“Uberrimae Fidei” Rides High

QBE Seguros v. Morales-Vázquez, 986 F.3d 1 (C.A.1 (Puerto Rico), 2021); QBE Seguros v. Morales-Vázquez, 2021 U.S. App. LEXIS 1399, 986 F.3d 1

By: Joshua Robin

This case involves a dispute between Mr. Morales-Vasquez, the insured, and QBE Seguros, the insurer which sought to void a policy of insurance issued to its insured on the basis of the doctrine of “Uberrimae Fidei” – utmost good faith. Specifically, QBE asserted the policy was void because Mr. Morales failed to disclose the fact that he had a total of nine boats rather than the two he listed on his insurance forms. More importantly, he had also failed to disclose he had been involved in an accident when he grounded a previous boat in Puerto Rico. Mr. Morales counter-claimed for bad faith for the Plaintiff’s failure to properly settle his claim related to a boat fire. The district concluded that QBE was entitled to void the policy because Mr. Morales breached not only the duty of uberrimae fidei, but also the policy’s warranty of truthfulness.

The Defendant appealed this decision based on four grounds: First, that the doctrine of uberrimae fidei is inapplicable because of recent changes to law in the United Kingdom. Second, that as QBE did not actually rely on his omissions, so he did not breach his duty. Third, he did not breach his warranty of truthfulness. Four, that his affirmative defenses trump any right that QBE had to void the policy.

The appellate court held that United States maritime doctrine of uberrimae fidei requires all parties to a maritime insurance contract to disclose all known facts or circumstances material to an insurer’s risk. Under the doctrine, an insurer may void a maritime insurance policy if its insured fails to disclose all known facts or circumstances. Judge Selya acknowledged that the UK Parliament recently enacted insurance reform, overturning uberrimae fidei. However, all parties to this case were American, and so fall under the jurisdiction and law of the United States of America. Congress has not followed Parliament’s lead in overturning the doctrine. Additionally, the defendant provided no case to support his idea that U.S. maritime law must be tailored to comport with English common law. Parliament’s change of U.K. maritime law does not affect the U.S.’s maritime law.

Next, Mr. Morales argued that QBE must show it actually relied on his omissions. The court held that actual reliance is not necessary for an insurer to void a policy under the doctrine of uberrimae fidei. The appellate court determined that materiality of a false statement or omission, without more, provides a sufficient ground for voiding such a policy. Materiality is understood by assessing the likely impact of facts that may influence a prudent insurer when considering whether to issue a particular policy. In this case, the incomplete accident history (most notably the earlier grounding) crossed the threshold for materiality.

This same analysis was used to the detriment of the defendant’s third argument of his warranty of truthfulness. The insurance contract signed by the defendant did not water down the doctrine of uberrimae fidei. A materially false statement by an insured to an insurer is enough to breach the warranty of truthfulness.

The court did not analyze the defendant’s final argument because he developed no argument on appeal that his affirmative defenses apply against the doctrine of uberrimae fidei.

Based on the prior reasons, the appellate court affirmed the judgement of the district court.