HIH Marine Serv. v. Fraser, No. 99-11321

• Decision Date: 19 May 2000
• Docket Number: No. 99-11321
• Citation: 211 F.3d 1359
• Parties: (11th Cir. 2000) HIH MARINE SERVICES, INC., Plaintiff-Counter- Defendant-Appellee, v. RODGER FRASER, M.D., d.b.a. SHALOM ENTERPRISES, LIMITED, Defendants-Counter-Claimants-Appellants.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1359

211 F.3d 1359 (11th Cir. 2000)

HIH MARINE SERVICES, INC., Plaintiff-Counter- Defendant-Appellee, v. RODGER FRASER, M.D., d.b.a. SHALOM ENTERPRISES, LIMITED, Defendants-Counter-Claimants-Appellants.

No. 99-11321

UNITED STATES COURT OF APPEALS ELEVENTH CIRCUIT.

May 19, 2000.

Appeal from the United States District Court, for the Southern District of Florida, D.C. Case No. 98-786-CIV-SH

Before ANDERSON, Chief Judge, CARNES, Circuit Judge, and OAKES^*, Circuit Judge.

OAKES, Senior Circuit Judge:

Roger Fraser and Shalom Enterprises, Ltd. (collectively "appellants") appeal the district court's award of summary judgment to HIH Marine Services, Inc. ("HIH") in this marine insurance case. The appellants contend that the district court erred in its choice of law analysis and in its conclusion that the policy issued by HIH was void ab initio. Because we find that the district court was correct in holding that material misrepresentations voided any possible coverage available to the appellants, we affirm the decision below.

BACKGROUND

Fraser, doing business as Shalom Enterprises, owned a private recreational yacht called the Netan-El that he anchored in Jamaica. In January 1998, Fraser entered into discussions with Mobay Underseas Tours, Ltd. ("Mobay")¹ regarding the chartering of the Netan-El for sightseeing tours in Montego Bay. These discussions envisioned an arrangement where Mobay assumed custody and control of the Netan-El to use her as a charter vessel in return for 15 per cent of the gross earnings of the charter operation. In anticipation of the operation, Mobay agreed to draft a proposed charter agreement and procure the appropriate marine insurance.

Mobay, working through a Miami insurance broker, had previously obtained marine insurance from HIH on another vessel. Mobay contacted the Miami broker and requested that HIH issue an endorsement to Mobay's pre-existing policy adding the Netan-El as an additional insured vessel. Although HIH was asked to cover the risk associated with a charter boat under the custody and control of Mobay, no chartering agreement between Mobay and the appellants was in effect at the time and Mobay did not have custody of the Netan-El. On February 2, 1998, HIH bound the requested coverage by an endorsement to Mobay's policy.

The Netan-El endorsement did not include Shalom as a named insured for hull coverage. When this was brought to HIH's attention, HIH agreed to add Shalom to the endorsement. A revised endorsement was forwarded to HIH for formal execution, but was not acted upon immediately because of the press of other business. Throughout this period, HIH expressly refused to issue the appellants a separate policy for the Netan-El.

During this same time in early February, Fraser informed Mobay that he was negotiating with a prospective purchaser of the Netan-El and that if the sale occurred, he would not enter into the proposed chartering agreement with Mobay. On February 12, 1998, a fire broke out on the Netan-El and the vessel was totally destroyed. At the time of the fire, no final charter agreement was in place between the appellants and Mobay, and Mobay did not have custody of the vessel. Additionally, HIH had not executed a revised endorsement adding Shalom as a named insured.

In early April, HIH denied the appellants' hull claim on the ground that coverage was bound on the condition that Mobay had assumed custody of the Netan-El pursuant to an operative charter agreement. HIH then brought the instant action in district court, seeking, inter alia, a declaration that the endorsement adding the Netan-El to Mobay's policy was void because of misrepresentations of material facts in the insurance application. The appellants counterclaimed, alleging that HIH knew of Shalom's ownership of the vessel and had agreed to issue an endorsement adding Shalom as a named insured, but had not done so because of a workload delay.

After the close of discovery, both parties moved for summary judgment. On April 22, 1999, the district court entered summary judgment in favor of HIH on the grounds that the Netan-El endorsement was void ab initio. This appeal followed.

DISCUSSION

The appellants raise four challenges to the district court's

decision. First, they argue that the district court erred in its choice of law analysis and its conclusion that United States, as opposed to Jamaican, law applied. Second, they contest the holding that Shalom was not a named insured and that Mobay had no insurable interest in the Netan-El. Third, they argue that the district court was wrong to find that material misrepresentations were made in Mobay's application for insurance. Finally, the appellants contend that waiver and estoppel should apply to HIH's claims. As required for a grant of summary judgment, we review the district court's decision de novo. See SCI Liquidating Corp. v. Hartford Fire Ins. Co., 181 F.3d 1210, 1212 (11th Cir. 1999).

With respect to the district court's choice of law analysis, the appellants admit in their reply brief that "the choice of law issue is largely academic, since Jamaican and American admiralty law are fully congruent in a number of respects." We agree with the appellants that the application of Jamaican law would have no substantive impact on the outcome of this case, and therefore decline to address the district court's conclusion that United States law applies.

With respect to the appellants' remaining arguments, we focus on the issue of material misrepresentation because a finding of material misrepresentation in this marine insurance case voids the policy and renders immaterial the appellants' arguments on insurable interest and waiver and estoppel.² The district court found that Mobay's failure to inform HIH that its chartering contract with the appellants was unexecuted and that Mobay did not have possession of the Netan-El were material misrepresentations that voided the policy under the doctrine of uberrimae fidei.

It is well-settled that the marine insurance doctrine of uberrimae fidei is the controlling law of this circuit. See Steelmet, Inc. v. Caribe Towing Corp., 747 F.2d 689, 695 (11th Cir. 1984)³; Certain Underwriters, 27 F. Supp.2d at 1312; International Ship Repair and Marine Serv., Inc. v. St. Paul Fire & Marine Ins. Co., 922 F. Supp. 577, 580 (M.D. Fla. 1996). Uberrimae fidei requires that an insured fully and voluntarily disclose to the insurer all facts material to a calculation of the insurance risk. See Steelmet, 747 F.2d at 695; see also Fireman's Fund Ins. Co. v. Wilburn Boat Co., 300 F.2d 631, 646 (5th Cir. 1962) (discussing the duty to disclose in marine insurance law); G. Gilmore & C. Black, The Law of Admiralty 62 (2d ed. 1975) ("[T]he highest degree of good faith is exacted of those entering [a marine insurance contract], for the underwriter often has no practicable means of checking on either the accuracy or the sufficiency of the facts furnished him by the assured before the risk is accepted and the premium and conditions set."). The duty to disclose extends to those material facts not directly inquired into by the insurer. See Jackson v. Leads Diamond Corp., 767 F. Supp. 268, 271 (S.D. Fla. 1991); see also Cigna Property & Cas. Ins., Co. v. Polaris Pictures Corp., 159 F.3d 412, 420 (9th Cir. 1998) ("Whether or not asked, an applicant for marine insurance is bound to reveal every fact within his knowledge that is material to the risk.").

Under uberrimae fidei, a material misrepresentation on an application for marine insurance is grounds for voiding the policy. See Steelmet, 747 F.2d at 695 (a misrepresentation, even if it is a result of "mistake, accident, or forgetfulness, is attended with the rigorous consequences that the policy never attaches and is void" ...