47 F.4th 225
3d Cir.2022Background
- Raiders Retreat (PA) insured a yacht with Great Lakes Insurance SE (GLI); the yacht grounded in June 2019 with ~$300K damage. GLI denied Raiders’ claim, asserting the vessel’s fire-extinguishing equipment had not been timely recertified/inspected and therefore the policy was void ab initio, even though the loss was not caused by fire.
- GLI sued in federal court for a declaratory judgment that the policy was void; Raiders asserted five counterclaims, including breach of contract and two surviving contract-based counts plus three extracontractual Pennsylvania-law claims (breach of fiduciary duty, bad faith under 42 Pa. Stat. § 8371, and UTPCPL violations).
- The policy contained a choice clause: disputes governed by federal admiralty law, and where no established admiralty precedent exists, New York substantive law applies.
- GLI moved on the pleadings to dismiss Raiders’ Pennsylvania extracontractual claims, arguing New York law governs and bars those remedies; the District Court granted dismissal and denied reconsideration, concluding The Bremen framework did not require applying Pennsylvania public-policy scrutiny.
- The Third Circuit held it had interlocutory appellate jurisdiction over the dismissal under 28 U.S.C. § 1292(a)(3) and concluded the District Court should have considered whether enforcing the policy’s choice-of-law would contravene a strong Pennsylvania public policy under The Bremen framework.
- Result: the Court vacated and remanded for the District Court to apply The Bremen analysis to determine whether applying New York law would violate Pennsylvania’s strong public policy; Raiders’ alternative contract-interpretation arguments were not preserved for appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does The Bremen framework (reasonableness/public-policy exception) apply to choice-of-law clauses in marine insurance contracts? | The Bremen applies; a state public-policy exception can make enforcement unreasonable and unjust. | The Bremen is irrelevant to choice-of-law in marine insurance; federal admiralty presumption of enforceability controls. | The Bremen framework extends to the choice-of-law clause here; District Court should have considered the public-policy exception. |
| Can state public policy (Pennsylvania) override a maritime insurance choice-of-law that selects New York? | Pennsylvania’s strong public policy protecting insureds could preclude applying New York law. | Federal admiralty law presumptively enforces marine-insurance choice clauses, so state policy cannot override. | The court held the District Court erred by not considering whether enforcing New York law would contravene a strong Pennsylvania public policy and remanded for that analysis. |
| Is this interlocutory appeal proper under 28 U.S.C. § 1292(a)(3)? | Appeal allowed because dismissal conclusively determined rights as to extracontractual claims and those claims seek relief unavailable under remaining counts. | (No meaningful contest) | The Third Circuit found interlocutory jurisdiction appropriate and reached the merits. |
| Were Raiders’ alternative contract-interpretation/ambiguity arguments preserved for appeal? | Raiders argued the clause does not mandate NY law and could be ambiguous (construe against drafter). | GLI relied on clear clause and District Court ruling. | The court held Raiders failed to preserve those arguments below, so they are not for appellate review. |
Key Cases Cited
- The Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (U.S. 1972) (forum-selection clauses enforceable unless unreasonable or contrary to strong forum public policy)
- Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585 (U.S. 1991) (extends Bremen framework to state-vs-state forum selections and form contracts)
- Wilburn Boat Co. v. Fireman’s Fund Ins. Co., 348 U.S. 310 (U.S. 1955) (maritime contracts governed by federal admiralty law where established federal rule exists; otherwise state law applies)
- Milanovich v. Costa Crociere, S.p.A., 954 F.2d 763 (D.C. Cir. 1992) (applies Bremen’s reasonableness/public-policy test to contractual choice-of-law clauses)
- Galilea, LLC v. AGCS Marine Ins. Co., 879 F.3d 1052 (9th Cir. 2018) (held Bremen inapplicable where FAA/federal maritime law fills the gap and state policy cannot override federal law)
- Great Lakes Reinsurance (UK) PLC v. Durham Auctions, Inc., 585 F.3d 236 (5th Cir. 2009) (upheld marine-insurance choice-of-law provision absent a showing that enforcement would be unreasonable or unjust)