Certain Underwriters at Lloyds v. Inlet Fisheries, Inc. (389 F. Supp. 2d 1145, 2005)

ORDER FROM CHAMBERS

[RE: Motions at dockets 135, 151, and 163]

SEDWICK, District Judge.

I. MOTIONS PRESENTED

At docket 135 plaintiff Certain Underwriters at Lloyds, London (“Lloyds”) moved for summary judgment requesting the court to hold that, as a matter of law, defendants Inlet Fisheries, Inc. (“IFI”) and Inlet Fish Producers, Inc. (“IFP”) (collectively “Inlet”) violated the federal maritime doctrine of ubemmae fidei (“duty of utmost good faith”) by failing to disclose facts material to insurance risk thereby rendering the marine insurance policy issued by Lloyds to Inlet void ab initio. At docket 151 Inlet opposed Lloyds’ motion and cross-moved for summary judgment requesting the court to hold that, as a matter of law, the doctrine of uberrimae fidei does not apply and that Inlet did not fall to disclose any fact material to the insurance risk undertaken by Lloyds. At docket 152 third-party defendant Totem Agencies, Inc. (“Totem”) filed an amicus curiae memorandum in support of Inlet. At docket 163 Lloyds moved to strike the testimony of Forrest V. (Woody) Wilton, offered by Inlet as expert testimony. All motions have been fully briefed. Oral argument was not requested and would not assist the court.

II. BACKGROUND/FACTS

On or about August 26, 2002, while moored in Steamboat Slough, the Quanir-tuug Princess (“QP ”) sank, spilling oil and other toxic materials. Inlet lacked the financial resources to, and Lloyds declined to, fund the environmental remediation and cleanup work required, so the cleanup project was federalized. Lloyds declined coverage under its policy and initiated the current action to declare the policy void ab initio on the grounds that Inlet violated the federal maritime duty of utmost good faith (uberrimae fidei). Lloyds alleges that in its application for coverage Inlet failed to make a full and complete disclosure of facts material to the underwriting decision by not disclosing its prior pollution loss history and the fact of and reasons for cancellation of its prior pollution insurance. The facts underlying this litigation are mostly undisputed. The dispute is over the inferences or conclusions to be drawn from the facts.

In June 2000, the pollution insurance carrier for Inlet, Water Quality Insurance Syndicate (“WQIS”), gave notice that, because of the age and condition of Inlet’s vessels, WQIS would cancel the coverage unless Inlet ordered condition surveys of the vessels and complied with the surveys’ recommendations. Inlet failed to comply with the WQIS requirements. In August 2000, WQIS sent Inlet a cancellation notice effective August 28, 2000. On or about August 17, 2000, Totem, on behalf of Inlet, provided a completed application for vessel pollution insurance to Puget Sound Underwriters (“PSU”). The application identified IFI, IFP and Arctic Salmon, Inc. as the insureds and four non-self-propelled vessels, Fort Yukon, Yukon II, Harvester Barge, and QP, to be insured. The response to Question 5 “Pollution Loss History” was “None.” PSU, acting as the agent of Lloyds, issued an insurance policy naming IFI and IFP as insureds and Arctic Salmon as an additional insured effective from August 28, 2000, through August 28, 2001. This policy was extended for an additional year, through August 28, 2002. No additional application was submitted and no additional information concerning the insureds or the vessels was requested by or provided to either PSU or Lloyds. On August 28, 2002, the policy was extended for another year through August 28, 2003 subject to Inlet submitting a new application.

In May 2000, the Maren I, owned by either IFI or IFP, sank in Steamboat Slough, in the Kuskokwim River near Be-thel, Alaska. In early August, 2000, the Harvester Barge suffered a minor spill (approximately 55 gallons of diesel fuel) into the waters of the Kuskokwim River while moored at the City Dock, Bethel Alaska. Neither incident was disclosed prior to the time the policy was issued in 2000 or the time it was renewed in 2001. The record also shows that IFI and/or IFP had been involved in other releases of pollutants into the waters of the Kuskok-wim River in the Bethel Area in 1996, 1997, and 1998 which were not disclosed. In addition, Inlet failed to disclose the fact of and details regarding the policy cancellation by WQIS.

III.ISSUES PRESENTED

The motions at dockets 135 and 151 raise these issues: (1) is the maritime duty of utmost good faith (uberrimae fidei) an established federal admiralty rule applicable to marine pollution insurance policies precluding application of state law; (2) are prior pollution history of the insured, condition of the vessels, and the cancellation of insurance coverage by another insurer material to the underwriting decision, the non-disclosure of which breaches the doctrine of ubernmae fidei; and (3) were the actions of Lloyds subsequent to learning of the undisclosed information inconsistent with its claim of materiality or did they constitute a waiver of the duty to disclose. Also at issue in the cross-motion at docket 151 is whether question number 5 on the “Application: U.S. Oil Pollution Act of 1990,” entitled: “Pollution Loss History” is ambiguous in that it could reasonably be, and was, interpreted as being exclusively directed to the pollution loss history of the vessels to be insured, not the loss history of the applicant.

The issue raised by the motion at docket 163 is whether Wilton has sufficient recent relevant specialized knowledge, training, skill, education or experience about underwriting practices for marine pollution insurance to qualify as an expert.

IV.STANDARD OF REVIEW

Summary judgment is appropriate if, when viewing the evidence in the light most favorable to the non-moving party, there are no genuine issues of material fact, and the moving party is entitled to judgment in its favor as a matter of law. “Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge, [when] he is ruling on a motion for summary judgment.” In response to a properly supported motion for summary judgment, the opposing party must set forth specific facts showing that there is a genuine issue for trial. The issue of material fact required to be present to entitle a party to proceed to trial is not required to be resolved conclusively in favor of the party asserting its existence; all that is required is that sufficient evidence supporting the claimed factual dispute be shown to require a fact-finder to resolve the parties’ differing versions of the truth at trial. There is no genuine issue of fact if, on the record taken as a whole, a rational trier of fact could not find in favor of the party opposing the motion.

V.DISCUSSION

A. Motion To Strike Wilton’s Opinion Testimony

Admission of expert testimony is governed by Rule 702 of the Federal Rules of Evidence which provides:

If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise, if (1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case.

Lloyds asserts that Wilton does not qualify as an “expert,” his opinion is not based on sufficient facts or data, his opinion is not derived from reliable principles and methods, and he has not applied his analysis reliably to the facts of the case.

Wilton has expressed the following opinions relevant to the issues presented in the case:

3.Based upon my dealings with underwriters in placing marine insurance, I have found that there is a significant difference between underwriting marine pollution insurance for non-tanked vessels, and underwriting marine protection & indemnity and hull & machinery insurance. Non-tanked vessels are vessels that do not carry oil or hazardous material in bulk as cargo or cargo residue. The pollution underwriters for non-tanked vessels will accept the risk and set their rates based on far less information than aP&IorH&M insurer will typically require for placement of the risk. Basically, the pollution underwriters for non-tanked vessels will underwrite a policy based on the size of the vessel, the type of the vessel, and the amount of insurance sought. The pollution underwriter will leave to the P & I and H & M insurer to gather the details about the operation, owner, and vessels. When insuring tanked vessels, a pollution underwriter may require a more detailed application.

4. I understand that Lloyds is now claiming that the following information is material to its placement of the risk marine pollution:

-Prior loss history of the companies, including the MAREN I sinking and the August 2000 incident in which oil that had been discharged from the HARVESTER BARGE was spilled onto rocks from an on-shore pump

-Conditions of the vessels

-Cancellation of the WQIS policy, reasons for that cancellation, and demand by WQIS that the vessels be surveyed before renewal

-Inlet Fisheries bankruptcy

-That the QP was mortgaged for more than its value.

In my experience, none of the information is typically sought in an application for marine pollution insurance for non-tanked vessels and none of it affects or impacts the decision of an underwriter to accept risk or set its premium rate.

5. I have reviewed Lloyds’ application form, where it asks for “Pollution Loss History.” Based on my 45 years of experience in the marine insurance industry, the term “loss history” as used in the Lloyd’s/PSU [sic ] application form referred to the specific loss history for the vessels proposed for insurance. The only loss history that would affect the underwriter’s decision to accept the risk would be the loss history for the specific vessels to be listed on the schedule of vessels for the policy.

6. In my years in the marine insurance industry, I have reviewed many different insurance forms for many different types of policies. The application form used int his case by Lloyd’s/PSU [sic ] is a “bare bones” application seeking minimal information. The application seeks information that is material to each underwriter’s decision to accept a risk. Based on my experience, the broker in this case, and the assured were entitled to assume that the application requested all of the information that was material to the underwriting decision. The broker was justified in interpreting the application to seek loss history for the vessels to be insured.

7. On August 8, 2000, I sent to Totem the Puget Sound Underwriting application (TOT 381-83). On my fax to Totem (TOT 386), I specifically told them that page two, which asks whether the vessels had current surveys, did not need to be completed. That is because the condition of the vessels is not material to the risk to be covered. When I sent the application to Totem, I expected Totem or its client to answer the question “Pollution Loss History” by providing the pollution loss history of the vessels to be listed on the schedule of vessels. I did not expect that Inlet or Totem would identify a pollution loss history for each assured entity because that was not what the application form in this instance requested. I expected the assured would disclose the specific loss history for the vessels listed on the schedule of vessels.

When expert testimony is offered, the trial judge serves as “gatekeeper” to ensure that it meets the requirements of Rule 702, including determining admissibility with respect to a motion for summary judgment. The party offering opinion testimony must prove the witness is qualified to testify and that the testimony is admissible by a preponderance of evidence. The trial judge has wide discretion in determining whether to admit or exclude the testimony.

Advocating the admissibility Wilton’s opinions, Inlet mainly relies on Hangarter v. Provident Life and Accident Insurance Co. In that bad faith case, the Ninth Circuit held that expert testimony was admissible to establish insurance industry standards, and the trial court did not abuse its discretion in allowing the expert testimony of a person who had 25 years of experience working for insurance companies and as a consultant. Under Han-garter, the predominate matter to consider in qualifying a witness to give testimony about industry standards is the witness’ knowledge and experience in the industry. However, Wilton’s 45 years of overall experience in the insurance industry is not necessarily sufficient to qualify him to render an opinion about the specific industry standards at issue here; materiality of information to evaluating risks in underwriting marine pollution policies. Inlet reads Hangarter too broadly. In rejecting the argument that the witness lacked specialized knowledge as to insurance bad faith claims, the Hangarter court summarized the expert’s qualifications:

Caliri has twenty-five years’ experience working for insurance companies and as an independent consultant. His experience has included evaluating insurance claims, assisting insureds in dealing with insurance companies to obtain payment of their claims, marketing insurance products, and evaluating insurance policies. Caliri worked for both Unum and Provident as a representative at the time many of their own occupation disability policies like Hangarter’s were sold and has received training on how insurance companies in general, and Defendants in particular, adjust claims. He has also been found qualified to testify on insurance practices and standards within the industry twelve times before (once in an insurance bad faith case), and has never been found to be unqualified. Moreover, Caliri’s expertise has been employed by defense firms (including one involved in this litigation) 35-40% of the time he has served as an expert.

Clearly, this lays at least the minimal foundation of knowledge, skill, and experience required in order to give ‘expert’ testimony on the practices and norms of insurance companies in the context of a bad faith claim. Given Caliri’s significant knowledge of and experience within the insurance industry, the district court did not abuse its discretion in concluding that he was qualified to testify as an expert witness.

The topic in Hangarter was claims processing. Here, the topic is underwriting marine pollution policies. It is, therefore, necessary to focus on Mr. Wilton’s experience, which started in 1958, as it relates to underwriting marine pollution policies. The following table summarizes that experience.

Year(s)_Employer_Duties/Responsibilities_

1958-1959 Atlantic Mutual Insurance Trainee in property and marine claims; file _clerk. TNo underwriting experience noted.l

1959-1961 New Zealand Insurance Primarily in claims. [No underwriting _experience noted.l_

1961-1965 Boston Insurance Claims and underwriting. Did some yacht underwriting but did not quote or bind _accounts._

1965-1968 Great American Insurance Assisted with yacht and cargo underwriting _but did not bind or quote accounts._

1968-1970 Marsh & McLennan_Claims adjusting._

1970 P.A.C. Insurance manager in charge of insurance contracts with Navy & Army & claims. _fNo underwriting experience noted.l_

1971-1978 Dawson & Company Claims and placement. Produced and placed marine accounts; cargo, hull, and P & I. TNo underwriting experience noted.l_

In charge of claims and did marine underwriting (about 60% of his time). T.W. Rice was a managing general agency and surplus line brokerage; acted as agent for other insur-1978-1985 T.W. Rice & Co.

ers who gave T.W. Rice authority to under-_write business and placed business as well.

1985-1999 Marine Insurance Managers President (formed company with wife). [Marine Insurance Managers was a managing general agency and surplus line broker.] In charge of all operations with special attention to production (putting business on the books). Did some day-to-day under-_writing._

1999-2003 Spotlite Insurance Spotlite was brokerage and surplus line brokerage. Business was primarily entertainment with a few small hull and yacht accounts. [Mr. Wilton’s duties or functions are not described; no underwriting experi-_ence noted.]_

2003- Totem Agency Totem utilizes Mr. Wilton’s surplus line license; employed on a commission basis on any business produced and a fee for when Totem uses his license. Other than to sign the policies, Mr. Wilton performs no other function with respect to the surplus line license. [No underwriting experience noted.]

Wilton testified that until 1968 there were no stand-alone marine pollution policies; marine pollution coverage was part of P & I coverage. When asked specifically about standards with respect to marine pollution insurance Mr. Wilton testified:

Q. What are the generally accepted marine insurance industry standards with respect to vessel pollution insurance?

A. Vessel pollution insurance is merely an add-on to — for other insurances. And the other insurances are the main types that you — underwriters investigate and everything else. So I — as far as I know, I never looked at anything on pollution by itself.

Wilton acknowledged that in 2000 Lloyds (through PSU) and WQIS were the only two issuers of stand-alone marine pollution policies. Notwithstanding this, prior to rendering his opinion, Wilton did not contact either Lloyds or WQIS to determine what underwriting standards either used.

Despite many years of experience in the insurance business, with respect to underwriting marine pollution policies Wilton’s experience is minimal, sporadic, and concerning stand-alone policies of the type at issue in the case at bar non-existent. His opinion as to current industry standards is based on experience in underwriting at a time when pollution insurance did not stand-alone but were part of protection and indemnity policies, and even that experience is not of recent vintage. Finally, Wilton has no knowledge of the underwriting policies, practices, or procedures of either Lloyds or WQIS, the dominant issuers of marine pollution policies. In sum, Wilton lacks “particularized experience with vessel pollution policies” and, therefore, although qualified to testify as an expert on some aspects of the standards of the insurance industry, he is not qualified to testify as an expert on underwriting marine pollution insurance policies.

Inlet argues in the alternative that Wilton may give his opinion as a lay witness under Rule 701 which provides:

If the witness is not testifying as an expert, the witness’ testimony in the form of opinions or inferences is limited to those opinions or inferences which are (a) rationally based on the perception of the witness, and (b) helpful to a clear understanding of the witness’ testimony or the determination of a fact in issue, and (c) not based on scientific, technical, or other specialized knowledge within the scope of Rule 702.

Inlet’s argument on this point is terse and undeveloped. Inlet does not show how the Wilton’s opinion meets the three-prong test of Rule 701. Inlet’s reliance on Williams Enterprises, Inc. v. Sherman R. Smoot Co. is misplaced. The lay opinion of the insurance broker in that case was based upon the broker’s personal knowledge of the facts and a specific finding by the trial court, acting as the trier of fact, that the testimony would be useful. The court held that the fact the broker based his opinion on specialized knowledge was irrelevant. As long as a witness has personal knowledge of the facts, the witness is entitled to draw conclusions and inferences from those facts—regardless of whether he applied any specialized expertise. Under Rule 701, as amended in 2000, the testimony of a witness must be scrutinized under the rules regulating expert opinion to the extent that the witness is providing testimony based on scientific, technical, or other specialized knowledge within the scope of Rule 702, effectively overruling the D.C. Circuit holding in Williams Enterprises. Wilton is not drawing a conclusion or inference from personally perceived facts; he is rendering an opinion based on experience and specialized knowledge which must meet the standards of Rule 702. It is not admissible under Rule 701.

To the extent that it is directed at Wilton’s opinion testimony, the motion at docket 163 will be granted. Except for the first sentence of paragraph 6 and the first two sentences of paragraph 7, paragraphs 3, 4, 5, 6, and 7 of the Declaration of Forrest V. (Woody) Wilton dated April 11, 2005, are stricken.

B. Inlet’s Cross-Motion Regarding Ambiguity

In an earlier motion at docket 86 Inlet sought to summary judgment based on an asserted ambiguity in question 5 “Pollution Loss History” on the Application Form. Lloyds’ complaint alleges that Inlet’s prior pollution loss history, if disclosed, would have resulted in denial of the insurance application. Inlet contended _ in the prior motion that the application form is ambiguous because question 5 could reasonably be and was interpreted to be directed only at the pollution loss history of the vessels to be insured, not the applicant’s loss history. At docket 127 the court denied Inlet’s motion on the ground that Inlet had failed to present any evidence that the application form was interpreted in the manner ascribed to it by Inlet. Since a material fact upon which the motion was premised had not been established, the court was unable to rule as a matter of law that the Pollution Loss History question is ambiguous.

In the current motion at docket 151, Inlet again contends that question 5 is ambiguous. Although presented as a new motion, Inlet is in effect requesting the court to reconsider its prior order that it was unable to rule as a matter of law that the question “Pollution Loss History” is ambiguous. Thus, Inlet’s renewed motion butts up against the law of the case doctrine, i.e., a court is generally precluded from reconsidering an issue that has already been decided by the same court or a higher court in the same case However, law of the case doctrine is not a shackle without a key. So long as a district court retains jurisdiction over a case, the court has inherent power to reconsider and modify an interlocutory order for sufficient cause. That inherent power is not unfettered: “the court may reconsider previously decided questions in cases in which there has been an intervening change of controlling authority, new evidence has surfaced, or the previous disposition was clearly erroneous and would work a manifest injustice.” The case at bar implicates the second ground, newly discovered evidence.

The new evidence propounded by Inlet consists of the declaration of Eric Parthemer. Based thereon, Inlet argues:

Totem, on behalf of defendants, likewise reasonably interpreted Lloyd’s question of “pollution loss history,” after consulting with an independent marine insurance expert, to pertain to vessels actually listed on the policy, rather than the various entities who owned those vessels.

To succeed, Inlet must show that the evidence is newly discovered or unknown to it until after its prior motion was submitted for decision and that it could not with reasonable diligence have discovered and produced such evidence prior to that submission. Inlet makes no such showing. Indeed, the nature of the evidence demonstrates that Inlet could have discovered the evidence by the exercise of reasonable diligence, e.g., simply making an inquiry of its agent.

Even if the new evidence were considered, the outcome would not change, because the prior ruling is not erroneous. In that part of the declaration referred to and relied on by Inlet, Parthemer states:

2. In August 2000, Totem Agencies sought marine pollution insurance on behalf of Inlet Fisheries, Inc., and Inlet Fish Producers (the Inlet Entities). We consulted with Woody Wilton, who I knew to be experienced in the filed of marine insurance. Mr. Wilton provided to us a Puget Sound Underwriters (PSU) application for marine pollution insurance. The application was completed by Jan Townsend, who was my assistant at the time, and according to the fax notation on the application, forwarded to Puget Sound Underwriters on August 17, 2000.

In part of his declaration not referred to by Inlet, Mr. Parthener also stated:

3. On the application sent to Puget Sound Underwriters on August 17, 2000, was a question asking: “Pollution Loss History.” Based on my discussions with Mr. Wilton and my understanding of the meaning of that questions [sic] that question requested the pollution loss history for the vessels being insured, not the applicants. The question was completed based on information then known by me.

Parthener’s declaration is deficient. First, it indicates that a person other than the declarant, Jan Townsend, actually prepared the application. Although it somewhat elliptieally implies that he gave Townsend the necessary information, nothing in the declaration actually states that he provided direction on completing the application. Second, the declaration implies that Parthener consulted Wilton about the interpretation of question 5, but describes no specific conversation with him. Yet, Wilton, also a witness for Inlet, unequivocally testified at deposition that he had no conversation with Totem personnel concerning interpretation of the question. In addition, Parthener indicates that the answer was based on his understanding of the question but does not state the basis for that understanding. Parthener’s statements are conclusory in nature and insufficient to raise a triable issue of fact.

Inlet has also referred to the deposition testimony of D. Kenneth Draper that there was no reason that the application could not have asked specifically for the “pollution loss history of the applicants.” Mr. Draper testified upon examination by counsel for Inlet:

Q. Given his interpretation, your interpretation, do you think that the phrase, pollution loss history, as used in that application is ambiguous?

A. No.

Q. And why is that.

A. Loss history of the insureds, IFI, IFP, and Arctic Salmon, is what is sought. It is not the vessels. Not just the vessels on the schedule at the time. They may have sold a vessel a month before that had a million dollar spill. Can’t exclude that.

Q. On what do you base your opinion on that it is the applicant’s — just looking at this form, what do base that it is the applicant’s loss history.

A. Industry practice has always required loss history of the account, the account being insured. And so if Inlet had the Maren I in 2000 and had a spill, that’s part of the record.

Q. (By Mr. Tretow) Well do you think that Mr. Parthener’s interpretation of what is requested there, based upon his discussion with Mr. Wilton, is an unreasonable interpretation.

A. Yes.

Q. Now, is there any reason why this application could not have said, applicant’s pollution loss history.

A. It could have.

Q. Any reason why you think it wouldn’t or shouldn’t contain that.

A. Unnecessary because of really what we are talking about here is utmost good faith. The underwriters should be in a position to understand the loss history of the account and be given information from the insured that might be material to the risk.

The evidence in this case does not support an inference that the response to question 5 was based on a perceived ambiguity. Rather, the inference to be drawn from the evidence is that either: (1) the person completing the application was not provided the information on the prior pollution history of IFI, IFP and Arctic Salmon; (2) Totem was of the opinion that the pollution loss history of the applicants was immaterial; or (3) the information was deliberately concealed to preclude any further inquiry.

Contrary to the arguments of Inlet and Totem, neither AXA Global Risks (UK) Ltd. v. Pierre nor Albany Insurance Co. v. Horak support a different result. The question at issue in Pierre specifically requested the loss history of the operator but omitted any mention of the vessel. The court, quite correctly, rejected the insurers argument that it unambiguously also encompassed the vessels to be insured: holding instead that, at best, the term was ambiguous and the interpretation by the insured was reasonable. In this case, the question did not specifically specify the pollution loss history of either the vessels or the proposed insureds. In Horak, it is true as asserted by Totem that the court held that a failure to disclose the loss history of the vessel itself was material. The court in Horak did not hold that the loss history of the insured was not material; that question was not before the court. Lloyds has not taken the position that question 5 does not encompass the loss history of vessel to be insured, Lloyds’ position is that it unambiguously encompasses the loss history of the insured. Inlet also misreads or takes out of context C.P. ex rel. M.L. v. Allstate Insurance Co. The Alaska Supreme Court stated:

An ambiguity does not exist, however, merely because the parties disagree as to the interpretation of a term. An ambiguity exists only where the contract as a whole and all the extrinsic evidence support two different interpretations, both of which are reasonable.

To the extent that there is a disagreement over the meaning of question 5, the record in this case indicates it is a post hoc disagreement manufactured for litigation purposes. Neither the application as a whole nor the extrinsic evidence support the interpretation that question 5 is limited to the pollution loss history of the vessels to the exclusion of that of the owners/operators. Moreover, the interpretation must be reasonable. The interpretation propounded by Inlet is contrary to common knowledge and understanding. Inlet’s position is further undercut by the authority Inlet has itself cited in its argument with respect to the application of the doctrine of uberrimae fidei

Marine risks are diverse and unique. A vessel’s quality and characteristics when built, its trading range, the staffing and maintenance practices of its owners and operators, including loss history with respect to other vessels oumed or managed by the same entity, all figure into the calculation of the premium.

This observation is as true of marine pollution insurance as it is of hull or protection and indemnity insurance. As the court noted in its prior order, “[vjessels do not cause toxic spills; it is the operators of those vessels who cause spills.”

Not only was the prior decision of the court at docket 127 not clearly erroneous, it was and remains correct. Question 5 “Pollution Loss History” is not ambiguous as a matter of law. The cross-motion at docket 151 on this issue will be denied.

C. Lloyd’s Motion for Summary Judgment and Inlet’s Cross-motion

Lloyds has moved for summary judgment on the basis that under the maritime duty of utmost good faith (ubberimae fi-dei ) Inlet’s failure to disclose facts material to the insurance risk, e.g., prior pollution history, vessel condition, and insurability by another underwriter, voids the policy. In its cross-motion Inlet asks for a determination that (1) the doctrine of uberrimae fidei does not apply to marine pollution insurance; (2) Lloyds’ failure to cancel the policy certificate for the year 2002-2003 establishes as a matter of law that the non-disclosures were not material; and (3) Inlet did not make any material misrepresentations, or fail to disclose material information in its application for insurance.

The underlying facts are essentially undisputed. (1) Three months prior to the time Inlet submitted its application to PSU, a vessel owned by Inlet (but not one proposed to be insured) sank resulting in a marine pollution loss. (2) Approximately a week and a half before submission of the application, a vessel proposed to be insured was involved in a minor marine pollution incident. (3) Two months prior to the application’s submission, Inlet’s marine pollution insurer, WQIS, requested that Inlet have the vessels to be insured surveyed and comply with the recommendations of the marine surveyor. (4) Inlet failed or refused to comply with the request of WQIS and WQIS issued a notice of cancellation. (5) Inlet did not disclose any of the preceding information in the application process.(6) Except for pollution loss history, the application form provided by PSU/Lloyds did not request disclosure of the undisclosed information. (7) PSU/ Lloyds issued a policy for an one-year period, August 28, 2000, through August 28, 2001.(8) The policy was automatically renewed for the one-year period August 28, 2001 through, August 28, 2002.(9) On or about August 26, 2002, the QP, a vessel covered by the policy, sank resulting in a pollution loss. (10) The policy was renewed for an one-year period August 28, 2002 through August 28, 2003.

The initial issue is whether the doctrine of uberrimae fidei applies to the marine pollution insurance policy. Lloyds correctly notes that in a prior ruling the court, implicitly if not explicitly, held that the doctrine of uberrimae fidei applies. Inlet is, in effect, asking the court to reconsider its prior ruling. As noted above, “the court may reconsider previously decided questions in cases in which there has been an intervening change of controlling authority, new evidence has surfaced, or the previous disposition was clearly erroneous and would work a manifest injustice.” It is the third possible basis which must be considered here.

Inlet makes essentially a three-pronged attack on the application of the doctrine of uberrimae fidei in this case. First, Inlet argues that under the holding in Wilburn Boat the court must apply state law. The court disagrees. Under Wilburn Boat, the court applies state law to maritime insurance contracts in the absence of an established federal admiralty rule. The Wilburn Boat court found that no federal admiralty rule applicable to the breach of warranty issue in the case before it. The majority rule is that the doctrine of uberrimae fidei in marine insurance contracts, long ago recognized by the Supreme Court in McLanahan and Sun Mutual> is established federal admiralty law. Only the First and Fifth Circuits have departed from this holding. In doing so, the First and Fifth Circuits appear to have misread Wilburn Boat and disregarded over 200 years of English and American precedents, as well as prior decisions in those circuits themselves. Although the Ninth Circuit has not expressly ruled on the issue of whether the doctrine of ubemmae fidei “trumps” contrary state law, it has recognized that the doctrine is part of established admiralty law.

Second, Inlet suggests that no justification exists for application of ubemmae fidei to marine pollution policies. Basically, Inlet argues that such policies, having been developed in response to a specific statutory liability created by various federal and state statutes, do not fall within the parameters of traditional marine insurance policies. This is a distinction without a significant difference. What is being insured is the same, ie., maritime vessels and operations. The only change is the nature of the liability being insured. A marine pollution policy is substantially similar in nature to a protection and indemnity policy: it provides coverage for damage or harm to a third-person. In addition, some level of pollution coverage is often included in P & I policies. Inlet also argues that because no reported decision has applied the doctrine of ubemmae fidei to a marine pollution policy, it is not applicable. The obverse of the coin is that no reported decision has declined to apply the doctrine to a marine pollution policy. Applicability of the doctrine of ubemmae fidei to marine pollution policies appears to be an issue of first impression, but that does not weigh in Inlet’s favor given the similarity between the risks undertaken by the insurer respecting marine pollution policies and other marine insurance policies.

Third, Inlet argues that the doctrine of ubemmae fidei is antiquated, relying in large part upon an analysis of the doctrine by Prof. Thomas J. Schoenbaum. Inlet’s reliance on Prof. Schoenbaum is puzzling for, as correctly quoted and read in context, Prof. Schoenbaum supports the continued viability of the doctrine. After noting, as quoted by Inlet, that the doctrine was increasingly being questioned or repudiated and abrogated in American law as to non-maritime matters, Prof. Schoenb-aum posed the question: “Is the doctrine of utmost good faith necessary to the law of marine insurance, or is it merely an anachronism left over from the distant past?” After exhaustively analyzing American and English law and the policy considerations underlying the doctrine of ubemmae fidei, he concluded that it was necessary. In a paragraph somewhat misquoted by Inlet, Prof Schoenbaum stated:

It is submitted that both defenders and attackers of the doctrine have not properly understood the duty of utmost good faith. It is not a broad duty of disclosure based on “old-fashioned” moral principles. It is rather a practical and narrow duty to require facts within the special knowledge of one party to a marine insurance contract to be disclosed to the other.

Prof. Schoenbaum goes on to state.

The rule of utmost good faith is grounded in economic efficiency. It is a rule designed to minimize costs to both insurers and assureds. In marine insurance cases the particulars of the risk are peculiarly within the knowledge of the assured. The rule places the onus on the party with the exclusive knowledge of the circumstances affecting the risk to disclose so that the risk can be most precisely and cheaply evaluated. This should lead to lower costs for insurers and, ultimately, lower and more precise premium costs for assureds.

Some have disputed the necessity for the rule based upon modern social and economic conditions. In some areas of insurance, risks may no longer be individually evaluated and the rule may be less compelling. But marine insurance remains an industry where the individualized risk calculation and negotiation still play a key role. Thus, the doctrine of utmost good faith is of continuing importance, particularly in marine insurance.

Prof. Schoenbaum concluded.

It is this author’s conclusion from analyzing and comparing the American and English law and jurisprudence that the doctrine of utmost good faith still has utility in marine insurance because it fosters a high standard of care, economic efficiency, and lower premiums for assureds. Furthermore, because the marine insurance industry is international in scope and likely to become more so due to recent agreements at the World Trade Organization to remove barriers to trade in services its efficient operation would be enhanced by a harmonization of the divergences that have crept into English and American law.

As Prof. Schoenbaum noted and this case illustrates, the marine insurance industry is international in scope. Lloyds, generally recognized as the preeminent insurer of maritime risks, is based in London. Great Britain has codified the doctrine of uberrimae fidei in marine insurance law. The court also notes that New. York, the home of the other dominate underwriter of marine pollution insurance, WQIS, also applies the doctrine of uberrimae fidei to marine insurance. In addition to New York, California, also home to significant maritime activity, applies the doctrine to marine insurance policies. While not dispositive of the precise point at issue, these facts certainly should be considered.

The court, mindful of the admonition that lower federal courts should not presume that a later pronouncement by the Supreme Court overrules sub silen-tio a prior decision of the Supreme Court directly on point, declines to follow the First and Fifth Circuits in boarding Wil- bum Boat and abandoning application of the doctrine of uberrimae fidei to marine insurance policies. Wilburn Boat should not be read by a lower federal court as overruling or even undermining McLana-han and Sun Mutual. Given the implications of jettisoning the doctrine of uberri-mae fidei, including its adverse impact on uniformity in admiralty law which is inherently international in scope, and in light of the implicit if not explicit recognition by the Ninth Circuit that the doctrine is established in admiralty law, if such a course is to be sailed it must be set by Congress or the appellate courts. This court joins the Western District of Washington in holding that the marine doctrine of uberri-mae fidei or “utmost good faith” is an established rule of admiralty law. Consequently, that doctrine, not state law, applies to the insurance policy in this case.

The parties agree that under the doctrine of uberrimae fidei the omitted information must be “material.” The parties also agree that to be material the fact must impact the underwriter’s decision to either (1) accept the risk or (2) in setting the premium. The burden of proof of materiality is on the insurer. Thus, the court must look at the facts that were not disclosed to determine the materiality of each to the underwriting process.

Inlet and Totem have expended significant effort arguing that if something was material PSU/Lloyds should have asked, and absent inquiry must be immaterial. This argument, based on cases that did not involve the application of the marine doctrine of uberrimae fidei, misses a basic premise of the doctrine as applied in this circuit: a material fact must be disclosed even in the absence of a request. Prof. Schoenbaum has stated the rule as follows:

Another rule of materiality under American law is that facts that are the subject of a specific inquiry by the insurer are deemed material, but failure to make inquiry does not excuse a failure to disclose material facts. Where inquiry is made and the insurer did not ask for the information, however, the omitted fact is likely to be deemed non-material.

In this case, the undisclosed facts included: (1) pollution loss attributable to the Maren I, an owned vessel but not proposed to be insured, occurring in May 2000, three months preceding the date of the application; (2) pollution loss attributable to the Harvester Barge, a vessel proposed to be insured, on August 9, 2000, less than ten days preceding the date of the application; and (3) the fact that WQIS was canceling its policy and the reason therefore.

Addressing first the failure to disclose the prior loss history. The court begins with the premise that: “An insurance applicant’s loss history is material to the risk.” That the loss history was material to the underwriting decision by Lloyds is established by the uncontrovert-ed testimony of Stephen Hargrave, an underwriter for Lloyds, Philip Sandle, a liability underwriter for Lloyds, and Rowland Dawe, a Director of Ropner Insurance Services, Limited. As to the Maren I, in addition to the argument that the application form question was directed solely to the vessels to be insured (an argument rejected above), Inlet argues that, at the time of the Maren I incident it was owned by IFP, operated by Arctic Salmon, Inc., and all cleanup expenses were incurred by Arctic Salmon. However, IFP and Arctic Salmon are also named as applicants on the policy application. Moreover, evidence in the record indicates that IFI and IFP are owned and controlled by a single individual, Vincent L. Goddard, and Arctic Salmon is in some way a related entity. The failure to disclose the IFI-IFP-Arctic Salmon relationship and pollution loss history of Arctic Salmon is itself a material omission. There is also evidence in the record that the Maren I incident also involved the QP, ie., that the QP was moored next to the Maren I, listing heavily, and had to have petroleum products removed as a precautionary measure as it was itself in danger of sinking.

Inlet argues that IFP did not consider the pollution incident as involving the Harvester Barge itself, but as the result of the actions by a third-party contractor operating on shore. Be that as it may, the spill which occurred during a transfer from the Harvester Barge was reported as being connected to the Harvester Barge, and payment of the costs of cleanup requested from WQIS. Moreover, it overlooks the fact that, as Inlet itself argues, the liability for spills is absolute, a “no-fault” concept, and as the vessel owner IFI was responsible for the spill caused by the third-party contractor irrespective of fault—the very risk Lloyds was being asked to insure. Inlet’s position overlooks the fact that the test is not whether the proposed assured believed the fact was material but whether a reasonable person in the assured’s position would know that the fact was material. Even if the test were not an objective one, there is no evidence in the record that the third party contractor’s involvement was the reason for the omission by the person who actually prepared the application.

Cancellation of a policy by a previous insurer is likewise material. That the failure was material to underwriting at Lloyds is also established by the uncontra-dicted testimony of Messrs. Hargrave and Sandle. Inlet does not dispute that WQIS canceled the policy it had issued to IFI, with IFP and Arctic Salmon as additional assureds, or that this was not disclosed. Lloyds argues that WQIS canceled the policy on two grounds: failure to comply with a request that Inlet have the vessels surveyed and nonpayment of the premium. Both Inlet and Totem argue that the WQIS cancellation was premised on non-material financial considerations, not the poor quality of the vessels. In particular, Totem relies on handwritten notes dated August 10, 2000, on a communication from WQIS to Totem in which it is asserted that Inlet considered doing the surveys but only if WQIS would reinstate, but since the WQIS’s letter precluded reinstatement, no surveys were done. Totem’s argument misconstrues the facts to reach the implied conclusion the cancellation was solely financially based.

On June 6, 2000, Totem notified Inlet in a facsimile communication that stated in part:

Water Quality Insurance Syndicate recently received a survey regarding the condition of your vessels. They are wanting to send cancellation notice because of the age and condition of your vessels. They are willing to rescind the cancellation provided you get your vessels surveyed and your expense and are willing to adhere and comply with the surveyors recommendations. The short term recommendations will have to be completed immediately, while any long term recommendations, Water Quality Insurance Syndicate is willing to work with you on getting resolved in a reasonable manner.

They do require you to go through The Alexander Gowe, Inc. company as the surveyor. The contact name is Andrew King, and his phone number is (206) 285-0520.

On June 21, 2000, Totem sent a followup facsimile that stated in part:

See attached copies of correspondence regarding Water Quality Syndicate sending cancellation notice.

They were holding off sending the notice until you had contacted and worked with their recommended surveyor. However, when they contacted him today, they found that no one from your office had contacted him, so they are now sending cancellation notice to be effective July 20, 2000.

On August 7, 2000, WQIS sent notice of “final” cancellation to both Inlet and Totem, stating in relevant part:

Based on our review of our file for Inlet Fisheries, Inc., it appears that policy premiums have not been paid for the current policy period or the previous policy period.

Moreover, Inlet Fisheries has failed to comply with WQIS’s demand that its vessels be surveyed (which would allow WQIS to confirm exposure) and adhere to any recommendations by the survey- or. Accordingly, please consider this a twenty-day notice of cancellation in accordance with Section 21.36.220.

In the event that the survey requirements have been complied with and premiums paid, this letter shall constitute a sixty-day notice of cancellation. This cancellation is final.

Based on the declaration of Vincent Goddard, Inlet argues that it did not refuse to have the surveys done but that it was unable to arrange for a marine surveyor to come to Bethel within the time frame required by WQIS. Mr. Goddard’s statement and Inlet’s argument ring hollow and are at odds with independently established facts. WQIS had specifically required use of a particular surveyor and provided the name and telephone number of the person to contact. It is uncontro-verted that Inlet did not contact the specified surveyor.

The logical inference to be drawn from these facts is that vessel condition was of significant, if not paramount, concern to WQIS; particularly in light of the fact that the Maren I sank the month preceding the initial demand. The last paragraph of the “final” cancellation notice is indicative that WQIS had concerns beyond “financial considerations”; indeed it may be inferred that “financial considerations” were of rei-atively minor importance since WQIS intended to cancel even if the premiums were paid. Moreover, there is no evidence that an intent to comply with the survey requirements was ever communicated to WQIS, certainly not prior to the August 7, 2000, “final” cancellation notice, some two months after WQIS made its initial demand.

Perhaps more importantly, the critical point that Inlet and Totem fail to grasp is the fact that WQIS had received information, i.e., a marine survey, that gave rise to concern about the condition of the Inlet vessels. This concern was communicated to Totem and by it to Inlet. Inlet did nothing to alleviate that concern. Thus, both Inlet and Totem had full knowledge that an underwriter of marine pollution insurance considered the condition of the vessels to be insured not only material but that the underwriter had reason to doubt the seaworthiness of the vessels. Despite this knowledge, the cancellation and concerns of WQIS were not disclosed. Whether or not the concerns of WQIS were well-founded, Inlet had an obligation to disclose the facts.

This does not, however, end the matter. Inlet and Totem have raised two additional points that bear on the issue. First, since materiality is based on the post hoc testimony of Lloyd’s underwriters, albeit uncontradicted by competent admissible evidence, it nonetheless remains a triable issue of fact precluding the entry of summary judgment. Second, the actions taken by Lloyds after learning of the undisclosed facts establish that the undisclosed facts were not material as a matter of law.

Turning first to the question of whether the uncontradicted testimony of Lloyds’ underwriters is insufficient to sustain the grant of summary judgment as a matter of law. Inlet and Totem argue that the testimony of the Lloyds’ underwriters is self-serving and speculative and can not, therefore, support the grant of summary judgment. The cases cited by Inlet and Totem do not support that conclusion. In Christiania General Insurance Corp. Of New York v. Great American Insurance Co., the Second Circuit, applying New York law to a non-marine policy stated:

Still, it is possible a jury could believe this position was simply hindsight, and that because no significant number of ATV claims had been made at the time when the reinsurance certificates were issued and because what was involved was excess insurance, Christiania would not in fact have rejected the risk or accepted the risk only at higher premiums.

The thrust of the Christiania General decision is that there was other evidence in the case that created a triable issue of fact, not that the testimony of the underwriter was insufficient as a matter of law.

The Fifth Circuit in Gulfstream Cargo Ltd. v. Reliance Insurance Co., a case involving the doctrine of uberrimae fidei, observed:

Of course, testimony of this kind coming long after the issuance of the policy and the intervening loss, not shown to have been causally related to the earlier concealed unseaworthiness, is self-serving in a vivid way. But this goes to its credibility, and the Trial Judge impliedly credited this.

First, Gulfstream did not involve a motion for summary judgment and, as the court noted, this went to credibility, a factor that, as noted above, the court may not consider in ruling on a motion for summary judgment. Second, the basis for the Gulfstream creation of the credibility issue, a lack of causal connection between the loss and the concealed fact, is directly contrary to controlling law in this circuit.

Inlet quotes Mims v. Old Line Life Insurance Co. of America, as follows:

Generally, however, such “Monday morning quarterbacking” is disfavored and the materiality of misrepresentations will be a factual issue to be decided by the trier of fact.

While that quote is accurate, as far as it goes, it is grossly misleading and does not reflect the holding of the court. The complete passage, which does reflect the court’s holding, is as follows:

An insurer may establish the materiality of misrepresentations through the affidavit of an underwriter. Generally, however, such “Monday morning quarterbacking” is disfavored and the materiality of misrepresentations will be a factual issue to be decided by the trier of fact, which naturally precludes summary judgment. * * * * Here, however, unlike in Fernandez or Beneby, plaintiff has offered no contradictory evidence to rebut the underwriter’s statement that an “insured’s past medical history and medical treatment are material ... and Bennett’s failure to disclose these visits to hospitals, in and of itself, would have caused [defendant] to decline to issue the policy.” Doc. 123 at 4. Furthermore, because these knowing misrepresentations concern Bennett’s medical history, they so affect the insurer’s assessment of risk that such misrepresentations are material as a matter of law.

The Ninth Circuit, in upholding a grant of summary judgment in favor of an insurer on the issue of a material omission based upon the affidavits of an underwriter, specifically rejected the rule urged by Inlet and Totem:

NML met its burden of proving the absence of any genuine issue of material fact that Gasaway’s misrepresentations materially affected the acceptance of the risk through the Westphal affidavits.

•H •!• *1* ifc

Gasaway offered no witnesses, depositions, or affidavits to contradict NML’s position. Instead she argued that West-phal’s conclusions were nothing more than self-serving speculation that should be disregarded. This is nothing more than “mere allegations or denials” which are insufficient to overcome NML’s showing. That being so, the materiality of the misrepresentations is such that reasonable minds could reach only one conclusion as to whether the answer was true or false. Therefore, summary judgment was appropriate.

Inlet and Totem argue that the best evidence of materiality is the industry standard. Unfortunately for Inlet and Totem they failed to introduce any competent, admissible evidence that the industry-standard differs from the standard Lloyd’s witnesses identify. The only competent evidence of industry standards is that presented by the deposition testimony of Messrs. Hargrave, Sandle, and Dawe (familiar with the underwriting requirements of Lloyds) discussed above, and the Declaration of Russell Brown, an underwriter for WQIS. Mr. Brown in his declaration stated unequivocally that prior loss history of the insured, vessel condition, and prior cancellation by a pollution insurer are among the most important facts considered in evaluating a risk and setting policy conditions. This evidence, being uncontra-dicted, not only supports the grant of summary judgment on the issue but, under controlling law, compels it.

Totem attempts to bolster its argument on materiality by comparing the PSU application form to the NASIS Protection and Indemnity Application. The NASIS form not only asks about the current carrier but also whether the applicant had been “denied coverage or been subject to cancellation by underwriters.” The NASIS application also requests a copy of the “most recent condition/valuation survey” and if “all recommendations listed on the survey have been complied with.” This very argument establishes that Totem knew, or should have known, that both the fact of cancellation by WQIS and the condition of the vessels were material. Yet, despite the knowledge of the cancellation by WQIS and the reasons therefor, Totem did not disclose that information. The court also finds disingenuous Totem’s argument that the application was dated August 17 and the cancellation was not effective until August 28 and the only question on the application form was to identify the current insurer, which was answered correctly. Totem knew on August 17 that the WQIS policy was being irrevocably can-celled effective August 28 and the reasons for that cancellation.

The next issue is whether the actions taken by Lloyds after it learned of the omitted facts create a triable issue of fact as to the materiality of the omitted facts. Put another way, did Lloyds by its conduct, i.e., after having received sufficient information that would (and did) raise suspicions in the mind of a mind of a reasonable insurer that there are other material circumstances nonetheless proceed to underwrite the risk, waive the defect? This argument is essentially based on the uncontroverted facts that after Lloyds learned of the material non-disclosures, it (1) bound coverage for the inlet vessels for the policy year 2002, (2) left unchanged the premiums charged, and (3) declined to cancel the coverage for the policy year. These “facts,” standing alone, would likely create a triable issue of fact. However, the court must look to the totality of Lloyds’ conduct. The salient facts during the relevant period are as follows:

August 6, 2002—Lloyds provided Inlet with quote for renewal of policy.

August 27, 2002—PSU/Lloyds learned of the Maren I incident and that IFI had filed bankruptcy.

August 28, 2002—Lloyds agreed to renew the policy as quoted subject to Inlet submitting a new application form. Coverage bound by PSU. Lloyds directed PSU to “instruct [counsel] to consider case and act on underwriter’s behalf.”

September 4, 2002 — PSU first followup to Totem requesting completed application form.

September 5, 2002 — PSU requested confirmation of P & I coverage from Totem. Totem responded it did not write P & I for Inlet. Information would have to come from Vince [Goddard]. September 10, 2002 — Counsel for Lloyds informed IFI and IFP of Lloyds’ reservations and requested (1) confirmation of P & I insurance coverage and (2) files and correspondence regarding the Mar-en I loss.

September 16, 2002 — Commanding Officer, Marine Safety Office Anchorage requested permission to scuttle the QP due to its deteriorated condition, lack of water tight integrity, and the likelihood that the vessel would sink again requiring another federal response because Inlet lacked the financial resources to conduct pollution response activities or prevent the vessel from sinking again. September 18, 2002 — Follow-up by PSU to Totem on request for new application form (also notes previous follow-ups on September 4 and 11).

September 19, 2002 — PSU received completed application form, which answered the question on pollution loss history: “QUANIRTUGG PRINCESS — 8/02 OTHERS — POLLUTION CLAIM.” PSU sent an e-mail to Lloyds requesting advice on the addition of an additional vessel (Inlet Harvester) to the policy and including the following:

ALSO — on the app we finally received, they list the QP incident, BUT DO NOT L