Unbearable Bear
Certain Interested Underwriters at Lloyd's,London v. Bear, LLC, 2019 U.S. App. LEXIS38812;2019 WL 7369430 (9th Cir. Dec. 31, 2019)
By: Ronald CantinIII
In this case out of theNinth Circuit, Bear, LLC appealed the district court’s summary judgment infavor of Certain Interested Underwriters at Lloyd’s London (“Underwriters”). Thedistrict court held that the “all risk marine insurance contract” between Bearand Underwriters did not cover the fire which destroyed Bear’s yacht. Thecontract contained “a repair clause,” which stated that Underwriters must givepermission before the yacht underwent major repairs, “hot work”(welding), or when “in a shipyard that requested a waiver of subrogation.”[1] The fire which destroyedthe yacht was caused by hot work, during a major repair, in a shipyard thatrequested a waiver of subrogation. Bear did not gain, nor attempt to gain, Underwriters’permission for these acts. The court held that the repair clause “unambiguouslyexpresses an intent that…Underwriters would have no obligation to cover damagesto the yacht arising from the circumstances of the repair.”[2]
Bear also appealed thedistrict court’s ruling that Patrice Grossinger, Bear’s third-party defendant,owned no duty to Bear. The court found that Grossinger worked for the owner of Bearas a personal lines broker; she had nothing to do with the policy in question. TheNinth Circuit affirmed the district court’s ruling on summary judgment that thebroker met duty to explain the policy to Bear. The record showed that Bear hadbeen given “several explanations and warnings about the policy, and explicitlyabout the repair clause.”[3] The appellate court alsoruled that Florida does not strictly limit a broker’s duty to give advice andmake recommendations to clients. However, according to the Ninth Circuit, evenif there was a duty to “reasonably advise and recommend,”[4] the district court wascorrect in its judgment that the duty was not breached.
This is a simple contractdispute. Bear did not abide by the contract in place. The contract explicitlystated that it was necessary to gain the Underwriters’ approval for (1)shipyards which require a waiver of subrogation, (2) major repairs, and (3) anyhot work. In this case, Bear placed the ship in a shipyard, which required awaiver of subrogation, to make major repairs, which required hot work, and allof these actions were performed without the Underwriters’ approval. The NinthCircuit was correct in affirming the district court’s judgment that Bear held responsibilityfor violating the repairs clause.
Bear also claimed thatthe repair clause rendered the coverage illusory. As the appellate courtstates, the repair clause does not vitiate coverage. Rather than vitiate thecoverage, the repair clause simply contains conditions that insured agrees tobefore receiving coverage. The clause was not hidden, and Bear fully availeditself to these conditions when contracting for insurance coverage. Furthermore,the conditions within the clause did not degrade the coverage to such a pointthat it was illusory.
[1] Certain Interested Underwriters at Lloyd's,London v. Bear, LLC, 2019 U.S. App. LEXIS 38812, at *2 (9th Cir. Dec. 31, 2019).
[2] Certain Interested Underwriters at Lloyd's,London v. Bear, LLC, 2019 U.S. App. LEXIS 38812, at *3 (9th Cir. Dec. 31, 2019);See O'Brien v. Progressive N. Ins.Co., 785 A.2d 281, 288, 291 (Del. 2001).
[3] Certain Interested Underwriters at Lloyd's,London v. Bear, LLC, 2019 U.S. App. LEXIS 38812, at *6 (9th Cir. Dec. 31, 2019).
[4] Certain Interested Underwriters at Lloyd's,London v. Bear, LLC, 2019 U.S. App. LEXIS 38812, at *7 (9th Cir. Dec. 31, 2019).
