## Facts

- Sealink, Inc., a Puerto Rico maritime cargo carrier, hired Frenkel & Co., an insurance broker, to procure marine insurance, including a hull and machinery (H&M) policy for the M/V Sealink Express.
- Sealink’s president, Kristian Meszaros, completed and signed an insurance application certifying the information was complete and accurate, acknowledging underwriters would rely on it, and accepting that misrepresentations or omissions could void coverage and require updated disclosures.
- Frenkel confirmed Meszaros signed the application and transmitted it to underwriters; Frenkel did not independently verify the substantive accuracy of Sealink’s responses.
- Frenkel provided policy documentation to Sealink but did not provide a standard form (MAR 91) containing a forum-selection clause requiring litigation in England.
- In July 2000, the vessel suffered a fire and was declared a constructive total loss; Sealink submitted an H&M claim.
- Underwriters denied coverage, asserting serious misrepresentations and nondisclosures in the application, including undisclosed prior bankruptcy applications; Sealink later recovered $25,000 from underwriters after related litigation.
- Sealink sued Frenkel in 2004 under diversity jurisdiction, alleging broker negligence caused the policy to be voided/coverage denied and caused lost business opportunities and other damages.
- Frenkel moved for summary judgment, disputing duty, breach, and proximate causation and arguing, among other defenses, that admiralty principles and limitations should apply.

## Issues

1. Whether the broker-negligence claims related to placement of marine insurance fell within admiralty jurisdiction or proceeded under diversity jurisdiction and Puerto Rico law.
2. Whether the action was time-barred under a maritime limitations period or timely under Puerto Rico law.
3. Whether the broker had a duty to verify the truth and completeness of the insured’s application answers and/or to provide or explain MAR 91 and its forum-selection clause.
4. Whether any alleged broker breach proximately caused the underwriters’ denial of coverage and Sealink’s claimed damages, or whether Sealink’s own misrepresentations severed causation.

## Decision

- The court treated the case as proceeding under diversity jurisdiction and applied Puerto Rico substantive law rather than admiralty jurisdiction for the broker-malpractice claims.
- The court granted Frenkel’s motion for summary judgment and dismissed Sealink’s claims.
- The court held Sealink failed to raise a triable issue that Frenkel breached a cognizable duty or that any alleged broker act or omission was the proximate cause of the coverage denial and claimed losses.
- The court concluded the underwriters’ denial based on Sealink’s misrepresentations and nondisclosures broke any causal chain between Frenkel’s conduct and the loss.
- As to MAR 91, the court found no showing that nondisclosure of a forum-selection clause caused coverage denial or produced distinct compensable harm.

## Legal Principles

- A broker placing marine insurance for a commercial insured generally may rely on the insured’s certified application representations and has no ordinary duty to investigate or audit their truth absent special circumstances or an assumed undertaking.
- Where underwriters deny or avoid coverage due to the insured’s material misrepresentations or nondisclosures, those acts may constitute an intervening cause that defeats proximate causation in a negligence claim against the broker.
- A broker’s failure to transmit or explain a forum-selection clause does not support damages without proof that the omission affected coverage or caused a concrete, separate injury tied to forum consequences.
- On summary judgment, the insured must produce evidence of duty, breach, and a direct, adequate causal link between the broker’s conduct and the asserted loss; speculative “but for” theories are insufficient.

## Conclusion

The court entered summary judgment for the insurance broker because the denial of marine coverage was attributable to the insured’s own application misrepresentations, and the insured failed to show any broker duty breach or proximate causation, including any damages tied to nondisclosure of a forum-selection clause.


Sealink, Inc. v. Frenkel & Co., 441 F. Supp. 2d 374 (D.P.R. 2006)