Breach of Warranty in Marine Insurance Policy Must Increase the Risk Under Florida Insurance Law
Serendipity At Sea, LLC v. Underwriters At Lloyd's of London Subscribing To Policy No. 187581, No. 21-11733, 2023 U.S. App. LEXIS 138 *; __ F.4th __; 2023 WL 33202 (Jan. 4, 2023, 11th Cir.)
We start the new year with an opinion from the 11th Circuit Court of Appeals regarding the breach of an express warranty in a policy of marine insurance.
M/Y SERENDIPITY, owned by Serendipity at Sea, LLC, was destroyed in the Bahamas when hurricane Dorian hit in August, 2019 as a Category 5 storm. The policy contained a Captain warranty requiring that “a full-time licensed captain is employed for the maintenance and care of the vessel and is aboard while underway." As the hurricane brewed in the Atlantic, the owner and two captains in the Bahamas agreed that it was safer to let the vessel remain in the Bahamas rather than bring it back to Florida, as Central Florida was the predicted area where the storm was to hit. Dorian exploded in strength from a Cat. 3 to a Cat. 5 hurricane in seven hours, changed course, devastated Great Abaco in the Bahamas, and destroyed the vessel. The owner’s claim was denied by the insurer on the basis that the insured breached the captain warranty. Suit was filed in Florida state court and removed to federal court.
The insured asserted that the warranty provision was ambiguous. The trial court agreed but also determined that under any interpretation of the policy, the insured nonetheless breached the warranty. On cross motions for summary judgment, the trial judge granted the insured’s Motion for Summary Judgment maintaining that the insured failed to rebut the affidavit of the insurer’s expert who stated that the vessel would have been moved by a licensed captain.
The appeal court agreed with the trial judge that though the warranty is ambiguous, the insured violated it as the captain identified by the insured was not compensated and was retired. This was not what the policy contemplated even in the most favorable interpretation to the insured.
The panel, however, reversed summary judgment. Under Florida law, the breach or violation of warranty is neither a defense nor voids the policy unless the breach “increased the hazard by any means within the control of the insured.”1 The insured offered reasons why the breach did not increase the hazard which were not addressed by the insurer. Similarly, the trial judge only held that the insured failed to rebut the testimony of the insurer’s expert and failed to consider the insured’s evidence which created a genuine issue of material fact for the jury. Hence, reversal and remand were ordered.
We wish to thank Adam Davis of the Adam Davis Law Firm for forwarding this opinion to us.
A copy of the 11th Circuit Opinion is attached in PDF format.
1 2023 U.S. App. LEXIS 138 as *7; citing Fla. Stat. § 627.409(2). The parties did not dispute that Florida law applied to the policy.
