Author: Edward F. LeBreton, III, Marc Thomas Summers
Date: July 1, 2001
MARINE INSURANCE AND GENERAL AVERAGE
EDWARD F. LeBRETON, III
MARC THOMAS SUMMERS
NEW ORLEANS (1)
The special topic addressed in this chapter is "express" warranties in Protection
and Indemnity ("P&I") policies, and the coverage issues which commonly arise when
insurers seek to enforce them. By definition, an express or promissory warranty is a promise
by an insured that a stated event will or will not occur, or that some other condition precedent
will be fulfilled, or that a particular factual statement is true. British Marine Insurance Act
of 1906, §33(1).
Express warranties should be distinguished from exclusions which limit the
extent of coverage and are not based on the actions of the insured. Sometimes, the word
"warranty" is used in an exclusion, e.g. "Warranted free of claims for ..." These are not true
warranties. Parks, Law and Practice of Marine Insurance and Average, 1st Ed., Vol. 1 at p.
233. Also, this chapter does not address the question of implied warranties, which is treated
in Chapter 19.
We briefly discuss the effect of breach of express warranties and whether it is
necessary that the breach cause the loss. We then digest cases involving particular
warranties. We include cases dealing with other forms of marine policies when the
principles are applicable to P&I policies. Within specific topics, both federal and state cases
are organized by geographic areas based on the federal circuits.
The Supreme Court's decision in Wilburn Boat Co. v. Fireman's Fund
Insurance, 348 U.S. 310 (1955), controls when marine insurance is governed by federal
maritime law and when it is governed by state law, and it pervades all marine insurance
issues. Wilburn is outside the scope of this paper; however, we note whether particular cases
were decided according to state or federal law. Readers wishing to learn more about Wilburn
should consult other sections of this annotation or the following articles. Cattell, Edward V.
and others, Marine Insurance Survey: A Comparison of United States Law to the Marine
Insurance Act of 1906, 20 Tul. Mar. L. J. 1 (1995); Goldstein, Joel K., The Life and Times
of Wilburn Boat: A Critical Guide (Part I), 28 J. Mar. L. & Com., 395 (1997); Goldstein,
Joel K., The Life and Times of Wilburn Boat: A Critical Guide (Part II), 28 J. Mar. L. &
Com., 555 (1997); Sturley, Michael F., Restating the Law of Marine Insurance A Workable
Solution to the Wilburn Boat Problem, 29 J. Mar. L. & Com., 41 (1998).
I. EFFECT OF BREACH
Most courts hold that coverage is suspended during the time the insured is in
breach of an express warranty and that coverage resumes immediately when the breach is
cured. Graham v. Milky Way Barge, Inc., 824 F.2d 376 (5th Cir. 1987); Cotton Blossom
Corp., Inc. v. Lexington Ins. Co., 615 F. Supp. 87 (D.C. Mo. 1985) (applying both federal
maritime and Missouri law); Reliance Ins. Co. v. The ESCAPADE, 280 F.2d 482 (5th Cir.
1961). However, some courts have held that, when the policy contains a specific provision
that a breach of warranty voids the policy, coverage is terminated. Certain Underwriters at
Lloyd's v. Montford, 52 F.3d 219 (9th Cir. 1995).
II. STRICT ENFORCEMENT vs. REQUIRING CAUSATION
Traditionally, courts have held that the breach of an express warranty
suspended policy coverage. However, more recently, some courts have required that a
particular breach increase the risk that the insured would incur a covered loss or cause the
loss. The following cases illustrate this development.
A. The Traditional Rule
The traditional rule has its roots in British law and was applied as federal
maritime law before Wilburn. Under British Law, an express warranty requires exact and
literal compliance by the insured. "Although the loss may not have been in the remotest
degree connected with the breach of warranty, the Underwriter is nonetheless discharged in
that account from all liability for the loss . . ." Arnould, Law of Marine Insurance and
Average, 16th Ed., Vol. 2 at pp. 682-683; See also, Marine Insurance Act, § 33(3);
Forsikringsak-tieselskapet Vesta v. Butcher,  1 Lloyd's Reg. 331. As a matter of
American judicial policy, the British rule was carried forward into U.S. cases in order to keep
American marine insurance law in harmony with that of England. Queen Ins. Co. v. Globe
& Rutgers Fire Ins. Co., 263 U.S. 487 (1924).
The British rule continues to be reflected in U.S. cases decided under British
law. In Hartford v. Lloyd's, 1989 A.M.C. 2576 (E.D. Pa. 1989), the defendant issued a
policy to Cunard which contained the following: "Warranted: No hold harmless agreements
given." The evidence was clear that Cunard had given hold harmless agreements prior to the
existence of the policy and that the warranty had been breached. Pennsylvania choice of law
provisions mandated that English law be followed. The court ruled that, under the British
rule of strict compliance, the insurer was entitled to recision of the policy.
Similarly, in Campbell v. Hartford, 533 F.2d 496, 1976 A.M.C. 799, 801 (9th
Cir. 1976), the Ninth Circuit applied the English rule that "[n]o cause, however sufficient;
no motive, however good; no necessity, however irresistible, will excuse the non-compliance
with an express warranty" by an insured who violated a lay up warranty. This is the rule
even where there is no connection between the breach and the loss.
B. Post - Wilburn Strict Enforcement Cases
Before the advent of the Wilburn choice of law analysis, strict enforcement was
the rule in American courts. Wilburn Boat Co. v. Fireman's Fund Ins. Co., 201 F.2d 833
(5th Cir. 1953); Fidelity Phoenix Ins. Co. v. Chicago Title and Trust Co., 12 F.2d 573 (7th
Cir. 1926). However, even after the Wilburn decision some American courts have held that
strict compliance was the rule.
In Capital Costal Corp. v. Hartford Fire Ins. Co., 1974 A.M.C. 2039 (E.D. Va.
1974), the court ruled that the insurer of a vessel was released from liability due to the breach
of a crew warranty. Further, the court ruled that this was so even where compliance with the
warranty would not have avoided the loss. Interestingly, the court cited a pre-Wilburn case
as the basis for mandating strict enforcement of the warranty without addressing the choice
of law issue.
In Graham v. Milky Way Barge, Inc., 824 F.2d 376 (5th Cir. 1987), the court,
relying upon Louisiana law, vitiated policy coverage under the insured's P&I and hull
policies due to the insured's violation of a trading warranty. The court found that no
Louisiana anti-technical statute applied and then stated that whether or not the breach
increased the likelihood of the of the accident was "irrelevant."
The court in Certain Underwriters at Lloyd's v. Montford, 52 F.3d 219 (9th
Cir. 1995) (yacht policy), held that, under California law, breach of an even immaterial
warranty will void coverage when the policy expressly declares that such a breach would
void coverage. There, the policy contained a "cruising warranty" which provided that a
breach of the warranty would "immediately terminate (coverage) and the policy or certificate
will be null and void." Id. at 221. Recognizing that California law strictly enforces even
immaterial warranties in marine policies when the policy calls for it, the court held that the
insured's action of taking the vessel outside of the warranty area a month prior to the
accident vitiated coverage from that point forward. Id. at 223.
In Port Lynch v. New England International Assurety of America, 754 F. Supp.
816 (W.D. Wash. 1991), the insured breached a trading warranty. Applying the
"established" admiralty rule of strict enforcement of warranties, the court denied coverage.
In dicta, the court examined the issue under Washington law and found that the "warranty"
would be considered an essential term under the contract, thus relieving the insurer of
proving that the breach contributed to the loss.
The U.S. Southern District of Florida's decision in Home Ins. Co. v. Vernon
Holdings, 1995 A.M.C. 369 (S.D. Fla. 1994) arose out of a claim under a hull policy which
had been denied by the insurer on the basis of the breach of a navigation warranty. After
finding that federal law applied to the claim, the court held that the warranty had been
breached and, as a result, this precluded recovery under the policy. The court noted,
however, that had the issue been one of Florida law, the insurer would have to show that the
breach of warranty increased the hazard before the breach could be enforced.
C. "Enhanced" Risk of Loss Required to Enforce Warranty
Courts interpreting Florida and Massachusetts law have held that, as a pre-requisite to enforcing a warranty, the insurer must show that the breach "increased the
In dicta, the First Circuit recognized that Massachusetts law requires that an
insurer show that the breach of warranty increased the insurer's risk of loss. Mutual Fire,
Marine & Inland Ins. Co. v. Costa, 789 F.2d 83 (1st Cir. 1986) (citing, M.G.L.A. chapter
175, § 186).
In Prado v. Lexington Ins., 1990 A.M.C. 2782 (D. Mass. 1990) (hull policy),
the U.S. District Court for the District of Massachusetts found that Massachusetts law
applied to a policy containing a crew warranty. In Massachusetts, the relevant law requires
that, as a pre-requisite to enforcing a warranty, the insurer has the burden of proving that the
breach increased the insurer's risk of loss. M.G.L.A. chapter 175, § 186.
In Windward Traders v. Fred S. James & Co. of N.Y., 855 F.2d 814 (11th Cir.
1988), the court applied section 627.409(2) of the Florida Insurance code to an insurer's
claim that the insured breached its policy's trading warranty. The code provision provides:
(2) A breach or a violation by the insured or any warranty, condition, or
provision of any wet marine or transportation insurance policy, contract of
insurance, endorsement, or application therefore shall not render the policy or
contract void, or constitute a defense to a loss thereon, unless such breach or
violation increased the hazard by any means within the control of the insured.
In finding for the insured on the issue, the court specifically stated that, while the warranty
had been breached, the insurer could not show the required increase in hazard.
The U.S. District Court for the Middle District of Florida relied upon the same
provision of Florida law in another case involving a crew warranty. Fireman's Fund Ins. v.
Cox, 742 F. Supp. 609, 1990 A.M.C. 908 (M.D. Fla. 1989).
D. Causation Required
When state law applies pursuant to Wilburn, courts sometimes have required
that, for a breach of warranty to vitiate coverage, the insurer must prove that the breach
caused of the loss.
In releasing an insurer from liability under a lay-up warranty in a hull policy,
the U.S. Fourth Circuit cited the "familiar rule" that "breach of an express warranty . . .
releases the insurer from any liability due to the breach." Goodman v. Fireman's Fund Ins.,
1979 A.M.C. 2534 (4th Cir. 1979) (emphasis added).
In Wilburn Boat Co. v. Fireman's Fund Ins., 348 U.S. 310 (1955), itself, the Supreme
Court applied a Texas statute to hold that breach of a pleasure use warranty would avoid a
loss only if it was shown to have caused the loss.
Albany Ins. Co. v. Anh Thi Kieu, 927 F.2d 882 (5th Cir. 1991) (hull policy).
In denying the insurer's defense of breach of warranty, the court applied Texas' anti-technicality statute which states that a breach of warranty would not constitute a defense to
an action on an insurance policy unless the insurer could show that the breach caused or
contributed to the loss. Tex. Ins. Code Ann. Art. 6.14 (Vernon 1981 & Supp. 1990).
In denying an insurer's defense of breach of warranty, the U.S. District Court
for the District of Oregon applied Washington law which required a causal connection
between the breach of notification warranty and a personal injury. Rondy's Inc. v. Ins. Co.
of North America, 1986 WL 22352 (D. Or. 1986). On the other hand, in Highlands
Insurance Co. v. Koetze, 651 F. Supp. 346 (W.D. Wash. 1987), the court applied Washington
law to hold that, for a breach of warranty to void a policy, the insurer must show that the
breach both increased the risk of the type of loss sustained and also was related to the loss.
The court found that having the vessel outside of the trading limits increased the loss, but
nevertheless denied the motion on the grounds that there was a question of fact as to whether
the breach was related to the injury.
III. TREATMENT OF PARTICULAR WARRANTIES
A. Trading Warranties
In Ciaramitaro v. The Saskatchewan Government Ins. Office, 1956 A.M.C. 928
(U.S.D.C. Mass. Dis. 1956), affirmed in 1956 A.M.C. 1400 (1st Cir. 1956), the warranty
stated that vessel was to be "engaged in day fishing only, out of Gloucester, Mass." The
insured on occasion would not return to Gloucester and would drop anchor within the shelter
of another harbor. At the time of the loss, the vessel was engaged in day fishing. The court
reasoned that, at the time of the loss, any breach of warranty was cured.
In La Reunion Francaise, S.V. v. Halbart, 1999 AMC 14 (E.D. NY 1998), a
shipowner participating in a rally from Virginia to the British Virgin Islands lost his sailboat
in heavy seas 560 miles off the East Coast. The navigation warranty in the policy limited
coverage to the East Coast, Bahamas and Caribbean, and the insurer denied coverage for
sailing too far offshore. The court upheld coverage because the navigational limits did not
contain a mileage limitation. It determined that "specificity, rather than generality, is the
standard practice in marine insurance navigational limits warranties." Similarly, the court
refused to uphold the policy's "racing exclusion" because "race" was insufficiently defined
in the policy.
In Whorton v. The Home Ins. Co., 1983 A.M.C. 2342 (E.D. Va. 1983), aff'd,
724 F.2d 427 (4th Cir. 1994), the insured's broker extended the vessel's navigation limits to
include a fishing voyage to Key West, although the insurer later said that the broker was not
authorized to do so and denied the extension. The vessel then was lost due to the barratry
of the master on an ill-fated drug run beyond even the extended limits. The court held that
"[u]nder Virginia law the marine insurer's solicitation agent had authority to extend policy's
geographical limits to include Key West and insurer could not claim, after the vessel had set
out on her voyage, that the extension was not binding on it." Further, the court held that acts
in preparation for the drug run had been committed in Key West. Accordingly, there were
acts of barratry committed within the extended navigation limits, and the loss was covered.
In Graham v. Milky Way Barge, Inc., 824 F.2d 376 (5th Cir. 1987), the court
denied coverage under a P&I and hull policies on a jack-up oil rig when the policies
specifically limited the rig to the "inland waters of the Gulf states" and to 40 feet of water
for "elevating purposes." After the district court found that there was coverage, the Fifth
Circuit reversed, finding that it was undisputed that the rig was working beyond the
navigational and operational limits imposed by the policy.
Employers Ins. of Wausau v. Trotter Towing Corp., 834 F.2d 1206 (5th Cir.
1988), involved a hull policy which limited the insured vessel to the Mississippi River, its
tributaries and the Gulf Intercoastal Waterway within 100 miles of Greenville, Mississippi.
When the vessel was lost out side of the trading limits established in the policies, the court
denied coverage, relying upon language within the policy that any deviation beyond
navigational limits voids the policy, under both Mississippi and federal maritime law.
In Steptore v. Masco Const. Co., Inc., 619 So.2d 1183 (La. App. 1st Cir.
1993), reversed on other grounds, 643 So.2d 1213 (La. 1994), the policy limited the subject
vessel to navigation along three different facilities along the Mississippi River . Upon
learning that the insured barges were lost in an accident at a different facility then those
scheduled in the policy, the court denied coverage relying upon cases supporting strict
enforcement of navigation warranties.
R&W Boat Rentals, Inc. v. Pennsylvania Ins. Co., 257 So.2d 448, 1972 A.M.C.
1783 (La. App. 1st Cir. 1972), involved a policy containing a navigation warranty which
confined the insured vessel to "the inland waters of Louisiana including the Lakes, Bays, and
sounds of this State but excluding any open waters of the Gulf of Mexico." The policy also
provided: "Any deviation beyond the navigation limits provided herein shall void this policy
. . ." When the vessel was lost ten miles out in the open Gulf, the insurer sought to avoid
coverage. The court found that the insured was in clear violation of the warranty and found
in favor of the insurer.
In The Home Ins. Co. v. Thunderbird, Inc., 1977 A.M.C. 797 (Miss. 1976), the
policy limited coverage to not more than "100 miles off shore." The loss occurred off the
shore of Bahamas. The court reasoned that "[b]ecause the limitations on the warranted area
are words of limitation, they are strictly construed against the insurer." The court found "off
shore" is not restricted to the shore of the continental U.S. in the absence of a provision in
the policy to that effect. Accordingly, the court upheld coverage.
In Snyder v. Motorists Mutual Ins. Co., 1965 A.M.C. 1791 (Ohio App. 1965),
the accident occurred approximately four miles from the Florida Keys. The navigation limits
were the "continental United States." After review of several references, the court held that
the policy language was ambiguous and resolved the ambiguity in favor of insured.
In Certain Underwriters at Lloyd's v. Montford, 52 F.3d 219 (9th Cir. 1995),
the court reviewed a case in which the policy contained a "cruising warranty," and
specifically stated that breach of the warranty would "immediately terminate (coverage) and
the certificate of insurance will be null and void." Following receipt of the insured's notice
of loss, the insurer found that the vessel had traveled outside the range of the warranty the
previous month and denied coverage. Notwithstanding the fact that the vessel was stolen
while it was within the limits set out in the policy, the court, following California law, agreed
that the policy was voided by the earlier breach.
In Highlands Insurance Co. v. Koetje, 651 F. Supp. 346 (W.D. Wash. 1987),
the policy contained a trading warranty which limited the vessel to certain waters including
and surrounding the Puget Sound. (The policy also contained a crew warranty, discussed
infra) The insurer moved for summary judgement on the basis that the vessel was working
outside the warranty area. Applying Washington law, the court denied summary judgement
on the basis that it was unclear whether the breach was related to the injury.
Four years later, the Western District of Washington revisited the trading
warranty issue in Port Lynch v. New England International Assurety of America. 754 F.
Supp. 816 (W.D. Wash. 1991). Port Lynch involved an excess hull policy which contained
a trading warranty that limited the vessel to use in shrimp processing in southeast Alaska.
After the vessel was lost while crabbing over 1,000 miles away in the Bearing Sea, the
insurers denied coverage, and the court agreed.
In U.S. Fire Ins. Co. v. Liberti, 1989 A.M.C. 1436 (N.D. Cal. 1989), an insurer
denied coverage under a warranty in a P&I policy which provided that the insured vessel
would be confined to the waters and tributaries of San Francisco Bay. After finding that
California law applied, the court focused upon the California rule that there is no right to
rescind or avoid policy obligations unless the insurer can either show (1) that the provision
is material to the policy, or (2) the policy specifically sets forth that a breach will void the
policy. On a motion for summary judgement, the court held that the question of whether the
breach of the trading warranty materially affects the risk was a question of fact and that the
policy did not contain the requisite language to fulfill the second condition.
In Harris v. Glenn Falls Ins. Co., 1972 A.M.C. 138 (Cal. App. 1971), the court
held that a type written warranty that the vessel would be laid up and out of commission in
Sausalito, California superseded the privileges provision in the printed policy form. The
court rejected the argument that the policy was ambiguous citing Civil Code section 1651,
which provides that precedence is given to specific provisions added to a printed form.
In First Interstate Bank of Or. v. Allstate Ins. Co., 701 P.2d 791, 1987 A.M.C.
662 (Or. App. 1985), the policy limited coverage to 50 miles of the United States, and the
loss occurred in the territorial waters of Mexico, outside the navigation limits. The policy
did not contain a standard mortgagee's interest clause, but did contain a loss payable
endorsement which stated that coverage of the mortgagee would not be invalidated by any
change in "the location of the vessel." The court concluded that the lender had an
endorsement that provided coverage even in the event of a loss for which the named insured
is not covered.
In Albany Insurance Co. v. Jones, 1997 AMC 1407 (D. Alaska 1996), the
insurance policy required that the vessel owner or his son (named in the policy as an
"alternate skipper") to be aboard the vessel at all times. The court determined that this crew
warranty is similar to navigating warranties, and, accordingly, held that breach of the
warranty is governed by the federal maritime rule requiring strict compliance. Therefore, the
policy was void when an injury occurred on the insured vessel while the son was aboard an
adjacent vessel. The court left open, however, the question of whether the son's absence
from the primary vessel constituted barratry, which would trigger coverage.
In Lexington Ins. Co. v. Cooke's Seafood. 835 F.2d 1364 (11th Cir. 1988), the
policy provided that the insured vessel was limited to a certain area within 100 miles of
shore. When the vessel began to experience mechanical problems, rather than head in to
port, it sought parts from an oil rig located over 100 miles from shore. Thereafter, while
moored next to the rig, the vessel was lost in a hurricane. The court applied the strict
enforcement rule to void coverage. Notably, however, the court cited an exception to the rule
for circumstances where necessity requires that a vessel to exceed navigation limits. Under
the circumstances, the court found that there was not a sufficient need for the vessel to breach
the warranty and voided coverage.
In United States Fire Ins. Co. v. Cavanaugh, 732 F.2d 832, 1985 A.M.C. 1001
(11th Cir. 1984), the court held that the loss of the vessel by grounding and fire beyond the
geographical limit of the policy was not a breach of warranty because the ultimate cause of
the loss was barratry. The vessel was found aground and burning 150 miles southwest of
Jamaica, well beyond the navigation limits. The court reasoned that "[the vessel] was taken
some 400 miles beyond the warranted limits by the unauthorized act of a third party in
violation of both written and verbal agreements, an act in which the [owners] were insured.
What would have been a breach of warranty is not a breach in this case where the 150 mile
limit was exceeded due to the barratrous acts of [the captain]."
Applying federal law, the court in Home Insurance Co. v. Vernon Holdings,
1995 A.M.C. 369 (S.D. Fla. 1994), denied coverage for breach of trading limits by the
insured. The insured vessel was limited to "trading between the Turks and Caicos Islands,
Dominican Republic and Bahama Islands" but was lost after leaving the Turks and Caicos
islands en route to Haiti.
In La Reunion Francaise, S.A. v. Christy, 1999 AMC 2499 (M.D. Fla. 1999),
the court denied coverage to a vessel owner and her estranged husband. The husband sailed
the boat to Jamaica, where it sank. The original policy allowed for coverage only between
the East Coast of the United States and the Mediterranean and temporarily had been reduced
to only the East Coast. The court construed the navigational limits narrowly, and released
the insurance company from liability. The wife argued that, under Florida law, coverage was
several, and that she should not be bound by the husband's breach of warranty. The court
held that there is established federal admiralty law on navigation warranties, and,
accordingly, federal law should govern. Under federal law, the breach of the navigation
warranty resulted on loss of coverage for both the husband and wife.
In Aetna Insurance Company v. Dudney, 595 So.2d 238 (Fla. App. 4th Dist.
1992), a Florida state appeals court applied federal admiralty law to void insurance coverage
due to breach of a warranty in a yacht policy that confined the subject vessel to particular
waters during the winter months. Even though the case was heard in Florida, which requires
that the insured show an increased hazard as a result of a breach, the court applied
"entrenched" federal maritime law mandating strict enforcement.
In B & S Associates, Inc. v. Indemnity Casualty and Property Ltd., 1994
A.M.C. 2960 (Fla. App. 4th Dist. 1994), an all risk policy warranted that the insured sailboat
would remain within fifty (50) miles of the United States and the Bahamas. The owner
chartered the sailboat, and the sailboat was found on the shores of Jamaica, with the charterer
dead from hypoglycemic shock resulting from uncontrolled diabetes. On the basis that the
body had been dead for 5 or 6 days, the court reasoned that the accident could have happened
in the area of coverage. The court stated "Once the insured establishes a loss apparently
within the terms of an all-risk policy, the burden shifts to the insurer to prove that the loss
arose from a cause which is excepted." The court found that the insurer did not provide
sufficient evidence that the accident occurred outside the warranty to exclude coverage. The
court reversed the order entering summary judgment for the insurer and held there were at
least material issues of fact.
In Rosenberg v. Maritime Ins. Co., Ltd., 1968 A.M.C. 1609 (Fla. App. 3rd Dist.
1968), the insured vessel was covered by a policy containing an express navigation limit
confining it to the inland waters of Kentucky. When the vessel was found sunk in Miami,
Florida, the insurer sought to avoid coverage. The court found in the insurer's favor holding
that the vessel was in violation of the warranty which resulted in a bar to recovery by the
vessel's owner. See also, USF&G v. Thompson, 1990 A.M.C. 444 (Fla. App. 4th Cir. 1989).
Florida Marine Towing, Inc. v. United National Insurance Co., 686 So.2d 711
(Fla. App. 3d Dist. 1997). Relying on U.S. Supreme Court precedent, the court held that
"inland waters" means waters on the land side of the coast line. Waters between the coast
line and the state boundary three miles offshore are referred to as the "marginal sea."
Accordingly, the vessel breached the navigation limits of "inland waters" when it sank in the
Atlantic ocean offshore of the beach. However, the mortgage holder, named as an additional
insured on the policy, is not adversely affected by the breach of warranty by the mortgagor.
In Winter v. Employers Fire Ins. Co., 1962 A.M.C. 1972 (Fla. Civ. Ct. Duval
1962), the court held that the phrase "continental United States" was ambiguous and that
ambiguity would be resolved in favor of insured. The insured took a trip to the Bahamas and
on the way back there was an accident 14 miles off the Florida coast. After reviewing
numerous references, the court held that the limits extended to the seaward edge of the
continental shelf or to the half way point between the U.S. coast and a foreign island
possession. The court reasoned "although coverage may have ceased while the boat was in
the Bahamas beyond the prescribed area, the policy again attached upon again returning to
the insured area."
(ii). Held Covered Clauses
Held covered clauses are used by insurers to provide a means of extending
warranties when the insureds operations require a change. They usually provide for the
particular voyage beyond the limits of the warranty to be reported to the insurer and for the
payment of an additional premium. They may affect how the warranty is enforced.
In Bristol Steamship v. London Assurance, 404 F. Supp. 749 (S.D. N.Y. 1975), the
insured obtained port risk insurance which limited the subject vessel to a specific port. The
policy also contained a held covered clause which provided: "In the event of deviation to be
held covered at an additional premium to be hereafter arranged, provided previous notice be
given." During the policy period, the owner moved the vessel to a new port where it suffered
a casualty. The insurer denied the insured's subsequent claim on the grounds that the insured
did not provide adequate notice of the changing of ports. The court did not give the "held
covered" clause effect on the grounds that there had been no previous notice or agreement
concerning the movement of the vessel. Therefore, the court held that there was no coverage.
In Northwestern National Ins. Co. v. Federal Intermediate Credit Bank of
Spokane, 839 F.2d 1366 (9th Cir. 1988), the insured obtained a hull policy that contained
both a held covered clause and a trading warranty. Prior to sending the vessel on a voyage
outside of the warranty area, the insured notified his broker and sought an extension of the
trading limits. The extension was never granted. Unaware that the insurer had not agreed,
the insured went ahead with the voyage and the vessel was lost outside the trading limits.
The policy's held covered clause provided that the insured would be covered in the event of
a breach of warranty if the insured gave notice when they found out about the breach and
when the insurer and insured agreed to the payment of an additional premium. This gave rise
to the question of whether the insured's act of notifying the broker was sufficient to comply
with the requirements of the clause. The court found that the broker was not the insurer's
agent and, thus, denied coverage.
In Campbell v. Hartford Fire Ins. Co., 533 F.2d 496 (9th Cir. 1976), the court
applied English law in a case involving the breach of a lay up warranty and a claim of
coverage under a held covered clause. The policy provided that the held covered clause
would have effect when there was a breach of "cargo, trade, locality or date of sailing"
warranties in the policy. When the vessel was lost during the lay up period the owner sought
coverage, arguing that the held covered clause applied as the breach of the lay up warranty
related to "locality." The court disagreed and found that the clause did not apply on the
grounds that a lay up warranty is not concerned with the location of a vessel at a particular
time, but rather to the condition of the vessel during the winter months.
Kalmbach v. Ins. Co. of State of Pa., 529 F.2d 552 (9th Cir. 1976), involved
a hull policy requiring that the subject vessel be laid up for particular period of time. An
endorsement was subsequently added to shorten the lay up period but warranted that prior
to navigation during this period a captain's approval and a favorable long range weather
forecast were required. When the vessel was lost during the extension period, the insurer
denied coverage due to breach of the warranty. The insured relied on a held covered clause
within the policy to maintain coverage despite the breach. In analyzing the held covered
clause, the court looked to English jurisprudence which found coverage under a held covered
clause despite the breach of warranty. The court found that, while there was an issue of fact
regarding the alleged breach of warranty, the held covered clause would prevail in any event,
and the court remanded the case for further proceedings to determine whether the warranty
had been breached and, if so, what additional premiums the insured needed to pay.
In Hilton Oil Transport v. T.E. Jonas, 75 F.3d 627 (11th Cir. 1996), the
plaintiff breached a hull policy's trading limits warranty but sought coverage under the
policy's held covered clause. In denying the insurer's motion for summary judgement, the
court stated that there was an issue of fact as to whether the policy holder intentionally
breached the warranty. If so, the held covered clause would not operate and the insurer
Windward Traders v. Fred S. James & Co. of N.Y., 855 F.2d 814 (11th Cir.
1988), involved a claim under a hull policy for the loss of a vessel. The policy contained a
navigation warranty limiting the vessel to trade in the Caribbean and also a held covered
clause requiring notification to underwriters of a change of location. When the vessel was
lost in the Atlantic Ocean, the insurer denied coverage based upon the insured's failure to
notify it that the vessel was outside of the trading limits. In rendering a decision in favor of
the insured, the court relied on the Florida Anti-technical Statute which provided that unless
the breach of a provision increased the hazard under the policy coverage would stand. It
reasoned that the failure to give notice could not have increased the hazard under the policy.
Notably, since the insurer did not deny coverage on the grounds of the breach of navigation
warranty, the court did not consider the issue of what effect this may have had.
B. Crew Warranties
Under this heading, we include warranties with respect the number of seamen
working aboard a vessel, the specific captain in command, and the number of passengers
which a particular vessel may carry.
In Mutual Fire, Marine & Inland Ins. Co. v. Coasta, 789 F.2d 83 (1st Cir.
1986), the policy stated that the insured vessel could carry a maximum of 100 passengers.
After two passengers were injured while the vessel was carrying 118, the insurer brought an
action for a declaration of no coverage. The trial court and the First Circuit viewed the
policy provision as a coverage provision, not a warranty. Nevertheless, the First Circuit
noted that had the provision amounted to a warranty, Massachusetts law would apply to
require the insurer to show that the larger number of passengers aboard the vessel would
have increased the risk of loss to the insurer. In reviewing this question, the court found that
the risk of loss would be greater with 118 passengers than 100. Accordingly, coverage was
Prado, Inc. v. Lexington Ins. Co., 1990 A.M.C. 2782 (D. Mass. 1990), involved
a warranty that a particular captain be in command of the insured vessel. The court applied
Massachusetts law which requires a causal relationship between the breach of warranty and
the loss incurred. The issue was whether the insurer carried its burden in proving that having
a captain aboard the vessel different than the one named in the warranty actually increased
the risk of loss to the insurance company. After examining both captains' qualifications, the
court found that having a different captain aboard did not increase the risk of loss and upheld
In Capital Coastal Corp. v. Hartford Fire Ins. Co., 1974 A.M.C. 2039 (E.D.
Va. 1974), the policy required that a particular captain be the master of the insured vessel and
that the policy did not provide coverage when the vessel was operated by any other master.
After the vessel was lost under the command of a captain different than the one named in the
warranty, the vessel's insurer sought to avoid coverage. Applying the strict enforcement
standard, the court found that the insured was in breach of the crew warranty and found in
favor of the insurer.
In Albany Ins. Co. v. Anh Thi Kieu, 927 F.2d 882 (5th Cir. 1991), the insured
breached an "owner aboard warranty." The court applied the Texas Insurance Code which
contains an "anti-technical" provision stating that an insured's breach of warranty will not
constitute a defense unless the breach caused or contributed to the destruction of the insured
property. In ruling against the insurer, the court found that the fact that the owner was not
aboard did not make the accident any more likely than had the owner been aboard; however,
the court noted that it is possible that, under a different set of circumstances, the breach of
an owner aboard warranty might contribute to a loss.
In Albany Ins. Co. v. Ngo Van Nguyen, 1996 WL 680252 (E.D. La. 1996), a
P&I policy contained an express warranty that the total number of crew members on the
vessel at any one time should not exceed three. At the time of the accident, the vessel
contained five crew members. Upon a motion for summary judgment by the insurer, the
court applied federal admiralty law and found that due to the fact that there were five crew
members on the vessel, the warranty had been breached and, therefore, the policy was void.
In St. Paul Fire & Marine Ins. v. BELLE OF HOT SPRINGS, 844 F. Supp. 550
(8th Cir. 1988), a P&I policy contained an express warranty requiring that the vessel be "in
charge of a qualified master at all times." During a passenger voyage, the vessel's licensed
master left the helm to a new deck hand while he went to another deck to tend bar. The deck
hand subsequently attempted to dock the vessel and allided with a dock. The vessel's insurer
sought to avoid coverage on the basis of breach of warranty. In considering the issue, the
court held that the warranty required more than "mere" presence of a qualified master aboard
the vessel and that the master must actually be in charge of the vessel to satisfy the warranty.
Accordingly, the court ruled for the insurer.
In Highlands Ins. Co. v. Koetje, 651 F. Supp. 346 (W.D. Wash. 1987), the
policy limited the insured vessel to one crew member. There was an injury when more than
one crew member may have been aboard. The court stated that Washington law required that
the insurer prove both that the breach contributed to the loss sustained or increased the risk
of the type of loss sustained, and that the breach is also related to the injury sustained. The
court found that having additional crew members aboard the vessel would increase the risk
of loss and would also be related to the kind of injury sustained. However, it refused to grant
the motion for summary judgment on the basis that a disputed issue of material fact remained
regarding whether the additional crew member was actually aboard the insured vessel.
In Fireman's Fund Ins. Co. v. Cox, 1990 A.M.C. 908 (M.D. Fla. 1989), the
policy limited the crew to three. There was a mutiny on board the vessel in which two of the
five crew members killed the captain and injured a mate. In attempting to avoid the
consequences of the breach, the vessel owner argued that neither the captain, the mate, nor
the cook were "crew" members within the meaning of the insurance policy. The court,
looking to the natural and most commonly understood meaning of crew member, found that
they were included within the scope of the warranty. In addition, the vessel owners
contended that regardless of the number of crew members on board the vessel at the time of
the mutiny, the insurer could not escape liability because Florida law requires that the insurer
prove that additional crew members increased the hazard to the vessel. See Fla. Stat.
§627.409(2). The court stated: "The presence of one or two additional crew members,
particularly when the policy expressly set a limit of only three to begin with, is not a mere
technical violation of the policy but significantly alters the risk of loss plaintiff would be
called on to bear." On this basis, the court affirmed an earlier summary judgment in the
C. Lay-up and Watchmen Warranties
In Sea Fever Corp. v. Hartford Fire Ins. Co., 1983 A.M.C. 1276 (U.S.D.C.
Mass. 1982), the court held that fishing vessel owner was not covered under a marine
insurance policy due to breach of lay-up warranty, even though he was unaware of it. The
insured's broker had obtained a policy containing an unusual provision for a fishing vessel
policy: that the vessel would be laid-up for two months during the winter. The vessel was
lost going to a repair yard during this period. Based on the "marine insurance law of
Massachusetts," the court found that the insured is bound to the terms of the insurance
contract whether he knows them or not, or whether, if asked, the insurer would have agreed
to the voyage. Accordingly, there was no coverage. However, the insured did recover
against the insurance broker for breach of fiduciary duty for not advising of the unusual term.
In Sirius Ins. Co. (U.K.) Ltd. v. Collins, 16 F.3d 34 (2d Cir. 1994), the insured
vessel was kept on a trailer and the policy required that it be kept in a locked, fenced
enclosure, in a garage or building, and that the trailer be secured with a ball lock while
attached to a vehicle. The vessel was stolen after the insured placed it on his property
without having put it in a locked enclosure and without securing the trailer with a ball lock
attached to a vehicle. The defendant argued that, since the theft occurred ashore, litigation
under the policy was not within maritime jurisdiction. The court disagreed stating that "all
contracts which related to navigation, business, or commerce of the sea" fall within maritime
jurisdiction. The court of appeals then affirmed the district court's holding that the plaintiff's
omissions voided the policy.
In Gehrlein's Production Tooling Corp. v. The Travelers Fire Ins. Co., 1957
A.M.C. 1029 (S.D. N.Y. 1957), the warranty stated that the yacht was to be laid up from
November until May. During the lay-up period, the yacht was moved to a painting berth,
where water entered the stern scuppers in an unusual low tide. The court held that lay-up
warranty was not breached when the vessel was moved to painting berth in same yard.
In Emil Eamotte v. Employers Commercial Union Ins. Co. of Am., 1976
A.M.C. 204 (N.Y. App. 2nd Dept. 1975), the policy warranted that a yacht would be laid up
and out of commission from November 15 to March 15, but did not indicate whether the
yacht would be laid-up in wet or dry storage. The court reasoned that "the criteria to be
applied in determining whether the plaintiff complied with the warranty is whether the action
taken by [the insured] conforms with the well established local customs and practice as to
laying up similar vessels in the particular area where the yacht was kept." The appellate
court found that dry as well as wet storage was a common practice in the area and held that
the trial court erred in granting judgment for defendant insurer.
In Poulos v. Fireman's Fund Ins. Co., 231 N.Y.S. 2d 206, 1962 A.M.C. 1979
(N.Y. Supreme Ct., Suffolk 1962) the court held that insured had violated a lay-up warranty.
The warranty stated that the vessel would be laid up from November until May. The court
stated: "Leaving a small open boat, uncovered and completely exposed to the elements, tied
up at a public marina during the winter months scarcely can be considered safe practice
within the meaning of the policy."
In Goodman v. Fireman's Fund Ins. Co., 1979 A.M.C. 2534 (4th Cir. 1979),
a hull insurance policy stated that the vessel would be "laid up and out of commission" for
a particular period of time. The court determined that whether a vessel is laid up depends
upon local custom. The court found that the custom in the region was to close the sea valves
as a part of winterizing the vessel. Because the insured failed to close the valves, he
breached the express lay-up warranty, thus releasing the insurer from all liability.
In Walker & Sons, Inc. v. Valentine, 431 F.2d 1235, 1970 A.M.C. 2261 (5th
Cir. 1970), the insured tug sank at its berth due to leaking through the stuffing box. The
court held that the insured had violated the watchman warranty, therefore, underwriters were
not liable. The warranty required that an employee of the insured examine the vessel at
reasonable intervals, including the bilges. Whether applying federal maritime law or
Mississippi law, a yard superintendent who occasionally walked around the yard but was not
expected to board any of the vessels was insufficient.
In Wigle v. The Aetna Casualty and Surety Co., 1959 A.M.C. 2270 (E.D. Mich.
1959), in an effort to winterize the vessel, the insured asked one of his friends to run the
motor to remove any water contained in it. The friend forgot to close the seacock valve, and,
as a result, the vessel took on water and sank. The court held that there was no peril of the
sea and that the negligence of the friend was not insured. The court then stated, "the sinking
was directly caused by the omissions of plaintiff and his friends aboard plaintiff's boat while
it was not properly laid up, as warranted in the policy."
In Cotton Blossom Corp., Inc. v. Lexington Ins. Co., 615 F.Supp. 87 (D.C. Mo.
1985) the court the insured breached a "watchman" warranty contained in a hull policy. In
conducting a Wilburn analysis, the court found that Missouri and federal law were the same
in that both provided that the breach of an express warranty in a policy of marine insurance
suspends coverage of the underlying policy during the existence of the breach. Accordingly,
the court denied coverage.
Marine Charter & Storage v. All Underwriters at Lloyd's of London, 628 F.
Supp. 740 (S.D. Fla. 1986), involved a vessel covered under an all risks yacht policy which
contained a lay up warranty obligating the insured to keep the vessel within a certain marina
for four months. When the vessel sustained damage outside of the marina during the lay up
period the insurer sought to avoid liability. The court agreed, reasoning that the "movement
of the vessel imposes an increased risk of casualty upon the underwriters for which they had
not been paid." While the court did not specifically refer to the Florida Anti-Technicality
Statute (F.S.A. § 627.409(2)), the foregoing statement makes it apparent the court thought
that the breach of warranty increased the risk of loss.
D. Change in Management or Use Warranty
In Commercial Union Ins. Co. v. Horne, 787 F.Supp. 337 (S.D.N.Y. 1992), the
policy warranted that the insured yacht could be chartered for a maximum of five day
charters per year. The owner chartered the yacht for five months to a sailing school, and
there was a loss during this period. The insured argued that an endorsement extending the
navigation limits for the same five month period indicated an intent to cover the charter.
Applying Connecticut law, the court reasoned that "[b]y chartering the yacht for a period of
five months without receiving an acceptance in writing as required by the policy, the
Defendants breached an express promissory warranty and violated the terms of the contract."
Accordingly, there was no coverage.
In Newark Ins. Co. v. Blair, 1994 A.M.C. 1061 (S.D. N.Y. 1993), the policy
stated that "[i]f you sell, transfer, mortgage or pledge your boat or this policy, policy
coverage will cease without further notice to you unless such change is accepted by us in
writing." The insured entered into an agreement to sell the boat. Although the agreement
required four installment payments, it said that, upon execution, title transferred to buyer.
The buyer sought to be made an additional insured, but the insurer was not informed of any
change in ownership interest. The court reasoned under New York state law that "where a
warranty in a marine insurance policy pertains to any risk of marine navigation, transit or
transportation on seas or inland waters, the breach of such warranty precludes recovery under
such policy." Accordingly, the court granted the insurer's motion for summary judgment
declaring that the policy was void.
In Parfait v. Central Towing, Inc., 660 F.2d 608 (5th Cir. 1981), the policy
This insurance shall be void in case the vessel named herein, or
any part thereof, shall be sold, transferred or mortgaged, or if
there be any change of management or charter of the vessel, or
if this policy be assigned or pledged, without previous consent
in writing of this company.
A third party purchased all the stock in the corporation which owned the vessel, and there
was an immediate and complete change in directors and executive officers. There was an
injury to a crew member, and the issue was whether these corporate changes constituted a
change in management of the insured vessel. The Fifth Circuit ruled that it did and denied
In Travelers Indemnity Co. v. Gulf Weighing Corp., 352 F.Supp. 335, 1974
A.M.C. 2478 (E.D. La. 1972), the court found no breach of the private pleasure warranty in
a marine insurance policy. The policy stated "warranted to be used solely for private
pleasure purposes and not to be hired or chartered unless approved and permission endorsed
hereon." In this case, the court found that there was no charter agreement. The parties only
agreed to share expenses. The court quoted the 5th Circuit when it said "The essence of a
charter agreement is that the charterer employs the entire ship or a substantial portion of it
for a particular voyage or a particular period of time from one holding himself out as a public
carrier." The court reasoned that the warranty was not breached because the Captain did not
receive money for his services and there was no mutuality of assent for a valid charter.
Rondys, Inc. v. Insurance Co. of N. Am., 1986 WL 22352 (D. Or. 1986),
involved two P&I policies which provided that the policies would be void if the subject
vessel was sold, transferred, mortgaged or chartered without consent of the insurer. After
the vessel was chartered and some crew members suffered personal injury, both insurers
denied coverage based upon breach of warranty. The court noted that Washington law
mandates that there must be a causal connection between the breach of warranty and the loss
sustained. The court ruled in the insured's favor insofar as neither insurer could prove a
causal connection between the change in management and the personal injury sustained.
E. Class Maintenance and Survey Warranties
In Berns & Koppstein, Inc. v. Orion Ins. Co., 170 F.Supp. 707, 1959 A.M.C.
2455 (S.D. N.Y. 1959), aff'd per curiam, 273 F.2d 415(2), 11960 A.M.C. 1379 (2d Cir.
1960) the court held that the survey requirements in policy had not been breached. In this
case, the underwriter required each cargo be surveyed by a specific surveyor and that survey
was to occur "immediately prior to shipping." The specific surveyor subcontracted the
surveys for a particular voyage and the surveys took place from several days to 2 weeks prior
to shipment. The court reasoned that there was no breach because it was past practice to
subcontract surveys and "immediately" must be given a reasonable interpretation in light of
the practicalities of the situation.
In New York Marine v. Gulf Marine, 1994 A.M.C. 976 (E.D. La. 1993), a hull
If the classification society of the Vessel or her class therein be
changed, canceled, or withdrawn, then unless the underwriters
agree thereto in writing, this policy shall automatically terminate
at the time of such change of ownership, flag, charter,
requisition, or classification.
Sometime after the insurer issued the policy, the classification society conducted a renewal
survey and noted several outstanding matters which needed to be fixed. When the repairs
were not done after the passage of some time, the classification society suspended the
vessel's classification. Following a loss, the vessel's insurer denied coverage. Considering
a provision in the policy that a breach of warranty would void the policy, the court denied
The Eastern District of Louisiana revisited the class warranty issue four years
later in P.S. International v. Caribbean Sealift, Ltd., 1997 WL 256652 (E.D. La. 1997). The
policy contained two "class" warranties. First, the insured was obligated to keep its vessel
fully classed throughout the term of the insurance and, second, it had to advise its
classification society of any defects arising on board the vessel during the term of the
insurance. After a claim was made for cargo damage, the insurer denied liability on the
basis that the vessel owner breached both warranties by failing to notify its classification
society of certain hull leakage problems and repairs undertaken aboard the vessel prior to the
vessel sailing. The court denied the insurer's motion for summary judgement because it was
unsure whether the captain had to be privy to the failure to advise the classification society,
which also meant there was an issue of fact whether the failure of the insured to notify the
classification society would result in the vessel not being "fully classed."
In Oceanic Contractors, Inc. v. Underwriters at Lloyd's, 1981 A.M.C. 1264
(La. C.D.C. 1980), the policy stated that "Warranted approval of tug, towage and stowage
arrangements by United States Salvage Association and all their recommendations complied
with." The association approved subject to the propriety of insured's calculations.
Underwriters determined that the insured left significant factors out of their calculations. The
court held that there was no lack of propriety in the calculations performed by insured. The
court stated that the factors assumed by the Underwriters were to some degree arbitrary.
F. Miscellaneous Warranties
High Bilge Alarm
In Than H. Long Partnership v. Highlands Ins. Co., 32 F.3d 189 (5th Cir.
1994), a hull policy required the owner to maintain an operable high water bilge alarm .
While out fishing, the vessel sank, and the insurer denied coverage on the basis that the
vessel violated the bilge warranty. The Fifth Circuit noted that Louisiana law and federal
maritime law both mandated that coverage be denied. Interestingly, the Fifth Circuit stated
that it is necessary for a breach of warranty to be a cause of the loss to deny recovery. This
directly contradicts the strict enforcement standards announced previously by the Fifth
Circuit and other courts concerning federal maritime and Louisiana law. See Graham, supra.
Nevertheless, the court found that the insured's failure to maintain a proper bilge alarm was
a cause of the loss and, therefore, a basis for denying coverage.
Express Warranty of Seaworthiness
In Certain Underwriters at Lloyds v. Johnson, 1999 AMC 1452 (D.P.R. 1999),
the policy contained a clause which required the vessel to be in seaworthy condition at the
inception of the policy. It also contained additional language which provided that it will not
afford coverage when the insured fails to exercise due diligence to maintain the vessel in
seaworthy condition. The court interpreted these provisions as an express statement of the
implied warranty applicable under the "American Rule" which provides that the "insured
promises not to knowingly send a vessel to sea in unseaworthy condition." Under this rule,
coverage will be denied only if the unseaworthy condition proximately caused the damage.
In this case, the vessel was damaged when seawater entered the vessel through one or more
of the port lights. The court determined, based on a surveyor's report, that the owners had
prior knowledge of the condition and failed to correct it. Therefore, the loss was not covered.
In addition to the crew warranty discussed supra, Albany Ins. Co. v. Anh Thi
Kieu, 927 F.2d 882 (5th Cir. 1991), also reviewed the application of an express seaworthiness
warranty. The warranty, contained in the insured's hull policy, obligated the insured to
exercise due diligence to maintain the subject vessel in a seaworthy condition. Upon
receiving a claim for damage to the vessel in an allision, the insurer denied coverage partially
upon the grounds of breach of the seaworthiness warranty due to the vessel's hull being
infested with toredo worms. Applying the Texas anti-technicality statute, the court found
that the breach, if any, did not provide a basis for avoiding coverage as the infestation did not
contribute to the damage to the vessel.
In St. Paul Fire & Marine Ins. v. Belle of Hot Springs, 844 F.2d 550 (8th Cir.
1988), the master of an excursion vessel left an inexperienced deck hand at the wheel while
he went to the second deck to tend bar. When the deck hand attempted to dock the vessel,
there was an allision resulting in personal injuries. The court held that the owner breached
an express warranty that the vessel be in charge of a qualified master. The court also held
that leaving an unqualified person in charge of the vessel made it unseaworthy and breached
the express warranty that the owner exercise due diligence to keep the vessel seaworthy.
Stating that the policy required strict adherence to warranties, the court held that the insurer
was not liable under its policy.
Private Pleasure Warranty
Reliance Insurance Company v. The ESCAPADE, 280 F.2d 482 (5th Cir.
1950), involved a yacht hull policy which contained a "private pleasure warranty" limiting
the vessel to private pleasure use. When the vessel was lost during a charter, the insurer
sought to avoid coverage. However, while the court found that the warranty had been
breached and that this would have suspended coverage, it also found that the insurer was
estopped from asserting the defense because of its actions in connection with the salvage of
the vessel. See also, Travelers Indem. Co. v. Gulf Weighing Corp., 1974 A.M.C. 2478 (E.D.
Warranty Against Gasoline or Explosives
Kron v. Hanover Fire Ins. Co., 1964 A.M.C. 1467 (N.Y. Sup. Ct. 1964)
involved a vessel which was destroyed by fire while moored at a pier. After the loss, the
vessel's insurer disclaimed coverage on the grounds that the vessel owners had breached a
warranty against keeping gasoline or explosives aboard the vessel. Apparently, the vessel's
owner had been using a gasoline powered blow torch aboard the vessel as well as having
some gasoline in a can. The court found for the insurer, requiring strict compliance with the
warranty whether or not the breach contributed to the accident.
In Commercial Union Insurance Co. v. Flagship Marine Services, Inc., 190
F.3d 26 (2d Cir. 1999), the court construed a "towage endorsement" covering towage of
vessels not exceeding 50 feet in length as a warranty that the insured vessel would not tow
other vessels in excess of 50 feet. The court determined a warranty existed because the
endorsement appeared in the policy under the warranty heading and language in the policy
supported the finding. The court denied coverage under either New York or Florida law
because the breach of warranty materially increased the risk assumed by the insurer.