                                                                                                                           Opinions of the United
2008 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


9-29-2008

AGF Marine Aviation v. Cassin
Precedential or Non-Precedential: Precedential

Docket No. 07-1640




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                                     PRECEDENTIAL

      UNITED STATES COURT OF APPEALS
           FOR THE THIRD CIRCUIT


              Nos. 07-1640, 07-1641


      AGF MARINE AVIATION & TRANSPORT

                         v.

              RICHARD C. CASSIN

CIT GROUP/SALES FINANCING, INC.; UNITED STATES
 OF AMERICA SMALL BUSINESS ADMINISTRATION,

                              Intervenor-Defendants
                              in District Court

                Richard C. Cassin,

                                   Appellant in 07-1640

          CIT Group/Sales Financing, Inc.,

                                   Appellant in 07-1641




                        -1-
            On Appeal from the District Court
                    for the Virgin Islands
                     (No. 01-cv-00049)
        District Judge: Honorable Curtis V. Gomez


                   Argued May 5, 2008

    Before: RENDELL, FUENTES, and CHAGARES,
                   Circuit Judges

           (Opinion Filed: September 29, 2008)

Gregory H. Hodges, Esq. (Argued)
Dudley, Topper & Feuerzeig
P.O. Box 756, 1A Fredericksberg Gade
Charlotte Amalie, St. Thomas
USVI, 00804-0000

      Counsel for AGF Marine Aviation Transport

Kevin F. D’Amour, Esq.(Argued)
Ogletree, Deakins, Nash, Smoak & Stewart
P.O. Box 10829
Charlotte Amalie, St. Thomas
USVI, 00801-0000

      Counsel for Richard C. Cassin



                           -2-
Alexandra L. Bartsch, Esq. (Argued)
205 Follen Road
Lexington, MA 02421

Carol G. Hurst, Esq.
5150 Dronningens Gade, Suite 4
Charlotte Amalie, St. Thomas
USVI

       Counsel for CIT Group/Sales Financing, Inc.



                  OPINION OF THE COURT



FUENTES, Circuit Judge:
       Richard Cassin filed a claim for insurance with AGF
Marine Aviation & Transport (“AGF”) after his 85-foot charter
yacht (the “Yacht”) sank off the coast of Grenada. Upon
reviewing the claim, AGF discovered that Cassin
misrepresented the purchase price of the Yacht and sought a
declaration from the District Court for the Virgin Islands that
Cassin’s insurance policy was void from its inception. The
District Court granted summary judgment in favor of AGF,
applying the federal maritime doctrine of uberrimae fidei, which
requires that an insured exercise the utmost good faith and
disclose to the insurer all facts material to an insurance risk. In
this appeal we must determine whether uberrimae fidei applies

                               -3-
to the insurance policy issued to Cassin, and whether Cassin
made a material misrepresentation that voided that policy. We
will resolve both issues in the affirmative, and will therefore
affirm the District Court’s dismissal.
                                I.
       Because our decision is based on the representation of
the purchase price that Cassin made at the time he financed and
insured the Yacht, we begin with a detailed description of those
transactions. In late 1996 or early 1997, Magnus Falk placed
the Yacht on the market for sale with Southern Trades Yacht &
Ship Brokers (“Southern Trades”). Thereafter, the Yacht was
advertised in various boating magazines for $450,000. Cassin
contacted Robert Carson, the owner of Southern Trades, and
expressed interest in purchasing the Yacht. It is undisputed that,
at closing in December 1997, Falk received $400,000 from
Cassin for the sale of the Yacht.
       Nevertheless, Cassin represented that the purchase price
for the Yacht was $600,000 in his application for financing to
purchase the Yacht, and in later applications to insure the Yacht.
In August 1997, several months before the purchase, Cassin
applied for financing from Trident Funding Corporation
(“Trident”). In a letter to Trident, Cassin acknowledged that
Falk would only receive $400,000 at closing, but nevertheless
requested financing for “80% of the $600K purchase price,” or
$480,000. App. 189. He explained that in 1995 (two years
before Falk listed the Yacht for sale with Southern Trades), he
acquired a one-third interest in the Yacht from Falk, his “friend
and business partner.” App. 189. A “down payment of
$120,000” for the purchase of the Yacht, Cassin wrote, “will


                               -4-
come out of [his] existing share of the boat ($200K).” Id.
Finally, “[a]t closing, Magnus Falk will receive $400,000 less
Bob Carson’s 10% commission on the $400K, and I will receive
$80,000 to recapture the remainder of my equity.” Id. Trident
eventually agreed to finance $400,000 of the purchase price.
        After the initiation of this action, and in response to an
interrogatory from AGF, Cassin provided a different account of
his negotiations for the Yacht. He stated that “[a]ll negotiations
for purchase of the vessel were conducted by Mr. Bob Carson of
Southern Trades. . . . I never had a direct conversation with Mr.
Falk or communicated personally with him in any way until
after the purchase transaction was completed.” App. 186. In
addition, contrary to his representations to Trident that he
acquired the equity in 1995, Cassin stated that the equity was
assigned as “part of the Purchase Agreement which Mr. Falk
agreed to and signed before witnesses. It was a component of
the deal.” App. 187. To explain the transfer of the $200,000
equity, Cassin stated that “[i]t was my understanding from Mr.
Carson that Mr. Falk had agreed to cede me a $200K equity in
the vessel in order to be able to net $400,000 from its sale.”
App. 186. In response to a different interrogatory asking for an
explanation for the $200,000 equity, Cassin stated “I was not
given any ‘reason(s)’ why Mr. Falk agreed to assign us a
$200,000 equity position in the yacht.” App. 187.
        The deal between Cassin and Falk for purchase of the
Yacht closed on December 4, 1997. Thereafter, Cassin insured
the Yacht from December 1997 through March 2000 on three
successive insurance policies, each time for approximately
$600,000. None of these policies were with AGF, the plaintiff
in this case. On March 30, 2000, Theodore Tunick & Company

                               -5-
(“Tunick”) sent Cassin a letter indicating that his insurance
policy was about to end, and offering a “renewal indication”
which listed certain terms for a new insurance policy. App.
241.1 The renewal indication stated that the policy form would
be “TLD/4/COM,” which is the insurance policy that Cassin
ultimately received from AGF.2 Id. The letter from Tunick also
stated that “form TLD/4/COM contains certain limitations and
exclusions . . . . A full copy of the policy form is available upon
request.” Id. Cassin completed an application for renewal on
March 30, 2000, and submitted it to Tunick. On the application,
in the space requesting “Purchase Price,” Cassin wrote
“$600,000.” App. 150. Tunick then submitted the application
to TL Dallas, an underwriting agent. TL Dallas presented the
application to AGF on April 4, 2000, and AGF bound coverage
to Cassin for the Yacht from April 1, 2000 to April 1, 2001.
       Two months later, on June 5, 2000, Cassin received a
three-page insurance binder (“Binder”) from Tunick, in which
AGF is listed as “Company” and Tunick is listed as “Producer.”
App. 306. The Binder included the following statement at the
top of the front page: “THIS BINDER IS A TEMPORARY
INSURANCE CONTRACT, SUBJECT TO THE
CONDITIONS SHOWN ON THE REVERSE SIDE.” App.
306 (emphasis in original). On the reverse side, in a section


       1
        The parties dispute whether Tunick was Cassin’s agent
or AGF’s agent. We need not resolve this dispute to dispose of
the case.
       2
      While Tunick contacted Cassin to renew his insurance,
AGF had never before insured Cassin or the Yacht.

                               -6-
entitled “Conditions,” the Binder states that “[t]he Insurance is
subject to the terms, conditions and limitations of the policy(ies)
in current use by the Company. . . . This binder is cancelled
when replaced by a policy.” App. 307. The Binder also makes
one explicit reference to Citi Group/Sales Financing, Inc.
(“CIT”), Trident’s successor and a first priority lienholder on the
vessel, listing it as a “Loss Payee.” App. 308.3 The Binder does
not contain a choice of law provision.
       Approximately five and a half months after AGF began
insuring the Yacht, TL Dallas, on behalf of AGF, sent Tunick an
insurance policy (“Policy”) marked “TLD/4/COM,” which was
the form code specified in the March 30 renewal indication.
App. 402-418. Tunick forwarded the Policy to Cassin on
October 11, 2000, which was the first time that Cassin saw the
Policy.
       On November 5, 2000, the Yacht sank in 600 meters of
water off the coast of Grenada after it allegedly collided with a
semi-submerged container. Cassin subsequently filed a claim on
the Policy. On March 7, 2001, after AGF investigated Cassin’s
claim, AGF filed the complaint in the present action, alleging
that the Policy was void from its inception because Cassin
misstated the purchase price in his original insurance
application.
       After extensive discovery by the parties, the District


       3
        At the time the Yacht sank, it was securing debts to CIT
($390,000) and United States of America Small Business
Administration ($170,000). Both creditors intervened in the
District Court, but only CIT joined Cassin’s appeal.

                               -7-
Court granted AGF’s motion for summary judgment as to both
Cassin and CIT. The District Court noted that under the
Policy’s choice of law provision, “any dispute arising [under the
Policy] shall be adjudicated according to well established,
entrenched principles and precedents of substantive United
States Federal Admiralty law,” when they exist. AGF Marine
Aviation & Transport v. Cassin, No. 2001-49, 2007 WL 309948,
at *4 (D.V.I. January 22, 2007). Next, the District Court
concluded that the doctrine of uberrimae fidei, which “requires
that an insured fully and voluntarily disclose to the insurer all
facts material to a calculation of the insurance risk,” is an
“entrenched federal precedent,” and therefore applies to this
dispute pursuant to the Policy’s choice of law provision. Id. at
*2, *4 (quoting HIH Marine Servs., Inc. v. Fraser, 211 F.3d
1359, 1362 (11th Cir. 2000)). Moreover, the District Court
found that the purchase price for the Yacht was only $400,000,
and that Cassin’s statement to the contrary on the insurance
application was a material misrepresentation in violation of
uberrimae fidei, permitting AGF to void the Policy from its
inception. Finally, the District Court determined that CIT could
not recover under the Policy independently of Cassin.
       Cassin and CIT appeal. They argue that the Policy, and
its choice of law provision, do not apply to this dispute; that
uberrimae fidei is not firmly entrenched federal admiralty law;
and that this Court must remand for a trial under Virgin Islands
law, which does not apply the doctrine of uberrimae fidei to
marine insurance disputes. In addition, CIT argues that it is an
additional insured under the policy, permitting it to recover
regardless of whether Cassin breached the duty of utmost good
faith.


                              -8-
       The District Court had subject matter jurisdiction
pursuant to 48 U.S.C. § 1612(a), which provides the District
Court of the Virgin Islands with the same jurisdiction as district
courts of the United States. In New England Mut. Marine Ins.
v. Dunham, 78 U.S. 1 (1870), the Supreme Court recognized
marine insurance contracts as within the federal courts’ maritime
jurisdiction. See also Wilburn Boat Co. v. Fireman’s Fund Ins.
Co., 348 U.S. 310, 313 (1955) (“Since the insurance policy here
sued on is a maritime contract the Admiralty Clause of the
Constitution brings it within federal jurisdiction.”).
       The District Court granted the plaintiff’s motion for
summary judgment, which was a final judgment; thus, we have
jurisdiction pursuant to 28 U.S.C. § 1291. For the following
reasons, we will affirm the District Court’s dismissal.




                               -9-
                               II.
      Cassin and CIT argue that at the time the Yacht sank the
Binder, and not the Policy, was in effect.4 Contrary to Cassin
and CIT’s contentions, we conclude that the Policy was in effect


       4
        Because the Binder did not have a choice of law
provision, if it were in effect we would follow the choice of law
analysis set forth by the Supreme Court in Wilburn Boat; that is,
we would apply well established principles of federal admiralty
law to resolve this dispute, but if none existed, we would apply
state law as the federal rule of decision. 348 U.S. at 313;
Calhoun v. Yamaha Motor Corp., 40 F.3d 622, 628 (3d Cir.
1994). As discussed in greater detail below, the first step of the
Wilburn Boat analysis, determining whether there is a well
established principle of federal admiralty law that controls the
dispute, is mirrored in the choice of law provision contained in
the Policy eventually issued to Cassin: “It is hereby agreed that
any dispute arising hereunder shall be adjudicated according to
well established, entrenched principles and precedents of
substantive United States Federal Admiralty law.” App. 411.
Hence, it is the second part of the Wilburn Boat analysis that
differs from the Policy’s choice of law provision. While the
Policy selects New York law as the federal rule of decision
absent applicable federal admiralty law, the appellants contend
that we would apply Virgin Islands law under the Wilburn Boat
analysis. Importantly, the appellants contend that Virgin Islands
law is favorable to them, because to void a policy under Virgin
Islands law, an insurance company must show that the insured
not only made a material misrepresentation, but intended to
make the misrepresentation.

                              -10-
at the time the Yacht sank.
         As described above, Cassin applied for insurance on
March 30, 1997, to begin two days later on April 1, 1997. On
April 4, 1997, AGF bound coverage for Cassin. As described in
the Binder that Cassin received on June 5, the Binder was a
temporary agreement, “subject to the terms, conditions and
limitations of the policy(ies) in current use by the Company,”
and was “cancelled when replaced by a policy.” App. 307.
Hence, the Binder issued to Cassin signaled an intent to conform
with the textbook understanding of a binder as “[a] temporary
contract of insurance . . . intended to give the applicant
protection pending the execution and delivery of a formal
written policy.” 16 Richard A. Lord, Williston on Contracts §
49:53, at 428 (4th ed. 2000); id. at 431 (“The binder overcomes
the general rule that there is no coverage without the issuance of
a policy.”); 1A Lee R. Russ & Thomas F. Segalia, Couch on
Insurance 3d § 13:1, at 13-2 (1995) (“[I]nsurance companies
often issue a ‘binder,’ also called ‘temporary’ or ‘preliminary’
insurance, upon application for insurance or payment of the first
premium, which covers the applicant until the insurance
company’s investigation of his or her insurability can be
completed and a policy issued or the risk refused.”). As an
interim contract, a binder does not necessarily include all of the
terms of an agreement to insure; rather, “the legal rights and
duties of the contracting parties that are not covered by the
provisions of the binder, or otherwise, must be determined by an
inspection of the terms of the written policy which the parties
expected would be issued.” Williston § 49:53, at 429; Couch §
13:8, at 13-20 (“[T]erms not specified in the binder are, under
ordinary circumstances, to be found in the policy, particularly
where the application or binder incorporates such terms by

                              -11-
reference.”).
       Tunick’s March 4 letter to Cassin advised that “coverage
form TLD/4/COM contains certain limitations and exclusions”
and that a “full copy of the policy form is available upon
request.” App. 241. The Binder explicitly warned that it was
“subject to the terms, conditions and limitations of the
policy(ies) in current use by the Company.” App. 307.
Moreover, the traditional understanding regarding the formation
of contracts to insure is consistent with both the March 4 letter
and the Binder. Yet neither Cassin nor CIT ever requested to
see AGF’s standard insurance policies.             Under these
circumstances, we conclude that the Binder was replaced by the
Policy, which was issued in accordance therewith.
        Cassin and CIT argue that the Policy could not replace
the Binder in this case because the Policy was not issued until
September or October 1997, five to six months after coverage
began. However, we conclude that the time between issuance
of the Binder and the Policy, which was explicitly contemplated
in the Binder, did not render the Policy inapplicable. The
appellants also argue that the Policy conflicts with the Binder,
because the Policy contains a choice of law provision and the
Binder does not. We disagree. The absence of a choice of law
provision in the Binder does not create an inconsistency. In fact,
the Binder signaled that there would be provisions in the Policy
that were not explicit in the Binder. See Couch § 13:8, at 13-20
(noting that a binder “merge[s] in the terms and conditions of
the written policy issued in accordance therewith”). Therefore,
the Policy, and its choice of law provision, was in effect at the




                              -12-
time the Yacht sank, and governs this dispute.5
                              III.
       The Insurance Policy’s choice of law provision stated:
       It is hereby agreed that any dispute arising
       hereunder shall be adjudicated according to well
       established, entrenched principles and precedents
       of substantive United States Federal Admiralty
       law and practice but where no such well
       established, entrenched precedent exists, this
       insuring agreement is subject to the substantive
       laws of the state of New York.


App. 411. The plain language of this provision requires that we
determine whether there are any entrenched principles of
admiralty law that would control the dispute. The relevant
principle to consider is uberrimae fidei.
       The doctrine of uberrimae fidei imposes a duty of the
utmost good faith and requires that parties to an insurance
contract disclose all facts material to the risk. If an insured

       5
        CIT argues that because it never received notice of the
Policy, which was sent only to Cassin, the changes effected
therein cannot apply to CIT. It references the “Evidence of
Property Insurance” form prepared the day after the Binder,
which labels CIT a “Loss Payee” and indicates that CIT would
be notified “of any changes to the policy.” App. 309. However,
as we conclude that the Policy is consistent with the Binder, no
notification was required.

                             -13-
defaults on this duty, the contract may be avoided by the insurer.
See Certain Underwriters at Lloyds, London v. Inlet Fisheries
Inc., 518 F.3d 645, 648 (9th Cir. 2008); HIH Marine Servs., 211
F.3d at 1363; Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 13 (2d
Cir. 1986). A party’s intent to conceal, or lack thereof, is
irrelevant to the uberrimae fidei analysis. See Steelmet, Inc. v.
Caribe Towing Corp., 747 F.2d 689, 695 (11th Cir. 1984)
(holding that a material misrepresentation, even if it is a result
of “mistake, accident, or forgetfulness, is attended with the
rigorous consequences that the policy never attaches and is
void”) (internal quotation marks omitted). The only thing that
matters is the existence of a material misrepresentation.
       The Policy’s choice of law provision mandates that we
look to “well established, entrenched principles and precedents
of substantive United States Federal Admiralty law.” App. 411.
Yet, as we mentioned above in footnote 4, we see no difference
between this mandate and the analysis we would undertake
pursuant to Wilburn Boat in the absence of a choice of law
provision. See Wilburn Boat, 348 U.S. at 313 (noting that even
if a contract dispute falls under this Court’s admiralty
jurisdiction, “it does not follow . . . that every term in every
maritime contract can only be controlled by some federally
defined admiralty rule”); Calhoun, 40 F.3d at 627-28 (discussing
Wilburn Boat and comparing the relationship between state and
federal law in admiralty cases to their relationship in preemption
cases such as Clearfield Trust Co. v. United States, 318 U.S. 363
(1943), and its progeny).6


       6
         While we have not evaluated how to determine when a
rule is “judicially established” so as to be the rule of decision,

                              -14-
       We have previously held, in a case decided after Wilburn
Boat, that “in the maritime context a boat owner must meet its
duty of uberrimae [fidei].” East Coast Tender Serv., Inc. v.
Robert T. Winzinger, Inc., 759 F.2d 280, 284 n.3 (3d Cir. 1985)
(concluding that while uberrimae fidei is applicable, the
insured’s “behavior is consistent with the notion of ‘utmost good
faith’”). The majority of our sister circuits to decide the issue
are in agreement that uberrimae fidei controls in maritime
insurance disputes. See Puritan Ins. Co., 779 F.2d at 870 (2d
Cir.) (“It is well established that the parties to a marine
insurance contract are held to the highest degree of good faith[,]
uberrimae fidei.”); Inlet Fisheries, 518 F.3d at 654 (9th Cir.)
(“Following the framework of Wilburn Boat, we hold that the
longstanding federal maritime doctrine of uberrimae fidei, rather
than state law, applies to marine insurance contracts.”); HIH
Marine Servs., 211 F.3d at 1362 (11th Cir.) (“It is well-settled


Wilburn Boat, 348 U.S. at 314, other Circuits have. The Ninth
Circuit requires that a “rule be sufficiently longstanding and
accepted within admiralty law that it can be said to be
‘established.’” Inlet Fisheries, 518 F.3d at 650. The Fifth
Circuit requires the admiralty rule to be “entrenched federal
precedent.” Albany Ins. Co. v. Anh Thi Kieu, 927 F.2d 882,
888 (5th Cir. 1991). Meanwhile, the Second Circuit looks to
whether the rule is “well established,” Puritan Ins. Co. v. Eagle
S.S. Co. S.A., 779 F.2d 866, 870 (2d Cir. 1985), and the
Eleventh Circuit determines whether the rule is “well settled,”
Steelmet, Inc., 747 F.2d at 695. While these Circuits might
differ somewhat on the precise language they use, the idea
behind the analysis is consistent, and directs what we must do in
the present dispute.

                              -15-
that the marine insurance doctrine of uberrimae fidei is the
controlling law of this circuit.”).
        Meanwhile, the First Circuit has questioned whether
uberrimae fidei is well established, but has declined to decide
the issue. See Commercial Union Ins. Co. v. Pesante, 459 F.3d
34, 38 (1st Cir. 2006) (declining to decide issue, because even
under state law, the facts of the case made the policy voidable);
Windsor Mt. Joy Mut. Ins. Co. v. Giragosian, 57 F.3d 50, 54
(1st Cir. 1995) (declining to decide issue, because even under
uberrimae fidei, the insurer would not be able to avoid the
policy).
        The Fifth Circuit is the only circuit to disavow the
doctrine of uberrimae fidei as “not ‘entrenched federal
precedent.’” Anh Thi Kieu, 927 F.2d at 889. In Anh Thi Kieu,
the Fifth Circuit reversed the course it had taken in previous
cases. See Fireman’s Fund Ins. Co. v. Wilburn Boat Co., 300
F.2d 631, 647 n.12 (5th Cir. 1962) (declaring that uberrimae
fidei “is solidly entrenched in our body of federal maritime
law”). Despite a lengthy exposition of the history of the
doctrine of uberrimae fidei, going back 200 years, the opinion
concluded that recent application had been “spotty” and
uberrimae fidei “is entrenched no more.” Anh Thi Kieu, 927
F.2d at 889-90.
       The Fifth Circuit’s position has been criticized quite
heavily, most recently by the Ninth Circuit in Inlet Fisheries.
See 518 F.3d at 652-53. It also contradicts the general sentiment
in scholarly literature. See Thomas J. Schoenbaum, Admiralty
and Maritime Law 297 (4th ed. 2004); Graydon S. Staring &
George L. Waddell, Marine Insurance, 73 Tul. L. Rev. 1619,
1651 (1999); Mitchell J. Popham & Chau Vo, Misrepresentation

                              -16-
and Concealment in Marine Insurance Contracts: An Analysis
of Federal and State Law Within the Ninth Circuit, 11 U.S.F.
Mar. L.J. 99, 108-12 (1998-1999); Thomas J. Schoenbaum, The
Duty of Utmost Good Faith in Marine Insurance Law: A
Comparative Analysis of American and English Law, 29 J. Mar.
L. & Com. 1, 11-13 (1998).
        In the face of this general agreement regarding uberrimae
fidei’s status as entrenched federal admiralty law, Cassin and
CIT argue that the mere fact that there is a circuit split prevents
a holding that uberrimae fidei is firmly entrenched. However,
they fail to address the fact that our Circuit has already held that
uberrimae fidei applies to maritime insurance contracts. See
East Coast Tender Serv., 759 F.2d at 284 n.3. We reaffirm our
prior precedent, and conclude that the doctrine of uberrimae
fidei is well entrenched and therefore controls this dispute.
                                IV.
       Having determined that uberrimae fidei applies to the
insurance policy issued to Cassin, we now determine whether
Cassin made a material misrepresentation. Cassin argues that
there are outstanding questions of fact regarding whether he
misrepresented the purchase price, and if so, whether such a
misrepresentation was material.




                               -17-
                               A.
       The District Court concluded that Cassin failed “to offer
any specific facts that place in dispute that the amount paid for
the [Yacht] was anything more than $400,000.” Cassin, 2007
WL 309948, at *5. In particular, the District Court relied on the
fact that all involved parties concede that the only monetary
value exchanged was $400,000. The District Court was
unpersuaded by Cassin’s argument that the purchase price
included a $200,000 equity stake in the Yacht, which was “at
best a benefit that flowed from Falk to Cassin” without
consideration. Id. Therefore, the District Court held that Cassin
misstated the purchase price.
      Cassin and CIT concede that only $400,000 in monetary
value was exchanged. But they insist that the purchase price
was $600,000, because that is the price listed on the “Purchase
and Sale Agreement.” Appellant’s Br. at 1. They also point to
surveys from 1997 and 1998, which valued the Yacht at
$600,000.7
       We are unpersuaded by the appellants’ arguments. The
record does not contain any deed transferring the $200,000
equity stake from Falk to Cassin. Moreover, Cassin’s
explanations regarding the equity transfer are so incompatible
with one another that no reasonable juror could conclude that
the $200,000 equity was ever transferred to Cassin. Cassin told
Trident, months before the Purchase and Sale Agreement was
signed, that he already had a $200,000 stake in the Yacht. In


       7
      There is no survey in the record from 2000, the year
AGF insured the Yacht.

                              -18-
fact, he represented that he acquired the equity in 1995, two
years before he applied for financing. The $200,000 equity in
the boat, according to Cassin, was transferred irrespective of the
ultimate sale of the Yacht. Yet in response to interrogatories,
Cassin argued that Falk transferred $200,000 in equity as part of
the Purchase and Sale Agreement. Cassin struggled to explain
what consideration was exchanged for the equity. He suggested
in one interrogatory that the equity allowed Falk to earn
$400,000 on the boat, which we take to mean that the market
value for the boat was only $400,000. In response to another
question, he stated that no reason was provided.
       We agree with the District Court that the evidence in the
record leaves no question as to the dubious nature of the
$200,000 equity and that the purchase price was $400,000.
Cassin misrepresented the purchase price to Trident in his
application for financing and has continued to misrepresent the
purchase price.
                               B.
        We still must determine whether that misrepresentation
was material. The question of materiality must be viewed from
the perspective of a reasonable person in the insured’s position.
See Knight, 804 F.2d at 13. The Second Circuit has defined
material facts in the uberrimae fidei context as “something
which would have controlled the underwriter’s decision to
accept the risk.” Id. at 13 (citations and quotation marks
omitted). The Ninth Circuit has held more broadly that “[t]he
fact that the insurer has demanded answers to specific questions
in an application for insurance is in itself usually sufficient to
establish materiality as a matter of law.” Freeman v. Allstate
Life Ins. Co., 253 F.3d 533, 536 (9th Cir. 2001) (citation

                              -19-
omitted); see also N.H. Ins. Co. v. C’Est Moi, Inc., 519 F.3d
937, 939 (9th Cir. 2008). Black’s Law Dictionary, meanwhile,
defines “material” as “of such a nature that knowledge of the
item would affect a person’s decision-making; significant;
essential.” Black’s Law Dictionary 998 (8th ed. 2004); see also
L. Buglass, Marine Insurance and General Average in the
United States 24 (2d ed. 1981) (stating that a material fact is one
that “would influence the judgment of a prudent insurer in fixing
the premium, or determining whether he will take the risk”).
       We believe that the Knight definition of materiality is too
narrow. A fact need not “control” an underwriter’s decision to
be material, as the term is usually understood. On the other
hand, we conclude that the Ninth Circuit’s formulation is more
broad than necessary to resolve this dispute. For example, the
misrepresentation of an applicant’s middle initial on a marine
insurance application, without more, would not violate
uberrimae fidei. Nevertheless, we are persuaded by the Ninth
Circuit’s more limited statement regarding purchase price: “The
purchase price of a vessel ‘is unquestionably a fact material to
the risk,’ as it provides an objective measure of the vessel’s
worth and the corresponding risk of insuring the vessel.” C’Est
Moi, Inc., 519 F.3d at 939 (quoting Certain Underwriters at
Lloyd’s v. Montford, 52 F.3d 219, 222 (9th Cir. 1995)).
         Cassin and CIT contend that the value of the Yacht is a
much more important indicator of the insurance risk, and two
appraisals valued the Yacht at $600,000. However, those
appraisals were from 1997 and 1998, two years before AGF
began insuring the Yacht. More importantly, while a Yacht’s
valuation may entail subjective considerations, the “purchase
price . . . can be presumed to be objective because it was arrived

                               -20-
at through arm’s length negotiations between parties with
opposing interests.” C’Est Moi, Inc., 519 F.3d at 940. We
conclude that when a marine insurer asks for the purchase price,
it is a fact material to the risk, the misrepresentation of which
violates uberrimae fidei. As Cassin misrepresented the purchase
price of the Yacht, the Policy was voidable ab initio, relieving
AGF of the duty to satisfy Cassin’s claim.8
                                V.
       Finally, CIT argues that it may recover under the Policy
despite Cassin’s misrepresentation.9 CIT conceded at oral
argument that under New York law a loss payee is not protected
independently of the insured, absent a clause to that effect in an
insurance policy.10 See Wometco Home Theatre, Inc. v.


       8
        Cassin suggests that AGF should be prohibited from
benefitting from uberrimae fidei because it acted in bad faith by
returning Cassin’s premiums after the Yacht sank, “in a
deceptive attempt to void [the] policy.” Appellant’s Br. 27.
While uberrimae fidei requires the utmost good faith on the part
of both insured and insurer, the record makes clear that AGF did
not breach that duty. AGF explicitly disclosed its intention to
void the Policy in its complaint, filed March 7, 2001, before the
return of any premiums.
       9
        The parties agree that there is no well established federal
admiralty principle governing this issue. Therefore, pursuant to
the choice of law provision, we will apply New York law.
       10
        CIT argues that it was an “additional insured” under the
Binder. However, the Binder explicitly categorizes CIT as a

                               -21-
Lumbermens Mut. Cas. Co., 97 A.D.2d 715, 716 (N.Y. App.
Div. 1983) (“In the absence of a provision that the insurance
policy shall not be invalidated by any act or neglect of the
insured, a ‘loss payee’ is not itself an insured under the policy;
it is merely the designated person to whom the loss is to be paid.
It is established that such a loss payee may only recover if the
insured could have recovered.” (citations omitted)). CIT also
conceded that there is no such clause in the Policy. Because we
conclude that the Policy was in effect at the time the Yacht sank,
and that CIT was at best a loss payee under the insurance policy,
it follows that CIT cannot recover under the Policy
independently of Cassin. We will therefore affirm the District
Court’s dismissal of CIT’s claims.
                               VI.
      For the foregoing reasons, we will affirm the District
Court’s grant of summary judgment in favor of AGF.




“Loss Payee.” See App. 308. A document prepared the day
after the Binder, entitled “Evidence of Property Insurance,” also
explicitly categorizes CIT as “Loss Payee.” See App. 309.
While the first page of the Binder has a checked box next to
“Additional Insured,” CIT is not listed in the space provided.
Rather, CIT is unambiguously listed as a “Loss Payee.”

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