Your Boat Insurance Claim can be Denied due to unrelated contract violations

by Boat Alert / Last Updated: May 6, 2026 / Understanding Boats

The U.S. Supreme Court has ruled on a boat insurance case that has significant implications for boaters nationwide.

The case involves Pennsylvania businessman Phil Pulley and his 70-foot motor yacht, Raiders, which sustained $300,000 in damages after hitting something and taking on water. However, the insurance claim was denied by Great Lakes Insurance (GLI), the German company that insured the boat, due to an out-of-date fire suppression system on board.

This is alarming for boat owners but it makes sense in terms of laws and reasonable exceptions that won’t cause substitutions or unwanted effects.

Latest news and ruling: Great Lakes Insurance SE v. Raiders Retreat Realty Co., LLC – Wikipedia

Full text of the ruling: 22-500 Great Lakes Ins. SE v. Raiders Retreat Realty Co. (02/21/2024) (supremecourt.gov)

What happened to the claim?

Great Lakes declared the insurance policy “void from its inception” and refunded the premiums paid by Pulley, effectively denying the claim.

This type of denial based on unrelated contract violations has been a common practice by insurers in recent years, with Pulley’s case shedding light on the widespread issue. Pulley argued that the denial constituted a “bad faith insurance claim” and sought compensation for the damages.

Legal Escalation

The case took a legal turn when it was discovered that the insurance contract specified that New York law would apply to claims disputes. While Pennsylvania laws do not support effectively denying damage claims, New York precludes bad-faith claims against insurers. This raised the issue of whether the “choice of law” clause in the contract should be upheld or if Pennsylvania’s strong public policy to protect its citizens should take precedence.

The Supreme Court’s decision will determine whether the law of the forum state should be considered in cases like this. The presence of a choice of law clause in marine insurance contracts provides some predictability and consistency for the industry. However, it also raises questions about the fairness and relevance of such clauses when applied to specific claims.

This case has broader implications for boaters and the insurance industry as a whole. Since the Supreme Court upheld the choice-of-law clause, it could further empower insurance companies to deny claims based on unrelated contract violations.

On the other hand, ruling in favor of Pulley could open the door for more challenges to insurance denials and potentially change the way marine insurance works.

What Are “Unrelated Contract Violations” in Boat Insurance?

An unrelated contract violation — sometimes called a policy breach or warranty violation — occurs when a boat owner fails to comply with a condition written into their insurance policy, even if that condition had nothing to do with the incident that caused the damage.

In the Great Lakes Insurance v. Raiders Retreat Realty case, the boat owner’s claim was denied not because of negligence during the incident, but because of an out-of-date fire suppression system. The flooding that damaged the vessel had no connection to fire safety equipment. Yet the insurer used that policy breach to void the entire contract.

Common examples of policy conditions that could be used to deny an otherwise valid claim include:

• Expired safety equipment — fire extinguishers, flares, or EPIRBs past their service date
• Unlicensed operators — using a vessel without the operator license required in the policy
• Navigation territory violations — sailing outside the geographic limits specified in the policy
• Lay-up period violations — operating the boat during months when it is supposed to be stored ashore
• Failure to disclose prior damage — not reporting pre-existing hull damage or a prior salvage title at the time of underwriting
• Unauthorized charter or commercial use — using a pleasure-rated boat to earn money

Understanding these contract conditions is the first step to protecting yourself from a surprise denial.

How Does the Supreme Court Ruling Affect Boaters in Every State?

The February 2024 ruling in Great Lakes Insurance SE v. Raiders Retreat Realty Co. confirmed that choice-of-law clauses in maritime contracts are presumptively enforceable under federal admiralty law. In plain language, this means that if your policy says disputes will be governed by the law of a particular state — say, New York — that state’s law will almost certainly apply, even if you live and boat in a state with stronger consumer protections.

Why This Matters State by State

Some states have robust “bad faith insurance” statutes that allow policyholders to sue insurers who deny claims without reasonable cause. Other states, like New York as it existed at the time of the Raiders Retreat case, make it much harder to pursue such claims.

Because marine insurance policies routinely select jurisdictions that are favorable to insurers, boaters who assumed their home state’s laws protected them may find those protections don’t apply.

Practical takeaway: Before purchasing or renewing a boat insurance policy, identify the choice-of-law clause — usually buried in the general conditions section — and research what that state’s laws say about bad-faith insurance denials and the enforceability of warranty breaches.

Step-by-Step: How to Review Your Boat Insurance Policy for Hidden Denial Traps

Reviewing a marine insurance policy is not glamorous, but it can save you hundreds of thousands of dollars. Here is a practical process to follow:

1. Locate the Warranties and Conditions Section

This section (sometimes called “Conditions,” “Warranties,” or “Policy Conditions”) lists every obligation you must meet continuously throughout the policy period — not just at the time of the loss. Read each item carefully.

2. Check Every Equipment Expiration Date

Cross-reference the equipment requirements in your policy against the actual expiration dates on your:

• Fire extinguishers (typically require annual inspection or 5-year hydrostatic testing)
• Flares and pyrotechnic signals (expire 42 months from date of manufacture in the U.S.)
• Life raft hydrostatic release devices
• EPIRB battery and hydrostatic release expiration dates
• Fire suppression systems in engine compartments

3. Confirm Your Navigation Area

Most recreational boat policies define a cruising territory — a geographic boundary you must stay within. Operating outside that territory, even briefly, can constitute a breach. If you plan an extended coastal or offshore passage, contact your broker in advance to extend your coverage territory.

4. Verify Operator Requirements

If your policy requires the operator to hold a USCG captain’s license or complete a boating safety course, make sure those credentials are current before letting anyone else take the helm.

5. Note the Choice-of-Law Clause

Write down which state’s law governs your policy. Look up whether that state allows bad-faith claims against insurers and what the statute of limitations is for coverage disputes.

6. Ask Your Broker Directly

Ask: “What are the most common reasons boat insurance claims are denied, and do any of those conditions apply to me right now?” A good broker should be able to walk through your specific policy.

The Difference Between a Voided Policy and a Denied Claim

These two outcomes sound similar but have very different implications for the insured.

A denied claim means the insurer refuses to pay for a specific loss, but the policy itself remains in force. You might still be covered for future incidents.

A voided policy (also called “void ab initio,” meaning void from the beginning) is far more damaging. The insurer declares the contract never legally existed, typically refunds your premiums, and leaves you with no coverage — retroactively. In the Raiders Retreat case, Great Lakes Insurance voided the policy from its inception, which is why returning the premiums was seen as adequate and no claim payment was owed.

A voided policy can also have downstream consequences:

• It may be reported to insurance databases, making it harder to obtain coverage in the future
• It could affect financing agreements that require the vessel to be continuously insured
• It may expose you to personal liability if an uninsured incident caused harm to a third party

Boat Insurance Claim Denied? Here’s What to Do Next

If your insurer has denied your claim or threatened to void your policy, you still have options. Acting quickly and methodically is critical.

1. Get the Denial in Writing

Request a formal written denial letter that cites the specific policy provision(s) the insurer is relying on. This is your baseline document for any appeal or legal challenge.

2. Gather Your Own Documentation

Collect all evidence related to the incident — photos, GPS logs, weather reports, witness statements, and maintenance records. Build a timeline showing what happened and what the condition of your vessel was.

3. Review the Policy Language Carefully

Read the cited provision and the surrounding context. Insurance policies are contracts, and ambiguous language is typically construed against the insurer under a doctrine called contra proferentem. A coverage attorney can help identify ambiguities.

4. File a Complaint with Your State Insurance Commissioner

Even if the policy is governed by another state’s law, your home state’s insurance regulator may have jurisdiction to investigate unfair claims-handling practices. Filing a complaint creates a formal record and sometimes prompts insurers to reconsider.

5. Consult a Marine Insurance Attorney

Given the complexity introduced by the Great Lakes Insurance ruling, an attorney who specializes in maritime or admiralty law is your most valuable resource. Many offer free initial consultations. Time limits (statutes of limitations) vary by jurisdiction, so don’t delay.

6. Explore Alternative Dispute Resolution

Some policies include arbitration clauses. Others may be subject to mediation programs offered by state bar associations or insurance regulators. These can be faster and less expensive than litigation.

How to Prevent Your Boat Insurance Claim from Being Denied

The best defense against a denied claim is rigorous policy compliance before any incident occurs. Here is a maintenance and documentation checklist that addresses the most common denial triggers:

Keeping dated receipts, service records, and inspection reports in a dedicated folder — both physical and digital — creates a paper trail that makes it much harder for an insurer to claim you were in breach.

Does Boat History Affect Your Insurance Coverage?

Yes — undisclosed vessel history is one of the leading causes of policy voidance in the marine insurance industry. Insurers underwrite marine policies based on the information provided at the time of application. If material facts about the boat’s past are concealed or misrepresented, the insurer may have grounds to void the policy from inception, regardless of what caused the claim.

Key history items that must typically be disclosed include:

• Prior total losses or constructive total losses — was the boat ever declared a total loss by a previous insurer?
• Salvage title or branded title — a boat history report can reveal whether the HIN is associated with a salvage record
• Prior storm or flood damage — hurricane-damaged vessels that were repaired and resold sometimes carry hidden structural issues
• Outstanding marine liens — unpaid repair yards, fuel suppliers, or financing companies can hold maritime liens against a vessel, complicating a claim
• Theft and recovery history — a boat that was previously stolen may require additional documentation at the time of a future claim

Running a boat history report by HIN (Hull Identification Number) before purchasing a used vessel — and providing that report to your insurer at the time of underwriting — is one of the most effective ways to ensure full disclosure and reduce the risk of a voided policy down the road.

Frequently Asked Questions About Boat Insurance Claim Denials

Can an insurer deny a boat insurance claim for a reason unrelated to the loss? Yes. As confirmed by the U.S. Supreme Court in Great Lakes Insurance SE v. Raiders Retreat Realty Co. (2024), insurers can void a marine insurance policy based on a policy breach even if that breach is unrelated to the cause of the damage. The key is whether the breach constitutes a violation of a warranty or material condition in the contract.

What is a choice-of-law clause in a boat insurance policy? A choice-of-law clause specifies which state’s (or country’s) laws will govern disputes under the contract. Because the Supreme Court upheld such clauses in maritime contracts, the law of the selected state — not your home state — will generally apply to a coverage dispute.

Does my state’s bad-faith insurance law protect me? Not necessarily. If your policy selects a governing law jurisdiction that does not recognize bad-faith insurance claims — or has weaker protections than your home state — those home-state remedies may not be available to you. This was the central issue in the Raiders Retreat case.

What is the difference between a marine warranty and a policy condition? In marine insurance, a “warranty” is a strict promise that a fact is true or that something will (or will not) be done. Breach of a warranty traditionally allows the insurer to void the policy regardless of whether the breach caused the loss. A “condition” typically requires a causal connection before the insurer can deny a claim. Whether a given provision is classified as a warranty or condition depends on the policy language and the governing law.

How can I find out if my boat has a prior salvage or total loss record? You can run a boat history report using the vessel’s Hull Identification Number (HIN) through services like Boat-Alert.com. These reports aggregate data from USCG, state titling agencies, insurance industry databases, and other sources to flag salvage brands, prior theft, and other history items.

If my claim is denied, can I still file a lawsuit? Yes, subject to the terms of your policy and the applicable statute of limitations. However, the governing law clause in your policy may affect which court has jurisdiction and what remedies are available. Consult a maritime attorney promptly if your claim is denied.

Conclusion

Regardless of the ruling that came out in February 2024, this case highlights the need for boaters to carefully review their insurance policies and understand the implications of choice of law clauses. It also brings attention to the practices of insurance companies and raises important questions about the fairness of denying claims based on technicalities unrelated to the incident at hand.

Check your PFDs, Check your batteries, check your smoke detectors, and your fire extinguishers.

Get your boat insurance quote from Roamly today.

#legal #insurance #supremecourt #ChoiceOfLaw #denied

References:

• Read news article: A Case Study for Avoiding a Maritime Legal Battle (boatblurb.com)
• and Supreme Court Takes Up Boat Insurance Case (substack.com)
• Latest news and ruling: Great Lakes Insurance SE v. Raiders Retreat Realty Co., LLC – Wikipedia
• Full text of the ruling: 22-500 Great Lakes Ins. SE v. Raiders Retreat Realty Co. (02/21/2024) (supremecourt.gov)

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