IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
D.C. Case No. 98-786-CIV-SH
HIH MARINE SERVICES, INC.,
RODGER FRASER, M.D., d.b.a.
SHALOM ENTERPRISES, LIMITED,
Appeal from the United States District Court,
for the Southern District of Florida
(May 19, 2000)
Before ANDERSON, Chief Judge, CARNES,
Circuit Judge, and OAKES*, Circuit Judge.
*Honorable James L. Oakes, Senior
U.S. Circuit Judge for the Second Circuit, sitting by designation.
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.
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
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
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
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.
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" (quoting Wilburn Boat Co., 300 F.2d at 646)).
A misrepresentation is material if "it might have a bearing
on the risk to be assumed by the insurer." Northfield
Ins. Co. v. Barlow, 983 F. Supp. 1376, 1380 (N.D. Fla. 1997);
see also Kilpatrick Marine Piling v. Fireman's
Fund Ins. Co., 795 F.2d 940, 942-43 (11th Cir. 1986) (materiality
is "that which could possibly influence the mind of a prudent
and intelligent insurer in determining whether he would accept
Here, the district court found that
HIH issued the Netan-El endorsement to insure a charter vessel
that HIH assumed was in Mobay's custody pursuant to a charter
agreement. The district court also found that the lack of an
executed charter agreement and Mobay's failure to take custody
of the vessel were material facts of which HIH should have been
informed, especially in light of HIH's refusal to insure the
Netan-El as a private vessel in the appellants' name. The district
court therefore concluded that Mobay's failure to inform HIH
of these facts was a material misrepresentation that voided the
The appellants argue that HIH knew
that the appellants owned the Netan-El and, because of that knowledge,
were responsible for requesting a copy of the charter agreement
or seeking information about the chartering operation from Mobay.
HIH's failure to do so, the appellants contend, resulted in a
waiver of that information. The central principle of uberrimae
fidei, however, is that the insured bears the burden
of full and voluntary disclosure of facts material to the decision
to insure. This duty to disclose is based on the rationale that
requiring the marine insurer to investigate each and every claim
made by those applying for coverage "would be both time
consuming and expensive." Northfield Ins. Co., 983
F. Supp. at 1383. Instead, the law has placed the burden of good
faith disclosure with the person in the best position to know
all the facts: the insured. Id. The appellants' argument
that HIH had an obligation to investigate in this case is therefore
Additionally, the appellants assert
that HIH's assumption that the endorsement was for a charter
vessel in Mobay's possession under a finalized charter agreement
was a "subjective and secret" limitation on the policy
of which the appellants were unaware. As with the appellants'
first argument, this contention contradicts the disclosure obligations
imposed under uberrimae fidei. HIH issued the Netan-El
endorsement to an existing commercial charter policy held by
Mobay and specifically refused separate private vessel coverage
to the appellants. Under such circumstances, we cannot agree
that HIH had secretive assumptions that the Netan-El was in Mobay's
custody under an executed charter agreement; rather, we find
that HIH was entitled to know such facts in order to assess the
coverage risk, and that the appellants were required to disclose
Finally, the appellants contend
that Mobay's lack of custody and the status of the charter agreement
were not material facts because the Netan-El represented less
of an insurance risk to HIH as a private vessel than as the commercial
charter vessel for which HIH was willing to issue coverage. As
discussed above, materiality in the marine insurance context
is broadly defined as anything that could influence the insurer's
evaluation of the risk presented by the insured. See Northfield
Ins. Co., 983 F. Supp. at 1380. As the insurer, HIH had the
right to assess the risk using accurate information on the identity
of its insured and the use of the vessel. The record establishes
that HIH was willing to risk insuring Mobay, an existing commercial
policyholder, in a professional charter operation, but unwilling
to insure the appellants for a private recreational vessel. Mobay's
failure to disclose that it did not have custody of the Netan-El
and that no charter agreement had been finalized were therefore
material to HIH's insurance decision. The appellants' opinion
that the Netan-El was at less risk as a private vessel than as
a charter vessel is simply irrelevant to the materiality analysis
and, we might add, possibly wrong, especially given the vessel's
location in the Caribbean.
Because the appellants have offered
no argument requiring a different conclusion, we agree with the
district court that Mobay made material misrepresentations to
HIH in obtaining the Netan-El endorsement that voided the policy
ab initio. As indicated above, this finding makes
it unnecessary to consider the appellants' arguments on insurable
interest and waiver and estoppel. We therefore AFFIRM the decision
of the district court granting summary judgment to HIH on all
ANDERSON, Chief Judge, dissenting:
In my judgment, there is a genuine
issue of fact as to whether or not there was a misrepresentation.
Accordingly, I respectfully dissent.
Mobay's principal, Christopher Roberts,
was originally a party to this case, but was voluntarily dismissed
by HIH prior to any appearance in the action.
If the policy is voided, the
question of whether an insurable interest existed is moot. Additionally,
"uberrimae fidei does not permit the
use of the principles of waiver and estoppel to provide coverage
where there has been a material misrepresentation on the application."
Certain Underwriters v. Giroire, 27 F. Supp.2d 1306,
1310 (S.D. Fla. 1998).
raised the question whether the general rule of uberrimae
fidei applied to protective and indemnity policies
as well as to hull policies. See 747 F.2d at 695. This
court ultimately found it unnecessary to decide that issue. See
Steelmet, Inc. v. Caribe Towing Corp., 842 F.2d
1237, 1241 n.3 (11th Cir. 1988). Because the coverage applicable
to the defendants in this case was hull coverage only, however,
there is no question that uberrimae fidei applies