Acadia Ins. Co. v. McNeil, 96-2240

• Decision Date: 17 June 1997
• Docket Number: No. 96-2240,96-2240
• Citation: 116 F.3d 599
• Parties: ACADIA INSURANCE COMPANY, Plaintiff, Appellant, v. Michael McNEIL, et al., Defendants, Appellees, George McNeil, Plaintiff, Appellee.
• Court: U.S. Court of Appeals — First Circuit

Page 599

116 F.3d 599

1997 A.M.C. 2409

ACADIA INSURANCE COMPANY, Plaintiff, Appellant, v. Michael McNEIL, et al., Defendants, Appellees George McNeil, Plaintiff, Appellee.

No. 96-2240.

United States Court of Appeals First Circuit.

June 17, 1997.

Bruce W. Felmly, Manchester, NH, with whom J. Kirk Trombley, McLane, Graf, Raulerson & Middleton, Portsmouth, NH, Marilyn L. Lytle, and Thacher Proffitt & Wood, New York City, were on brief, for plaintiff, appellant.

Timothy R. McHugh and Hoch & McHugh, Boston, MA, on brief for American Institute of Marine Underwriters, amicus curiae.

Christine M. Rockefeller, with whom Burns, Bryant, Hinchey, Cox & Rockefeller, P.A., Dover, NH, was on brief, for appellee Michael McNeil.

Emmanuel Krasner, Farmington, NH, with whom Krasner Professional Association, was on brief, for appellee George McNeil.

Before SELYA, Circuit Judge, COFFIN, Senior Circuit Judge, and LYNCH, Circuit Judge.

CERTIFICATION OF A QUESTION TO THE NEW HAMPSHIRE SUPREME COURT

SELYA, Circuit Judge.

This case involves an issue of New Hampshire law as to which we have found no decisive New Hampshire precedent. Accordingly, we certify the controlling question of state law to the New Hampshire Supreme Court in accordance with New Hampshire Supreme Court Rule 34 (1997).

Background

In 1995, a boating accident occurred on Lake Winnipesaukee in Alton, New Hampshire, involving a boat owned and operated by appellee Michael McNeil. His father, appellee George McNeil, was a passenger aboard the craft. The appellant, Acadia Insurance Company (Acadia), insured Michael McNeil's boat under its Yacht Policy # YPA0008483-11, which had been issued and delivered in New Hampshire. When George McNeil sued his son for negligence in a New Hampshire state court, claiming to have sustained bodily injuries and consequential damages, Acadia denied coverage and filed a declaratory judgment action against Michael McNeil in New Hampshire's federal district court (invoking the court's jurisdiction over both admiralty and diversity cases, see 28 U.S.C. §§ 1332, 1333(1) (1994)). Acadia maintained that it had no obligation to defend or indemnify its named insured, Michael McNeil, relative to his father's claim because the policy in question excluded coverage for intra-family liability.

Thereafter, George McNeil filed a state-court action against Acadia, seeking a declaration that the intra-family exclusion contained in Acadia's policy was unenforceable. Acadia removed that case to the federal forum. The district court consolidated the two cases. When the parties cross-moved for summary judgment, the court ruled that a New Hampshire statute, N.H.Rev.Stat. Ann. § 412:2(II) (Supp.1996), invalidated the intra-family exclusion, and it entered judgment accordingly. This appeal ensued.

The facts that bear on the coverage question are largely undisputed. They give rise to a pair of legal questions. First, inasmuch as the New Hampshire statute clearly applies to liability policies, it must be determined whether the yacht policy which Acadia issued to Michael McNeil is a species of liability insurance as opposed to a species of ocean marine insurance. Second, if the policy is indeed an ocean marine policy, as Acadia and its amicus contend, the question remains whether the state statute applies to ocean marine policies.

Classifying the Policy

The first of the two questions that we have posed implicates federal admiralty law, and so we answer it ourselves.

Federal admiralty jurisdiction exists when the subject matter of a contract which underlies a case or controversy is maritime in nature. See Insurance Co. v. Dunham, 78 U.S. (11 Wall.) 1, 29, 20 L.Ed. 90 (1870). "The general doctrine that in contract matters admiralty jurisdiction depends upon the nature of the transaction ... must ... be treated as settled." Grant Smith-Porter Ship Co. v. Rohde, 257 U.S. 469, 476, 42 S.Ct. 157, 158, 66 L.Ed. 321 (1922). In furtherance of this doctrine--which is as vibrant now as it was in 1922--federal admiralty jurisdiction attaches in actions based upon marine insurance policies. ¹ See Kossick v. United Fruit Co., 365 U.S. 731, 735, 81 S.Ct. 886, 890, 6 L.Ed.2d 56 (1961); Windsor Mt. Joy Mut. Ins. Co. v. Giragosian, 57 F.3d 50, 54 (1st Cir.1995); Albany Ins. Co. v. Wisniewski, 579 F.Supp. 1004, 1013 (D.R.I.1984).

The rule, once stated, must be applied, and its application depends upon how a particular policy is to be classified. Marine insurance is defined as insurance with a subject matter specifically related to hazards encountered in maritime transportation, including the risks of river and inland navigation. See Dunham, 78 U.S. at 30; see also Jeffcott v. Aetna Ins. Co., 129 F.2d 582, 584-85 (2d Cir.1942); 1 Alex L. Parks, The Law & Practice of Marine Insurance & Average 19 (1987); 1 Lee R. Russ & Thomas F. Segalla, Couch on Insurance 3d § 1:58, at 1-80 to 1-81 (1996); see generally Kenneth H. Volk, Parsing the Admiralty Clause: Jurisdiction of Marine Insurance Transactions, 66 Tul. L.Rev. 257, 269-274 (1991) (canvassing definitions). Specifically, ocean marine insurance is insurance associated primarily with risks related to vessels or the maritime industry, ² and it extends to exposures in inland waterways. See 1 Arthur E. Brunck et al., Ocean Marine Insurance 1-4 (1988); Volk, supra, at 274. Inland marine insurance, by contrast, covers risks inherent in land transportation. See Volk, supra, at 276; Lariviere v. New Hampshire Fire Ins. Co., 105 N.H. 73, 75-76, 193 A.2d 13, 15 (1963).

Under the yacht policy here at issue, Acadia provides insurance (up to stated dollar limits) for Michael McNeil's boat (a 1995 Sea Ray 160 SR Sportjet) and confines the area of use to "inland lakes and rivers in the States of Maine, New Hampshire, Vermont, New York and Massachusetts not to exceed 50 miles offshore." The policy comprises several sections. Four of these deal with specified types of coverages: Section A--property insurance (under which the policy insures against loss of, or damage to, the boat's hull and appurtenances by reason of certain maritime perils); Section B--liability insurance (under which the policy insures the boat owner and those in privity with him against "all loss of life, bodily injury and property damage which occur during the policy period and for which you [the insured] become legally liable to pay by reason of your ownership, operation, or maintenance of" the boat); ³ Section C--longshore and harbor workers' compensation insurance; and Section D--medical payments (in connection with injuries arising out of the use of the boat) and uninsured boater insurance. Section E deals with the insured's duties after an accident or loss, and Section F contains the general conditions of coverage. It is, therefore, readily evident that the protection afforded by the yacht policy is tied closely to the pleasure boat and matters arising out of its ownership, operation, and maintenance in specified waters. ⁴ On that basis, the yacht policy constitutes an ocean marine policy within the federal courts' admiralty jurisdiction. See Wilburn Boat Co. v. Fireman's Fund Ins. Co., 348 U.S. 310, 311, 313, 75 S.Ct. 368, 369, 370, 99 L.Ed. 337 (1955); Sirius Ins. Co. (UK) Ltd. v. Collins, 16 F.3d 34, 37 (2d Cir.1994); Truehart v. Blandon, 884 F.2d 223, 226 (5th Cir.1989); Windsor Mt. Joy Mut. Ins. Co. v. Pozzi, 832 F.Supp. 138, 139-40 (E.D.Pa.1993).

The appellees' protestations to the contrary lack force. They assert, in general, that any policy which insures against third-party claims is perforce a liability policy. Applying this same syllogism, they assert, in particular, that Acadia's yacht policy must be a liability policy because it includes some liability coverage. But this reasoning blurs the distinction between a policy's terms and its type, and, in the bargain, ignores the duality inherent in ocean marine insurance.

We think it is beyond cavil that liability coverages may be inserted in an ocean marine policy without altering the essential character of the policy, for ocean marine insurance classically comprises both property and liability coverages. See 1 Brunck, supra, at 2; 1 Parks, supra, at 212-13. Indeed, the most hoary form of marine liability insurance--the protection and indemnity policy--indemnifies against a vessel owner's liabilities to third parties. See 8 Almer W. Beale, Benedict on Admiralty § 6.02[B], at 6-19 to 6-20 (7th ed. rev.1996); 2 Parks, supra, at 843. Since almost all insurance policies available to pleasure craft owners contain a liability component, see 8 Benedict on Admiralty, supra, § 6.02, at 6-14; 2 Thomas J. Schoenbaum, Admiralty and Maritime Law § 19-1, at 406-07 (2d ed.1994), the appellees' construct, if accepted, would effectively merge two separate classes of insurance. We refuse to paint with so broad a brush.

Furthermore, an insurance policy's predominant purpose, as measured by the dimensions of the contingency insured against and the risk assumed, determines the nature of the insurance. See 1 Couch on Insurance 3d, supra, § 1:8, at 1-14; Royal Ins. Co. v. Pier 39 Ltd. Partnership, 738 F.2d 1035, 1036-37 (9th Cir.1984). Assayed in this way, Acadia's yacht policy is plainly a policy of ocean marine insurance. Although the policy includes a liability component, the losses covered are limited to maritime liabilities. Hence, the inclusion of this component does not change the essential character of the policy. Just as a general liability policy that only incidentally covers some maritime risks would not constitute an ocean marine policy, so, too, the inclusion of some incidental nonmaritime risks in an ocean marine policy will not transform it into a general liability policy. See Volk, supra, at 272 ("A marine insurance policy not solely concerned with maritime risks ... may be subject to admiralty jurisdiction if the nonmaritime risks are merely incidental.").

The short of it is that the yacht policy at...