Promissory Warranty Must Be Fulfilled
Ralph Young owned and lived on a seventy-four-foot motor operated vessel
named the SUMMER STAR (“the vessel”). Mr. Young insured the vessel with
Yachtinsure Services, Inc. from 2013 through 2019.
As a result the USDC was asked to resolve an issue of the voidability of
a marine insurance policy under principles of federal maritime law.
In Transpac Marine, LLC v. Yachtinsure Services, Inc., Civil Action No.
20-10115-DPW, United States District Court, D. Massachusetts (February
13, 2023) followed the precedent establishing the inviolability of a
promissory warranty.
BACKGROUND
Mr. Young's Renewal Application
On April 16, 2019, Mr. Young applied for the renewal of his marine
insurance policy to Yachtinsure to renew his existing policy, Mr. Young
was obligated to submit an updated application form and a Hurricane Plan
for review by Yachtinsure's underwriters.
The Hurricane Plan included a warranty by Mr. Young that the vessel will
be secured with “10 lines, 3/4 inch Nylon braid.” The applicant was
warned that the Hurricane Plan contains “statements upon which
underwriters will rely in deciding to accept this insurance” and that
the Hurricane Plan “will form the basis of” any insurance contract
between the parties.
After an inquiry from the insurer Mr. Young confirmed that in the event
of a named/numbered storm, mooring lines will be doubled. Mr. Young's
email representation that he would double the mooring lines on the
vessel in the event of a named windstorm was incorporated into his
policy agreement with Yachtinsure.
Events Preceding the Destruction of the Vessel
During an examination under oath conducted by Yachtinsure Mr. Young
testified he decided to sail to Crown Bay in St. Thomas, U.S. Virgin
Islands where the storm was expected to pass with windspeeds below
thirty-miles-per-hour. Mr. Young resolved to wait out the storm. On
August 26, he purchased two, new, one-inch diameter mooring lines from
the local chandlery in preparation for the storm. Beyond securing the
vessel with those two additional mooring lines and moving upholstery
below deck, Mr. Young made no further safety preparations.
Just after noon, high winds from Hurricane Dorian parted Mr. Young's
mooring lines, causing the vessel to drift out to sea. However, the
anchor's chain became entangled with a sailboat operated by a
third-party mariner, Dan Radulewicz.
Plaintiff's Claim and Defendant's Denial
Mr. Young filed a claim declaration with Yachtinsure on September 3,
2019.
DISCUSSION
The court found the Hurricane Plan to be unambiguous.
Mr. Young responded to the Hurricane Plan with what is, in essence, a
stipulation that he would secure the SUMMER STAR with the mooring
configuration he identified when the policy took effect and during its
continuance. Thus, this provision of the Hurricane Plan constitutes an
unambiguous promissory warranty to secure the SUMMER STAR with ten nylon
mooring lines that were 3/4 inch diameter in normal circumstances
(i.e., in the absence of a named or numbered storm) and with 20 in a
named and numbered storm.
Consequences of Breach of Promissory Warranties
Under both federal law and New York law, a breach of a promissory
warranty will permit the insurer to void a marine insurance contract.
Simply material compliance will not satisfy the insured's obligations.
Plaintiff's Breach
The court concluded that Yachtinsure established beyond reasonable
factual dispute that Mr. Young failed to meet his obligation of strict
compliance with his warranties under the Hurricane Plan.
Mr. Young's admission that he did not use twenty 3/4 inch nylon braid
lines to secure his boat during Hurricane Dorian - and thereby satisfy a
prophylactic condition the policy called for - is sufficient to prevent
him from recovering under the policy.
Summary judgment granted to Yachtinsure.
(c) 2023 Barry Zalma & ClaimSchool, Inc.
