Gulfstream Cargo, Ltd. v. Reliance Insurance Company

Decision Date28 March 1969
Docket NumberNo. 23109.,23109.
PartiesGULFSTREAM CARGO, LTD., Appellant, v. RELIANCE INSURANCE COMPANY, Appellee.
CourtU.S. Court of Appeals — Fifth Circuit

Paul E. Gifford, Miami, Fla., Dubbin, Schiff, Berkman & Dubbin, Miami, Fla., of counsel, for appellant.

G. Morton Good, Cromwell A. Anderson, Miami, Fla., Smathers & Thompson, Miami, Fla., of counsel, for appellee.

Before JOHN R. BROWN, Chief Judge, TUTTLE and GODBOLD, Circuit Judges.

JOHN R. BROWN, Chief Judge:

The question in this case is whether nondisclosure by the prospective assured of known facts reflecting spectacular unseaworthiness of the vessel existing at the time the policy attaches constitutes concealment vitiating the AITH (Hulls) time policy. The District Judge, long experienced in maritime matters, on fact findings1 that are not challenged, concluded that there was concealment and its consequence was the avoidance of the policy. From this it inevitably followed that he held the Insurer2 not liable for the total loss of the vessel ten months later from a peril otherwise covered under the Inchmaree clause,3 for negligence of the master in imprudently abandoning ship after development of leaks not shown to have been causally related to the earlier unseaworthiness. We affirm.

In October 1961, the Assured4 sought insurance on the M/V Papoose, a woodenhull vessel then "coming to the twilight of her life."5 Built in 1933 to a length of 69 feet, she was rebuilt in 1936 by lengthening her to 73 feet. In terms somewhat inelegant and certainly lacking in nautical flavor, it was this tail end which is Assured's undoing.

At the time of her purchase by the Assured in October 1960, a detailed condition survey report was made by marine surveyor Havenner. It showed M/V Papoose to be generally in good shape.6 Whether she was so in fact is now open to serious question as the Assured's action as owner attests.7

The policy was issued to take effect on October 12, 1961. The Assured dealt with its agent Thomas Burckes of Washington, D. C., whose familiarity with wet marine insurance was presumably limited. He in turn dealt with Mr. Tierney of Thomas J. Fisher & Co., Washington agents of Insurer, who in turn dealt with Insurer's Baltimore office (William Becker and his assistant Charles Hall), who in turn dealt with the Philadelphia home office (McTott, in effect, manager of the marine department).

In response to a request of Insurer's Baltimore office, Tierney obtained and transmitted a copy of the Havenner survey report (note 6, supra), which he obtained from Burckes who in turn got it from Mrs. Wilken. In his transmittal letter Tierney added the comment that "I understand the ship is in better condition than when the Havenner survey * * * was made. * * *"8 R. 115. Thus the picture painted was the rosy one of a fine craft then in tip-top shape.

But this was far from the truth as the Assured knew only too well. This knowledge went back at least to the preceding June (1961) when the vessel's Master reported that on the trip from Maryland to Fort Lauderdale, Florida, the stern of M/V Papoose had unusual rhythmic vibrations and that she leaked excessively. But it didn't end there, nor did it end with imputed knowledge from reports made to the owner by the Master. For after an interlude in a shipyard, M/V Papoose with the Wilkens aboard set out on a voyage to and from Fort Lauderdale and Nassau in the Bahamas. On that trip the vessel again leaked excessively. On return to Fort Lauderdale, the vessel was again put into shipyard at Broward Marine.

The shipyard was alarmed at the sag in her stern, so much so that they feared she would hog or break while on the ways. They recommended that a surveyor be employed to advise the owners concerning handling her on the dry dock and the repairs needed. At this point, now about September 15, 1961, enters Chadwick, a marine surveyor of unquestioned competence, his recommendations for repairs,9 and his report to the owners. With a simplicity of understatement the Trial Judge characterized this two-page report as revealing "extensive repair work necessary in the stern of the vessel due to rot." But it was more than that. In the very opening paragraph of his report, Chadwick takes note of the Havenner survey, a copy of which he was furnished, and points out the deficiencies of that survey and the probable cause of them.10 And then in detail his report reveals starkly the things which made M/V Papoose unfit "for any use offshore" or for "carrying cargo even on the Intercoastal Waterway.11

But this report, except for putting it in more technical and specific terms, did not really teach the Wilkens anything they did not know. They were fully aware of the facts the report revealed and of the vessel's condition.12 And as proof positive that they were aware that the Havenner survey report — within a few days known by them to be in the hands of Insurer considering issuing hull coverage on M/V Papoose — did not reflect the true condition of the vessel at that time, and for that matter probably in 1960 at the time of purchase, the Wilkens fired off two hot letters on September 7 and September 25, 1961, to the sellers in Maryland complaining vociferously of misrepresentation by the seller.13 That this was no off-the-cuff, spur-of-the-moment, impetuous complaint made in the passion of anger is shown by the fact that these claims soon resulted in lawsuits against both the seller and surveyor Havenner (see note 7, supra). Devastating as was this information, now known both by personal experience, observation, and from the detailed Chadwick survey, the Chadwick survey was not sent to Insurer nor, for that matter, even to Burckes. Nor is there any testimony from either of the Wilkens that either of them relayed all or part of the Chadwick survey report by word of mouth to Burckes. Although Burckes claims to have passed on information to Tierney, and we credit that fully as the trial Judge did arguendo, nothing approaches the specificity or spectacular nature of the deficiencies or, more significant, Chadwick's informed categorical expert opinion of basic unfitness, that is unseaworthiness, for the proposed trade — a factor of the first magnitude to a marine underwriter.14

With this approach, little detail is needed concerning how Insurer's witnesses Tierney, Becker, and Hall described the information received by each of them from Burckes. First, being a factual matter resting almost altogether on recollections of informal telephone and oral communication, the Judge's fact findings have the heavy insulation of F.R.Civ.P. 52(a). Second, these representatives could hardly learn more than they were told, and Burckes makes clear that he learned little and told them no more (see note 14, supra). But on any analysis, the Trial Judge was certainly entitled to find that they were neither informed of the extensive nature of the patent deterioration or of the spectacular nature of the vessel's unfitness, nor did they learn enough to put them on inquiry.15

It rounds out the factual review to say that the testimony was uncontradicted that had Insurer been furnished the Chadwick report either by a copy or a substantial oral summary of it, the insurance would not have been effected, and indeed the submission would not have even been considered. Of course, testimony of this kind coming long after the issuance of the policy and the intervening loss, not shown to have been causally related to the earlier concealed unseaworthiness, is self-serving in a vivid way. But this goes to its credibility, and the Trial Judge impliedly credited this. Considering the fact that an honest, reasonably complete report of Chadwick's findings would have alerted the prospective underwriter to the judgment of a qualified expert concerning the present spectacular and marked unseaworthiness, it is an understatement to say the Trial Judge's fact findings on this point remain safely afloat with the buoyancy that F.R.Civ.P. 52(a) affords. See June T, Inc. v. King, 5 Cir., 1961, 290 F. 2d 404, 1961 A.M.C. 1431.

When we come to the law it is direct and clear. And this is so whether the case is governed by the maritime law or whether, under Wilburn,16 it becomes a question of Florida law. The law of Florida recognizes concealment as a ground for avoiding the contract altogether,17 and there is every indication that if Florida's preceding law is inadequate to fill in all the gaps, Florida would draw heavily on maritime law in fashioning its own principles.18

In the last Wilburn decision, note 16 supra, this Court declared the law in unmistakable terms:

"Nothing is better established in the law of marine insurance than that `a mistake or commission material to a marine risk, whether it be wilful or accidental, or result from mistake, negligence or voluntary ignorance, avoids the policy. And the same rule obtains, even though the insured did not suppose the fact to be material.\' 3 Couch Insurance, at page 2568. And it is stated in 29 American Jurisprudence, Insurance, at page 956: `§ 690. — In Case of Marine Insurance. `Concealment,\' in the law of marine insurance, is the failure to disclose any material fact or circumstance in relation to the subject matter of the contract which may increase the liability to loss, or affect the risk or obligation assumed, and which is, in fact or law, within or ought to be within, the knowledge of one party, and of which the other party has no actual or presumptive knowledge. In the case of marine insurance the insured must disclose all facts material to the risk, and in default of such duty the contract may be avoided by the insurer. In other words, an applicant for marine insurance must state all material facts which are known to him and unknown to the insurer. It has been said that the insured is bound to communicate every material fact within his knowledge not known or presumed to be known to the underwriter, whether
...

To continue reading

Request your trial
66 cases
  • Port Lynch, Inc. v. NEW ENGLAND INTERN. ASSURETY OF AM.
    • United States
    • United States District Courts. 9th Circuit. United States District Court (Western District of Washington)
    • 7 d1 Janeiro d1 1991
    ...the material fact. Puritan Ins. Co. v. Eagle S.S. Co. S.A., 779 F.2d 866, 870 (2d Cir.1985); Gulfstream Cargo, Ltd. v. Reliance Insurance Co., 409 F.2d 974, 980-81 (5th Cir.1969). Moreover, with respect to breaches of express warranties in a marine insurance contract, there is federal case ......
  • Fireman's Fund Ins. Co. v. Great Am. Ins. Co. of N.Y.
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • 31 d1 Março d1 2014
    ...the condition of the object insured has also been held to constitute violation of uberrimae fidei. See Gulfstream Cargo, Ltd. v. Reliance Ins. Co., 409 F.2d 974, 975, 982 (5th Cir.1969) (non-disclosed information described vessel as “wholly unfit and in need of major repairs to make her rea......
  • Fireman's Fund Ins. Co. v. Great Am. Ins. Co. of N.Y., Max Specialty Ins. Co.,
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • 31 d1 Março d1 2014
    ...of the object insured has also been held to constitute violation of uberrimae fidei. See Gulfstream Cargo, Ltd. v. Reliance Ins. Co., 409 F.2d 974, 975, 982 (5th Cir.1969) (non-disclosed information described [10 F.Supp.3d 491] vessel as “wholly unfit and in need of major repairs to make he......
  • Employers Ins. of Wausau v. Occidental Petroleum Corp., 14880
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • 10 d4 Dezembro d4 1992
    ...Co., 608 F.2d 145, 147 (5th Cir.1979), cert. denied, 449 U.S. 830, 101 S.Ct. 97, 66 L.Ed.2d 35 (1980); Gulfstream Cargo, Ltd. v. Reliance Ins. Co., 409 F.2d 974, 983 (5th Cir.1979); Tropical Marine Prods., Inc. v. Birmingham Fire Ins. Co. of Pa., 247 F.2d 116, 119 (5th Cir.1957), cert. deni......
  • Request a trial to view additional results
2 books & journal articles
  • Introduction to the claims game
    • United States
    • James Publishing Practical Law Books How Insurance Companies Settle Cases
    • 1 d6 Maio d6 2021
    ...(9th Cir.1962); Puritan Ins. Co. v. Eagle S.S. Co. S.A. , 779 F.2d 866, 870 (2d Cir.1985); Gulfstream Cargo, Ltd. v. Reliance Ins. Co. , 409 F.2d 974, 980-81 (5th Cir.1969); Port Lynch, Inc. v. New England Int’l Assurety, Inc. , 754 F.Supp. 816, 820 (W.D. Wash. 1991). Specialized maritime c......
  • Admirality Law for the Land-side Alabama Lawyer
    • United States
    • Alabama State Bar Alabama Lawyer No. 71-4, July 2010
    • Invalid date
    ...insured's implied warranty that the vessel is seaworthy at the inception of the policy. See Gulfstream Cargo, Ltd. v. Reliance Ins. Co., 409 F.2d 974, 981-84 (5th Cir. 1969). These covenants are not always consistent with state insurance laws, which the United States Supreme Court has held ......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT