A Law and Economics Analysis of the Duty of Utmost Good Faith (Uberrimae Fidei) in Marine Insurance Law for Protection and Indemnity Clubs.

Authors

Elizabeth Germano

Abstract

Writing for the Supreme Court in The Lottawanna in 1875, Justice Joseph P. Bradley envisioned federal and state regulation of maritime affairs as “a system of law coextensive with, and operating uniformly in, the whole country.” He thought state involvement in maritime law defeated the consistency and uniformity the Constitution sought to achieve for interstate and international commerce. Over 100 years later, Justice Antonin Scalia, describing the current relationship between state and federal regulation in the admiralty arena, stated: “It would be idle to pretend that the line separating permissible from impermissible state regulation is readily discernible in our admiralty jurisprudence, or indeed is even entirely consistent within our admiralty jurisprudence.” The chief reason for the current state of affairs is admiralty jurisprudence has evolved from court rulings rather than black letter law. Because contracts are conceptual, the boundaries of admiralty jurisdiction over contracts have been challenging to define. To be cognizable in admiralty, a contract must be wholly maritime. The characterization of a contract as “maritime” is significant because if the dispute is not inherently local, federal law controls the interpretation of a maritime contract. It is important to understand the Wilburn Boat analysis because the choice-of-law may be outcome determinative in admiralty cases. Except for the Fifth Circuit, all the federal circuits having examined the question of whether uberrimae fidei is a judicially established federal admiralty rule, have determined that it is. Should the Fifth Circuit decide to revisit its decision, there is ample judicial reasoning, legal commentary, and economic theory that supports the economic efficiency of uberrimae fidei. Specifically, with respect to protection and indemnity clubs, economic theory supports the efficiency of uberrimae fidei to dispel information asymmetry and broaden the availability of insurance to low-risk individuals.

Publisher

St. Mary's University School of Law

Recommended Citation

Elizabeth Germano, A Law and Economics Analysis of the Duty of Utmost Good Faith (Uberrimae Fidei) in Marine Insurance Law for Protection and Indemnity Clubs., 47 St. Mary's L.J. (2016).
Available at: https://commons.stmarytx.edu/thestmaryslawjournal/vol47/iss4/1