News Flash: Marine Insurance Forum Selection Clause Upheld in Florida

In Wello & Mom, LLC v. Clear Spring Prop. & Cas. Co., 2023 WL 8609239, 2023 Fla. App. LEXIS 8438 (Fla. 3d DCA Dec. 13, 2023, Florida’s Third District Court of Appeals, which encompasses Miami-Dade County has held that a policy's forum selection clause, which required that suits arising under the policy be subject to the exclusive jurisdiction of the federal courts, is enforceable.

On appeal, the insured contended the policy's forum selection clause should be deemed unenforceable as it was not negotiated and deprived it of the right to a jury trial, given the insurer had already filed a separate declaratory judgment action in federal court.

The court surprisingly found that there is a well-entrenched rule of federal admiralty law favoring the enforcement of forum selection clauses in maritime contracts, citing several well-known cases including M/S Bremen v. Zapata Off-Shore Co., Carnival Cruise Lines, Inc. v. Shute and Turner v. Costa Crociere S.p.A.. However none of the cases cited in the decision involved forum selection clauses in marine insurance policies, as claimed in the decision, and none of the cases squarely address Wilburn Boat Co. v. Fireman's Fund Ins. Co., 348 U.S. 310 (1955), which held that “the whole judicial and legislative history of insurance regulation in the United States warns us against the judicial creation of admiralty rules to govern marine policy terms…” Wilburn Boat also noted that the “control of all types of insurance companies and contracts has been primarily a state function since the States came into being.”

This latest ruling adds to the anticipation of SCOTUS’ ruling in Great Lakes Insurance SE v. Raiders Retreat Realty Co, LLC, No. 22-500, where the insurer is employing the same M/S Bremen argument requesting SCOTUS to uphold applying a choice of law clause calling for all cases against the insurer to be brought in New York State.

If you are interested in obtaining of copy of this decision or wish to discuss any matter involving marine insurance, please feel free to reach out to me at blog@miamimaritimelaw.co or 305.377.3700.

Florida Tort Reform Law: A Short Summary of Some of Its Consequences and Effects

On March 24, 2023, Florida’s Governor signed into law HB 837, transforming Florida tort law. With two important exceptions, the law applies to new lawsuits filed after March 24, 2023.

Salient Points of Select[1] Sections of the Law

·         Medical Bills. The law limits the introduction of evidence for medical damages at trial. The law limits evidence of paid medical bills and future medical care to the amount paid or needed for services regardless of the source of the payment:

o   Effects

• Defense experts on the appropriateness of the amount of medical bills required.

• Plaintiff-oriented doctors will rethink their medical treatment and billing approach.  

• Lower medical expenses should reduce non-economic damages awards and nuclear verdicts and increase settlements.

• More reasonable life care plans. 

• Reduced abuse of letters of protection.

·         Letters of Protection. If a Plaintiff receives medical services subject to a letter of protection, the plaintiff must disclose: a copy of the letter of protection; all billing for medical expenses, itemized and coded; whether the provider sold the accounts receivable to a third party, the name and dollar amount paid by the third party; whether the plaintiff had health insurance at the time of treatment and the identity of the health care coverage provider; and whether the claimant was referred for treatment under a letter of protection and, if so, the identity of the person who made the referral.

o   Effect

• Brings letters of protection out in the open. Before, the law stated that there was an attorney-client privilege in communications related to an attorney’s referral of a client for treatment. Juries will now hear about letters of protection, what they mean, the financial relationship they create and the doctor's financial interest in the case's outcome.  

Comparative Negligence. The law changes Florida's comparative negligence system from a pure comparative negligence system to a modified one, so that a plaintiff who is more at fault for their injuries than the defendant may not generally recover damages from the defendant.

o   Effect

• Avoids outsized awards against nominally negligent defendants.  In matters where the plaintiff was significantly at fault, plaintiffs will argue for more considerable damages so that defendants with low negligence pay an outsized portion of damages. However, defendants can now have a defense verdict if plaintiff found 51% at fault. 

Bad Faith. The law modifies bad faith law to allow an insurer to avoid third-party bad faith liability if the insurer tenders the policy limits or the amount demanded by the claimant within 90 days after receiving actual notice of the claim.

o   Effects 

• Ends “set-up” claims. Before this law, the system incentivized plaintiffs to devise situations that led to a bad faith claim to obtain larger settlements.   

• Reduce bad faith claims.  Allowing insurers enough time to evaluate a claim will result in more comprehensive claims handling and fewer bad faith claims.    

[1] For more information on Florida tort reform law, please feel free to reach out to me at mov@miamimaritimelaw.co or 305.377.3700.

Cruise Pax, Crew and Shareholders Suing Over COVID-19

The last cruise ship carrying passengers reportedly docked on Tuesday, April 21, 2020. The COSTA DELIZIOSA disembarked passengers in Genoa, Italy, allowing more than 1,500 people to return home after a 113-day round the world voyage. Under orders from the Centers for Disease Control and Prevention, it will be some time until cruise ships will once again be able to sail from U.S. ports. In the meantime, cruise lines are dealing with a host of lawsuits filed by passengers, crew and their own shareholders who accuse the companies of negligence in exposing them to the Coronavirus or otherwise downplaying the risk.

One of the first cases filed was for 40 passengers on board the GRAND PRINCESS, who claimed emotional distress due to an outbreak of COVID-19 onboard. Princess has defended the suits, stating that allowing cruise ship passengers to sue over emotional distress because they could have been exposed to the COVID-19 pandemic would “open the door to open-ended liability.” Princess cited the U.S. Supreme Court case of Metro-North Commuter R. Co. v. Buckley, 521 U.S. 424 (1997), which generally holds that Plaintiffs are prohibited from suing for fear of exposure, in this case, to the Coronavirus. Such an “unprecedented theory of liability for emotional distress” could unleash lawsuits against all types of businesses, reasons Princess. Princess further notes that “[i]f accepted, plaintiffs’ theory would open the door to open-ended liability for every business, school, church, and municipality across America, stalling economic recovery in the wake of the COVID-19 pandemic and complicating the ability of businesses to reopen…If individuals in plaintiffs’ situation can recover, businesses, school, churches and other venues across America will be forced to keep their doors closed long after state stay-at-home orders are lifted, lest they risk crushing liability to each and every one of their invitees for emotional distress, based on the mere possibility of infection, because some employee or other current or past customer of the business was later discovered to have the virus.”

Maritime law generally allows recovery for emotional distress if there is physical injury to the claimant. However generally, maritime law does not permit recovery for mental anguish or wholly emotional injuries absent some physical impact and unless the emotional injury is associated with some actual physical injury to the claimant.

In addition to the lawsuits for emotional distress, Princess faces wrongful death claims on behalf of passengers who died from COVID-19 and at least one class action on behalf of more than 2,000 passengers on the GRAND PRINCESS. The suit claims Carnival and Princess failed to protect passengers and contain the spread of the virus. At least 100 of the passengers contracted COVID-19, and two died after disembarking, according to the complaint.

A shareholder also filed a class action against Carnival Corp., the parent company of Princess. The same occurred to Norwegian Cruise Lines, where a shareholder filed a stock drop securities class action in the Southern District of Florida. The shareholder’s suit challenged statements made by NCL on and after February 20, 2020, in which the company allegedly minimized the likely impact of the Coronavirus outbreak on NCL’s operations and omitted information about allegedly deceptive sales practices undertaken in response to the virus.

Rpyal Caribbean faces a wrongful death lawsuit after a 27-year-old crew member on the CELEBRITY INFINITY died from the virus and two others were airlifted off of the OASIS OF THE SEAS.

Congress has launched an investigation into Carnival’s response to the Coronavirus pandemic. Bloomberg reported that the U.S. House Committee on Transportation and Infrastructure is investigating the company's handling of the outbreak as more than 1,500 cases have been confirmed from aboard the company's ships and dozens of passengers and crew members have died.

The rapid developments in the spread and economic impact of COVID-19 present particular challenges for officers and directors of public companies trying to manage their businesses while providing timely and truthful information to shareholders. Shareholders have filed suits alleging that public companies materially misrepresented the impact of COVID-19 on their operations. If history is any guide, derivative litigation alleging director and officer mismanagement is likely to follow. Directors and officers of public companies should exercise great care in any public statements regarding the impact of COVID-19 on their businesses, and carefully consider and document the steps they are taking to oversee and respond to COVID-19 developments.

Cruise lines have been particularly hard hit as large numbers of COVID-19 cases were identified among cruise passengers, certain cruises faced lengthy quarantines at sea, and cruise ship operations were suspended from all U.S. ports of call. Add to the expenditures of cruise lines having to keep ships afloat, requires huge expense, while not generating revenue. There have been articles suggesting that with so many lawsuits already filed, and more likely to come, the hope is that some rulings will help write new case law and make it easier to bring future cases against cruise lines. The idea being that cruise lines have insurance to cover any possible awards or settlements. However such statements ignore the plain truth that cruise lines have high self-insured retentions. They would have to pay out a considerable amount of money for each individual claim before their insurance policies kick in. These same people suggest that high volume litigation against cruise lines are unlikely to have much of a financial impact on the companies. This is to not understand how cruise ships and their owners are insured. Add the fact that the no-sail orders in effect in the U.S. are crippling the cruise industry, there is the adage that you should not kill the goose that lays the golden egg.

This law firm does not represent cruise lines and has no “skin in this game.” Nevertheless, these are issues that will affect not just cruise lines but ordinary working ships. If the cruise lines all go down with some of these novel theories, smaller carriers, with less power, will likely be next. Please feel free to reach out to us at blog@miamimaritimelaw.co, if you would like to discuss these issues further.

Navigational Limits Upheld in Eleventh Circuit

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.

If you are interested in receiving a copy of this decision or wish to discuss this decision further, please feel free to write to me at blog@miamimaritimelaw.co or you may call me at 305-377-3700.