Marine insurance policies often require insureds to follow promises known as warranties. For Maryland vessel owners and businesses, these warranties may address where a vessel can travel, how it must be maintained, who may operate it or what safety equipment must remain aboard.
A breach occurs when the insured fails to comply with one of those promises. The consequences can be serious because a warranty may operate as a condition of coverage rather than a minor term. Whether the insurer may deny a claim can depend on the policy language and the law governing the contract.
How can a warranty breach affect coverage?
Common warranties may require a vessel to:
- Remain within navigational limits
- Undergo surveys
- Maintain fire-suppression systems
- Employ qualified crew
- Avoid operations
For example, a boat insured for Chesapeake Bay use could create a coverage dispute if it travels beyond an agreed navigation area.
Marine insurance disputes are unusual because federal maritime law may apply alongside state insurance principles. In Wilburn Boat Co. v. Fireman’s Fund Insurance Co., the U.S. Supreme Court held that state law may govern the effect of certain warranty breaches when no established federal maritime rule controls.
More recently, Great Lakes Insurance SE v. Raiders Retreat Realty Co. confirmed that choice-of-law provisions in maritime contracts are generally enforceable under federal maritime law.
A Maryland policyholder should not assume Maryland law automatically decides whether a breach defeats coverage. The policy may select another state’s law, and the wording of the warranty can affect the result.
After a loss, insureds should preserve the policy, survey reports, maintenance records, vessel logs and communications with the insurer. Consulting with a Maryland maritime insurance legal professional can help evaluate whether a warranty was breached and whether the insurer has a basis for denying the claim.