In Great Lakes Insurance SE v. Raiders Retreat Reality Co., LLC, the U.S. Supreme Court overturned a federal appeals court opinion an ruled unanimously in favor of the insurer, concluding that “choice-of-law provisions in maritime contracts are presumptively enforceable.”
In the underlying case, Pennsylvania-based Raiders Retreat Realty purchased an insurance policy from Great Lakes Insurance, a company organized in Germany and headquartered in the U.K. According to the opinion, the “insurance contract included a choice-of-law provision that, as relevant here, selected New York law to govern future disputes between the parties.”
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Years later, the opinion continues, “Raiders’ boat ran aground near Fort Lauderdale, Florida. After Raiders submitted an insurance claim, Great Lakes denied coverage. Great Lakes asserted that Raiders breached the insurance contract by failing to maintain the boat’s fire-suppression system. According to Great Lakes, the breach voided the insurance contract in its entirety, even though the boat’s fire-suppression system did not contribute to the accident.”
As a result, Great Lakes sued Raiders for declaratory relief in the U.S. District Court for the Eastern District of Pennsylvania, however Great Lakes alleged that Raiders breached the insurance contract and that the breach allowed Great Lakes to deny insurance coverage. In response, Raiders “advanced contract claims under Pennsylvania law. Great Lakes countered that Pennsylvania law did not apply to this dispute; rather, New York law applied under the choice-of-law provision in the parties’ insurance contract.”
The District Court agreed with Great Lakes, reasoning that “federal maritime law regards choice-of-law provisions as presumptively valid and enforceable.” The U.S. Court of Appeals for the Third Circuit, however, vacated the judgement, holding that “choice-of-law provisions in maritime contracts are presumptively enforceable as a matter of federal maritime law, but nonetheless must yield to a strong public policy of the state in which suit is brought—here, Pennsylvania’s public policy regarding insurance.” The U.S. Supreme Court then granted certiorari to resolve a split in the courts of appeals regarding the enforceability of choice-of-law provisions in maritime contracts.
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Justice Kavanaugh concluded that “choice-of-law provisions in maritime contracts are presumptively enforceable as a matter of federal maritime law, with certain narrow exceptions, and no exception to the presumption applies in this case. We reverse the judgement of the Court of Appeals.”