catlin (syndicate 2003) at llo v. san juan towing & marine servi, 1st cir. (2015)

7/26/2019 Catlin (Syndicate 2003) at Llo v. San Juan Towing & Marine Servi, 1st Cir. (2015)

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United States Court of AppealsFor the First Circuit

No. 13- 2491

CATLI N ( SYNDI CATE 2003) AT LLOYD' S,

Pl ai nt i f f , Appel l ee,

v.

SAN J UAN TOWI NG AND MARI NE SERVI CES, I NC. ,

Def endant , Appel l ant .

APPEAL FROM THE UNI TED STATES DI STRI CT COURTFOR THE DI STRI CT OF PUERTO RI CO

[ Hon. Franci sco A. Besosa, U. S. Di st r i ct J udge]

Bef or e

Tor r uel l a, Thompson, and Kayat t a,

Ci r cui t J udges.

Manuel Sosa- Bez, wi t h whom I an P. Carvaj al and Sal daa,Car vaj al & Vl ez- Ri v, P. S. C. , wer e on br i ef , f or appel l ant .

J ames W. Car bi n, wi t h whom P. Ryan McEl duf f and Duane Mor r i sLLP, wer e on br i ef , f or appel l ee.

Febr uary 6, 2015


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TORRUELLA, Circuit Judge. Thi s i s an appeal f r om a

deci si on of t he Uni t ed St at es Di st r i ct Cour t f or t he Di st r i ct of

Puer t o Ri co si t t i ng i n admi r al t y. The t r i al i nvol ved a mar i t i me

i nsur ance pol i cy i ssued by Appel l ee Cat l i n ( Syndi cat e 2003) at

Ll oyd' s ( "Cat l i n") , t o cover t he f l oat i ng dr ydock1 PERSEVERANCE

owned by Appel l ant San J uan Towi ng and Mar i ne Servi ces ( "SJ T") , a

shi p r epai r company based i n San J uan, Puer t o Ri co. At t r i al , t he

di st r i ct cour t concl uded t hat t he i nsur ance pol i cy was voi d ab

i ni t i oby r eason of SJ T' s vi ol at i on of t he doct r i ne of uber r i mae

f i dei i n i t s appl i cat i on f or t hepol i cy. 2 See Cat l i n ( Syndi cat e

1 A "f l oat i ng dr ydock" i s a f l oat i ng st r uct ur e t hat can bepar t i al l y submer ged t o a pr edet er mi ned dept h by f l oodi ng i t sbal l ast t anks. Af t er a shi p t o be r epai r ed i s docked i nt o posi t i onon t he par t i al l y submer ged st r uct ur e, t he st r uct ur e, wi t h t he shi paboar d, i s r ef l oat ed by pumpi ng t he wat er out of t he bal l ast t anksunt i l t he pont oon deck i s cl ear of wat er , and t hen t he r epai r s canbe per f or med on t he shi p. Thi s i s di st i ngui shabl e f r om what i scommonl y r ef err ed t o as a gr avi ng dr ydock, whi ch i s a permanent l y

f i xed, l and- based basi n wi t h ent r ance encl osur es const r uct ed at ornear t he wat er ' s edge, i nt o whi ch, when t he basi n i s f i l l ed wi t hwat er , a shi p ent er s. Af t er t he ent r ance encl osur es ar e cl osed,t he basi n i s pumped dr y of water , exposi ng t he underwater port i onsof t he vessel ' s hul l t o be r epai r ed or wor ked on. See O' Lear y v.Puget Sound Br i dge & Dr y Dock Co. , 349 F. 2d 571, 573 ( 9t h Ci r .1965) ( quot i ng t he Depar t ment of t he Navy, Bur eau of Yar ds andDocks) ; see al so J ML Tr adi ng Cor p. v. Mar i ne Sal vage Cor p. , 501 F.Supp. 323, 325 n. 2 ( E. D. N. Y. 1980) ; Md. Cas. Co. v. Lawson, 101F. 2d 732, 733 ( 5t h Ci r . 1939) ( "A f l oat i ng dock recei ves a vesselwhen t he dock i s submerged, af t er whi ch the water t i ght compart ment sof t he dock are pumped out and the buoyancy of t he dock r ai ses t he

vessel . ")

2 Uber r i mae f i dei means r oughl y "ut most good f ai t h. " See Bl ack' sLaw Di ct i onary 1754 (10t h ed. 2014) ; see al so Gr ande v. St . PaulFi r e & Mar i ne I ns. Co. , 436 F. 3d 277, 282 ( 1st Ci r . 2006) . Undert hi s doct r i ne, t he i nsur ed i n a mar i t i me i nsur ance cont r act i sr equi r ed " t o di scl ose t o the i nsur er al l known ci r cumst ances t hat

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2003) at Ll oyd' s v. San J uan Towi ng & Mar i ne Ser vs. , I nc. , 979 F.

Supp. 2d 181, 186 ( D. P. R. 2013) ( "Cat l i n I V") . The di st r i ct cour t

er r ed i n deemi ng t he cont r act voi d ab i ni t i o; r at her , we f i nd t hat

i t was voi dabl e. We t her ef or e af f i r m, al bei t wi t h a mi nor

modi f i cat i on of t he l ower cour t ' s hol di ng t o r ef l ect t hi s

cor r ect i on.

I. Background

A. Factual History

I n 2006, SJ T r et ai ned t he servi ces of Mar i ne Consul t ant s,

I nc. ( "Mar i ne Consul t ant s") t o per f or m a condi t i on and val uat i on

survey of t he f l oat i ng dr ydock PERSEVERANCE. I n t hat survey, whi ch

was dat ed Apr i l 17, 2006, t he PERSEVERANCE was val ued at

$1, 500, 000. Ther eaf t er , on August 27, 2006, SJ T pur chased t he

PERSEVERANCE f or $1, 050, 000. Subsequent l y, SJ T made i mprovement s

t o t he f l oat i ng dr ydock, modi f yi ng i t so t hat i t coul d be t owed

f r om Loui si ana t o Puer t o Ri co. Mar i ne Consul t ant s t hen i ssued

anot her condi t i on and val uat i on repor t on November 21, 2006, i n

whi ch i t val ued t he f l oat i ng dr ydock at $1, 750, 000. Thi s $250, 000

i ncr ease i n val ue f r om t he f i r st r epor t t o t he second was t he

r esul t of t he val ue added t o t he f l oat i ng dr ydock due t o t he

mat er i al l y af f ect t he i nsur er ' s r i sk, t he def aul t of whi ch . . .r ender s t he i nsur ance cont r act voi dabl e by t he i nsur er . " Wi ndsorMount J oy Mut . I ns. Co. v. Gi r agosi an, 57 F. 3d 50, 54- 55 ( 1st Ci r .1995) ; accor d Bl ack' s Law Di ct i onar y ( 10t h ed. 2014) 808 ( def i ni ngut most good f ai t h as " [ t ] he st at e of mi nd of a par t y t o a cont r actwho wi l l f r eel y and candi dl y di scl ose any i nf or mat i on t hat mi ghti nf l uence t he ot her par t y' s deci si on t o ent er i nt o t he cont r act ") .

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i mprovement s and modi f i cat i ons t hat al l owed t he PERSEVERANCE to be

t owed t o Puert o Ri co.

By 2009, and as l at e as 2011, due t o decl i ni ng busi ness

and i ncreasi ng f i nanci al di st r ess, SJ T was act i vel y t r yi ng t o sel l

t he PERSEVERANCE. SJ T had i ni t i al l y adver t i sed t he sal e pr i ce i n

2009 as $1, 350, 000. I n Febr uar y 2010, SJ T adver t i sed t he f l oat i ng

dr ydock f or sal e i n Boat s & Har bor s - - a mar i ne i ndust r y

publ i cat i on - - f or $1, 350, 000. Dur i ng J anuar y 2011, SJ T cont i nued

t o adver t i se the PERSEVERANCE f or sal e at $1, 350, 000. On J anuary

3, 2011, a pot ent i al buyer of f er ed t o pur chase t he f l oat i ng dr ydock

f or $700, 000. As negot i at i ons pr ogr essed t hr oughout t he mont h, SJ T

l owered t he PERSEVERANCE' s pur chase pr i ce t o $850, 000, and

event ual l y, on J anuar y 29, 2011, t o $800, 000. That pot ent i al buyer

ul t i matel y di d not consummate t he pur chase.

I n Apr i l 2011, SJ T agai n adver t i sed t he PERSEVERANCE f or

sal e i n Boat s & Har bor s. Thi s t i me t he aski ng pr i ce was $800, 000.

Fi ve mont hs l at er , on Sept ember 4, 2011, SJ T agr eed t o sel l t he

PERSEVERANCE t o Leevac Shi pyar ds ( "Leevac" ) , a Loui si ana- based

company, and on Sept ember 19, 2011, SJ T si gned a pur chase- and- sal e

agr eement i n whi ch i t accept ed Leevac' s of f er t o pur chase t he

f l oat i ng dr ydock f or $700, 000. The deal l at er f el l t hr ough.

Bet ween August 2006 and Febr uar y 2011, SJ T i nsured t he

PERSEVERANCE wi t h the RLI I nsur ance Company ( "RLI " ) , wi t h a

decl ared hul l val ue of t he PERSEVERANCE under t hi s pol i cy of

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$1, 750, 000, pr esumabl y based on t he second Mar i ne Consul t ant s

condi t i on and val uat i on r eport dated on November 21, 2006. I n

Febr uar y 2011, RLI cancel l ed t he dr ydock' s i nsur ance pol i cy,

crypt i cal l y st at i ng "Loss Hi st or y"3 as t he r eason f or sai d act i on.

Ther eaf t er , at SJ T' s r equest , SJ T' s i nsur ance broker ,

J ohn Toscani ( "Toscani " ) , who was l ocat ed i n New Yor k, approached

Cat l i n seeki ng, t hr ough Ll oyd' s, a mar i ne i nsur ance pol i cy

"consi st i ng of hul l , [ pr ot ect i on and i ndemni t y] , shi p r epai r s,

gener al l i abi l i t y and cont r act or ' s equi pment " ( emphasi s added) .

SJ T' s broker r epr esent ed t hat t he PERSEVERANCE' s pr i or i nsurance

cover age was f or $1, 750, 000, but di d not pr ovi de Cat l i n wi t h a copy

of RLI ' s not i ce of cancel l at i on. The par t i es agr ee t hat SJ T di d

not pr ovi de addi t i onal r epr esent at i ons suggest i ng t hat t hi s was t he

act ual val ue of t he PERSEVERANCE, and Cat l i n' s r epr esent at i ve, Mr .

Ki r chhof er , t est i f i ed t hat he di d not ask f or mor e i nf or mat i on on

t he f l oat i ng dr ydock' s val ue or condi t i on, but r at her assumed t hat

t he val ue was i n l i ne wi t h t hat number . Most i mpor t ant l y, SJ T al so

di d not di scl ose i nf or mat i on r egar di ng subst ant i al , pr eexi st i ng

damage t o t he PERSEVERANCE' s hul l , whi ch had been evi dent si nce at

l east Apr i l 2010.

3 A l oss hi st or y r ef l ect s t he decl i ne i n val ue of an asset due t osome ki nd of adver se event ( e. g. , vandal i smor a nat ur al di sast er ) .Loss hi st or i es ar e of t en i ncl uded i n l oss hi st or y repor t s orsi mi l ar document at i on, al l owi ng i nsur er s t o ver i f y t he condi t i on oft he pr oper t y mor e ef f i ci ent l y.

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Ther eaf t er , t he Cat l i n pol i cy - - t he Ocean Mar i ne

I nsur ance Pol i cy ( t he "Pol i cy") - - became ef f ect i ve i n Apr i l 2011,

wi t h a t ot al i nsur abl e val ue of $1, 840, 000. The Pol i cy, however ,

cont ai ned an endor sement t hat modi f i ed i t s t er ms t o l i st t he

i nsured val ue at $1, 750, 000, t he same st ated amount i n t he pr evi ous

RLI pol i cy. Addi t i onal l y, t he t ot al l i mi t of l i abi l i t y f or each

l oss occur r ence was set at $1, 000, 000.

On Sept ember 28, 2011, t he PERSEVERANCE was ber t hed at

Pi er 15, i n San J uan, Puer t o Ri co. At t he di r ect i on of Mar k Payne

( "Payne") , one of SJ T' s pr i nci pal s, t he f l oat i ng dr ydock was

bal l ast ed4 f or t he pur pose of per f ormi ng mai nt enance on part s of

t he hul l . Payne i nst r uct ed t he r epai r men t o add bal l ast wat er t o

t he f l oat i ng dr ydock' s s t er n compar t ment s t o al l ow access t o the

f or war d sect i ons t o be r epai r ed. Ther eaf t er , Payne l ef t t he

PERSEVERANCE' S ber t hi ng area on per sonal busi ness. At

appr oxi mat el y 3: 30 p. m. , bef or e he l ef t f or t he day, SJ T f or eman

J os Monge gave i nst r uct i ons t o t he r epai r men t o pi ck up and shut

of f t he wat er hose t hat was st i l l f i l l i ng at l east one of t he

f l oat i ng dr ydock' s bal l ast t anks.

Lat e t hat eveni ng, SJ T t ug Capt ai n Padi l l a ( "Padi l l a")

r et ur ned t o Pi er 15 af t er a t owi ng assi gnment and f ound t he

4 See supr a not e 1. The act of bal l ast i ng i nvol ves pumpi ng wat eri nt o t he f l oat i ng dr ydock' s "bal l ast t anks, " whi ch ar e empt y whent he boat i s f ul l y af l oat and t hus keep t he dr ydock buoyant .Pumpi ng water i nt o the tanks r educes t he buoyancy of t he dr ydock,causi ng i t t o r i de l ower i n t he wat er .

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PERSEVERANCE wi t h i t s af t sect i on compl etel y underwater and i t s

f or war d par t awash. Padi l l a pr oceeded t o cal l Payne on hi s cel l

phone to i nf or mhi mof t he di r e si t uat i on t he PERSEVERANCE was i n,

but t en mi nut es l at er , at about mi dni ght , cal l ed hi m agai n t o

i nf or mhi mof t he t ot al si nki ng of t he PERSEVERANCE. Payne ar r i ved

shor t l y t her eaf t er and, t oget her wi t h Padi l l a, obser ved t hat a f i r e

hose connect ed t o a wat er mai n on the dock was st i l l pumpi ng water

i nt o t he sunken dr ydock, wi t h t he val ve on shor e st i l l i n an open

posi t i on. Payne pr oceeded t o shut t he val ve, whi ch was easi l y seen

and accessi bl e t o anyone who wi shed t o t ur n of f t he f l ow of wat er .

Ref l oat i ng t he PERSEVERANCE t urned out t o be a

chal l engi ng pr ocess, t aki ng near l y one mont h t o compl et e. Af t er

bei ng r ef l oated, t he PERSEVERANCE was i nspect ed and t he damage

assessed by expert mar i ne surveyor s. The surveyor s f ound t he

under si de of t he f l oat i ng dr ydock to be subst ant i al l y rust ed and

decayed, t he exi st ence of whi ch SJ T had known about but f ai l ed to

di scl ose t o Cat l i n when i t sought cover age under t he Pol i cy. Thi s

damage expl ai ned why r ef l oat i ng t he PERSEVERANCE - a dr ydock t hat

was desi gned speci f i cal l y t o be abl e to submer ge and r ef l oat usi ng

i t s bal l ast t anks - - had been so di f f i cul t . Dur i ng t he mont h of

December 2012, t he dr ydock was sol d f or scr ap f or $40, 000. 00.

SJ T pr oceeded t o f i l e a cl ai m wi t h Cat l i n, al l egi ng t he

t otal l oss of t he PERSEVERANCE, i n t he amount of $1, 750, 000.

Cat l i n deni ed t hi s cl ai m, r el yi ng on t he di scr epancy bet ween t he

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amount t he PERSEVERANCE was i nsured f or accor di ng t o t he

Endorsement ( $1, 750, 000) and i t s act ual market val ue ( appr oxi matel y

$700, 000 t o $800, 000) , as evi denced by the sal e pr i ce adver t i sed t o

potent i al buyer s around t he t i me when SJ T sought t he quote f or t he

Pol i cy.

B. Procedural History

To af f or d a bet t er under st andi ng of t he f i nal r esol ut i on

of t hi s appeal , we deem i t appr opr i at e t o i ncl ude a r sum of t he

pr ocedur al hi st or y of t hi s case bef or e t he di st r i ct cour t . On

November 8, 2011, Cat l i n f i l ed a decl ar at or y j udgement compl ai nt

agai nst SJ T, i nvoki ng bot h admi r al t y (28 U. S. C. 1333) and

di ver si t y ( 28 U. S. C. 1332) j ur i sdi ct i on. Cat l i n al l eged ei ght

admi r al t y or mar i t i me cl ai ms and sought t o voi d t he Pol i cy pur suant

t o t he doct r i ne of uber r i mae f i dei . I n t ur n, SJ T f i l ed a separ at e

di ver si t y sui t agai nst Cat l i n, demandi ng r ecover y f or t he f ul l

i nsur ed val ue of $1, 750, 000 under t he Pol i cy f or t he l oss of t he

PERSEVERANCE. Cat l i n count ercl ai med and t he cases were

consol i dat ed.

1. Catlin I

On Apr i l 8, 2013, t he di st r i ct cour t gr ant ed SJ T' s mot i on

f or par t i al summar y j udgment and di smi ssed wi t hout pr ej udi ce t he

cl ai mbr ought by Cat l i n, concl udi ng t hat under t he r ecent l y deci ded

case of Lozman v. Ci t y of Ri vi er a Beach, 133 S. Ct . 735 ( 2013) , t he

cour t l acked admi r al t y j ur i sdi ct i on over t hi s cont r over sy because

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t he PERSEVERANCE was not a "vessel . "5 See Cat l i n ( Syndi cat e 2003)

at Ll oyd' s v. San J uan Towi ng & Mar i ne Ser vs, I nc. , Ci vi l Nos. 11-

2093 ( FAB) ; 11- 2116 ( FAB) , 2013 U. S. Di st . LEXI S 52307, at *37- 38

( D. P. R. Apr . 8, 2013) ( "Cat l i n I ") . Thi s rul i ng was based on t he

court ' s determi nat i on t hat t he PERSEVERANCE di d not meet t he Lozman

t est f or det er mi ni ng whet her a f l oat i ng st r uct ur e was a "vessel "

f or admi r al t y j ur i sdi ct i on pur poses because "a r easonabl e observer ,

l ooki ng t o t he PERSEVERANCE' s physi cal char act er i st i cs and

act i vi t i es, woul d not consi der i t t o be desi gned t o any pr act i cal

degr ee f or car r yi ng peopl e or t hi ngs on wat er . " I d. at *37.

2. Catlin II

On May 13, 2013, t he di st r i ct cour t ent er t ai ned a mot i on

f or r econsi der at i on of i t s r ul i ng i n Cat l i n I . Al t hough t he cour t

cont i nued t o adher e t o i t s f i ndi ng t hat t he PERSEVERANCE f ai l ed t o

meet t he Lozman st andard as t o what const i t ut es a vessel f or t he

pur poses of admi r al t y j ur i sdi ct i on, i t never t hel ess concl uded t hat

admi r al t y j ur i sdi ct i on was pr esent because t he cent r al i ssue of t he

cont r over sy concer ned a mar i t i me cont r act - - i . e. , t he Pol i cy - -

t he "pr i mar y obj ect i ve" of whi ch was " essent i al l y mar i t i me [ i n]

nat ur e" and " r el at es t o navi gat i on, busi ness or commerce of t he

sea. " Cat l i n ( Syndi cat e 2003) at Ll oyd' s v. San J uan Towi ng &

5 I n so r ul i ng, t he di st r i ct cour t r ej ected t he Repor t andRecommendat i on i ssued by t he magi st r ate j udge, who had f ound (pr i ort o t he announcement of t he new Lozman test ) t hat t he PERSEVERANCEwas a "vessel . "

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Mar i ne Ser vs. , I nc. , 946 F. Supp. 2d 256, 260 ( D. P. R. 2013)

( "Cat l i n I I ") ; see al so Nor f ol k S. Ry. Co. v. J ames N. Ki r by, Pt y

Ltd. , 543 U. S. 14, 24- 25 ( 2004) . I t al so r ul ed t hat Cat l i n' s

compl ai nt pr oper l y pl eaded di ver si t y j ur i sdi ct i on and f ound

di ver si t y to be an al t er nat e gr ound f or t he exer ci se of f eder al

j ur i sdi ct i on, even i f not i n admi r al t y. See Cat l i n I I , 946 F.

Supp. 2d at 267.

3. Catlin III

On J ul y 30, 2013, t he di st r i ct cour t once agai n opi ned on

t he di sput e, t hi s t i me r egar di ng t he out st andi ng mot i ons f or

summar y j udgment f i l ed by Cat l i n and SJ T, r espect i vel y. Cat l i n

( Syndi cat e 2003) at Ll oyd' s v. San J uan Towi ng & Mar i ne Ser vs. ,

I nc. , 974 F. Supp. 2d 64 ( D. P. R. 2013) ( "Cat l i n I I I ") . I n

subst ance, t he cour t concl uded t hat not wi t hst andi ng i t s f i ndi ng

t hat t he PERSEVERANCE was not a "vessel , " f ederal admi r al t y

j ur i sdi ct i on and l aw di d at t ach t o t hi s cont r oversy because t he

i nt er pr et at i on of a mar i t i me cont r act was at i ssue ( as per Cat l i n

I I ) . I d. at 74- 76. Fur t her mor e, t he di st r i ct cour t hel d t hat t he

doct r i ne of uber r i mae f i dei ' s r epr esent at i on and di scl osur e

r equi r ement s t oget her const i t ut ed an "ent r enched f eder al pr ecedent "

t hat woul d appl y t o t hi s case i f t he f act s al l eged by Cat l i n wer e

pr oven t o be cor r ect . I d. at 75- 76. The cour t , however , was

unabl e t o deci de the mer i t s of t hese cont ent i ons because t her e wer e

f act ual mat t er s i n di sput e t hat needed t o be r esol ved i n a t r i al

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and not vi a summar y j udgment . I d. at 79- 80. I n r ul i ng on t he

quest i on as t o t he r i sks cover ed by t he Pol i cy, an al t er nat e i ssue

r ai sed by Cat l i n' s deni al of cover age, t he di st r i ct cour t f ound

t hat t he Pol i cy was an "al l r i sk i nsur ance pol i cy, " as cont ended by

SJ T. I d. at 83. Summary j udgment , however , coul d not be ent ered

on behal f of SJ T on t hi s i ssue because ther e wer e f act ual i ssues i n

di sput e as t o whether t he PERSEVERANCE sank due t o "f or t ui t ous

ci r cumst ance[ s] or casual t y . . . cover ed under t he al l r i sk

pol i cy. " I d. at 84. These out st andi ng f act ual i ssues needed t o be

r esol ved t hr ough a t r i al .

4. Catlin IV

On Oct ober 8, 2013, af t er a bench t r i al , t he di st r i ct

cour t r esol ved t he mer i t s of t hi s cont r over sy. See Cat l i n

( Syndi cat e 2003) at Ll oyd' s v. San J uan Towi ng & Mar i ne Ser vs. ,

I nc. , 979 F. Supp. 2d 181, 191 ( D. P. R. 2013) ( "Cat l i n I V" ) . Havi ng

al r eady r ul ed i n Cat l i n I I I t hat uber r i mae f i dei was an ent r enched

doct r i ne gover ni ng mar i t i me i nsurance cont r act s, t he cour t made

f i ndi ngs of f act i n suppor t of i t s event ual concl usi on t hat SJ T had

f ai l ed t o compl y wi t h t he doct r i ne of uber r i mae f i dei i n i t s

appl i cat i on f or t he Pol i cy, and was t her ef or e bar r ed f r omr ecover y

t her eunder . I d. at 186- 191.

II. Discussion

The appl i cat i on of t he doct r i ne of uber r i mae f i dei t o

t hi s cont r over sy ( as deci ded i n Cat l i n I I I ) , whi ch i n moder n

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Amer i can j ur i spr udence i s ext ant onl y i n t he cont ext of mar i t i me

i nsur ance, 6 depends on t he out come of t he cent r al i ssue rai sed by

SJ T bot h her e and bel ow: whet her Puer t o Ri co' s I nsurance Code, P. R.

Laws Ann. t i t . 26, 1101 et seq. ( "t he Code") , i s t he cont r ol l i ng

subst ant i ve l aw i n t hi s cont r over sy r at her t han gener al f eder al

mar i t i me l aw. SJ T cont ends t hat Sect i on 1110 of t he Code cont ai ns

speci f i c pr ovi si ons t hat addr ess t he i ssue of whet her

r epr esent at i ons made dur i ng negot i at i ons t o obt ai n i nsur ance

cover age af f ect an i nsur ed' s abi l i t y t o col l ect on a pol i cy. SJ T

al l eges t hat t hese st at ut or y pr ovi si ons cont r avene and pr evai l over

t he doct r i ne of uber r i mae f i dei pur suant t o t he J ones Act of 1917

( "J ones Act ") , 48 U. S. C. 749, 7 and our hol di ng i n Guer r i do v.

Al coa S. S. Co. , 234 F. 2d 349, 355 ( 1st Ci r . 1956) . We concl ude,

based on our de novo r evi ew, t hat i t does not .

6

See

Gi r agosi an,

57 F. 3d at 54 n. 3 ( "The sol e r emai ni ng vest i geof t he doct r i ne i s i n mar i t i me i nsurance. " ) ; Thomas J . Schoenbaum,The Duty of Ut most Good Fai t h i n Mar i ne I nsur ance Law: AComparat i ve Anal ysi s of Amer i can and Engl i sh Law, 29 J . Mar . L. &Com. 1, 39 ( 1998) . At one t i me, good f ai t h was a r equi r ement ofgener al cont r act l aw. See gener al l yEr i c M. Hol mes, A Cont ext ualSt udy of Commer ci al Code Fai t h: Good- Fai t h Di scl osur e i n Cont r actFor mat i on, 39 U. Pi t t . L. Rev. 381 ( 1978) ( pr ovi di ng an anal ysi s oft he hi st or i cal devel opment of t he concept of good f ai t h) .

7 The J ones Act grant ed U. S. ci t i zenshi p t o t he peopl e of Puer t oRi co and est abl i shed a "ci vi l gover nment " wi t h a l ocal l y- el ect ed

l egi sl at i ve br anch. 39 St at . 951. Var i ous st at ut or y pr ovi si ons oft he J ones Act were repeal ed or amended wi t h t he enact ment of t hePuer t o Ri can Feder al Rel at i ons Act of 1950 ( "PRFRA") , whi ch r emai nsextant l aw t oday. See 48 U. S. C. 731- 916. Fur t her mor e, t hePRFRA aut hor i zed t he peopl e of Puer t o Ri co t o organi ze a governmentpur suant t o a const i t ut i on of t hei r own adopt i on, but subj ect t oCongr essi onal appr oval . I d. 731( a) - ( d) .

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A. Does Federal Admiralty Law Apply to this Controversy?

As a gener al r ul e, i n t he absence of est abl i shed and

gover ni ng f eder al admi r al t y l aw, t he st at es have l ar gel y unf et t er ed

power t o r egul at e mat t er s r el at ed t o mar i ne i nsurance. See Wi l bur n

Boat Co. v. Fi r eman' s Fund I ns. Co. , 348 U. S. 310, 321 ( 1955) ( "We,

l i ke Congr ess, l eave t he r egul at i on of mar i ne i nsur ance wher e i t

has been - - wi t h t he St at es. " ) ; Commer ci al Uni on I ns. Co. v.

Pesant e, 459 F. 3d 34, 37 ( 1st Ci r . 2006) ( "Gener al l y, i n cases

i nvol vi ng a mar i ne i nsur ance cont r act , we wi l l appl y st at e

l aw . . . . " ) .

Under Sect i ons 7 and 8 of t he J ones Act , now codi f i ed at

48 U. S. C. 747- 749, because Puer t o Ri co has cont r ol over i t s

har bor s and navi gabl e wat er s, we ar e r equi r ed t o t r eat Puer t o Ri co

l i ke a st at e. However , i n t he absence of a f eder al st at ut e

expr essl y made appl i cabl e to Puer t o Ri co, Sect i ons 8, 9, and 378 of

t he J ones Act gr ant Puer t o Ri co mor e power t o l egi sl at e i n t he

admi r al t y and mar i t i me f i el d t han i f i t wer e a st at e, i nsof ar as

t he act aut hor i zes i nconsi st ent Puer t o Ri co l aws. 48 U. S. C. 749,

821. 9Mor eover , t hi s Cour t has hel d t hat :

8 The PRFRA r epeal ed t he l ast paragr aph of Sect i on 37 of t he J onesAct , whi ch deal t wi t h l ocal l egi sl at i ve aut hor i t y t o creat e

execut i ve depar t ment s

9 Sect i on 8 of t he J ones Act , 48 U. S. C. 749 st at es i n r el evantpar t :

Al l l aws of t he Uni t ed St at es f or t he pr ot ect i on andi mpr ovement of t he navi gabl e waters of t he Uni t ed St atesand t he pr eser vat i on of t he i nt er est s of navi gat i on and

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[ T]he r ul es of admi r al t y and mar i t i me l aw oft he Uni t ed St at es ar e pr esent l y i n f or ce i nt he navi gabl e wat er s of t he Uni t ed St at es i nand ar ound t he i sl and of Puer t o Ri co t o t heext ent t hat t hey ar e not l ocal l y i nappl i cabl eei t her because t hey were not desi gned t o appl y

t o Puert o Ri can waters or because t hey havebeen r ender ed i nappl i cabl e t o t hese wat er s byi nconsi st ent Puer t o Ri can l egi sl at i on.

Guer r i do, 234 F. 2d at 355. The exer ci se of t hat power by Puer t o

Ri co can have t he ef f ect of r ender i ng conf l i ct i ng non- st at ut or y

f eder al mar i t i me l aw "l ocal l y i nappl i cabl e. " I d.

SJ T cont ends t hat Sect i on 1110 of t he Code shoul d be

deemed t o be t he ki nd of conf l i ct i ng l ocal l egi sl at i on t hat can

r ender i nappl i cabl e non- st at ut or y admi r al t y l aw, i ncl udi ng t he

doct r i ne of uber r i mae f i dei . Sect i on 1110 st at es:

Al l st at ement s and descr i pt i ons i n anyappl i cat i on f or an i nsur ance pol i cy or i nnegot i at i ons t her ef or , by or i n behal f of t hei nsured, shal l be deemed t o be r epr esent at i onsand not war r ant i es. Mi sr epr esent at i ons,

omi ssi ons, conceal ment of act s, and i ncor r ectst atement s shal l not pr event a r ecover y undert he pol i cy unl ess:

( 1) Fraudul ent ; or( 2) mat er i al ei t her t o the accept anceof t he r i sk, or t o t he hazard assumedby t he i nsur er ; or( 3) t he i nsur er i n good f ai t h woul dei t her not have i ssued t he pol i cy, orwoul d not have i ssued a pol i cy i n asl arge an amount , or woul d not havepr ovi ded cover age wi t h r espect t o t he

hazar d r esul t i ng i n t he l oss, i f t het r ue f act s had been made known t o t he

commerce, except as so f ar as t he same may be l ocal l yi nappl i cabl e, shal l appl y t o sai d i sl and and wat er s andt o i t s adj acent i sl ands and wat er s.

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i nsur er as r equi r ed ei t her byappl i cat i on f or t he pol i cy orot her wi se.

When t he appl i cant i ncur s i n any of t heact i ons enumer at ed i n subsect i ons ( 1) , ( 2) ,and ( 3) of t hi s sect i on, r ecover y shal l onl y

be pr event ed i f such act i ons or omi ssi onscont r i but ed t o t he l oss t hat gave r i se to t heact i on.

P. R. Laws Ann. t i t . 26, 1110. Ther ef or e, SJ T ur ges us t o appl y

t he mor e f avor abl e Sect i on 1110, i n l i eu of t he st r i ct er uber r i mae

f i dei doct r i ne.

We di sagr ee wi t h SJ T' s cont ent i on. Thi s pr ovi si on i s not

r el evant t o t he pr esent case because t he appl i cabi l i t y pr ovi si on of

t he Code, Sect i on 1101, expr essl y excl udes ocean mar i ne i nsurance

f r om t he ambi t of t he Code. Sect i on 1101 st at es:

( 1) The appl i cabl e pr ovi si ons of t hi s chapt er[ i . e. Chapt er 11] shal l appl y t o i nsur ancesot her t han ocean mar i ne . . . i nsur ance[ ] asdef i ned i n subsecti on ( 2) . . . .( 2) For t he pur poses of subsect i on ( 1) of t hi ssect i on and t hi s t i t l e, ' ocean mar i ne. . .i nsur ance[ ] ' shal l i ncl ude onl y:

( a) I nsur ances upon vessel s, craf t s,hul l s, and of i nt er est s t her ei n or wi t hr el at i on t her et o.

( b) I nsur ance of mar i ne bui l der s' r i sks. . . .

See P. R. Laws Ann. t i t . 26, 1101 ( emphasi s added) . Thi s Cour t

has pr evi ousl y r ul ed t hat i n enact i ng t hi s pr ovi si on, Puer t o Ri co

i nt ended " t o excl ude mar i t i me i nsur ance cont r act s f r om [ t he]

st at ut or y pr ovi si ons [ i n t he Code] gover ni ng t he i nt er pr et at i on and

const r uct i on of i nsur ance cont r act s. " Ll oyd' s of London v. Pagn-

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Snchez, 539 F. 3d 19, 25 ( 1st Ci r . 2008) ; see al so Rei f er - Mapp v.

7 Mar i s, I nc. , 830 F. Supp. 72, 76 ( D. P. R. 1993) .

I t i s exact l y t he ki nd of cover age descr i bed i n Sect i on

1101 of t he Code t hat was pr ovi ded t o SJ T by Cat l i n i n t he Pol i cy:

Cover age: Hul l , Pr ot ect i on & I ndemni t yi ncl udi ng Col l i si on & Tower s Li abi l i t y, Mar i neGener al Li abi l i t y i ncl udi ng Shi p Repai r er sLi abi l i t y, Equi pment . . . .

( emphasi s added) . Ther ef or e, t her e can be no doubt t hat t he Pol i cy

i s an ocean mar i ne i nsurance pol i cy wi t hi n t he meani ng of Sect i on

1101, because t he PERSEVERANCE i s a "cr af t " and/ or a "hul l , " and

t he Pol i cy cover s mar i t i me i nt er est s and r i sks. As pr evi ousl y

st at ed, t he Pol i cy was procur ed f or SJ T by Toscani , who "pl aced a

package pol i cy consi st i ng of hul l , P&I , shi p r epai r s, l egal ,

gener al l i abi l i t y and cont r act or s equi pment " ( emphasi s added) , wi t h

Cat l i n. I ndeed, Toscani admi t t ed t hat he consi der ed t he Pol i cy t o

be a mar i ne i nsurance pol i cy. I t cont ai ned Endor sement 5

( "Dr ydock") , whi ch provi ded cover age f or t he PERSEVERANCE, and

speci f i cal l y i dent i f i ed t he per i l s i nsur ed agai nst as pr i nci pal l y

t hose r el at ed t o t he seas and r el at ed mar i t i me r i sks:

TOUCHI NG THE ADVENTURES AND PERI LS whi ch we,t he sai d Assur er s, ar e cont ended t o bear andt ake upon us, t hey ar e of t he Seas, Ri ver s,Lakes, Har bour s, . . . or ot her causes of

what soever nat ur e ar i si ng ei t her on shor e orot her wi se, causi ng Loss of or i nj ur y to t hePr oper t y her eby i nsur ed, and of al l ot herPer i l s, Losses, and Mi sf or t unes t hat have orshal l have come to the Hur t , Det r i ment , orDamage of t he sai d Dock . . . or any partt her eof .

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The di st r i ct cour t ' s f i ndi ngs r egar di ng t he PERSEVERANCE

suppor t t he concl usi on t hat t he Pol i cy cover ed a st r uct ur e wi t hi n

t he ocean mar i ne i nsur ance except i on t o t he Code:

The Perseverance consi st ed of a hor i zont alpl at f or m cal l ed a pont oon, whi ch measured 150f eet l ong, 70 f eet wi de, and 5 f eet t al l . I thad a super st r uct ur e - - i t s "wi ngwal l s" - -whi ch consi st ed of t wo ver t i cal el ement s 120f eet l ong, f our f eet wi de, and si xt een f eett al l . The t op of t he por t wi ngwal l was f i t t edwi t h one semi - shel t er ed st eel cont r ol r oom.The Perseverance had a r aked bow and t wo t owpads t o connect i t t o a t owi ng vessel , andaccor di ng t o Payne [ SJ T' s mar i ne manager] ," [ t ] he dr ydock was speci al l y out f i t t ed andpr epar ed f or t he voyage t o San J uan [ f r omLoui si ana, of appr oxi mat el y 2000 mi l es] . Uponar r i val i n San J uan, most of t hePer sever ance' s t empor ar y modi f i cat i ons[ i ncl udi ng wi r e t owi ng cabl e, t owi ng chai ns,emergency r et r i evi ng l i ne, emergency dr agr ope, emergency t ow wi r e, and al l emergencyt ow wi r e at t achment cl i ps] r equi r ed f ornavi gat i on, except f or t he r aked bow, wer er emoved and were not repl aced. Addi t i onalmodi f i cat i ons of t he dr y dock were t hen made,i ncl udi ng t he "i nst al l at i on of t wo st eelgangways, shor e power cabl e, a pneumat i cmani f ol d and an el ect r i cal di st r i but i onpanel . "

Cat l i n I , 2013 U. S. Di st . LEXI S 52307, at *6- 8. 10 Fur t her f act ualf i ndi ngs by t he cour t hel p t o suppor t t hi s concl usi on:

The Perseverance was secur ed and at t ached t ot he sout hwest er n end of t he out f i t t i ng Pi er 15i n Mi r amar , a l ocat i on t hat was adj acent t o an

apr on desi gned by the Puert o Ri co Port sAut hor i t y ( "Por t s Aut hor i t y") f or r ent al

10 These f i ndi ngs wer e adopt ed by t he di st r i ct cour t as par t of i t sf i ndi ngs i n Cat l i n I V; t hey ar e not chal l enged on appeal . SeeCat l i n I V, 979 F. Supp. 2d at 182 n. 1.

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t o . . . SJ T. The ar ea occupi ed by . . . SJ Tcont ai ned moor i ng l i nes, support equi pment andmachi ner y, gr oundi ng connect i on, el ect r i ci t y,and compr essed ai r . At t he pi er , t hePer sever ance r ecei ved el ect r i cal power f r omgener at or s l ocat ed on shor e . . . when needed.

A shor esi de pneumat i c l i ne f ed compr essed ai rt o t he dr y dock, and the wi ng wal l wasconnect ed di r ect l y to a gr oundi ng l ug on t hepi er wi t h a t hr ee- quar t er - i nch gr oundi ng wi r e.At l east one gangway - - chai ned both t o thedr y dock and t he pi er - - pr ovi ded access t ot he Per sever ance, whi ch was t i ed t o t he dockwi t h more t han t en t hr ee- i nch- di ameter moor i ngl i nes and numer ous spr i ng l i nes. . . .

At t he t i me t hat i t sank, t hePer sever ance . . . had been non- oper at i onalf or al most a year . Bet ween t he t i me i t ar r i vedi n 2007 and when i t sank i n 2011, t he dr y dockwas occasi onal l y moved t en or f i f t een f eetwi t hi n i t s assi gned ar ea at t he pi er . Themovement [ was] done f or t he pur pose ofr et ur ni ng t he dr y dock back t o i t s or i gi nalposi t i on af t er r ai si ng and r epai r i ng a vessel ,and was accompl i shed by t he use of r opespul l ed by ei t her har bor wor ker s or a pi ckuptruck.

I d. at 8- 9.

Fi nal l y, based on t he evi dence pr esent ed, t he di st r i ct

cour t f ound as f ol l ows: "The Per sever ance was desi gned,

const r uct ed, and used to pr ovi de mar i ne mai nt enance and repai r

ser vi ces t o vessel s, " and "[ i ] t s i nt ended use [ was] t o l i f t

f l oat i ng equi pment f or i nspect i on and r epai r . " I d.

We agai n not e t hat t he Pol i cy expr essl y i ncl uded "hul l "

cover age f or t he PERSEVERANCE. At a mi ni mum, t he descr i pt i on of

t he PERSEVERANCE adopt ed by t he t r i al cour t , and pr evi ousl y

descr i bed, i s undoubt edl y encompassed wi t hi n t he t er m "hul l " as

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used i n Sect i on 1101' s def i ni t i on of ocean mar i ne i nsurance under

t he Code. See Davi d Aubur n et al . , Oxf or d Amer i can Wr i t er ' s

Thesaur us442 ( 1st ed. 2004) ( l i st i ng "st r uct ur e" as one synonymof

"hul l " ) . 11

Not t o be i gnor ed i s t he obvi ous f act t hat we ar e deal i ng

wi t h a f l oat i ng st r uctur e, at l east one t hat shoul d be f l oat i ng

11 The quest i on of whet her a mar i t i me st r uct ur e i s a vessel , cr af tor hul l under sect i on 1101 of t he Code i s, of cour se, a quest i on ofPuer t o Ri co l aw, not f eder al l aw. However , i n t he onl y case i n

whi ch t he Puer t o Ri co Supr eme Cour t has i nt erpr eted t he r el evantsect i ons of t he i nsur ance code, t o whi ch SJ T poi nt s i n suppor t oft hei r ar gument , t he cour t t ur ned t o f eder al l aw i n gener al , and t hef eder al l aw of admi r al t y i n par t i cul ar , as a sour ce of gui dance.See Qui ones v. G. Amer . I ns. Co. , 97 D. P. R. 368 ( 1969) ; see al soHer nndez v. S. S. Mut . Under wr i t i ng Ass' n, Lt d. , 388 F. Supp. 312( D. P. R. 1974) ( i nt er pr et i ng t he Puer t o Ri co I nsur ance Code sol el yvi a f eder al l aw) . Accor di ngl y, we do l i kewi se.

Whi l e t he t er m"hul l " i s i l l - def i ned i n f eder al admi r al t y l aw,i n cont r ast t o "vessel , " whi ch has been t he subj ect of ext ensi veand ongoi ng di scussi on, i t i s nonet hel ess cl ear t hat t he t er m i sappl i cabl e t o a st r uct ur e such as t he PERSEVERENCE. See Er i c

Sul l i van, The Mar i ne Encycl opaedi c Di ct i onar y 209 ( 5t h ed. 1996)( def i ni ng a hul l as t he "[ s] hel l or body of a shi p") .I nt er est i ngl y, t he or i gi n of t hi s naut i cal t er m appear s t o bebot ani cal :

hull [ OE] The not i on under l yi ng t he wor d hul l i s of' cover i ng' or ' conceal i ng. ' I t or i gi nal l y meant ' peapod'- et ymol ogi cal l y , t he ' cover i ng' of peas - and comesul t i matel y f r omthe same I ndo- Eur opean sour ce as pr oducedEngl i sh cel l , cl andest i ne, conceal , hal l , hel l , andpossi bl y col our and hol st er . I t i s gener al l y assumed t hathul l ' mai n body of a shi p, ' whi ch f i r st appear ed i n t he

15t h cent ur y, i s t he same wor d ( a shi p' s hul l r esembl i ngan open peapod) , al t hough some et ymol ogi st s havesuggest ed t hat i t may be connected wi t h hol l ow.

J ohn Ayot o, Di ct i onar y of Wor d Or i gi ns 289 ( 1990) . As a f l oat i ngdr ydock unquest i onabl y has t he f or mof a shel l af l oat i n t he wat er ,i t can be apt l y descr i bed as a hul l .

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under nor mal condi t i ons, even when par t l y f l ooded t o t ake on a shi p

i n need of r epai r s. I t i s di f f i cul t t o count enance t he exi st ence

of a st r uct ur e t hat not onl y f l oat s on pont oons, per f or ms essent i al

mar i t i me repai r wor k on t he water , and i s capabl e of bei ng t owed

( and i n f act has been t owed t housands of mi l es on t he open ocean)

wi t hout concl udi ng t hat i t i s a "hul l " or a "craf t . "

We need t o di scuss one f i nal argument r ai sed by SJ T

bef or e ent er i ng i nt o a di scussi on of t he mer i t s of whet her t he

uber r i mae f i dei doct r i ne appl i es t o t hi s cont r over sy: namel y, SJ T' s

cont ent i on t hat t he cont r ol l i ng def i ni t i on f or what const i t ut es

"mar i ne and t r anspor t at i on i nsur ance" i s cont ai ned i n Sect i on 405

of Code, and not Sect i on 1101. See P. R. Laws Ann. t i t . 26 405.

Accor di ng t o SJ T, because Sect i on 405( d) " i ncl ud[ es] dr y docks" as

one of t he st r uct ur es cover ed by Sect i on 405' s def i ni t i on of

"mar i ne i nsur ance, " t he Pol i cy i n t hi s case, whi ch cover s a

f l oat i ng dr ydock, i s not wi t hi n t he ocean mar i ne i nsur ance

excl usi on cont ai ned i n Sect i on 1101. See i d. Thus, SJ T al l eges

Sect i on 405 bar s appl i cat i on of uber r i mae f i dei .

Ther e ar e at l east t wo f undament al r easons why SJ T' s

ar gument on t hi s i ssue i s f l awed. The f i r st i s t hat a pl ai n

r eadi ng of Sect i on 1101 cl ear l y est abl i shes t hat t he cont r ol l i ng

def i ni t i on f or t he ent i r e Code as t o what i s mar i ne i nsur ance i s

f ound i n t hat sect i on of t he Code. Sect i on 1101( 2) speci f i cal l y

st at es t hat f or "pur poses of subsect i on ( 1) of t hi s sect i on [ whi ch

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est abl i shes t he excl usi on of ocean mar i ne i nsur ance f r om

appl i cat i on of t he Code] and t hi s t i t l e, ' ocean mar i ne

. . . i nsur ances' shal l i ncl ude onl y: ( a) I nsur ances upon vessel s,

craf t s, hul l s, and of i nt er est s t her ei n or wi t h r el at i on t her et o. "

P. R. Laws Ann. t i t . 26, 1101 ( emphasi s added) . That def i ni t i on

super cedes al l ot her conf l i ct i ng l anguage i n Ti t l e 26, of whi ch

Sect i on 405 i s a par t , even assumi ng t her e i s such a conf l i ct .

The second poi nt i s t hat t her e i s no such conf l i ct

because t he "dr y docks" r ef er r ed t o i n Sect i on 405( 1) ( d) ar e

t ot al l y di f f er ent st r uctur es t han t he f l oat i ng dr ydock i nvol ved i n

t he pr esent case. Al l t he ut i l i t i es r ef er r ed t o i n Secti on

405( 1) ( d) ar e f i xed, l and- based st r uct ur es, e. g. , "pi er s, whar ves,

docks and sl i ps, and ot her ai ds t o navi gat i on and t r anspor t at i on,

i ncl udi ng dr y dock and mar i ne r ai l ways, dams and appur t enant

f aci l i t i es f or t he cont r ol of wat er ways. " No l egi sl at i ve i nt ent i s

di scer ni bl e f r om t hi s l anguage t o suppor t t he concl usi on t hat we

shoul d i ncl ude a movabl e, f l oat i ng st r uct ur e wi t hi n t hat f i xed,

l and- based congl omerate. Thus, Sect i on 405 does not have any

bear i ng on f l oat i ng dr ydocks. 12

I n t he pr esent case, t her e i s no l ocal l egi sl at i on t hat

i s " i nconsi st ent " wi t h f eder al admi r al t y l aw. Thus, based on t he

meani ng of t he t er ms cr af t and hul l , t he f act ual f i ndi ngs of t he

12 See not e 1, supr a, f or t he di st i nct i on bet ween f l oat i ng andf i xed dr y docks.

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di st r i ct cour t as t o t he PERSEVERANCE' s st r uct ur e and f unct i on, t he

l anguage of t he Pol i cy and t he ci r cumst ances sur r oundi ng i t s

pr ocur ement , and t he cl ear di ct at e of Sect i on 1101, t he Pol i cy i s

expr essl y excl uded f r om t he ambi t of t he Code by the "car ve out "

del i mi t ed i n Sect i on 1101.

B. Is Uberrimae Fidei an Entrenched Precept of Federal Admiralty

Law Applicable to this Controversy?

Pr esent ed t wi ce wi t h t hi s i ssue pr evi ousl y, we have not

yet t aken an aut hor i t at i ve st ance on whet her uber r i mae f i dei i s an

est abl i shed r ul e of mar i t i me l aw. See Pesant e, 459 F. 3d at 38( "Whi l e we have never act ual l y deci ded t he i ssue, i t i s t r ue t hat

we have quest i oned whet her uber r i mae f i dei i s an est abl i shed r ul e

of mar i t i me l aw. ") ; Gi r agosi an, 57 F. 3d at 54 n. 3 ( "[ I ] t i s

debatabl e whether t he doct r i ne can st i l l be deemed an ' ent r enched'

r ul e of l aw. " ) . The quest i on of whet her a doct r i ne i s an

est abl i shed r ul e of mar i t i me l aw, t hough seemi ngl y abst r use, i s of

vi t al i mpor t ance i n admi r al t y cases as i t can pr ove t o be

di sposi t i ve i n cont r over si es such as t he di sput e at hand. Thi s i s

because f or mar i ne i nsurance cont r act cases, we onl y appl y f eder al

mar i t i me rul es t hat ar e est abl i shed and set t l ed; ot her wi se we woul d

l ook t o st at e l aw. See Pesant e, 459 F. 3d at 37; Gi r agosi an, 57

F. 3d at 54.

Mar i ne i nsur ance i s vi t al t o t he adequat e f l ow of

commerce. The natur e of t he r i sks t hat ar e covered by mar i t i me

i nsur ance i s such t hat , gi ven t he ur gent necessi t y f or t he

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pl acement of t hi s t ype of i nsur ance cover age that i s of t en pr esent

i n the busi ness of mar i t i me commerce, as wel l as t he ext r eme

di st ances t hat of t en separ at e t he i nsur ance seeker and t he i nsur er ,

i t i s i mper at i ve t hat t he i nsur er be pr ovi ded wi t h t r ut hf ul and

val i d i nf or mat i on about t he r i sk t he i nsur er i s asked t o under t ake

by t he part y most abl e to pr ovi de such dat a: t he i nsured.

Al t hough t hi s cour t had not yet hel d def i ni t i vel y t hat

uber r i mae f i dei i s an est abl i shed r ul e of mar i t i me l aw, we do so

now, t hus j oi ni ng t he near - unani mous consensus of our si st er

ci r cui t s , 13 r ul i ng wi t hout f ur t her equi vocat i on t hat t he doct r i ne

of uber r i mae f i dei i s an est abl i shed r ul e of mar i t i me l aw i n t hi s

Ci rcui t . 14 Thi s r ul i ng shoul d har dl y be sur pr i si ng. As ear l y as

13 See, e. g. , N. Y. Mar i ne & Gen. I ns. Co. v. Cont ' l Cement Co. ,LLC, 761 F. 3d 830, 839 ( 8t h Ci r . 2014) ( r ecogni zi ng t hat uber r i maef i dei i s " est abl i shed f eder al pr ecedent " ) ; AGF Mar i ne Avi at i on &Tr ansp. v. Cass i n, 544 F. 3d 255, 263 ( 3d Ci r . 2008) ( same) ; Cer t ai n

Under wr i t er s at Ll oyd' s, London v. I nl et Fi sher i es I nc. , 518 F. 3d645, 650- 54 ( 9t h Ci r . 2008) ( same) ; HI H Mar i ne Ser vs. , I nc. v.Fraser , 211 F. 3d 1359, 1362 ( 11t h Ci r . 2000) ( same) ; Pur i t an I ns.Co. v. Eagl e S. S. Co. S. A. , 779 F. 2d 866, 870 ( 2d Ci r . 1985)( same) . The Fi f t h Ci r cui t i s al one i n hol di ng t hat uber r i mae f i deii s "not ent r enched f eder al pr ecedent . " Al bany I ns. Co. v. Anh ThiKi eu, 927 F. 2d 882, 889 ( 5t h Ci r . 1991) ( i nt er nal quot at i on mar ksomi t t ed) . Thi s vi ew, however , has been heavi l y cr i t i ci zed. See,e. g. , I nl et Fi sher i es I nc. , 518 F. 3d at 652- 54 ( di spar agi ng t he AnhThi Ki eu deci si on as l ogi cal l y f l awed and concl udi ng t hat i t "doesvi ol ence" t o est abl i shed l aw) .

14 Our adopt i on of uberr i maef i dei does not vi ol at e t he Supr emeCour t ' s war ni ng i n Wi l bur n Boat Co. , 348 U. S. at 316, not t o cr eat enew admi r al t y r ul es t hat gover n mar i ne i nsur ance pol i ci es. SeeI nl et Fi sher i es I nc. , 518 F. 3d at 650- 51 ( " [ T] he Supr eme Cour t i nWi l bur n Boat expr essed a r el uct ance f or f eder al cour t s t o f ashi onnew admi r al t y r ul es, not a desi r e t o do away wi t h exi st i ng ones. " ) .Uber r i mae f i dei i s a j udi ci al l y creat ed admi r al t y r ul e t hat

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1828, t he Supr eme Cour t charact er i zed an i nsurance cont r act as "a

cont r act uber r i mae f i dei . " McLanahan v. Uni ver sal I ns. Co. , 26

U. S. 170, 185 ( 1828) . I n f act , 100 year s l at er , " t he doct r i ne was

r ef er r ed t o as a ' t r adi t i onal ' aspect of i nsur ance l aw. "15 N. Y.

Mar i ne & Gen. I ns. Co. , 761 F. 3d at 839 ( quot i ng St i pci ch v. Met r o.

Li f e I ns. Co. , 277 U. S. 311, 316 ( 1928) ) . Even f ol l owi ng t he

Supr eme Cour t ' s Wi l bur n Boat Co. deci si on i n 1955, whi ch hel d that

st at es shoul d have t he pr i mar y say i n mat t er s of mar i ne i nsurance,

348 U. S. at 321, t he ci r cui t cour t s - i ncl udi ng t he Fi f t h Ci r cui t

pr i or t o i t s Anh Thi Ki eu deci si on i n 1991 - r out i nel y appl i ed

uber r i mae f i dei as a f eder al admi r al t y rul e to mar i ne i nsur ance

cont r act s because i t was so wel l - est abl i shed. See I nl et Fi sher i es

I nc. , 518 F. 3d at 651- 52 ( ci t i ng, e. g. , I nger sol l Mi l l i ng Mach. Co.

v. M/ V Bodena, 829 F. 2d 293, 308 ( 2d Ci r . 1987) ; Fi r eman' s Fund

I ns. Co. v. Wi l bur n Boat Co. , 300 F. 2d 631, 646 ( 5t h Ci r . 1962) ( on

r emand f r om t he Supr eme Cour t ) ) .

subst ant i al l y pr edat es Wi l bur n Boat Co. and has been r eappl i ed t i meand t i me agai n even af t er t he Wi l bur n Boat Co. deci si on. See,e. g. , I nl et Fi sher i es I nc. , 518 F. 3d at 653 ( obser vi ng t hatuber r i mae f i dei i s a 200- year - ol d r ul e) ; see al so McLanahan v.Uni ver sal I ns. Co. , 26 U. S. 170, 185 ( 1828) ( di scussi ng uber r i maef i dei i n t he cont ext of i nsur ance) .

15 As one comment at or has put i t , " ' no r ul e of mar i ne i nsurance i sbet t er est abl i shed t ha[ n] t he ut most good f ai t h r ul e. ' " I nl etFi sher i es I nc. , 518 F. 3d at 653- 54 ( al t er at i on i n or i gi nal )( quot i ng Thomas J . Schoenbaum, The Dut y of Ut most Good Fai t h i nMar i ne I nsur ance Law: A Comparat i ve Anal ysi s of Amer i can andEngl i sh Law, 29 J . Mar . L. & Com. 1, 11 ( 1998) ) .

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Then, i n 1991, t he Fi f t h Ci r cui t hel d i n Anh Thi Ki eu

t hat uber r i mae f i dei was not est abl i shed mar i t i me l aw, a deci si on

t hat t he Ni nt h Ci r cui t has char act er i zed as an "abr upt [ ] change[ ]

[ i n] cour se" . I d. at 652 ( r ef er enci ng Anh Thi Ki eu, 927 F. 2d at

889- 90) . "I r oni cal l y, wer e i t not f or t he Anh Thi Ki eu deci si on

i t sel f , t her e woul d be l i t t l e cause at al l t o doubt t hat uber r i mae

f i dei i s i ndeed f i r ml y ent r enched mar i t i me l aw. " I d.

We f i nd i t i nst r uct i ve t hat f ol l owi ng our 2006 deci si on

i n Pesant e, i n whi ch we quest i oned whether uber r i mae f i dei was an

est abl i shed r ul e of mar i t i me l aw, 459 F. 3d at 38, t hr ee of our

si st er ci r cui t s - t he Thi r d Ci r cui t i n 2008, t he Ni nt h Ci r cui t i n

2008, and t he Ei ght h Ci r cui t i n 2014 - f or mal l y recogni zed t he

doct r i ne as est abl i shed admi r al t y l aw. See N. Y. Mar i ne & Gen. I ns.

Co. , 761 F. 3d at 839; AGF Mar i ne Avi at i on & Transp. , 544 F. 3d at

263; I nl et Fi sher i es I nc. , 518 F. 3d at 654. Mor eover , t he Second

and El event h Ci r cui t s - cour t s t hat have r ecogni zed uber r i mae

f i dei as an est abl i shed mar i t i me r ul e si nce at l east t he 1980s16 -

have r ecent l y r eaf f i r med t he vi t al i t y of uber r i mae f i dei wi t hi n

t hei r r especti ve j ur i sdi cti ons. See, e. g. , St . Paul Fi r e & Mar i ne

I ns. Co. v. Mat r i x Posh, LLC, 507 F. App' x 94, 95 ( 2d Ci r . 2013) ;

I . T. N. Consol i dat or s, I nc. v. N. Mar i ne Under wr i t er s Lt d. , 464 F.

App' x 788, 790 n. 3 ( 11t h Ci r . 2012) ( per cur i am) . Ther ef or e, based

16 See Kni ght v. U. S. Fi r e I ns. Co. , 804 F. 2d 9, 13 ( 2d Ci r . 1986) ;St eel met , I nc. v. Car i be Towi ng Cor p. , 747 F. 2d 689, 695 ( 11t h Ci r .1984) .

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on bot h t he pol i cy r at i onal es suppor t i ng uber r i mae f i dei and t he

l ongst andi ng hi st or y and consi st ent appl i cat i on of t he doct r i ne by

most of t he ci r cui t s, we f or mal l y recogni ze uber r i mae f i dei as an

est abl i shed admi r al t y r ul e wi t hi n t hi s Ci r cui t .

C. Did SJT Violate Uberrimae Fidei?

We f i nal l y pr oceed t o an anal ysi s of t he appl i cat i on of

uber r i mae f i dei t o t hi s case. 17 At t he bench t r i al , Ri char d

Thompson ( "Thompson") , a hul l i nspect or who surveyed t he

PERSEVERANCE, t est i f i ed t hat he f ound "heavy wast age" i n t he

dr ydock' s hul l dur i ng an Apr i l 2010 i nspect i on. Af t er Thompson

not i f i ed SJ T of t he r ust and det er i or at i on pr obl ems, SJ T admi t t ed

t hat " t hose damages were pr e- exi st i ng. " Because t he PERSEVERANCE

was not i n pr i me condi t i on and busi ness was sl ow, SJ T of f er ed t o

sel l t he f l oat i ng dr ydock t o pot ent i al buyer s at a pr i ce bet ween

$700, 000 t o $800, 000, whi ch pr esumabl y appr oxi mated i t s act ual

val ue at t he t i me. I ndeed, i n Apr i l 2011 - - t he same mont h t hat

t he Cat l i n Pol i cy t ook ef f ect - - SJ T adver t i sed t he PERSEVERANCE

f or sal e at a pr i ce of $800, 000. Yet , SJ T, i n i t s request f or

mar i ne i nsur ance cover age f r om Cat l i n, r epr esent ed t o Cat l i n t hat

t he PERSEVERANCE had been pr evi ousl y i nsur ed by RLI f or $1, 750, 000

17 Our st andar ds of r evi ew f or a bench t r i al ar e wel l known; t hedi st r i ct cour t ' s f actual f i ndi ngs ar e pr ot ected by cl ear er r orr evi ew. Gi r agosi an, 57 F. 3d at 53.

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- $700, 000 mor e t han what SJ T pai d f or t he dr ydock or i gi nal l y. 18

We agr ee wi t h t he di st r i ct cour t t hat Cat l i n coul d have r easonabl y

assumed t he val ue pr esent ed t o i t i n t he pr evi ous i nsur ance pol i cy

f r om RLI as t he act ual val ue and eval uat ed i t s r i sks based on t he

condi t i ons i t woul d have r easonabl y expect ed f r oma dr ydock of t hat

val ue. SJ T' s f ai l ur e t o di scl ose t he t r ue val ue of t he

PERSEVERANCE, what SJ T pai d f or t he PERSEVERENCE, and t he

PERSEVERANCE' s l evel of det er i or at i on, t her ef or e, ar e al l mat er i al

f act s, t he nondi scl osur e of whi ch vi ol at es uber r i mae f i dei . See

N. H. I ns. Co. v. C' Est Moi , I nc. , 519 F. 3d 937, 939 ( 9t h Ci r . 2008)

( "The pur chase pr i ce of a vessel i s unquest i onabl y a f act mat er i al

t o t he r i sk, as i t pr ovi des an obj ect i ve measur e of t he vessel ' s

wor t h and t he cor r espondi ng r i sk of i nsur i ng t he vessel . " ( i nt er nal

quot at i on mar ks and ci t at i on omi t t ed) ) ; Pesant e, 459 F. 3d at 38

( expl ai ni ng t hat a mat er i al f act i s " t hat whi ch can possi bl y

i nf l uence t he mi nd of a pr udent and i nt el l i gent i nsur er i n

det er mi ni ng whet her i t wi l l accept [ a] r i sk" ( i nt er nal quot at i on

mar ks omi t t ed) ) ; Gr ande, 436 F. 3d at 283 ( " [ T] he st r i ct mar i t i me

18 I t i s t r ue t hat t he second Mar i ne Consul t ant s r epor t val ued t hePERSEVERANCE at $1, 750, 000 i n November 2006, due t o t he val ue addedby t he i mpr ovement s made t o t he shi p t o pr epare i t f or t owi ng. Yetcont i nui ng t o r epr esent t hi s amount as t he dr ydock' s actual val ue

mor e than f our year s l at er f ai l s t o account f or subsequentdepr eci at i on, damage, and decay, par t i cul ar l y i n t he absence off ur t her maj or i mpr ovement s t o t he vessel . Mor eover , we f i nd noer r or i n dr awi ng an i nf er ence t hat t he dr ydock' s adver t i sed sal epr i ce of $800, 000 i n Apr i l 2011 bet t er appr oxi mat ed t he act ualval ue of t he PERSEVERENCE t han an out dated val uat i on r eport f r omf our year s ear l i er .

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r ul e of uber r i mae f i dei [ pr ovi des t hat ] an i nsur ed must make f ul l

di scl osur e of al l mat er i al f act s of whi ch t he i nsur ed has, or ought

t o have, knowl edge . . . even t hough no i nqui r y be made. " ( l ast

al t er at i on i n or i gi nal ) ( i nt er nal quot at i on mar ks omi t t ed) ) .

Under uber r i mae f i dei , when t he mar i ne i nsur ed f ai l s t o

di scl ose to t he mar i ne i nsur er al l ci r cumst ances known t o i t and

unknown t o t he i nsur er whi ch "mat er i al l y af f ect t he i nsur er ' s

r i sk, " t he i nsur er may voi d t he mar i ne i nsur ance pol i cy at i t s

opt i on. Gi r agosi an, 57 F. 3d at 55. I n ot her wor ds, t he pol i cy

becomes voi dabl e. 19 See i d. at 54- 55. As di scussed above, t he

evi dence concl usi vel y shows t hat SJ T f ai l ed t o di scl ose mat er i al

i nf ormat i on about t he PERSEVERENCE' s act ual val ue and pr eexi st i ng

19 The di st r i ct cour t concl uded t hat under uber r i mae f i dei , t hePol i cy was voi d ab i ni t i o, meani ng t hat t her e was never anenf or ceabl e cont r act t o begi n wi t h. See Bl ack' s Law Di ct i onar y1805 ( 10t h ed. 2014) . However , as t he Supr eme Cour t has descr i bedi t , and as we concl ude now, uber r i mae f i dei r ender s a mar i nei nsur ance cont r act voi dabl e - t he cont r act i s deemed val i d unt i lbei ng voi ded at t he el ect i on of t he i nsur er . See, e. g. , St i pci ch,277 U. S. at 316 ( " I nsur ance pol i ci es ar e t r adi t i onal l y cont r act suber r i mae f i dei and a f ai l ur e by t he i nsur ed t o di scl ose condi t i onsaf f ect i ng t he r i sk, of whi ch he i s awar e, makes t he cont r act

voi dabl e at t he i nsur er ' s opt i on. ") . Mor eover , our pr i or casest hat di d not adopt uber r i mae f i dei as wel l - est abl i shed l aw al sodescr i be t he doct r i ne as one t hat r ender s an i nsurance cont r actvoi dabl e, not voi d ab i ni t i o. See, e. g. , Pesant e, 459 F. 3d at 38( "[ I ] f we wer e t o f i nd t hat t he doct r i ne of uber r i mae f i dei i s anest abl i shed r ul e of mar i t i me l aw, we woul d hol d t hat t he pol i cy wasvoi dabl e as a mat t er of l aw. " ) .

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det er i or at ed condi t i on pr i or t o Cat l i n det er mi ni ng whet her i t woul d

accept t he r i sk. Cat l i n was f r ee, t her ef or e, t o voi d t he pol i cy. 20

III. Conclusion

SJ T vi ol at ed t he doct r i ne of uber r i mae f i dei i n i t s

pr ocur ement of t he Pol i cy. Thus, Cat l i n was ent i t l ed t o voi d t he

Pol i cy. The deci si on of t he di st r i ct cour t i s af f i r med, however ,

i t s hol di ng i s modi f i ed t o r ef l ect t hat t he cont r act was voi dabl e,

not voi d ab i ni t i o.

Affirmed.

20 One mi ght ar gue t hat t her e i s a di st i nct i on bet ween an i nsurancepol i cy t hat pays t he i nsured amount ver sus an i nsurance pol i cy that

pays t he act ual val ue i n t he event of a t ot al l oss of t he dr ydock,and t he f act s i n t hi s case ar e not cl ear as t o whet her Cat l i n woul dhave pai d up t o t he l i abi l i t y l i mi t ( $1, 000, 000) or t he mar ketval ue ( appr oxi matel y $700, 000 to $800, 000, based on t he pr i ces atwhi ch SJ T was wi l l i ng t o sel l t he vessel ) . However , t hi s quest i oni s i mmat er i al , as uber r i mae f i dei l ooks sol el y t o whet her SJ Tsat i sf i ed i t s dut y of di scl osi ng al l mat er i al f acts known t o i t .Regar dl ess of t he f act ual uncer t ai nt y i n t hi s r espect , we f i nd t hatSJ T vi ol at ed uber r i mae f i dei under ei t her set of ci r cumst ances.Cl ear l y, i n t he f i r st scenar i o, i n whi ch Cat l i n owed t he f ul ll i abi l i t y l i mi t of $1, 000, 000 i n t he event of t ot al l oss, t hen t heactual val ue of t he PERSEVERANCE woul d be a mater i al f act , t he

nondi scl osur e of whi ch woul d vi ol at e uber r i mae f i dei . See Cassi n,544 F. 3d at 265; N. H. I ns. Co. , 519 F. 3d at 939. As t o t he secondscenar i o, had Cat l i n known t hat t he PERSEVERANCE was bei ng of f eredf or sal e at l ess t han f or t y- si x per cent of i t s i nsur ed val ue, i t ,l i ke any reasonabl e i nsur er , l i kel y woul d not have agr eed t o i ssuet he $1, 750, 000 i nsur ance pol i cy i n t he f i r st pl ace. See, e. g. ,Pesant e, 459 F. 3d at 38.

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catlin (syndicate 2003) at llo v. san juan towing & marine servi, 1st cir. (2015)

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