Marine Insurance Dispute Transferred to Maryland

On July 24, 2023, in the case Accelerant Specialty Ins. Co. v. Sero Services, LLC, a United States District Court judge granted a defendant's Motion to Dismiss for Lack of Personal Jurisdiction and/or Lack of Venue and/or Motion to Transfer to Court of Proper Venue. The ruling is significant because it illustrates that a marine insurer with no ties to Texas is not guaranteed to have a coverage dispute decided in Texas by naming a Texas company as the insured's agent in the policy.

A.  Background

Sero Services, LLC ("Sero"), a Maryland company, owned a 32 ft. aluminum passenger yacht the M/Y LIQUID LIMO. The vessel was operated in the inland and territorial waters of Maryland. Sero insured the vessel with Accelerant Specialty Insurance Company ("Accelerant"), an Arkansas business with its principal place of business in Georgia. The marine underwriters named Trident Marine Managers ("Trident") in Houston, Texas as Sero's agent on the policy. Sero obtained the policy through its insurance agent in Maryland.

The insurance policy for the M/Y LIQUID LIMO had an effective period of July 25, 2022, until July 25, 2023, and a laid-up period of October 1, 2022, to June 1, 2023, ashore in Ocean City, Maryland. Sero warranted that it would not use or navigate the vessel in any manner, during the dates specified in the laid-up period.

The M/Y LIQUID LIMO sank during the laid-up period while moored in Maryland on October 7, 2022. Accelerant investigated the loss and determined that the M/Y LIQUID LIMO was in the water at a slip, as opposed to ashore and in storage as required by the policy, when it sank. Further, Sero used the M/Y LIQUID LIMO for a charter trip during the laid-up period.

B.  Discussion 

Accelerant filed suit against Sero in United States District Court for the Southern District of Texas claiming that Sero was in breach of the Policy's express warranties, and conditions. Accelerant sued in Texas because Trident had an office in Texas. Sero responded by filing a motion to dismiss for lack of personal jurisdiction over Sero, improper venue and motion to transfer the suit to Maryland. Where exclusive jurisdiction over a dispute lies in either of two federal courts, the movant must show good cause for transfer of venue by clearly demonstrating that the transfer is for the convenience of parties and witnesses, in the interest of justice. The court examined four private interest and four public interest factors and noted there were no witnesses in Texas. Accelerant was an Arkansas company with its principal place of business in Georgia. The court concluded that transferring the case to Maryland was warranted because the vessel was only operated in Maryland, the insurance was procured in Maryland and the sinking occurred in Maryland. Furthermore, the witnesses and evidence were primarily located in Maryland.

C.  Why Is This Important?

• United States district courts have broad discretion in deciding whether to order a transfer of venue.

• Recognizing opportunities to transfer venue and successfully obtaining a transfer can save time and money. 
• A court should not transfer a case if the only practical effect is to shift inconvenience from the moving party to the nonmoving party.