Wilburn Boat Co. v. Fireman’s Fund Ins. Co. case brief summary

Wilburn Boat Co. v. Fireman’s Fund Ins. Co. (US 1955), 

Facts: Ps bought a small houseboat to use for commercial carriage of passengers on Lake Texoma, an artificial inland lake b/w TX and OK. D insured the boat from fire and other perils. While moored, the boat was destroyed by fire. P sued D for the policy coverage in state court; case was removed based on diversity. Liability was denied b/c (1) K said you couldn’t pledge title as happened here and (2) fine print of K said the boat, w/o consent, couldn’t be used for commercial activities.

Holding: -If TX law governs, the P prevails b/c provision against pledging would be invalid and, under TX law, a fire insurance policy isn’t void unless the breach contributes to the loss.

-TC said that TX law wouldn’t apply b/c this is an admiralty case, therefore federal law applies and policy breached, so D wins

-While a lot of maritime law is governed by Congress, it has left certain regulations to the state, like maritime insurance

-Traditionally, insurance has been left to the states, and everyone has assumed that maritime insurance was part of that state regulation

-Federal court regulation here would be piecemeal and a disaster

-Therefore, TX law should apply and Ps prevail

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• Wilburn Boat Co. v. Fireman’s Fun Ins. Co., 348 U.S. 310 (1955) 
• FACTS: The Powned a houseboat that they used to ferry people back and forth across a lake on the Oklahoma-Texas line. The boat was insured by the D. The boat was transferred from the original owners to the P. The boat caught fire while moored at a dock. The insurance company attempted to deny coverage because of clauses which prohibited using the boat for commercial purposes or from transferring ownership. Under Texas law the clauses would not be enforceable if the breach of them did not cause the loss. However, the DC held that federal admiralty law applied and that that law provided that breach of any of the terms of a maritime insurance policy bars recovery.  
• HELD: There is no federal admiralty rule that regulates marine insurance. This is a purely state law matter.  
• REASONING: A choice of rules on insurance involves various policy considerations and is obviously one which Congress or the states are peculiarly situated to make. The whole judicial and legislative history of insurance regulation in the US warns us against the judicial creation of admiralty rules to govern marine policy terms and warranties.
  • Notes:
    • Courts applying maritime law may adopt state law by express or implied reference where state law does not conflict with federal law or by virtue of the interstitial nature of federal law.
    • The general rule of maritime law that parties bear their own costs, coupled with the need for uniformity in federal maritime law, precludes the application of a state statute providing that a party may recover attorney’s fees for breach of contract.
    • If there is no admiralty rule that is established, then the sitting district judge has the latitude to establish a new rule. However, if there is no overriding admiralty interest, then the court should apply the doctrine of comity and apply state law.
    • In this particular case: the insurance involved is first party insurance. There is little need for a uniform national rule on insurance to insure a vessel. So there is no need to create a new rule. Also, the state has a large interest in regulating first party insurance because of the volume of law that is established in regulating insurance law. So, although this case is maritime in flavor, the interest is local, so state law is applicable. If it were third party insurance that was involved, the analysis could be different.