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Abstract

Time hull marine insurance policies provide insurance for a definite period against damage to or loss of a vessel. Even in cases in which a ship owner expressly warrants to an insurer that a vessel will be seaworthy when the policy takes effect, and unless the insurer waives all warranties, American admiralty law implies a warranty of seaworthiness as a condition of the contract. This implied warranty increases the insurer's chance of recovering his premium by mitigating his risk that the vessel will be damaged or lost. Although American admiralty law strives to remain harmonious with English admiralty law, American courts have, in a rare departure from favored uniformity, deviated from the English rule for implied warranties of seaworthiness in time hull marine insurance policies. Under English law, an owner breaches the warranty only when he has actual knowledge that the vessel is unseaworthy when the ship breaks ground. Under American law, an owner warrants absolutely when the policy takes effect that his vessel is seaworthy and that he will not thereafter, through bad faith or neglect, knowingly permit the vessel to break ground in an unseaworthy condition. The problem with American law lies in understanding what constitutes a knowing neglect. Some American courts purport to require actual knowledge by the owner that the vessel is unseaworthy before denying recovery. Other courts, however, will charge a shipowner with constructive knowledge of an unseaworthy condition and deny coverage under a time hull policy on that basis. Because of the disparity in the holdings by federal courts, Maine courts remain free to fashion their own rule for implied warranties in time hull policies. Pursuant to the United States Supreme Court's holding in Wilburn Boat Co. v. Fireman's Fund Insurance Co., marine insurance contracts may be construed according to state law unless an established federal rule governs. This Note argues that there is no established federal rule governing implied warranties for time policies because the federal courts have not agreed on whether the knowing neglect of an owner may be established merely by constructive, rather than actual, knowledge of unseaworthy conditions. Therefore, Maine law may apply. The Maine courts, however, have not squarely decided whether "knowing neglect" of an unseaworthy condition arising after the policy attaches may be established merely by charging an owner removed from the actual operation of the ship with constructive knowledge. This Note contends that when confronted with the issue, Maine courts should not charge an absent owner with constructive knowledge of the unseaworthy conditions of his vessel. Rather, the courts should require a showing of the owner's actual knowledge of unseaworthiness before precluding coverage under a time policy.

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