Court Opinion

ID: 8936615
Source: CourtListenerOpinion
Date Created: 2022-11-27 07:36:11.243702+00
Date Added: 2024-06-11T17:09:38.774107
License: Public Domain

CARDAMONE, Circuit Judge,
dissenting:
After learning from Mase and from the July 22,1980 binder about the IRINIO loss, none of ANGA’s employees made further inquiry. Based solely on this the district court found ANGA to be a “de facto” follower of the lead underwriter in all matters relating to this risk. Once ANGA is la-belled a follower, the majority finds that no omissions or misrepresentations in the original June 6, 1980 application for insurance, including the $638,115 loss to the MAR-IAM, were relied upon by ANGA and hence could not be classified as material. Because I believe that the district court’s finding of ANGA to be a “de facto” follower was clearly erroneous and that the decision today ignores the continuing strong viability of the uberrimae fidei doctrine in marine insurance cases, I respectfully dissent.
Not until June 15, 1981 — more than a year after Leeds submitted its original insurance application — was ANGA made aware of the correct 1979-80 loss record, including the dollar amount of the IRINIO loss and the substantial loss to the MAR-IAM. The credibility finding that Mase alerted either Hatzel or Gagliardi (ANGA’s employees) to the IRINIO loss in July, 1980, but not as to its amount is not disputed. One of the two named employees *874was also made aware simply of the fact of the IRINIO loss in the written binder sent to ANGA on July 22, 1980. But, the owners and Leeds knew then that the loss would total at least $300,000. Yet, they did not disclose this amount in any conversation with or information sent to ANGA in July. International’s1 President knew in April, 1980 that the MARIAM loss would total at least $370,000, but this loss also was not disclosed to Leeds until January 5, 1981 and not disclosed to ANGA for five more months.
When this transaction is viewed in perspective, two things become clear. ANGA made no independent investigation into the risk initially, nor did it make further inquiry into the dollar amount of the IRINIO loss when alerted to its existence. The owners and Leeds made a game out of their duty of disclosure. Playing each card as close to their vests as possible, the defendants initially submitted an original application containing several misrepresentations and omissions. When correcting these prior omissions the defendants released as little information as possible. In addition, they failed to disclose the substantial loss to the MARIAM, of which they were fully aware.
On balance, upholding the district court in this case will allow those seeking marine insurance to present incomplete information initially and to repeat the process when correcting prior misinformation. Once some disclosure is made — even if intentionally incomplete — the majority rules that the insurer must forage on its own for more information or risk being found not to have relied on any omissions or inaccuracies contained in the applicant’s disclosures.
Such a rule seems to me impractical and unworkable. Rather, in this case the doctrine of uberrimae fidei should apply. That doctrine obligates the assured to volunteer all information which might have a bearing on the scope of the risk assumed, and the failure to do so allows the insurer to void the policy. Contractors Realty v. Ins. Co. of North America, 469 F.Supp. 1287, 1294 (S.D.N.Y.1979). The insured is bound to communicate all material information regardless of whether any inquiry was made concerning it. Gulfstream Cargo, Ltd. v. Reliance Insurance Company, 409 F.2d 974, 980-81 (5th Cir.1969). Once the policy of insurance is procured the duty of disclosure continues and after-discovered information must be promptly and fully communicated. See Thebes Shipping, Inc. v. Assicurazion; Ausonia SPA, 599 F.Supp. 405, 426 (S.D.N.Y.1984).
Here, no serious doubt can exist that appellees should have disclosed on June 6, 1980 the losses to the IRINIO and the MARIAM. As to the IRINIO loss, some argument may be made that ANGA could not continue to ignore the IRINIO loss, once it was made aware of its existence. Concededly, an underwriter’s absolute right to demand disclosure of material facts may be waived by its neglect to investigate certain facts when a basis for inquiry is raised by the information communicated. See Gulfstream Cargo, Ltd. v. Reliance Insurance Company, 409 F.2d at 982. But this does not mean that an applicant for marine insurance can knowingly disclose incomplete information — in breach of its duty of complete good faith and full disclosure — hoping that the insurer will not investigate further into the amount or circumstances of a particular loss. The duty of full disclosure, especially a disclosure to correct prior misrepresentations, falls on the insured. To shift that burden in the name of non-materiality merely contradicts the strict duty of utmost good faith that underlies marine insurance. While a minute disclosure of every material circumstance is not required, 2 M. Mustill & J. Gilman, Amould’s Law of Marine Insurance and Average, § 646 at 493 (16th ed. 1981), the amount of a particular substantial loss or the fact of another loss can hardly be classified as “minute.”
*875Even assuming that ANGA waived its right to sue on the IRINIO loss, no disclosure was made to it of the MARIAM loss. Any waiver as to the IRINIO loss cannot constitute a waiver of all material omissions, on a theory that ANGA simply was ignoring all disclosures. ANGA should be entitled to void this contract solely because of the nondisclosure of the MARIAM loss. A party cannot waive rights to something about which it knows nothing, and while only scant notice of the IRINIO loss was given, absolutely no notice of the loss to the MARIAM was supplied.
The only proof that ANGA elected to follow the lead underwriter with regard to all decisions regarding the risks is that derived from an inference, that is to say, ANGA did not itself make a thorough investigation of the risks involved. From this the majority therefore concludes that ANGA must be a follower. Ranged against this ambivalent inference was not only testimony from ANGA’s employees that ANGA was not a follower, but several even stronger inferences that lead to the conclusion that ANGA was not a follower. First, unlike at least one other underwriter in this transaction, plaintiff did not agree to be bound by the lead underwriter’s determinations. Second, defendants freely admit that ANGA could have rescinded its obligation when the July 22, 1980 binder was sent. If ANGA was a follower of the lead underwriter, it would have had to relinquish all rights of rescission. Absent agreement to be bound by the lead underwriter and with a conceded right to rescind, ANGA was not a follower and a contrary finding is clearly erroneous as a matter of fact.
That is not the end of the matter. As a matter of law ANGA was entitled to rely on the doctrine of uberrimae fidei. Rather than concluding that ANGA was a follower because it did not make a thorough investigation of the risks involved, it seems more logical to believe that the doctrine of uberrimae fidei — intended to relieve insurers from many usual duties of investigation — was relied upon by ANGA. Thus, its failure to investigate on the basis of incomplete information should not constitute a waiver; it merely indicates that an insurer elects to take advantage of a favorable rule of law.
Finally, without expressly dealing with the question, the majority appears to have indirectly reduced the effect of the doctrine of uberrimae fidei. If such is the aim of the majority it deserves discussion. Because I believe the doctrine has continued vitality, and for the other reasons stated, I vote to reverse and to declare that ANGA is not liable on the risk.

. International Ship Management, Inc., not joined as a defendant in this litigation, was the managing agent for the owners in the United States.