Zalma on Insurance
Education • Business
Insurance Claims professional presents articles and videos on insurance, insurance Claims and insurance law for insurance Claims adjusters, insurance professionals and insurance lawyers who wish to improve their skills and knowledge. Presented by an internationally recognized expert and author.
Interested? Want to learn more about the community?
August 14, 2023
Strict Compliance With Warranty Required

Promissory Warranty Must Be Fulfilled

Barry Zalma
Aug 14, 2023

Read the full article at https://lnkd.in/gam6Eshm; se the full video at https://lnkd.in/gxhepeXV and at https://lnkd.in/gcxTvJtf and at https://zalma.com/blog plus more than 4550 posts.

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. On August 28, 2019, the vessel ran aground and was destroyed when Hurricane Dorian hit St. Thomas in the United States Virgin Islands, where the vessel was moored. Yachtinsure rejected the abandonment and denied Mr. Young’s claim, based on what it considered his material misrepresentations in his April 2019 policy renewal application.

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. The Insured pursued a claim for breach of contract against the Insurer, based on the insurer’s refusal to pay for damage sustained by Plaintiff’s insured vessel during a hurricane in August of 2019.

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

Yachtinsure asserts counterclaims for declaratory judgment seeking judgment that Mr. Young’s insurance policy was void as a matter of law and that Yachtinsure had no obligation to pay damages or the benefits promised by the policy.

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. The declaration also stated that misrepresentation or nondisclosure of material facts “may entitle underwriters to void the insurance.”

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. On August 28, 2019, the storm, by then named Hurricane Dorian, changed its trajectory and struck the Virgin Islands. By the time he learned that the storm would hit the Virgin Islands Mr. Young determined sailing away from the Virgin Islands to be unsafe. Instead, he decided to remain moored to a single mooring in Crown Bay, secured by six lines, four of unspecified diameter and two of a one-inch diameter.

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. Thereafter, as alleged, Mr. Radulewicz disconnected Mr. Young’s anchor gear causing the SUMMER STAR to be swept up in the storm. The vessel eventually ran aground on the lee shore about four miles from Crown Bay. Mr. Young was airlifted from the wreck by the United States Coast Guard.
Plaintiff’s Claim and Defendant’s Denial

Mr. Young filed a claim declaration with Yachtinsure on September 3, 2019.

DISCUSSION

The Supreme Court held in Norfolk S. Ry. Co. v. Kirby, that “federal law controls the contract interpretation” of a marine insurance policy when the contractual dispute at issue “is not inherently local,” observe that the First Circuit has held that there is a judicially established federal rule governing the particular area of marine insurance contract interpretation relevant: whether an insured’s representations in the policy constitute unambiguous, promissory warranties which, if breached, excuse the insurer from coverage.

The court found the Hurricane Plan to be unambiguous. The plain language of Mr. Young’s answer to Question 15 cannot be reasonably read to convey anything other than that Mr. Young would use ten lines of 3/4 inch Nylon braid to secure the vessel. Mr. Young’s response to Question 15 of the Hurricane Plan states unambiguously that he will secure the vessel with the configuration of mooring lines he specified in his response.

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. The weight of authority holds this strict compliance requirement applicable even to “collateral” warranties unrelated to the insured’s claims for damages.

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.

Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.

Subscribe and receive videos limited to subscribers of Excellence in Claims Handling at locals.com https://zalmaoninsurance.locals.com/subscribe.

Consider subscribing to my publications at substack at https://barryzalma.substack.com/publish/post/107007808

Go to Newsbreak.com https://www.newsbreak.com/@c/1653419?s=01

Follow me on LinkedIn: www.linkedin.com/comm/mynetwork/discovery-see-all?usecase=PEOPLE_FOLLOWS&followMember=barry-zalma-esq-cfe-a6b5257

Daily articles are published at https://zalma.substack.com. Go to the podcast Zalma On Insurance at https://podcasters.spotify.com/pod/show/barry-zalma/support; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library\

00:10:36
Interested? Want to learn more about the community?
What else you may like…
Videos
Posts
11 hours ago
Sovereign Immunity Prevents Suit Against USA

Chutzpah: After Criminal Prosecution Defendant Sues USA
Post 5164

See the full video at https://lnkd.in/g_QAZY-d and at https://lnkd.in/gbF7vMxG and at https://zalma.com/blog plus more than 5150 posts.

Dr. Segun Patrick Adeoye, a medical doctor, filed a lawsuit against the United States of America, seeking damages for alleged violations during his criminal prosecution. He was acquitted by a jury but claims to have suffered significant harm, including financial losses, damage to his professional reputation, and personal distress.

In Dr. Segun Patrick Adeoye v. The United States Of America, Civil Action No. 4:25-cv-83, United States District Court, E.D. Texas, Sherman Division (July 23, 2025) the USDC dismissed Adeoye’s suit.

FACTUAL BACKGROUND

Dr. Adeoye was indicted on charges of conspiracy to commit wire fraud and money laundering. The indictment alleged that he and his co-conspirators obtained at least seventeen million dollars through various fraudulent schemes. Despite being acquitted, Dr. Adeoye claims that his ...

00:07:56
11 hours ago
Amount of Loss Set by Appraisal Award

Payment of Appraisal Award Defeats Claim of Bad Faith
Post 5163

Read the full article at https://lnkd.in/dNpKKcYx, see the full video at https://lnkd.in/dNgwRP8q and at https://lnkd.in/dA9dvd-D, and at https://zalma.com/blog plus more than 5150 posts.

Hurricane Damage to Dwelling Established by Appraisal Award

In Homeowners Of America Insurance Company v. Emilio Menchaca, No. 01-23-00633-CV, Court of Appeals of Texas, First District (July 31, 2025) after a hurricane Homeowners of America Insurance Company (“HAIC”) estimated that the cost of covered repair to Menchaca’s house was $3,688.54, which was less than his deductible, and therefore no payment would be made.

FACTS

After Menchaca retained counsel HAIC advised that, under the terms of the policy, Menchaca was required to first invoke the appraisal process prior to filing suit, and that HAIC reserved the right to request that Menchaca and any adjuster hired on his behalf submit to an Examination Under Oath (“EUO”).

On August 23, 2018, Menchaca’s counsel ...

00:08:45
August 07, 2025
Amount of Loss Set by Appraisal Award

Payment of Appraisal Award Defeats Claim of Bad Faith
Post 5163

Read the full article at https://lnkd.in/dNpKKcYx, see the full video at https://lnkd.in/dNgwRP8q and at https://lnkd.in/dA9dvd-D, and at https://zalma.com/blog plus more than 5150 posts.

Hurricane Damage to Dwelling Established by Appraisal Award

In Homeowners Of America Insurance Company v. Emilio Menchaca, No. 01-23-00633-CV, Court of Appeals of Texas, First District (July 31, 2025) after a hurricane Homeowners of America Insurance Company (“HAIC”) estimated that the cost of covered repair to Menchaca’s house was $3,688.54, which was less than his deductible, and therefore no payment would be made.

FACTS

After Menchaca retained counsel HAIC advised that, under the terms of the policy, Menchaca was required to first invoke the appraisal process prior to filing suit, and that HAIC reserved the right to request that Menchaca and any adjuster hired on his behalf submit to an Examination Under Oath (“EUO”).

On August 23, 2018, Menchaca’s counsel ...

00:08:45
July 16, 2025
There is no Tort of Negligent Claims handling in Alaska

Rulings on Motions Reduced the Issues to be Presented at Trial

Read the full article at https://lnkd.in/gwJKZnCP and at https://zalma/blog plus more than 5100 posts.

CASE OVERVIEW

In Richard Bernier v. State Farm Mutual Automobile Insurance Company, No. 4:24-cv-00002-GMS, USDC, D. Alaska (May 28, 2025) Richard Bernier made claim under the underinsured motorist (UIM) coverage provided in his State Farm policy, was not satisfied with State Farm's offer and sued. Both parties tried to win by filing motions for summary judgment.

FACTS

Bernier was involved in an auto accident on November 18, 2020, and sought the maximum available UIM coverage under his policy, which was $50,000. State Farm initially offered him $31,342.36, which did not include prejudgment interest or attorney fees.

Prior to trial Bernier had three remaining claims against State Farm:

1. negligent and reckless claims handling;
2. violation of covenant of good faith and fair dealing; and
3. award of punitive damages.

Both Bernier and State Farm dispositive motions before ...

post photo preview
May 15, 2025
Zalma's Insurance Fraud Letter - May 15, 2025

ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional

See the full video at https://lnkd.in/gK_P4-BK and at https://lnkd.in/g2Q7BHBu, and at https://zalma.com/blog and at https://lnkd.in/gjyMWHff.

Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
This issue contains the following articles about insurance fraud:

Health Care Fraud Trial Results in Murder for Hire of Witness

To Avoid Conviction for Insurance Fraud Defendants Murder Witness

In United States of America v. Louis Age, Jr.; Stanton Guillory; Louis Age, III; Ronald Wilson, Jr., No. 22-30656, United States Court of Appeals, Fifth Circuit (April 25, 2025) the Fifth Circuit dealt with the ...

May 15, 2025
CGL Is Not a Medical Malpractice Policy

Professional Health Care Services Exclusion Effective

Post 5073

See the full video at https://lnkd.in/g-f6Tjm5 and at https://lnkd.in/gx3agRzi, and at https://zalma.com/blog plus more than 5050 posts.

This opinion is the recommendation of a Magistrate Judge to the District Court Judge and involves Travelers Casualty Insurance Company and its duty to defend the New Mexico Bone and Joint Institute (NMBJI) and its physicians in a medical negligence lawsuit brought by Tervon Dorsey.

In Travelers Casualty Insurance Company Of America v. New Mexico Bone And Joint Institute, P.C.; American Foundation Of Lower Extremity Surgery And Research, Inc., a New Mexico Corporation; Riley Rampton, DPM; Loren K. Spencer, DPM; Tervon Dorsey, individually; Kimberly Dorsey, individually; and Kate Ferlic as Guardian Ad Litem for K.D. and J.D., minors, No. 2:24-cv-0027 MV/DLM, United States District Court, D. New Mexico (May 8, 2025) the Magistrate Judge Recommended:

Insurance Coverage Dispute:

Travelers issued a Commercial General Liability ...

See More
Available on mobile and TV devices
google store google store app store app store
google store google store app tv store app tv store amazon store amazon store roku store roku store
Powered by Locals