Choice of law in marine insurance: What will SCOTUS do?

Can a marine insurer select the law of a state that has only tenuous (or even no) connections to the insured, insurer and vessel insurer? The issue is now before the Supreme Court. (Photo: ALM Archives)

Choice of law clauses are a valuable tool for parties to preemptively decide which jurisdiction’s laws should apply to the enforcement and interpretation of insurance policies. Typically, these contracts stipulate that the substantive laws of a specified jurisdiction should apply, regardless of where a dispute arises or is filed. This allows for parties insuring across multiple jurisdictions to establish uniformity and predictability to their policies. More importantly, it allows the insurer to select the laws most favorable to their interests. However, can a marine insurer select the law of a state that has only tenuous (or even no) connections to the insured, insurer and vessel insurer? The issue is now before the Supreme Court.

The United States Court of Appeals for the Third Circuit in Great Lakes Insurance SE v. Raiders Retreat Realty Co., LLC, considered the choice of law provision to a marine insurance policy. In Great Lakes Insurance, Raiders Retreat Realty held a $550,000 policy from Great Lakes Insurance (“Great Lakes”) for one of its yachts. When the yacht ran aground in 2019, Raiders filed a claim under its policy with Great Lakes, who denied the claim on the basis that that Raiders had not properly certified the yacht’s fire suppression system, thereby voiding coverage pursuant to the terms of the policy. Note that it was undisputed that this failure was irrelevant to the loss.