Fireman’s Fund Ins. Co. v. Great Am. Ins. Co., No. 14-1346 (2d Cir. 2016)
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Fireman’s Fund, Great American, and MSI issued insurance policies that provided various coverages for a dry dock in Port Arthur, Texas owned by Signal. After the dry dock sank in 2009, Signal and Fireman’s Fund sought contributions from Great American and MSI for the loss of the dry dock and resulting environmental cleanup costs. The district court ruled that the Great American and MSI policies were void in light of Signal’s failure to disclose when it applied for those policies that the dry dock had significantly deteriorated and that repairs recommended by a number of consultants and engineers over several years had not been made. MSI and Signal settled and now Fireman's Fund contends that it may still pursue appeal of the issues relating to the policy issued to Signal by MSI based on the court's decision in Maryland Cas. Co. v. W.R. Grace & Co. The court held that the Great American policy was a marine insurance contract subject to the doctrine of uberrimae fidei and that Signal’s nondisclosure violated its duty under that doctrine, permitting Great American to void the policy. The court also held that MSI’s policy was governed by Mississippi law; that, under that law, Signal materially misrepresented the dry dock’s condition; and that MSI was entitled to void the policy on that basis. Accordingly, the court affirmed the district court's finding that the policies were void.
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14 1346 cv(L) Fireman’s Fund Ins. Co. et al. v. Great Am. Ins. Co. et al. 1 In the 2 United States Court of Appeals 3 For the Second Circuit 4 5 6 August Term, 2014 Nos. 14 1346 cv(L) 7 8 9 10 FIREMAN S FUND INSURANCE COMPANY, ONE BEACON INSURANCE COMPANY, NATIONAL LIABILITY AND FIRE INSURANCE COMPANY, QBE MARINE & ENERGY SYNDICATE 1036, Plaintiffs – Counterclaim Defendants – Appellants, 11 v. 12 13 14 15 16 17 18 19 20 21 22 23 24 25 GREAT AMERICAN INSURANCE COMPANY OF NEW YORK, Defendant – Crossclaim Defendant – Counter Claimant – Appellee, MAX SPECIALTY INSURANCE COMPANY, Defendant – Crossclaim Defendant – Counter Claimant – Appellee, v. SIGNAL INTERNATIONAL, LLC, Defendant – Crossclaim Defendant – Cross Claimant. The Clerk of the Court is directed to amend the official caption to conform to the above. Signal International, LLC is no longer a party to the appeal. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 Appeals from the United States District Court for the Southern District of New York. No. 10 cv 1653 J. Paul Oetken, Judge. ARGUED: JUNE 24, 2015 DECIDED: MAY 20, 2016 Before: CABRANES, POOLER, and DRONEY, Circuit Judges. Fireman’s Fund Insurance Company (“Fireman’s Fund”) and Signal International, LLC (“Signal”) appealed from judgments of the United States District Court for the Southern District of New York (Oetken, J.), granting summary judgment to Great American Insurance Company of New York (“Great American”) and Max Specialty Insurance Company (“MSI”). Fireman’s Fund, Great American, and MSI underwrote insurance policies that included coverage for a dry dock that Signal owned. After the dry dock sank, Signal and Fireman’s Fund sought contribution for losses and cleanup costs from Great American and MSI. Fireman’s Fund initiated this action to resolve disputes regarding coverage. The district court held that the Great American and MSI policies were void because (1) Great American’s pollution insurance policy was a marine insurance contract subject to the doctrine of uberrimae fidei, and Signal’s failure to disclose that the dry dock had deteriorated and that repairs recommended over several years had not been made violated its duty of utmost good faith under that doctrine, and (2) Signal materially misrepresented the dry dock’s condition when it applied for coverage from MSI. We AFFIRM. 2 1 2 3 4 JOHN A.V. NICOLETTI (Robert A. Novak, William M. Fennell, on the brief), Nicoletti Hornig & Sweeney, New York, NY, for Plaintiffs Appellants. 5 6 7 8 9 10 11 12 13 GEORGE R. ZACHARKOW (Stephen J. Galati, Christian T. Johnson, on the brief), Mattioni, Ltd., Philadelphia, PA, for Defendant Appellee Great American Insurance Company of New York. STEPHEN D. STRAUS, Traub Lieberman Straus & Shrewsberry LLP, Hawthorne, NY, for Defendant Appellee Max Specialty Insurance Company. 14 DRONEY, Circuit Judge: 15 Plaintiffs Appellants are Fireman s Fund Insurance Company, 16 One Beacon Insurance Company, National Liability and Fire 17 Insurance Company, and QBE Marine & Energy Syndicate 1036 18 (collectively “Fireman’s Fund”), insurance companies that provided 19 marine general liability and marine excess liability policies to 20 Defendant–Appellant Signal International, LLC (“Signal”).1 Fireman’s Fund Insurance Company and One Beacon Insurance Company each agreed to cover fifty percent of the total amount insured under the marine general liability policy. Fireman s Fund Insurance Company and National 1 3 1 Fireman’s Fund and Signal appealed from a judgment of the United 2 States District Court for the Southern District of New York (Oetken, 3 J.), granting summary judgment to Defendants Appellees Great 4 American Insurance Company of New York (“Great American”) and 5 Max Specialty Insurance Company (“MSI”). 6 Fireman’s Fund, Great American, and MSI issued insurance 7 policies that provided various coverages for a dry dock in Port 8 Arthur, Texas owned by Signal. After the dry dock sank in 2009, 9 Signal and Fireman’s Fund sought contributions from Great 10 American and MSI for the loss of the dry dock and resulting 11 environmental cleanup costs. The district court ruled in 12 adjudicating a number of summary judgment motions that the Great 13 American and MSI policies were void in light of Signal’s failure to Liability and Fire Insurance Company each agreed to cover thirty four percent of the total amount insured under the marine excess liability policy, and QBE Marine & Energy Syndicate 1036 agreed to cover the remaining thirty two percent. The premiums for these two policies were also divided among the respective insurers. In this opinion, we refer to both the marine general liability policy and marine excess liability policy as issued by Fireman’s Fund. 4 1 disclose when it applied for those policies that the dry dock had 2 significantly deteriorated and that repairs recommended by a 3 number of consultants and engineers over several years had not 4 been made. 5 After submission of this appeal, MSI and Signal reached a 6 settlement and obtained a dismissal of the case between them. 7 Therefore, Signal no longer appeals the grant of summary judgment 8 to MSI. Nonetheless, Fireman’s Fund asserts that it may still pursue 9 appeal of the issues relating to the policy issued to Signal by MSI 10 based on our decision in Maryland Cas. Co. v. W.R. Grace & Co. See 11 218 F.3d 204, 211 (2d Cir. 2000) (“[T]he contract of settlement an 12 insurer enters into with the insured cannot affect the rights of 13 another insurer who is not a party to it. Instead, whatever 14 obligations or rights to contribution may exist between two or more 15 insurers of the same event flow from equitable principles.”). 16 Fireman’s Fund was granted summary judgment below against MSI 5 1 on a contribution claim based on MSI’s policy, and we assume 2 without deciding that Fireman’s Fund is correct that it may pursue 3 this appeal of the district court’s decision finding the MSI policy 4 void, based on Fireman’s Fund’s interest in the unappealed 5 summary judgment decision on contribution. 6 We agree with the district court’s orders. We hold that the 7 Great American policy was a marine insurance contract subject to 8 the doctrine of uberrimae fidei and that Signal’s nondisclosure 9 violated its duty under that doctrine, permitting Great American to 10 void the policy. We further hold that MSI’s policy was governed by 11 Mississippi law; that, under that law, Signal materially 12 misrepresented the dry dock’s condition; and that MSI was entitled 13 to void the policy on that basis. Accordingly, we AFFIRM. 6 1 2 BACKGROUND I. Factual Background 3 A. The Operation and Loss of the Dry Dock 4 Signal is a marine construction firm involved principally in 5 building and repairing ocean going structures such as offshore 6 drilling rigs, platforms, and barges. In 2003, Signal purchased six 7 facilities—two in Mississippi and four in Texas—for use in its 8 business of repairing, upgrading, and converting offshore drilling 9 rigs.2 One of the Texas facilities was a dockyard in Port Arthur, 10 Texas. In acquiring that facility, Signal assumed an existing lease of 11 a dry dock (“the dry dock”) located along the Sabine Neches These rigs included jack ups, semi submersibles, and mobile offshore production units. “A jack up is a rig that is towed to a location, where the legs are ‘jacked’ down to the ocean floor allowing the work area to be raised about 50 feet above the water level.” 1 Thomas J. Schoenbaum, Admiralty and Maritime Law § 3 9, at 169 n.8 (5th ed. 2011). “A semi submersible is a cross between a submersible and a barge . . . [that] is submerged about 50 feet after which special anchors are lowered to complete the mooring of the rig.” Id. A mobile offshore production unit is “a jackup rig that has been converted to an offshore production platform” and “can be moved and is reusable.” Norman J. Hyne, Dictionary of Petroleum Exploration, Drilling & Production 327 (2d ed. 2014). 2 7 1 Waterway near the Gulf of Mexico.3 The dry dock was built in 1944 2 at the direction of the United States Navy to repair Navy ships. In 3 early 2005, Signal accepted an offer from the lessor to purchase the 4 dry dock, which Signal had been using in its operations since it 5 assumed the lease. 6 Throughout its lease and ownership of the dry dock, Signal 7 received a number of reports on the dry dock’s deteriorated 8 condition. These included the following: The Heger Reports: The dry dock engineering firm Heger Dry Dock, Inc. (“Heger”) of Holliston, Massachusetts, periodically inspected the dry dock between 2002 and 2009. In 2002, Freide Goldman Offshore—the operator of the dry dock before Signal—asked Heger to inspect the dry dock in order to provide an estimate of its fair market value.4 In a December 9 10 11 12 13 14 A dry dock is a large structure used to lift ships and other ocean going vessels out of water for repairs and construction. The dry dock is lowered into the water by flooding its pontoons with water, and then, after an object is loaded onto the dry dock, it is raised by pumping water out of the pontoons. 4 Although the 2002 Heger Report was created before Signal assumed the dry dock lease, Freide Goldman Offshore’s President of Texas Operations, John Haley—who became Signal’s Senior Vice President of Texas Operations when Signal acquired the Port Arthur dockyard—received a copy of the report in December 2002, and Haley shared this report with other employees at Signal by (at the latest) January 2005. 3 8 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 2002 appraisal, Heger described “the dry dock [as being] . . . in fair to good condition, with the exception of the pontoon deck . . . , which [was] in poor condition and should be replaced, and section H, which showed markedly more corrosion internally . . . .”5 J.A. 4215. Heger estimated that the dry dock would have “10 years of remaining useful life if the pontoon deck [was] completely repaired,” but the costs of making these “extensive repairs” in the United States rendered the dry dock’s value “below zero.”6 J.A. 4215, 4216. In a series of subsequent reports from 2007 through 2009 commissioned by Signal to assist it in prolonging the existing life of the dry dock, Heger found that the dry dock had continued to deteriorate and that long term repairs had not been made. Instead, Signal had simply patched damaged areas with “doublers.”7 J.A. 688. Heger provided recommendations for extensive repairs that would be required for the dry dock to continue to operate safely. However, Heger repeatedly advised that “the expected life extension for 5 The dry dock consisted of eight pontoons designated “A” through “H.” Alternatively, assuming that the dry dock was transported for repairs abroad, Heger estimated that the dry dock’s fair market value would be approximately $800,000. 7 “Doublers,” or doubler plates, are steel plates that “offer a temporary solution for steel plate damage” on marine structures. Ibrahim A. Assakkaf, Reliability Design of Doubler Plates for Sea Tankers, in Advances in Civil Engineering and Building Materials 823, 823 (Shuenn Yih Chang et al. eds. 2013). The plates provide “an inexpensive method of repairing corroded plating, cracked plates, or defective welds.” Id. Doubler plates are “added [on] top of [a] defective area and welded around the plate’s perimeter.” Id. “This temporary repair method [is intended to] maintain structural integrity until . . . permanent repairs [are] made to the original corroded structure.” Id. 6 9 1 2 3 4 5 6 7 8 the dock . . . [would] only be a few years” and therefore “the cost, time and effort to perform this work [was] not economically justifiable.” J.A. 689. Heger also provided Signal with plans for converting the dry dock to a seven pontoon configuration (by removing Pontoon H) but warned that “the dry dock structure . . . should be satisfactorily restored before using the dock or proceeding with any modifications.” J.A. 4513 14. 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 The ABS Audits: Auditor ABS Consulting (“ABS”) of Houston, Texas, a maritime risk management firm, was designated by the Port of Port Arthur to review and report on Signal’s maintenance and repair programs at the dry dock. In 2003, ABS observed “the rapidly increasing rate of overall deterioration” of the dry dock, which was “largely due to the drydock’s age . . . , and . . . lack of adequate maintenance and/or repair.” J.A. 4166. ABS noted that, although it had notified the dry dock’s owners and operators in January 2000 of the “advanced state of . . . deterioration,” they had “made no apparent efforts” to implement ABS’s recommended repairs. J.A. 4168. Instead, “more than a hundred doubler plates ha[d] been welded over severely wasted/holed . . . platings.” J.A. 4167. Six months later, ABS reported that Pontoon H was “leaking severely,” and Pontoons E and G were “leaking significantly” as well. J.A. 4161. ABS concluded that “it appeared that unsafe drydock operations were being conducted” and recommended that “additional drydockings [not be conducted] until substantial hull repairs [were] made to ‘H’ pontoon and the repairs [were] verified.” J.A. 4162 (emphases omitted). 30 31 Internal Staff Study: In April 2003, Signal conducted an internal “staff study” to determine whether to purchase the 10 1 2 3 4 5 6 7 8 9 leased dry dock from the Port Commission of Port Arthur. The study found that, “without major renewal costs,” the dry dock’s remaining useful life was “only 3 to 5 years.” J.A. 4188. The study concluded that it would cost $21.88 million to extend the life of the dry dock’s pontoons “for maybe 10 to 15 years.” J.A. 4186 87. The study ultimately advised against purchasing the dry dock in light of its “relatively short remaining useful life and extreme costs of renewal/life extension.” J.A. 4188. 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 The DLS Surveys: The marine appraiser, surveyor, and consulting firm Dufour, Laskay & Strouse, Inc. (“DLS”) of Houston, Louisiana, and Florida was hired to inspect and appraise Signal’s Texas and Mississippi facilities “for the purpose of asset allocation and financial review” by GE Commercial Finance, Signal’s financing company. J.A. 526. Between 2005 and 2007, DLS observed that the dry dock “had significant water in most compartments . . . [that] require[d] pumping and trimming every four hours,” which was “indicative of some wastage holes in the bottom.” J.A. 551, 4437; see also J.A. 5314. Each year, DLS noted that “[t]he deck plating . . . ha[d] significant doubler plates where plating ha[d] either wasted or separated from internal framing” and that “there was . . . a 12 long tear in the plating extending along a transverse frame” that “reportedly . . . w[ould] be fitted with a proper doubler in the near future.” J.A. 551, 4437, 5314. In 2007, DLS concluded that the dry dock was in “fair to good condition” but recommended that its pontoons be dry docked and repaired “[a]s soon as practical within the succeeding eighteen months . . . to render [it] in good stable operating condition and provide a life extension.” J.A. 4437. 11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 The 2009 Heller Property Risk Assessment Report: Stephen Heller & Associates Inc. (“Heller”) of Houston—a loss prevention consulting firm—was hired by Signal in 2008 to conduct a risk review of Signal’s Mississippi and Texas facilities in order to “assist [insurance] underwriters in evaluating the exposures, operations, and loss prevention” for those facilities. J.A. 2267. In a January 2009 report, Heller rated the Mississippi and Texas facilities “[o]verall” as “Above Average,” meaning that they met “[a]cceptable standards including some industry best practices.” J.A. 2270. Heller found that “[t]he maximum foreseeable loss (MFL) or worst case scenario for these facilities [included] a sinking or structural collapse of [the] dry dock at . . . Port Arthur.” J.A. 2269. The maximum foreseeable loss was described as “one of extremely low probability and frequency based on previous industry experience.” J.A. 2298 99. 17 Signal never replaced the dry dock’s pontoons or pontoon 18 decks. Instead, Signal continued to use inserts and doublers to patch 19 holes in the decks. 20 In 2009, Signal decided to implement the seven pontoon 21 configuration by removing Pontoon H. On August 20, 2009, it 22 attempted to remove that pontoon, but during that procedure the 23 entire dry dock sank. 12 1 Shortly after the sinking, Signal notified the Texas General 2 Land Office (“GLO”), which regulates pollution affecting Texas 3 shoreline waters, about what had occurred. In September 2009, the 4 GLO advised Signal to “initiate immediate action to recover 5 the . . . dry dock from Texas coastal waters.”8 J.A. 3516. In June 6 2010, Signal hired Weeks Marine, Inc., to manage removal of the 7 sunken dry dock and cleanup of the site. Removal and cleanup 8 efforts were not completed until March 2012 and resulted in 9 $12,395,026 in costs. 10 B. 11 Signal had obtained five insurance policies that insured 12 against risks related to the dry dock at the time of its sinking: (1) a 13 marine general liability policy issued by Fireman s Fund; (2) a 14 marine excess liability policy issued by Fireman s Fund; (3) a 15 pollution policy issued by Great American (the “Pollution Policy”); The Insurance Policies Covering the Dry Dock The dry dock contained substantial amounts of asbestos and related contaminants. 8 13 1 (4) a primary property insurance policy ( the “PPI Policy”) issued by 2 Westchester Surplus Lines Insurance Company (“Westchester”); and 3 (5) an excess property insurance policy issued by MSI, which 4 provided coverage in excess of the PPI Policy (the “EPI Policy”). 5 Only the Great American Pollution Policy and the MSI EPI Policy 6 are at issue here. 7 Great American first underwrote the Pollution Policy in 2004 8 and renewed it annually through 2009. To obtain the renewal of the 9 policy for 2009, Signal completed and submitted Great American’s 10 standard “Vessel Pollution Liability Application” along with a 11 “Schedule of Vessels,” which included the dry dock and 12 approximately twenty five tugboats and barges owned by Signal. 13 The Pollution Policy insured Signal against losses of up to $5 million 14 for each property in the Schedule resulting from pollution 15 discharges into navigable waters. The policy specifically insured 16 against claims under the “Oil Pollution Act of 1990, . . . 33 U.S.C. 14 1 [§] 2701 et seq.” (“OPA”), the “Comprehensive Environmental 2 Response, Compensation[,] and Liability Act, 42 U.S.C. [§] 9601, et 3 seq.” (“CERCLA”), and the “Federal Water Pollution Control Act 4 Amendments of 1972, 33 U.S.C. [§] 1321, et seq.” (“FWPCA”), and the 5 costs of “on water removal of materials of a non OPA and non 6 CERCLA nature which has been mandated by an authorized public 7 authority and [was] the result of a defined single, sudden and 8 accidental event.” J.A. 737. An endorsement to the policy also 9 extended coverage to “all Vessels while under repair, alteration, 10 construction, conversion or rebuilding” within 100 miles of the Port 11 Arthur dockyard. J.A. 738. 12 MSI underwrote the EPI Policy in January 2009. To apply for 13 the policy, Signal submitted its “2009 2010 Property Insurance 14 Submission.” This document included a “Statement of Values” that 15 described the dry dock’s value as $13.6 million and the 2009 Heller 16 Report, but it did not include other information—such as the Heger 15 1 reports, the ABS audits, or the DLS surveys—suggesting that the dry 2 dock was in need of repair. The EPI Policy insured against loss of or 3 damage to properties listed in the Statement of Values, as well as 4 business interruption costs and “[e]xtra [e]xpense[s]” associated 5 with the loss of those properties. The policy provided $15 million 6 coverage for losses in excess of the underlying PPI Policy, which 7 covered losses up to $10 million. 8 C. Post Loss Insurance Claims 9 In January 2010, Westchester paid Signal its total coverage 10 amount of $10 million pursuant to the PPI Policy for losses related to 11 the dry dock. MSI paid Signal $3.6 million of its total coverage 12 amount of $15 million under the EPI Policy based on the $13.6 13 million value of the dry dock, as represented in the Statement of 14 Values. Great American refused to make any payments under its 15 Pollution Policy. 16 In meetings between Signal and its insurers in early 2010, MSI 17 and Great American argued that their policies did not cover the 16 1 costs of removing the dry dock from the Sabine Neches Waterway 2 and cleaning up the site. Fireman’s Fund agreed to fund Signal’s 3 removal and cleanup efforts but reserved its right to seek 4 reimbursement later from MSI and Great American. 5 II. Procedural Background 6 On March 2, 2010, Fireman’s Fund commenced this action 7 against Signal, Great American, and MSI, seeking a declaration as to 8 the obligations of Signal and its insurers for losses associated with 9 the sinking of the dry dock. MSI asserted cross claims against Signal 10 for the $3.6 million it had paid, and also sought to void the EPI 11 Policy on the ground of misrepresentation after discovery revealed 12 the various reports on the dry dock’s poor condition that Signal had 13 not provided to MSI when applying for the policy. Signal cross 14 claimed against MSI for cleanup and removal costs and additional 15 damages. Great American filed claims against Signal and Fireman’s 16 Fund, seeking a declaration that the Pollution Policy was void under 17 1 the maritime doctrine of uberrimae fidei, which imposes a duty of 2 utmost good faith on the insured,9 or alternatively under the policy’s 3 “Misrepresentation” clause.10 4 On October 15, 2010, Signal assigned to Fireman’s Fund its 5 rights under the Great American Pollution Policy, and Fireman’s 6 Fund continued to pursue coverage against Great American. Both 7 Signal and Fireman’s Fund maintained their claims against MSI; 8 Signal opposed MSI’s efforts to obtain from Signal the $3.6 million it 9 had already paid, and both Signal and Fireman’s Fund sought 10 additional payments from MSI under its EPI Policy. 11 This appeal arises out of eight motions that were filed after the 12 close of discovery. Fireman’s Fund, Signal, Great American, and 9 The doctrine of uberrimae fidei is discussed in more depth later in this opinion. The Pollution Policy’s “Misrepresentation” clause provides that “[a]ny concealment or misrepresentation by [the insured] of any material fact . . . will void this policy completely . . . , whether such concealment or misrepresentation is deliberate, negligent, inadvertent, innocent, or otherwise.” J.A. 727. 10 18 1 MSI moved or cross moved on the coverage issues for the Pollution 2 Policy and EPI Policy.11 3 On March 25, 2013, the district court granted partial summary 4 judgment, holding that under the EPI Policy, MSI was required to 5 contribute to the payments that Fireman’s Fund had made to Signal. 6 Fireman s Fund Ins. Co. v. Great Am. Ins. Co. of New York, No. 10 Civ. 7 1653 (JPO), 2013 WL 1195277, at *8 9 (S.D.N.Y. Mar. 25, 2013). 8 However, on March 31, 2014, the district court ruled—also on 9 summary judgment—that the Great American Pollution Policy and 10 the MSI EPI Policy were void ab initio because of Signal’s failure to 11 disclose the dry dock’s deteriorated state. See Fireman’s Fund Ins. Co. 12 v. Great Am. Ins. Co. of New York, 10 F. Supp. 3d 460, 466 (S.D.N.Y. 13 2014). The court concluded that the Great American Pollution Policy Fireman’s Fund and Signal jointly moved for summary judgment against Great American, and Great American cross moved for summary judgment against them, on Great American’s cross claims and counterclaims. Fireman’s Fund also moved for summary judgment, and Great American cross moved for summary judgment, as to whether cleanup and removal costs were covered by the Pollution Policy. Signal moved for partial summary judgment against MSI, seeking a declaration that the EPI Policy was not void. MSI cross moved for summary judgment against Signal on the same issue. 11 19 1 was a marine insurance contract subject to the doctrine of uberrimae 2 fidei and that Signal had breached its duty of utmost good faith to 3 Great American by withholding material information about the dry 4 dock’s condition when it applied for coverage. See id. 476 93. The 5 district court also held that the EPI Policy was void under 6 Mississippi law because Signal had materially misrepresented the 7 dry dock’s condition in its 2009 2010 Property Insurance 8 Submission. Id. at 494 503. The court therefore denied Fireman’s 9 Fund’s and Signal’s motions for summary judgment and partial 10 summary judgment, granted MSI’s and Great American’s motions 11 for summary judgment declaring the policies void, and denied the 12 remaining motions, including MSI’s motion for reconsideration of 13 the March 25, 2013 decision on contribution. Id. at 493 & n.19, 503 04 14 & n.25. Fireman’s Fund and Signal appealed. 15 After submission of this appeal, MSI and Signal reached a 16 settlement and obtained dismissal of the case between them. We 20 1 still must address the validity of the EPI policy, however, because, 2 notwithstanding the recent settlement between Fireman’s Fund and 3 Signal, the EPI policy is still the basis for Fireman’s Fund’s claim for 4 contribution against MSI. 5 6 7 DISCUSSION12 I. Great American’s Pollution Policy 8 Fireman’s Fund argues that Great American’s Pollution Policy 9 is not subject to the doctrine of uberrimae fidei. It further argues that, A district court’s grant of summary judgment is reviewed de novo. See Aulicino v. N.Y.C. Dep’t of Homeless Servs., 580 F.3d 73, 79 (2d Cir. 2009). Summary judgment should be granted “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). A fact is material if it might affect the outcome of the case under governing law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute is genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id. In making this determination, the Court “must ‘construe the facts in the light most favorable to the non moving party and must resolve all ambiguities and draw all reasonable inferences against the movant.’” Beyer v. Cty. of Nassau, 524 F.3d 160, 163 (2d Cir. 2008) (quoting Dallas Aerospace, Inc. v. CIS Air Corp., 352 F.3d 775, 780 (2d Cir. 2003)). Where “parties file[] cross motions for summary judgment[,] . . . each party s motion must be examined on its own merits, and in each case all reasonable inferences must be drawn against the party whose motion is under consideration.” Morales v. Quintel Entm t, Inc., 249 F.3d 115, 121 (2d Cir. 2001). 12 21 1 even if the doctrine applies, Signal did not breach its duty to Great 2 American because it provided all information that Great American 3 requested about the dry dock on its insurance application. 4 5 A. Admiralty Jurisdiction and the Doctrine of Uberrimae Fidei 6 Great American argues—and the district court concluded— 7 that the Pollution Policy is void under the maritime doctrine of 8 uberrimae fidei. For the doctrine to apply, Fireman’s Fund’s suit 9 against Great American “must . . . be sustainable under the [court’s] 10 admiralty jurisdiction.” Norfolk S. Ry. Co. v. Kirby, 543 U.S. 14, 23 11 (2004) (emphasis omitted). This is because federal courts’ “authority 12 to make decisional law for the interpretation of maritime contracts 13 stems from the Constitution’s grant of admiralty jurisdiction to 14 federal courts.” Id.; see U.S. Const. art. III, § 2, cl. 1 (providing that 15 the federal judicial power “shall extend . . . to all Cases of admiralty 16 and maritime Jurisdiction”). Thus, “the grant of admiralty 17 jurisdiction and the power to make admiralty law are mutually 22 1 dependent.” Kirby, 543 U.S. at 23. 2 “Title 28 U.S.C. § 1333(1) grants federal district courts the 3 power to entertain ‘[a]ny civil case of admiralty or maritime 4 jurisdiction.’” Atl. Mut. Ins. Co. v. Balfour Maclaine Int l Ltd., 968 F.2d 5 196, 199 (2d Cir. 1992). “[T]his grant includes jurisdiction ‘over all 6 contracts which relate to the navigation, business, or commerce of 7 the sea.’” Id. (ellipsis omitted) (quoting DeLovio v. Boit, 7 F. Cas. 418, 8 444 (C.C.D. Mass. 1815)). 9 “[T]here are few ‘clean lines between maritime and non 10 maritime contracts.’” Folksamerica Reinsurance Co. v. Clean Water of 11 N.Y., Inc., 413 F.3d 307, 311 (2d Cir. 2005) (quoting Kirby, 543 U.S. at 12 23). “The boundaries of admiralty jurisdiction over contracts are 13 conceptual rather than spatial, and defined by the purpose of the 14 jurisdictional grant—to protect maritime commerce.” Id. (citations 15 omitted). “[W]hether a contract is a maritime one . . . ‘depends 16 upon the nature and character of the contract,’ and the true criterion 23 1 is whether it has ‘reference to maritime service or maritime 2 transactions.’” Kirby, 543 U.S. at 23 24 (ellipsis omitted) (quoting N. 3 Pac. S.S. Co. v. Hall Bros. Marine Ry. & Shipbuilding Co., 249 U.S. 119, 4 125 (1919)). Our inquiry focuses on “whether the principal objective 5 of a contract is maritime commerce.” Id. at 25. “Therefore, the 6 contract’s subject matter must be our focal point.” Folksamerica, 413 7 F.3d at 312. 8 “[A]dmiralty jurisdiction will exist over an insurance contract 9 where the primary or principal objective of the contract is the 10 establishment of ‘policies of marine insurance.’” Id. at 315 (quoting 11 Ins. Co. v. Dunham, 78 U.S. (11 Wall.) 1, 35 (1870)). “[W]hether an 12 insurance policy is marine insurance depends on ‘whether the 13 insurer assumes risks which are marine risks.’” Id. at 316 (quoting 14 Jeffcott v. Aetna Ins. Co., 129 F.2d 582, 584 (2d Cir. 1942)). “[A]n 15 insurance policy’s predominant purpose, as measured by the 16 dimensions of the contingency insured against and the risk 24 1 assumed, determines the nature of the insurance.” Id. at 317 2 (quoting Acadia Ins. Co. v. McNeil, 116 F.3d 599, 603 (1st Cir. 1997)). 3 Thus, “[u]ltimately, coverage determines whether a policy is ‘marine 4 insurance,’ and coverage is a function of the terms of the insurance 5 contract and the nature of the business insured.” Id. 6 The question of whether an insurance contract is subject to the 7 court’s admiralty jurisdiction “ha[s] implications beyond conferring 8 federal jurisdiction.” Id. at 310. In particular, “[w]hen a contract is a 9 maritime one, and the dispute is not inherently local, federal law 10 controls the contract interpretation.” Kirby, 543 U.S. at 22 23. 11 Under federal law, a marine insurance contract is subject to 12 “the federal maritime doctrine of uberrimae fide, or utmost good 13 faith.” Folksamerica, 413 F.3d at 310; see also Knight v. U.S. Fire Ins. 14 Co., 804 F.2d 9, 13 (2d Cir. 1986) (“[T]he substantive law governing 15 marine insurance . . . . [includes the] well established [principle that] 16 under the doctrine of uberrimae fidei . . . the parties to a marine 25 1 insurance policy must accord each other the highest degree of good 2 faith.”). The doctrine is a recognition that “the [insured] is more 3 likely to be aware of . . . information” that “materially affects the risk 4 being insured,” N.Y. Marine & Gen. Ins. Co. v. Tradeline (L.L.C.), 266 5 F.3d 112, 123 (2d Cir. 2001), and that “[o]ften the insurer lacks the 6 practicable means to verify the accuracy or sufficiency of facts 7 provided by the insured for purposes of establishing the contractual 8 terms,” 2 Thomas J. Schoenbaum, Admiralty and Maritime Law § 19 9 14, at 404 05 (5th ed. 2011). For example, the vessel to be insured 10 may be at some great distance on the high seas, impossible to inspect 11 at the time the application for insurance is filed. See Warren J. 12 Marwedel & Stephanie A. Espinoza, Dagger, Shield, or Double Edged 13 Sword?: The Reciprocal Nature of the Doctrine of Uberrimae Fidei, 83 14 Tul. L. Rev. 1163, 1168 69 (2009). 15 Accordingly, under the doctrine, “the party seeking insurance 16 is required to disclose all circumstances known to it which 26 1 materially affect the risk.” Folksamerica, 413 F.3d at 311 (quoting Atl. 2 Mut. Ins. Co. v. Balfour MacLaine Int’l Ltd. (In re Balfour MacLaine Int l 3 Ltd.), 85 F.3d 68, 80 (2d Cir. 1996)); see also Knight, 804 F.2d at 13 4 (“Since the [insured] is in the best position to know of any 5 circumstances material to the risk, he must reveal those facts to the 6 underwriter, rather than wait for the underwriter to inquire.”). “If 7 [the insured] acquires material information after having applied for 8 insurance, he is required to communicate that information to the 9 proposed insurer” as well. Puritan Ins. Co. v. Eagle S.S. Co. S.A., 779 10 F.2d 866, 870 (2d Cir. 1985). Thus, “[t]he [insured] is bound, 11 although no inquiry be made, to disclose every fact within his 12 knowledge that is material to the risk.” 2 Schoenbaum, supra, § 19 13 14, at 405 06. “The standard for disclosure is an objective one, that 14 is, whether a reasonable person in the [insured’s] position would 15 know that the particular fact is material.” Knight, 804 F.2d at 13. 16 “Failure by the [insured] to disclose all available information 27 1 will allow the insurer to avoid the policy,” regardless of “whether 2 such omission is intentional or results from mistake, accident, 3 forgetfulness, or inadvertence.”13 2 Schoenbaum, supra, § 19 14, at 4 406; see Sun Mut. Ins. Co. v. Ocean Ins. Co., 107 U.S. 485, 510 (1883) 5 (“The concealment, whether intentional or inadvertent, . . . avoids 6 the policy . . . . In respect to the duty of disclosing all material 7 facts, . . . [t]he obligation . . . is one uberrimae fidei. The duty of 8 communication, indeed, is independent of the intention, and is 9 violated by the fact of concealment even where there is no design to 10 deceive.”); Puritan Ins. Co., 779 F.2d at 870 71; see also Catlin 11 (Syndicate 2003) at Lloyd s v. San Juan Towing & Marine Servs., Inc., The district court concluded that, under uberrimae fidei, the Pollution Policy was void ab initio, “meaning that there was never an enforceable contract to begin with.” Catlin (Syndicate 2003) at Lloyd s v. San Juan Towing & Marine Servs., Inc., 778 F.3d 69, 83 n.19 (1st Cir. 2015). However, we agree with the First Circuit that, “as the Supreme Court has described it, . . . uberrimae fidei renders a marine insurance contract voidable—the contract is deemed valid until being voided at the election of the insurer.” Id. (emphasis in original); see Stipcich v. Metro. Life Ins. Co., 277 U.S. 311, 316 (1928) (noting that, for insurance policies subject to the doctrine of uberrimae fidei, “a failure by the insured to disclose conditions affecting the risk, of which he is aware, makes the contract voidable at the insurer’s option”). As Great American seeks a declaration that the Pollution Policy is void, the distinction makes no practical difference here. 13 28 1 778 F.3d 69, 83 (1st Cir. 2015) (“Under uberrimae fidei, when the 2 marine insured fails to disclose to the marine insurer all 3 circumstances known to it and unknown to the insurer which 4 ‘materially affect the insurer’s risk,’ the insurer may void the marine 5 insurance policy at its option.” (emphasis in original) (quoting 6 Windsor Mount Joy Mut. Ins. Co. v. Giragosian, 57 F.3d 50, 55 (1st Cir. 7 1995))). However, “[t]he principle of uberrimae fidei does not require 8 the voiding of the contract unless the undisclosed facts were 9 material and relied upon.” Puritan, 779 F.2d at 871. 10 11 12 B. The Pollution Policy is a Marine Insurance Contract 1. The “Threshold Inquiry”: The Maritime Nature of the Dispute 13 In determining whether a contractual dispute falls within our 14 admiralty jurisdiction, “[s]everal of our cases . . . [have] require[d] 15 that, prior to inquiring into the subject matter of the contract, we 16 first make a ‘threshold inquiry’ into the subject matter of the 17 dispute.” Folksamerica, 413 F.3d at 312. Those cases hold that “a 29 1 federal court must initially determine whether the subject matter of 2 the dispute is so attenuated from the business of maritime commerce 3 that it does not implicate the concerns underlying admiralty and 4 maritime jurisdiction.” Id. (quoting Balfour, 968 F.2d at 200). 5 “[S]ome uncertainty [exists] as to the extent to which this 6 Court’s ‘threshold inquiry’ test survives the Supreme 7 Court’s . . . decision [in Kirby] . . . . [where,] [f]ocusing on the 8 contract subject matter, the [Kirby] Court found admiralty 9 jurisdiction.” Id. at 313. “[T]he absence of any discussion by the 10 Supreme Court [in Kirby] of a ‘threshold inquiry’ akin to that found 11 in our precedents is notable.”14 Id. at 314. “The Supreme Court introduced [Kirby] as ‘a maritime case about a train wreck.’” Folksamerica, 413 F.3d at 313 (quoting Kirby, 543 U.S. at 18). “That decision involved a contract for the transportation of goods from Australia to Alabama.” Id. (citation omitted). “The dispute concerned a railroad s liability for machinery damaged during a train derailment. The machinery had been transported by ship from . . . Australia, to Savannah, Georgia, and was en route from Savannah to Huntsville, Alabama, when the train derailed.” Id. (citation omitted). “The Court focused entirely on the underlying contract . . . . [in] f[inding] admiralty jurisdiction.” Id. 14 30 1 However, we need not resolve that uncertainty here. 2 Assuming the continued vitality of the “threshold inquiry” into the 3 subject matter of the dispute, this case survives it. The dispute over 4 the Pollution Policy concerns insurance coverage for the costs of 5 removing the dry dock and the pollutants it produced upon sinking 6 in navigable waters. The sinking of the dry dock created potential 7 dangers to public health and safety and the environment—matters 8 that would directly impact those who conducted maritime 9 commerce in those waters. 10 Moreover, the parties’ dispute here concerns information 11 provided to an insurer for pollution coverage for a structure used in 12 vessel repair and maintenance. These questions directly implicate 13 the business of maritime commerce. See Folksamerica, 413 F.3d at 313 14 (“The business of ship maintenance has long been recognized as 15 maritime . . . .”); id. at 321 (“Pollution coverage is widely recognized 16 as marine in nature.”); cf. Sirius Ins. Co. (UK) Ltd. v. Collins, 16 F.3d 31 1 34, 36 (2d Cir. 1994) (“There are few objects—perhaps none—more 2 essentially related to maritime commerce than vessels.”). 3 Thus, “the insurance claim [here] . . . has more than a 4 ‘speculative and attenuated’ connection with maritime commerce.” 5 Folksamerica, 413 F.3d at 313 (quoting Balfour, 968 F.2d at 200). 6 Assuming that the threshold inquiry survives Kirby, the dispute here 7 is sufficiently maritime in nature to withstand that inquiry. 8 2. The Maritime Nature of the Pollution Policy 9 Our next inquiry is whether the Pollution Policy itself is 10 sufficiently “marine” to warrant application of federal maritime law, 11 including the doctrine of uberrimae fidei. 12 Fireman’s Fund urges us to consider only the policy’s 13 coverage of the dry dock in determining whether the contract is 14 marine insurance. It maintains that such a “fixed structure drydock” 15 is not a vessel, and thus pollution coverage for the dry dock is not 16 subject to maritime jurisdiction. Fireman’s Fund Br. at 17. 17 Fireman’s Fund argues that this coverage is severable from the 32 1 policy’s coverage of other structures and vessels, as evidenced by 2 the fact that each object listed in the policy’s Schedule of Vessels is 3 subject to a separate premium. 4 Prior to Kirby, this Court had held that admiralty jurisdiction 5 was limited to “contracts, claims, and services [that were] purely 6 maritime.” Folksamerica, 413 F.3d at 314 (quoting Rea v. The Eclipse, 7 135 U.S. 599, 608 (1890)). “A ‘mixed’ contract, i.e., a contract that 8 contain[ed] both admiralty and non admiralty obligations [was], 9 therefore, usually not within admiralty jurisdiction.” Transatlantic 10 Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 109 (2d 11 Cir. 1997). “[T]he general rule that ‘mixed’ contracts f[e]ll outside 12 admiralty jurisdiction” was subject to two exceptions: (1) cases 13 where the “claim [arose] from a breach of maritime obligations that 14 [were] severable from the non maritime obligations of the contract” 15 (“the severability exception”), and (2) cases “where the non 16 maritime elements of a contract [were] merely incidental to the 33 1 maritime ones” (“the incidental exception”). Folksamerica, 413 F.3d 2 at 314 (citations and internal quotation marks omitted). 3 After Kirby, however, we “amended our jurisprudence on 4 maritime contracts.” Williamson v. Recovery Ltd. P ship, 542 F.3d 43, 5 49 (2d Cir. 2008). We held that “[i]n applying what we have 6 previously called the ‘incidental’ exception, we should focus ‘on 7 whether the principal objective of a contract is maritime commerce,’ 8 rather than on whether the non maritime components are properly 9 characterized as more than ‘incidental’ or ‘merely incidental’ to the 10 contract.” Folksamerica, 413 F.3d at 315 (citation omitted) (quoting 11 Kirby, 543 U.S. at 25). 12 We have not yet addressed the impact of Kirby on the 13 severability exception.15 The Ninth Circuit has held that the 14 exception “collapses in the wake of the [Kirby] Court’s conceptually 15 based ‘primary objective’ test.” Sentry Select Ins. Co. v. Royal Ins. Co. In Folksamerica, the plaintiff did not assert that the severability exception applied. See Folksamerica, 413 F.3d at 314. 15 34 1 of Am., 481 F.3d 1208, 1218 (9th Cir. 2007). We need not to resolve 2 the issue here, however. Assuming arguendo that the Pollution 3 Policy is severable and that its coverage of the dry dock should be 4 viewed in isolation, we nonetheless find that the policy is a maritime 5 contract. 6 To reach this conclusion, we consider whether “the primary or 7 principal objective of the [Pollution Policy’s dry dock coverage] is 8 the establishment of policies of marine insurance,” which “depends 9 on whether the insurer assumes risks which are marine risks.” 10 Folksamerica, 413 F.3d at 315, 316 (citations and internal quotation 11 marks omitted). This requires consideration of “the terms of the 12 insurance contract and the nature of the business insured.” Id. at 13 317. 14 As it pertains to the dry dock, the Pollution Policy insures 15 against liability for “accidental discharge or substantial threat of a 16 discharge” from the dry dock “into the navigable waters of the 35 1 United States.” J.A. 724. Coverage includes liability arising under 2 the OPA16 and the FWPCA,17 statutes that hold parties responsible 3 for the release of pollutants into navigable waters. See 33 U.S.C. §§ 4 1321(b)(3), 2702(a). It also extends to “the on water removal of 5 materials . . . [as] mandated by an authorized public authority.” J.A. 6 737. 7 In addition to emissions from the dry dock itself, the policy 8 insures against liability for emissions from “all Vessels while under 9 repair” within “a 100 nautical mile radius” of the Port Arthur 10 dockyard. J.A. 738. Thus, the policy provides coverage for vessels 11 located at the dry dock in connection with Signal’s repair business— The OPA holds parties that are responsible for “a vessel or a facility from which oil is discharged, or which poses the substantial threat of a discharge of oil, into or upon the navigable waters or adjoining shorelines” liable for “removal costs and damages.” 33 U.S.C. § 2702(a). 17 The provision of the FWPCA cited in the Great American Pollution Policy prohibits “[t]he discharge of oil or hazardous substances . . . into or upon the navigable waters of the United States, adjoining shorelines, or into or upon the waters of the contiguous zone . . . in such quantities as may be harmful.” 33 U.S.C. § 1321(b)(3). 16 36 1 the type of business which has “long been recognized as 2 maritime.”18 Folksamerica, 413 F.3d at 313. There is no indication 3 that coverage for vessels located at the dry dock was obtained 4 through the payment of separate premiums. Rather, coverage for 5 such vessels is an extension of the policy’s coverage of the dry dock. 6 See Sirius, 16 F.3d at 37 (noting that the existence of “separately 7 calculated premiums” is relevant in determining severability of 8 insurance contract provisions). We therefore cannot agree with 9 Fireman’s Fund that the policy’s provisions related to the dry dock 10 “did not provide coverage for any potential liabilities associated 11 with the actual repair or maintenance of vessels.”19 Fireman’s Fund Fireman’s Fund argues that Signal’s dry dock operations should be considered non maritime because, in 2009, sixty percent of Signal’s revenue came from ship construction, a non maritime activity. See Kossick v. United Fruit Co., 365 U.S. 731, 735 (1961) (“[A] contract to repair or to insure a ship is maritime, but a contract to build a ship is not.” (citations omitted)). However, Christopher Scott Cunningham, Signal’s Chief Financial Officer, testified that Signal’s construction projects took place at sites other than Port Arthur, and Fireman’s Fund has cited no evidence to the contrary. 19 We are also not persuaded by Fireman’s Fund’s argument that the Pollution Policy is not marine insurance because the dry dock bore no relation to a vessel 18 37 1 Br. 20. 2 We conclude that the primary object of the Pollution Policy’s 3 coverage of the dry dock was to insure against the risk of liability for 4 pollutants emitted during Signal’s ship repair and maintenance 5 operations there. Insurance policies protecting against such risks 6 have long been considered marine in nature. See Folksamerica, 413 7 F.3d at 321 (finding pollution coverage provisions to be marine, 8 given that “[p]ollution coverage is widely recognized as marine in 9 nature,” marine insurance contracts often include pollution 10 coverage, and “[t]he insured’s business operations in oil and cargo 11 transportation 12 significant”); see also Certain Underwriters at Lloyds v. Inlet Fisheries 13 Inc., 518 F.3d 645, 654 (9th Cir. 2008) (“One type of insurance render[ed] pollution coverage potentially or to maritime commerce. Kirby makes clear that the involvement of a vessel (or lack thereof) is not dispositive in determining whether a contract is marine. See Kirby, 543 U.S. at 23 (“To ascertain whether a contract is a maritime one, we cannot look to whether a ship or other vessel was involved in the dispute, as we would in a putative maritime tort case.”). Moreover, given its use in repairing and maintaining vessels, the dry dock itself bore a significant relationship to vessels and to maritime commerce. 38 1 typifying marine insurance is protection and indemnity (‘P & I’) 2 insurance . . . . P & I insurance historically included pollution 3 liability . . . . Vessel pollution policies mirror P & I policies in their 4 general terms, but cover liability under the OPA and other 5 environmental statutes. That vessel pollution insurance covers new 6 statutory liabilities . . . does not alter the fact that the risks of 7 incurring that liability stem from the same vagaries of marine life 8 that have shaped maritime insurance law for centuries.” (citation 9 omitted)). We hold that the Pollution Policy is a marine insurance 10 policy, subject to our admiralty jurisdiction and federal maritime 11 law, including the doctrine of uberrimae fidei.20 We also conclude that the Great American Pollution Policy is not so “inherently local” as to require the application of state law. Kirby, 543 U.S. at 22 23 (citing Kossick, 365 U.S. at 735). This analysis asks “whether . . . the application of state law would . . . disturb the uniformity of maritime law.” Kossick, 365 U.S. at 738. The Supreme Court has recognized that in contract cases, which implicate parties’ voluntary agreements, local interests are generally minimized. See id. at 741. Moreover, application of state law here would disturb the uniformity of maritime law by upsetting parties’ expectations that marine insurance policies are subject to the doctrine of uberrimae fidei. This expectation has significant implications for how both insurers and insureds negotiate such policies and conduct themselves for the duration of those policies. Cf. Jeremy A. Herschaft, 20 39 1 2 C. Signal Violated Its Duty of Utmost Good Faith by Failing To Disclose the Dry Dock’s Condition 3 We turn next to the questions of whether Signal violated its 4 duty of utmost good faith under the doctrine of uberrimae fidei and 5 whether this breach permits Great American to void the Pollution 6 Policy. Under the doctrine, Signal was “bound, although no inquiry 7 be made, to disclose every fact within [its] knowledge that [was] 8 material to the risk [insured against].” 2 Schoenbaum, supra, § 19 14, 9 at 405 06; see Puritan, 779 F.2d at 870. Not Your Average Coffee Shop: Lloyd s of London—A Twenty First Century Primer on the History, Structure, and Future of the Backbone of Marine Insurance, 29 Tul. Mar. L.J. 169, 180 81 (2005). The doctrine provides insurers with assurances that the party in the best position to provide information material to the risk—the insured—will bear the burden of providing such information. See Tradeline, 266 F.3d at 123 (“Uberrimae fidae . . . requires an [insured] to disclose any information that materially affects the risk being insured, because the [insured] is more likely to be aware of such information.”); 2 Schoenbaum, supra, § 19 14, at 404 05 (“Often the insurer lacks the practicable means to verify the accuracy or sufficiency of facts provided by the insured for purposes of establishing the contractual terms.”). The interest in uniform application of the doctrine is especially strong given that marine insurance policies, like the Great American Pollution Policy, frequently provide coverage for properties located in various states and throughout the world. See Kirby, 543 U.S. at 29 (“Confusion and inefficiency will inevitably result if more than one body of law governs a given contract’s meaning.”). Because here “state interests cannot be accommodated without defeating a federal interest [in the uniformity of maritime law], . . . federal substantive law should govern.” Id. at 27. 40 1 We have held that the doctrine “does not require the voiding 2 of the contract unless the undisclosed facts were material and relied 3 upon.” Puritan, 779 F.2d at 871. While both parties acknowledge the 4 materiality requirement, they disagree as to whether reliance is an 5 independent requirement and whether that requirement should 6 apply here. Great American notes that reliance has not been widely 7 discussed in this Circuit since Puritan. It also contends that, to the 8 extent reliance may be required in some circumstances, it should not 9 be required here, because this case involves a “complete non 10 disclosure,” as opposed to a partial, misleading disclosure. 14 1346 11 cv Dkt. No. 264. 12 Citing our decision in Puritan, the Eighth Circuit recently held 13 that materiality and reliance are “distinct elements,” both of which 14 must be proven for the doctrine to apply. See St. Paul Fire & Marine 15 Ins. Co. v. Abhe & Svoboda, Inc., 798 F.3d 715, 720 22 (8th Cir. 2015). 16 “[M]ateriality examines whether a fact would have influenced the 41 1 judgment of a reasonable and prudent underwriter,” id., in deciding 2 whether “to insure at all or at a particular premium,” Tradeline, 266 3 F.3d at 123; see also Sun Mut. Ins. Co., 107 U.S. at 509 10 (holding that 4 nondisclosure permitted avoidance of the contract where, “[h]ad 5 [the undisclosed information] been known, it [was] reasonable to 6 believe that a prudent underwriter would not have accepted the 7 proposal as made”). Reliance, however—according to the Eighth 8 Circuit—requires 9 misrepresentation or concealment of that material fact and the actual 10 underwriter’s decision to issue the policy.” St. Paul Fire, 798 F.3d at 11 722; see Puritan, 779 F.2d at 871 (“[A] marine insurance policy 12 ‘cannot be voided for misrepresentation where the alleged 13 misrepresentation was not relied upon and did not in any way 14 mislead the insurer.’” (quoting Rose & Lucy, Inc. v. Resolute Ins. Co., 15 249 F. Supp. 991, 992 (D. Mass. 1965))). “a causal connection 42 between the 1 We need not decide here whether subjective reliance is 2 required in all cases in order for the doctrine to apply. Even 3 assuming that it is, we find that Signal breached its duty to Great 4 American and that no genuine disputes of fact exist as to either the 5 materiality of Signal’s non disclosures or Great American’s reliance. 6 In applying for the 2009 2010 Pollution Policy, Signal’s 7 insurance broker submitted only Great American’s standard “Vessel 8 Pollution Liability Application” along with a “Schedule of Vessels,” 9 which listed the dry dock. It appears that the only information in 10 those materials related to the dry dock’s condition was that it was 11 built in 1945, that it was constructed from steel, and that its gross 12 tonnage was less than 27,000 tons; neither Signal nor Fireman’s Fund 13 has argued otherwise. Signal did not provide any surveys to Great 14 American when it applied for coverage for the dry dock. 15 Notwithstanding the paucity of relevant information 16 furnished by Signal to Great American, it is undisputed that by 2009 43 1 Signal had in its possession numerous surveys and reports 2 concluding that the dry dock had substantially deteriorated and that 3 necessary long term repairs were not being made. At least one 4 survey estimated that the dry dock’s value was “below zero.” J.A. 5 4216. Signal’s own internal documents and communications with 6 the Heger engineering firm demonstrate its awareness of these 7 concerns. Nevertheless, Signal did not disclose this information to 8 Great American. 9 This undisclosed information was clearly material—that is, it 10 “would have influenced the judgment of a reasonable and prudent 11 underwriter.” St. Paul Fire, 798 F.3d at 722 (emphasis omitted). That 12 multiple engineers and Signal’s own internal staff study described 13 considerable deterioration of the dry dock and Signal’s failure to 14 make recommended repairs over several years was precisely the 15 type of information that would have affected a reasonable insurer’s 16 decision “to insure [the dry dock] at all or [at least] at a particular 44 1 premium.” Tradeline, 266 F.3d at 123. If disclosed, this information 2 would have raised significant concerns about the likelihood of 3 pollutant emissions from the dry dock. Given the nature and 4 abundance of this information and the high likelihood that it would 5 have impacted coverage, there can be no genuine dispute that “a 6 reasonable person in [Signal’s] position would [have] know[n] that 7 [these] particular fact[s] [were] material” and that Signal therefore 8 had a duty to disclose them. Knight, 804 F.2d at 13; see Catlin, 778 9 F.3d at 82 (“[A] hull inspector who surveyed the [drydock] testified 10 that he found ‘heavy wastage’ in the drydock s hull during 11 an . . . inspection. . . . [The insured’s] failure to disclose . . . the 12 [drydock’s] level of deterioration [when it applied for 13 insurance] . . . [is a] material fact[], the nondisclosure of which 14 violates uberrimae fidei.”). 15 There is also no genuine dispute that in “decid[ing] to issue 16 the policy,” St. Paul Fire, 798 F.3d at 720, the underwriters at Great 45 1 American in fact relied upon the absence of this undisclosed 2 information from Signal’s application materials. Cindy Stringer, the 3 Great American underwriter who evaluated the Pollution Policy 4 applications from 2005 to 2010,21 testified at her deposition that, “had 5 I been able to read [the] [undisclosed] surveys, I definitely would 6 have been concerned . . . . If I had known [the dry dock] was in bad 7 shape, and Signal told me they were going to fix it up, . . . more than 8 likely, I would have told them I didn’t want to cover that vessel until 9 they completed all the recommendations.” J.A. 6440. She further 10 stated that, “[i]f I knew that the wing walls were in poor condition, I 11 definitely [would have] want[ed] to know what was being done 12 about it.” J.A. 6445. 13 Stringer’s testimony also established that, in agreeing to 14 underwrite the policy, she was acting on the understanding that Another underwriter, Charles Dillon, underwrote the original Pollution Policy in 2004. Stringer took over the account when Dillon left Great American in 2005. 21 46 1 Signal was complying with its duty of utmost good faith. She 2 testified as follows: 3 4 5 6 7 8 9 10 If the insured had information that could materially affect our policy, it would be their obligation to furnish us with that information. . . . [F]or example, if you were to read a survey that said that you had a vessel that was about ready to collapse or something like that, that would be something that you should bring to the attention of your broker, who would then bring it to our attention. 11 J.A. 6443. She also opined that “it would be common sense if you 12 had a vessel that was about ready to collapse or in danger of sinking 13 or something like that, you would definitely want to let somebody 14 know about it,” because “if a prudent insured [is] aware of a 15 condition that would put a vessel in jeopardy, . . . they owe the duty 16 to let underwriters know of that condition.” J.A. 6444. 17 Reese Lever, an underwriter who worked with Stringer on the 18 2009 renewal of the Pollution Policy,22 similarly testified that, if 19 Signal was “doing repairs on a vessel, . . . if they’re major repairs, it’s 22 According to Stringer, Lever compiled the renewal and Stringer approved it. 47 1 something we’d want to know about,” and that “it’s common sense 2 you’d want to let your insurers know that you’re repairing these 3 vessels.” J.A. 6431. Lever explained that, in his view, “it goes back 4 to the duty of utmost good faith. If there are vessels that have 5 problems, the underwriter should be aware of it.” J.A. 6431. 6 Fireman’s Fund argues that Signal did not have an obligation 7 to provide the undisclosed information because Great American did 8 not request surveys or additional information about the dry dock’s 9 condition as part of its underwriting criteria or application. 10 However, under the doctrine of uberrimae fidei, Great American was 11 not obligated to request such information. See Knight, 804 F.2d at 13 12 (“Since the [insured] is in the best position to know of any 13 circumstances material to the risk, he must reveal those facts to the 14 underwriter, rather than wait for the underwriter to inquire.” (emphasis 15 added)). Instead, Great American was entitled make its decision to 16 underwrite the policy based on the information that Signal 48 1 provided, secure in the knowledge that Signal was under a duty of 2 utmost good faith that required it to disclose all information 3 material to the risk insured against. See Tradeline, 266 F.3d at 123; 2 4 Schoenbaum, supra, § 19 14, at 404 06. 5 Fireman’s Fund also argues that a genuine dispute exists as to 6 whether the undisclosed information was material because Great 7 American agreed to insure another dry dock owned by Signal (“the 8 Bender dry dock”) under the Pollution Policy after the Port Arthur 9 dry dock sank, despite receiving a survey that “raised concerns” 10 about the Bender dry dock’s condition. J.A. 6019. For several 11 reasons, we are not persuaded. First, although Lever testified that 12 he considered several points in the Bender dry dock survey 13 significant to his underwriting analysis,23 none of those conditions 14 rose to the level of extensive dilapidation described in the 15 undisclosed reports regarding the Port Arthur dry dock. Moreover, The survey of the Bender dry dock does not appear in the record. The only evidence of its contents is Lever’s deposition testimony. 23 49 1 unlike the Bender dry dock, the available information regarding the 2 Port Arthur dry dock’s condition was not limited to an isolated 3 survey. Rather, the undisclosed information at issue here consisted 4 of reports by multiple engineers and risk management professionals 5 (and Signal itself) over a period of more than seven years that 6 contained corroborating accounts of extensive dry dock 7 deterioration and Signal’s continued failure to make recommended 8 long term repairs. In light of these significant distinctions, Great 9 American’s decision to insure the Bender dry dock does not raise 10 any genuine dispute as to whether the undisclosed information 11 regarding the Port Arthur dry dock was material and relied upon. 12 We conclude that Signal breached its duty of utmost good 13 faith by failing to disclose information about the dry dock’s 14 condition to Great American. Because this information was both 15 material and relied upon, Great American is entitled to void the 16 Pollution Policy. See Puritan, 779 F.2d at 871; see also Catlin, 778 F.3d 50 1 at 83 (“[T]he evidence conclusively shows that [the insured] failed to 2 disclose material information about the [dry dock’s] actual value 3 and preexisting deteriorated condition prior to [the insurer] 4 determining whether it would accept the risk. [The insurer] was 5 free, therefore, to void the policy.”). We affirm the district court’s 6 grant of Great American’s motion for summary judgment and its 7 denial of Fireman’s Fund and Signal’s cross motions. 8 II. MSI’s Excess Property Insurance Policy 9 We next consider the EPI Policy issued by MSI. The district 10 court held that the EPI Policy was not a maritime contract, Fireman s 11 Fund Ins. Co. v. Great Am. Ins. Co. of New York, No. 10 Civ. 1653 (JPO), 12 2013 WL 311084, at *5 (S.D.N.Y. Jan. 25, 2013), a conclusion that is 13 not challenged on appeal.24 Nevertheless, the court found that the The district court concluded that the dry dock was not a “vessel” under Lozman v. City of Riviera Beach, U.S. , 133 S. Ct. 735 (2013), see Fireman’s Fund, 2013 WL 311084, at *3 5, and that “the vessel status of the Drydock was relevant [to the question of whether the EPI Policy was a marine insurance contract] because it informed the primary purpose of the PPI and EPI Policies[] and . . . was dispositive because the Drydock was ‘by far’ the largest piece of property 24 51 was void under Mississippi law for 1 policy 2 material misrepresentation. Fireman’s Fund, 10 F. Supp. 3d at 503. 3 Fireman’s Fund argues that the district court erred in holding 4 that the EPI Policy was governed by Mississippi law rather than 5 Texas law. Alternatively, it contends that, even if Mississippi law 6 applies, the court erred in its application of that state law. For the 7 reasons below, we reject both arguments. insured” under those policies, Fireman’s Fund, 10 F. Supp. 3d at 479. The court did not find the dry dock’s status to be similarly dispositive of the question of whether the Great American Pollution Policy was a marine insurance contract. See id. We need not review the district court’s conclusion that the EPI Policy was a non maritime contract. Although MSI originally filed a cross appeal challenging that conclusion, MSI later moved to withdraw its cross appeal without prejudice to re filing if we ordered a remand in the appeals considered here. We granted the motion, and therefore the question of whether the EPI Policy is a maritime contract is not before us. 52 1 A. Mississippi Law Governs the EPI Policy 2 1. New York Choice of Law Rules 3 “We review the district court’s choice of law de novo.” Fin. 4 One Pub. Co. v. Lehman Bros. Special Fin., Inc., 414 F.3d 325, 331 (2d 5 Cir. 2005). 6 “A federal court sitting in diversity . . . must apply the choice 7 of law rules of the forum state.” Rogers v. Grimaldi, 875 F.2d 994, 8 1002 (2d Cir. 1989). “Generally, [New York] courts will enforce a 9 choice of law clause so long as the chosen law bears a reasonable 10 relationship to the parties or the transaction.” Welsbach Elec. Corp. v. 11 MasTec N. Am., Inc., 859 N.E.2d 498, 500 (N.Y. 2006) (citation 12 omitted). This is because “[a] basic precept of contract interpretation 13 is that agreements should be construed to effectuate the parties’ 14 intent.” Id. (citations omitted). 15 Where a choice of law clause is not dispositive, “[t]he first 16 step . . . is to determine whether there is an actual conflict between 17 the laws of the jurisdictions involved.” In re Allstate Ins. Co. (Stolarz), 53 1 613 N.E.2d 936, 937 (N.Y. 1993); see 28 Glen Banks, New York Practice 2 Series: New York Contract Law § 8:4 (2015) (“If the contract has no 3 choice of law clause and the laws of different jurisdictions could 4 apply, New York courts may undertake a choice of law analysis. 5 The first step in any case presenting a potential choice of law issue is 6 to determine whether there is an actual conflict between the laws of 7 the jurisdictions involved.”). If an actual conflict exists, New York 8 applies “[t]he ‘center of gravity’ or ‘grouping of contacts’ choice of 9 law theory.” Stolarz, 613 N.E.2d at 939. 10 11 12 13 14 15 16 [A]pplication of the “grouping of contacts” theory to choice of law disputes “gives . . . the place having the most interest in the problem paramount control over the legal issues arising out of a particular factual context, thus allowing the forum to apply the policy of the jurisdiction most intimately concerned with the outcome of the particular litigation[.]” 17 In re Liquidation of Midland Ins. Co., 947 N.E.2d 1174, 1179 (N.Y. 2011) 18 (quoting Auten v. Auten, 124 N.E.2d 99, 102 (N.Y. 1954)). “[B]y 19 stressing the significant contacts, [this analysis] enables the court, 20 not only to reflect the relative interests of the several jurisdictions 54 1 involved, but also to give effect to the probable intention of the 2 parties and consideration to ‘whether one rule or the other produces 3 the best practical result[.]’” Auten, 124 N.E.2d at 102 (citations 4 omitted) (quoting Swift & Co. v. Bankers Trust Co., 19 N.E.2d 992, 995 5 (N.Y. 1939)). 6 “Under this approach, the spectrum of significant contacts— 7 rather than a single possibly fortuitous event—may be 8 considered[.]” Stolarz, 613 N.E.2d at 939 (citation omitted). “[T]he 9 New York Court of Appeals has endorsed the following 10 factors (identified in the Restatement [(Second) of Conflict of Laws]): 11 ‘the places of negotiation and performance; the location of the 12 subject matter; and the domicile or place of business of the 13 contracting parties.’” Schwartz v. Liberty Mut. Ins. Co., 539 F.3d 135, 14 151 52 (2d Cir. 2008) (quoting Zurich Ins. Co. v. Shearson Lehman 15 Hutton, Inc., 642 N.E.2d 1065, 1068 (N.Y. 1994)). 55 1 “Critical to a sound analysis, however, is selecting the contacts 2 that obtain significance in the particular contract dispute.” Stolarz, 3 613 N.E.2d at 939. The New York Appellate Divisions have 4 repeatedly recognized that “‘where the insured risk is scattered 5 throughout multiple states, [New York] courts . . . deem the risk to 6 be located principally in one state,’ namely, in the state of the 7 insured’s domicile at the time the policy was issued,” and thus have 8 held that “the state of the insured s domicile should be regarded as a 9 proxy for the principal location of the insured risk.” Certain 10 Underwriters at Lloyd s v. Foster Wheeler Corp., 822 N.Y.S.2d 30, 35, 36 11 (App. Div. 1st Dep’t 2006) (emphasis added) (quoting Md. Cas. Co. v. 12 Cont l Cas. Co., 332 F.3d 145, 153 (2d Cir. 2003)), aff’d, 876 N.E.2d 500 13 (N.Y. 2007).25 These courts have noted that “[t]he state of the Accord Jimenez v. Monadnock Constr., Inc., 970 N.Y.S.2d 577, 580 81 (App. Div. 2d Dep’t 2013) (“Where the covered risks are spread over multiple states, ‘the state of the insured’s domicile should be regarded as a proxy for the principal location of the insured risk[.]’” (quoting Midland, 947 N.E.2d at 1179)); FC Bruckner Assocs., L.P. v. Fireman s Fund Ins. Co., 944 N.Y.S.2d 84, 85 (App. Div. 1st Dep’t 2012) (“[A]s we noted in Foster Wheeler with respect to a choice of law analysis 25 56 1 insured’s domicile is a fact known to the parties at the time of 2 contracting, and . . . application of the law of that state is most likely 3 to conform to their expectations.” Id. at 34 35. 4 2. Choice of Law Governing the EPI Policy 5 Fireman’s Fund argues that the district court erred by treating 6 “the state of the insured’s domicile [as] determinative” of the choice 7 of law analysis, Fireman’s Fund, 10 F. Supp. 3d at 496, and by 8 alternatively holding that the grouping of contacts analysis favors 9 application of Mississippi law over Texas law. 26 for insurance policies covering multistate risks, ‘[t]he state of the insured’s domicile is a fact known to the parties at the time of contracting, and (in the absence of a contractual choice of law provision) application of the law of that state is most likely to conform to their expectations[.]’” (quoting Foster Wheeler, 822 N.Y.S.2d at 34 35)); Liberty Surplus Ins. Corp. v. Nat l Union Fire Ins. Co. of Pittsburgh, Pa., 888 N.Y.S.2d 35, 36 (App. Div. 1st Dep’t 2009); Travelers Cas. & Sur. Co. v. Honeywell Int l, Inc., 880 N.Y.S.2d 66, 67 (App. Div. 1st Dep’t 2009); Appalachian Ins. Co. v. Riunione Adriatic Di Sicurata, 875 N.Y.S.2d 57, 58 (App. Div. 1st Dep’t 2009); cf. Lapolla Indus., Inc. v. Aspen Specialty Ins. Co., 566 F. App’x 95, 97 (2d Cir. 2014) (summary order) (citing Foster Wheeler, 822 N.Y.S.2d at 34, 37); Midland, 947 N.E.2d at 1179. 26 The district court found that Mississippi law and Texas law are in conflict regarding the circumstances under which a contract may be voided for misrepresentation. Fireman’s Fund, 10 F. Supp. 3d at 494 95. We agree. Compare Carroll v. Metro. Ins. & Annuity Co., 166 F.3d 802, 805 (5th Cir. 1999) (“Under 57 1 As a preliminary matter, we must determine if the district 2 court looked to the wrong “insured” in its choice of law analysis. 3 Signal claimed that its subsidiary, Signal International Texas L.P. 4 (“Signal Texas”), which is domiciled in Texas, owned and operated 5 the dry dock, so the relevant domicile of the insured is therefore 6 Texas. 7 However, contrary to this claim, there is no genuine dispute 8 that Signal International, LLC, was the relevant insured under the 9 EPI Policy. Signal’s consultant and former Senior Vice President of 10 Texas Operations, John Haley, stated in his affidavit that “Signal 11 International, L.L.C. . . . was the owner and operator of the AFDB 5 12 Drydock.” J.A. 1852. Furthermore, the EPI Policy itself names Mississippi law, if an applicant for insurance is found to have made a misstatement of material fact in the application, the insurer that issued a policy based on the false application is entitled to void or rescind the policy. . . . Whether the misrepresentation was intentional, negligent, or the result of mistake or oversight is of no consequence.”), with Mayes v. Mass. Mut. Life Ins. Co., 608 S.W.2d 612, 616 (Tex. 1980) (“It is now settled law in this state that . . . before [an] insurer may avoid a policy because of the misrepresentation of the insured . . . [the insurer must prove] the intent to deceive on the part of the insured in making [the representation] . . . .”). 58 1 “Signal International, LLC” as the “Insured[],” with an address in 2 Pascagoula, Mississippi. J.A. 168. Although the PPI Policy identifies 3 “[t]he First Named Insured” as “Signal International, LLC and any 4 owned . . . subsidiary,” J.A. 283, the PPI Policy identifies only Signal 5 International, LLC, by name and lists a Mississippi address for the 6 First Named Insured. Both the EPI Policy and the PPI Policy 7 therefore evince the parties’ understanding that the insured was 8 Signal International, LLC, which was domiciled in Mississippi. 9 Moreover, an analysis that would look to a subsidiary of the 10 insured based on the particular loss that triggered coverage would 11 be at odds with New York’s choice of law rules. Under New York 12 law, “barring extraordinary circumstances, only one state’s law 13 should govern an insurance agreement.” Md. Cas. Co., 332 F.3d at 14 153. New York courts have declined to look to the location of an 15 insured’s subsidiaries in determining choice of law, because 16 “applying multiple states’ laws to the enforcement of a single 59 1 insurance policy ‘defies the law as well as the traditional concerns of 2 judicial economy and uniformity.’” See FC Bruckner Assocs., L.P. v. 3 Fireman s Fund Ins. Co., 944 N.Y.S.2d 84, 85 86 (App. Div. 1st Dep’t 4 2012) (ellipses omitted) (quoting Wausau Bus. Ins. Co. v. Horizon 5 Admin. Servs. LLC, 803 F. Supp. 2d 209, 216 (E.D.N.Y. 2011)). 6 We therefore conclude that, in determining what law governs 7 the EPI Policy, the relevant insured is Signal International LLC, and 8 its domicile is Mississippi.27 9 Fireman’s Fund argues that the district court erred by treating 10 the insured’s domicile as dispositive of the choice of law analysis. Fireman’s Fund claims that Signal was domiciled both in Mississippi—“its principal office” at the time of contracting—and Delaware, “its place of incorporation.” Fireman’s Fund Br. at 57. However, where “the state of [a corporate insured’s] principal place of business [and] the state of its incorporation . . . are not the same state[,] . . . the state of the principal place of business takes precedence over the state of incorporation” for the choice of law analysis. Foster Wheeler, 822 N.Y.S.2d at 36; see Honeywell, 880 N.Y.S.2d at 67 (“[F]or [choice of law] purposes, a corporate insured’s domicile is the state of its principal place of business, not the state of its incorporation.” (citations omitted)); cf. Certain Underwriters at Lloyds of London v. Ill. Nat’l Ins. Co., 553 F. App’x 110, 111 12 (2d Cir. 2014) (summary order) (citing Foster Wheeler and applying law of the insured’s principal place of business); Restatement (Second) of Conflict of Laws § 188 cmt. e (1971) (“At least with respect to most issues, a corporation’s principal place of business is a more important contact than the place of incorporation . . . .”). 27 60 1 To the contrary, though, under New York law, the law of Signal’s 2 domicile governs the EPI Policy since the policy covers risks spread 3 across multiple states. See, e.g., Lapolla, 566 F. App’x at 97; Foster 4 Wheeler, 822 N.Y.S.2d at 34 36; cf. Midland, 947 N.E.2d at 1179. 5 Nevertheless, even if the totality of the relevant contacts is 6 considered, the result is the same. The EPI Policy’s “Declarations” 7 page states that “[t]his Insurance policy is issued pursuant to 8 Mississippi law covering surplus lines insurance.” J.A. 168. The 9 same page contains information specific to the Signal policy, 10 including the insured, the covered property, and the policy 11 premium.28 Signal’s 2009 2010 Property Insurance Submission also Fireman’s Fund argues that another page of the EPI Policy supports the application of Texas law. The page states that “[t]his insurance contract is with an insurer not licensed to transact insurance in this state and is issued and delivered as surplus line coverage under the Texas Insurance statutes.” J.A. 166. “Surplus lines insurance allows a person who seeks to insure a Texas risk but is unable to obtain that insurance from a Texas licensed insurer to seek the insurance from an insurer who is not licensed in Texas but is an ‘eligible’ surplus lines insurer.” Strayhorn v. Lexington Ins. Co., 128 S.W.3d 772, 775 (Tex. App. 2004) (quoting Tex. Ins. Code Ann. § 981.001), aff’d, 209 S.W.3d 83 (Tex. 2006). “A surplus lines insurer is, by definition, not authorized to issue insurance in Texas. [However,] Texas law permits surplus line insurers to provide insurance in Texas 28 61 1 listed Mississippi as the choice of law for the property policies. In 2 addition, in its preliminary claim statement for coverage after the 3 dry dock sank, Signal stated that the EPI Policy was “issued to a 4 Mississippi insured,” ” delivered to Signal’s offices in Mississippi,” 5 and “subject to Mississippi law and jurisdiction.” J.A. 6462. These 6 documents demonstrate the parties’ understanding that Mississippi 7 law would apply to the policy. 8 The balance of the other choice of law factors does not clearly 9 favor the law of one state over another. The EPI Policy was 10 negotiated in Virginia and New York. Performance of the contract 11 was to take place in Texas and Mississippi, and the value of the 12 assets insured by the EPI Policy was split almost evenly between if the insurer . . . meets certain requirements” under the Texas Insurance Code. Chandler Mgmt. Corp. v. First Specialty Ins. Corp., 452 S.W.3d 887, 893 (Tex. App. 2014) (citations omitted). The fact that Signal was able to obtain the EPI Policy as surplus lines insurance from MSI in accordance with Texas law does not answer the question of what state’s law the parties intended to govern the substance of the policy itself. The designation of Mississippi law on the “Declarations” page of the policy, combined with Signal’s designation of Mississippi as the applicable choice of law in its 2009 2010 Property Insurance Submission and preliminary claim statement after the loss of the dry dock, demonstrates that the parties intended Mississippi law to govern the policy. 62 1 those two states. Signal is domiciled in Mississippi, and MSI is 2 domiciled in Virginia. 3 The mere presence of the dry dock in Texas does not give 4 Texas an overriding interest in having its law govern the policy. 5 “[T]his is merely a dispute over who—[the insured or the insurer]— 6 must bear the cost[s]” related to the loss of the dry dock. Md. Cas. 7 Co., 332 F.3d at 155. “[T]he interest [of a state in which a covered 8 item is located] diminishes when the question is not whether 9 someone will or can pay for the cleanup but rather who will pay.” 10 Id. (internal quotation marks omitted). 11 Because the parties’ understanding and the insured’s domicile 12 favor application of Mississippi law, while the other choice of law 13 factors do not favor the law of any one particular state, Mississippi 14 has the “most significant relationship to the transaction and the 15 parties,” such that Mississippi law governs the EPI Policy. Midland, 16 947 N.E.2d at 1179 (quoting Zurich Ins. Co., 642 N.E.2d at 1068). 63 1 2 B. MSI Was Entitled to Void the EPI Policy under Mississippi Law 3 Fireman’s Fund next argues that, even if Mississippi law 4 governs the EPI Policy, the district court’s grant of summary 5 judgment to MSI was error. It contends that MSI failed to show that 6 the requirements to void a contract for material misrepresentation 7 were met, or that, at the very least, genuine disputes of fact preclude 8 summary judgment. 9 10 1. Material Misrepresentation under Mississippi Common Law 11 “Under Mississippi law, if an applicant for insurance is found 12 to have made a misstatement of material fact in the application, the 13 insurer that issued a policy based on the false application is entitled 14 to void or rescind the policy.”29 Carroll v. Metro. Ins. & Annuity Co., Although the district court and several courts applying Mississippi law have concluded that material misrepresentation renders a contract void ab initio, see Fireman’s Fund, 10 F. Supp. 3d at 465, 495; Republic Fire & Cas. Ins. Co. v. Azlin, No. 4:10 CV 037 SA JMV, 2012 WL 4482355, at *6 (N.D. Miss. Sept. 26, 2012); Dukes v. S.C. Ins. Co., 590 F. Supp. 1166, 1169 (S.D. Miss. 1984), aff d, 770 F.2d 545 (5th Cir. 1985), the Mississippi Supreme Court has recently stated that “the longstanding, well established law of this State renders voidable a policy issued 29 64 1 166 F.3d 802, 805 (5th Cir. 1999). Thus, “[i]n making . . . 2 underwriting decisions, insurers have the right to rely on the 3 information supplied in the application.” Id. at 805 06. “To establish 4 that, as a matter of law, a material misrepresentation has been made 5 in an insurance application, (1) it must contain answers that are 6 false, incomplete, or misleading, and (2) the false, incomplete, or 7 misleading answers must be material to the risk insured against or 8 contemplated by the policy.” Id. at 805 (emphasis omitted). 9 10 11 12 13 14 15 16 17 “Whether the misrepresentation was intentional, negligent, or the result of mistake or oversight is of no consequence.” Id. If the applicant for insurance undertakes to make a positive statement of a fact, if it be material to the risk, such fact must be true. It is not sufficient that he believes it true, but it must be so in fact, or the policy will be avoided, provided, always, that the misstatement be about a material matter. as a result of material misrepresentations,” Jones Smith v. Safeway Ins. Co., 174 So. 3d 240, 242 (Miss. 2015). As MSI sought a declaration that the EPI Policy is void, the distinction makes no practical difference here. 65 1 Prudential Ins. Co. of Am. v. Estate of Russell, 274 So. 2d 113, 116 (Miss. 2 1973) (emphasis omitted) (quoting Fid. Mut. Life Ins. Co. v. Miazza, 46 3 So. 817, 819 (Miss. 1908)); see also Miazza, 46 So. at 819 (“If the 4 misstatement is material, it can make no difference as to whether or 5 not it was made in good faith.”). 6 “A misrepresentation in an insurance application is material if 7 knowledge of the true facts would have influenced a prudent 8 insurer in determining whether to accept the risk.” Carroll, 166 F.3d 9 at 805. “Stated differently, a fact is material if it might have led a 10 prudent insurer to decline the risk, accept the risk only for an 11 increased premium, or otherwise refuse to issue the exact policy 12 requested by the applicant.” Id. 13 14 2. The EPI Policy’s Concealment Clause Did Not Require MSI to Prove “Intent to Deceive” 15 Fireman’s Fund argues that, in order to void the EPI Policy, 16 MSI was required to prove that Signal intended to deceive MSI 66 1 when it applied for insurance, regardless of whether Mississippi 2 common law would require such intent. We disagree. 3 The EPI policy’s “Concealment, Misrepresentation or Fraud” 4 clause (“the concealment clause”) provides that “[t]his Coverage 5 Part is void in any case of fraud by the Insured as it relates to this 6 Coverage Part at any time. It is also void if the named insured or 7 any other insured, at any time, intentionally conceal or misrepresent 8 a material fact . . . .” J.A. 172 (emphasis added). 9 However, although the policy’s concealment clause permits 10 the insurer to void the policy where concealment or 11 misrepresentation is intentional, it does not state that this is the 12 exclusive ground upon which the contract may be voided. Under 13 Mississippi law, “[w]hether the misrepresentation was intentional, 14 negligent, or the result of mistake or oversight is of no consequence” 15 in determining whether an insurer may void a policy for 16 misrepresentation or concealment. Carroll, 166 F.3d at 805. Nothing 67 1 in the EPI Policy indicates that the concealment clause was intended 2 to foreclose MSI’s right to void a policy for material 3 misrepresentation as provided under Mississippi law, and we 4 decline to read such a limitation into the policy. Cf. Ivison v. Ivison, 5 762 So. 2d 329, 336 (Miss. 2000) (“It is fundamental in contract law 6 that courts cannot make a contract where none exists, nor can they 7 modify, add to, or subtract from the terms of a contract already in 8 existence.”).30 We therefore conclude that MSI was not required to 9 prove that Signal intended to deceive it in order to void the policy. 10 11 12 3. MSI Was Not Required To Request “Answers” on an “Application” To Void the Policy for Material Misrepresentation 13 Fireman’s Fund next argues that MSI could not void the EPI 14 Policy on grounds of material misrepresentation because MSI did 15 not demonstrate that Signal made any false or misleading “answers” We note that at least one court applying Mississippi law, when confronted with a concealment clause nearly identical to the clause present here, permitted the insurer to seek to void the insurance policy under alternative theories of material misrepresentation and breach of the concealment clause, while recognizing that the latter required the statements to be “knowingly and willfully made” and the former did not. See Azlin, 2012 WL 4482355, at *5 12. 30 68 1 on an insurance “application.” See, e.g., Carroll, 166 F.3d at 805 (“To 2 establish that . . . a material misrepresentation has been made in an 3 insurance application, . . . it must contain answers that are false, 4 incomplete, or misleading . . . .”). It argues that MSI did not receive 5 any false “answers” from Signal, since it did not require Signal to 6 complete a standard application in order to obtain the policy. 7 Instead, Signal provided a property insurance submission of its own 8 creation (the 2009 2010 Property Insurance Submission), which 9 included the 2009 Heller Report and a “Statement of Values.” The 10 Statement of Values described the dry dock’s value as $13.6 million, 11 and the Heller Report described the possibility of the dry dock 12 sinking as a “worst case scenario” “of extremely low probability.” 13 J.A. 2269, 2298 99. Fireman’s Fund claims that Signal had no 14 affirmative duty to provide further information about the dry dock 15 in the absence of a request from MSI. 16 We are not persuaded by these arguments. While Mississippi 69 1 has frequently addressed the doctrine of material misrepresentation 2 in the context of traditional insurance applications, the Mississippi 3 Supreme Court has recognized that the doctrine arises from “a 4 principle of general application”—“the universal rule that any 5 contract induced by misrepresentation or concealment of material 6 facts may be avoided by the party injuriously affected thereby.” 7 Prudential, 274 So. 2d at 116 (emphasis omitted) (quoting Miazza, 46 8 So. at 819); cf. Dukes v. S.C. Ins. Co., 590 F. Supp. 1166, 1169 (S.D. 9 Miss. 1984) (“[T]he Plaintiff’s suit must fail in that the policy of 10 insurance should be declared void ab initio [for material 11 misrepresentation under Mississippi law]. This is simply a general 12 principal of contract law which the special nature of insurance contracts 13 does not alter.” (emphasis added)), aff d, 770 F.2d 545 (5th Cir. 1985). 14 “The omission or concealment of material facts can constitute a 15 misrepresentation, just as can a positive, direct assertion.” Davidson 16 v. Rogers, 431 So. 2d 483, 484 85 (Miss. 1983). 70 1 It would be inconsistent with these principles to hold—as 2 Fireman’s Fund suggests—that Signal could not misrepresent the 3 dry dock’s condition simply because MSI accepted a submission of 4 Signal’s own creation in agreeing to underwrite the policy. 5 Although MSI did not require Signal to complete a standardized 6 application, Signal nonetheless made affirmative representations 7 about the dry dock (by providing MSI with the Statement of Values 8 and the 2009 Heller Report) in order to induce MSI to insure it.31 9 When Signal provided this information, it was required to do so in a 10 way that was not misleading, because “[i]n making [its] 11 underwriting decision[], [MSI] ha[d] the right to rely on the 12 information supplied.” Carroll, 166 F.3d at 805; see also Golden Rule 13 Ins. Co. v. Hopkins, 788 F. Supp. 295, 301 (S.D. Miss. 1991) (“[T]he This case is therefore distinguishable from those cited by Fireman’s Fund which hold that, under Mississippi law, an “[insurance] company has no right to rescind [a] policy because there was information, not asked for on the application and not volunteered by the applicant, the knowledge of which would have caused the company to refuse to insure.” Mattox v. W. Fid. Ins. Co., 694 F. Supp. 210, 216 (N.D. Miss. 1988) (emphasis added). Here, although it was not requested on a standardized application, Signal volunteered information about the dry dock’s condition. 31 71 misrepresentation’ standard [under 1 ‘innocent Mississippi 2 law] . . . operates to the benefit of the misinformed insurance 3 company.”); cf. Prudential, 274 So. 2d at 116 (“If the applicant for 4 insurance undertakes to make a positive statement of a fact, if it be 5 material to the risk, such fact must be true.” (emphasis omitted) 6 (quoting Miazza, 46 So. at 819)). 7 By providing MSI with the Statement of Values and only the 8 2009 Heller Report, Signal represented (1) that the dry dock was 9 valued at $13.6 million, (2) that Signal was operating its facilities— 10 including the Port Arthur dockyard—in accordance with 11 “[a]cceptable standards including some industry best practices,” J.A. 12 1318, and (3) that the likelihood of the dry dock sinking was a 13 “worst case scenario . . . of extremely low probability,” J.A. 2298 99. 14 Signal made these representations despite knowing that (1) multiple 15 engineers—and its own employees—had concluded over several 16 years that the dry dock was in poor condition, in need of extensive 72 1 and costly repairs, and nearing the end of its useful life, (2) several 2 engineers had concluded that the dry dock was not operating safely 3 and that extensive repairs would be required before Signal could 4 attempt to reconfigure the dry dock to extend its life, and (3) Signal 5 was not undertaking the long term repairs that these engineers had 6 recommended. By selectively providing only positive information 7 about the dry dock’s condition, while failing to disclose the 8 substantial and multiple sources of information in its possession that 9 called these positive reports into question, Signal’s representations 10 to MSI amounted to a misrepresentation of the dry dock’s 11 condition.32 See Davidson, 431 So. 2d at 484 85. If material, this Fireman’s Fund argues that the 2009 2010 Property Insurance Submission was sufficient to put MSI on notice that it should inquire about possible deficiencies in the dry dock’s condition. See Mass. Mut. Life Ins. Co. v. Nicholson, 775 F. Supp. 954, 960 (N.D. Miss. 1991) (“[T]he insurance company has the right to rely on the information contained in the application, as long as the insurance company did not have ‘sufficient indications that would have put a prudent man on notice.’” (citation omitted) (quoting N.Y. Life Ins. Co. v. Strudel, 243 F.2d 90, 93 (5th Cir. 1957))). We disagree. Nothing in Signal’s submission suggested that the dry dock was dilapidated, that repairs were not being made, or that it was nearing the end of its useful life. The Heller Report’s reference to the sinking of the dry 32 73 1 misrepresentation provided a basis for MSI to void the policy under 2 Mississippi law. 3 4 4. Signal’s Misrepresentation Was Material and Induced MSI To Issue the EPI Policy 5 Fireman’s Fund argues that MSI failed to show that any 6 misrepresentation that Signal might have made regarding the dry 7 dock was material or relied upon in MSI’s decision to underwrite the 8 EPI Policy. It also argues that, at the very least, there are genuine 9 disputes of fact that should have precluded summary judgment on 10 these issues. 11 We disagree. The EPI Policy insured against business 12 interference and extra expenses resulting from the loss of specific 13 properties, including the dry dock. Information that the dry dock 14 had been appraised as having a negative value, had been described 15 as dilapidated and nearing the end of its useful life, and had not 16 undergone long term repairs (despite the recommendations of dock as a worst case scenario did not put MSI on notice of the need to inquire more fully about its condition before agreeing to underwrite the policy. 74 1 multiple engineers over several years) would be highly relevant to a 2 “prudent insurer[’s]” decision to underwrite the policy, since such 3 information—if investigated and discovered to be true—would 4 indicate an increased risk of loss. See Carroll, 166 F.3d at 805. 5 Signal’s experience in applying for hull insurance prior to 6 applying for the EPI Policy also demonstrates the materiality of the 7 undisclosed information and Signal’s knowledge that it was 8 material. In 2005, Signal’s insurance broker, Willis of Alabama, Inc., 9 applied for hull insurance for the dry dock by submitting the 2002 10 Heger Report to two insurance providers—Fireman’s Fund 11 Insurance Company (“FFIC”) and Trident Marine (“Trident”). The 12 FFIC underwriter inquired as to what repairs had been made, 13 observing that “[t]he [a]ppraisal [in the 2002 Heger report] reflects 14 an ‘Inside the United States’ net value of ($1,150,00) less than zero” 15 and that he was “going have a tough time convincing anybody” to 16 provide the requested insurance. J.A. 4251. Trident’s underwriter 75 1 similarly questioned whether any repairs had been made, noting 2 that, according to the 2002 Heger report, “the pontoon deck of all 3 sections was found to be in poor condition and should be replaced” 4 and “Section H was also in poor condition.” J.A. 4253. The 5 underwriter stated that Trident “would need confirmation from the 6 [insured] that this was taken care of before [Trident] could commit 7 to cover [the dry dock].” Id. Thus, in both instances, the 8 underwriters considered the 2002 Heger Report’s documented 9 concerns about the dry dock significant to their underwriting 10 decisions. Signal’s disclosure of the report permitted these 11 insurers—unlike MSI—to undertake a further investigation of the 12 dry dock’s condition before agreeing to underwrite the policy and at 13 a particular premium. 14 We therefore find that there is no genuine dispute that 15 Signal’s misrepresentation to MSI—which presented only positive 16 information regarding the dry dock’s condition while omitting 76 1 contrary information like the 2002 Heger Report—was material. See 2 Carroll, 166 F.3d at 805; cf. King v. Aetna Ins. Co., 54 F.2d 253, 254 55 3 (2d Cir. 1931) (“[The insured’s broker] was informed . . . by [another 4 insurer] that he must ascertain what [the insured] paid for the boat, 5 and, when [the broker] reported that [the insured] would not say, he 6 was told by [the other insurer] that [it] would not place the 7 insurance. If this information was material to the [other insurer], 8 [the broker] must have appreciated that it would be equally material 9 to the [insurer that issued the policy].”). 10 There is also no genuine dispute that MSI was, in fact, 11 induced to underwrite the policy based on this misrepresentation. 12 See Carroll, 166 F.3d at 805 (“[T]he insurer that issued a policy based 13 on the false application is entitled to void or rescind the policy.” 14 (emphasis added)); see also Republic Fire & Cas. Ins. Co. v. Azlin, No. 15 4:10 CV 037 SA JMV, 2012 WL 4482355, at *6 (N.D. Miss. Sept. 26, 16 2012) (“[M]isstatements of material fact in an application for 77 1 insurance provide grounds for declaring a policy issued in reliance 2 thereon void ab initio.” (emphasis added) (quoting GuideOne Mut. 3 Ins. Co. v. Rock, No. 1:06 CV 218 SA JAD, 2009 WL 1854452, at *2 4 (N.D. Miss. June 29, 2009))). 5 James F. Morano, III, the MSI underwriter responsible for the 6 EPI Policy, testified at his deposition that MSI “relied upon the 7 [2009] Heller report,” which “gave a favorable overview of the 8 condition of the properties,” for information regarding the dry 9 dock’s condition. J.A. 3241. He further testified that, if other 10 surveys had “told [him] information that was different from the 11 information that was being provided to [him], [he] would like to see 12 it” when making his underwriting decision. J.A. 3264. In 13 particular, “if [Signal] had surveys to indicate [the dry dock’s] 14 deteriorated condition, [or] repairs that ha[d] been done, that would 15 be helpful.” Id. In a sworn declaration, Morano further stated as 16 follows: 78 1 2 3 4 5 6 7 8 9 Had the conflicting information regarding the condition of the drydock been provided to [MSI] before the Policy was issued, I would have either declined to bind coverage, or offered coverage that expressly excluded claims arising out of the drydock, because the full picture regarding the condition of the drydock, as revealed in the many [undisclosed] engineer reports . . . , portrayed a material risk of imminent catastrophic failure. 10 J.A. 5629. Having reviewed Morano’s account and the remainder of 11 the record, we conclude that there is no genuine dispute that 12 Signal’s misrepresentation regarding the dry dock in its 2009 2010 13 Property Insurance Submission induced MSI to underwrite the EPI 14 Policy. 15 Because there is no genuine dispute that Signal induced MSI 16 to underwrite the EPI Policy by materially misrepresenting the dry 17 dock’s condition when it applied for coverage, the district court 18 correctly held that MSI was entitled to void the EPI Policy under 19 Mississippi law. Consequently, Fireman’s Fund may not succeed on 20 its claim for equitable contribution against MSI that it was granted 21 on summary judgment below, as the validity of the EPI policy is a 79 1 2 prerequisite to such a claim. CONCLUSION 3 We hold that Great American’s Pollution Policy is a marine 4 insurance contract and that Great American was entitled to void the 5 policy under the doctrine of uberrimae fidei due to Signal’s failure to 6 disclose material information indicating that the dry dock was in a 7 deteriorated condition and that recommended long term repairs 8 were not being made. We also hold that MSI was entitled to void 9 the EPI Policy under Mississippi law because Signal materially 10 misrepresented the dry dock’s condition when it disclosed to MSI 11 only reports reflecting positively on the dry dock, while failing to 12 disclose numerous other reports indicating that the dry dock was in 13 a dilapidated state and nearing the end of its useful life. Because no 14 genuine disputes of fact exist as to these issues, the district court 15 properly granted Great American’s and MSI’s motions for summary 80 1 judgment. Accordingly, the judgments of the district court are 2 AFFIRMED. 81
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