Article by Donald M. Waesche
In Insurance Co. v. Dunham, the sole issue before the United States Supreme Court was whether a case involving a marine insurance policy came within the admiralty and maritime jurisdiction of the federal courts. The Court, recognizing a number of arguments which supported federal jurisdiction over the dispute, stated:
Another argument in favor of the exercise of a large jurisdiction over maritime contracts, and contracts of marine insurance especially, is that it tends to promote uniformity of principle and practice throughout the different States in the administration of law. . . . Of all maritime contracts, that of insurance is probably the one most extensively in use. It is known and practiced in all civilized countries. It is important that the rules, practice, and laws which relate to it should be the same throughout the world, so far as is possible. That they vary in different places is a source of much confusion and embarrassment, and has been greatly lamented by jurists. This court cannot, of course, influence courts of other countries directly, but it can do much towards establishing uniformity of law and practice in the construction and administration of the law of insurance in this country by exercising jurisdiction over the subject. . . . Numberless illustrations might be adduced to show the want of uniformity and chaotic state of the law and practice of insurance; but it is, unhappily, too notorious. If a suit on a contract of insurance can be maintained in the admiralty, it must be decided according to the rules and principles of this court, and that would establish absolute uniformity in one court in every State in the Union, and have a strong tendency to establish it in the State courts, because of the great dignity of the court, the respect paid to its decisions, and its controlling influence over all matters over which it exercises jurisdiction. If the admiralty cannot exercise this jurisdiction, it must be left principally to the State courts, and the differences of opinion and practice, so much deplored, will remain and increase.
The Court's decision in Dunham, however, did not permanently settle the issue.
In Paul Marsh, Inc. v. Edward A. Goodman Co., an action was brought in a federal district court sitting as a court of admiralty to recover damages to goods that had been stored in a warehouse. The policy was one of marine insurance, with a warehouse-to-warehouse endorsement. The court, on its own motion, declined jurisdiction, stating: “Simply put, the issue is whether a claim on a contract of marine insurance carrying a warehouse endorsement can be the subject of a federal action when any damage, for which recovery is sought, occurred long after the completion of the transport of the goods.” The court went on to say:
The primary rationale for the existence of admiralty jurisdiction is the national interest in unified judicial supervision of the maritime industry. In the words of Professor Black,
The main thing is that if the court of admiralty is to exist at all, it should exist because the business of river, lake, and ocean shipping calls for supervision by a tribunal enjoying a particular expertness in regard to the more complicated concerns of that business. If the federal government maintains such a court, it must be because the providing of such a tribunal, and the seeing it function, is a federal concern.
The claims before this Court bear only the most attenuated relationship to this federal concern. To entertain these claims would be to subvert the purposes underlying our admiralty and maritime jurisdiction.
In contrast, in Mur-Joe Distributors, Inc. v. Reliance Insurance Co., where goods stored in warehouses in Monrovia, Liberia were lost as a result of fires, the court held that maritime law applied. The goods were covered by an open marine cargo policy with a warehouse-to-warehouse endorsement. The insurance company defended the action on the grounds, among others, that the doctrine of uberrimae fidei should be applied. The insureds had previously submitted claims to the Insurance Company of Africa for goods destroyed by fires stored at the warehouses in Monrovia, and the prior losses had not been disclosed. The court framed the issue as whether the warehouse endorsement was maritime in nature, stating:
Thus, it is clear that the doctrine of uberrimae fidei imposes a much higher duty on an applicant for marine insurance with regard to disclosure than is imposed upon one seeking to insure a casualty or other inland risk. A pivotal issue to be determined in this case is, therefore, whether the special warehouse endorsement at issue should be construed as marine insurance, so that the rule of uberrimae fidei governs, or whether the endorsement is severable as an independent fire insurance policy, governed by the less rigorous standard of material misrepresentation.
The court answered this pivotal question by holding that the warehouse-to-warehouse endorsement could not be severed from the open marine cargo policy. Therefore, the doctrine of uberrimae fidei applied rather than the less stringent standard applied to policies of fire insurance under New York state law.
About the Author
Donald M. Waesche. Partner with the firm of Waesche, Sheinbaum, and O'Regan, New York, New York.
Citation
66 Tul. L. Rev. 293 (1991)