Transpac Marine LLC v. Yachtinsure Servs.
| Decision Date | 13 February 2023 |
| Docket Number | Civil Action 20-10115-DPW |
| Parties | TRANSPAC MARINE, LLC, Plaintiff, v. YACHTINSURE SERVICES, INC., Defendant. |
| Court | U.S. District Court — District of Massachusetts |
I. BACKGROUND . . . . . . . . . . . . . . . . . . 4
A. Factual Background . . . . . . . . . . . . . . . . . . . . . . 4
1. Mr Young's Renewal Application. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2. Events Preceding the Destruction of the Vessel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
3. Plaintiff's Claim and Defendant's Denial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
B. Travel of the Matter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
C. The Parties' Contentions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
II. LEGAL STANDARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
III. DISCUSSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
A. Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
B. Choice of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
C. Legal Framework Applicable to This Matter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
1. Interpretation of Marine Insurance Contracts under Federal Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2. The Parties' Framing of the Legal Doctrines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
D. Interpretation of Relevant Terms of the Hurricane Plan . . . . . . . . . . . . 30
E. Consequences of Breach of Promissory Warranties . . . . . . . . . . .35
F. Plaintiff's Breach . . . . . . . . . . .. . . . . . . . . . .. . . . . . . . . . .. . . . . . . . . . .38
1. Question 15 2. Question 19: Safety Arrangements in the event of a Named Storm Warning . . . . . . . . . . .. . . . . . . . . . .. . . . . . . . . . .. . . . . . . . . . .42
IV. CONCLUSION . . . . . . . . . . .. . . . . . . . . . .44
This matter concerns the voidability of a marine insurance policy under principles of federal maritime law. Plaintiff Insured pursues a claim for breach of contract against Defendant Insurer, based on the insurer's refusal to pay for damage sustained by Plaintiff's insured vessel during a hurricane in August of 2019. The Insured contends that the damage to the vessel, along with the costs he has incurred as a direct result of the vessel's demise, are covered by his marine insurance policy and that he is entitled to the compensation provided for in his policy.
By contrast, the Insurer asserts that the policy issued to Plaintiff is void as a matter of law. The Insurer contends that it is beyond dispute that the Insured made material misrepresentations in his application for insurance coverage, which voids the policy in its entirety.
The parties advance cross-motions for summary judgment. Those motions require me to consider an insured's duty under federal maritime law to comply strictly with its representations and warranties in a marine insurance policy.
I will grant summary judgment to the Insurer because the Insured breached its promissory warranties to the Insurer under the policy. I will correlatively deny summary judgment to the Insured.
Plaintiff Transpac Marine, LLC, (“Transpac”) on behalf of its sole owner and managing member Ralph Young,[1]brings the instant action against its insurer, Defendant Yachtinsure Services, Inc. (“Yachtinsure”), for breach of their marine insurance policy. [Dkt. No. 1 at 1] Yachtinsure asserts counterclaims for declaratory judgment, 28 U.S.C. § 2201, seeking this court's judgment that Mr. Young's insurance policy is void as a matter of law and that Yachtinsure has no obligation to pay damages. [Dkt. No. 8 at 25]
Ralph Young owned and lived on a seventy-four-foot motor operated vessel named the SUMMER STAR (“the vessel”). [Dkt. No. 28-3 at 1 & 28-1 at 1] Mr. Young insured the vessel through Plaintiff Transpac with Defendant Yachtinsure Services, Inc. from 2013 through 2019. On August 28, 2019, the vessel ran aground and was destroyed when Hurricane Dorian hit St. Thomas in the United States Virgin Islands, where the vessel was moored. Mr. Young tendered abandonment of the vessel, submitted a claim for his damages to Yachtinsure, and demanded payment in accordance with his insurance policy. [Dkt. No. 24-3 at 2] Yachtinsure rejected the abandonment and denied Mr. Young's claim, based on what it considered his material misrepresentations in his April 2019 policy renewal application. [Dkt. 8 at 17]
On April 16, 2019, Mr. Young submitted an application for the renewal of his marine insurance policy to Yachtinsure for the period of April 25, 2019, to April 25, 2020. [Dkt. No. 28-3 at 4] To renew his existing policy, Mr. Young was obligated to submit an updated application form and a Hurricane Plan for review by Yachtinsure's underwriters. [Dkt. No. 28-3 at 4-6]
Yachtinsure's Hurricane Plan required substantive responses to twelve questions regarding how the subject vessel, the SUMMER STAR, would generally be operated and the safety precautions Mr. Young would take in the event of a tropical storm. Mr. Young's responses to two of those questions are of particular relevance to the instant matter.
The Hurricane Plan inquired in Question 15: “How many lines are going to be used to secure the vessel and what is the diameter and material of those lines?” Mr. Young responded: “10 lines, 3/4 inch Nylon braid” [Dkt. No. 24-5 at 1 (emphasis in original)] In Question 19, it asked: “What arrangements have you made for the safety of your vessel in the event that a named storm warning is issued?” Mr. Young responded “Constant weather watch and advance reservations at marinas[.]” [Dkt. No. 24-5 at 2]
The Hurricane Plan form provided by Yachtinsure also required applicants to sign a “Declaration” confirming that the applicant had disclosed all material facts, i.e., those “likely to influence acceptance or assessment of this hurricane questionnaire/plan by underwriters[,]” and that the applicant's representations were, to the best of his knowledge, true. [Dkt. No. 24-5 at 2] The applicant was warned that the Hurricane Plan contains “statements upon which underwriters will rely in deciding to accept this insurance” and that the Hurricane Plan “will form the basis of” any insurance contract between the parties. [Dkt. No. 24-5 at 2] The declaration also stated that misrepresentation or nondisclosure of material facts “may entitle underwriters to void the insurance.” [Dkt. No. 24-5 at 2]
Mr. Young completed and signed the Hurricane Plan on behalf of Transpac Marine, LLC on April 15, 2019 and submitted the documents to Yachtinsure the following day. [Dkt. No. 24-5 at 2] On April 17, Mr. Young's broker received a follow-up email from Yachtinsure's representative regarding the submitted Hurricane Plan. The representative stated in this email that “we need confirmation that the lines will be doubled in the event of a named/numbered windstorm.” [Dkt. No. 28-3 at 3(emphasis in original)] Mr. Young responded to his broker with an email, which appears on this record to have been forwarded to Yachtinsure's representative, stating "Confirmed that in the event of a named/numbered storm, mooring lines will be doubled.” [Dkt. No. 28-3 at 3] Yachtinsure asserts, and Mr. Young does not dispute, that Mr. Young's email representation that he would double the mooring lines on the vessel in the event of a named windstorm was incorporated into his policy agreement with Yachtinsure.[2][See Dkt. No. 30 at 13]
Yachtinsure's representative sent an email to Mr. Young's broker on April 24, 2019, with a list of special conditions for the renewal of Mr. Young's policy and an attached “cover summary with all endorsements that apply.” Among those special conditions was the statement that renewal was “subject to an updated Hurricane preparation plan being seen and agreed by underwriters within 14 days from inception.” [Dkt. No. 28-3 at 2] The Yachtinsure representative also reiterated that Yachtinsure “need[s] the HPP document [Hurricane Plan] updated with confirmation that the insured will double the amount of lines in the event of...
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