Catlin (Syndicate 2003) at Lloyd's v. San Juan Towing & Marine Services, Inc.
778 F.3d 69
1st Cir.2015Background
- SJT owned the floating drydock PERSEVERANCE, which had been inspected in 2006 and valued at $1.5M, improved for tow to Puerto Rico, and later valued at $1.75M; by 2010–2011 it showed heavy hull deterioration and was being marketed for sale at $700K–$850K.
- RLI previously insured the drydock for $1.75M but cancelled coverage in Feb 2011; SJT’s broker sought a package marine policy from Catlin in April 2011 and represented prior coverage of $1.75M without disclosing the hull’s significant preexisting damage.
- Catlin issued an Ocean Marine Insurance Policy listing an insured value of $1.75M (endorsement) with a per-loss liability limit of $1M.
- The drydock sank in Sept 2011 while ballasted for repairs; refloating and repair were difficult due to preexisting rust/decay; the drydock was later scrapped for $40K.
- Catlin denied SJT’s $1.75M claim and sued for a declaratory judgment to void the policy under the maritime doctrine of uberrimae fidei; consolidated litigation produced a bench trial where the district court found SJT failed to disclose material facts and declared the policy void ab initio.
- The First Circuit affirmed the denial of recovery but corrected the district court: uberrimae fidei renders a marine insurance contract voidable (insurer may elect rescission), not void ab initio; the court also held federal admiralty law (including uberrimae fidei) governs because the policy is an ocean marine policy excluded from Puerto Rico’s Insurance Code.
Issues
| Issue | Plaintiff's Argument (Catlin) | Defendant's Argument (SJT) | Held |
|---|---|---|---|
| Does Puerto Rico’s Insurance Code (P.R. Laws tit. 26 § 1110) displace federal maritime law on insurance representations? | Code does not apply; the policy is ocean marine and Section 1101 expressly carves ocean marine insurance out of the Code. | Section 1110 governs representations and limits insurer defenses; it should preempt or render inapplicable the federal uberrimae fidei rule. | Held: The policy is ocean marine under §1101; the Code’s §§1101/1110 do not displace federal admiralty law here. |
| Is the doctrine of uberrimae fidei an established rule of federal admiralty law? | Yes — longstanding maritime precedent supports recognizing utmost good faith as settled admiralty doctrine. | SJT argued state law controls or that uberrimae fidei is not an entrenched federal rule. | Held: Uberrimae fidei is an established admiralty rule in this Circuit. |
| Did SJT violate uberrimae fidei by nondisclosure/misrepresentation? | Catlin: SJT failed to disclose the drydock’s true condition and market value and misrepresented prior insured value, all material to risk. | SJT: Relied on prior valuation/insurer assumptions; Code protections should limit rescission. | Held: SJT failed to disclose material facts (deterioration, true value); this violated uberrimae fidei. |
| Remedy: Is the policy void ab initio or voidable? | Catlin sought voidance; district court held void ab initio. | SJT contended different remedy or that code limited insurer’s remedy. | Held: Policy is voidable (insurer may elect to void); district court’s judgment affirmed but modified to reflect voidable, not void ab initio. |
Key Cases Cited
- McLanahan v. Universal Ins. Co., 26 U.S. 170 (U.S. 1828) (early Supreme Court recognition of insurance as contract uberrimae fidei)
- Wilburn Boat Co. v. Fireman's Fund Ins. Co., 348 U.S. 310 (U.S. 1955) (states generally govern marine insurance absent entrenched federal rule)
- Stipcich v. Metropolitan Life Ins. Co., 277 U.S. 311 (U.S. 1928) (failure to disclose makes policy voidable at insurer’s option)
- Windsor Mount Joy Mut. Ins. Co. v. Giragosian, 57 F.3d 50 (1st Cir. 1995) (describing uberrimae fidei’s operation in admiralty and standard of review)
- Commercial Union Ins. Co. v. Pesante, 459 F.3d 34 (1st Cir. 2006) (discussing whether uberrimae fidei is established federal law)
- N.Y. Marine & Gen. Ins. Co. v. Continental Cement Co., LLC, 761 F.3d 830 (8th Cir. 2014) (recognizing uberrimae fidei as established admiralty rule)
- Certain Underwriters at Lloyd's, London v. Inlet Fisheries, Inc., 518 F.3d 645 (9th Cir. 2008) (same; defense of Anh Thi Kieu rejected)