Markel Am. Ins. Co. v. McRae (M.D. North Carolina – January 5, 2024)
The court addressed the doctrine of umberrimae fidei.
Under federal maritime law, an insurer can be excused from paying on a policy if the insured party has misrepresented or failed to disclose relevant facts. This duty of utmost good fiath, known as uberrimae fidei, is only found in maritime law.
The key inquiry is whether the insured disclosed to the insurer all known circumstances that materially affect the risk being insured. In other words, would the omitted information have reasonably affected the insurer’s determine to underwrite the risk. If the insured misrepresents a material fact in any way, they have breached their duty, even if the misrepresentation was unintentional, or due to negligence, mistake, accident, or voluntary ignorance. Any such misrepresentation results in a determination that the policy never attached and is void.
Markel alleged that the McRaes made several misrepresentations including that Mr. McRaie did not have a previous conviction, Mr. McRae’s license had not been suspended, the vessel had been prior insured, and that another insurance company had not refused to underwrite the vessel. The court found Mrs. McRae’s lack of knowledge regarding the alleged misrepresentations or belief that the statements were not relevant, did not excuse the misrepresentation. The court also found that the statements were material in that they were part of the insurer’s eligibility analysis. The court held that the doctrine of umberrimae fidei voided the underlying insurance policy and excused the insurers obligation to honor the policy.