What is the insured’s duty under marine insurance?



March 11, 2022

The law governing marine insurance in the United States has long been a source of considerable confusion. And if there ever was a clear set of principles applicable in such cases, the Supreme Court muddied the waters long ago with its infamous decision in Wilburn Boat Co. v. Fireman’s Fund Ins. Co., 348 US 310 (1955). That case, which involved a houseboat fire on a man-made inland lake on the Texas-Oklahoma border, established the “litmus test” for determining when maritime law should govern and when courts should consider state law in interpreting marine insurance contracts. .

Faced with the question of whether an insured’s policy should be voided for breach of policy guarantees when the insured has made misrepresentations in the application that bear no relation to the actual risk or loss claimed, the Supreme Court in Wilburn Boat concluded what “[w]Whatever the origin of the ‘literal compliance’ rule, we believe it is clear that it has not been judicially established as part of the body of federal admiralty law in this country.” Because there was no “established federal admiralty rule” governing such warranties, the Court ruled that it should instead look to state law which, as it happens, contained a provision protecting the insured from such “immaterial” violations of the guarantee.

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