Drake Fishing, Inc. v. Clarendon American Insurance

UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT

No. 97-1817

DRAKE FISHING, INC., ET AL.,

Plaintiffs, Appellants,

v.

CLARENDON AMERICAN INSURANCE CO.,

Defendant, Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Reginald C. Lindsay, U.S. District Judge]

Before

Torruella, Chief Judge,

Aldrich, Senior Circuit Judge,

and Boudin, Circuit Judge.

John A. Birknes, Jr. for appellants.

Thomas J. Muzyka with whom Clinton & Muzyka was on brief for

appellee.

February 20, 1998

ALDRICH, Senior Circuit Judge. The F/V DRAKE,

dragging for scallops on February 28, 1995, "hung" her dredge

on the bottom. She was unable to free by maneuvering, and

ended up with the wire at 90 degrees (downward), her stern

quarter into the wind, and seas splashing into the

lazarettes, the hatch covers having come off, and the crew

unable to replace them. The hydraulic winch jammed, and,

because of the rain and weather, the crew could not light a

torch to cut the wire. Meanwhile, the seas were filling the

lazarettes faster than the bilge pumps could handle. In

response to a May Day call, another vessel arrived and the

crew was saved, but the DRAKE was lost. This action was

brought to recover the agreed value, on defendant Clarendon

American Insurance Company's hull policy. On the basis of an

unsatisfied condition precedent, plaintiffs-appellants lost

on summary judgment in the district court. We affirm.

When the DRAKE put to sea on this voyage, it had

various minor deficiencies, including no lazarette bilge

alarm warning lights and no required spare communications

battery in the pilot house. The audible bilge alarms,

however, were working, and the crew was obviously aware of

the water. The battery's absence was also irrelevant to the

loss. Accordingly, Mass. G.L. ch. 175, 186 might have

precluded either of these defects, or a number of other minor

ones, from giving rise to a successful misrepresentation or

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breach of warranty defense on the policy,1 but this was not

the set-up. Defendant had a stronger defense, the

Massachusetts law of condition precedent.

Conformance with stated conditions that are agreed

to govern the attachment of the policy is obligatory,

regardless of their irrelevancy to the actual loss. See

Charles, Henry & Crowley Co. v. Home Ins. Co., 349 Mass. 723,

724-25, 212 N.E.2d 240 (1965); see also Edmonds v. United

States, 492 F. Supp. 970, 974 (D. Mass. 1980), aff'd, 642

F.2d 877 (1st Cir. 1981). It is enough that the statements

relate essentially to the insurer's intelligent decision to

issue the policy. See Charles, Henry & Crowley Co., 349

Mass. at 726. This question is an objective one: would the

matter be considered of importance by a reasonable insurer.

See Krause v. Equitable Life Ins. Co., 333 Mass. 200, 204,

129 N.E.2d 617 (1955); Lopardi v. John Hancock Mut. Life Ins.

Co., 289 Mass. 492, 496, 194 N.E. 706 (1935); Kravit v.

United States Cas. Co., 278 Mass. 178, 180, 179 N.E. 399

(1932); see also Edmonds, 642 F.2d at 883.

Involved here, among others, were the following

conditions. The DRAKE was to undergo and pass an inspection

by the United States Coast Guard and display a compliance

sticker. There was to be a back-up radio battery with

1. It is agreed that, though this was a marine policy,
Massachusetts law governs. See generally Wilburn Boat Co. v.

Fireman's Fund Ins. Co., 348 U.S. 310 (1955).

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associated charging equipment. And, the DRAKE was to have

both audible and visual bilge alarms in the lazarettes, wired

to the pilot house. All are conceded to have been

unsatisfied at the relevant times. The district court

focussed on the first, finding that "as a matter of law a

reasonable maritime insurer would have wanted to know and

would not as a matter of law, not fact, have issued th[e]

policy had it known that there wasn't that Coast Guard

sticker." We agree. Cf. Edmonds, 642 F.2d at 883 & n.2 (FAA

biennial flight review requirement).

There is a further question raised by the

plaintiffs: were these matters truly expressed as conditions

precedent. Whether a policy term is a condition precedent or

a warranty is a question of law. See Shaw v. Commercial Ins.

Co., 359 Mass. 601, 605-06, 270 N.E.2d 817 (1971). Here, the

requirement that the words "condition precedent" or their

equivalent be used was met. See Charles, Henry & Crowley

Co., 349 Mass. at 726. The Fishing Vessel Safety

Requirements Clause, expressly attached to and forming a part

of the policy, stated,

It is a condition precedent of this
coverage that these requirements must be
complied with prior to the attachment
date of this policy and as proof of such
compliance this Fishing Vessel Safety
Requirements Clause must be signed by the
Assured and be returned to this
company . . . .

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The listed "requirements" included the inspection sticker,

the battery, and the bilge alarms. The captain of the DRAKE,

who was also the son of its owner, signed the clause as the

assured, one month before the final voyage.2

Plaintiffs attempt to save their case by contending

that valid conditions precedent must appear, initially at

least, in the application for insurance. Although the

language in Charles, Henry & Crowley Co. might be read to

support this, see 349 Mass. at 726 ("[A] statement made in an

application for a policy of insurance may become a condition

of the policy rather than remain a warranty or representation

if . . . ."), other cases reveal a broader view, see Shurdut

v. John Hancock Mut. Life Ins. Co., 320 Mass. 728, 731, 71

N.E.2d 391 (1947) (application for reinstatement after

lapse); Lopardi, 289 Mass. at 495 (provisions in policy);

Kravit, 278 Mass. at 179 (policy schedule); see also Edmonds,

492 F. Supp. at 972-73 (amendments added in connection with

renewal).

There can be no dispute here that plaintiffs had

notice of the conditions, or that they related to the

insurer's decision to take the risk. Cf. Edmonds, 642 F.2d

2. Although the insured's signature is dated January 27,
1994 rather than 1995, it is clear that this was simply a
mistake. Despite a later, and feeble, effort to cast doubt,
plaintiffs-appellants essentially admitted as much. In any
event, plaintiffs-appellants can make no claim that the
Fishing Vessel Safety Requirements Clause was not a part of
the policy or that they had no notice.

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at 882. Clarendon reinstated the policy on February 2, 1995,

after issuing notice of cancellation, only after plaintiffs

had separately executed and submitted the Fishing Vessel

Safety Requirements Clause days earlier.3 The DRAKE had no

inspection sticker at that time, nor later that month when it

left harbor. Considering the facts and circumstances

surrounding the issuance of the policy, as we may, see

Massachusetts Mun. Wholesale Elec. Co. v. Town of Danvers,

411 Mass. 39, 45-46, 577 N.E.2d 283 (1991), we think it clear

that plaintiffs' argument fails. Cf. Shurdut, 320 Mass. at

731 (resumption of obligation after lapse made expressly

conditional upon the truth of statements made in the

application for reinstatement).

Affirmed.

3. A simultaneous basis for cancellation was non-payment of
the premium, also remedied before reinstatement. Although
its owners had never before had the Drake inspected by the
Coast Guard for purposes of obtaining a compliance sticker,
they requested such an inspection in February 1995 at the
behest of their insurance brokers. The Drake did not pass,
and no sticker was issued. The reasons are immaterial to the
loss. Cf. Edmonds.

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