TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA v. OCEAN REEF CHARTERS LLC
No. 19-13690
United States Court of Appeals, Eleventh Circuit
May 6, 2021
Before JORDAN, JILL PRYOR, and BRANCH, Circuit Judges.
[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
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No. 19-13690
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D.C. Docket No. 9:18-cv-81270-RAR
TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA,
Plaintiff - Counter Defendant - Appellee,
versus
OCEAN REEF CHARTERS LLC,
Defendant - Counter Claimant - Appellant.
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Appeal from the United States District Court
for the Southern District of Florida
________________________
(May 6, 2021)
Before JORDAN, JILL PRYOR, and BRANCH, Circuit Judges.
The Supreme Court held in Wilburn Boat Co. v. Fireman’s Fund Ins. Co., 348 U.S. 310, 316 (1955), that in the field of marine insurance state law should be applied where there is no established federal maritime rule governing the issue at hand. For over 60 years, Wilburn Boat has sown confusion with respect to the treatment of warranties in marine insurance policies. See, e.g., 2 Thomas Schoenbaum, Admiralty and Maritime Law § 19:15 (6th ed. 2020) (asserting that Wilburn Boat has “caused endless mischief”); Gerard J. Mangone, United States Admiralty Law 247 (1997) (noting that Wilburn Boat “has since troubled many maritime lawyers”); I Alex L. Parks, The Law and Practice of Marine Insurance and Average 13 (1987) (“Wilburn [Boat] cast the law of marine insurance into a state of turmoil.”).
In this case the district court held on summary judgment that, under Eleventh Circuit precedent, federal maritime law requires strict compliance with captain and crew warranties in a marine insurance policy. And because Ocean Reef Charters breached those warranties, there was no coverage for the loss of its yacht under a policy issued by Travelers Property Casualty Company.
Doing our best to make sense of Wilburn Boat and its progeny, we reverse. We
I
As this is an appeal from the grant of summary judgment, our review is plenary, and we view the facts in the light most favorable to Ocean Reef Charters. See Tolan v. Cotton, 572 U.S. 650, 651 (2014).
A
This case concerns the demise of the M/Y My Lady, a 92-foot Hatteras yacht. Ocean Reef, the owner of the M/Y My Lady, insured it with Travelers for a one-year term from October of 2016 to October of 2017. The 2016-17 policy, a renewal of annual policies issued in the two prior years, contained two express warranties that are at issue in this case. First, the captain warranty required Ocean Reef to employ a full-time professional captain approved by Travelers: “It is warranted you employ a professional captain for the yacht . . . Such captain shall be full time and approved by us.” Second, the crew warranty required Ocean Reef to have one full- or part-time professional crew member onboard: “You [shall] employ 1 full time or part time professional crew for your yacht[.]”
Ocean Reef purchased the 2016-17 policy through its insurance agent, Keen Battle Mead & Company, located in Homestead, Florida. Travelers negotiated and issued the policy through its producing agent, Hull & Company, based in Fort Lauderdale, Florida. Travelers delivered the policy to Hull at its Florida address and Hull in turn delivered the policy to Keen Battle in Hialeah, Florida. The policy named Ocean Reef as the insured with a New York address, but listed Key Largo, Florida, as the primary mooring location for the M/Y My Lady.
Ocean Reef did not employ a professional captain for the M/Y My Lady in early September of 2017, when Hurricane Irma was heading towards Florida. Nor did it have any crew onboard.
Eyeing the impending storm, Richard Gollel—the named operator of the M/Y My Lady—contacted Michael McCall, his former captain (who had previously been approved by Travelers and who was then in Massachusetts). Mr. Gollel asked Captain McCall whether he could move the yacht to a more protected location from its mooring near Mr. Gollel’s residence in Pompano Beach, Florida. Captain McCall initially agreed to the request, but, according to Ocean Reef, he changed his mind and advised Mr. Gollel that there was no way to move the yacht safely.
Mr. Gollel then sought permission to move the M/Y My Lady himself, but Hull (Travelers’ agent) told Keen Battle (Ocean Reef’s agent) that the yacht should not be moved. So Mr. Gollel did his best to secure the yacht by, among other things, adding extra fenders and mooring lines. The extra mooring lines proved ineffective when a year-old dock piling—to which the port bow line was attached—gave way as Hurricane Irma struck land on September 10-11, 2017. The yacht drifted onto other pilings and hit the sea wall, before eventually becoming holed and sinking at the dock. The damage resulted in a total constructive loss under the Travelers policy.
B
Shortly after the M/Y My Lady sank, and while she was still submerged, Travelers filed this lawsuit against Ocean Reef. Travelers denied coverage six weeks later, asserting that Ocean Reef had breached the captain and crew warranties in the policy.
The district court granted Travelers’ motion for summary judgment, concluding that “the Eleventh Circuit has fashioned an entrenched rule of admiralty: express warranties in maritime insurance contracts must be strictly construed in the absence of some limiting provision in the contract.” Travelers Property Casualty Co. v. Ocean Reef Charter LLC, 396 F. Supp. 3d 1170, 1176 (S.D. Fla. 2019). Ocean Reef appealed, and we set the case for oral argument.
II
This case concerns the interpretation of a marine insurance policy, which gives rise to federal admiralty jurisdiction. See Wilburn Boat, 348 U.S. at 313; St. Paul Fire and Marine Ins. Co. v. Lago Canyon, Inc., 561 F.3d 1181, 1184 (11th Cir. 2009). “As this case lies in admiralty, federal maritime conflict of laws control.” Cooper v. Meridian Yachts, Ltd., 575 F.3d 1151, 1161 (11th Cir. 2009).
So what law do we apply to determine the effect of Ocean Reef’s breaches of the captain and crew warranties? To figure out the answer, we look to the Supreme Court’s frequently criticized decision in Wilburn Boat.
A
Perhaps unsurprisingly, the facts in Wilburn Boat bore no resemblance to the clashes and controversies on the high seas that formed the basis of American admiralty jurisprudence. The case involved a houseboat located on an artificial inland lake between Texas and Oklahoma. See 348 U.S. at 311. The insurance policy included two warranties of relevance—one providing that the boat could not be sold or otherwise transferred, and another providing that the boat could be used only for private pleasure purposes. See id. Both warranties were breached, and the boat was subsequently destroyed by a fire unrelated to the breaches. See id. The owner made a claim under the policy, which the insurer denied due to the breaches. See id. The owner argued that Texas law should determine the effect, if any, of the breaches, but the Fifth Circuit sided with the insurer. It held that federal maritime law applied, and that there was an established maritime rule requiring literal compliance with all express warranties in marine insurance policies. The owner’s breaches, therefore, voided coverage. See id. at 312-13.
When the case came before it, the Supreme Court posed two questions: “(1) Is there a judicially established federal admiralty rule governing these warranties? (2) If not, should we fashion one?” Id. at 314. Answering those questions, the Court reversed and remanded for application of Texas law.
The Court first concluded that there was no established federal maritime rule “requiring strict fulfillment of marine insurance warranties,” explaining that “[w]hatever
Moving on to the second question, the Court declined to fashion a uniform federal rule governing breaches of warranties in marine insurance policies, and opted instead for the application of state law. It considered adopting the old common-law rule requiring literal and strict compliance with warranties, but thought that rule was “harsh.” Id. at 320. Noting that the choice as to what rule to adopt involved policy considerations best left to Congress, the Court concluded that it was going to “leave the regulation of marine insurance where it has been—with the [s]tates.” Id. at 322.
Justice Reed, joined by Justice Burton, registered a strong dissent in Wilburn Boat. First, he asserted that English law and American law required strict compliance with marine insurance warranties. See id. at 325-26 (citing English and American authorities). Second, he lamented the detrimental effect the Court’s decision would have, including a lack of uniformity in federal maritime law. See id. at 327-28. As he put it, “[s]tate authority, . . . although it may provide remedies, does not extend to changing the general substantive admiralty law.” Id. at 331. Third, he believed that the applicability of state law with respect to warranties would adversely affect the certainty needed by vessel owners and insurers: “What law is to govern—that of the [s]tate where the insurance contract was issued, the [s]tate of the accident, or the [s]tate of the forum? It seems an unreasonable interference with maritime activity to allow the many states to declare the substantive law of marine insurance.” Id. at 334. Fourth, he thought that the Court’s decision could not be limited to the unique facts in Wilburn Boat: “The considerations which lead me to favor a uniform rule are not changed simply because a relatively small boat was here involved, or the number of [s]tates through which it passed were few, or because its ultimate destination was a small lake.” Id. at 334-35.
B
One problem with Wilburn Boat, as commentators have pointed out, is that it rests on a flawed premise. At the time the case was decided, “all the major admiralty [appellate courts in the United States] had long accepted the literal performance rule.” 2 Schoenbaum, Admiralty and Maritime Law, at § 19:15. This rule derived from English common law and applied to all express warranties in marine contracts. See id. (“English law applied the rule of automatic discharge as a consequence of breach of warranty.”). Indeed, the Supreme Court itself had referenced a rule of strict compliance with marine warranties in the early 1800s. See Hazard’s Administrator, 33 U.S. at 583 (a misrepresentation that a ship was “coppered” would void the policy, and it was “immaterial in what way the loss may arise”). Another problem is that Wilburn Boat undermines uniformity in admiralty law. See Joel K. Goldstein, The Life and Times of Wilburn Boat: A Critical Guide (Part II), 28 J. Mar. L. & Com. 555, 558 (1997) (“By holding that state law governed the issues presented, Wilburn frustrated the effort to create uniform law regarding marine insurance. In so doing, it represented a departure
Wilburn Boat poses difficult choice-of-law questions in cases involving breaches of express warranties. The Supreme Court denied the existence of a then-entrenched federal maritime rule on the subject, and declined to fashion a uniform maritime rule, while at the same time seemingly instructing courts in future cases to look to whether there exists such a rule. See Wilburn Boat, 348 U.S. at 316-18. So the challenge for us is to find a way to give meaning to the Court’s opinion in express-warranty cases.
The Supreme Court has given us little help on the matter. In the 65 years since Wilburn Boat was decided, the Court has cited the case just 13 times. Only two of those cases are relevant here, and neither one dealt with an express warranty in a marine insurance policy.
In Kossick v. United Fruit Co., 365 U.S. 731 (1961), the Supreme Court considered an alleged oral agreement by a shipowner to assume responsibility for any improper or inadequate treatment of a seaman at a public health hospital. The Court held that “several considerations point to an accommodation favoring the application of maritime law.” Id. at 741. It distinguished but did not overrule Wilburn Boat, noting that “[a] concurring opinion and some commentators have preferred to refer [that] decision to the absurdity of applying maritime law to a contract of insurance on a houseboat established in the waters of a small artificial lake between Texas and Oklahoma.” Id. at 742 (citations omitted). It then declared: “Needless to say the situation presented here has a more genuinely salty flavor than that.” Id.
As a matter of linguistics, or even intuition, we are unsure what to make of this sentence in Kossick. How “genuinely salty” is salty enough? Where, for example, does a dispute stemming from an incident in brackish water fall on the scale? See American Dredging Co. v. Miller, 510 U.S. 443, 452-53 (1994) (comparing Wilburn Boat and Kossick: “It would be idle to pretend that the line separating permissible from impermissible state regulation is readily discernible in our admiralty jurisprudence, or indeed is even entirely consistent within our admiralty jurisprudence.”). Whatever the precise meaning of Kossick, we concluded relatively quickly that it did not overrule Wilburn Boat. See Irwin v. Eagle Star Ins. Co., 455 F.2d 827, 829-30 (5th Cir. 1972) (“Despite the language in Kossick tending to limit the Wilburn Boat opinion to its facts, we believe that Kossick did an incomplete job of burying the Wilburn Boat obeisance to state contract law in certain cases involving marine contracts.”).
In 2004, the Supreme Court cited Wilburn Boat for the principle that “not every term in every maritime contract can only be controlled by some federally defined admiralty rule.” Norfolk Southern Railway Co. v. Kirby, 543 U.S. 14, 27 (2004) (quoting Wilburn Boat, 348 U.S. at 313). The Court went on to say that “[a] maritime contract’s interpretation may so implicate local interests as to beckon interpretation by state law,” but added that “when state interests cannot be accommodated without defeating a federal interest . . . then federal substantive law should govern.” Id. The Norfolk Southern choice-of-law formulation is obviously different than the one set out in Wilburn Boat. But
By not squarely addressing Wilburn Boat in the 65 years since its issuance, the Supreme Court has left the lower federal courts at sea without a rudder or compass. If we were writing on a blank slate, we would consider holding that there should be a uniform maritime rule regarding the effect of a breach of an express warranty in a marine insurance policy—and from there determine what that uniform rule should be. See generally DeLovio v. Boit, 7 F.Cas. 418, 443 (C.C.D. Mass. 1815) (Story, J.) (noting the “advantages resulting to the commerce and navigation of the United States, from a uniformity of rules and decisions in all maritime questions”); 1 Benedict on Admiralty § 111 (7th rev. ed. 2020) (explaining that the “fundamental purpose” of the grant of admiralty jurisdiction was to “preserve adequate harmony and appropriate uniform rules relating to maritime matters” and to “bring them within the control” of the federal government); Goldstein, The Life and Times of Wilburn Boat, 28 J. Mar. L. & Com. at 557 (“[T]he uniformity idea has long antecedents regarding marine insurance.”).
The slate, however, is not blank. It is covered in graffiti, and we must somehow make sense of the layers of paint.
C
Wilburn Boat remains on the books, and we are bound by its treatment of warranties in marine insurance policies despite the ample criticism the decision has received. As we read Wilburn Boat, it instructs us “to look to see if the specific warranty at issue is (or should be) the subject of a uniform or entrenched federal admiralty rule.” Great Lakes Reinsurance (UK) PLC v. Rosin, 757 F.Supp.2d 1244, 1257 (S.D. Fla. 2010). That is the way we interpreted Wilburn Boat early on. See, e.g., Koninklyke Nederlandsche Stoomboot Maalschappy, N.V. v. Strachan Shipping Co., 301 F.2d 741, 743 (5th Cir. 1962) (observing that although Wilburn Boat “held that marine insurance contracts should be governed by state law, there can be no doubt that a clearly established federal judicially-fashioned maritime rule governs a stevedore’s breach of warranty to perform services in a workmanlike fashion”); Fireman’s Fund Ins. Co. v. Wilburn Boat Co., 300 F.2d 631, 647 n.2 (5th Cir. 1962) (explaining that Wilburn Boat “held that state law is to be applied in the field of marine insurance only where ‘entrenched federal precedent is lacking’ with respect to a specific issue”).1
We recognize that there is language in some of our cases pronouncing the existence
The district court relied on these cases to conclude that “the Eleventh Circuit has fashioned an entrenched federal rule of admiralty: express warranties in maritime insurance contracts must be strictly construed in the absence of some limiting provision in the contract.” Ocean Reef Charters, 396 F. Supp. 3d at 1176. The district court’s view is understandable given the mess we have created, but we cannot take the broad pronouncements in Cooke’s Seafood and Hilton Oil at face value. Doing so would eviscerate Wilburn Boat and its holding that there is no established federal maritime rule requiring strict fulfillment of all warranties in marine insurance policies. See 2 Schoenbaum, Admiralty and Maritime Law, at § 19:15 (explaining that cases which hold that “the literal performance rule still applies to warranties as a matter of federal law. . . . choose to ignore the Supreme Court’s mandate [in Wilburn Boat] that state law applies to insurance warranties”).
As a subsequent panel, we accept and treat as binding the specific holdings in Cooke’s Seafood and Hilton Oil, which are that the breach of a navigation limit warranty bars coverage as a matter of maritime law even when the breach is unrelated to the loss. See Cooke’s Seafood, 835 F.2d at 1367; Hilton Oil, 75 F.3d at 630. There is, after all, authority for the proposition that there exists an entrenched federal maritime rule governing navigation limit warranties. See generally Fla. Marine Towing, Inc. v. United Nat’l Ins. Co., 686 So.2d 711, 713 (Fla. App. 1997) (“Federal courts have recognized that . . . strict construction of navigational limit warranties has been an established admiralty rule of the federal judiciary.”) (quotation omitted).
We decline, however, to read those cases as purporting to overrule Wilburn Boat with respect to the treatment of all warranties in maritime insurance policies. The Supreme Court, and only the Supreme Court, has the prerogative of overruling its own decisions. See Bosse v. Oklahoma, 137 S.Ct. 1, 2 (2016). Unlike some commentators, see, e.g., Staring, Dead Letter, 42 J. Mar. L. & Com. at 484-85, we cannot scuttle Wilburn Boat just because we might disagree with it. We instead harmonize Wilburn Boat with Cooke’s Seafood and Hilton Oil by limiting the latter cases to the specific warranty they addressed. See Rosin, 757 F. Supp. 2d at 1257. This approach may be messy and do little to solve the overall doctrinal confusion, but we think it is the only path open to us if we are going to be faithful to Wilburn Boat.2
D
As this case does not involve a navigation limit warranty or a seaworthiness warranty, Cooke’s Seafood, Hilton Oil, and Aguirre do not control or dictate the outcome. The precise questions for us under Wilburn Boat are whether there exist entrenched federal maritime rules governing captain or crew warranties. The answer to those questions is no.
As for the crew warranty, we have found no American cases or authorities recognizing or announcing an entrenched maritime rule. There is, however, an old and often-cited English case which held that the breach of a crew warranty voided a marine insurance policy even though the breach was cured before the loss and was unrelated to the loss. See DeHahn v. Hartley, 1 T.R. 343, 345-46, 99 E.R. 1130(K.B. 1786) (warranty required crew of at least 50 but ship initially sailed with 46). In the words of Chief Justice Mansfield, “[a] warranty in a policy of insurance is a condition or contingency, and unless that be performed, there is no contract.” Id.
For several reasons, DeHahn does not change our conclusion that there is no entrenched federal maritime rule governing breaches of crew warranties. First, Travelers does not claim that such an established federal rule exists. Second, in his Wilburn Boat dissent
All of this means that Florida law, specifically
E
As noted, the Supreme Court in Wilburn Boat considered the then-existing English rule requiring literal performance of marine warranties to be “harsh,” 348 U.S. at 320, and some commentators have theorized that the Court’s disdain for that rule led to its bewildering decision. See 2 Schoenbaum, Admiralty and Maritime Law, at § 19:15 (“There is evidence of another reason for [the Wilburn Boat] decision: dissatisfaction with the English law of warranties.”). English law, however, has recently turned full circle and we take a moment to note the change on the other side of the pond.
The United Kingdom Insurance Act of 2015 abandoned the literal compliance rule, so that now “rescission is no longer the [automatic] remedy for breach of warranty.” Hugh D. Baker, Sailing to Calmer Seas: The United Kingdom Insurance Act 2015 and Its Potential Effect on United States Marine Insurance Markets and Law, 41 Tul. Mar. L. J. 159, 180 (2016). Instead, a breach only suspends coverage until it is cured. See Insurance Act 2015, c.4 (U.K.), at §10. In addition, an insured who breaches a warranty and fails to cure can recover if it “shows that the non-compliance with the term could not have increased the risk of the loss which actually occurred in the circumstances in which it occurred.” See id. at § 11(3). If there are still “special reasons for keeping in harmony with the marine insurance laws of England, the great field of this business,” Queen Ins. Co. of America v. Globe & Rutgers Fire Ins. Co., 263 U.S. 487, 493 (1924), it will be interesting to see what effect the Act has on American maritime law (and on how Wilburn Boat is viewed). See 2 Schoenbaum, Admiralty and Maritime Law, at § 19:15 (“It is likely that the new U.K. law will encourage U.S. courts to formalize these doctrines.”); Attilio M. Costabel, The UK Insurance Act 2015: A Restatement of Marine Insurance Law, 27 St. Thomas U. L. Rev. 133, 166 (2015) (“[T]he . . . Act will surely have influence on the law of marine insurance, both in the United States and at the home of the Act in the United Kingdom.”).
III
In the 1975 edition of their treatise on admiralty law, Grant Gilmore and Charles
“It may be that Wilburn Boat was a bad (or at least badly written) decision.” Rosin, 757 F. Supp. 2d at 1256. But we are stuck with it, and finding no established maritime rule governing captain and crew warranties, we hold that Florida law governs. We reverse the district court’s order granting summary judgment to Travelers, and remand for further proceedings.
REVERSED AND REMANDED.