Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_04-cv-01076/USCOURTS-cand-4_04-cv-01076-3/pdf.json

Nature of Suit Code: 120
Nature of Suit: Marine Contract Actions
Cause of Action: 28:1331 Fed. Question

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

DONALD F. CHIARIELLO,

Plaintiff,

v.

ING GROEP NV, a

Netherlands

corporation,

Defendant.

 /

No. C 04-1076 CW

ORDER ADDRESSING

PARTIES' CROSSMOTIONS FOR SUMMARY

JUDGMENT

 Plaintiff Donald F. Chiarello moves for summary adjudication of

certain issues in this case. Defendant ING GROEP NV opposes the

motion, and cross-moves for summary judgment in its favor based on

its affirmative defenses. Plaintiff opposes the cross-motion. 

The matter was heard on November 4, 2005. Having considered

all of the papers filed by the parties and oral argument on the

motion, the Court GRANTS in part Plaintiff's motion for summary

adjudication and DENIES it in part, and DENIES Defendant's crossmotion. 

BACKGROUND

The following facts are undisputed, unless otherwise noted. 

Plaintiff, a retired attorney, is the former owner of a wooden

sailing vessel named the ATTU, which he purchased in January, 2001. 

Plaintiff is an experienced sailor, and he lived on the boat. 

Plaintiff sought an insurance policy for the ATTU through Blue

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Water Insurance Company (hereinafter, Blue Water), located in

Jupiter, Florida. Blue Water's business is "assisting members of

the public such as [Plaintiff] in obtaining marine insurance for

their vessels." Spink Decl. ¶ 2. As a broker, Blue Water was not

authorized to bind an insurer, but only "to submit information" to

underwriters in an attempt to obtain quotes or coverage. Id. ¶ 5. 

Blue Water did business with T.L. Dallas (Special Risk) Ltd.

(hereinafter, T.L. Dallas), a United Kingdom-based company. T.L.

Dallas acts as a managing agent for marine insurance companies. 

Unlike Blue Water, T.L. Dallas is authorized to underwrite insurance

and handle claims for insurance companies, including Defendant. 

Plaintiff filed his first application for coverage with Blue

Water on December 20, 2000. The pre-printed application form was

prepared by Blue Water. Blue Water responded to Plaintiff's initial

application with a proposal for insurance by Lloyd's of London; the

proposal was made "subject to satisfactory crew resumes and

itinerary." Kelly Decl., Ex. 5, December 26, 2000 Insurance

Proposal to Plaintiff from Blue Water. On February 10, 2001, a Blue

Water representative informed Plaintiff that "the Underwriters are

still awaiting satisfactory crew resumes . . . ." Kelly Decl., Ex.

6, February 10, 2001 Letter from Kristin L. Woodruff to Plaintiff. 

Plaintiff never responded to this request for crew information, and

neither Blue Water nor the underwriter followed up on the request. 

Plaintiff submitted a renewal application to Blue Water on

January 9, 2002, in which he stated that no changes from the

previous year's "coverages, values & navigation area" were needed. 

Blue Water responded by sending Plaintiff a renewed policy with

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Lloyd's, "subject to satisfactory crew resumes prior to departure

from New Zealand coastal waters." Kelly Decl., Ex. 8, March 6, 2002

Letter from Donald W. Spink to Plaintiff. Again, Plaintiff did not

provide the requested crew information, and neither Blue Water nor

the underwriter followed up on the request. 

Plaintiff submitted a second renewal application to Blue Water

on October 11, 2002, stating that he required a change in

navigational area. This renewal application, also pre-printed and 

prepared by Blue Water, had been revised to contain the following

new section, captioned in bold print, "Please Read Before Signing

This Application," and reading in part,

This application shall be incorporated in its entirety into any

policy of insurance issued to you. Any misrepresentation in

this application shall automatically render your insurance

coverage null and void from inception. Please therefore check

to make sure that all questions have been fully answered and

that all relevant facts have been disclosed. This application

constitutes the complete and exclusive statement by you

concerning the subject matter hereof. If you need to

supplement your application, you must do so in writing on a

supplemental application. . . . Single-handed navigation is

not allowed unless your policy has been specifically endorsed

for such activity. . . . This application shall be governed

by and interpreted in accordance with Florida law, without

regard to principles of conflicts of law. 

Kelly Decl., Ex. 9, Oct. 8 Application. The parties dispute the

meaning and effect of the single-handed navigation clause. Mr.

Spink testified that the single-handed navigation language was an

"informational thing that the insured acknowledges when he signs

this application that he understands single-handed navigation is not

allowed unless the policy has been endorsed." Mannion Decl., Ex.

13, Spink Dep. 82:19-23. He added it to the application on the

advice of his attorney, as a result of a dispute with an insured who

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1

Plaintiff objects to much of Mr. Usher's testimony as

inaccurate and speculative. Plaintiff's objections generally go to

the weight rather than the admissibility of Mr. Usher's evidence,

and are overruled. 

2

Plaintiff objects to the admission of these and other faxes

on the grounds that Mr. Kelley, counsel for Defendant, is unable to

attest personally to the authenticity of the faxes. Plaintiff does

not, however, contest the authenticity of the documents themselves. 

The Court considers the documents attached to the Kelley

Declaration for the purpose of this motion only. 

4

navigated a boat single-handed despite the fact that his policy

contained a three-crew warranty. Mannion Decl., Ex. 18, Spink Dep.

33-34. B. A. Usher, Managing Director for T.L. Dallas, testified

that single-handed navigation meant single-handed sailing, but that

the relevant clause did not prohibit single-handed navigation or

sailing for short trips because T.L. Dallas "would try to behave on

a reasonable basis. For an extended voyage, certainly" the

prohibition applies.1 Mannion Reply Decl., Ex. 16, Usher Dep.,

83:18-84:24. 

In the process of renewing Plaintiff's application, Blue Water

was reminded that information about the crew was required. Lloyd's

sent Blue Water information about renewing Plaintiff's policy but

noted, "Subject to detailed crew resumes (these still appear to be

outstanding from last year !!)." Kelly Decl., Ex. 10, November 22,

2002 Fax from David Mason of Waterborne Under Writing Agency

(associated with Lloyd's) to Mark Spink. More than one month later,

Blue Water was given a quote from a new insurance agency, Defendant

ING GROEP NV, but T.L. Dallas stated as a special condition, "Crew

details required." Id., Ex. 11, December 30, 2002 Fax from Matthew

McLean of T.L. Dallas to Don Spink.2

 T.L. Dallas agreed to issue a

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temporary policy for Plaintiff, subject to the provision of new crew

details, and the day after repeated that a copy of Plaintiff's "full

crew details" was required. Kelly Decl., Ex. 12, January 2, 2003

Fax from Jo Naylor of T.L. Dallas to Don Spink; id., Ex. 13, January

3, 2003 Fax from Rob Elvin of T.L. Dallas to Don Spink. 

On January 3, 2003, Blue Water emailed Plaintiff, informing him

that the underwriters were requesting his crew details and asking

for the crew's sailing resume. Kelly Decl., Ex. 14, January 3, 2003

Email from Blue Water to Plaintiff. The next day, Plaintiff

responded by email to Blue Water identifying his only crew member as

Sandra Huberfeld and describing her background information and

sailing experience. Id., Ex. 15, January 4, 2003 Email from

Plaintiff to Blue Water. At that time, both Plaintiff and Ms.

Huberfeld expected that she would be on board during the entire

policy period. 

T.L. Dallas apparently did not receive this information

immediately, and on February 3, 2003 sent another fax to Blue Water

asking for full crew details and warning that the policy would be

cancelled from its inception if the missing documentation was not

provided within one week. Blue Water promptly responded with the

information Plaintiff had provided about Ms. Huberfeld, which T.L.

Dallas accepted. 

According to Mr. Usher, had either Plaintiff or Ms. Huberfeld

had less than 5,000 miles of blue water experience, he would have

insisted that another individual be included on board as crew. 

Usher Decl. ¶ 25. Mr. Spink also understood that T.L. Dallas'

requests for information about the crew, after the issuance of a

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temporary coverage note, were "in order to assist in determining

whether [the underwriter] was going to agree to issue a policy of

marine insurance on [Plaintiff's] vessel." Spink Decl. ¶ 8. Both

Mr. Usher and Mr. Spink understood Plaintiff's information to mean

that Ms. Huberfeld would be on board the ATTU during the entire

policy term. Spink Decl. ¶ 12; Usher Decl. ¶ 33. 

 On February 18, 2003, T.L. Dallas issued a Cover Note and

policy for Plaintiff. The policy specified that its terms

"incorporat[ed] in full the application form signed by [Plaintiff]." 

Kelly Decl., Ex. 19, Insurance Agreement § 2. The section on

"General Conditions & Warranties" provided that Plaintiff's brokers

"shall be deemed to be exclusively the agents of [Plaintiff] and not

of us in any and all matters . . . . Any notice given or mailed by

or on behalf of us to the said brokers . . . shall be deemed to have

been delivered to you." Id. § 9(i). It warned that the policy

would be void "in the event of non-disclosure or misrepresentation

of a fact or circumstances material to our acceptance or continuance

of this insurance." Id. § 9(n). The insurance policy agreement

further provided that any dispute would be adjudicated according to

well-established substantive federal admiralty laws, or New York law

absent federal admiralty precedent. Neither the policy agreement's

sections on exclusions to coverage, its general conditions and

warranties, nor any other portion of the policy addressed singlehanded navigation or crew requirements generally. The policy sent

to Plaintiff did not include or attach any of the application forms

submitted to Blue Water by Plaintiff. 

In May, 2003, Ms. Huberfeld decided to leave the ATTU. 

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3Defendant objects and moves to strike portions of Mr.

Matthews' testimony and the report by Wager and Associates, on the

grounds that Mr. Matthews is not qualified as an expert in these

matters. Defendant's motion to strike is denied; regardless of the

7

Plaintiff did not inform Blue Water or Defendant that she was no

longer a member of the crew. Mr. Spink states that he would have

expected Plaintiff to provide Blue Water with information about Ms.

Huberfeld's departure, and that such information would have been

passed along to T.L. Dallas immediately. Spink Decl. ¶ 14. After

Ms. Huberfeld left, Plaintiff sometimes sailed alone and sometimes

with companions of with varying levels of experience. 

On or around October 11, 2003, Plaintiff began sailing the ATTU

from Palau Tioman, Malaysia to Singapore. Plaintiff expected the

trip to take less than one day. He was alone on the ship, and was

equipped with a Global Positioning Satellite (GPS) system, a sextant

and numerous maps and charts. At approximately 4:15 a.m. on October

12, 2003, the ATTU suddenly listed and began to sink. At the time,

Plaintiff was on deck, alert and did not see anything amiss. The

ship sank in less than a minute. Plaintiff swam to his

automatically inflated lifeboat, and was rescued sixty-three hours

later by a passing fishing boat. Following the loss, Plaintiff

notified Blue Water, which in turn notified T.L. Dallas. 

T.L. Dallas appointed the firm of Wager and Associates to

investigate the circumstances of the loss. Guy Matthews, a trained

marine insurance adjuster and Wager employee, determined that

Plaintiff's solo operation of the ATTU did not cause or contribute

to the vessel's sinking, and that Plaintiff's operation of the ATTU

did not breach the implied warranty of seaworthiness.3 Mannion

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extent of Mr. Matthews' expertise, it is admissible not to prove

how the ATTU sank, but to support a showing that Defendant lacks

evidence proving Plaintiff caused the accident. 

8

Decl. Ex. 2, Defendant's Response to Plaintiff's Requests for

Admissions, First Set, Nos. 29-32; id., Ex. 8, Matthews Dep. 6:4-14;

id., Ex. 9, October 23, 2003 Wager Preliminary Report. Mr. Matthews

concluded that the ATTU was certainly a total loss, and recommended

payment of Plaintiff's claim. 

Ultimately, however, Mark Thomas, T.L. Dallas' claims manager,

decided to deny Plaintiff's claim on the basis that Plaintiff's solo

operation of the boat constituted a material non-disclosure in

violation of the doctrine of uberrimae fidei. Kelley Decl., Ex. 20,

June 11, 2003 Email from A. M. Thomas to Thierry Serck. In support

of this decision, Mr. Thomas cited a case called La Reunion

Francaise, S.A. v. Haugen, No. 98-7129-Civ-Ferguson/Snow (S.D. Fla.

Jan. 20, 2000). T.L. Dallas also served as underwriter for the

defendant in La Reunion Francaise, in which the court decided that

single-handed sailing was a special condition affecting insurance

coverage that should have been disclosed pursuant to uberrimae

fidei. 

Plaintiff moves for summary adjudication of issues related to

his claim for breach of contract, including (1) whether Defendant's

insurance policy provided coverage for the sinking of Plaintiff's

vessel; (2) whether Defendant breached the insurance contract by

refusing to pay; (3) the amount owed under the policy; and

(4) whether Florida or New York law is applicable. Defendant crossmoves for summary judgment in its favor on the basis of its

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affirmative defenses: (1) that it is allowed to void or cancel

Plaintiff's policy based on the doctrine of uberrimae fidei, and

(2) that Plaintiff engaged in single-handed navigation in violation

of the terms of the insurance policy, so Defendant is not required

to cover the loss of the ATTU. 

LEGAL STANDARD

Summary judgment is properly granted when no genuine and

disputed issues of material fact remain, and when, viewing the

evidence most favorably to the non-moving party, the movant is

clearly entitled to prevail as a matter of law. Fed. R. Civ. P. 56;

Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Eisenberg v.

Ins. Co. of N. Am., 815 F.2d 1285, 1288-89 (9th Cir. 1987).

The moving party bears the burden of showing that there is no

material factual dispute. Therefore, the court must regard as true

the opposing party's evidence, if supported by affidavits or other

evidentiary material. Celotex, 477 U.S. at 324; Eisenberg, 815 F.2d

at 1289. The court must draw all reasonable inferences in favor of

the party against whom summary judgment is sought. Matsushita Elec.

Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Intel

Corp. v. Hartford Accident & Indem. Co., 952 F.2d 1551, 1558 (9th

Cir. 1991). 

Material facts which would preclude entry of summary judgment

are those which, under applicable substantive law, may affect the

outcome of the case. The substantive law will identify which facts

are material. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248

(1986).

Where the moving party does not bear the burden of proof on an

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issue at trial, the moving party may discharge its burden of showing

that no genuine issue of material fact remains by demonstrating that

"there is an absence of evidence to support the nonmoving party's

case." Celotex, 477 U.S. at 325. The moving party is not required

to produce evidence showing the absence of a material fact on such

issues, nor must the moving party support its motion with evidence

negating the non-moving party's claim. Id.; see also Lujan v. Nat’l

Wildlife Fed’n, 497 U.S. 871, 885 (1990); Bhan v. NME Hosps., Inc.,

929 F.2d 1404, 1409 (9th Cir. 1991), cert. denied, 502 U.S. 994

(1991). If the moving party shows an absence of evidence to support

the non-moving party's case, the burden then shifts to the opposing

party to produce "specific evidence, through affidavits or

admissible discovery material, to show that the dispute exists." 

Bhan, 929 F.2d at 1409. A complete failure of proof concerning an

essential element of the non-moving party's case necessarily renders

all other facts immaterial. Celotex, 477 U.S. at 323.

Where the moving party bears the burden of proof on an issue at

trial, it must, in order to discharge its burden of showing that no

genuine issue of material fact remains, make a prima facie showing

in support of its position on that issue. See UA Local 343 v. NorCal Plumbing, Inc., 48 F.3d 1465, 1471 (9th Cir. 1994). That is,

the moving party must present evidence that, if uncontroverted at

trial, would entitle it to prevail on that issue. See id.; see also

Int’l Shortstop, Inc. v. Rally's, Inc., 939 F.2d 1257, 1264-65 (5th

Cir. 1991). Once it has done so, the non-moving party must set

forth specific facts controverting the moving party's prima facie

case. See UA Local 343, 48 F.3d at 1471. The non-moving party's

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"burden of contradicting [the moving party's] evidence is not

negligible." Id. This standard does not change merely because

resolution of the relevant issue is "highly fact specific." See id.

DISCUSSION

I. Coverage of Single-Handed Navigation 

A central issue to both Plaintiff's claim for breach of

contract and Defendant's affirmative defenses is whether the clause

in the renewal application regarding single-handed navigation bars

coverage of this accident, which occurred while Plaintiff was

sailing solo. Plaintiff maintains that the clause is invalid or

unenforceable, on various grounds. Defendant asks the Court to

decide, as a matter of law, that the single-handed navigation clause

excludes coverage of the accident. 

The interpretation of an insurance policy is a question of law

that may be decided on summary judgment. Exxon Corp. v. St. Paul

Fire and Marin Ins. Co., 129 F.3d 781, 786 (5th Cir. 1997). When

terms in an insurance contract are undefined, they are "read in

light of the skill and experience of ordinary people, and given

their everyday meaning as understood by the 'man on the street.'" 

Hyman v. Nationwide Mut. Fire Ins. Co., 304 F.3d 1179, 1188 (11th

Cir. 2002) (quoting Thomas v. Prudential Prop. & Cas., 673 So.2d

141, 142 (Fla. Dist. Ct. App. 1996)). Policy language is ambiguous

if it is "susceptible to more than one reasonable interpretation,

one providing coverage and one limiting coverage." Id. at 1186

(quoting Auto-Owners Ins. Co. v. Anderson, 756 So. 2d 29, 34 (Fla.

2000)). 

Plaintiff argues that the single-handed navigation clause is

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unenforceable because it was contained only in the renewal

application rather than in the contract itself, and because Mr.

Spink had no intent or authority to author a limitation of coverage. 

Defendant counters that the contract incorporated all the terms of

the application, and urges the Court to construe the application

against Plaintiff because it was authored by Plaintiff's agent. 

The location of an exclusion may render it ambiguous and

unenforceable. See Ajax Bldg. Corp. v. Hartford Fire Ins. Co., 358

F.3d 795, 799 (11th Cir. 2004) (construing an insurance policy in

favor of the insurer and noting that "the exclusion clause in this

. . . policy is not hidden among other language so as to create

ambiguity and confusion."; see also Saltarelli v. Bob Baker Group

Med. Trust, 35 F.3d 382, 386 (9th Cir. 1994) (finding purported

exclusion of pre-existing medical conditions unenforceable where

exclusion language neither clear nor plain and inconspicuously

buried in list of definitions); Hodges v. Nat'l Union Indem. Co.,

249 So. 2d 679, 681 (Fla. 1971) ("the fine print of an insurance

policy . . . should not be read to exclude coverage unless it

plainly and with certainty 'brings home' in unambiguous language to

the insured that he is not protected in a certain particular"). 

Here, the insurance policy itself includes a lengthy list of

exclusions to coverage and general conditions and warranties, yet

never addresses the issue on which Defendant now seeks to limit its

liability. The provision purportedly barring Plaintiff from singlehanded navigation was not only absent from the policy, but it was

contained in an application form, not prepared by Defendant, that

was never returned to Plaintiff. Defendant argues that any

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ambiguity in the scope of coverage due to the application form

should be interpreted against Plaintiff because the single-handed

navigation clause in the application form was authored by Mr. Spink,

Plaintiff's agent. Defendant relies on Halpern v. Lexington Ins.

Co., 715 F.2d 191, 193 (5th Cir. 1983), in which the court held that

ambiguity in coverage would be interpreted against an insured where

it was the insured's own description of the property that was later

disputed. The Fifth Circuit found in that case that interpretation

of ambiguity against the insurer would "produce an unreasonable and

absurd result." Under the facts of this case, however, it is an

interpretation in Defendant's favor that would result in an

unreasonable result, granting Defendant a windfall on the basis of a

gratuitous warning offered to Plaintiff by his broker. Therefore,

the Court finds that the single-handed navigation clause in the

application did not plainly or clearly limit the terms of the

insurance policy, which did not itself contain any such exclusion. 

Furthermore, Defendant's position assumes that Plaintiff's

agent could unwittingly add a limitation to coverage, despite

Defendant's own decision not to include such a limitation in the

policy. Defendant provides no authority for this proposition. 

Indeed, Defendant repeatedly emphasizes that Mr. Spink was

Plaintiff's agent, with no authority to bind the insurer, and Mr.

Spink himself describes the language application form as

"informational" only. Plaintiff obtained insurance from another

company in two prior years using application forms without any

reference to the issue of single-handed navigation. The insurance

policy's incorporation of the application was clearly intended to

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include those affirmative representations made by Plaintiff, e.g.

regarding his intended route or the state of the vessel, not the

terms of Blue Water's own application form. In fact, the terms in

the application cannot be incorporated wholesale into the contract,

as illustrated by the conflict between the application's Florida

choice-of-law provision and the contract's New York provision. 

For these reasons, the Court finds that the single-handed

navigation clause included in the renewal application was not

incorporated into the insurance contract between Plaintiff and

Defendant. 

For the same reasons, the Court finds that the Florida choiceof-law provision in the renewal application is not incorporated into

the policy. Therefore, the Court does not reach the issue of the

applicability of Florida statute § 627.409(2), which requires that

an insurer seeking to deny coverage show a causal connection between

the insured's breach, or violation of a warranty, condition or

provision, and a resulting increase in hazard. 

As a result, the Court denies Defendant's motion for summary

adjudication of its defense that Defendant was not required to cover

the loss of the ATTU because Plaintiff's single-handed navigation

violated the terms of the insurance policy. The Court also denies

Plaintiff's motion for summary adjudication that Florida law applies

to the insurance contract. 

II. Uberrimae Fidei and New York Counterparts

Defendant moves for summary judgment in its favor on its

defense that Plaintiff misrepresented or failed to disclose material

facts, i.e. Ms. Huberfeld's May, 2003 departure from the crew, in

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violation of the doctrine of uberrimae fidei, thus allowing

Defendant to void the policy. Plaintiff opposes the motion. 

Pursuant to the terms of the insurance policy, the Court applies

well-established substantive federal admiralty law, and New York law

where no federal admiralty precedent exists. 

A. Federal Admiralty Law

Under the doctrine of uberrimae fidei, "the parties to a marine

insurance policy must accord each other the highest degree of good

faith." Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 13 (2nd Cir.

1086) (citing Puritan Ins. Co. v. Eagle S.S. Co., S.A., 779 F.2d

866, 870 (2nd Cir. 1985)). This "requires that an insured fully and

voluntarily disclose to the insurer all facts material to the

calculation of the insurance risk." HIH Marine Serv., Inc., v.

Fraser, 211 F.3d 1359, 1362 (11th Cir. 2000) (citing Steelmet, Inc.,

v. Caribe Towing Corp., 747 F.2d 689, 695 (11th Cir. 1984)). "Since

the assured is in the best position to know of any circumstances

material to the risk, he must reveal those facts to the underwriter,

rather than wait for the underwriter to inquire." Knight, 804 F.2d

at 13. If the insured fails to meet the standard of uberrimae

fidae, the underwriter is entitled to void the policy ab initio. 

Id. (citing Puritan Ins. Co., 779 F.2d at 870-71). 

The doctrine is well-established federal law. HIH Marine

Serv., 211 F.3d at 1362. However, the question of whether the

doctrine of uberrimae fidei imposes a continuing obligation on the

assured to notify the insurer of any subsequent change in a material

fact is not similarly well-established. Where federal maritime law

is not well-settled, the Supreme Court's decision in Wilburn Boat

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Co. v. Fireman's Fund Ins. Co., 348 U.S. 310 (1955), has generally

been interpreted, "in deference to state hegemony over insurance, to

discourage the fashioning of new federal law and to favor the

application of state law." Albany Ins. Co. v. Wisniewski, 579 F.

Supp. 1004, 1013-14 (D. R.I. 1984) (listing cases). 

Neither party cites directly applicable federal admiralty

precedent. Plaintiff denies that he had any ongoing duty to report

changes in his situation that occurred after the policy was finally

issued. Plaintiff cites Rallod Transp. Co. v. Continental Ins. Co.,

727 F.2d 851, 853 (9th Cir. 1984), for the proposition that the

insured's duty to disclose terminates when an insurance contract is

formed. However, the Ninth Circuit in Rallod was specifically

construing California insurance law, and did not consider uberrimae

fidei. The cases cited by Defendant generally involve

misrepresentations or failures to disclose information prior to the

commencement of coverage. See, e.g., HIH Marine Serv., 211 F.3d at

1363-64 (voiding marine insurance policy ab initio based on

assured's material misrepresentation to insurer regarding identity

of insured and use of vessel). 

The First Circuit has stated in dicta that the uberrimae fidei

doctrine imposes a "strict, continuing obligation on the vessel

owner to ensure that the vessel will not, through bad faith or

neglect, knowingly be permitted to break ground in an unseaworthy

condition." Windsor Mount Joy Mut. Ins. Co. v. Giragosian, 57 F.3d

50, 55 (1st Cir. 1995) (citing Austin v. Servac Shipping Line, 794

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4In Windsor Mount Joy, the First Circuit expressly declined to

conduct a Wilburn Boat inquiry into whether settled maritime law or

State law should be applied because it found no violation even

under the most stringent possible standard, reasoning that

uberrimae fidei required only that vessel owner not "knowingly"

permit the vessel to break ground in an unseaworthy condition. 57

F.3d at 54-55. 

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F.2d 941 (5th Cir. 1986)).4

 However, this statement is not

persuasive because it conflates two separate sections in Austin: 

first, a discussion of uberrimae fidae, which does not refer to a

"continuing" obligation, and second, a discussion of the warranty of

seaworthiness, which the court did describe as a "continuing

obligation." Austin, 794 F.2d at 943, 944. 

For these reasons, the Court finds that well-established

federal admiralty law required Plaintiff fully and voluntarily to

disclose to the insurer all facts material to the calculation of the

insurance risk, but did not impose a continuing obligation to

disclose. See Navegacion Goya, S.A., v. Mut. Boiler & Mach. Ins.

Co., 411 F. Supp. 929, 936 n.8 (S.D. N.Y. 1975) (noting no wellestablished federal rule with respect to whether affirmative

representations are necessarily warranties that the same

circumstances will continue). The Court therefore looks to relevant

State law to determine whether Plaintiff had such a continuing

obligation. See Section II(C), below. 

B. Material Misrepresentation or Omission

Thus, the only question regarding federal uberrimae fidae is

whether Plaintiff fully and voluntarily disclosed to Defendant all

facts material to the calculation of the insurance risk, at the time

he applied for insurance. The standard for whether a risk should be

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disclosed is objective, that is, "whether a reasonable person in the

assured's position would know that the particular fact is material." 

Knight, 804 F.2d at 13 (citing Btesh v. Royal Ins. Co., 49 F.2d 720,

721 (2nd Cir. 1931)). A material fact is "'something which would

have controlled the underwriter's decision' to accept the risk." 

Id. (quoting Btesh at 721). 

Defendant's evidence shows that the crew details provided by

Plaintiff were material to the risk insured. In contrast to prior

insurers, Defendant asked repeatedly for details about the crew, and

issued only a temporary policy until the missing documentation was

provided. However, Defendant shows no evidence that the crew

details provided by Plaintiff were inaccurate or incomplete. 

Plaintiff's undisputed testimony is that he and Ms. Huberfeld

intended that she would stay aboard the ATTU during the entire

insurance period. Nor does Defendant show that Plaintiff failed to

disclose or misrepresented any other relevant facts when he applied

for insurance and responded to T.L. Dallas' requests for

information. Therefore, the Court concludes that there is no

evidence that Plaintiff violated his duty under uberrimae fidae, and

Defendant is not entitled to void the policy on that ground. 

C. New York Law

Navegacion Goya squarely addresses the issue of an insured's

obligation under New York State law to report changes in information

provided at the time the insurance contract was agreed. There, the

defendant insurers attempted to deny coverage by claiming that the

policy had been voided when the vessel's flag was changed from

American to Panamanian during the period of coverage. At the time

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when the insured applied for coverage, the flag of the ship was

represented as American. 411 F. Supp. at 933. The defendants

introduced uncontradicted expert testimony that flag is customarily

a material consideration in the writing of marine insurance

contracts. Id. The defendants argued that the change in flag

breached a promissory representation made at the time the insurance

was bound, or, in the alternative, that the change in flag was a

material alteration of the risk insured and therefore discharged the

policy. 

Applying New York law to the promissory representation issue,

the court in Navegacion Goya concluded,

[W]hile the issue is not firmly settled, the more persuasive

authority supports the view of the plaintiffs herein that under

New York law a representation as to future conduct of the

insured has no promissory character unless it is either

specifically so described or is included in the policy itself. 

Id. at 937. It also held, "If an exclusion of liability is intended

by the insurer which is not made apparent from the language used, it

is the insurer's responsibility to make this fact clearly known."

Id. (citing Gov. Empl. Ins. Co. v. Ziarno, 273 F.2d 645 (2nd Cir.

1960). With respect to the question of whether the insured had a

continuing obligation to inform the insurer of material changes to

the risk insured, the court similarly concluded that it did only if

the insurer "notif[ies] the insured at the time coverage is granted

of any changes which will result in a loss of coverage." Id. at

936. 

Defendant claims that Plaintiff's statement regarding the makeup of his crew was a promissory representation because Mr. Spink's

understanding that this was the case can be imputed to Plaintiff. 

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Yet Mr. Spink does not state that he was actually notified by

Defendant or T.L. Dallas that changes in the crew would result in

loss of coverage. Such an unstated "understanding" of an insurance

agent, mentioned nowhere in the policy itself and not communicated

to Plaintiff, does not fulfill the notice requirements of Navegacion

Goya. Defendant did not notify Plaintiff at the time coverage was

granted that changes to his crew would result in a loss of coverage;

indeed, Defendant never notified Plaintiff of this condition at any

time. The statement regarding single-handed navigation in the

application drafted by broker Blue Water, also not provided to

Plaintiff at the time coverage was granted, fails to put Plaintiff

on notice of that changes in crew could result in loss of coverage. 

Therefore, the Court finds that, under New York law, Plaintiff's

disclosure of his crew was not a promissory representation and did

not establish a continuing obligation to notify Defendant of future

changes in the crew. 

III. Breach and Amount Owed

Plaintiff moves for summary adjudication that Defendant

breached the policy in question; that the amount owed is $163,000;

and that Plaintiff is entitled to prejudgment interest. Defendant

relies solely on its defenses to oppose Plaintiff's motion for

summary adjudication, and does not otherwise dispute the issues of

breach, the amount owed or the right to prejudgment interest. 

Accordingly, the Court grants Plaintiff's motion for summary

adjudication on those issues. 

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CONCLUSION

For the foregoing reasons, the Court DENIES Plaintiff's motion

for summary adjudication that Florida law applies to the contract

and otherwise GRANTS Plaintiff's motion for summary adjudication

(Docket No. 84). Defendant's cross-motion for summary judgment is

DENIED (Docket No. 107). Within two weeks of the date of this

order, Plaintiff shall submit his motion for attorneys' fees and his

calculation of prejudgment interest. Defendant shall file its

opposition two weeks later and Plaintiff may reply a week after

that. Judgment will enter thereafter. Defendant shall bear

Plaintiff's costs of the action. 

IT IS SO ORDERED.

Dated: 3/2/06

 

CLAUDIA WILKEN

United States District Judge

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