Glen W. King v. Allstate Insurance Company

JOHNSON, Circuit Judge,

dissenting:

Because I believe that this Court’s decision in Steelmet, Inc. v. Caribe Towing Corp., 747 F.2d 689 (11th Cir.1984), endorsing the rule in Gulfstream Cargo, Ltd. v. Reliance Ins. Co., 409 F.2d 974 (5th Cir.1969)1, firmly established that in this Circuit federal law controls the interpretation of marine insurance even in the face of contrary state authority, I must dissent.

I. ANALYSIS

In reviewing a challenge to jury instructions, this Court asks whether the instructions show any “tendency to confuse or to mislead the jury with respect to the applicable principles of law.” Rohner, Gehrig & Co. v. Capital City Bank, 655 F.2d 571, 580 (5th Cir.Unit B 1981).2 “So long as his jury instructions reflect the pertinent substantive law, the trial judge is given wide discretion as to the style and wording that he may employ.” Andres v. Roswell-Windsor Village Apartments, 777 F.2d 670, 673 (11th Cir.1985). An erroneous instruction requires reversal where this *1544Court “is ‘left with a substantial and ineradicable doubt as to whether the jury was properly guided in its deliberations,' ” National Independent Theatre Exhibitors, Inc. v. Charter Financial Group, Inc., 747 F.2d 1396, 1402-03 (11th Cir.1984), cert. denied, 471 U.S. 1056, 105 S.Ct. 2120, 85 L.Ed.2d 484 (1985) (quoting Miller v. Universal City Studios, Inc., 650 F.2d 1365, 1372 (5th Cir.1981)), and where the party objecting to the instruction suffered “prejudicial harm.” See Pesaplastic, C.A. v. Cincinnati Milacron Co., 750 F.2d 1516, 1525 (11th Cir.1985).

Marine insurance policies are governed by federal maritime law, where that law provides a specifically controling rule, and otherwise by the contract law of the state where the policy was issued. See Eagle Leasing Corp. v. Hartford Fire Ins. Co., 540 F.2d 1257, 1261 (5th Cir.1976), cert. denied, 431 U.S. 967, 97 S.Ct. 2926, 53 L.Ed.2d 1063 (1977); accord Ingersoll Milling Machine Co. v. M/V Bodena, 829 F.2d 293, 305-06 (2d Cir.1987), cert. denied, 484 U.S. 1042, 108 S.Ct. 774, 98 L.Ed.2d 860 (1988).3 This approach reflects the supremacy and uniformity traditionally accorded to federal maritime law. See Kossick v. United Fruit Co., 365 U.S. 731, 738-39, 81 S.Ct. 886, 891-92, 6 L.Ed.2d 56 (1961).

The insurance policy in the present case provided that “[tjhis policy is void if you intentionally conceal or misrepresent any material fact or circumstance, before or after loss.” King thus argues that the court should have instructed that Allstate had to prove intentional misrepresentation on the original application in order to void the policy. As the majority noted supra, the district court instructed the jury as follows:

In the case of marine insurance the insured must disclose all facts material to the risk, and in default of such duty the contract may be avoided by the insurer. In other words, an applicant for marine insurance must state all material facts which are known to him and unknown to the insurer. It has been said that the insured is bound to communicate every material fact within his knowledge not known or presumed to be known to the insurer, whether inquired for or not; and that a failure in either particular, although it may arise from mistake, accident, or forgetfulness, is attended with the rigorous consequences that the policy never attaches and is void, for the reason that the risk assumed is not the one intended to be assumed by the parties.4

The above standard is taken almost verbatim from Gulfstream Cargo, 409 F.2d at 980-81, which described it as a basic principle of maritime insurance law. In Steelmet, Inc. v. Caribe Towing Corp., 747 F.2d 689, 695 (11th Cir.1984), this Court found that “[t]he general rule of marine insurance, requiring full disclosure, is well settled in this circuit, and as a clear rule of maritime law it is the controlling federal rule even in the face of contrary state authority[ ]”. Steelmet then specifically quoted the Gulfstream Cargo standard to support its holding. Id. Gulfstream Cargo clearly furnishes a controlling standard on the issue of concealment and misrepresentation in marine insurance policies. Accordingly, King’s contention that Louisiana law governs the interpretation of the policy in this case is meritless.

Determining that this policy should be interpreted in light of federal maritime law, however, does not end the inquiry. As the majority notes, this Court has held in one context that an insurer can “contract itself out of a misrepresentation-in-the-application defense”. State Farm Fire and Cas. Co. v. Oliver, 854 F.2d 416, 419-20 (11th Cir.1988) (applying Alabama law to homeowner’s policy). By agreeing to specific policy language providing that only inten*1545tional misrepresentations will void the contract, the insurer can waive the defense despite the existence of a governing rule of law more favorable to it. Id. Oliver relied on the fact that Alabama courts had determined such contractual provisions to be “not contrary to public policy in Alabama.” Id. at 420. By contrast, the Gulfstream Cargo standard relies strongly on the admiralty doctrine that marine insurance policies, “contrary to the general rule applicable to other kinds of insurance,” 5 demand “uberrimae fidei" (i.e., requiring “the most perfect good faith” on the part of the insured).6 This exception exists because “the underwriter often has no practicable means of checking on either the accuracy or the sufficiency of the facts furnished him by the assured before the risk is accepted and the premium and conditions set.” Steelmet, 747 F.2d at 695 (quoting G. Gilmore & C. Black, Law of Admiralty 62 (2d ed. 1975)). The uberrimae fidei doctrine therefore counsels against the majority’s ruling that the parties may contract around the Gulfstream Cargo rule merely because of the general principle that insurance policies should be liberally construed in favor of the insured and strictly against the insurer.

Absent an unambiguous statement that the parties intend to contract around the Gulfstream Cargo rule, the policy should be read to give effect to the contested language while remaining consistent with the principles of federal maritime law.7 This may be done by reading the debated clause to provide for avoidance based on intentional misrepresentations occurring any time after the policy takes effect or even after a loss has occurred while implicitly retaining the Gulfstream Cargo standard with regard to misrepresentations made in the course of applying for the policy. This reading would add to the insured’s obligations rather than defining their outer limits. Because the parties failed to state unambiguously their intention to contract around the Gulfstream Cargo standard, Oliver does not support the majority’s interpretation of the contested clause. For the foregoing reasons, the district court did not err in instructing the jury that even unintentional misrepresentations or nondisclosures by King could void the policy.

King makes a last-ditch argument that, even assuming the instruction based on the Gulfstream Cargo standard was correct, the instructions as a whole merit reversal because of the unresolved conflict between the Gulfstream Cargo standard and the quoted language of the policy. Regardless of how conflicting, contradictory, ambiguous, and confusing the instructions might have been in this regard, they could not possibly have prejudiced King.8 Because the Gulfstream Cargo standard was correct, any confusion introduced by quoting the policy language could only have bene-fitted King. King therefore cannot claim *1546to have suffered prejudice from this instruction. Pesaplastic, C.A. v. Cincinnati Milacron Co., 750 F.2d at 1525.

II. CONCLUSION

Because I believe that the district court properly instructed the jury that federal law controlled the interpretation of the contested marine insurance policy, I would Affirm the judgment below.

. All decisions of the former Fifth Circuit rendered prior to the close of business on October 1, 1981 constitute precedent binding on this Court. Bonner v. City of Prichard, 661 F.2d 1206, 1207 (11th Cir.1981) (en banc).

. Rohner was decided by Unit B of the former Fifth Circuit and therefore is binding precedent on this Court. See Stein v. Reynolds Securities, Inc., 667 F.2d 33, 34 (11th Cir.1982).

. The district court noted this principle in its June 14, 1988, Order Determining Choice of Law, holding that "in the absence of federal maritime law, Louisiana law governs construction of the contract herein.” As the jury instructions reflect, however, the district court later determined that federal maritime law did furnish a controlling standard in this case.

. The district court then recited the policy language quoted above without explaining to the jury how it should reconcile the two standards.

. See Gulfstream Cargo, 409 F.2d at 981 n. 20 (quoting 45 C.J.S. Insurance § 645a).

. See id., 409 F.2d at 981 n. 20; Black’s Law Dictionary 1363 (5th ed. 1979).

. See Restatement (Second) of Contracts § 206(a) ("In the interpretation of a ... [contract] term ... an interpretation which gives a reasonable, lawful, and effective meaning to all the terms is preferred to an interpretation which leaves a part unreasonable, unlawful, or of no effect.’’) (emphasis added); cf. Carriers Container Council, Inc. v. Mobile S.S. Assoc., Inc., 896 F.2d 1330, 1340 (11th Cir.1990) ("The court should review its interpretation of a labor-management contract for consistency with federal labor law.’’).

. It is odd that the district court instructed the jury on both standards without providing any guidance on how to reconcile them, other than reciting for the jury the principle that "in interpreting the policy ... where the language ... may be reasonably construed in more than one way, it should be construed in the light most favorable to the insured.” This Court has established, however, that whether a contract is ambiguous or not is a question of law, see International Bhd. of Boilermakers v. Local Lodge D111, 858 F.2d 1559, 1561 (11th Cir.1988), cert. denied, — U.S. -, 109 S.Ct. 1955, 104 L.Ed.2d 424 (1989), and that the meaning of an ambiguous contract, where no relevant factual dispute exists, should be resolved by the judge, not the jury. See Ellenwood v. Southern United Life Ins. Co., 373 So.2d 392, 394 (Fla.App.1979). King thus correctly argued at the charge conference that the proper interpretation of this policy should not have been left to the jury.