In Geico Marine Ins. Co. v. Shackleford, Case No. 18-12105, 2019 U.S. App. LEXIS 37228 (11th Cir. Dec. 17, 2019), the U.S. Court of Appeals for the Eleventh Circuit held that a marine insurance policy did not cover the loss because the policy unambiguously contained a navigational limit when the loss occurred, nothing in the record supported the conclusion that the insurer voluntarily and intentionally relinquished its right to enforce the navigational limit, the parties did not contract out of federal maritime law, which required absolute enforcement of express navigational limits and the vessel was outside of the covered navigational area when the loss occurred.
The facts in this case are a little convoluted, but ultimately, the insured had informed Geico Marine that he needed an updated policy to sail his vessel to Fort Lauderdale for repairs. However, when Geico Marine updated the policy to allow for navigation, it reinstated a previous navigational limit requiring the vessel to be “north of Capt Hatteras, NC from June 1 until November 1 annually.” When the insured had a casualty in Lake Sylvia in Fort Lauderdale in June and made a claim under the policy, Geico Marine denied coverage and filed a declaratory judgment action claiming, among other things, that coverage was barred by the policy’s navigational limit and that Florida law does not strictly enforce warranties in marine insurance contracts.
The insured alleged, among other things, that Geico Marine “waived” its right to enforce the navigation limit when it agreed that he could sail the vessel to Fort Lauderdale in late May. The Eleventh Circuit painstakingly reviewed the policy and found that the policy unambiguously contained a navigational limit when the loss occurred. The Court then found that under Florida law, Geico Marine did NOT waive its navigational limit requirement as “[n]othing in this record supports the conclusion that Geico Marine voluntarily and intentionally relinquished its right to enforce the navigational limit.”
More importantly, the Court address the insured’s argument that the parties contracted out of the federal maritime rule requiring absolute enforcement of express navigational warranties. The Court found that the federal rule of absolute enforcement of warranties, as opposed to the Florida rule which allows a marine insurer to avoid coverage based on an insured’s breach of warranty only if the breach “increased the hazard by any means within the control of the insured”, was controlling as the the federal maritime law is the default rule and displaces contrary state law when construing a marine insurance contract. Thus, “[b]ecause the parties did not contract out of maritime law, we must apply the federal rule requiring absolute enforcement of express navigational limits.”
This is a very important ruling post AIG Centennial, as prior to this, the courts had adopted a “entrenched federal precedent” standard. In other words, the court would have to find that the general maritime law was “entrenched federal precedent” before it would allow federal maritime law to displace state law.
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