521 F.Supp.3d 580
E.D. Pa.2021Background
- Great Lakes Insurance SE (GLI) insured Raiders Retreat Realty Co., LLC’s vessel; a 2016 survey recommended servicing the Halon system and fire extinguishers. Raiders submitted a survey-compliance letter marking no outstanding recommendations.
- The marine hull policy contained an express warranty requiring fire extinguishers to be properly installed and maintained, including annual certification/tagging and recharging as necessary.
- In June 2019 the vessel ran aground and sustained significant damage; Raiders filed a coverage claim. GLI’s investigation concluded the extinguishers had not been inspected/recertified and denied coverage for material misrepresentation and breach of the warranty.
- GLI sued for declaratory relief; Raiders counterclaimed for breach of contract, breach of implied covenant, breach of fiduciary duty (Count III), bad faith under 42 Pa. Cons. Stat. § 8371 (Count IV), and UTPCPL violations (Count V).
- GLI moved for judgment on the pleadings on Counts III–V, arguing the policy’s choice-of-law clause requires application of federal admiralty law and, where maritime precedent is lacking, New York law—thereby precluding Pennsylvania statutory claims and a fiduciary-duty claim under New York law.
- The court held federal maritime choice-of-law principles govern, enforced the contractual choice-of-law clause (finding GLI has sufficient New York contacts), and granted judgment on the pleadings dismissing Counts III–V as not cognizable under New York law.
Issues
| Issue | GLI (Plaintiff) | Raiders (Defendant) | Held |
|---|---|---|---|
| Whether GLI waived reliance on the policy’s choice-of-law clause by failing to plead it as an affirmative defense | Choice-of-law is not an affirmative defense; GLI timely raised it after answering | GLI waived the defense by not pleading it under Rule 8(c) | GLI did not waive the argument; raising it soon after pleading was timely |
| Which choice-of-law rules apply (state vs. federal) | Federal maritime choice-of-law governs marine insurance contracts | Pennsylvania (forum) law should apply; clause unenforceable | Federal maritime choice-of-law applies because marine insurance falls within admiralty jurisdiction |
| Enforceability of the contract’s choice-of-law clause (NY law if maritime precedent absent) | Clause is presumptively valid; enforceable because GLI has sufficient NY contacts and enforcement is not unreasonable | Clause unenforceable because applying NY law would frustrate Pennsylvania public policy (esp. bad-faith remedies) | Clause is valid and enforceable; GLI has substantial NY contacts; state public policy cannot override maritime choice-of-law in this context |
| Effect on counterclaims (Counts III–V) | Counts III–V barred because New York law applies and does not recognize those claims | Counts III–V are cognizable and should proceed under Pennsylvania law | Counts III–V are not cognizable under New York law; judgment on the pleadings granted as to those counts |
Key Cases Cited
- Calhoun v. Yamaha Motor Corp., U.S.A., 216 F.3d 338 (3d Cir. 2000) (choice-of-law rules depend on basis of federal jurisdiction)
- AGF Marine Aviation & Transp. v. Cassin, 544 F.3d 255 (3d Cir. 2008) (marine insurance contracts lie within federal maritime jurisdiction)
- New England Mut. Marine Ins. v. Dunham, 78 U.S. 1 (U.S. 1870) (historic recognition of maritime jurisdiction over marine insurance)
- Great Lakes Reinsurance (UK) PLC v. Durham Auctions, Inc., 585 F.3d 236 (5th Cir. 2009) (contractual choice-of-law provisions in marine insurance are generally enforceable)
- The Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972) (forum-selection clauses unenforceable if they contravene strong public policy of the forum)
- Milanovich v. Costa Crociere, S.p.A., 954 F.2d 763 (D.C. Cir. 1992) (applied Bremen framework to choice-of-law clauses)
- Galilea, LLC v. AGCS Marine Insurance Co., 879 F.3d 1052 (9th Cir. 2018) (state public policy cannot override federal maritime law; distinguishes Bremen)
- Stoot v. Fluor Drilling Servs., Inc., 851 F.2d 1514 (5th Cir. 1988) (choice-of-law clause in admiralty upheld absent lack of substantial relationship or conflict with maritime law purposes)