"The Hello Dolly" Was Not Where the Owner Promised it Would be When it
Sunk in Breach of Warranty
Great Lakes Insurance, S.E. insured the Hello Dolly VI, a boat owned by
Gray Group Investments, L.L.C. The Hello Dolly sank in Pensacola,
Florida, during a hurricane. Gray Group filed a claim under the
insurance policy, Great Lakes denied coverage, and Great Lakes then
sought a declaratory judgment that it properly did so.
In Great Lakes Insurance, S.E. v. Gray Group Investments, L.L.C., No.
22-30041, United States Court of Appeals, Fifth Circuit (August 1, 2023)
Hurricane Sally struck the Gulf Coast in September 2020. In its path
lay the Hello Dolly VI (hereafter, the Vessel), which was moored behind
Gray Group's eponymous member Michael Gray's house in Pensacola,
Florida. The Vessel sustained damage during the storm and sank at its
mooring. Great Lakes denied coverage, asserting that Gray Group had
breached several warranties.
The Warranties
Great Lakes contended that Gray Group breached the "hurricane protection
plan" (the HPP) that Gray Group had submitted in response to Great
Lakes's "hurricane questionnaire" (the HQ). The HQ requested the
Vessel's location during hurricane season and asked a series of
questions regarding Gray Group's contingency plans in the event of a
hurricane. In the HPP, Gray Group stated that the Vessel would be
located at the Orleans Marina in New Orleans, Louisiana, and detailed
the protective measures Gray Group would take when a hurricane
approached. At the time the Vessel sank it was not even near Louisiana
nor did Gray Group comply with the HPP.
The district court agreed with Great Lakes and granted it summary
judgment. Specifically, the district court held that the phrase
"application for insurance" was ambiguous but that extrinsic evidence
showed that the parties intended "application for insurance" to
encompass the HPP. Continuing the analysis, the court concluded that
Gray Group's statement in the HPP that the Vessel was to be located at
the Orleans Marina during hurricane season was also ambiguous. Gray
Group had thus breached its warranty, justifying Great Lakes's denial of
coverage.
ANALYSIS
The Court of Appeals of New York has long recognized the concept of
incorporation by reference. For nearly as long as New York has
recognized incorporation by reference, its Court of Appeals has allowed
parol evidence to prove the identity of the paper that the parties
attempted to incorporate.
Gray Group's HPP, with its representation that the Vessel's "marina or
residence" location during hurricane season was the Orleans Marina, was
included in the policy's ambiguous incorporation of Gray Group's
application for insurance.
Under a bolded header labeled "WARNING," the HQ, which prompted Gray Group's submission of the HPP, advised that "this declaration and
warranty shall be incorporated in its entirety into any relevant policy
of insurance."
The district court concluded that the HPP's representation regarding the
Vessel's "marina or residence" location was a warranty such that Gray
Group's breach of it voided the policy. The Hello Dolly VI never got to
where she belonged. Gray Group's representations to the contrary were
validly incorporated into the policy as warranties, and Gray Group's
breach of its warranties justified Great Lakes's denial of coverage when
the Hello Dolly sank.
ZALMA OPINION
A warranty is a promise made by an insured that must be kept in its
entirety for the policy to be effective. When, during hurricane season
the Vessel was docked in Florida rather than the promised marina in
Louisiana with special protections from hurricanes, the promise was not
kept and the warranty was breached, Not only did the vessel sink, the
breach of warranty sunk the claim. (c) 2023 Barry Zalma & ClaimSchool, Inc.