St. Paul Fire & Marine Insurance v. Abhe & Svoboda, Inc., 798 F.3d 715

Abhe & Svoboda leased a ‘‘dumb’’ barge SEI-34 for use as a stationary equipment platform while painting the Pell Bridge; a November 2010 survey noted pinholes, non-watertight under-deck tanks, and bilge water but did not recommend repairs.
Abhe applied for a marine hull and P&I policy; St. Paul Fire issued the policy effective July 1, 2011, based on an application (originally submitted to Abhe’s prior insurer) that did not include SEI-34 or the 2010 survey; Abhe later submitted an updated vessel schedule listing SEI-34 with a $225,000 value but did not provide the 2010 survey.
SEI-34 sank in an October 2011 storm; Abhe contracted salvage services, arbitration with the salvager awarded Abhe damages, and Abhe sought defense/indemnity from St. Paul Fire.
St. Paul Fire denied coverage and sued for a declaratory judgment that the policy was void ab initio under uberrimae fidei (utmost good faith) for Abhe’s alleged non-disclosure of material facts; Abhe counterclaimed, including negligence.
The district court granted summary judgment for St. Paul Fire, voiding the policy for nondisclosure of the 2010 survey and dismissing Abhe’s counterclaims; Abhe appealed.
The Eighth Circuit reviewed whether actual reliance by the insurer is a required element of the uberrimae fidei defense and whether disputed facts precluded summary judgment.

Issue	Abhe’s Argument	St. Paul Fire’s Argument	Held
Whether an insurer must show it relied on an insured’s nondisclosure to void a marine policy under uberrimae fidei	Reliance is required; insurer must show the omission induced issuance of the policy	Reliance is not always required; materiality alone can void the policy unless insurer actually knew the fact and bound the risk anyway	Reliance is a distinct required element; insurer must show causal inducement (reversed and remanded)
Whether summary judgment was proper given the record on reliance and materiality (including vessel value)	There are genuine disputes of fact on whether St. Paul relied on the omissions and whether SEI-34’s condition/value were material	The underwriter reviewed the application and would have considered the survey/value important; no genuine dispute	There are triable issues of fact as to both reliance and materiality (case remanded for further proceedings)

Puritan Ins. Co. v. Eagle Steamship Co. S.A., 779 F.2d 866 (2d Cir. 1985) (reliance on undisclosed facts is required to void a marine policy under uberrimae fidei)
Shipley v. Ark. Blue Cross & Blue Shield, 333 F.3d 898 (8th Cir. 2003) (insurer must show actual reliance on misrepresentations when voiding a policy)
Countryside Cas. Co. v. Orr, 523 F.2d 870 (8th Cir. 1975) (material misrepresentation relied on by insurer will void policy)
Sun Mut. Ins. Co. v. Ocean Ins. Co., 107 U.S. 485 (1883) (objective materiality: whether a prudent underwriter would have refused the risk)
N.Y. Marine & Gen. Ins. Co. v. Cont’l Cement Co., 761 F.3d 830 (8th Cir. 2014) (uberrimae fidei applies to marine insurance contracts)
Kilpatrick Marine Piling v. Fireman’s Fund Ins. Co., 795 F.2d 940 (11th Cir. 1986) (insured must disclose known circumstances that materially affect the risk)
Certain Underwriters at Lloyd’s, London v. Inlet Fisheries, Inc., 518 F.3d 645 (9th Cir. 2008) (insurer must show undisclosed facts would have affected its decision to offer the policy)