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People v. Zych

April 15, 1999


The opinion of the court was delivered by: Chief Justice Freeman

Agenda 12-January 1999.

Plaintiff, the State of Illinois ex rel. Illinois Historic Preservation Agency and Department of Transportation (State), brought this declaratory judgment action seeking a determination that it owned the remains of the shipwrecked Lady Elgin under the Abandoned Shipwreck Act of 1987 (Act) (43 U.S.C. §2101 et seq. (1988)). The trial court found that title to the wreck belonged to defendant, CIGNA Property and Casualty Insurance, as the successor in interest to the ship's original insurer, Aetna Insurance Company, which had acquired ownership after the ship sank in 1860. The appellate court reversed, concluding that CIGNA had abandoned any interest in the ship and that ownership of the wreck thus vested in the State. 292 Ill. App. 3d 1084. We granted defendants' petition for leave to appeal (166 Ill. 2d R. 315 ) and now reverse the appellate court and affirm the circuit court. We note that two amicus curiae briefs have been submitted in support of the State; one by Columbus-America Discovery Group, and another jointly by the following organizations: National Trust for Historic Preservation; Advisory Council on Underwater Archaeology; Association for Great Lakes Maritime History; Council of American Maritime Museums; Institute of Nautical Archaeology; Landmarks Preservation Council of Illinois, Inc; National Conference of State Historic Preservation Officers; North American Society for Oceanic History; Society for American Archaeology; and Society for Historical Archaeology.


As the facts of this case were sufficiently set forth by the appellate court, we reiterate only those essential to our determination. The Lady Elgin met her demise in September 1860 as a result of a collision with the lumber schooner Augusta during inclement weather. Aetna Insurance Company paid the Lady Elgin's owner, Gurdon S. Hubbard, $11,993.20 on the loss in full satisfaction of its obligations under a policy covering the ship and her cargo. Thereafter, the wreckage remained submerged and undiscovered until 1989, when defendant, Harry Zych, a professional salvage diver, located it off the coast of Highland Park. Zych first participated in an unsuccessful search for the Lady Elgin in 1969, with local divers. In 1971 or 1972, after extensively researching the shipwreck and its potential location, Zych began his own search for the vessel. Gradually updating and improving his search equipment, Zych ultimately located the ship using a "sidescan sonar." Although Zych acknowledged that his search was not full time, it was nonetheless arduous. The vessel had broken into pieces and was scattered over several miles, and proved to be some distance from the area originally reported. After the shipwreck, the vessel retained very little salvage value; its primary value today derives from its historical significance. Shortly after locating the wreck Zych notified Ivan Avery, an officer of a CIGNA company, regarding his discovery, prompting Avery to search CIGNA's archives for documentation concerning the ship. In April 1990, Zych formed defendant, the Lady Elgin Foundation (Foundation). The Foundation and CIGNA executed an agreement under which CIGNA transferred its interest in the wreckage to the Foundation in exchange for 20% of the gross proceeds from any sale of property or artifacts subsequently recovered from the vessel.

Following the Disposition of Zych's in rem admiralty case (see 292 Ill. App. 3d at 1087 (discussing federal litigation)), the State commenced the instant action for declaratory and injunctive relief under the Act. The complaint alleged that the Lady Elgin was an "abandoned shipwreck" under the Act and that the State was thus vested with title. See 43 U.S.C. §2105(c) (1994). At the ensuing bench trial, the State attempted to prove that (1) Aetna had never obtained title to the shipwreck in the first instance, because it had refused to accept "abandonment," or ownership of, the wreck; and (2) even if Aetna had taken title, CIGNA subsequently abandoned any claim or interest it may have held by failing to make any effort to recover the ship until it was discovered by Zych in 1989. The evidence presented consisted of the testimony of several expert witnesses and six pieces of correspondence pertaining to the ship which were recovered from CIGNA's archives. When questioned as to why CIGNA did not have additional documentation, Avery testified that it was Aetna's practice at that time to keep policy and claim information at the field office handling the particular claim. Avery believed it was quite likely that additional documents pertaining to the claim of the Lady Elgin had been retained at Aetna's Chicago office; however, that office had been completely destroyed in the Chicago Fire of 1871.

Each of the six letters retrieved were drafted in 1860, either by Aetna's vice-president, Thomas Alexander, or its president, E.G. Ripley. In the first letter, Alexander informed agents in Aetna's Chicago office, Hunt and Hubbard (also the ship's owner), that he had been notified of the loss and that Aetna "hope[d to] escape any claims on *** cargo." The second letter was from Alexander to Captain E.P. Dorr, an Aetna agent in Buffalo, New York, noting that the Augusta had "been libelled for $42,000" and inquiring whether this had been done at the instance of the owners of the Lady Elgin. The next letter, to an agent in Cincinnati, noted that policies covering the Lady Elgin were $5,000 for the hull and $2,500 for the cargo. In the subsequent letter, Ripley notified Hubbard and Hunt that Aetna wished to pay the claims on the ship as soon as they could be proved, and instructed the agents to prepare the claims and pay them. On October 10, 1860, Alexander again wrote to Hubbard and Hunt, stating, in relevant part:

"We regret that Mr. Hubbard declines to allow us the legal interest? [sic] 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." (Emphasis added.)

The final letter of November 15, 1860, from Alexander to Hubbard and Hunt notes the payment of $11,993.20 "in full of policy on Lady Elgin."

Evidence of Aetna's Initial Acquisition of Ownership

The Lady Elgin was a total loss, and Aetna's payment to Hubbard on the claim considerably exceeded that provided under the policy for the ship. After an insurer pays a claim on a total loss, it has the prerogative either to reject or accept "abandonment" of the remains of the insured vessel. An acceptance of abandonment means that the underwriter is vested with complete title to the wreckage including any rights or liabilities that may attach. The expert testimony of Ivan Avery and George Stellwag established that once the insurer pays on the loss, ownership of the wreckage passes automatically to that insurer, and it is unnecessary for the claimant to make an express tender of abandonment. Avery testified that in 1860, in the vast majority of cases of total loss, the practice of underwriters was to accept ownership of the insured wreckage. Avery further testified that he had "no question" that Aetna had accepted abandonment of the Lady Elgin. This opinion was partially based upon the notation in one of the letters that the Augusta had been "libelled for $42,000." According to Avery, this fact played a very important role in Aetna's decision to accept title, because it represented the amount that Augusta was likely going to have to pay in damages to the owners of the Lady Elgin. If Aetna accepted abandonment, it would obtain the right to these damages through subrogation. The State called Victor Simone as a marine insurance expert. Simone testified that an insurance company's determination of whether to accept or reject abandonment is unrelated to its decision to pay a claim, because the latter decision merely turns upon whether the claim falls within coverage. Simone testified that it was common for insurance companies to refuse abandonment, and that he believed Aetna never acquired title to the Lady Elgin because (1) in response to a request to admit promulgated by the State, Aetna conceded that "on October 10, 1860," it had "not accepted" abandonment of the ship; (2) there was no evidence that Aetna acquired title; and (3) common sense dictated rejection of the wreckage because it would be difficult to salvage and had little salvage value. Addressing the statement in the letter of October 10, 1860, regarding Captain Dorr's instruction not to accept abandonment, Simone testified that this clearly showed that Aetna would not accept ownership of the vessel. Stellwag gave a contrary opinion, however, testifying that Captain Dorr's "instruction" was merely a recommendation, and that it was too early for a final decision by Aetna because the claim on the loss had not yet been paid.

Evidence of CIGNA's Alleged Abandonment of Ownership

It was undisputed that neither Aetna nor CIGNA had attempted to salvage the Lady Elgin until Zych discovered the wreck and entered into the agreement with CIGNA. However, testimony of the parties' experts proved that until relatively recently, such efforts would have been extremely painstaking and economically impractical. The State's expert, Robert Kutzleb, described various methods available in 1860 by which the lake could be "dragged," and then, when an item was "snagged," divers dispatched to retrieve it. Defense experts, however, dismissed this method as impractical in this case because the Lady Elgin had broken into many pieces and the bottom of Lake Michigan was replete with rocks and debris.

Defense expert Martin Klein testified that, as late as 1960, salvage technology was still "very rudimentary." Klein acknowledged that the sidescan sonar ultimately used to discover the ship was available in 1967; however, it was still in its infancy and very costly. In Klein's opinion, given the existent salvage and navigational technology, the chances of the Lady Elgin having been discovered prior to 1989 were "almost negligible." This was primarily because the wreckage was scattered and proved to be miles away from the location commonly reported. This was substantially corroborated by Zych, who also testified as a defense expert.

In ruling in favor of defendants, the trial court first rejected the State's contention that Aetna had refused abandonment, and concluded that the company had accepted title to the wreckage in 1860 when it paid the claim under the policy. The court then went on to find that the State had failed to prove that CIGNA subsequently abandoned its interest. The court was persuaded by the fact that CIGNA had preserved for 129 years the six pieces of correspondence evidencing its coverage of the ship, certain details of the claim, and its payment on the loss. The court further found that ...

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