Opinion ID: 765983
Heading Depth: 3
Heading Rank: 2

Heading: Interpretation of the Warranty

Text: 26 Since recovery is precluded under New York if the warranty was breached, regardless of its materiality to the insurer's risk, and is also precluded under Florida law if the breached warranty was material to the insurer's risk, we need not decide which law applies if we find that the warranty in this case was breached and was material to the insurer's risk. We therefore turn to the interpretation of the warranty and the question of its materiality to the insurer's risk. 27 The starting point in interpreting an insurance policy is to determine whether the policy terms are ambiguous. As a general rule, plain or unambiguous language will be given its ordinary meaning and effect, and the need to resort to rules of construction arises only when an ambiguity exists. Ingersoll Milling Mach. Co. v. M/V Bodena, 829 F.2d 293, 306 (2d Cir. 1987). 'As with contracts generally, a provision in an insurance policy is ambiguous when it is reasonably susceptible to more than one reading.' In re Prudential Lines, Inc., 158 F.3d 65, 77 (2d Cir. 1998) (quoting Haber v. St. Paul Guardian Ins. Co., 137 F.3d 691, 695 (2d Cir. 1998)). The determination of whether an insurance policy is ambiguous is a matter of law for the court to decide. Id. 28 We find that the Tow Endorsement is unambiguous and that it precludes coverage under either New York or Florida law for the accident that occurred in this case. The Tow Endorsement is clear on its face as to the hazards to which it is addressed. It states that [i]n consideration of the rate and premium charged, . . . coverage is hereby provided for the towage of yachts up to 50 feet in length. This is an affirmative statement of coverage that necessarily implies that the towage of anything other than yachts up to 50 feet in length is not covered. The unambiguous implication of this provision is that, in exchange for Commercial Union's promise to provide coverage at the agreed-upon rate, Flagship Marine warranted that it would not tow vessels greater than 50 feet. There can be no doubt that this warranty was breached in this case and that it was material, because the length of vessels towed was correlated to the risk assumed by Commercial Union. Therefore, under New York or Florida law, Flagship Marine's breach precludes its recovery under the insurance contract. 29 Our conclusion regarding the materiality of the towed vessels' length to the insurer's risk is bolstered by a review of the other pertinent provisions of the policy. It reveals that, without the Tow Endorsement, there would be no coverage for the commercial towage of any vessel. The Tow Endorsement specifically rescinds a standard provision in Commercial Union's policy which disclaims [a]ny liability for, or Any loss, damage, or expense arising from or accruing by reason of the towage of Any other vessel or craft other than emergency towage of a vessel in distress at sea to a port or place of safety. The Tow Endorsement thus deleted the general exclusion of towage and replaced it with an endorsement of towage in the limited circumstance of yachts less than 50 feet. This history suggests that the risks associated with towing were material to Commercial Union's evaluation of its exposure; and the 50-foot limitation suggests that Commercial Union further considered length to be an indication of the size of that risk. 30 We also disagree with the district court's view that the use of the term yacht in the Tow Endorsement, as opposed to the term vessel, used elsewhere in the contract to refer to all types of craft, signifies that coverage was provided for the towage of non-yachts of any size (or, in other words, that Flagship Marine warranted only that it would not tow yachts greater than 50 feet). To the contrary, we read the endorsement as (1) providing coverage for the towage of yachts less than 50 feet; (2) contemplating the towage of yachts greater than 50 feet upon payment of an agreed-upon additional premium; and (3) being silent on the towage of non-yachts. Particularly in light of the fact that, without the endorsement, there would be no coverage whatsoever for towage, we cannot agree with the district court that the endorsement's silence as to non-yachts creates coverage. Cf. Advance Watch Co. v. Kemper Nat'l Ins. Co., 99 F.3d 795, 805 (6th Cir. 1996) ([T]he absence of an exclusion cannot create coverage; the words used in the policy must themselves express an intention to provide coverage for liability for the kind of occurrence or injury alleged by the claimant.); Continental Cas. Co. v. Pittsburgh Corning Corp., 917 F.2d 297, 300 (7th Cir. 1990) ([A]n exclusion from insurance coverage cannot create coverage.) (citations omitted).