In a recent unanimous decision by the Supreme Court, Justices called for vigorous enforcement of choice-of-law clauses in maritime insurance contracts. The decision in Great Lakes Insurance v. Raiders Retreat Realty did not surprise those who had followed the previous fall’s oral arguments, which revealed a bench deeply skeptical of the uncertainties maritime insurance contracts would face under a lower court decision limiting enforcement of said clauses. Justice Kavanaugh’s opinion emphasized the need for predictability in enforcing such clauses.
Commercial contracts often include choice-of-law provisions that call for the application of the law from a particular jurisdiction. In this case, a European insurance company providing coverage to a yacht owned by a Pennsylvania company included a clause calling for the application of New York law. The dispute arose where the application of Pennsylvania law would expose the insurer, Great Lakes Insurance, to a tort action not available under New York law.
Justice Kavanaugh noted the constitutional underpinnings under which federal courts create and apply maritime law, aiming for a system of maritime law that operates uniformly across the country. The Court outlined that there is an existing federal maritime rule regarding the enforceability of choice-of-law provisions, despite the Supreme Court not having addressed the issue directly in recent years. The decision was supported by consistent decisions from federal courts of appeals and references in previous Supreme Court cases.
Enforcing maritime forum-selection clauses, Kavanaugh pointed to relevant Supreme Court cases ‘The Bremen v. Zapata Off-Shore Co.‘ and ‘Carnival Cruise Lines v. Shute‘ that dictates similar conclusions for choice-of-law provisions.
Furthermore, strong enforcement of choice-of-law clauses was considered crucial to facilitate maritime commerce as it aids in reducing uncertainty and lowering costs for maritime actors, especially marine insurers for better-risk assessments.
In essence, this decision reinforces the fact that exceptions to enforceability of choice-of-law clauses are narrow, and it is paramount to have stable and uniform rules governing maritime activities. The details provide a closer look at this significant decision and its implications for legal professionals involved with maritime insurance contracts.