Opinion
No. CV 99 0171669-S (X05)
May 13, 2003
MEMORANDUM OF DECISION
The plaintiff, Andrew Rocco ("Rocco") commenced this action against the defendant, Continental Insurance Company ("Continental") for breach of contract, breach of the covenant of good faith and fraud when the defendant refused to pay for the loss of his boat after it disappeared in December of 1997.
The Court makes the following findings of fact by a preponderance of the evidence. Rocco was the sole owner of a 1987 34-foot Wellcraft named the SEA SCAPE. On November 10, 1997, Rocco contacted Continental to obtain a quotation on marine insurance for the M/V SEA SCAPE and then submitted an application for approval. The Marine Insurance Application executed by Rocco on December 1, 1997, and which the insurance company relied on states in pertinent part:
When Rocco was divorced in April of 1997, he obtained under the divorce decree sole title to the boat and had the right to use the M/V SEA SCAPE until it was sold. His ex-wife, Helen Rocco had the right to one-half of the proceeds when the boat was sold and therefore had an insurable interest in the M/V SEA SCAPE. Rocco and Helen had agreed that he would sell the boat within two years. Rocco never provided defendant Continental Insurance Company with a copy of the divorce settlement document.
Some of the dealings plaintiff had were with Continental's agent Boat/U.S. Because the parties did not distinguish between the two entities for purposes of liability the court will refer to them as Continental or the insurance company in its memorandum of decision.
It is critical that you correct wrong information and complete any information omitted.
The application further states, immediately above the signature line:
While my signature verifies this information to be true, this application does not bind me to accept insurance, nor does it bind Boat/U.S. or the Insurance Company to accept me as an applicant for insurance. If I accept, I hereby authorize any company, credit bureau, or Department of Motor Vehicles that has knowledge of me to give such information to Boat/U.S. Underwriting to be used for Boat/U.S. insurance purposes only. Omitting, misrepresenting or stating falsely on this application constitutes insurance fraud and is subject to criminal and civil penalties.
When Rocco initially requested a marine insurance quotation, he represented to the insurance company that the cruising limits would be Inland Lakes and Rivers and therefore he would need Lakes and Rivers coverage as opposed to the more expensive Coastal Waters coverage. At the time that Rocco applied for insurance he was keeping his boat at the Stamford Landing Marina which is located in Stamford Harbor in federal project waters and not on the Rippowam River. Additionally, Rocco was aware that Long Island Sound was in coastal waters and that he would be cruising in coastal waters. Despite this, the records of the insurance company demonstrate that he requested U.S. Inland Lakes and Rivers coverage as the cruising/navigational limits for the M/V SEA SCAPE. In fact, on five separate occasions the insurance company sent documentation to Rocco, which stated that the Cruising Limits for the marine insurance policy he was purchasing were "U.S. Inland Lakes and Rivers" and "Inland lakes and rivers of the United States (excluding the Great Lakes)." Rocco never corrected this incorrect information.
Rocco also provided an inaccurate purchase price of $125,000.00 for his boat to the insurance company (1) during his verbal application for marine insurance taken on November 11, 1997; (2) on the Marine Insurance Application he executed on December 1, 1997 and returned to defendant; and (3) when he was queried about the purchase price on December 22, 1997, when he first contacted defendant to report the alleged loss of the M/V SEA SCAPE. Instead, Rocco only paid $65,000 for the boat or approximately one-half of what he reported to the insurance company.
Rocco also filled out an Application of Vessel Registration form with an inaccurate purchase price of only $15,000.00, and submitted it to the Department of Motor Vehicles, thus resulting in the underpayment by him of $3,000.00 in applicable sales taxes to the State of Connecticut.
After Rocco completed the application process, the defendant issued a policy to Rocco providing coverage for the period November 18, 1997 through November 18, 1998. Based on uncontroverted testimony, the court finds that the underwriter would have rejected Rocco's application or would have charged a higher premium for the coverage on the M/V SEA SCAPE if she had known that the purchase price was inaccurate and/or that the boat was going to be cruising in coastal waters.
The contract entered into between defendant Continental Insurance Company and Rocco contains the following terms and conditions which Rocco was required to observe/comply with:
1) a cooperation provision:
Immediately upon a loss, you must:
1. Take all necessary steps to protect the boat and its equipment from further loss . . .
2. Give us immediate notification of the loss and its circumstances . . .
Following a loss you must:
2. Submit a statement describing the loss and any records needed to verify the loss, its amount and your interest in any property lost . . .
5. Cooperate with us in the investigation, defense, or settlement of any loss, and agreed to be examined under oath if we so request . . .
8. Give us a final notarized statement ("Proof of Loss"), if requested.
Payment of Loss
After we receive all statements and supporting papers, we will promptly process your claim . . .
Your cooperation is needed to expedite settlement and payment. If you do not provide any requested papers within a year of the loss the claim may be voided.
2) a Fraud and Concealment provision which states:
There is no coverage from the beginning of the policy if you or your agent have omitted, concealed, misrepresented, sworn falsely, or attempted fraud in reference to any matter relating to this insurance before or after any loss.
3) a Legal Action Against Us provision, which states:
No legal action may be brought against us unless there has been full compliance with all terms of this policy.
(Emphasis added.)
Less than a month after obtaining insurance coverage, Rocco allegedly discovered his boat missing when he went to check on it one evening after work. Stamford Landing Marina had locked security gates, spotlights and lighted walkways and docks as security in December of 1997.
Rocco has provided at least four different dates on which he claims to have discovered his vessel missing. He initially told the insurance company he found the boat missing December 21, 1997, and then December 18, 1997. When he spoke with the police he initially said December 18, 1997, and subsequently, December 17, 1997. At trial he testified that he discovered the boat missing before December 19, 1997, the day he was remarried in Greenwich to his second wife Kristiana, but that he could not remember if it was December 16th or 17th. He also testified that he only came to the marina once that week, that he was alone, and that he was not there on the day of his wedding. The only consistency in his statements as to when he discovered the boat missing is that it occurred prior to his wedding on December 19, 1997.
On the evening of December 19, 1997, however, the bartender at the Stamford marina restaurant observed Rocco, his new wife, Kristiana, and her son, at the Stamford Landing Marina even though both Rocco and Kristiana claim not to have been there on that date and even though Rocco had allegedly already discovered the boat missing. The bartender's testimony in this regard is credible because he reported this information to the Stamford Police Department on January 9, 1998 and he verified the date he observed Rocco and Kristiana Rocco through his time records at the Paradise Grill. He was personally familiar with both Rocco and Kristiana Rocco. In fact, when he saw the Roccos on December 19th coming from their car towards the marina he began bringing out the ingredients for a chocolate martini because Kristiana Rocco habitually ordered chocolate martinis from him. The Roccos, however, did not enter the restaurant. Instead, they kept walking down towards the location of Roccos' boat even though it was a late evening in December. When the bartender left to go home at the end of his shift that evening the Rocco's car was still in the parking lot. Vallerie Morris was the dockmaster at Stamford Landing Marina in December of 1997. Rocco never contacted the dockmaster at anytime, either in person, by letter, or by telephone, in order to inform and/or inquire of her as to the disappearance of his vessel. This is despite the fact that in December of 1997 Morris, had a dual telephone line system that rang in both the dockmaster's building located at Stamford Landing Marina, and in her apartment. Morris also had an answering machine in order to take messages in case she was not present when she received a call.
Rocco first reported the alleged disappearance of his boat to the insurance company on December 22, 1997. Accordingly, he waited at least four days from when he allegedly discovered the boat missing to provide notice to the insurance carrier of his loss. He did not go to the police station to report his loss until January 2, 1998.
When the insurance company began its investigation regarding the alleged disappearance of the boat, Andrew and Kristiana Rocco lied to the CNA investigator Dan Telychka. On January 21, 1998, they provided him with untruthful information about being on a Caribbean honeymoon, on a Royal Caribbean lines vessel, from December 20, 1997 until January 5, 1998. Rocco stated this was the reason that he could not report the M/V SEA SCAPE missing to the Stamford Police Department until January 6, 1998. In fact, Rocco had gone to the Stamford Police Department on January 2, 1998 to report the loss.
Rocco's other excuse for not filing a police report until January of 1998, some two to three weeks after the alleged theft of the M/V SEA SCAPE, was that he had called earlier but that the Stamford Police Department allegedly told Rocco that they could not take a stolen vehicle/vessel report without the vehicle/vessel's registration. Even if this did occur, which the court is skeptical of, it makes no sense that Rocco waited nearly three weeks from the date he allegedly found the boat missing to file a written report.
When Rocco did eventually meet with the police as part of its investigation, he also lied to the police stating that the reason he could not file a police report earlier, was that he had been on his honeymoon on a cruise ship in the Caribbean from late December 1997 through January 5, 1998. When he was caught in this lie by the police after being shown that he had actually filed his first written police report on January 2, 1998, his excuse for lying was that both his wife and he wanted their parents to think they had a honeymoon.
The Stamford Police found that the information provided to them by Rocco so inconsistent and suspicious that they decided to conduct an investigation to determine if Rocco might be involved in the disappearance of the M/V SEA SCAPE.
Peter Koch, Rocco's former business partner also testified during the trial. He was credible when he testified that prior to the date of the alleged loss, Rocco told Koch that "its easy to sign your name at the dotted line when you purchase something and if you can't pay for it just let them come and get it or repo it. And if not, report it stolen and collect on the insurance."
Rocco also provided the insurance company with inaccurate information during the insurance company's attempt to adjust Rocco's claim by lying about the following:
a) on December 22, 1997 in that he advised the insurance company that he had already filed a report with the Stamford Police Department;
b) stating that his boat was not for sale when he had agreed with his ex-wife to sell it within the next two years;
(c) about being on a honeymoon as the excuse for not filing a police report in a timely manner; and
(d) failing to ever advise the insurance company that he had filed a sworn statement with the Stamford Police Department in which he admitted to lying to the Stamford Police Department and to the insurance investigator concerning his non-existent honeymoon in the Caribbean on a cruise ship.
Additionally, when the insurance company and its counsel repeatedly requested documentation, signed statements and/or information in order to attempt to process Rocco's claim, Rocco refused to provide any documentation other than a copy of the vessel registration and a copy of the initial police report that he filed on January 2, 1998. Rocco also failed to provide an authorization that would have allowed Continental to obtain the documentation. Rocco had left many of the M/V SEA SCAPE documents with Helen Rocco at the time of their divorce. However, he never contacted her following his submission of the claim to obtain the requested M/V SEA SCAPE documents that he had possibly left in her possession.
The insurance company was also able to learn, despite the lack of cooperation from Rocco, that:
a) the bartender who worked in the Stamford Landing Marina complex had seen plaintiff Andrew V. Rocco, Kristiana Kakas Rocco and her son at the marina late on the evening of December 19, 1997 carrying duffle bags and heading in the direction of the M/V SEA SCAPE;
b) Rocco was employed as a mechanic at O'Keefe Cadillac Olds, Inc., making a mechanic's salary;
c) Rocco's partnership with Peter Koch concerning the operation of KR Service Station had recently broken up;
d) Rocco had just purchased an expensive new home on December 18, 1997 for $410,000.00 (one of the days the boat was allegedly discovered missing), and;
e) Rocco had not timely reported the loss of the M/V SEA SCAPE to the Stamford Police Department and had lied that he had been on his honeymoon on a cruise ship in the Caribbean until January 5, 1998.
DISCUSSION I. Federal Admiralty/Maritime Law Preemption
This is a case of admiralty/maritime law, brought pursuant to the "savings to suitors" clause, and as such must be governed by federal admiralty/maritime law.It has been consistently held that whether or not a party sues in admiralty, diversity, or pursuant to the "savings to suitors" clause in state court, the court which hears the suit is bound to apply substantive admiralty law principles including admiralty preemption principles. See: Offshore Logistics Inc. v. Tallentire, 477 U.S. 207, 223 (1986) ("state courts [may] entertain in personam maritime causes of action, but in such cases . . . the substantive remedies afforded by the States must conform to federal maritime standards"); Panama R. Co. v. Vasquez, 271 U.S. 557, 560-61 (1926); Kossick v. United Fruit Co., 365 U.S. 731 (1961) (the U.S. Supreme Court applied the federal maritime preemption doctrine to strike the use of New York State's statute of frauds because federal admiralty judge made law had held valid all oral agreements in the maritime context). See also: Gilmore Black, The Law of Admiralty, § 1-13 (2d . Ed. 1975).
Thus, even though Rocco elected to bring his suit in state court pursuant to the "savings to suitors" clause, this court is bound to apply federal maritime/admiralty law in deciding this case.
II. The Doctrine Of Uberrimae Fidei
The doctrine of uberrimae fidei requires the assured to disclose to the insurance company any circumstances that materially affect the risk being insured. In Knight v. U.S. Fire Insurance Company, 804 F.2d 9 (2d Cir. 1986), cert denied, 480 U.S. 932 (1987), the Second Circuit Court of Appeals stated:
In evaluating whether particular facts are material, we must turn to the substantive law governing marine insurance. It is well established under the doctrine of uberrimae fidei that the parties to a marine insurance policy must accord each other the highest degree of good faith. Puritan Ins. Co. v. Eagle S.S. Co., S. A., 779 F.2d 866, 870 (2d Cir. 1985). This stringent doctrine requires the assured to disclose to the insurer all known circumstances that materially affect the risk being insured. Since the assured is in the best position to know of any circumstances material to the risk, he must reveal those facts to the underwriter, rather than wait for the underwriter to inquire. Id. The standard for disclosure is an objective one, that is, whether a reasonable person in the assured's position would know that the particular fact is material. Btesh v. Royal Ins. Co., 49 F.2d 720, 721 (2d Cir. 1931). To be material, the fact must be "something which would have controlled the underwriter's decision" to accept the risk. Id. The assured's failure to meet this standard entitles the underwriter to void the policy ab initio. Puritan Ins. Co., 779 F.2d at 870-71. (Emphasis ours.)
Thus, even if the insurance company had not asked Rocco about the purchase price, or his intended cruising limits, which it did, the doctrine of uberrimae fidei required Rocco to truthfully disclose this information.
The Second Circuit Court of Appeals further held:
Thus, the materiality of the nondisclosure does not depend on what an investigation would have revealed. The facts of this case illustrate the difficulty courts would face in determining retrospectively what an investigation would have uncovered, when the goods have already been lost. Instead, the insurer should be afforded the opportunity to investigate prior to its acceptance of the risk. Accordingly, the assured is required to communicate the information to the insurer before the policy is issued, so that the insurer can decide for itself at that time whether to accept the risk. This obligation is not burdensome to the assured and it comports with the open disclosure required by the doctrine of uberrimae fidei.
In Btesh v. Royal Insurance Co., Ltd. of Liverpool, 49 F.2d 720 (2d Cir. 1931), the Second Circuit Court of Appeals held:
The assured under a marine policy must disclose to the underwriter all circumstances known to him which materially affect the risk. McLananan v. Universal Insurance Co., 1 Pet. 170, 187, 188 7 L.Ed. 98; Sun Mutual Ins. Co. v. Ocean Ins. Co., 107 U.S. 485, 509, 510, 1 S.Ct. 582, 27 E.Ed. 337; St. Paul F. M.I. Co. v. Balfour, 168 F. 212, 217 (C.C.A. 9); Muller v. Globe R Ins. Co., 246 F. 759, 761 (C.C.A. 2). Just what is material the decisions do not, and in the nature of things cannot, exactly define, except to say that it must be something which would have controlled the underwriter's decision. By this we understand only what a reasonable person in the assured's position would suppose.
(Emphasis ours.)
The standard for disclosure is an objective one, that is, whether a reasonable person in the assured's position would know that the particular fact is material. Btesh v. Royal Ins. Co., 49 F.2d 720, 721 (2d Cir. 1931). See also: Gulfstream Cargo, Ltd. v. Reliance Insurance Company, 409 F.2d 974 (5th Cir. 1969) (failure to disclose condition of vessel is a basis for voiding marine insurance policy ab initio); Crowley Marine Services, Inc. v. Paul Hunt, 1995 AMC 2562 (W.D.Wash. 1995) (failure to disclose death on vessel a valid basis for underwriter voiding policy ab initio); Albany Insurance Company v. Wisniewski, 579 F. Sup. 1004 (D.R.I. 1984) (failure of insured to disclose true purchase price valid basis for voiding marine insurance policy ab initio); Ebisons Harounian Imports, Inc. v. Travelers Indemnity Company, 1993 AMC 1149 (Sup.Ct., New York County 1992) (failure of the insured to disclose two prior losses was basis for court granting underwriter's motion for summary judgment based on doctrine of uberrimae fidei); Royal Insurance Company of America v. Fleming, 1986 AMC 2077 (M.D.Fla. 1985) (failure of insured to disclose true age of vessel voids policy of marine insurance based on doctrine of uberrimae fidei); Mur-Joe Distributors, Inc. v. Reliance Insurance Co. of New York, 1989 AMC 2020 (Sup.Ct., New York County 1989) (motion for summary judgment granted based on assured's violation of doctrine of uberrimae fidei); Commercial Union Insurance Company v. Flagship Marine Services, Inc., 190 F.3d 26 (2d Cir. 1999).
Here, knowledge of the actual purchase price and the actual cruising limits would have affected defendant's underwriting decision in that it would have either rejected Rocco's application or charged a higher premium.
Specifically, if Continental had been advised of the true purchase price of the M/V SEA SCAPE, and/or of its correct cruising limits, it would have declined to underwrite coverage on Rocco's vessel or, if it had made an exception to its coverage policies, would have charged a higher premium.
In Certain Underwriters at Lloyds v. Montford, 53 F.3d 219, 222 (9th Cir. 1995), the Ninth Circuit Court of Appeals held that the marine insurance applicant/insured's failure to provide the actual; i.e., accurate, purchase price of the vessel resulted in a breach of his duty of utmost of faith, and as a result thereof, allowed the underwriter to void the policy.
The Ninth Circuit Court of Appeals stated:
We reject Montford's argument that inserting the "present market value" of a vessel, rather than the actual purchase price, is an acceptable industry practice in applying for marine insurance when the application specifically asks for the purchase price. Under these circumstances, the vessel's purchase price is unquestionably a fact material to the risk. Underwriters were entitled to void the policy based on Montford's material misrepresentation, and the district judge did not err in granting summary judgment on this ground.
(Emphasis ours.)
Moreover, in Hartford Insurance Company v. Garvey, 1989 AMC 652 (N.D.Calif. 9189), the Court stated with respect to an applicant/insured's misrepresentation of the actual purchase price:
The over-valuation of the insured vessel by the insured is a misrepresentation of a material fact and voids the policy because it increases the risk, provides an inducement to insurance fraud, and changes the object of the insurance from indemnity to an outright gamble at stakes greatly favoring the insured. See 1 Amould, Law of Marine Insurance and Average, 16th Ed., p. 427; see also 2 Amould at p. 984. The principle of indemnity places an outer limit on the freedom of the parties to fix the insured value of the vessel by agreement. Patterson, Essentials of Insurance Law, (2d ed.), p. 138, citing King v. Aetna Ins. Co., 54 F.2d 1253 (2 Cir. 1931). Because of the above misrepresentations and concealments of material facts, plaintiff is entitled to rescind its contract of insurance with defendant.
(Emphasis ours.)
Likewise, in Albany Insurance Company v. Horak, 1994 AMC 273 (W.D.N.Y. 1993), the marine insurance applicant, misrepresented the true purchase price of the vessel. The Court in Albany Insurance Company held:
The principle announced in Knight and their application to the facts of that case compel a similar result in the case now before this court. There is no dispute that Horak failed to disclose to the insurance company that he had paid only $57,000 for the boat and that he had bought it "as is where is" after an accident, later investing significant labor and materials in its restoration. A reasonable person in Horak's position would know that these particular facts "would have controlled the underwriter's decision" to accept the risk, as is made clear both by Mercurio's affidavit testimony and by the fact that these issues were the target of direct questions on the application form.
(Emphasis ours.)
Rocco, as a party seeking marine insurance, had a duty to disclose to Continental, his prospective insurer, the vessel's price. His material nondisclosures in connection with his application for insurance operate to void the policy ab initio under the uberrimae fidei principle of marine insurance law.
III. Rocco Materially Breached the Cooperation Clause and the Fraud and Concealment Provision
A substantial or material breach of a cooperation clause in an insurance policy puts an end to an underwriter's obligation to its insured. Nelson v. Peerless Insurance Co., 1994 WL 592031 (Conn.Super. New Haven); Hartford Accident and Indemnity Company, 30 Conn. App. 403 (1974); O'Leary v. Lumbermen's Mutual Casualty Co., 178 Conn. 32, 420 (1979); Westbrook Insurance Company v. Jeter, 117 F. Sup.2d 139 (D. Conn. 2000); Hudson Tire Mart, Inc. v. Aetna Cas. Sur. Co., 518 F.2d 671, 674 (2d Cir. 1975); Brown v. Employer's Reinsurance Corp., 206 Conn. 668, 675. Rocco clearly breached the cooperation requirement of his policy when he repeatedly failed to provide requested documentation and/or authorizations.
Even when an insured is not bound by an express duty to cooperate provision in the insurance policy, an implied duty of full and fair disclosure is required by law on the part of an insured. Carrier Corp. v. Home Insurance Company, 1992 WL 478585 (Conn.Super. 1992), 6 Conn.L.Rptr. 478.
Additionally, when there exists the possibility that the insured has engaged in fraud and/or has had some connection with the loss claimed, requests for documentation concerning the insured's whereabouts at the time of the loss, his financial condition and possible motive are material to the underwriter's investigation and must be provided by the insured. Bergen v. The Standard Fire Insurance Co., 1997 WL 809957 (Super.Conn. 1997), 21 Conn.L.Rptr. 154; McCarthy v. The Travelers Indemnity Company, 2000 Conn.Super LEXIS 823 at 15-16 (2000).
In this case, Continental acted reasonably when it requested additional documentation regarding Rocco's whereabouts and financial situation at the time of the alleged loss of his boat. This is especially true because Rocco lied about his non-existent honeymoon and lied about his whereabouts for the two weeks in which he failed to report the boat's loss to the police. He had also just bought an expensive new home. The documentation being sought clearly related to the whereabouts of Rocco at the time of the loss, his financial condition, and his possible motive. It was reasonable for the insurance company to request this information and Rocco breached the cooperation clause by not providing the documentation.
These misrepresentations regarding the purchase price and Rocco's whereabouts after the boat allegedly disappeared were clearly intentional and material. Accordingly, this conduct also constitutes a breach of the policy provision regarding fraud and concealment and voids his insurance coverage. Ofstein v. Nationwide Insurance Co., 1999 Conn.Super LEXIS 1259 at 10 (1999), 24 Conn.L.Rptr. 494; Fine v. Bellafonte Underwriters Insurance Co., 725 F.2d 179, 183 (2d Cir. 1984); Allstate Ins. Co. v. Priga, 810 F. Sup. 373 (D. Conn. 1992), affirmed, 1 F.3d 133 (2d Cir. 1993). Plaintiff has therefore failed to prove breach of contract by the insurance company or breach of the implied covenant of good faith. Finally, plaintiff presented no evidence supporting a claim for fraud by the insurance company.
IV. Defendant's Counterclaim
Defendant has filed a counterclaim asking the court to enter judgment rescinding the policy and exonerating defendant from claims of loss by plaintiff. The Court has already ruled with regards to plaintiff's Complaint that the contract was voided ab initio because of Rocco's material misrepresentations. The Court declines to enter judgment for the defendant now rescinding the contract as this would be inconsistent with its ruling that the insurance coverage was null and void from inception. The Court will enter judgment for the defendant on its counterclaim declaring that defendant is exonerated from claims of loss by plaintiff arising out of the alleged loss of his vessel.
CONCLUSION
For all the foregoing reasons, Rocco has not sustained his burden of proof in proving breach of contract, breach of the covenant of good faith or fraud and therefore judgment is entered for the defendant on Counts one through three of the Complaint. The defendant, Continental Insurance Company, having met its burden of proof on its counterclaim and the plaintiff having not met his burden with respect to his special defenses, the Court enters judgment for the defendant on the counterclaim.
CHASE T. ROGERS SUPERIOR COURT JUDGE