Who Needs a Captain? Part 2

A panel of the United States Court of Appeals for the Eleventh Circuit again took up the issue of compliance with a captain’s warranty in Serendipity at Sea, LLC v. Underwriters at Lloyd’s of London. In that case, the LLC owner of the yacht Serendipity took out a Lloyd’s policy requiring that a “full time” captain be engaged for the vessel, although one of the LLC members could operate the vessel without the captain aboard. The only captain in the picture was a retired family friend who assisted the owner in exchange for the occasional dinner or cruise. The member sailed the vessel from Florida to Great Abaco Island in the Bahamas without the friendly retired captain aboard, although two local captains helped the member dock the vessel at house on Great Abaco. The member then flew back to Florida, only to see Hurricane Dorian form in the Atlantic. Initial forecasts had the storm skirting the Bahamas, but it wound up making landfall at Great Abaco and destroying the Serendipity.

The Eleventh Circuit considered two issues. One was whether an insurance warranty for a “full time licensed captain… employed for the maintenance and care of the vessel” was ambiguous. The court reasoned that the warranty could be read two ways: the insured had to employ a boat captain on a full time basis; or the captain could be employed on a part time basis, so long as he or she worked full time as a boat captain (i.e. employment on other boats was OK). The insured, however, had failed to employ a full-time captain under either interpretation; the family friend only assisted on occasion, and did not work full time as a boat captain—he was, after all, retired. In short, the insured breached the full-time captain warranty.

That was not the end of it, however, because Florida law provides that a breach of an insurance warranty does not void the policy unless the breach “increased the hazard” ¹Fla. Stat. § 627.409(2). The insurer had submitted expert opinion to the effect that any licensed captain worth his or her salt would have left the Bahamas to escape the oncoming hurricane. The insured, however, countered that Hurricane Dorian’s track had been extremely erratic, and that leaving the Bahamas at the last minute might have been equally if not more dangerous. The court held that there was an issue of fact on that score, reversing the lower court’s grant of summary judgment for the insurer.

The most interesting thing about the Serendipity case is its omission of any reference to maritime law. As recently as 2021, another Eleventh Circuit panel determined that there was no entrenched federal maritime law on the interpretation of a captain’s warranty in a marine insurance policy (see a previous post on this blog). This rather treacherous analysis was made necessary by the United States Supreme Court’s infamous 1955 decision in Wilburn Boat Co. v. Fireman’s Fund Insurance Co., ²348 U.S. 310 (1955) in which the Supreme Court held that a boat policy’s warranty against commercial use was governed by Texas law, not maritime law as most practitioners supposed at the time. In Travelers Property Casualty Co. of America v. Ocean Reef Charters LLC, ³996 F.3d 1161 (11th Cir. 2021) a three-judge panel of the Eleventh Circuit lamented that the Supreme Court had “left the lower federal courts at sea without a rudder or compass” by failing to clarify Wilburn Boat’s confusing blend of maritime and state law. Ocean Reef Charters panel went to far as to invite the Supreme Court to “wade in and let us know what it thinks of Wilburn Boat today.” No such wading has occurred since the 2021 decision.

The Serendipity case was decided by a different panel of Eleventh Circuit judges. The case is consistent with Ocean Reef Charters, in that it applies Florida law rather than maritime law to the warranty in question. But the Serendipity court did not even cite Ocean Reef Charters, even though the latter 2021 decision seems very much on point. Nor did the Serendipity opinion cite or discuss Wilburn Boat or maritime law in general. On the contrary, the court considered itself bound to apply Florida law because its jurisdiction was based on diversity of citizenship. But maritime law applies to issues within maritime jurisdiction, even if jurisdiction is based on diversity of citizenship. This would seem to entail at least a nod to Wilburn Boat and Ocean Reef Charters. The Serendipity case seems to be in some tension with Ocean Reef Charters, if only in that the Ocean Reef Charters court complained about the disorder wrought by Wilburn Boat and wished the Supreme Court would re-examine the case, whereas the Serendipity panel did not express the same angst and indeed seemed perfectly comfortable applying state law to warranty issues in a marine insurance policy.