Decision Alert: Supreme Court Unanimously Holds Choice-of-Law in Maritime Contracts Presumptively Enforceable

On February 21, 2024, the Supreme Court unanimously held in Great Lakes Insurance SE v. Raiders Retreat Realty Co., LLC that choice-of-law provisions in maritime contracts are presumptively enforceable under federal maritime law and that the exceptions were too narrow to apply.

As more fully summarized in Dykema’s November 2023 edition, the dispute arose from an insurance contract in which the insurer, Great Lakes, sought a declaratory judgment and Raiders asserted extra-contractual counterclaims under Pennsylvania law, despite the choice-of-law provision in the policy that stated New York law governed when well-established, “entrenched” principles of federal admiralty law were absent. Great Lakes sought enforcement of the choice-of-law provision for any issue not “entrenched” in federal admiralty law.

The opinion, written by Justice Kavanaugh, reasoned that Article III contemplates a uniform system of maritime law, and following the Court’s 1955 decision in Wilburn Boat Co. v. Fireman’s Funds Ins. Co., the Court may create new maritime rules if an established rule does not exist. The opinion also explains that longstanding precedent confirms a uniform federal maritime rule exists for choice-of-law provisions. Additionally, Justice Kavanaugh took aim at Wilburn Boat, observing that case did not deal with warranty issues and its holding does not dictate that state law should apply here because a federal maritime rule already exists for choice-of-law provisions.

Justice Thomas concurred in the opinion in full but wrote to explain his concerns that Wilburn Boat “is at odds” with the fundamentals of federal maritime law. According to Justice Thomas, Wilburn Boat sets aside the 150 years of precedent establishing federal maritime law by allowing state law to apply in some maritime insurance contexts. Justice Thomas critiqued the Wilburn Boat Court’s reasoning that because states primarily govern general insurance law, they should also govern maritime insurance law as a fundamental misunderstanding of federal maritime law. Finally, given the many critiques of Wilburn Boat, and the Court’s departure from its principles, Justice Thomas reasoned that its only application is when maritime contract disputes “so implicate local interests as to beckon interpretation by state law.”

For more information, please contact Chantel Febus, James Azadian, Cory Webster, Christopher Sakauye, McKenna Crisp, Monika Harris, or Puja Valera.