Sw Traders LLC v. United Specialty Insurance Company, aka USSIC, aka State National, aka State…

* This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
SW TRADERS LLC,
Plaintiff - Appellant,
v.
UNITED SPECIALTY INSURANCE
COMPANY, aka USSIC, aka State
National, aka State National Insurance
Company, aka HCC Insurance Holdings;
OPTIMUM CLAIMS SERVICES INC;
WFT INCORPORATED, also known as
WFT of Seattle,
Defendants - Appellees.
No. 10-35065
D.C. No. 2:09-cv-00778-MJP
MEMORANDUM*
Appeal from the United States District Court
for the Western District of Washington
Marsha J. Pechman, District Judge, Presiding
Argued and Submitted November 3, 2010
Seattle, Washington
Before: B. FLETCHER, FERNANDEZ and BYBEE, Circuit Judges.
FILED
NOV 18 2010
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS

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Appellant SW Traders, LLC appeals the district court’s grant of summary
judgment in favor of Appellees United Specialty Insurance Company (“USSIC”),
Optimum Claims Services, Inc., and WFT Incorporated, and the district court’s
denial of its Rule 56(f) request. Appellant filed this suit to recover payment under
a marine insurance contract for losses sustained by the M/V PACIFIC DAWN on
its voyage from Vancouver to Hawaii. Prior to the exchange of discovery, but after
Appellant moved for summary judgment, the district court granted summary
judgment in favor of Appellees, holding that the contract was void at its inception
under the admiralty doctrine of uberrimae fidei. The district court also denied
Appellant’s request for further discovery under Federal Rule of Civil Procedure
56(f). We have jurisdiction over this appeal under 28 U.S.C. § 1291 and we now
affirm.
I.
We review de novo the district court’s grant of summary judgment in favor
of Appellees. Cascade Health Solutions v. PeaceHealth, 515 F.3d 883, 912 (9th
Cir. 2008) (citation omitted). Federal Rule of Civil Procedure 56(c) entitles a party
to summary judgment “if the pleadings, depositions, answers to interrogatories,
and admissions on file, together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party is entitled to a

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judgment as a matter of law.” Fed. R. Civ. Pr. 56(c). In deciding a motion for
summary judgment, we view the evidence in the light most favorable to the
non-moving party, and draw all justifiable inferences in favor of the non-moving
party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255(1986); Betz v. Trainer
Wortham & Co., 486 F.3d 590, 591 (9th Cir. 2007).
II.
Appellant does not dispute that uberrimae fidei is available as a defense. It
argues, however, that it does not apply in this case. Uberrimae fidei is a
longstanding federal maritime doctrine that applies to marine insurance contracts.
New Hampshire Ins. Co. v. C'Est Moi, Inc., 519 F.3d 937, 938 (9th Cir. 2008)
(citing Certain Underwriters at Lloyd’s v. Inlet Fisheries, 518 F.3d 645, 655 (9th
Cir. 2007)) (internal quotation marks omitted). Meaning “utmost good faith”, the
doctrine requires applicants for marine insurance “to reveal every fact within
his/her knowledge that is material to the risk,” even when this information is not
explicitly sought or asked for by the insurer. Cigna Prop. and Cas. Ins. Co. v.
Polaris Pictures Corp., 159 F.3d 412, 418 n.1 (9th Cir. 1998). An insurer can
invoke this rule to void an insurance contract if it can show “either intentional
misrepresentation of a fact, regardless of materiality, or non-disclosure of a fact
material to the risk, regardless of intent.” Id. at 420 (internal citations omitted).

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We conclude that Appellees are entitled to this defense because there was a
non-disclosure of a fact material to the risk by Appellant. Appellant failed to
affirmatively disclose the true owner of the insured vessel to the insurers. This
court has recognized ownership of a vessel as material to an insurance company’s
assessment of risk. See Cigna Prop., 159 F.3d at 420 (noting that Polaris failed to
disclose a party’s ownership interest in the vessel in question and that this was
material to the insurance company’s risk); see also Washington Int’l Ins. Co. v.
Mellone, 773 F. Supp. 189, 191–193 (C.D. Cal. 1990) (noting that co-ownership
interests are material to the insurance risk). In addition, Appellees present the
declaration of Robin Armfield, Vice-President and marine underwriter for WFT
Incorporated, to further support the materiality of vessel ownership. In her
declaration, she states, “[a]n underwriter bases much of its underwriting process on
the identity of the vessel owner which establishes essential information such as
whether the owner is an experienced owner and/or operator of a vessel, the owner’s
location, and the intended purpose and manner of operation of the subject vessel.”
Appellants offer nothing that legitimately calls the materiality of vessel
ownership into question. Appellant argued at oral argument that the identity of the
vessel’s true owner, Reginald Gates, may not, in this case, have affected
Appellee’s decision to insure the vessel, and that summary judgment was therefore

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unwarranted. This argument, however, misses the mark. Ship ownership is
indisputably material to an insurance company’s assessment of the risk, regardless
of whether the identity of the owner actually increases the risk of insuring a
particular vessel. As such, Appellant had a duty under uberrimae fidei to disclose
the true identity of the vessel owner to Appellees.
In addition, although documentation was given to the insurance company
revealing that SW Traders, LLC was the owner of the insured vessel, nothing in
this documentation revealed that Reginald Gates, and not Stanley Lambert, was the
sole member of the identified corporate owner. Accordingly, the district court’s
holding that Appellees are entitled to the defense of uberrimae fidei, and that the
contract was void at its inception, is affirmed. The panel need not reach the
alternative grounds upon which judgment was rendered in Appellees’ favor.
III.
Appellant contends that the district court erred in implicitly denying its Rule
56(f) request. Rule 56(f) allows the district court, when a party opposing a motion
for summary judgment “shows by affidavit that, for specified reasons, it cannot
present facts essential to justify its opposition,” to “order a continuance to enable
affidavits to be obtained, depositions to be taken, or other discovery to be

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undertaken.” Fed. R. Civ. Pro. 56(f). Denial of a Rule 56(f) request is reviewed
for abuse of discretion. Margolis v. Ryan, 140 F.3d 850, 853 (9th Cir. 1998).
Pursuant to its request, Appellant sought the opportunity to depose Ms.
Armfield on the issue of whether the identity of the owner of the vessel was
actually material to the risk, and on whether Ms. Armfield’s initial declaration was
coerced. Appellants moved under Rule 56(f) in the hopes that Ms. Armfield would
directly contradict the statements that she made in her previous declarations. The
facts sought by Appellant in its Rule 56(f) request can most generously be
considered speculative, if not far-fetched. Therefore, the district court did not
abuse its discretion in denying Appellant’s Rule 56(f) motion, and its decision is
affirmed. See Margolis, 140 F.3d at 854 (noting that the facts sought in a Rule
56(f) motion must be based on more than mere speculation).
IV.
Because Appellees are entitled to the defense of uberrimae fidei, summary
judgment was properly granted in their favor. The judgment of the district court is
hereby AFFIRMED.

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