Insurance Law
Marine Insurance Warranty
Declaratory Action
Anti-Technical Statute (to Prevent the Insurer from Avoiding Coverage on a Technical Omission Playing No Part in the Loss)
Admiralty Law
New York State Law
Florida Law
Appeal from the United States District Court for the Southern District of Florida D.C. Docket No. 9:18-cv-81270-RAR
Insurance coverage dispute between Travelers Property Casualty Company of America (“Travelers”) and Ocean Reef Charters LLC, (“Ocean Reef”), a Florida Limited Liability Company. Ocean Reef owned a 92-foot yacht, the M/Y My Lady, which was destroyed during Hurricane Irma in September 2017. Ocean Reef had a $2 million insurance policy with Travelers covering property damage to the yacht. One of the My Lady’s representatives for Ocean Reef with respect to the boat, Richard Gollel, moored the yacht to a dock behind his Pompano Beach, Florida residence as the hurricane approached. But the yacht was destroyed by what registered as a Category 4 storm.
Travelers tried to avoid paying for the loss by preemptively seeking a declaratory judgment that the policy did not cover the loss because Ocean Reef did not have a full-time, licensed captain and crew for the yacht during the hurricane, as required under warranties in the insurance policy. It brought the declaratory action in the Western District of New York, alleging that Ocean Reef had an office and its principal place of business in Rochester, New York. Under New York state law, an insured forfeits coverage by violating a marine insurance warranty, regardless of whether the violation had any effect on the accident. The same is true under federal admiralty law as applied to at least some marine insurance warranties. Travelers Prop. Cas. Co. of Am. v. Ocean Reef Charters LLC, 996 F.3d 1161, 1167–68 (11th Cir. 2021).
2 See Com. Union Ins. Co. v. Flagship Marine Servs., Inc., 190 F.3d 26, 31–32 (2d Cir. 1999) (discussing how, “under . . . the law of most states,” including New York, “warranties in maritime insurance contracts must be strictly complied with, even if they are collateral to the primary risk that is the subject of the contract, if the insured is to recover” (citing N.Y. Ins. L. § 3106(c))). “However, unlike New York and the majority of states, Florida does not require strict compliance with all warranties, but it does preclude recovery where the ‘breach or violation increased the hazard by any means within the control of the insured.’” Id. at 32 (quoting Fla. Stat. § 627.409(2)). (Fn. 2).
3 Florida Statute § 627.409(2) is a “so-called ‘anti-technical statute.’” Travelers, 996 F.3d at 1164. The statute “was ‘designed to prevent the insurer from avoiding coverage on a technical omission playing no part in the loss.’” Id. at 1170 (quoting parenthetically Pickett v. Woods, 404 So. 2d 1152, 1153 (Fla. 5th Dist. Ct. App. 1981)). (Fn. 3).
On remand, because Travelers offered no expert witness—such as a licensed captain competent to speak to the issue—to prove that the lack of a full-time captain and crew played a role in the destruction of the yacht during Irma, the District Court granted summary judgment to Ocean Reef. We affirm.
Ocean Reef’s insurance policy had contained two express warranties since Ocean Reef first insured the My Lady with Travelers in 2014. One was called the “Captain Warranty.” The Captain Warranty provides: It is warranted you employ a professional captain for the yacht shown on the Declarations Page of this policy. Such captain shall be employed full time and approved by us. We will pay up to $1,500 for the cost of hiring a replacement captain, approved by us, if your captain is unable to perform his regular duties due to a medically certified cause. The other warranty was called the “Crew Warranty.” The Crew Warranty provides: You employ 1 full time or part time professional crew for your yacht shown on the Declarations Page of this policy. We also provide coverage for any additional, temporary crew you employ.
(…) As indicated supra, Travelers likely engaged in a strategy to avoid the application of Florida’s anti-technical statute, Fla. Stat. § 627.409(2). Under that statute, it would need to prove that the lack of a full-time captain and crew played a material role in the My Lady’s sinking to avoid paying Ocean Reef. On the other hand, under the federal rule that applies to some marine insurance warranties, Travelers, 996 F.3d at 1167–68, “and the law of most states,” including New York, “warranties in maritime insurance contracts must be strictly complied with, even if they are collateral to the primary risk that is the subject of the contract, if the insured is to recover.” Com. Union Ins. Co. v. Flagship Marine Servs., Inc., 190 F.3d 26, 31–32 (2d Cir. 1999) (citing N.Y. Ins. L. § 3106(c)).
(…) On February 25, 2019, Ocean Reef disclosed Captain Thomas Danti and Allister Dredge, a marine surveyor, as expert witnesses. They attached both experts’ reports to the disclosure. The disclosure included both experts’ qualifications, their opinions, and the bases for their opinions. See Fed. R. Civ. P. 26(a)(2). Captain Danti opined, after interviewing Gollel and inspecting the site, that the “storm preparations by Mr. Gollel met the standard of care of a professional Mariner.” He also opined that “the main cause of the vessel’s damage was unforeseeable failure of a mooring pile.” So, “the lack of a full time captain would not have prevented the yacht from becoming a total loss.” Danti’s bottom-line conclusion was: “There was no increased hazard in risk to the vessel by not having a full time captain at the time of the incident.” Dredge, the surveyor, also opined that the damage to the yacht was a “constructive total loss,” as repairs would cost $2.5 million.
(…) For the reasons discussed in Travelers Property Casualty Co. of America v. Ocean Reef Charters LLC, 996 F.3d 1161 (11th Cir. 2021), Florida law applies.
The Florida anti-technical statute we must apply provides: A breach or violation by the insured of a warranty, condition, or provision of a wet marine or transportation insurance policy, contract of insurance, endorsement, or application 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. Fla. Stat. § 627.409(2). “The statute is designed to prevent the insurer from avoiding coverage on a technical omission playing no part in the loss.” Pickett, 404 So. 2d at 1153. Whether an insured increased the hazard by noncompliance with a warranty “is typically a question of fact for the jury.” Serendipity at Sea, LLC v. Underwriters at Lloyd’s of London Subscribing to Pol’y No. 187581, 56 F.4th 1280, 1290 (11th Cir. 2023) (citing Pearl Assurance Co. v. S. Wood Prods. Co., 216 F.2d 135, 136 (5th Cir. 1954)).
The effect of Ocean Reef’s failure to retain a full-time captain and crew leading up to and during Hurricane Irma is exactly the kind of issue that requires expert testimony. The question is hypothetical. Discussing what would have happened if a captain were in charge of the My Lady during Hurricane Irma necessarily requires hypothesizing. “And the ability to answer hypothetical questions is ‘[t]he essential difference’ between expert and lay witnesses.” United States v. Henderson, 409 F.3d 1293, 1300 (11th Cir. 2005).
Secondary Sources: Weinstein’s Federal Evidence § 701.03[1] (2023); Stephen A. Saltzburg et al., 3 Federal Rules of Evidence Manual § 701.02[7] (Matthew Bender 12th ed.)
(U.S. Court of Appeals for the Eleventh Circuit, June 23, 2023, Travelers Property Casualty Company of America v. Ocean Reef Charters LLC, Docket No. 21-14509, Publish)
