In the very recent
matter of Certain Underwritiers at Lloyds, London v. Inlet Fisheries, Inc. et
al., 208 U.S. App. LEXIS 2951 (9th Cir. Feb. 11, 2008), the court
succinctly provided a history of this doctrine. Inlet Fisheries was an
Alaska-based fish buying and processing business. Inlet had stand-alone vessel
pollution insurance which was cancelled by a prior SEQ
CHAPTER \h \r 1syndicate for failing to conduct requested surveys and
failing to pay premiums. The survey was requested because of a prior incident
wherein one of Inlet’s vessels hit a sand bar and sunk with 3,000 gallons of
diesel oil on board. One week prior, the same vessel had been involved in
another pollution incident and yet another vessel owned by Inlet was reportedly
listing at the dock “with the potential of turning turtle.” One day following
the syndicate sending its notice of cancellation, a different Inlet vessel was
involved in an oil spill.
Prior to the
effective date of cancellation, Inlet sought vessel pollution insurance from
Certain Underwriters at Lloyds. The application requested information
concerning Inlet’s current vessel pollution insurer and Inlet listed the
syndicate but did not state anything about the impending cancellation.
Additionally, the application requested information about prior pollution losses
and Inlet wrote “none”. Inlet did not disclose, and the application did not
request, information concerning the condition of Inlet’s vessels, its financial
status or the fact of, or reason for, the syndicate’s cancellation of the prior
policy.
Two years later one
of Inlet’s vessels spilled oil and sank and Inlet in turn made a claim. Lloyds
commenced an investigation concerning the incident and Inlet generally. Once
Lloyds learned of the above stated material facts, Lloyds filed a declaratory
judgment action seeking to void the policy ab inito under the doctrine of
uberrimae fidei. Inlet opposed and argued Alaska state law applied and
advanced the point Lloyds never requested the allegedly material information.
The district court
granted the relief sought by Lloyds which was affirmed by the Ninth Circuit. In
its analysis, the court cited many examples as to how this doctrine is well
entrenched in federal maritime law and thus must be followed pursuant to
Wilburn Boat.
In reaching its
holding, the Ninth Circuit provided a comprehensive overview of the history of
marine insurance and noted it was not until 1870 when the United States Supreme
Court first recognized marine insurance contracts were within the federal
courts’ maritime jurisdiction. New Eng. Mut. Marine Ins. v. Dunham, 78
U.S. 1 (1870). Marine insurance has always occupied a unique place in the legal
universe, straddling federal and state regulatory jurisdiction. Red Cross
Line v. ATL Fruit Co., 264 U.S. 109 (1924) (holding that states can regulate
maritime insurance provided the regulations do not “conflict with any essential
feature of the general maritime law”). It is also worth noting the Ninth
Circuit took the opportunity to SEQ CHAPTER \h \r 1criticize
a 1991 ruling by the Fifth Circuit in the case of Albany Ins. v. Anh Thi Kieu,
927 F.2d 882 (5th Cir. 1991) which held the doctrine of uberrimae
fidei was not entrenched “federal precedent” and applied Texas state law.
It is important to
note when a matter before the court involves an issue of marine insurance,
federal maritime law will apply, assuming applicable precedent exists. In the
absence of such precedent, the court will follow the logic of Wilburn Boat
and apply state substantive law. Uberrimae fidei certainly differs from
most state law. Although the overwhelming jurisprudence recognizes the vitality
of uberrimae fidei, there technically is now a split amongst the Circuit
Courts of Appeals. Thus, it is conceivable, if the right case presents
itself, the United States Supreme Court could grant certiorari.
