Fireman's Fund Insurance v. Great American Insurance
822 F.3d 620
| 2d Cir. | 2016Background
- Signal owned and Port Arthur dry dock that repeatedly was reported over 2002–2009 as severely deteriorated and in need of extensive repairs; Signal patched defects rather than performing long-term repairs. The dry dock sank during a 2009 reconfiguration attempt, prompting $12.4M removal/cleanup costs.
- Relevant insurance: Great American Pollution Policy (2004–2009 renewals) covering pollution liability for the dry dock and vessels under repair; MSI Excess Property Insurance (EPI) issued Jan. 2009 in excess of a primary property policy, relying on Signal’s 2009–2010 Property Insurance Submission (which stated a $13.6M value and included only the favorable Heller report).
- After the loss, Westchester paid $10M (primary), MSI paid $3.6M under EPI, Great American denied pollution coverage; Fireman’s Fund funded cleanup and sued Great American, MSI, and Signal seeking coverage declarations and contribution.
- District court granted summary judgment voiding Great American’s Pollution Policy under the maritime doctrine of uberrimae fidei (uberrimae fidae) for Signal’s nondisclosure, and voiding MSI’s EPI Policy under Mississippi law for material misrepresentation; Fireman’s Fund and Signal appealed; MSI settled with Signal during appeal but Fireman’s Fund retained interest in the MSI-policy issues for contribution purposes.
- Second Circuit affirmed: (1) Pollution Policy is marine insurance within admiralty jurisdiction and Great American may void it for Signal’s nondisclosure of material facts under uberrimae fidei; (2) Mississippi law governs the EPI policy and MSI may void it because Signal materially misrepresented/omitted adverse information when applying.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Great American Pollution Policy is governed by federal maritime law/uberrimae fidei | Fireman’s Fund: policy (or dry-dock coverage) not maritime; doctrine need not apply | Great American: policy insures marine risks (pollution, OPA, FWPCA) and relates to vessel repair—admiralty jurisdiction and uberrimae fidei apply | Pollution Policy is marine insurance; admiralty jurisdiction applies and federal maritime doctrine (uberrimae fidei) governs |
| Whether Signal breached duty of utmost good faith to Great American by nondisclosure | Fireman’s Fund: Signal provided all requested information; no duty to volunteer surveys | Great American: Signal had multiple surveys showing severe deterioration and failed to disclose them; under uberrimae fidei insured must disclose material facts | Signal breached uberrimae fidei; undisclosed reports were material and Great American relied on absence of them; policy voidable and district court judgment affirmed |
| Choice of law for MSI EPI Policy (Mississippi v. Texas) | Fireman’s Fund: Texas law should apply because dry dock located in Texas and subsidiary ownership argued | MSI: New York choice-of-law rules point to insured’s domicile (Signal LLC — Mississippi) and parties’ expectations favor Mississippi law | Mississippi law governs the EPI Policy (insured’s domicile and parties’ expressions control) |
| Whether MSI may void EPI Policy under Mississippi law for misrepresentation | Fireman’s Fund: MSI didn’t obtain standard application answers; must prove intent to deceive; Heller report and submission did not put MSI on notice | MSI: Signal’s submission deliberately omitted multiple adverse surveys, represented a favorable condition and value, inducing MSI; Mississippi law allows voiding for material misrepresentation regardless of intent | MSI entitled to void EPI: Signal’s omissions/misrepresentations were material and induced MSI to underwrite; summary judgment affirmed |
Key Cases Cited
- Norfolk S. Ry. Co. v. Kirby, 543 U.S. 14 (2004) (admiralty jurisdiction and when federal maritime law governs contracts)
- Folksamerica Reins. Co. v. Clean Water of N.Y., Inc., 413 F.3d 307 (2d Cir. 2005) (tests for maritime nature of insurance contracts and application of uberrimae fidei)
- Puritan Ins. Co. v. Eagle S.S. Co., 779 F.2d 866 (2d Cir. 1985) (uberrimae fidei requires disclosure of material facts; nondisclosure can void marine policies)
- Tradeline (L.L.C.) v. N.Y. Marine & Gen. Ins. Co., 266 F.3d 112 (2d Cir. 2001) (insured’s superior knowledge and materiality standard under uberrimae fidei)
- Carroll v. Metropolitan Ins. & Annuity Co., 166 F.3d 802 (5th Cir. 1999) (Mississippi law: material misstatement/concealment allows insurer to void policy regardless of intent)
- Sun Mut. Ins. Co. v. Ocean Ins. Co., 107 U.S. 485 (1883) (historic principle that concealment of material facts voids marine policies)
- Catlin (Syndicate 2003) at Lloyd’s v. San Juan Towing & Marine Servs., Inc., 778 F.3d 69 (1st Cir. 2015) (failure to disclose material hull/drydock deterioration permits insurer to void policy)