Travelers Prop. Cas. Co. of Am. v. Ocean Reef Charters LLC

996 F.3d 1161

TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA, Plaintiff - Counter Defendant - Appellee,

v.OCEAN REEF CHARTERS LLC, Defendant - Counter Claimant - Appellant.

No. 19-13690

United States Court of Appeals, Eleventh Circuit.

May 6, 2021

Michael E. Conroy, Walter Cooper Jarnagin, McAlpin Conroy, PA, Miami, FL, for Plaintiff - Appellee.

Stephen Anthony Marino, Jr., Ver Ploeg & Marino, PA, Miami, FL, Benjamin C. Hassebrock, Stephanie Alice Weeks, Hunton Andrews Kurth, LLP, Miami, FL, for Defendant - Appellant.

Before JORDAN, JILL PRYOR, and BRANCH, Circuit Judges.

JORDAN, Circuit Judge:

The Supreme Court held in Wilburn Boat Co. v. Firearm's Fund Ins. Co. , 348 U.S. 310, 316, 75 S.Ct. 368, 99 L.Ed. 337 (1955), that in the field of marine insurance state law should be applied where there is no established federal maritime rule governing the issue at hand. For over 60 years, Wilburn Boat has sown confusion with respect to the treatment of warranties in marine insurance policies. See, e.g. , 2 Thomas Schoenbaum, Admiralty and Maritime Law § 19:15 (6th ed. 2020) (asserting that Wilburn Boat has "caused endless mischief"); Gerard J. Mangone, United States Admiralty Law 247 (1997) (noting that Wilburn Boat "has since troubled many maritime lawyers"); I Alex L. Parks, The Law and Practice of Marine Insurance and Average 13 (1987) (" Wilburn [Boat] cast the law of marine insurance into a state of turmoil.").

In this case the district court held on summary judgment that, under Eleventh Circuit precedent, federal maritime law requires strict compliance with captain and crew warranties in a marine insurance policy. And because Ocean Reef Charters breached those warranties, there was no coverage for the loss of its yacht under a policy issued by Travelers Property Casualty Company.

Doing our best to make sense of Wilburn Boat and its progeny, we reverse. We conclude that there is no entrenched maritime rule governing captain or crew warranties, and that as a result Florida law applies to determine the effect of Ocean Reef's breaches.

I

As this is an appeal from the grant of summary judgment, our review is plenary, and we view the facts in the light most favorable to Ocean Reef Charters. See Tolan v. Cotton , 572 U.S. 650, 651, 134 S.Ct. 1861, 188 L.Ed.2d 895 (2014).

A

This case concerns the demise of the M/Y My Lady , a 92-foot Hatteras yacht. Ocean Reef, the owner of the M/Y My Lady , insured it with Travelers for a one-year term from October of 2016 to October of 2017. The 2016-17 policy, a renewal of annual policies issued in the two prior years, contained two express warranties that are at issue in this case. First, the captain warranty required Ocean Reef to employ a full-time professional captain approved by Travelers: "It is warranted you employ a professional captain for the yacht ... Such captain shall be full time and approved by us." Second, the crew warranty required Ocean Reef to have one full- or part-time professional crew member onboard: "You [shall] employ 1 full time or part time professional crew for your yacht[.]"

Ocean Reef purchased the 2016-17 policy through its insurance agent, Keen Battle Mead & Company, located in Homestead, Florida. Travelers negotiated and issued the policy through its producing agent, Hull & Company, based in Fort Lauderdale, Florida. Travelers delivered the policy to Hull at its Florida address and Hull in turn delivered the policy to Keen Battle in Hialeah, Florida. The policy named Ocean Reef as the insured with a New York address, but listed Key Largo, Florida, as the primary mooring location for the M/Y My Lady .

Ocean Reef did not employ a professional captain for the M/Y My Lady in early September of 2017, when Hurricane Irma was heading towards Florida. Nor did it have any crew onboard.

Eyeing the impending storm, Richard Gollel—the named operator of the M/Y My Lady —contacted Michael McCall, his former captain (who had previously been approved by Travelers and who was then in Massachusetts). Mr. Gollel asked Captain McCall whether he could move the yacht to a more protected location from its mooring near Mr. Gollel's residence in Pompano Beach, Florida. Captain McCall initially agreed to the request, but, according to Ocean Reef, he changed his mind and advised Mr. Gollel that there was no way to move the yacht safely.

Mr. Gollel then sought permission to move the M/Y My Lady himself, but Hull (Travelers’ agent) told Keen Battle (Ocean Reef's agent) that the yacht should not be moved. So Mr. Gollel did his best to secure the yacht by, among other things, adding extra fenders and mooring lines. The extra mooring lines proved ineffective when a year-old dock piling—to which the port bow line was attached—gave way as Hurricane Irma struck land on September 10-11, 2017. The yacht drifted onto other pilings and hit the sea wall, before eventually becoming holed and sinking at the dock. The damage resulted in a total constructive loss under the Travelers policy.

B

Shortly after the M/Y My Lady sank, and while she was still submerged, Travelers filed this lawsuit against Ocean Reef. Travelers denied coverage six weeks later, asserting that Ocean Reef had breached the captain and crew warranties in the policy.

Following discovery, the parties filed cross-motions for summary judgment. Travelers argued that federal maritime law requires strict compliance with express warranties in marine insurance contracts, and that a breach bars coverage even if it is unrelated to the loss. Ocean Reef countered that Florida's so-called "anti-technical statute" should instead apply, and that under that statute the breaches did not preclude coverage because they were unrelated to the loss. See Fla. Stat. § 627.409(2) ("A breach ... does not void the policy or contract, or constitute a defense to a loss thereon, unless such breach or violation increased the hazard by any means within the control of the insured."). Ocean Reef presented lay and expert testimony that the failure to have a captain and crew did not increase the hazard to the M/Y My Lady , and that the yacht sunk due to the unforeseeable failure of the dock piling.

The district court granted Travelers’ motion for summary judgment, concluding that "the Eleventh Circuit has fashioned an entrenched rule of admiralty: express warranties in maritime insurance contracts must be strictly construed in the absence of some limiting provision in the contract." Travelers Property Casualty Co. v. Ocean Reef Charters LLC , 396 F. Supp. 3d 1170, 1176 (S.D. Fla. 2019). Ocean Reef appealed, and we set the case for oral argument.

II

This case concerns the interpretation of a marine insurance policy, which gives rise to federal admiralty jurisdiction. See Wilburn Boat , 348 U.S. at 313, 75 S.Ct. 368 ; St. Paul Fire and Marine Ins. Co. v. Lago Canyon, Inc. , 561 F.3d 1181, 1184 (11th Cir. 2009). "As this case lies in admiralty, federal maritime conflict of laws control." Cooper v. Meridian Yachts, Ltd ., 575 F.3d 1151, 1161 (11th Cir. 2009).

So what law do we apply to determine the effect of Ocean Reef's breaches of the captain and crew warranties? To figure out the answer, we look to the Supreme Court's frequently criticized decision in Wilburn Boat .

A

Perhaps unsurprisingly, the facts in Wilburn Boat bore no resemblance to the clashes and controversies on the high seas that formed the basis of American admiralty jurisprudence. The case involved a houseboat located on an artificial inland lake between Texas and Oklahoma. See 348 U.S. at 311, 75 S.Ct. 368. The insurance policy included two warranties of relevance—one providing that the boat could not be sold or otherwise transferred, and another providing that the boat could be used only for private pleasure purposes. See id . Both warranties were breached, and the boat was subsequently destroyed by a fire unrelated to the breaches. See id. The owner made a claim under the policy, which the insurer denied due to the breaches. See id. The owner argued that Texas law should determine the effect, if any, of the breaches, but the Fifth Circuit sided with the insurer. It held that federal maritime law applied, and that there was an established maritime rule requiring literal compliance with all express warranties in marine insurance policies. The owner's breaches, therefore, voided coverage. See id. at 312-13, 75 S.Ct. 368.

When the case came before it, the Supreme Court posed two questions: "(1) Is there a judicially established federal admiralty rule governing these warranties? (2) If not, should we fashion one?" Id . at 314, 75 S.Ct. 368. Answering those questions, the Court reversed and remanded for application of Texas law.

The Court first concluded that there was no established federal maritime rule "requiring strict fulfillment of marine insurance warranties," explaining that "[w]hatever the origin of the ‘literal performance’ rule may be, we think it plain that it has not been judicially established as part of the body of federal admiralty law in this country." Id . at 314, 316, 75 S.Ct. 368. The Court acknowledged that one of its early cases referenced a rule requiring strict compliance with marine warranties, but did not think that the case applied a federal maritime rule. See id. at 315, 75 S.Ct. 368 (discussing Hazard's Administrator v. New England Marine Ins. Co. , 33 U.S. (8 Pet.) 557, 580, 8 L.Ed. 1043 (1834) ).

Moving on to the second question, the Court declined to fashion a uniform federal rule governing breaches of warranties in marine insurance policies, and opted instead for the application of state law. It considered adopting the old common-law rule requiring literal and strict compliance with warranties, but thought that rule was "harsh." Id . at 320, 75 S.Ct. 368. Noting that the choice as to what rule to adopt involved policy considerations best left to Congress, the Court concluded that it was going to "leave the regulation of marine insurance where it has been—with the [s]tates." Id. at...