Atlantic Specialty Insurance Company v. Karl's Boat Shop, Inc.

UNITED STATES DISTRICT COURT

DISTRICT OF MASSACHUSETTS

___________________________________

)

ATLANTIC SPECIALTY INSURANCE )

COMPANY, )

)

Plaintiff, )

)

v. ) CIVIL ACTION

) NO. 19-11219-WGY

KARL’S BOAT SHOP, INC., KBS REALTY )

TRUST, and KARL E. ANDERSON, )

)

Defendants. )

___________________________________)

YOUNG, D.J. August 20, 2020

MEMORANDUM AND ORDER

I. INTRODUCTION

This case concerns the duties owed by the owner of a

business to its insurer under maritime and Massachusetts law.

Before the Court is Atlantic Specialty Insurance Company’s

(“Atlantic Specialty”) motion for summary judgment. Pl.’s Mot.

Sum. J., ECF No. 24; Pl.’s Mem. Supp. Mot. Summ. J. (“Pl.’s

Mem.”), ECF No. 25. The defendants, Karl’s Boat Shop, Inc.

(“Karl’s”), KBS Realty Trust (the “Trust”) and Karl E. Anderson

(“Anderson”) (collectively “KBS”) oppose the motion, and cross-

move for summary judgment. See Defs.’ Mem. Opp’n Pl.’s Mot.

Summ. J. (“Defs.’ Opp’n”) 2, ECF No. 28.

On May 31, 2019, Atlantic Specialty, an insurance

underwriter, brought the present action for declaratory relief

against KBS for Misrepresentation of Material Fact (Count I) and

Violation of the Doctrine of Uberrimae Fidei (Count II). See

generally Compl., ECF No. 1.

Anderson, the owner of Karl’s Boat Shop and the trustee of

KBS, operates a boat yard and marina that offers the storage of

vessels as a service. Compl. ¶¶ 5-7. Atlantic Specialty

alleged that it issued an insurance contract to KBS, under which

KBS was required to cause all owners of vessels stored at its

facility to execute a waiver indemnifying it (and thus Atlantic

Specialty) from claims. Compl. ¶¶ 8-9, 18-19. Atlantic

Specialty then alleged that KBS routinely failed to require

vessel owners to sign the waivers, a material breach of their

contract. Id. ¶¶ 21-25. When a fire broke out at a KBS storage

barn damaging the vessels stored therein, multiple third parties

threatened KBS with claims, Answer to Compl. Karl E. Anderson

(“Answer”) ¶ 29, ECF No. 9,1 and KBS in turn requested that

Atlantic Specialty defend and indemnify it. Compl. ¶¶ 26-32.

Atlantic Specialty therefore requests a Declaratory Judgment

that would allow it to void its contract with KBS, and thus deny

coverage of these third-party claims. Id. 10-11.

1 The three Defendants, who are all alter egos of Anderson,

filed identical Answers. See ECF Nos. 9-11.

Both parties have filed Statements of Material Fact. Pl.’s

Statement Material Fact L.R. 56.1 (“Pl.’s SOF”), ECF No. 26;

Defs.’ Opp’n, Attach. 3, Statement of Disputed and Undisputed

Facts (“Defs.’ Disputed Facts) and (“Defs.’ SOF”), ECF No. 28-3.

Atlantic Specialty has filed a Reply and a response disputing

KBS’s characterization of the facts. See Pl.’s Reply, ECF No.

31; Pl.’s Statement Material Facts L.R. 56.1 re Mot. Sum. J.

(“Pl.’s Response SOF”).

Based on the undisputed facts in the record, and taking all

reasonable inferences in favor of the non-moving party KBS,

Atlantic Specialty has met its burden of showing that KBS

breached its insurance contract under the maritime doctrines of

uberrimae fidei and the warranty of truthfulness. Accordingly,

this court GRANTS summary judgment in favor of Atlantic

Specialty, and DENIES KBS’s cross-motion for summary judgment.

II. UNDISPUTED FACTS

Atlantic Specialty is an insurance company organized under

the laws of New York, with its principal place of business in

Plymouth, Minnesota. Pl.’s SOF ¶ 1. Karl Anderson is the sole

officer of Karl’s as well as the trustee of KBS Realty, and all

entities are organized and operate in Massachusetts. Id. at ¶¶

2-4.

Karl’s is located at 50 Great Western Road, Harwich, Mass.,

about two miles from any navigable waterway. Defs.’ Opp’n, Ex.

1, Affidavit of Karl Anderson (“Anderson Affidavit”) ¶¶ 1-2.

The focus of the business is the maintenance and repair of

recreational boats, including painting, cleaning, and hull and

deck repair, and annual launching and hauling of some boats from

moorings or docks. Id. ¶¶ 3-5. Karl’s stores boats at a barn

at 411 Upper County Road (“the Barn”) and must haul boats

overland to transport them to both locations. Id. ¶¶ 6-7.

KBS applied for insurance from Atlantic Specialty (under

its trademark “International Marine Underwriters”) on January

15, 2015, see Defs.’ Opp’n, Attach. 5, National Marina Program

Application (“2015 Application”), ECF No. 28-2, and Atlantic

Specialty issued the original insurance policy between these

parties in February 2015, id., Attach. 6, Insurance Policy

B5JH54698 (“2015 Insurance Policy”), ECF No. 28-2. Atlantic

Specialty renewed the policy for 2016, 2017, and 2018 without

requiring reapplication. See Defs.’ Opp’n, Ex. 1, Affidavit of

Karl Anderson (“Anderson Affidavit”) ¶¶ 17-18. The policy at

issue in the current case ran from January 16, 2018 to January

16, 2019. See Compl., Ex. A, Insurance Policy B5JH54698 (“2018

Insurance Policy”), ECF No. 1-1. KBS had also received

insurance from International Marine Underwriters from 2010 to

2014. Anderson Affidavit ¶¶ 8-9, 14-15.

On February 9, 2016, Atlantic Specialty sent a loss control

specialist, Robert Loring, to conduct a survey of KBS. Pl.’s

SOF ¶ 9; id., Attach. 1, Decl. of Russell Bond (“Bond Decl.”) ¶¶

15-16, ECF No. 26-1. Loring identified six areas for

improvement and provided them to KBS, which faxed back a

document to International Marine Underwriters in June of 2016,

acknowledging its receipt and its plans for improvement. Bond

Decl. ¶¶ 19-20; Anderson Affidavit ¶ 19; Pl.’s SOF, Ex. A., Loss

Control Survey Recommendations (“2016 Loss Fax”), ECF No. 26-2.

The heading of the loss control recommendation states,

“[f]ailure to respond may jeopardize your insurance coverage.”

Id. at 2. It makes six recommendations, each of which is

labelled “Recommendation Grade: Necessary,” all using language

indicating a particular change “should be” implemented. Id. at

3-4. One of these recommendations was for a Boat Storage

Agreement, stating:

A boat storage agreement should be instituted. The

agreement should require that boat owners provide

proof of insurance and the agreement should have hold

harmless and indemnification language. Legal counsel

should be consulted for proper wording to ensure that

it complies with state and local statutes.

Id. KBS stated for this recommendation “Enclosed,” id. at 3,

and included in the fax two documents, a waiver (“Waiver”) and

short-term storage contract (“Storage Contract”), id. at 5-6.

The Waiver states in pertinent part:

In contracting with Karl’s Boat Shop, Inc., I

recognize and accept that there are certain elements

of risk that exist . . . I will in no way hold Karl’s

Boat Shop, Inc. responsible for any such damage that

may occur during the handling of my boat.

Id. at 5. The Storage Contract similarly states:

Karl’s Boat Shop, Inc. assumes no responsibility for

loss or damage to vessels, engines, or articles left

onboard in case of fire, theft, rodents, damage,

exposure to the elements, acts of God, or any other

cause however arising.

Id. at 6.

KBS had once before completed a similar loss control

compliance form, in 2010. See Anderson Dep. ¶¶ 8-14. The 2010

loss control survey, directed by International Marine

Underwriters, also recommended the implementation of a boat

storage agreement, and KBS included a similar Waiver and Storage

Agreement in its response to that survey that contained an

identical disclaimer. See Defs.’ Opp’n, Attach. 2, Loss Control

Survey Recommendations (“2010 Loss Fax”), 4-6, ECF No. 28-2.

At his deposition, Karl Anderson testified that the 2010

fax was actually sent by his employee Heather Brown, that she

had filled out the responses to the recommendations, and that he

was unsure whether he had authorized her to sign his name on it.

Pl.’s SOF, Ex. 23, Dep. of Karl Anderson 47:10-50:5, ECF No. 26-

26. He also stated that he specifically instructed her in 2010

to have all customers execute the waiver and storage agreements.

Id., Ex. 24, Dep. of Karl Anderson 67:9-67:20. He did not,

however, periodically check to ensure she was actually

complying. Id., Ex. 24, Dep. of Karl Anderson 67:23-68:9, ECF

No 26-29. Anderson does not specify if he signed the 2016

response, but this Court infers that he did so because the

handwriting is different than the 2010 response, and Anderson

acknowledges intentionally sending that fax. See 2016 Loss Fax;

Pl.’s SOF, Ex. 5, Dep. of Karl Anderson at 64:3-64:20, ECF No.

26-7.

On or about June 2, 2018, a fire occurred at the Barn.

Pl.’s SOF ¶¶ 32-33. Atlantic Specialty eventually paid KBS

$221,347 for damage to the property and related expenses. Pl.’s

Reply, Ex. 1, Decl. Russell Bond (“Second Bond Decl.”) ¶¶ 7-8,

ECF No. 31-1.

Multiple vessels owned by third parties also were damaged

in the fire. Id. ¶¶ 33-34. Several of these third parties

communicated to KBS that they intended to seek compensation, and

one of these parties filed suit. See Pl.’s SOF, Ex. 14, Wianno

Senior # 184 Claim of Compensation, ECF No. 26-16; id., Ex. 15,

Kennedy Letter, ECF No. 26-17; id., Ex. 16, Chubb Insurance

Letter, ECF No. 26-18; id., Ex. 17, Complaint, ACE American

Insurance Company et. al. v. Karl’s Boat Shop, Inc. (“ACE

Complaint”), 19-cv-12521, ECF No. 26-19. KBS requested that

Atlantic Specialty provide it with defense and indemnity

regarding these third-party claims, pursuant to the 2018

Insurance Policy. Pl.’s SOF ¶ 36.

Atlantic Specialty investigated. In response to

interrogatories by Atlantic Specialty, KBS admitted it had no

records indicating the parties who brought third party claims

for fire damage had executed the Waiver or Storage Agreements.

Pl.’s SOF, Ex. 19, Def.’s Responses Request Admission (“Def.’s

Admissions”) Responses 6, 10, ECF No. 26-21. KBS stated that

Heather Brown was the one responsible for ensuring that KBS

obtained these executed documents, but that she “was terminated

from employment under circumstances which suggest she will not

be cooperative with KBS in determining whether customers signed

the relevant documents.” Pl.’s SOF, Ex. 21, Def.’s Response

Interrogatories 15-23, ECF No. 26-24.

Anderson was unsure whether Brown was working for KBS in

June of 2016, when it submitted the 2016 Loss Fax. Id., Ex. 25,

Anderson Dep. 35:12-35:16, ECF No. 26-28. KBS eventually fired

her –- around 2017, to Anderson’s best recollection -- based in

part on “fishy” accounting irregularities and inconsistencies in

payroll. Id., Ex. 27, Dep. of Karl Anderson 32:19-34:8, ECF No.

26-30. Anderson did not name any other employees as responsible

for seeing to the execution of the paperwork after Brown left,

though he claims that Brown was responsible for seeing to the

execution of all paperwork “in the relevant time.” Def.’s

Response Interrogatories 15-23, ECF No. 26-24.

Both parties purport to dispute the material facts

submitted by the other party. See Defs.’ Disputed Facts, Pl.’s

Reply Defs.’ SOF. On closer examination, however, most of these

purported disputes merely amount to different characterizations

of the underlying undisputed evidence. The sole exception is

KBS’s dispute of Atlantic Specialty’s statement that the third

parties “were not required or did not actually execute the

Storage Agreement and Waiver.” Pl.’s SOF ¶ 37; Defs.’ Disputed

Facts ¶¶ 37. KBS states that the evidence does not support such

a broad conclusion, and is correct insofar as Atlantic

Specialty’s statement is an inference rather than a fact.

Defs.’ Disputed Facts ¶¶ 37. KBS has, however, produced no

evidence indicating the documents ever were signed. Id. Thus,

it has not actually disputed the inference, and there are no

genuine disputes of material fact. See Celotex Corp. v.

Catrett, 477 U.S. 317, 331 (1986) (Brennan, J., dissenting).

III. ANALYSIS

A. Summary Judgment

Summary judgment is appropriate on any claim for which

there is no genuine dispute of material fact and one party is

entitled to judgment as matter of law. Fed. R. Civ. P. 56(c).

The moving party bears the burden of proving it is entitled to

summary judgment. Celotex Corp., 477 U.S. at 330 (Brennan, J.,

dissenting). That party, if it bears the burden at trial as is

the case here, has an initial burden of producing

incontrovertible2 prima facie evidence of its claims. Id. at

331. Once it has done so the non-moving party has the burden of

producing evidence creating a “genuine issue” of dispute. Id.;

Blackstone Headwaters Coalition, Inc. v. Gallo Builders, 410 F.

3d 299, 302 (1st Cir. 2019).

A fact is material if it “has the potential to change the

outcome of the suit.” Calero-Cerezo v. United States Dep't of

Justice, 355 F.3d 6, 19 (1st Cir. 2004) (citing Parrilla-Burgos

v. Hernandez-Rivera, 108 F.3d 445, 448 (1st Cir. 1997)). A

genuine dispute exists if the evidence is “sufficiently open-

ended to permit a rational factfinder to resolve the issue in

favor of either side.” National Amusements, Inc. v. Town of

Dedham, 43 F.3d 731, 735 (1st Cir. 1995). If there are no

genuine disputes of material fact, the court reviews the record

in the light most flattering to the nonmoving party, taking all

reasonable inferences in that party’s favor. Maldonado-Denis v.

Castillo-Rodriguez, 23 F.3d 576, 581 (1st Cir. 1994). The court

is not required, however, to make unreasonable inferences in

2 This is so because, even were the evidence supporting the party

with the burden of proof uncontroverted, the fact finder could

choose to disbelieve it. Reeves v. Sanderson Plumbing Prod.,

Inc., 530 U.S. 133, 151 (2000).

.

favor of the nonmoving party if the factual record supports only

one interpretation. Scott v. Harris, 550 U.S. 372, 380 (2007).

B. Jurisdiction

Atlantic Specialty asserts that this Court has maritime

jurisdiction because the underlying insurance contract is for

marine insurance. See Compl. ¶ 2; Pl.’s Mem. 9-10. KBS argues

that the insurance contract is not actually for marine insurance

because it concerns the insurance of a storage facility located

inland. Defs.’ Opp’n 7-8.

Atlantic Specialty is correct. Since the dispute is

maritime in nature this Court has jurisdiction pursuant to 28

U.S.C. § 1333, and federal admiralty law controls. See Central

Int'l Co. v. Kemper Nat'l Ins. Cos., 202 F.3d 372, 373-374 (1st

Cir. 2000).3

Atlantic Specialty argues that the 2018 Insurance Policy is

a “marine insurance policy” because it concerns watercraft that

are inherently covered by maritime jurisdiction. Pl.’s Mem. at

9 (citing Essex Ins. Co. v. Detroit Bulk Storage, Inc., 11-CV-

3 This Court has jurisdiction over all three KBS entities.

KBS argues KBS Realty Trust, as a trust, may not be sued under

Massachusetts law, Defs.’ Opp’n 1 n.1 (citing Morrison v.

Lennett, 415 Mass. 857, 859-860 (1993)), but business trusts in

Massachusetts may be sued. Mass. Gen. L. ch. 182, § 6. KBS

Realty Trust is a nominee trust, Compl. ¶ 6, one of the types of

trust that are not immune from suit. Apahouser Lock & Sec.

Corp. v. Carvelli, 26 Mass. App. Ct. 385, 388 (Mass. App. Ct.

1988).

13277, 2012 WL 1893514, at *3 (E.D. Mich. May 23, 2012); Catlin

at Lloyd's v. San Juan Towing & Marine, 778 F.3d 69, 80–82 (1st

Cir. 2015)). In particular, Atlantic Specialty points to

language in the policy providing coverage to “Marina Operators”

for “loss or damage to boats,” see 2018 Insurance Policy 12, for

Protection and Indemnity arising from “the ownership or

operation of watercraft,” id. at 14, and coverage of “watercraft

. . . against all risks of direct physical loss of, or damage

to, the watercraft insured from any external cause,” id. at 103.

KBS disputes that the underlying policy is a “marine

contract,” arguing that only three pages of the policy deal with

maritime aspects, and that is it not a “Marina Operator.”

Defs.’ Opp’n at 7. KBS notes that its facilities are two miles

from any navigable waterway and that it conducts no maritime

operations from the barn location. Id. at 8. It argues that

“[s]imply designating an insurance contract as ‘marine’ is

insufficient to invoke admiralty jurisdiction,” id., and that

even a contract with an actual marina intended to insure

property is not necessarily maritime, id. (citing Hartford Fire

Ins. Co. v. Harborview Marina & Yacht Club Community Ass., Inc.,

Civ. No. PJM 16-769, 2016 WL 7178304 (D. Md., Dec. 9, 2016)).

KBS concludes that instead of looking at the labels on the

policy, this Court ought ask “whether the nature of the

transaction was maritime.” Id. (quoting Exxon Corp. v. Central

Gulf Lines, Inc., 500 U.S. 603, 611 (1991)).

Issues of contract interpretation are matter of law, see

Lloyd’s of London v. Pagan Sanchez, 539 F.3d 19, 22 (1st Cir.

2008), and all material facts relevant to the jurisdiction

inquiry are undisputed.4

“The boundaries of admiralty jurisdiction over contracts —-

as opposed to torts or crimes —- being conceptual rather than

spatial, have always been difficult to draw.” Kossick v. United

Fruit Co., 365 U.S. 731, 735 (1961). A contract may be maritime

in nature, even if it involves activity on land, if “the

principal objective . . . is maritime commerce.” Norfolk

Southern Railway Co. v. Kirby, 543 U.S. 14, 25 (2004) (holding

that a single contract for transportation of goods over both sea

and rail was maritime). The rule from Kirby is called the

“primary objective test.” See Sentry Select Ins. Co. v. Royal

Ins. Co. of Am., 481 F.3d 1208, 1218 (9th Cir. 2007).

“Ultimately, coverage determines whether a policy is ‘marine

insurance,’ and coverage is a function of the terms of the

insurance contract and the nature of the business insured.”

4 The sole “disputed” fact with respect to the contract is

whether Karl’s Boat Yard is a “marina.” Defs.’ Opp’n 7. This

is not a material fact because the name of the facility is not

material to the jurisdiction analysis.

Folksamerica Reinsurance Co. v. Clean Water of N.Y., Inc., 413

F.3d 307, 317 (2d Cir. 2005).

Courts have differed since the Kirby decision on how to

implement an exact test for determining when an insurance

contract’s “primary objective” is maritime. See Philip Michael

Powell, The Mixed Up Exercise of Admiralty Jurisdiction Over

Mixed Contracts, Namely Umbrella Insurance Policies Covering

Shore-side and Seaside Risks, 20 Ocean & Coastal L. J. 1, 24-38

(2015). The First Circuit itself has not applied the

jurisdiction test from Kirby to a mixed insurance contract

covering both land and sea components, though other district

courts in this circuit have. See, e.g., Catlin (Syndicate 2003)

at Lloyd's v. San Juan Towing & Marine Servs., 946 F. Supp. 2d

256, 262 (D. P.R. 2013).

It is therefore useful to examine the methodologies used by

other Circuits to analyze maritime contracts. The tests from

the Second and Sixth Circuit are the most distinct and

straightforward. Powell, Mixed Up Exercise at 25, 28. Both

tests would ultimately impose maritime jurisdiction on these

facts.

The Sixth Circuit looks at the contract as a whole. New

Hampshire Ins. Co. v. Home Savings and Loan Co. of Youngstown,

Ohio, et. al., 581 F.3d 420, 425 (6th Cir. 2009). In New

Hampshire Ins. it explained its approach as follows: “the Court

has endorsed a ‘conceptual’ approach, encouraging courts to

consider the contract as a whole and instructing that we should

look for guidance in analogous precedent.” Id. at 427 (citing

Kossick, 365 U.S. at 735). The Sixth Circuit noted that this

inquiry looks at both the “interests insured” and the “risks

insured against.” Id. In applying this test, the court

determined that a policy for the insurance of a marina and yacht

dealership that included a truth-in-lending provisions did not

have, as its primary objective, maritime commerce. Id. at 423.

This was because, the court reasoned, the yacht dealership dealt

in vessels as stock for sale rather than instruments of maritime

commerce, id. at 424, and because the non-maritime elements of

the contract predominated the portion covering the marina, id.

at 428-30 (noting that, while the marina operations did include

the harboring and launching of vessels, they excluded owned

watercraft and pollution). The Court concluded that the

contract’s primary objective was to protect the businesses as

businesses and as fixed structures. Id. at 431.

The Second Circuit engages in a two-step inquiry. See

Folksamerica, 413 F.3d at 312. It first conducts a threshold

inquiry asking whether the dispute itself is maritime in nature.

Id. If the dispute itself is not maritime, the Second Circuit

does not impose maritime jurisdiction, even if the overall

contract is maritime in nature. Id. (citing Atlantic Mut. Ins.

Co. v. Balfour Maclaine Int'l, Ltd., 968 F.2d 196, 200 (2d Cir.

1992) (ruling that a dispute over stolen coffee cargo in storage

was not covered by admiralty jurisdiction because the coffee had

not yet entered the stream of maritime commerce)). Only after

conducting this threshold inquiry does the Second Circuit engage

in an analysis of the “primary objective” of a contract to see

if it is maritime commerce. Id. at 315. In Folksamerica, the

court first determined that a dispute over a “a ship-

maintenance-related injury sustained by a ship oil-tank cleaner

aboard an ocean-going vessel in navigable waters” passed the

threshold inquiry. Id. at 313. It then analyzed the contract

between the parties, determining that a commercial general

liability policy was maritime in nature because it included

coverage of several traditional maritime risks including

pollution and the operation of vessels. Id. at 318-19. The

Second Circuit’s reasoning at the second step of discerning the

contract’s primary objective does not differ from other

circuits.

There are upsides and downsides to both approaches. The

Second Circuit’s test has the benefit of avoiding arguably

absurd results. For example, in Catlin, the United States

District Court for the District of Puerto Rico conducted an

inquiry essentially the same as the Sixth Circuit’s test and

ruled that the sinking of a floating drydock was covered by

maritime jurisdiction (regardless of whether it was a “vessel”)

because it was designed to engage in maritime commerce by

providing repairs and maintenance to ships. 946 F. Supp. 2d at

264-67. Destruction of a shoreside facility, whether by fire or

water, does not inherently fall under maritime jurisdiction, see

New Hampshire Co., 581 F.3d at 429, and there is no

jurisdictional difference between a floating facility and a

shoreside one, Exxon Corp., 500 U.S. at 611, so the reasoning

from Catlin suggests that, hypothetically, if the current

dispute were over the fire damage to the barn instead of the

vessels therein it would still be maritime. See Second Bond

Decl. ¶¶ 7-8. This would be a strange application of maritime

jurisdiction. New Hampshire Co., 581 F.3d at 427 (citing Royal

Ins. Co. v. Pier 39 Ltd. P'ship, 738 F.2d 1035, 1036 (9th

Cir.1984) (noting that insurance for a beach house against

“perils of the sea” would almost certainly be outside maritime

jurisdiction)). Applying the Second Circuit’s threshold inquiry

would screen out such cases.

The Sixth Circuit test, however, appears more closely

tethered to Supreme Court precedent. In New Hampshire Co. the

Sixth Circuit noted that the Supreme Court has declined to

endorse a threshold inquiry, and that it has stated that the

“nature and subject-matter of the contract at issue should be

the crucial consideration in assessing admiralty jurisdiction.”

581 F.3d at 425 (quoting Exxon Corp., 500 U.S. at 611). As the

Sixth Circuit explained, creating an additional threshold

inquiry may narrow the scope of maritime jurisdiction to the

point of contradicting the Supreme Court. Id. (citing Kossick,

365 U.S. at 736-38) (ruling that a maritime employment contract

covered a dispute arising from events that occurred at a New

York hospital). Indeed, the Second Circuit “note[d] some

uncertainty” as to whether the threshold inquiry survived Kirby,

and relied entirely on pre-Kirby cases from within its own

Circuit in determining such an inquiry was necessary.

Folksamerica, 413 F.3d at 312-313.

Because the Sixth Circuit test appears more in line with

Supreme Court precedent, it is the one this Court adopts. As

will be explained below, however, the Second Circuit test would

lead to the same result here because the nature of the dispute

is itself maritime.

To begin, the 2018 Insurance Contract has the “genuinely

salty flavor” of a maritime contract. Kossick, 365 U.S. at 742;

Sentry Select, 481 F.3d at 2020. The 2018 Insurance Policy

covers six areas: Marina Operators Legal Liability, Protection &

Indemnity (“P&I”), Commercial General Liability (“CGL”),

Property, Equipment/Tools, and Owned Watercraft. 2018 Insurance

Contract 3. KBS declined three types of coverage –- Boat

Dealers, Piers, Wharves and Docks, and Terrorism -- which shows

that all the types of coverage it did select were intentional.

Id. The total yearly premium was $16,480, over half of which

($9,450) was for Marina Operator Legal Liability. Id. The

premium paid for portions of the policy can show their relative

importance. See Sentry Select Co., 481 F.3d at 1219 (labelling

a portion of a policy dealing with employee liability

“insignificant” because the insurer “did not charge an increased

premium when the endorsement was added.”).

The Marina Operator Legal Liability section covers:

the legal liability of the Insured as a marina

operator for loss or damage to boats, engines,

trailers, and outboard motors, the property of others,

which are in its care, custody or control for purposes

of repair, service, maintenance, consignment, storage,

mooring, launching, hauling, fueling, docking, or

other similar marina operations.

2018 Insurance Policy 12. This coverage extends to the covered

premise as well as “property away from your premises in you or

your employees’ custody for covered marina operations . . .”

Id. The policy also covers pollution caused by vessels and

equipment. Id. at 13. There are several exclusions from

coverage, but damage to watercrafts is not among them. Id. at

12-13.

The second and eighth sections of coverage, for P&I and

Owned Watercraft, are indisputably maritime. The P&I section

provides coverage for two Boston Whalers owned by KBS, id. at 2,

on both land and water, id. at 14. The Owned Watercraft

Insurance covers damage to these watercraft, both on land and at

sea. Id. at 103-105. The total premium for these policies was

$811, about 5% of the total cost. Id. at 4.

The third, sixth and seventh sections of coverage, for CGL,

Property, and Equipment/Tools, are not inherently maritime in

nature because they provide the kind of general insurance

available to any business, and coverage of a land-based

facility, even one involved in maritime commerce, is not

inherently maritime. Id. at 3, 19-34 (CGL); 37-97 (Property);

98-105 (Equipment/Tools); see New Hampshire Ins. Co., 581 F.3d

at 430. These policies together cost $6,219 per year, about 38%

of the total premium5. Id. at 4. The three listed locations for

property coverage are 50 Great Western Road, Harwich, MA (the

main shop); 5-7 Rosemary LN, W. Yarmouth, MA (warehouse); and

the Barn. Id. at 3, 6. The majority of the cost of premiums

are for the main shop. Id. at 6.

The primary object of this insurance policy thus was to

provide legal liability coverage for the operation of the

business, with the insurance of the buildings, equipment, and

owned vessels as secondary objectives. As indicated by its 2015

application for insurance, the primary purpose of KBS’s business

5 The cost of Commercial General Liability is listed as

“Included” rather than being broken out into a specific dollar

figure. 2018 Insurance Policy 3.

was repair work, as the gross receipts for repair work were

$220,000, versus $60,500 for storage and $57,500 for

hauling/launching. 2015 Application 2.

Each component of the Legal Liability coverage, as applied

to KBS, is marine in nature because it insures against maritime

peril. Contracts for repair of vessels already built certainly

concern a maritime peril. See Kossick, 365 U.S. at 735 (citing

Endner v. Greco, 3 F. 411, 412-413 (S.D.N.Y. 1880)); Point Adams

Packing Co. v. Astoria Marine Const. Co., 594 F.2d 763, 766 (9th

Cir. 1979) (citing New Bedford Dry Dock Co. v. Purdy, 258 U.S.

96, 99 (1922)). Insurance contracts covering “traditional

marine risks” such as pollution and damage to watercrafts do as

well. Cf. Sentry Select, 481 F.3d at 1219 (explaining that an

umbrella insurance policy’s exclusion of “traditional marine

risks” such as pollution and watercraft damage indicated it was

not maritime). That a contract includes land transportation

does not alter its maritime nature. Kirby, 543 U.S. at 27.

Most importantly, contracts for short-term or winter

storage of vessels on land are maritime, when accompanied by

repairs and servicing. See Fireman's Fund American Ins. Co. v.

Boston Harbor Marina, Inc., 285 F.Supp. 36, 39 (D. Mass. 1968)

(Wyzanski, J.) (rev’d on other grounds 406 F.2d 917 (1st Cir.

1969) (upholding the jurisdictional analysis)). As the Supreme

Court explained over a century ago:

[T]here is no difference in character as to repairs

made upon the hull of a vessel dependent upon whether

they are made while she is afloat, while in dry dock,

or while hauled up by ways upon land. The nature of

the service is identical in the several cases, and the

admiralty jurisdiction extends to all.

North Pacific S.S. Co. v. Hall Bros. Marine R. & Shipbuilding

Co., 249 U.S. 119, 128 (1912).6

Because the object of the contract was maritime, as were

the risks insured against, the contract falls under maritime

jurisdiction.

C. Choice of Law

If a contract falls within the maritime jurisdiction of the

Court, it applies “federal maritime rules that are established

and settled; otherwise [it] would look to state law.” Catlin at

Lloyd's, 778 F.3d at 80. In other words, state law controls

unless “an established maritime rule controls the disputed

issue, and that rule is materially different from state law.”

Commercial Union Ins. Co. v. Pesante, 459 F.3d 34, 37 (1st Cir.

6 There is language in New Hampshire Ins. that appears at

first glance to be helpful to KBS, namely that maritime

jurisdiction only extends to contracts covering a “particular

vessel.” 581 F.3d at 431. The court in Essex Ins., considering

a fact pattern very similar to the current case, makes a

convincing distinction by noting that the policy in New

Hampshire Ins. referred only to the marina as a whole, but the

insurance contract before that court insured vessels

collectively by covering loss or damage “[t]o watercraft and

equipment, cargoes, freights . . . .” 2012 WL 1893514, at *3.

The contract between Atlantic Specialty and KBS contains similar

language insuring vessels and cargo collectively. 2018

Insurance Policy at 12.

2006) (quoting Windsor Mount Joy Mut. Ins. Co. v. Giragosian, 57

F.3d 50, 54 (1st Cir. 1995)). State law also controls if the

dispute is “inherently local.” Kirby, 543 U.S. 14, 22-23. The

First Circuit will conduct the “inherently local” inquiry only

if a state has clearly expressed a rule contrary to the federal

rule, or demonstrated a strong interest in a different rule.

Lloyd's of London, 539 F.3d at 25.

Atlantic Specialty has cited two separate doctrines of

maritime law as applicable to this case – the doctrine of the

warranty of truthfulness, and the doctrine of uberrimae fidei.

Pl.’s Mem. 10, 15-16. Both doctrines relate to the

circumstances under which an insurer may void a contract because

of misstatements or omissions by the insured party, and both are

clearly established in the First Circuit. See Catlin (Lloyd’s),

778 F.3d at 80-81 (Uberrimae fidei); Lloyd's of London, 539 F.3d

at 24 (promissory warranties); see also Seguros v. Morales-

Vazquez, Civ. A. No. 15-2091, 2018 U.S. Dist. LEXIS 133864, at

*33 (D. P. R. Aug. 7, 2018) (analyzing the warranty of

truthfulness as a promissory warranty).

If both federal and state law arrive at the same result, to

accommodate state interests, this Court may decide based on

substantive the state law. Northern Assur. Co. of Am. v. Keefe,

845 F. Supp. 2d 406, 413 (D. Mass. 2012) (citing Kirby, 543 U.S.

at 27).

D. Count I: Misrepresentation of a Material Fact

Atlantic Specialty argues that the 2018 Insurance Policy is

voidable under both maritime and Massachusetts law because KBS

said it would not misrepresent any material facts, and then

misrepresented that it would require customers to execute the

Waiver and Storage Agreement. Pl.’s Mem. 17. KBS argues that

it did not make any misrepresentations, that Atlantic Specialty

did not rely on its statements in granting the insurance policy,

that any breach did not increase the level of risk, and that its

statements were not material. Defs.’ Opp’n 13-14.

Atlantic Specialty is correct that this policy is voidable

under either Massachusetts or Federal law. This court will

therefore conduct its inquiry under the stricter Massachusetts

standard, which necessarily satisfies the maritime standard.

1. Legal Standard

“Under Massachusetts law, contract interpretation is a

question of law for the court unless the contract is ambiguous.”

Nicolaci v. Anapol, 387 F.3d 21, 26 (1st Cir. 2004). The

language of a contract is ambiguous only if it is “susceptible

of more than one meaning and reasonably intelligent persons

would differ as to which meaning is the proper one.” Barclays

Bank PLC v. Poynter, 710 F.3d 16, 21 (1st Cir. 2013) (quoting

Lass v. Bank of Am., N.A., 695 F.3d 129, 134 (1st Cir. 2012)).

Contracts free from ambiguity are “interpreted according to

their plain terms” and courts “construe all words according to

‘their usual and ordinary sense.’” Barclays Bank PLC, 710 F.3d

at 21 (internal citation omitted). Words are interpreted

“within the context of the contract as a whole, rather than in

isolation.” Id.

Atlantic Specialty argues that it may void the insurance

policy under maritime law because KBS breached the warranty of

truthfulness. Pl.’s Mem. 15. Maritime law dictates that “‘a

breach of a promissory warranty in a maritime insurance contract

excuses the insurer from coverage.’” Maclean v. Travelers Ins.

Co., 299 F. Supp. 3d 231, 234 (D. Mass. 2017) (Gorton, J.)

(quoting Lloyd's of London, 539 F.3d at 24).

The relevant warranty is contained in the final section of

the Policy: General Conditions of Coverage Applicable to all

Coverage Sections. Section X(7), titled “Concealment,

Misrepresentation or Fraud,” reads:

This insurance Program shall be void as to all

interests insured if, whether before or after a loss,

any insured hereunder has concealed or misrepresented

any material fact or circumstance concerning this

insurance or the subject thereof, or the interests of

the insured therein, or in the case of any fraud or

false swearing by any insured hereunder relating

thereto.

2018 Insurance Policy 112. The alleged misrepresentation at

issue is KBS’s claim that it would require customers to execute

the Waiver and Storage Agreement. Pl.’s Mem. 16.

Atlantic Specialty argues in the alternative that the

Policy is voidable under Massachusetts law because KBS violated

a “condition precedent,” or because it increased the risk of

loss by misrepresenting material facts. Pl.’s Mem. 17-20.

Under Massachusetts law, violation of a “condition

precedent” –- but not a “warranty” -- allows an insurance

company to void a policy:

[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: (1) the

statement made by the insured relates essentially to

the insurer's intelligent decision to issue the

policy; and (2) the statement is made a condition

precedent to recovery under the policy, either by

using the precise words 'condition precedent' or their

equivalent.

Northern Assur. Co. of Am, 845 F. Supp. 2d at 415 (quoting

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

726 (1965).

Massachusetts law also allows a policy to be voided if the

insured breaches by making a material misstatement, but only if

that misstatement increases the risk of loss:

No oral or written misrepresentation or warranty made

in the negotiation of a policy of insurance by the

insured or in his behalf shall be deemed material or

defeat or avoid the policy or prevent its attaching

unless such misrepresentation or warranty is made with

actual intent to deceive, or unless the matter

misrepresented or made a warranty increased the risk

of loss.

Mass. Gen. L. Ch. 175, § 186. See also Progressive Direct Ins.

Co. v. Martin, 425 F. Supp. 3d 48, 53 (D. Mass. 2019)

(Mastroianni, J.); Barnstable County Ins. Co. v. Gale, 425 Mass.

126, 128 (1997). Atlantic Specialty has not alleged that KBS

intended to deceive. See Pet.’s Mem. 19.

Section X(7) would qualify as a “condition precedent” under

Massachusetts law. Atlantic Specialty argues the section meets

all the requirements of a condition precedent: it is in a

section labelled “General Conditions of Coverage,” the language

“shall be void” is the equivalent of saying “condition

precedent,” and it relates to the intelligent decision to issue

the policy. Pl.’s Reply 10-14 (citing 2018 Insurance Policy

112; Charles, Henry & Crowley Co., 349 Mass. 723 (1965)).

Massachusetts case law indicates that parties can make a

warranty of truthfulness a condition precedent to a contract.

See Shurdut v. John Hancock Mut. Life Ins. Co., 320 Mass. 728,

732 (1947) (“The provisions of [section 186] . . . do not apply

where the truth of certain statements is made a condition

precedent to the reinstatement of the policy.”). The First

Circuit has held that the phrase “shall be void” can indicate a

condition precedent. See Mass. Mut. Life Ins. Co. v.

Fraidowitz, 443 F.3d 128, 132 (1st Cir. 2006) (citing Lopardi v.

John Hancock Mut. Life Ins. Co., 289 Mass. 492 (1935)). This is

because, the First Circuit explained, the phrase “shall be void”

makes coverage contingent on the insured meeting a related

requirement, in that case a clause that rendered disability

coverage inapplicable when the insurance applicant was already

disabled while applying for the policy. Id. at 131-133. By the

same logic, the “natural meaning” of the phrase “shall be void”

in Section X(7) is to make insurance coverage contingent on

truthfulness, and this clause is therefore a condition

precedent. Id. (quoting Lopardi, 289 Mass. at 495).

In other words, the equivalent of the maritime warranty of

truthfulness is embedded in the contract and enforceable under

Massachusetts law. This Court will therefore conduct the

remainder of its analysis for count I under Massachusetts law as

it is not “materially different” from federal law. Pesante, 459

F.3d at 37.

2. Application

(a) Misrepresentation

Atlantic Specialty characterizes KBS’s alleged

misrepresentation as follows: KBS represented to Atlantic

Specialty that it would require customers to execute the Waiver

and Storage Agreement, and it failed to do so. Pl.’s Mem. 11.

The word “misrepresentation” does not invoke intent under

either maritime or Massachusetts law. See Catlin (Syndicate

2003) at Lloyd’s v. San Juan Towing & Marine Services, Inc., 974

F. Supp. 2d 64, 78 (D.P.R. 2013) (noting, in the context of

uberrimae fidei, that misrepresentation can be due to “fraud,

negligence, accident, or mistake.”); Mass. Gen. L. Ch. 175, §

186. KBS argues that this Court should consider

“misrepresentation” to require intent, as in ordinary non-legal

usage the term can imply an intentional lie. See Defs.’ Mem.

12. If a contractual term is ambiguous the Court construes it

against the insurance company as the drafter of the contract.

See Littlefield v. Acadia Ins. Co., 392 F.3d 1, 6 (1st Cir.

2004). This is true, however, only if “reasonably intelligent

persons would differ as to which meaning is the proper one.”

Citation Ins. Co. v. Gomez, 426 Mass. 379, 381 (1998). As the

word “misrepresentation” is a defined legal term under both

maritime and Massachusetts law, it is unreasonable to read into

it an intent requirement wholly absent from the statutes and

case law.

KBS asserts it is a disputed fact that it represented it

would require customers to sign the Waiver and Storage

Agreement. Pl.’s SOF ¶ 17, Defs.’ Disputed Facts ¶ 17. It is

not. The loss control recommendations stated it was “Necessary”

for KBS to “institute” an agreement that “should require” boat

owners to sign hold harmless and indemnification language, and

KBS responded by writing “Enclosed,” and attaching the two

agreements. 2016 Loss Fax 3. By enclosing the documents, KBS

objectively manifested assent to the terms. See T.F. v. B.L.,

442 Mass. 522, 527 (2004) (citing Restatement (Second) of

Contracts § 19 (1981)). KBS argues that the use of the verb

“should” renders these terms merely advisory, Defs’ Opp’n 9-11,

but words must be read in context, and the presence of

“Recommendation Grade: Necessary” immediately following the

clause containing the verb “should” shows that the instructions

were not mere suggestions. 2016 Loss Fax 2-4. Tellingly,

Anderson himself said in his deposition that he intended to

represent he would require customers to execute the Waiver and

Storage Contract. Pl.’s SOF, Ex. 5, Dep. of Karl Anderson at

64:3-64:20, ECF No. 26-7.

KBS also asserts it is a disputed fact that it failed to

execute the agreements with its customers. Pl.’s SOF ¶ 37;

Defs.’ Disputed Facts ¶¶ 37. It is undisputed that KBS cannot

produce signed storage agreements for any of the third parties

making the claims giving rise to the current controversy. KBS

argues this evidence is inconclusive, that it indicates “simply

that Karl’s Boat Ship could not produce documents.” Defs.’

Opp’n 14. What is in evidence is that Anderson delegated the

signing of these documents to a subordinate, did not routinely

check that she was following his directive, and later fired her.

In other words, there is no evidence in the record that KBS ever

complied with its promissory representations. A company cannot

nullify its obligations by blaming an employee for failure to

comply. This Court is only required to take “reasonable

inferences” in favor of the non-moving party, Maldonado-Denis,

23 F.3d at 581, and on this record it cannot reasonably infer

that KBS was complying with its promises (at the very least,

with respect to the parties whose property was damaged in the

fire).

Under Massachusetts law, a party has breached a promissory

representation if it is not in “substantial compliance,” a lower

standard than “absolute compliance.” See Hanover Ins. Co. v.

Treasurer & Receiver Gen., 74 Mass. App. Ct. 725, 732 (Mass.

App. Ct. 2009) (citing St. Paul Fire & Marine Ins. Co. v. Boston

Housing Authority, 25 Mass. App. Ct. 6, 12 n.7 (Mass. App. Ct.

1987). The party seeking to void the insurance contract has the

burden of showing a lack of substantial compliance. Hanover

Ins., 74 Mass. App. Ct. at 729. In St Paul’s Fire, the court

ruled that when the Boston Housing Authority’s executives knew

employees were not enforcing required standards of compliance

for one of twenty-five accounts, it was not in substantial

compliance with a contract requiring that compliance. 25 Mass.

App. Ct. at 13-14. In contrast, in Hanover Ins., the court

ruled that a government department was in substantial compliance

with its promise to conduct internal audits when its non-

compliance was unintentional and applied to only a small

fraction of its bank accounts. 74 Mass. App. Ct. at 732.

While KBS’s failure to comply may not rise to the level of

intentional neglect shown in St Paul’s Fire, because it cannot

produce its records, there is no evidence it substantially

complied with its promises. 25 Mass. App. Ct. at 12. It has

therefore committed a misrepresentation in violation of Section

X(7).

(b). Materiality

KBS argues its alleged failure was not material because

Atlantic Specialty has failed to produce evidence of actual

reliance, and has failed to produce evidence that its failure to

execute storage agreements increased risk. Defs.’ Opp’n 13-15.

Atlantic Specialty argues the breached promises were material

because it would not have issued the policy had it known KBS did

not intend to comply, and because KBS knew at the time that its

representations were material. Pl.’s Mem. 12-15.

The insurance contracts contain language indicating the

misrepresentations were material, a question that is objective

rather than subjective. See Barnstable County Ins. Co., 425

Mass. at 128. The insurance policy that Atlantic Specialty

issued for the first time in 2015 (and has not been altered

since) indicated it had the right to conduct inspections, give

reports, and make recommendations. 2018 Insurance Policy 112;

Anderson Affidavit ¶¶ 17-18. The Policy explained that these

inspections “relate only to insurability and premiums to be

charged.” Id. Regarding the importance of storage agreements

specifically, the application KBS submitted in 2015 includes

language stating: “If you provide any storage a copy of the

storage agreement is required for coverage to apply.”

Application 20. Thus, Atlantic Specialty put KBS on notice that

any forthcoming inspections could affect its insurability and

premiums, and that storage agreements were an area of particular

interest. The actual language of Atlantic Specialty’s

recommendations also indicates their necessity. 2016 Loss Fax

2-4. The recommendations from Atlantic Specialty to KBS

included the following language: “Failure to respond may

jeopardize your insurance coverage,” id. at 1, and the word

“Necessary” is repeated for each of the recommendations, id. at

2-3. These are clear indicia of materiality.

Even though the test in Massachusetts is objective,

evidence of actual reliance indicates materiality. See Bruno v.

Restuccia, No. 01-4906-E, 2003 Mass. Super. LEXIS 252, at *12

(Mass. Sup. Ct. Aug. 27, 2003), (Gershengorn, J.) (examining the

element of objective reliance in the context of fraud). There

is ample evidence here of actual reliance. Atlantic Specialty

has produced a declaration from an experienced underwriter,

Russell Bond, in which he states that the company would not have

permitted coverage if KBS had failed to respond to the loss

control survey or had represented that it would not comply with

the requirement that all customers execute the Waiver and

Storage Agreement. Bond Decl. ¶¶ 24-26. The Court may

consider such evidence. See Merchants Ins. Group v. Mr.

Cesspool, LLC, Civ. A. No. 08-cv-12040, 2010 U.S. Dist. LEXIS

72204, at *24-25 (D. Mass. 2010) (Woodlock, J.). KBS has

produced no evidence to the contrary, and Bond’s declaration

accords with the language of both the 2018 Insurance Policy and

the recommendations.7

Anderson, himself, believed in 2016 that the

representations were material. In his deposition, he

acknowledged that he believed it was necessary to confirm the

loss control recommendations in order to receive insurance.

Pl.’s SOF, Ex. 5, Dep. of Karl Anderson 62:18-64:2, ECF No. 26-

7. Anderson also acknowledged in that deposition that he

intended to represent he would require customers to execute the

Waiver and Storage Contract. Id. at 64:3-64:20. He further

acknowledged that he understood at the time that the insurance

company had requested the documents so he could be covered, and

that receiving these documents was “important” to the insurance

company. Id., Ex. 8, Dep. of Karl Anderson 65:5-65:11, ECF No.

7 KBS has questioned whether Bond need be qualified as an

expert under Fed. R. Civ. Proc. 26(b), see Joint Pretrial Mem.

15, ECF No. 35, but he need not be so qualified in order to

testify as to his personal knowledge of procedures in place at

his own company. See Merchants Ins. Group, 2010 U.S. Dist.

LEXIS 72204, at *24-25.

26-10. Similarly, elsewhere in the deposition he stated he sent

the 2016 Loss Fax “[t]o comply with their recommendations” in

order “[t]o be insured,” and that the fax was required. Id.,

Ex. 12, Dep. of Karl Anderson 63:10-64:2.

This combination of undisputed objective and subjective

evidence shows materiality.

KBS argues the policy is not voidable because any

misrepresentations were not made in connection with applying for

insurance. Defs.’ Opp’n 9 (quoting Ingersoll Milling Mach. Co.

v. M/V Bodena, 829 F.2d 293, 308 (2d Cir. 1987) (defining

uberrimae fidei as applying to a party “seeking marine

insurance”). This misconstrues the standard because the

contractual language of the insurance policy required KBS to

refrain from either misrepresenting or concealing material

facts.

In Quincy Mut. Fire Ins. Co. v. Quisset Props. The

Massachusetts Appeals Court analyzed whether a policy could be

voided under section 186 when an insurance company automatically

renewed a car insurance policy without conducting any inquiry as

to whether material facts had changed. 69 Mass. App. Ct. 147,

148 (Mass. App. Ct. 2007). In that case, the owner of a car

that was insured through a business never informed his insurer,

through multiple periods of automatic renewal, that the business

had dissolved. Id. at 151. Since the insurer never made any

requests for information after the initial application, the

court held that the car-owner did not make any

“misrepresentations.” Id. at 153. As the court explained:

when neither a policy provision nor a renewal

application requires the insured to provide updated

information to the insurer, the insured's failure to

do so is not a misrepresentation within the meaning of

G. L. c. 175, § 186. In such circumstances, the onus

is on the insurer to identify the information that it

considers material and request from the insured

updated information concerning any changes.

Id. Thus, the focus is on whether an inquiry occurred at all,

not whether it occurred specifically within an application. As

the Supreme Judicial Court has explained, “when an insured makes

a material misrepresentation during the application or renewal

period for an insurance policy, the insurer may be able to deny

coverage on that basis.” Commerce Ins. Co. v. Gentile, 472

Mass. 1012, 1015 (2015) (emphasis added).

The inquiry under Massachusetts law proceeds in three

parts. First, KBS agreed not to “conceal” any material facts,

2018 Insurance Policy 112, a contractual “policy provision” that

imposes a higher affirmative duty than the baseline

Massachusetts law. See Quincy Mut. Ins., 69 Mass. App. Ct. at

153. Second, by responding to Atlantic Specialty’s loss control

survey in 2016, KBS represented during the 2017 renewal period –

- in response to an affirmative inquiry by Atlantic Specialty --

that it would comply with the loss control survey

recommendation, a material requirement. Third, KBS breached

Section X(7) in 2017, during the 2018 renewal period, by

concealing its material failure to adhere to Atlantic

Specialty’s loss control recommendations. KBS has stated that

Heather Brown was responsible for executing the agreements

during the “relevant time.” Def.’s Response Interrogatories 15-

23. In his deposition, Anderson stated that to the best of his

recollection she left in 2017. Anderson Dep., 32:8-32:18.

Thus, based on Anderson’s testimony KBS failed to adhere to the

agreements prior to the 2018 issuance of the policy.

In conclusion, Atlantic Specialty has met its burden to

show that KBS breached a condition precedent to the contract by

committing material misrepresentations and concealments, which

means the contract is voidable.

E. Count II: Uberrimae Fidei

KBS argues that, even if maritime law applies, the parties

have contracted around uberrimae fidei, and the doctrine is

obsolete and ought no longer be applied. Defs.’ Opp’n 15.

Uberrimae fidei is the doctrine of utmost good faith under

maritime law. QBE Seguros v. Morales-Vázquez, Civ. No. 15-2091,

2017 U.S. Dist. LEXIS 189273, at *3 (D. P.R. Nov. 14, 2017).

“Under this doctrine, the insured is required ‘to disclose to

the insurer all known circumstances that materially affect the

insurer's risk, the default of which . . . renders the insurance

contract voidable by the insurer.’” Pesante, 459 F.3d at 37

(1st Cir. 2007) (quoting Windsor Mount Joy Mut. Ins. Co. v.

Giragosian, 57 F.3d 50, 54-55 (1st Cir. 1995)). To show a

breach of the duty of utmost good faith, the insurer must show

that the insured misrepresented or concealed a material fact.

QBE Seguros, 2017 U.S. Dist. LEXIS 189273, at *4. Whether a

fact is material is judged objectively. St. Paul Fire & Marine

Ins. Co. v. Halifax Trawlers, Inc., 495 F. Supp. 2d 232, 240 (D.

Mass. 2007).

The language contained in Section X(7) of the 2018

Insurance Agreement essentially reflects the doctrine of

uberrimae fidei. See 2018 Insurance Policy 112. KBS’s

protestation to the contrary, see Defs.’ Opp’n 12, requires

reading an intent requirement into the words “conceal” and

“misrepresent” that has no basis in case law. Compare Quintero

v. Geico Marine Ins. Co., 389 F. Supp. 3d 1153, 1160 (S.D. Fl.

2019) (ruling similar language in an insurance contract

reflected the doctrine of uberrimae fidei because it lacked the

word “intent”) with King v. Allstate Ins. Co., 906 F.2d 1537,

1539 (11th Cir. 1990) (ruling parties had contracted around

maritime law when policy became void if insured “intentionally”

concealed or misrepresented material facts). With respect to

the timing of the misrepresentation, see Defs.’ Opp’n 12,

uberrimei fidei applies if misrepresentations are made in a

request for renewal, or if concealment occurs after the

insurance policy goes into effect. See Fireman's Fund Ins. Co.

v. Great Am. Ins. Co., 822 F.3d 620, 633-34, 638-640 (2nd Cir.

2016); Quintero, 389 F. Supp. 3d at 1162; Reliance Ins. Co. v.

McGrath, 671 F. Supp. 669, 676 (N.D. Cal. 1987).

The First Circuit currently has pending an appeal of QBE

Seguros, 2017 U.S. Dist. LEXIS 189273, a case that applied

uberrimae fidei. See QBE Seguros v. Morales-Vasquez, No. 19-

1503 (1st Circuit). KBS asks this Court to review the arguments

made by the parties there and overturn the doctrine. Defs.’

Opp’n 15.

The Appellant’s brief raises two relevant issues. The

first is whether the doctrine of uberrimae fidei is now obsolete

because English law no longer recognizes a duty of utmost fair

dealing in insurance contracts, and the Supreme Court has

instructed federal courts to keep admiralty law in harmony with

the laws of England. See Brief for the Appellants 22-23, QBE

Seguros, No. 19-1503 (citing Wilburn Boat Co. v. Fireman’s Fund

Ins. Co., 348 U.S. 310, 325 (1955) (Reed, J., dissenting) and

id. at 323 (Frankfurter, J., concurring)). The district court

rejected this argument because the First Circuit has expressly

adopted uberrimae fidei. See Opinion and Order, QBE Seguros, at

4-7, Civ No. 15-2091, ECF No. 80 (D. P.R. Sep. 28, 2016)

(McGiverin, M.J.) (citing Catlin (Lloyd’s), 778 F.3d at 80-81).

It also rejected the argument that the Supreme Court “commanded

federal courts to follow in step with the latest developments of

English marine insurance law so as to ensure uniformity in the

marine insurance market . . .” by noting that the Supreme Court

does not require American federal courts to “follow House of

Lords’ decisions automatically.” Id. at 6 (quoting Standard Oil

Co. of N.J. v. United States, 340 U.S. 54, 59 (1950)) (emphasis

supplied by district court).

The second issue is whether uberrimae fidei allows an

insurer to void a policy only if it actually relied on a

misstatement of fact. See Appellant’s Brief 37-40, QBE Seguro,

No. 19-1503. Several other circuits include reliance as an

element of uberrimae fidei. See St. Paul Fire & Marine Ins. Co.

v. Abhe & Svoboda, Inc., 798 F.3d 715, 720-21 (8th Cir. 2015);

Puritan Ins. Co. v. Eagle S.S. Co. S.A., 779 F.2d 866, 871 (2d

Cir. 1985) (quoting Rose and Lucy, Inc. v. Resolute Insurance

Co., 249 F. Supp. 991, 992 (D. Mass. 1965) (Ford, J.). The

applicable First Circuit case, Catlin (Lloyd’s), makes no

mention of reliance, however. 778 F.3d at 83. The District

Court in QBE Seguro took this to mean that reliance is not an

element, pointing out that the First Circuit’s analysis included

asking whether the insurer “could have reasonably” made

assumptions and evaluations based on insured’s

misrepresentations. 2017 U.S. Dist. Lexis 189273, at *10

(citing Catlin (Lloyd’s), 778 F.3d at 83) (emphasis supplied by

the District Court). This objective test of materiality

excludes reliance as an element.

This Court considers the analysis by Magistrate Judge

McGiverin eminently convincing. Furthermore, it is bound to

follow precedents established by the First Circuit, United

States v. Moore-Bush, 963 F.3d 29, 37 (1st Cir. 2020) and the

First Circuit recognizes uberrimae fidei as established

doctrine, without reliance as an element. See Catlin (Lloyd’s),

778 F.3d at 80-83. This Court therefore applies the doctrine as

promulgated by the First Circuit.

As KBS failed to disclose to Atlantic Specialty that it was

in material breach of the contract due to its failure to execute

the storage agreements, Atlantic Specialty therefore may also

void the contract under uberrimae fidei.

IV. Conclusion

In conclusion, this Court GRANTS summary judgment in favor

of Atlantic Specialty, and DENIES summary judgment as to KBS.

Accordingly, this Court enters a declaratory judgment that

Atlantic Specialty has no obligations to KBS under the 2018

Insurance Policy, that the 2018 Insurance Policy is voidable due

to violation of uberrimae fidei and condition precedent within

the contract, and that Atlantic Specialty has no duty to provide

coverage, defend, or indemnify KBS with respect to third-party

claims.

SO ORDERED.

/s/ William G. Young

WILLIAM G. YOUNG

DISTRICT JUDGE