Opinion ID: 579835
Heading Depth: 2
Heading Rank: 4

Heading: Illegality of the Contract/Breach of Warranties

Text: 32 The underwriters, citing a lack of proper Coast Guard documentation, argue that the policy is void and subject to rescission because the KINGFISHER could not legally be operated for the purpose for which she was insured. We reject this argument. Cal.Ins.Code § 1903(c) prohibits an insurer from rescinding a marine insurance contract on the ground that the insured concealed a lack of proper documentation, unless the concealment is related to the loss. Here, it was not. 33 The underwriters further argue that they may void the policy because Cole breached Warranty 6 of the policy. Warranty 6 states in part: Warranted Coast Guard Certificate issued where required and complied with. Warranty 6 (reprinted in Excerpts of Record, Tab 15-20). 34 Cole appears to have breached this warranty when, during the initial term of the policy, he operated the vessel for commercial purposes without proper documents. This breach was immaterial, however. 35 Under Cal.Ins.Code § 448, [u]nless the policy declares that a violation of specified provisions thereof shall avoid it, the breach of an immaterial provision does not avoid the policy. A California appellate court confronted a similar question in Los Angeles Mutual Ins. Co. v. Cawog, 30 Cal.App.3d 378, 383 (1973). There, the court held that an insured's breach of a coinsurance clause in his fire insurance policy did not relieve the insurer of liability despite the characterization of the clause as a warranty. The key issue was whether the breach of the warranty was material to the insurer's risk. In this case, like Cawog, breach of the warranty was immaterial to the insurer's risk. 6 36 Further, once Cole discovered that he lacked the necessary documentation for commercial charters, he no longer operated the vehicle as a commercial charter, but instead used it only for pleasure. 7 Indeed, during the period of the 60-day extension, Cole operated the vessel only for pleasure purposes. At the time the Kingfisher sank, Cole was in full compliance with the warranty. 37