Wilburn Boat Company v. Fireman's Fund Insurance Company/Dissent Reed

by Stanley Forman Reed

United States Supreme Court

348 U.S. 310

Wilburn Boat Company  v.  Fireman's Fund Insurance Company

 Argued: Oct. 14 and 15, 1954. --- Decided: Feb 28, 1955

Mr. Justice REED, with whom Mr. Justice BURTON joins, dissenting.

The opinion of the Court states that 'the crucial questions in this case narrow down to these: (1) Is there a judicially established federal admiralty rule governing these warranties? (2) If not, should we fashion one?' By question (1) the Court means, as its opinion shows, a federal admiralty rule that a warranty of an insured is to be strictly enforced with the result that a breach of the warranty relieves the insurer of liability for loss although the breach was not shown to have contributed to the loss.

The Court concludes that the literal performance rule has not been established by statute or by judicial decision. It acknowledges that a maritime insurance policy is a maritime contract brought under federal jurisdiction by the Admiralty Clause of the Constitution. New England Mutual Marine Insurance Co. v. Dunham, 11 Wall. 1, 20 L.Ed. 90. And so it recognizes that the power 'to fashion controlling federal rules' rests in the Federal Government-in Congress and the federal courts. However, the Court determines that in the absence of congressional action it will leave the formulation of rules governing marine insurance policies to the States. It applies this conclusion to the effect of a breach of warranty in a maritime insurance policy.

I disagree with both conclusions. Our admiralty laws, like our common law, came from England. As a matter of American judicial policy, we tend to keep our marine insurance laws in harmony with those of England. Queen Ins. Co. of America v. Globe & Rutgers Fire Ins. Co., 263 U.S. 487, 493, 44 S.Ct. 175, 176, 68 L.Ed. 402; Calmar Steamship Corp. v. Scott, 345 U.S. 427, 442-443, 73 S.Ct. 739, 747, 97 L.Ed. 1125. Before our Revolution, the rule of strict compliance with maritime insurance warranties had been established as the law of England. ^[1] That rule persists. While no case of this Court has been cited or found that says specifically that the rule of strict compliance is to be applied in admiralty and maritime cases, that presupposition has been consistently adopted as the basis of reasoning from our earliest days. ^[2] Other courts have been more specific. ^[3] No case holds to the contrary.

I am inclined to think that Congress or this Court might well consider modifying the strict rule insofar as the breached warranty does not contribute to the loss. But since the Court concludes that it will not undertake the task, ^[4] it is unnecessary for me to go farther than to say that in the absence of federal amelioration I would follow the established rule of holding the insured to his warranty. ^[5]

This brings me to the crucial phase of the Court's decision which, so the Court says, 'leaves the regulation of maritime insurance where it has been-with the States.' This is the dominant issue here, and the Court's decision strikes deep into the principle of a uniform admiralty law and will have the result of unduly burdening maritime commerce. This is the issue presented by the petition for certiorari and argued in petitioner's brief on the merits.

One rule of laws stands unquestioned. That is that all courts, state and federal, which have jurisdiction to enforce maritime or admiralty substantive rights must do so according to federal admiralty law. ^[6] See particularly the excellent discussion of Judge Magruder in Doucette v. Vincent, 1 Cir., 194 F.2d 834, 841 et seq. The issue of an insurer's liability upon an insured's broken warranty is clearly a matter of substantive law.

The Court relies upon Paul v. Virginia, 8 Wall. 168, 19 L.Ed. 357; Hooper v. People of State of California, 155 U.S. 648, 15 S.Ct. 207, 39 L.Ed. 297; and Nutting v. Commonwealth of Massachusetts, 183 U.S. 553, 22 S.Ct. 238, 46 L.Ed. 324, as holding that 'States could regulate marine insurance the same as any other insurance.' Those cases only approve provisions of state law that require agents and companies to take out licenses and conform to various conditions preliminary to doing business. ^[7] The Court also relies on congressional action and inaction, but the fact that Congress has regulated the organization, taxing and licensing of fire, casualty and marine insurance companies in the District of Columbia, and has recognized the existence of marine companies under the Merchant Marine Act of 1922, has no relevancy to whether the provisions of state law should control the effect to be given to warranties in marine insurance policies. Nor does the McCarran Act indicate that States may legislate to change fundamentally maritime insurance law. ^[8] It was so decided in Maryland Casualty Co. v. Cushing, 347 U.S. 409, 413, 74 S.Ct. 608, 610, 98 L.Ed. 306. The answer as to whether state or federal law governs marine insurance contracts lies in the nature of the federal admiralty jurisdiction.

The Constitution, Art. III, § 2 provides that 'The judicial Power shall extend * * * to all Cases of admiralty and maritime Jurisdiction * * *.' The First Congress enacted that the district courts 'shall also have exclusive original cognizance of all civil causes of admiralty and maritime jurisdiction * * * saving to suitors, in all cases, the right of a common law remedy, where the common law is competent to give it * * *.' ^[9] In this manner national control was asserted over maritime litigation. It was needed because the Republic bordered a great length of the Atlantic littoral and the navigable waters furnished the best avenue of transportation.

Although congressional authority over maritime trade was not expressly granted by the Constitution, the grant of admiralty jurisdiction together with the Necessary and Proper Clause has been found adequate to enable Congress to declare the prevailing maritime law for navigable waters throughout the Nation. ^[10] The Commerce Clause aids where interstate commerce is affected, but has not the scope of 'navigable waters.' ^[11] Congressional power to rest exclusive jurisdiction in the federal courts where, as here, the constitutionally delegated judicial authority exists, is established. The Moses Taylor, 4 Wall. 411, 429, 18 L.Ed. 397. The remedy preserved by the savings clause of the Judiciary Act of 1789, 'is not a remedy in the common law courts * * * but a common-law remedy.' Id., 4 Wall. at page 431. The meaning of the quoted clause becomes plainer when read with the state statute which The Moses Taylor held unconstitutional. That statute, authorized a 'proceeding against the vessel,' a strictly in rem proceeding in admiralty, Id., 4 Wall. at pages 412, 413, different from the common-law action in personam. Consequently, when a California resident brought an in rem proceeding in a California court, he was pursuing an admiralty remedy, not a common-law remedy. This Court, therefore, held the case outside the saving clause of the minth section of the Judiciary Act of 1789. ^[12]

On the other hand, a state court was held to have jurisdiction to sell a vessel to enforce a lien in Knapp, Stout & Co. v. McCaffrey, 177 U.S. 638, 20 S.Ct. 824, 44 L.Ed. 921, where the suit was against the owner, in personam, although in equity for foreclosure of a possessory lien. '(T)he remedy chosen by the plaintiff was the detention of the raft for his towage charges.' Id., 177 U.S. at page 644, 20 S.Ct. at page 827. As this was a state-approved remedy in the common law, the use of state equity procedure to enforce the lien was held to be in accord with the reservation of a common-law remedy from the exclusive jurisdiction of admiralty. ^[13] Thus, by saving a suitor's common-law remedy, Congress has created by § 9 of the Judiciary Act of 1789, now 28 U.S.C. (Supp. V, 1952) § 1333, 28 U.S.C.A. § 1333, only a limited exclusive jurisdiction. The state courts may furnish not only a common-law remedy existing at the time of the adoption of the Constitution, for substantive admiralty rights, but also new judicial remedies created by statute; that is, whatever remedy is not strictly in rem. ^[14]

State authority, however, although it may provide remedies, does not extend to changing the general substantive admiralty law. That is the maritime law existing as a body of law enforceable in admiralty. The extent of the states' power to grant rights arising from maritime incidents is not subject to definition. It may vary as the course or manner of navigation or commerce changes. It exists in some circumstances, see Just v. Chambers, 312 U.S. 383, 388, 61 S.Ct. 687, 691, 85 L.Ed. 903, and, as indicated both in the majority and minority opinions in the Jensen case, 244 U.S. 205, 37 S.Ct. 524, 61 L.Ed. 1086, must be determined in each situation. ^[15] The principles which control the validity of an assertion of state power in the admiralty sphere are, however, clear. State power may be exercised where it is complementary to the general admiralty law. It may not be exercised where it would have the effect of harming any necessary or desirable uniformity. ^[16] The cases decided by this Court make it plain that state legislation will not be permitted to burden maritime commerce with variable rules of law that destroy that uniformity. ^[17]

Since Congress has power to make federal jurisdiction and legislation exclusive, the situation in admiralty is somewhat analogous to that governing state action interfering with interstate commerce. In the absence of congressional direction, it is this Court that must bear the heavy responsibility of saying when a state statute has burdened the required federal uniformity. ^[18] It is one thing to allow the States to add a remedy or create a new cause of action for certain incidents arising out of maritime activity. It is quite another thing to relinquish an entire body of substantive law making for a whole phase of maritime activity to the States. Such action does violence to the premise upon which the admiralty jurisdiction was constructed. ^[19]

It is not only in markings, lights, signals, and navigation that States are barred from legislation interfering with maritime operation. The need for a uniform rule is just as great when dealing with the effect to be given to marine insurance on boats which plough our navigable waters. A vessel moves from State to State along our coasts or rivers. State lines may run with the channel or across it. Under maritime custom an insurance policy usually covers the vessel wherever it may go. If uniformity is needed anywhere, it is needed in marine insurance. It is like the question of seaworthiness which must be controlled by one law. It presents the same problem as a state law controlling the operation of interstate boats. Kelly v. State of Washington, 302 U.S. 1, 15, 58 S.Ct. 87, 94, 82 L.Ed. 3. For a State to require policies to be issued under its authority or to require extra-state policies to be interpreted by its laws burdens maritime operations unduly. Shipmasters must know how to handle their vessels to preserve their insurance. Insurers must know the risks they are assuming when they fix their premiums. What law is to govern-that of the State where the insurance contract was issued, the State of the accident, or the State of the forum? It seems an unreasonable interference with maritime activity to allow the many States to declare the substantive law of marine insurance.

The Court refuses to declare the governing maritime law on warranties in this case because it could only be done 'piecemeal on a case-by-case basis.' It would prefer to await congressional enactment of a comprehensive code. But questions of contract interpretation and the effect to be given to contract provisions are questions which the Court is particularly equipped to handle. A broad legislative approach might be desirable; but in its absence we could establish a rule governing the effect to be given to breaches of warranties which would be binding on every court in the land. It is certainly not desirable to defer to the legislature of Texas or any other State which, though it can enact a comprehensive code, can make it binding only in its own State. To do so destroys the essential uniformity of the maritime law.

My understanding of the facts and legal issues and the rule to be deduced from the Court's decision forbid my joining the limited concurrence of MR. JUSTICE FRANKFURTER. The policy here is not restricted to the boat's use on Lake Texoma nor to its use in any one State. In addition to its use on the lake, the policy covered a 'cruise from Greenville, Mississippi, via Mississippi and Red Rivers to Denison, Texas' and then to the lake. The waters of five States were navigated before reaching the lake, which is itself an interstate body of water lying between Texas and Oklahoma. The considerations which lead me to favor a uniform rule are not changed simply because a relatively small boat was here involved, or the number of States through which it passed were few, or because its ultimate destination was a small lake.

This state rule of law covering the incidents of marine insurance affects not only Texas or Lake Texoma but the longest voyage within the cruising capacity of The Wanderer. As is shown by The Hamilton, 207 U.S. 398, 28 S.Ct. 133, 52 L.Ed. 264, such an exercise of state power permits the States to declare the applicable laws of marine insurance even on the high seas. The event of loss must always be local, but the coverage of the policy is general. ^[20] When state power intrudes upon the uniformity imposed by federal law, its exercise is invalid when applied to maritime litigation whether the application occurs in litigation arising from an incident that happens on a small lake or a mighty river.

I would affirm.

Notes

1. Bean v. Stupart, 1 Doug. 11; DeHahn v. Hartley, 1 T.R. 343 (each reported 99 Eng.Rep., full reprint, 9 and 1130, respectively); 2 Arnould Marine Insurance (14th ed.) c. 20.
2. Hodgson v. Marine Ins. Co. of Alexandria, 5 Cranch 100, 109, 3 L.Ed. 48:
3. Ogden v. Ash, 1 Dall. 162, (Reprint page 174), 1 L.Ed. 82 (Common Pleas of Philadelphia County); Martin v. Delaware Ins. Co., C.C.D.Pa., 16 Fed.Cas. p. 894, No. 9,161; Snyder v. Home Ins. Co., D.C.S.D.N.Y., 133 F. 848; Whealton Packing Co. v. Aetna Ins. Co., 4 Cir., 185 F. 108, 34 L.R.A., N.S., 563; Canton Ins. Office v. Independent Transp. Co., 9 Cir., 217 F. 213, L.R.A.1915C, 408; Shamrock Towing Co. v. American Ins. Co., 2 Cir., 9 F.2d 57, 60; Aetna Ins. Co. v. Houston Oil & Transp. Co., 5 Cir., 49 F.2d 121; Robinson v. Home Ins. Co., 5 Cir., 73 F.2d 3; Levine v. Aetna Ins. Co., 2 Cir., 139 F.2d 217; Home Ins. Co. v. Ciconett, 6 Cir., 179 F.2d 892; Red Top Brewing Co. v. Mazzotti, 2 Cir., 202 F.2d 481; United States Gypsum v. Insurance Co., D.C.S.D.N.Y., 19 F.Supp. 767.
4. Compare Halcyon Lines v. Haenn Ship Corp., 342 U.S. 282, 285, 72 S.Ct. 277, 279, 96 L.Ed. 318.
5. The facts in this case are that the boat was destroyed by fire of unknown origin while moored in Lake Texoma. 'The policy provides that the insurance shall be void in case the interest insured shall be sold, assigned, transferred, or pledged without the previous consent in writing of the assurers, and further that it is warranted by the assured that the vessel shall be used solely for private pleasure purposes and shall not be hired or chartered unless permission is granted by indorsement on the policy.' 201 F.2d at page 834. All these warranties were breached. The insurer might reasonably have required their inclusion before issuing the policy.
6. Watts v. Camors, 115 U.S. 353, 6 S.Ct. 91, 29 L.Ed. 406; Garrett v. Moore-McCormack Co., 317 U.S. 239, 243, 63 S.Ct. 246, 249, 87 L.Ed. 239; 'Even if Hawn were seeking to enforce a state-created remedy for this right, federal maritime law would be controlling. While states may sometimes supplement federal maritime policies, a state may not deprive a person of any substantial admiralty rights as defined in controlling acts of Congress or by interpretative decisions of this Court. These principles have been frequently declared and we adhere to them.' Pope & Talbot, Inc. v. Hawn, 346 U.S. 406, 409-410, 74 S.Ct. 202, 205, 98 L.Ed. 143; Madruga v. Superior Court, 346 U.S. 556, 561, 74 S.Ct. 298, 301, 98 L.Ed. 290; Maryland Casualty Co. v. Cushing, 347 U.S. 409, 413-419, and concurring opinion 423 et seq., 74 S.Ct. 608, 610-613, 615, 98 L.Ed. 306. Cf. The Armar (1954), 2 Lloyd's List Rep. 95, 101 (N.Y.Sup.Ct.). See 9 Benedict, Admiralty, 55, n. 77.
7. In Durkee v. India Mutual Ins. Co., 159 Mass. 514, 34 N.E. 1133, the issue of the power of a State to change the admiralty law was not touched upon.
8. 59 Stat. 33, 15 U.S.C. §§ 1011, 1012, 15 U.S.C.A. §§ 1011, 1012.
9. Judiciary Act of 1789, § 9, 1 Stat. 77. There has been no intentional change in meaning by the revision of 1948, 28 U.S.C. (Supp. V, 1952) § 1333, 28 U.S.C.A. § 1333, which reads:
10. The Propeller Genesee Chief v. Fitzhugh, 12 How. 443, at pages 459-460, 13 L.Ed. 1058; this includes power to change the admiralty procedure to trial by jury; In re Garnett, 141 U.S. 1, 12, 11 S.Ct. 840, 842, 35 L.Ed. 631; Southern Pacific Co. v. Jensen, 244 U.S. 205, 215, 37 S.Ct. 524, 528, 61 L.Ed. 1086; Panama R. Co. v. Johnson, 264 U.S. 375, 385, 44 S.Ct. 391, 393, 68 L.Ed. 748; Nogueira v. New York, N.H. & H.R. Co., 281 U.S. 128, 138, 50 S.Ct. 303, 306, 74 L.Ed. 754; Garrett v. Moore-McCormack Co., 317 U.S. 239, 244, 63 S.Ct. 246, 250, 87 L.Ed. 239; O'Donnell v. Great Lakes Dredge & Dock Co., 318 U.S. 36, 39, 63 S.Ct. 488, 490, 87 L.Ed. 596; Pennsylvania R. Co. v. O'Rourke, 344 U.S. 334, 337, 73 S.Ct. 302, 304, 97 L.Ed. 367.
11. The Belfast, 7 Wall. 624, 640, 19 L.Ed. 266. Cf. O'Donnell v. Great Lakes Dredge & Dock Co., note 10, supra.
12. The same rule was applied in efforts to enforce state-created liens in state courts by proceedings in rem against the boat in The Robert W. Parsons, 191 U.S. 17, 37, 24 S.Ct. 8, 15, 48 L.Ed. 73, and in The Glibe, 167 U.S. 606, 616-618, 623-624, 17 S.Ct. 930, 933-934, 936, 42 L.Ed. 296.
13. Mr. Justice Brown wrote for the Court:
14. Red Cross Line v. Atlantic Fruit Co., 264 U.S. 109, 123 124, 44 S.Ct. 274, 276-277, 68 L.Ed. 582: 'The 'right of a common-law remedy,' so saved to suitors, does not, as has been held in cases which presently will be mentioned, include attempted changes by the states in the substantive admiralty law (i.e., 264 U.S. at page 124, 44 S.Ct. at page 277, where it was said of state statutes held unconstitutional, they were 'invalid, because their provisions were held to modify or displace essential features of the substantive maritime law'), but it does include all means other than proceedings in admiralty which may be employed to enforce the right or to redress the injury involved. It includes remedies in pais, as well as proceedings in court; judicial remedies conferred by statute, as well as those existing at the common law; remedies in equity, as well as those enforceable in a court of law. Knapp, Stout & Co. v. McCaffrey, 177 U.S. 638, 644 et seq., 20 S.Ct. 824 (827) 44 L.Ed. 921; Rounds v. Cloverport Foundry & Machine Co., 237 U.S. 303, 35 S.Ct. 596, 59 L.Ed. 966. A state may not provide a remedy in rem for any cause of action within the admiralty jurisdiction. The Hine v. Trevor, 4 Wall. 555, 18 L.Ed. 451; The Glide, 167 U.S. 606, 17 S.Ct. 930, 42 L.Ed. 296. But otherwise the state, having concurrent jurisdiction, is free to adopt such remedies, and to attach to them such incidents, as it sees fit. New York, therefore, had the power to confer upon its courts the authority to compel parties within its jurisdiction to specifically perform an agreement for arbitration, which is valid by the general maritime law, as well as by the law of the state, which is contained in a contract made in New York and which, by its terms, is to be performed there.'
15. Cf. Cooley v. Board of Wardens, 12 How. 299, 316, 13 L.Ed. 996; Standard Dredging Corp. v. Murphy, 319 U.S. 306, 309, 63 S.Ct. 1067, 1068, 87 L.Ed. 1416; Caldarola v. Eckert, 332 U.S. 155, 158, 67 S.Ct. 1569, 1570, 91 L.Ed. 1968; see Pope & Talbot v. Hawn, 346 U.S. 406, 410, 418, 74 S.Ct. 202, 205, 209, 98 L.Ed. 143.
16. Levinson v. Deupree, 345 U.S. 648, 73 S.Ct. 914, 97 L.Ed. 1319.
17. Kelly v. State of Washington, 302 U.S. 1, 15, 58 S.Ct. 87, 94, 82 L.Ed. 3; Panama R. Co. v. Johnson, 264 U.S. 375, 386 387, 44 S.Ct. 391, 393-394, 68 L.Ed. 748; and cases cited; Western Fuel Co. v. Garcia, 257 U.S. 233, 242, 42 S.Ct. 89, 90, 66 L.Ed. 210; Chelentis v. Luckenbach S.S.C.o., 247 U.S. 372, 381 et seq., 38 S.Ct. 501, 503, 62 L.Ed. 1171, and cases cited: The City of Norwalk, D.C., 55 F. 98, 106. See Madruga v. Superior Court, 346 U.S. 556, 561, 74 S.Ct. 298, 301, 98 L.Ed. 290. 1 Benedict, Admiralty (6th ed.), p. 53. Cf. Minnesota Rate Cases (Simpson v. Shepard), 230 U.S. 352, 399, 33 S.Ct. 729, 739, 57 L.Ed. 1511.
18. Just v. Chambers, 312 U.S. 383, 388, 392, 61 S.Ct. 687, 691, 693, 85 L.Ed. 903; Kelly v. State of Washington, supra, 302 U.S. 14-15, 58 S.Ct. 94. Cf. Southern Pacific Co. v. State of Arizona, 325 U.S. 761, 769, 65 S.Ct. 1515, 1520, 89 L.Ed. 1915. See the statement from the international standpoint in The Lottawanna, 21 Wall. 558, 572, 22 L.Ed. 654.
19. The Uniformity of the Maritime Law, 24 Mich.L.Rev. 544, 556; Erie R. Co. v. Tompkins and the Uniform General Maritime Law, 64 Harv.L.Rev. 246, 269.
20. See The City of Norwalk, D.C., 55 F. 98, 106.