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

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the insurance claim was denied by Great Lakes Insurance (GLI), the German company that insured the boat, due to an out-of-date fire suppression system on board.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.

The Final Ruling

In a decision issued on February 21, 2024, the Supreme Court unanimously held that choice-of-law provisions in maritime contracts are presumptively enforceable under federal maritime law, and that while narrow exceptions do exist, they were not applicable in this case. The judgment of the court of appeals is reversed.

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.

#legal #insurance #supremecourt #ChoiceOfLaw #denied

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