Opinion ID: 557231
Heading Depth: 2
Heading Rank: 1

Heading: Maritime Preemption

Text: 7 Albany contends that the federal law of uberrimae fidei, which invalidates marine insurance contracts on evidence of the assured's material misrepresentations to the underwriter, supports its denial of liability on the policy covering the STACY MARIE. Anh Thi Kieu responds that relevant provisions of the Texas Insurance Code preclude Albany's denial of coverage. The issue is simply stated, but the law is complex: does federal maritime law or state insurance regulation determine the effect of an assured's misrepresentations? Although the courts typically rely upon federal common law to resolve maritime disputes, state law occasionally can be used to supplement or even supersede maritime law. Coastal Iron Works, Inc. v. Petty Ray Geophysical, 783 F.2d 577, 582 (5th Cir.1986); J. Ray McDermott & Co. v. The Vessel Morning Star, 457 F.2d 815, 818 (5th Cir.) (en banc), cert. denied, 409 U.S. 948, 93 S.Ct. 271, 34 L.Ed.2d 218 (1972). 2 State law is particularly significant in marine insurance disputes. 8 In Wilburn Boat Co. v. Fireman's Fund Insurance Co., 348 U.S. 310, 75 S.Ct. 368, 99 L.Ed. 337 (1955), the United States Supreme Court concluded that the regulation of marine insurance is, in most instances, properly left with the states. Id. at 321, 75 S.Ct. at 374-75. Following the direction of the Court in Wilburn Boat, the Fifth Circuit has ruled that the interpretation of a contract of marine insurance is--in the absence of a specific and controlling federal rule--to be determined by reference to appropriate state law. Ingersoll-Rand Financial Corp. v. Employers Ins. of Wausau, 771 F.2d 910, 912 (5th Cir.1985). This presumption of state law is, by now, axiomatic. INA of Texas v. Richard, 800 F.2d 1379, 1380 (5th Cir.1986). State law, therefore, governs the interpretation of marine insurance policies unless an available federal maritime rule controls the disputed issue. This Circuit has identified three factors that a court should consider in determining if a federal maritime rule controls the disputed issue: (1) whether the federal maritime rule constitutes entrenched federal precedent, Fireman's Fund Ins. Co. v. Wilburn Boat Co., 300 F.2d 631, 633 (5th Cir.), cert. denied, 370 U.S. 925, 82 S.Ct. 1562, 8 L.Ed.2d 505 (1962); (2) whether the state has a substantial and legitimate interest in the application of its law, Morrison Grain Co. v. Utica Mut. Ins. Co., 632 F.2d 424, 429 (5th Cir.1980); (3) whether the state's rule is materially different from the federal maritime rule, Walker & Sons, Inc. v. Valentine, 431 F.2d 1235, 1239 (5th Cir.1970). See Kossick v. United Fruit Co., 365 U.S. 731, 738-39, 81 S.Ct. 886, 891-92, 6 L.Ed.2d 56 (1961). 3 These factors are merely instructive and not dispositive. We address them in reverse order. 9 State insurance law generally should not govern marine insurance disputes if it is materially different from federal maritime law. The application of state law inconsistent with the core principles of maritime law would defeat the reasonably settled expectations of maritime actors. Exxon Corp. v. Chick Kam Choo, 817 F.2d 307, 318 (5th Cir.1987), rev'd on other grounds, 486 U.S. 140, 108 S.Ct. 1684, 100 L.Ed.2d 127 (1988). While there is no requirement that state insurance regulations precisely mirror parallel federal regulations, state law should not be applied unless it bears a reasonable similarity to the federal maritime practice. We find a reasonable similarity between the applicable federal and state laws in the instant case. Under the uberrimae fidei doctrine, an assured's material misrepresentations invalidate the policy of insurance ab initio. Gulfstream Cargo, Ltd. v. Reliance Ins. Co., 409 F.2d 974, 980-81 & n. 20 (5th Cir.1969). Under Texas law, an assured's misrepresentations may invalidate the policy of insurance, but only if the insured intended to deceive the insurer. Mayes v. Massachusetts Mutual Life Ins. Co., 608 S.W.2d 612, 616 (Tex.1980). Texas law, unlike federal law, imposes an appropriate limitation that relatively minor misstatements which the insured did not intend to make do not afford the insurer an excuse to refuse payment. The fundamental nature of both laws, however, is the same. Texas insurance law shares the concern of federal maritime law that an assured should not profit from her material misrepresentations to the underwriter. 10 State insurance law generally should not govern marine insurance disputes if the state does not have a substantial and legitimate interest in the application of its law. Federal maritime law properly controls any maritime dispute in the absence of a substantial and legitimate state interest. Stated conversely, state law should not be applied unless the local state interest materially exceeds the comparative maritime concerns in the controversy. See Grant Smith-Porter Ship Co. v. Rohde, 257 U.S. 469, 477, 42 S.Ct. 157, 158, 66 L.Ed. 321 (1922); Walter v. Marine Office of America, 537 F.2d 89, 94-95 (5th Cir.1976). It is evident in the instant case that the local state interest is substantial and legitimate. Regulation of insurance relationships, including marine insurance relationships, has historically been a matter of state concern. See Wilburn Boat Co., 348 U.S. at 316, 75 S.Ct. at 371. From their experience, states are far better equipped to balance the risks that each party to an insurance contract endures. The State of Texas has concluded that the burden of unintentional misrepresentations should fall on the insurance underwriter. Texas has a material interest in ensuring that marine insurance underwriters do not invalidate the insurance protection of Texas citizens on the basis of misrepresentations that were neither willfully or intentionally asserted. 11 State insurance law generally should not govern marine insurance disputes if an existing federal maritime rule constitutes entrenched federal precedent. Maritime law, as federal common law, supersedes state law if the maritime law specifically governs the conduct in question and consistently has been invoked to control such conduct. In the absence of preexisting entrenched federal maritime law, this Court will refuse to impose unfamiliar federal common law maritime requirements on the parties to a marine insurance contract. See INA of Texas, 800 F.2d at 1382 (In case after case, we have applied state law in interpreting marine insurance policies, because there is no contrary federal admiralty rule.). The application of unfamiliar federal maritime rules engenders undesirable uncertainty among maritime actors; this Court can easily avoid such uncertainty by the application of already well-developed state laws. Chick Kam Choo, 817 F.2d at 317. 12 The question whether the uberrimae fidei doctrine is entrenched federal precedent is troublesome. Repeated references to the doctrine appear in early United States Supreme Court opinions. See, e.g., Stipcich v. Metropolitan Life Ins. Co., 277 U.S. 311, 316, 48 S.Ct. 512, 513, 72 L.Ed. 895 (1928); Phoenix Life Ins. Co. v. Raddin, 120 U.S. 183, 189, 7 S.Ct. 500, 502, 30 L.Ed. 644 (1887). The Supreme Court applied the uberrimae fidei doctrine as a traditional aspect of insurance law in general. See Stipcich, 277 U.S. at 316, 48 S.Ct. at 513 (Insurance policies are traditionally contracts uberrimae fidei and a failure by the insured to disclose conditions affecting the risk, of which he is aware, makes the contract voidable at the insurer's option.). As mentioned, though, insurance law is typically a matter of state concern. Over the years most states abandoned the strict uberrimae fidei articulation. Today, the sole remaining substantial vestige of the doctrine is in maritime insurance law. See 2 Arnould, Marine Insurance & Average Sec. 575, at 531 (13th ed. 1950); F. Tempelman & C. Greenacre, Marine Insurance 16-17 (4th ed. 1934); W. Winter, Marine Insurance 223 (3d ed. 1952). 13 Even under maritime law, the federal courts have rarely invoked the uberrimae fidei doctrine. Despite the long history of the doctrine in the Supreme Court, only three cases--two of which date from the 1960s--have examined the availability of the doctrine in this Circuit. Each of these cases has confidently asserted that the doctrine is well recognized in federal law. Indeed, in Fireman's Fund Insurance Co. v. Wilburn Boat Co., 300 F.2d 631 (5th Cir.1962), the Court expressly declared that the uberrimae fidei doctrine is solidly entrenched in our body of federal maritime law. Id. at 647 n. 12 (emphasis added). 4 In Gulfstream Cargo, Ltd. v. Reliance Insurance Co., 409 F.2d 974 (5th Cir.1969), the Court, relying extensively upon its language in Fireman's Fund Insurance Co., stated without equivocation that [n]othing is better established in the law of marine insurance than that 'a mistake or commission material to a marine risk, whether it be wilful or accidental, or result from mistake, negligence or voluntary ignorance, avoids the policy.'  Id. at 980 (quoting Fireman's Fund Insurance Co., 300 F.2d at 646). Each of these cases has declined, however, to enforce the strict uberrimae fidei rule as the basis for the invalidation of a marine insurance policy. 14 The circumstances in Fireman's Fund Insurance Co. and Gulfstream Cargo, Ltd. were unusual. In both cases, the Court assumed, without formally deciding, that the uberrimae fidei doctrine was controlling federal precedent. The Court nonetheless resolved each case on state law grounds, concluding that state insurance law would not permit the respective plaintiffs to recover under their marine insurance policies. In Fireman's Fund Insurance Co., the Court remarked that, because Texas law would not afford relief anyway, the applicability of the uberrimae fidei doctrine was of minimal significance. 300 F.2d at 647 n. 12. In Gulfstream Cargo, Ltd., the Court echoed its prior opinion and conceded that it was unnecessary to further resolve the struggle between federal and state law in marine insurance disputes. 409 F.2d at 981. 15 The circumstances were equally unusual in the only other case in this Circuit to discuss the availability of the uberrimae fidei doctrine. In Austin v. Servac Shipping Line, 794 F.2d 941 (5th Cir.1986), the Court affirmed a district court's conclusion that the uberrimae fidei doctrine did not preclude the plaintiff's recovery under a marine hull insurance policy. The Court emphasized that, even if the doctrine existed, the uberrimae fidei doctrine did not require invalidation of the policy because the plaintiff's alleged misrepresentations were not material. Id. at 944. 5 Consequently, like Fireman's Fund Insurance Co. and Gulfstream Cargo Ltd., Austin's expression of the significance of the doctrine was mere dicta. 16 It is the accepted practice of this Court that one panel cannot overturn the decisions of another. See Hodge v. Seiler, 558 F.2d 284, 287 (5th Cir.1977); Puckett v. Commissioner, 522 F.2d 1385, 1385 (5th Cir.1975). None of the opinions of this Court which have cited the uberrimae fidei doctrine authoritatively conclude, however, that the doctrine applies to the exclusion of state law. For that matter, no opinion of this Court has ever explicitly authorized the application of the uberrimae fidei doctrine to invalidate a marine insurance policy. The uberrimae fidei doctrine, in sum, is a rule which this Court has recognized, but never applied. We therefore conclude, albeit with some hesitation, that the uberrimae fidei doctrine is not entrenched federal precedent. 17 The facts in the instant case are analogous to the facts in the salient opinion of Wilburn Boat Co. v. Fireman's Fund Insurance Co., 348 U.S. 310, 75 S.Ct. 368, 99 L.Ed. 337 (1955). The marine insurance underwriter in Wilburn Boat Co. refused to pay for the loss of a houseboat because the plaintiffs allegedly had breached certain warranties in the insurance policy. The underwriter sought application of a so-called strict breach of warranty rule under general maritime law. The Supreme Court, however, viewed this maneuver with skepticism. Noting that there were very few federal cases on marine insurance in which the strict breach of warranty rule has even been considered, the Court determined that the strict breach of warranty rule had not been firmly established as part of the body of federal law. Id. at 315-16, 75 S.Ct. at 371-72. Accordingly, the Court required the application of state law. Id. at 321, 75 S.Ct. at 374. 18 The same result should ensue here. There are very few cases on marine insurance in this Circuit which have considered the uberrimae fidei doctrine. Even when this Court has considered the doctrine, it has not applied the doctrine. Perhaps the doctrine was entrenched federal precedent at the time of the Fireman's Fund Insurance Co. and Gulfstream Cargo, Ltd. decisions, but its spotty application in recent years--even in other circuits 6 -- suggests that the uberrimae fidei doctrine is entrenched no more. 19 Concluding, as we do, that all three factors a court should consider in the marine insurance preemption analysis favor the application of state law, we therefore must examine the relevant state law to determine the viability of Anh Thi Kieu's request for compensation. But before we leave our discussion of the tug of war between federal and state law, we find it necessary to stress those decisions which we do not reach. This Court does not hold that federal maritime law no longer embraces the uberrimae fidei doctrine: while we have found no cases in this Circuit which apply the doctrine, we also have found no cases which expressly reject the doctrine. Neither does this Court hold that state insurance law always will supersede the uberrimae fidei doctrine. In an appropriate case, it is entirely possible that application of the doctrine would be more appropriate than application of the relevant state insurance regulations. 7