U.S. First Circuit Court of Appeals Adopts Uberrimae Fidei as Established Rule of Maritime Law
U.S. First Circuit Court of Appeals Adopts Uberrimae Fidei as Established Rule of Maritime Law
Fifth Circuit Remains Sui Generis - Insurance Contract Voidable not Void Ab Initio
By: Kevin Phillips
Catlin Syndicate 2003 at Lloyd’s v. San Juan Towing Marine Servs., Inc., 2015 U.S. App. LEXIS 1934, 2015 WL 500744 (1st Cir. Feb. 6, 2015).
In a rather tortuous history generating four prior opinions by the district court which initially held that it lacked admiralty jurisdiction over a dispute for coverage for loss of a floating drydock on the basis that the insured property was not a vessel based on Lozman v. City of Riviera; then, a reversal of that decision after the court on rehearing held that admiralty jurisdiction was present because the central issue of the controversy concerned a maritime contract. Next, the court issued yet another decision that the doctrine “uberrimae fidei” constituted an "entrenched federal precedent" that would apply to this case. After a trial on the merits, the district court held in its final opinion that the insured violated the doctrine which then rendered the policy void ab initio.On appeal, the First Circuit determined that the while Puerto Rico has more power within its waters than any State of the U.S. and can enact legislation which can have the effect of rendering conflicting non-statutory federal maritime law "locally inapplicable,” the Insurance Code of Puerto Rico is not applicable to the subject insurance because the code excludes ocean marine insurance. As the policy was issued to cover a craft or a hull and covers maritime risks, it was an ocean marine policy. Ostensibly, the insured urged the court to apply the Insurance Code of Puerto Rico which required any misrepresentation, concealment or incorrect statements to constitute fraud and contribute to the loss as opposed to the stricter doctrine uberrimae fidei.
The First Circuit stated without equivocation that the doctrine is an established rule of maritime law: “Although this court had not yet held definitively that uberrimae fidei is an established rule of maritime law, we do so now, thus joining the near-unanimous consensus of our sister circuits, ruling without further equivocation that the doctrine of uberrimae fidei is an established rule of maritime law in this Circuit.” In so doing the court recognized that the Fifth Circuit is the lone Circuit court which has held otherwise. The trial judge held that as the insured violated its obligation of utmost good faith the policy was void ab initio. The judgment was affirmed but modified to the extent that violation of the obligation made the policy voidable, that is, that the contract is deemed valid until being voided at the election of the insurer.
