585 F.3d 236 (5th Cir. 2009), 08-60898, Great Lakes Reinsurance (UK) PLC v. Durham Auctions, Inc.

Docket Nº:08-60898.
Citation:585 F.3d 236
Opinion Judge:GARWOOD, Circuit Judge:
Party Name:GREAT LAKES REINSURANCE (UK) PLC, Plaintiff-Appellant, v. DURHAM AUCTIONS, INC., Defendant-Appellee.
Attorney:John Anthony Scialdone, Todd Gregory Crawford (argued), Balch & Bingham, L.L.P., Gulfport, MS, for Plaintiff-Appellant. William H. Jones (argued), Petal, MS, for Defendant-Appellee.
Judge Panel:Before KING, GARWOOD and DAVIS, Circuit Judges.
Case Date:October 09, 2009
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit

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585 F.3d 236 (5th Cir. 2009)



DURHAM AUCTIONS, INC., Defendant-Appellee.

No. 08-60898.

United States Court of Appeals, Fifth Circuit.

October 9, 2009

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John Anthony Scialdone, Todd Gregory Crawford (argued), Balch & Bingham, L.L.P., Gulfport, MS, for Plaintiff-Appellant.

William H. Jones (argued), Petal, MS, for Defendant-Appellee.

Appeal from the United States District Court for the Southern District of Mississippi.

Before KING, GARWOOD and DAVIS, Circuit Judges.

GARWOOD, Circuit Judge:

This case is before us on a certified question under 28 U.S.C. § 1292(b). An administration panel of this court previously granted the motion of the parties for leave to appeal under FED. R.APP. P. 5. The appeal presents choice of law questions respecting a marine insurance policy.

Plaintiff-appellant, Great Lakes Reinsurance (UK) PLC (" Great Lakes" ), a United Kingdom non-admitted surplus lines insurer, brought this action in the district court below against defendant-appellee, Durham Auctions, Inc. (" Durham" ), a Mississippi Corporation with its principal place of business in Mississippi, to declare void a policy of marine insurance Great Lakes had issued to Durham. The policy covered the vessel " TIME OUT," a 48 foot, diesel powered, model 1979, " PACEMAKER" motor yacht, owned by Durham.

Jurisdiction was founded on 28 U.S.C. § 1333(1), admiralty or maritime jurisdiction. The policy covered the period November 8, 2004, to November 8, 2005, and provided principally hull and protection and indemnity coverage in respect to the vessel (only the hull coverage is involved here). Durham counterclaimed for recovery under the policy for loss of the vessel when it sank in September 2005 while moored in Cedar Lake, Mississippi. The vessel was normally berthed at Biloxi, Mississippi, and was used by the owners of Durham, and their family and friends, for sports fishing and general pleasure use in the Gulf Coast area. The policy quotation provides, in part, " Warranted Private and Pleasure use only. Navigating Inland & Gulf Coast USA and Gulf of Mexico not exceeding 100 miles offshore."

Durham had initially acquired the vessel in November 2002 in Florida, and promptly moved it across the Gulf, under its own power, to Mississippi, where it was berthed thereafter. The vessel was apparently insured by another insurer from November 2002 to November 2004.

To acquire the Great Lakes policy, Durham went through its Mississippi agent, which in turn retained a Florida broker

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which in turn retained a United Kingdom broker, to whom Great Lakes issued the policy and who then delivered the policy to the Mississippi agent, who delivered it to Durham.1 The policy expressly provides that the insured may serve process on the insurer by serving specified attorneys at their stated New York City addresses and that in any such suit on the policy " the Underwriters will abide the final decision of the Court or any Appellate court in the event of an appeal." 2

Great Lakes moved for summary judgment asserting that the policy was voided at its inception by material misrepresentations by Durham in the insurance application, which the policy incorporates, including misrepresentations and failures to disclose concerning the purchase price paid by Durham for the vessel, its loss history and status of repairs,3 and breaches of express policy warranties concerning the condition of the vessel and related matters.4

Particularly relevant to this appeal is the policy's " CHOICE OF LAW" provision, reading as follows:

" It is hereby agreed that any dispute arising hereunder shall be adjudicated according to well established, entrenched principles and precedents of substantive United States Federal Admiralty law and practice but where no

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such well established, entrenched precedent exists, this insuring agreement is subject to the substantive laws of the state of New York."

In its motion for summary judgment, Great Lakes relied on this clause and on the maritime law doctrine of uberrimae fidei. 5 Great Lakes recognized, however, that in Wilburn Boat Co. v. Fireman's Fund Ins. Co., 348 U.S. 310, 75 S.Ct. 368, 99 L.Ed. 337 (1955), the Court held that, because there was no " judicially established federal admiralty rule governing" the warranties at issue in the insurance policy covering the fire damaged vessel in that case, id. at 370, the federal courts should not " attempt to fashion an admiralty rule governing [those] policy provisions." Id. at 373-74. The case was accordingly remanded " for a trial under appropriate state law." Id. at 374. And, Great Lakes further recognized that in Albany Ins. Co. v. Kieu, 927 F.2d 882 (5th Cir.1991), this court held " albeit with some hesitation, that the uberrimae fidei doctrine is not ‘ entrenched federal precedent’ " so that, under the Supreme Court's Wilburn Boat opinion, state law, rather than federal uberrimae fidei, applied. Kieu at 889.6 Accordingly, Great Lakes took the position that even if the first clause of the policy's above " CHOICE OF LAW" provision, concerning " well established, entrenched principles and precedents of substantive United States Federal Admiralty law and practice" did not apply, nevertheless the second clause thereof, calling for application of " the substantive laws of the state of New York" would apply, and further, that " New York law echoes the doctrine of uberrimae fidei as described."

The district court denied Great Lakes' motion for summary judgment. It ruled that Mississippi law, not uberrimae fidei nor New York law, applied. As to New York law, the court observed that " the parties have not made it sufficiently clear that New York has any substantial relationship to the parties or the transaction, or that there is any other reasonable basis for this choice of law." The court went on to hold that there were genuine issues of material fact as to whether certain misrepresentations by Durham (including representing the purchase price of the vessel as

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$150,000 when it was actually $100,000) were material and that Durham's failure to disclose certain matters was not grounds for policy cancellation because under Mississippi law there was no such duty as to matters not specifically inquired about although recognizing that the duty to disclose was not so limited under uberrimae fidei .7

Thereafter, Great Lakes filed a Motion in Limine to declare choice of law, requesting that the court rule that, pursuant to the policy's choice of law provision the applicable law was that of New York, or, alternatively, that Kieu was wrongly decided and that uberrimae fidei was firmly entrenched federal precedent and should be applied either as such or under the choice of law provision. In support of this motion, Great Lakes submitted an affidavit reflecting that: Great Lakes, a United Kingdom business entity with its principal place of business in the United Kingdom, maintained its agent for service of process in New York; that New York was the first state in which Great Lakes was approved as a surplus lines carrier; that Great Lakes maintains its United States Trust Fund account in New York; and that " Great Lakes' most substantial relationship in the United States is with the state of New York." The district court denied this motion, and subsequent motion for reconsideration, essentially ruling that it had already determined the issue on its denial of Great Lakes' motion for summary judgment and the evidence and arguments thereafter submitted by Great Lakes were too late. We note, however, that there was no grant of summary judgment, partial or otherwise, as to whether uberrimae fidei or New York or Mississippi law applied, nor had there been any pretrial conference or any pretrial order under Rule 16, FED. R. CIV. P., relating thereto, and hence the choice of law issue remained open for trial on the merits.

Subsequently, and prior to any pretrial order under Rule 16, Great Lakes and Durham filed with the district court their joint motion for certification of an interlocutory appeal under section 1292(b). They advised the district court that they had reached a bracketed settlement agreement contingent only upon the resolution on appeal of the choice of law issue, and requested the court to certify under section 1292(b) its rulings on Great Lakes' motion for summary judgment, its motion in limine to declare choice of law and its motion for reconsideration insofar as they addressed that issue. The district court granted the motion, stating in its order that,

According to the Joint Motion, the parties have reached a bracketed settlement agreement contingent only upon the outcome of the choice of law issue on appeal .... [t]he sole remaining issue to be determined is the applicable law.


This Court's earlier opinions addressed several issues relevant to the choice of law question. The parties' settlement agreement is contingent only upon the outcome of the choice of law issue on appeal; specifically whether Mississippi law, New York law or the General Maritime Law doctrine of Uberrimae Fidei, governs the parties' rights under a contract of marine insurance. The parties have agreed to submit the choice of law issue based upon the current

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record, having stipulated that the record of the District Court is complete as to all factual contentions relevant to this determination, and have further agreed not to ask the Court of Appeals to remand the case for further proceedings at the trial court level.8

At oral argument the parties confirmed that pursuant to their bracketed settlement agreement, their motion and the district court's order, the only issue to be resolved is whether, on the basis of the current record, the applicable substantive law is, on the one hand, Mississippi law, in which event Durham will receive from Great...

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