In a recent hearing concerning Great Lakes Insurance v Raiders Retreat Realty, the Supreme Court justices leaned towards supporting the consistent enforcement of choice-of-law clauses in maritime insurance contracts. These clauses allow the parties involved in the contract to choose the legal jurisdiction that will govern their contract’s interpretation, execution, and dispute resolution.
At the crux of the argument is whether a contract dispute should be resolved under New York law or Pennsylvania law. This is particularly significant as the outcomes under these jurisdictions are vastly different – New York law would uphold the insurer’s denial of coverage, while Pennsylvania law would likely oppose it.
The Supreme Court case resonates with three previous cases, including Wilburn Boat Co. v. Fireman’s Insurance Co., a 1955 decision. The ruling determined that absent any overriding federal law or precedent on maritime matters, the courts should look to relevant state law. This stance was heavily based on the historical state regulation of insurance industries and the clear absence of federal insurance regulation.
However, the other two cases – The Bremen v. Zapata Off-Shore Co. and Carnival Cruise Lines v. Shute – have laid contrasting precedent by enforcing the choice-of-forum clauses within maritime law.
The discourse during the latest hearing indicates that the justices believe these later cases could have possibly signaled a retreat from the Wilburn Boat decision. Apparently, the justices are now examining whether these choices-of-forum clauses illuminate how federal courts should allow people to choose the law governing their contracts.
Though the final ruling remains pending, the current discussion suggests that maritime choice-of-law clauses will likely stand firm, with minimal opportunity for invalidation. For more details, you can review the original coverage of this hearing at SCOTUSblog.