2) assuming Aetna acquired title, whether Aetna abandoned its interest; and (3) whether the State established that the Lady Elgin was listed or determined eligible for listing in the National Register of Historic Places.

We find that Aetna acquired title to the Lady Elgin. We also find that Aetna/CIGNA abandoned its interest in the shipwreck and that the Lady Elgin shipwreck was listed in the National Register of Historic Places for purposes of the Act. Accordingly, we reverse the trial court's order that awarded title to defendants.

The history and legacy of the Lady Elgin have been well documented as the second-greatest tragedy in the history of the Great Lakes and have been celebrated in both story and song. Zych v. Wrecked Vessel Believed To Be the "Lady Elgin", 960 F.2d 665, 666-67 (7th Cir. 1992).

On the evening of September 7, 1860, the Lady Elgin left Chicago on its way to Wisconsin. On board the ship were 393 passengers, including members of a militia group called the Union Guards from an Irish, Democratic ward in Milwaukee who had taken their wives, children and friends to Chicago to attend a political rally for Stephen Douglas, a presidential candidate against Abraham Lincoln.

As the passengers danced to the music of the bands in the deck areas, a thunderstorm developed. About 2 a.m., a schooner named the Augusta rammed the Lady Elgin and continued its course to Chicago. Within 30 minutes after the collision, the Lady Elgin broke into pieces and sank about 10 miles off shore. Rescue efforts saved only 96 of the 393 passengers on board. Legend has it that the disaster caused the transfer of political power in Milwaukee from the Irish to the Germans because so many Irish political activists died in the shipwreck.

The wreckage remained undiscovered until Zych found it in 1989, a few miles off the shore of Highland Park. To assert ownership rights as the finder of the wreckage, Zych filed an in rem admiralty action in the United States District Court for the Northern District of Illinois. Zych v. Unidentified, Wrecked & Abandoned Vessel, Believed To Be the SB "Lady Elgin", 755 F. Supp. 213 (N.D. Ill. 1990).

The ownership rights of the Lady Elgin were the subject of federal litigation from August 1989 (the filing of Zych's admiralty action) until July 1992 when the federal district court entered an order declaring that the Lady Elgin Foundation, and not Harry Zych, "is the sole owner of the shipwrecked vessel believed to be the Lady Elgin as against all the world with the exception of the State of Illinois." Zych v. The Unidentified, Wrecked & Abandoned Vessel, Believed To Be the SB "Lady Elgin", No. 89--C--6501 (1992) (unpublished judgment order).

In September 1992, the State filed the instant cause of action seeking a declaratory judgment and asserted that it owned the shipwreck under the Act. In May 1996, the trial commenced.

Zych testified that he is a professional diver and engages primarily in salvage and oil field activity. Zych first became involved in the Lady Elgin in 1969 when he went wreck diving with some local divers. Zych later researched the history of the ship and began his own underwater search in 1971. From 1972 through 1989, Zych's search was not a full-time job but rather an activity he did on weekends and when time allowed away from his regular job. In 1989 Zych located the Lady Elgin in 53 feet of water in Lake Michigan about four miles off shore from Highland Park.

At trial, the State admitted into evidence copies of six letters from 1860 relating to the Lady Elgin and partial reconstructions of those letters. CIGNA, Aetna's successor, recovered these documents from the archives of Aetna. The letters were authored by Thomas Alexander, who was a vice-president of Aetna, or by E.G. Ripley, who was the president of Aetna.

By letter dated September 11, 1860, Alexander wrote to Aetna's agents in Chicago (Hubbard and Hunt) and stated that he had been informed by telegraph of the loss of the Lady Elgin. Alexander wrote "hope we escape any claims on *** cargo." Gurdon Saltonstall Hubbard was both an agent of Aetna and the owner of the Lady Elgin.

By another letter dated September 11, 1860, Alexander wrote to an Aetna agent in Buffalo, New York (Captain E.P. Door), about the ship named Augusta, i.e., the ship that collided with the Lady Elgin, causing it to sink. Alexander stated that the newspapers reported that the Augusta had "been libelled for $42,000" and asked whether this had been done by the owners of the Lady Elgin.

By letter dated September 13, 1860, Ripley wrote to J.B. Bennett, who is identified in the transcription notes as Aetna's general agent in Cincinnati, Ohio. Ripley stated that "we had $5000 on the 'Lady Elgin' and $2500 on cargo -- the Boat belonged to Mr. Hubbard mainly."

By letter dated September 22, 1860, Ripley wrote to Hubbard and Hunt in Chicago. Ripley acknowledged receipt of "papers relating to claims for" the Lady Elgin, including invoices of certain shipments. Ripley stated that "we wish to pay these claims as soon as they are properly proved -- let them be thus prepared, and reduced to the cash point and pay them."

By letter dated October 10, 1860, Alexander wrote to Hubbard and Hunt in Chicago. The letter states that the Lady Elgin "gave us a strong pull upon our small receipts." The letter further states

"We regret that Mr. Hubbard declines to allow us the legal interest? off his claim because we should prefer to pay it at that rate -- and because we think the circumstances would justify his concession of the legal interests in this case -- however, we shall not discuss the point and permit the claim to layover until its maturity. Permit us to confirm Capt. Dorr instructions not to accept an abandonment of the vessel, for the reason which he informs us he gave you on his recent visit to Chicago."

In the sixth and final letter, dated November 15, 1860, Alexander wrote to Hubbard and Hunt in Chicago and stated that "we take notice of the payment of $11993 20/100 to GSHubbard in full of policy on Lady Elgin."

Three witnesses testified as marine insurance experts: (1) Victor Simone, for the State; (2) Ivan Avery, called by the State; and (3) George Stellwag, for defendants.

As the State's witness, Victor Simone opined that Aetna never acquired title to the Lady Elgin based upon (1) a response by CIGNA in a request to admit where CIGNA "admitted that on October 10, 1860, an abandonment of the Lady Elgin was not accepted by Aetna"; (2) the absence of anything to indicate that Aetna acquired title; and (3) common and economic sense that would prompt an insurance company not to want any part of the wreck that had very little salvage value and not to want to assume any potential liabilities. Referring to the October 10, 1860, letter, Simone testified that the letter clearly indicates that Aetna would not accept abandonment. Simone further opined that, even assuming that Aetna acquired title, Aetna's actions prove that it abandoned any interests in the vessel.

Simone testified that in the maritime insurance field, the "acceptance of abandonment" means that the insurance company accepts complete responsibility for the vessel and has title to it. With the acceptance of abandonment, an insurance company accepts the liability associated with the abandonment, most especially the removal of the wreck. An insurance company's refusal to accept abandonment signifies that it does not wish to own the vessel and declines to take title to it.

Simone testified that the payment of claims by the insurance company has nothing to do with acceptance or rejection of abandonment but, rather, is determined by whether the claim was covered by the policy. The claim for the loss of Lady Elgin was paid because the insurance policies covered collision. Refusing to accept abandonment occurs when the insurance company pays the claims and then refuses an offer of abandonment. Such a refusal means that the insurance company does not want to accept title to the vessel, does not want any part of the vessel, and is just paying the claim. Simone stated that an insurance company's refusal to accept abandonment is "very common" and he is not familiar with any instance where an insurance company accepted abandonment. Simone explained that if an insurance company accepted abandonment, it "would then become responsible for anything that would occur for which [it] could be held legally liable." Silence on the part of the insurance company is not enough to accept abandonment and, instead, indicates that it does not want any part of the vessel.

Simone testified that acceptance or rejection of abandonment, i.e., accepting or not accepting title, has nothing to do with subrogation. According to Simone, subrogation has nothing to do with title, and the rights of subrogation against ...


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