Opinion ID: 769947
Heading Depth: 2
Heading Rank: 2

Heading: Are Attorney's Fees Available in Marine Insurance Contract Disputes?

Text: 15 Appellants argue that the district court erred in holding that a federal maritime law existed on the issue of attorney's fees, thereby preempting the application of Fla. Stat. § 627.428. Accordingly, we must resolve whether federal or state law governs. 16 Federal courts have long considered actions involving marine insurance policies to be within the admiralty jurisdiction of the federal courts and governed by federal maritime law. See Wilburn Boat Co. v. Fireman's Fund Ins. Co., 348 U.S. 310, 321, 75 S.Ct. 368, 99 L.Ed. 337 (1955); New England Mut. Marine Ins. Co. v. Dunham, 78 U.S. (11 Wall.) 1, 33-34, 20 L.Ed. 90 (1870); Morewitz v. West of England Ship Owners Mut. Protection & Indem. Ass'n, 896 F.2d 495, 498-99 (11th Cir.1990); Morrison Grain Co., Inc. v. Utica Mut. Ins. Co., 632 F.2d 424, 428 n. 4 (5th Cir.1980). But, when neither statutory nor judicially created maritime principles provide an answer to a specific legal question, courts may apply state law provided that the application of state law does not frustrate national interests in having uniformity in admiralty law. Coastal Fuels Mktg., Inc. v. Florida Express Shipping Co., Inc., 207 F.3d 1247, 1251 (11th Cir.2000); see also Offshore Logistics, Inc. v. Tallentire, 477 U.S. 207, 222-23, 106 S.Ct. 2485, 91 L.Ed.2d 174 (1986) ([T]he extent to which state law may be used to remedy maritime injuries is constrained by a so-called 'reverse-Erie ' doctrine which requires that the substantive remedies afforded by the States conform to governing federal maritime standards.); Steelmet, Inc. v. Caribe Towing Corp., 779 F.2d 1485, 1488 (11th Cir.1986) (One must identify the state law involved and determine whether there is an admiralty principle with which the state law conflicts, and, if there is no such admiralty principle, consideration must be given to whether such an admiralty rule should be fashioned. If none is to be fashioned, the state rule should be followed.). The parties in this case differ as to whether an applicable maritime principle governs the question at issue. 17 Underwriters argues that there exists a well-established maritime law prohibiting any award of attorney's fees in an admiralty action absent a contract provision, a federal statute, or bad faith in the litigation process. See Coastal Fuels, 207 F.3d at 1250; Noritake Co., Inc. v. M/V Hellenic Champion, 627 F.2d 724, 730 n. 5 (5th Cir.1980). Because Fla. Stat. § 627.428 allows an insured to collect attorney's fees based solely on whether he prevailed, Underwriters asserts that § 627.428 conflicts with established maritime law. 18 Appellants agree that, in general, attorney's fees are not recoverable in admiralty actions. They, however, contend that this general rule does not apply in the context of marine insurance contract actions. The Supreme Court has held that in the absence of a specific and controlling rule, the interpretation or construction of a marine insurance contract is to be determined by state law. See Wilburn Boat, 348 U.S. at 321, 75 S.Ct. 368 (We, like Congress, leave the regulation of marine insurance where it has been-with the States.); see also Steelmet, 842 F.2d at 1244 n. 9 ([A]dmiralty courts will generally look to appropriate state law in determining questions involving a marine insurance contract.) (quoting Gulf Tampa Drydock Co. v. Great Atlantic Ins. Co., 757 F.2d 1172, 1174 (11th Cir.1985)). Having held that state law controls the interpretation of marine insurance policies, it would defy both logic and sound policy were we to hold that the applicability of attorney's fees vel non must be determined by reference to uniform federal law. INA of Texas v. Richard, 800 F.2d 1379, 1381 (5th Cir.1986). Thus, the question becomes whether there exists an established federal maritime policy addressing the specific issue of whether attorney's fees lie in the context of marine insurance contract disputes. 19 This circuit has awarded attorney's fees pursuant to Fla. Stat. § 627.428 in a number of marine insurance contract disputes. See Windward Traders, 855 F.2d at 819-20 (11th Cir.1988) (awarding attorney's fees pursuant to Fla. Stat. § 627.428 where a vessel owner prevailed against his insurers to recover under a marine insurance contract); Steelmet, 842 F.2d at 1245 (same); Stuyvesant, 286 F.2d at 604 (awarding attorney's fees pursuant to Fla. Stat. § 625.08 (now codified as § 627.428) where a vessel charterer prevailed against the vessel owner's insurers to recover under a marine insurance contract); see also Blasser Bros., 628 F.2d at 386 (rejecting an attorney's fees award pursuant to Fla. Stat. § 627.428 where the vessel owner failed to follow the statute's procedures); American Eastern Dev't Corp. v. Everglades Marina, Inc., 608 F.2d 123, 125-26 (5th Cir.1979) (rejecting an attorney's fees award pursuant to Fla. Stat. § 627.428 because the statute did not permit an award of fees when an injured third party beneficiary brought the case). 6 Underwriters notes that in these cases, this court did not address expressly whether an established federal maritime policy existed. Rather, this court assumed without any discussion that state law applied. Nonetheless, because these cases consistently applied state law to decide whether or not attorney's fees lie in the context of a marine insurance dispute, they strongly support, if not implicitly hold, that there exists no specific and controlling federal law relating to attorney's fees in maritime insurance litigation. See Robertson, 27 J. Mar. L. Com. at 562 (The ... Eleventh Circuit take[s] the view that '[t]here is no specific and controlling federal rule of law relating to attorney's fees in maritime insurance litigation' and that therefore 'state law ... govern[ ]s the issue ... whether or not attorney's fees lie in the context of a marine insurance dispute.' ). Furthermore, Underwriters has not cited, nor have we found, any Eleventh Circuit decision which rejects an award of attorney's fees in the context of a marine insurance contract dispute on the basis that federal law and not state law applies. 20 Two other courts of appeal have addressed this issue and have reached opposite results from each other. In INA of Texas v. Richard, 800 F.2d 1379 (5th Cir.1986), the Fifth Circuit, citing to a number of cases from the Old Fifth Circuit, held that [t]here is no specific and controlling federal rule of law relating to attorney's fees in maritime insurance litigation. Id. at 1381. To the contrary, the court concluded that the Fifth Circuit has consistently found state law to govern the issue of whether or not attorney's fees lie in the context of a marine insurance contract dispute. See id. In contrast, the Second Circuit, in American National Fire Insurance Co. v. Kenealy, 72 F.3d 264 (2nd Cir.1995), held that there exists an established federal maritime law that prohibits attorney's fees in marine insurance contract disputes. See id. at 270. 21 Underwriters argues that this court should reject its prior decisions and the Fifth Circuit's decision in Richard 7 and follow the decision in Kenealy as signifying the emergence of an established federal law. In reviewing the Kenealy decision, we, however, observe that the cases which underlie the court's rationale in Kenealy do not support the notion of an emerging federal rule of law relating to attorney's fees in maritime insurance litigation. See Robertson, 27 J. Mar. L. Com. at 566 (It [ ] appears that [Kenealy ] was wrongly decided. The court mistakenly took the American rule-a general federal procedural rule-for a substantive rule of maritime law, and wrongly used that rule to displace state substantive law.). 22 The Kenealy court concluded that the Second Circuit in Ingersoll Milling Machine Co. v. M/V Bodena, 829 F.2d 293 (2d Cir.1987), held that the general prohibition on attorney's fees in admiralty suits applies in a suit over a marine insurance contract. See 72 F.3d at 270. Next, the Kenealy court rejected the Richard decision by noting that the First and Third Circuits, writing after Ingersoll, reached the same conclusion as Ingersoll. However, neither the First nor the Third Circuit cases dealt with a dispute over a marine insurance contract. The Third Circuit, in Sosebee v. Rath, 893 F.2d 54 (3d Cir.1990), faced a maritime tort action. See id. at 55. In Southworth Machinery Co. v. F/V Corey Pride, 994 F.2d 37 (1st Cir.1993), the First Circuit found the defendant liable as a result of its breach of its express warranty for parts and workmanship incident to the repair of a ship which is a standard contractual breach to which maritime law has always applied. See id. at 42. Moreover, the First Circuit's decision supports the proposition that federal maritime law does not cover marine insurance contract disputes. The First Circuit stated that: 23 State statutes providing for attorney's fees may sometimes be given effect in admiralty cases, notably, where the attorney's fees are awarded incident to a dispute that is not normally a subject of maritime law. For example, in Pace v. Insurance Company of North America, 838 F.2d 572, 578-79 (1st Cir.1988), we held that maritime law did not preempt a Rhode Island cause of action allowing recovery of damages and attorney's fees for an insurer's bad faith refusal to pay or settle claims; the refusal to settle [insurance] claims is normally left untouched by maritime law. 24 Id. at 41 (emphasis added). Thus, the cases relied upon by Kenealy do not support the Kenealy court's proposition that they reached the same conclusion as Ingersoll. 25 In addition, Underwriters does not provide any reason, nor have we found one, to require a unitary and uniform federal rule respecting attorney's fees in maritime insurance litigation. See INA, 800 F.2d at 1381; see also Coastal Fuels, 207 F.3d at 1251 (holding that no reason existed to create a uniform national rule in admiralty where the case concerned attorney's fees and whether the contractual provision which provided for attorney's fees should allow a party to recover attorney's fees where it succeeded on all but one minor issue). 26 In conclusion, we hold that a district court may award attorney's fees pursuant to Fla. Stat. § 627.428 against an insurer in a maritime insurance contract case. Accordingly, we reverse the district court's judgment and remand this case for further proceedings consistent with this opinion. 27 REVERSED AND REMANDED.