## Facts

- Anh Thi Kieu, a Texas resident, sought marine hull insurance for the F/V STACY MARIE, a shrimping vessel operating off the Texas coast.
- Kieu applied through a Louisiana insurance agency; the application was forwarded to Albany Insurance Company’s general agent, and Albany issued coverage effective March 1, 1988.
- The English-language application contained inaccurate statements, including that Kieu regularly captained the vessel, that the vessel had no damage in the prior five years, and that Kieu paid $110,000 for the vessel.
- In fact, Kieu bought the vessel in 1984 for $30,000, did not operate it as captain, and the vessel previously collided with another vessel in 1984 and sustained minor damage that was repaired.
- Albany had opportunities through underwriting and related information to discover these inaccuracies yet continued the policy without modification or cancellation.
- After issuance, the vessel allided with an offshore platform in the Gulf of Mexico and suffered significant damage.
- Kieu made a claim; Albany’s investigators recommended denial based on the application misstatements.

## Issues

1. Whether federal maritime law provides an established, controlling rule (including the doctrine of *uberrimae fidei*) that governs misrepresentations in marine insurance and displaces state law.
2. If no controlling federal maritime rule applies, which state’s law governs the policy and whether that law permits Albany to avoid coverage based on the application misstatements.

## Decision

- The Fifth Circuit affirmed the district court’s judgment for Kieu.
- The court held that *uberrimae fidei* was not an entrenched, uniformly applied federal maritime rule requiring displacement of state law for this dispute.
- Applying maritime choice-of-law analysis, the court concluded Texas had the most significant relationship to the transaction and parties, so Texas insurance law governed.
- Under Texas law, Albany could not rescind or avoid the policy based on the misstatements given Albany’s opportunity to discover the true facts and its decision to continue coverage.
- The court upheld the award of approximately $90,405 for hull damage and sue-and-labor expenses.

## Legal Principles

- Under *Wilburn Boat* analysis, courts first ask whether an established federal maritime rule governs a marine insurance issue; if not, state law supplies the rule of decision.
- The doctrine of *uberrimae fidei* does not apply as a controlling federal maritime rule in the Fifth Circuit absent a showing that it is entrenched and uniformly applied.
- In marine insurance disputes without a controlling federal rule, maritime choice-of-law principles determine which state’s insurance law applies, focusing on the state with the most significant relationship to the policy and parties.
- Under Texas insurance law as applied, an insurer may be barred from avoiding coverage for application misstatements when the insurer had a fair opportunity to investigate and nonetheless issued or maintained the policy.

## Conclusion

The Fifth Circuit held that no controlling federal maritime rule required application of *uberrimae fidei*, applied Texas law based on the policy’s strongest connections, and affirmed coverage because the insurer could not void the policy for misstatements it could have discovered while continuing coverage.


Albany Ins. Co. v. Anh Thi Kieu, 927 F.2d 882 (5th Cir. 1991)