Grande v. St. Paul Fire & Marine Insurance

United States Court of Appeals
For the First Circuit

No. 05-1734

FRANK P. GRANDE,

Plaintiff, Appellant,

v.

ST. PAUL FIRE & MARINE INSURANCE COMPANY;
CHARTER LAKES MARINE INSURANCE,

Defendants, Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MAINE

[Hon. John A. Woodcock, Jr., U.S. District Judge]

Before

Boudin, Chief Judge,

Stahl, Senior Circuit Judge,

and Lynch, Circuit Judge.

Michael X. Savasuk for appellant.
Mark G. Furey with whom Thompson Bull Furey Bass & MacColl
was on brief for appellees.

February 2, 2006
 BOUDIN, Chief Judge. This appeal concerns a claim for

insurance coverage following a maritime loss. The matter was

decided by the district judge adversely to the plaintiff, Frank P.

Grande ("Frank P."), on the defendants' motion for judgment as a

matter of law at the close of plaintiff's case during the trial

before a jury. Grande v. St. Paul Fire & Marine Ins. Co., 365 F.

Supp. 2d 57, 59 (D. Me. 2005). We therefore recite the facts based

upon the evidence offered by the plaintiff, drawing inferences in

his favor. Guilloty Perez v. Pierluisi, 339 F.3d 43, 50 (1st Cir.

2003).

Frank P. owned a 25-foot Catalina sailboat called

APHRODITE, based in Maine. He had charter insurance for the vessel

from St. Paul Fire & Marine Insurance Company ("St. Paul"),

obtained through Charter Lakes Marine Insurance ("Charter Lakes"),

which was an authorized agent of St. Paul. The latest version of

the policy limited coverage to "Atlantic coastal waters of the

United States between Eastport, ME and St. Marys, GA, not more than

100 miles from shore, Coastal Atlantic Maine."

In spring 2003, Frank P. found a new sailboat, a 44-foot

Irwin named GINA, in Miami, Florida. His cousin, Frank A. Grande

("Frank A."), paid for the vessel, on the understanding that Frank

P. would own and operate the vessel and eventually pay Frank A.

back the purchase price. Frank P. planned to sail the GINA from

Miami back up to Maine and to use it in his charter business in

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place of the APHRODITE. He contacted Mark VanEpps of Charter

Lakes, requesting coverage for chartering the vessel in Maine and

for his trip from Florida to Maine.

On or about April 28, 2003, VanEpps faxed an insurance

quote and application to Frank P., who filled out the application,

listing himself as owner and sole operator, and faxed it back to

VanEpps. The quote included one-time trip coverage from Florida to

Maine for a $150 premium. According to Frank P., he told VanEpps

that he wanted to get the GINA from Florida to Maine "in a timely

fashion and as the crow flies."

Prior to Frank P.'s departure from Miami on May 6, 2003,

VanEpps reported by telephone to Frank P. (who had not yet received

the new policy) that he was now covered by St. Paul and thus was

"good to go" with the GINA on his voyage to Maine. On the trip to

Maine, the GINA sought to evade bad weather near Cape Hatteras,

adjusted her course southeast, and was 150 to 160 nautical miles

from shore when Frank P. and crew were rescued by the Coast Guard

on May 17. The vessel, although later salvaged, was effectively a

total loss.

After the incident, Frank P. received a formal St. Paul

policy for the GINA dated May 19, 2003 (the day after he had called

Charter Lakes to notify it of the loss), containing an endorsement

covering the trip but also stating that the GINA was covered only

within 100 miles from shore. When Frank P. filed a claim with St.

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Paul, it was rejected on the ground that the GINA had been outside

the 100-mile limit when the loss occurred.

Several months later, Frank P. brought this diversity

suit against St. Paul and Charter Lakes in federal district court

in Maine. Frank P.'s contract claim asserted insurance coverage.

A separate negligence claim charged Charter Lakes with failing to

procure the insurance that Frank P. requested, and with failing to

notify him of the supposed 100-mile limit prior to his departure

(contrary to its alleged practice in prior dealings with Frank P.).

Frank P. also asserted an estoppel claim,1 arguing that St. Paul

was barred from denying coverage because of his justified reliance

on their unreasonably misleading conduct.

The case was tried to a jury in April 2005, but after the

close of Frank P.'s evidence, the district court granted judgment

for the defendants as a matter of law. Grande, 365 F. Supp. 2d at

59. In substance, the court said that Frank P. had failed to

establish contract coverage for the trip he took; that any

insurance coverage he did procure was voidable because of the

failure to disclose Frank A.'s interest; and that the negligence

1
Estoppel is not ordinarily viewed as an independent cause of
action, but as a set of rules preventing someone in specified
circumstances from altering or contesting a proposition. Prosser
& Keeton on Torts § 105, at 733 (5th ed. 1984). Maine case law is
unclear. Compare Waterville Homes, Inc. v. Me. Dep't of Transp.,
589 A.2d 455, 457 (Me. 1991) (noting that estoppel functions only
as "an equitable affirmative defense"), with Martin v. Prudential
Ins. Co., 389 A.2d 28, 30-32 (Me. 1978) (treating equitable
estoppel as an independent theory of recovery).

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and estoppel claims foundered because of the non-disclosure and

because Frank P. had failed to show that anyone else would have

insured him outside the 100-mile limit. Id. at 62-67.

On this appeal, review is de novo because the district

court granted judgment as a matter of law, and we take Frank P.'s

evidence in the light most favorable to his case and assume

credibility issues in his favor. Guilloty Perez, 339 F.3d at 50.

We accept the parties' view that Maine law applies except so far as

it might be displaced by a governing federal rule applicable to

maritime matters. See Wilburn Boat Co. v. Fireman's Fund Ins. Co.,

348 U.S. 310, 319-21 (1955); Greenly v. Mariner Mgmt. Group, Inc.,

192 F.3d 22, 25-26 (1st Cir. 1999).

We begin with Frank P.'s contract theory, which, if

successful, likely looks to liability of St. Paul rather than

Charter Lakes; an agent who acts for a disclosed principal is not

ordinarily party to the contract or liable for its breach by the

principal. See County Forest Prods., Inc. v. Green Mountain

Agency, Inc., 758 A.2d 59, 69 (Me. 2000). Here, Frank P. has not

sought to recover on the policy as issued, regarding that avenue as

blocked by the specific endorsement language excluding coverage

beyond the 100-mile limit.

Instead, Frank P. argues in substance that the contract

in force during his trip was a temporary "binder" contract that

filled the gap until a formal policy later issued, and that the

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formal policy misstated the coverage agreed to for the trip. This

binder contract, in Frank P.'s view, was formed by the exchanges

between the parties, including VanEpps' ultimate "good to go"

assertion, and does not incorporate any 100-mile limit on the trip

from Florida to Maine. According to Frank P.'s testimony, he told

VanEpps that he was requesting trip insurance and VanEpps told him

after receiving the completed application back that he was covered.

Frank P. testified that he told VanEpps that he planned

to travel from Florida to Maine in a straight line (specifically,

"as the crow flies"). During opening arguments, Frank P.'s counsel

stated that such a route would have taken Frank P. outside of the

100-mile limit; although this statement itself was not evidence,

United States v. Rose, 104 F.3d 1408, 1416 (1st Cir. 1997), cert.

denied, 520 U.S. 1258 (1997), Frank P. later submitted into

evidence a chart from which the jury could have determined that

such a route would naturally have taken the GINA outside of a 100-

mile limit between Cape Hatteras and Maine.

Frank P. further testified as to past practice in his

dealings with Charter Lakes. He claimed that in the past,

navigational limits for the APHRODITE had been cited in Charter

Lakes' quote letter, and that the written binder issued thereafter

had cited those same limits, which in turn were cited in the

formally issued policy. Frank P. testified that during his

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negotiations with VanEpps, no navigational limit was mentioned by

VanEpps as to the trip from Florida to Maine.

In granting judgment for defendants as a matter of law,

the district judge took the view that, under general law applicable

to insurance, a temporary binder provides only that coverage that

is common practice in the industry and that it was Frank P.'s

obligation--as the claimant under a binder contract--to establish

that such insurance could be procured from St. Paul or others

without a 100-mile limit. Grande, 365 F. Supp. 2d at 63-64.

Admittedly, Frank P. offered no evidence on this issue one way or

the other.

Case law does use common practice to fill in missing

terms where, as is ordinarily the case, the binder arrangement is

a temporary measure and contains little detail of its own. "[W]hen

a loss occurs after a binder has been issued, but before a policy

is written, the insurer is bound to provide coverage in line with

its standard policies referenced in the binder, or policies

standard throughout the industry." Pine Ridge Realty, Inc. v.

Mass. Bay Ins. Co., 752 A.2d 595, 599 (Me. 2000) (citations

omitted); see also Acadia Ins. Co. v. Allied Marine Transp. LLC,

151 F. Supp. 2d 107, 125 (D. Me. 2001). If Frank P.'s binder claim

rested on a general request for insurance followed by a standard

binder commitment by VanEpps, this would be a different case.

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 Here, however, Frank P. does not claim merely that he

asked that insurance be switched from APHRODITE to GINA, which

might easily be understood as importing the existing 100-mile limit

contained in the APHRODITE policy or as compelling a search for

common practice. Rather, he testified that he also asked VanEpps

for coverage for the trip from Florida to Maine and that he told

VanEpps that the GINA would follow the most direct course (which a

reasonable jury might find--based on the chart submitted into

evidence--would take her more than 100 miles offshore).

The "common practice" rule does not apply if a "special

agreement" has been made in the course of contracting. Acadia Ins.

Co. v. Allied Marine Transp. LLC, 151 F. Supp. 2d 107, 125 (D. Me.

2001) ("The general rule regarding the terms of an oral binder or

contract for temporary insurance pending issuance of a written

policy consists, in the absence of a special agreement, of the

usual provisions of contracts employed to effect like insurance."

(emphasis added)). Thus, when VanEpps said that insurance was in

force, a jury could find (although not obliged to do so) that the

parties were agreeing that the insurance was in force for the trip

as described by Frank P. to VanEpps.

Defendants might say that the conversations were

different or urge different inferences, but these would be typical

jury issues. If the facts are resolved in Frank P.'s favor, we

think that a contract--narrowed to an initial understanding that

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coverage would include the trip unconstrained by a 100-mile limit--

might reasonably be inferred by a jury. How matters would stand at

the end of the defense case, if contrary evidence were offered, is

not something we need to anticipate.

Two other objections were found by the district court to

preclude recovery. The first was what the district judge described

as Frank P.'s failure to offer proof of causation running from the

alleged wrong to actual harm. The district judge said that Frank

P. had failed to show that insurance providing the coverage sought

by Frank P.--i.e., for a trip outside the 100-mile limit--would

have been available either from St. Paul or anyone else. Grande,

365 F. Supp. 2d at 63-64.

There is some precedent, including one case from a Maine

superior court, that is hostile to claims for a negligent failure

to procure insurance, or even an alleged breach of a promise to

procure insurance, where it turns out that the sought insurance was

not in fact available.2 This may make some sense where, as

commonly appears to be so in these cases, there was no reliance on

the broker's representation. This is about the best sense we can

make of this case law when the facts of the cases are examined.

2
See Royal Maccabees Life Ins. Co. v. Peterson, 139 F.3d 568,
570 (7th Cir. 1998); Huff v. Standard Life Ins. Co., 897 F.2d 1072,
1074 (11th Cir. 1990); Bayly, Martin & Fay, Inc. v. Pete's Satire,
Inc., 739 P.2d 239, 244 (Colo. 1987); Bangor-Brewer Bowling Lanes,
Inc. v. Commercial Union-York Ins. Co., 2001 WL 1719238 (Me. Super.
Ct. Pen. Cty., July 3, 2001).

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 Frank P.'s contract claim does not rest on a promise by

the broker to seek to procure insurance--it is a claim that the

broker, seemingly with apparent authority, provided insurance

coverage for breach of which (one would expect) ordinary

expectation damages are available. And, just to wrap matters up,

even a negligence claim would on the present facts arguably rest on

actual reliance (given Frank P.'s testimony that he would not have

traveled outside of the 100-mile navigational limit had he known

that such a limit attached). Thus, the causation objection is not

enough to justify the directed verdict.

The district court's other objection was that Frank P.'s

written application for the insurance was materially false because

it represented him as the GINA's "registered owner" and did not

disclose Frank A.'s interest anywhere on the application. 365 F.

Supp. 2d at 64-67. The district court said that under Maine law,

"[a]n insured must disclose in an application for insurance all

known circumstances that materially affect the insurer's risks,"

id. at 65, adding that the doctrine is especially stringent under

general maritime law where marine insurance policies are

"traditionally contracts uberrimae fidei." Id. (quoting Windsor

Mount Joy Mut. Ins. Co. v. Giragosian, 57 F.3d 50, 54 (1st Cir.

1995)). "Uberrimae fidei" roughly translates as "of the utmost

good faith." Black's Law Dictionary 1558 (8th ed. 2004).

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 Regardless of whether the stricter maritime doctrine

applies (as opposed to Maine law), we find that a jury issue is

presented. In the application that Frank P. faxed to VanEpps, the

entry for "registered owner(s) or [l]essee(s)" was answered with

Frank P.'s name and address. It may be debatable whether Frank P.

was the "owner"; on the one hand, his cousin, Frank A., paid for

the vessel and the bill of sale was made out to Frank A. On the

other hand, Frank P. testified that it was understood between the

two cousins that Frank P. then became the owner of the boat,

subject to an obligation to repay the purchase price in due course.

If Frank P.'s testimony is credited, then he might be

regarded as "the owner" in the legal sense (given the intention of

the cousins as to ownership) and in the economic sense (if, as

appears to have been the case, Frank P. bore the risk of loss in

the event that the boat sank uninsured). Again, the defendants

could contest the facts and the inferences, but it is hard to see

how a verdict on the contrary premise could be directed.

Admittedly, Frank P. was apparently not the "registered

owner" when the application was submitted. This phrase refers to

a filing with an official registry for vessels, such as is afforded

by individual states or by the Coast Guard. Frank P. said that his

plan was to register the vessel in his name when he got to Maine.

It is unclear that any such filing was ever made in Frank A.'s

name. Based on Frank P.'s testimony, a jury could reasonably find

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him to be the "owner," but not the "registered owner," of the

vessel at the time it sailed.

Absent a different regime imposed by statute, an

insurance contract is ordinarily voidable if a false statement in

the application was "material"--materiality meaning something that

affects the risk and might lead either to a higher premium or a

refusal of insurance. There are various formulations: one treatise

says that in the marine insurance context, a material fact is "that

which can possibly influence the mind of a prudent and intelligent

insurer in determining whether it will accept the risk." 4A

Appleman & Appleman, Insurance Law and Practice § 2651 (rev. ed.

Supp. 2005).

Materiality, although largely a matter of applying a

legal standard to particular facts, is one of those "mixed"

questions that, like "negligence," is ordinarily left to the trier

of fact unless the outcome is so clear that a reasonable jury could

decide it only one way. "[C]ourts and commentators have long

recognized that materiality is primarily a question of fact, the

resolution of which is necessarily a function of context and

circumstances." Dopp v. Pritzker, 38 F.3d 1239, 1244 (1st Cir.

1994), cert. denied, 514 U.S. 1108 (1995); see also Howard Fire

Ins. Co. v. Chase, 72 U.S. 509, 515 (1866). Tradition and policy

make this a reasonable assignment of functions.

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 Ownership of the insured property is normally a material

fact in an insurance contract, see, e.g., Cigna Prop. & Cas. Ins.

Co. v. Polaris Pictures Corp., 159 F.3d 412, 420 (9th Cir. 1998),

cert. denied, 528 U.S. 815 (1999); among other things, the owner is

the main party with an insurable interest, and the owner ordinarily

has the primary incentive to safeguard the property (which reduces

the risk). But if Frank P.'s testimony is accepted, he arguably

was the owner in both senses. The district court seemed to think

that Frank A. was the real owner, but given Frank P.'s testimony,

this is a matter for the jury; indeed, it appears quite possible

that Frank A. was not the owner when the insurance was sought.

It might still be "material" that the application

inaccurately described Frank P. as the registered owner, but why is

not so evident as to justify judgment as a matter of law. Neither

the district court nor St. Paul's brief explains why registration

is significant to the risk. There may well be a reason that St.

Paul can adduce at trial. But, for now, it is an open question why

the insurer would care whether Frank P., if the real owner,

completed the registration before or after he arrived in Maine.

The district judge seemed to say that, in any event, it

was material that Frank A. had purchased the boat in the first

instance, transferred it orally, but had not yet been paid. It is

not clear that any question in the application called for a

disclosure of such facts; for example, if Frank P. had purchased

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the vessel from the manufacturer with no money down and then

registered it in his name, nothing in the application seemed to

call for this to be disclosed. Under ordinary contract law, false

statements can undermine contracts, but an affirmative duty to

disclose is not universal. 1 Farnsworth on Contracts § 3.26c(3),

at 409-10 (3d ed. 2004).

Nevertheless, under the strict maritime rule of uberrimae

fidei, an insured must make "full disclosure of all material facts

of which the insured has, or ought to have, knowledge . . . even

though no inquiry be made." 7 Russ & Segalla, Couch on Insurance

§ 99:2 (3d ed. 1997) (footnote omitted); see also HIH Marine Servs.

v. Fraser, 211 F.3d 1359, 1362 (11th Cir. 2000); Cigna, 159 F.3d at

420. This doctrine apparently rests on the special circumstances

of maritime insurance in which the insurer may have less than

ordinary opportunities to inspect and verify.

Yet even if the maritime rule applies–-whether Maine law

would apply the same approach anyway has not been briefed--judgment

as a matter of law was not justified here. Frank A. testified that

he never intended to possess or operate the vessel, and Frank P.

said that he owned the vessel, owing Frank A. the purchase price.

It is not clear why this arrangement would affect the insurer's

risk assessment (although reasons might be adduced during the

defendants' case at trial).

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 We therefore conclude that as to Frank P.'s contract

claim against St. Paul, judgment as a matter of law should not have

been granted. This brings us to the negligence and estoppel

claims. Frank P. argues that such claims would survive even if the

contract claim fell; the district judge treated both non-contract

theories as more or less variations on the same theme as the

contract claim, and, after disposing of the contract claim, found

that the other two followed suit.

In principle, the contract, negligence, and estoppel

claims are not identical as to elements or even parties. For

example, while there is normally no liability of the agent for the

principal's breach of contract, an agent may sometimes be liable in

negligence to one with whom he deals, County Forest Prods., 758

A.2d at 69-70, while the principal may or may not be liable; and

obviously whether one made and breached a contract or acted

negligently in breach of a duty of care are two different

questions.

Here, the district court ruled that the same

considerations that it deemed to bar the contract claim--the

disclosure flaws and lack of causation--also barred the alternative

claims. Because we disagree with the premise as applied to the

contract claim, no lengthy discussion of its extension to the other

two claims is needed; they too must be remanded for further

proceedings. However, we caution against too ready an assumption

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that the answers or defenses that work against one claim

necessarily work against all.

The judgment of the district court is vacated and the

matter remanded for further proceedings consistent with this

decision. Costs are awarded to appellant on the appeal.

It is so ordered.

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