Argued and Submitted December 6, 2000 — Pasadena, California
D.W. NELSON, Circuit Judge:
La Reunion Francaise ("La Reunion"), a French insurance company, appeals a district court order dismissing its declaratory judgment action for lack of subject matter jurisdiction. The district court held there was no admiralty jurisdiction under 28 U.S.C. § 1333 over the disputed marine insurance policy because La Reunion failed to prove that the insurance contract was "wholly maritime in nature," or that the nonmaritime elements of the contract were incidental or severable. We conclude that the insurance contract is wholly maritime in nature. Therefore, we reverse and remand for the district court to exercise its admiralty jurisdiction.
I. FACTUAL AND PROCEDURAL BACKGROUND
On February 10, 1997, La Reunion issued an insurance policy to Brad Barnes ("Barnes") for his twenty-foot powerboat valued at $64,000. Barnes renewed the policy for a second year in February 1998. The policy covered damage to the boat and insured against liability and theft. In addition, the policy included two conditions. Use of the boat was limited to the inland waters of California, and Barnes was required to store the boat on land for six months out of the year.
Barnes reported his powerboat as stolen from its dry dock storage location on May 15, 1998. After he submitted a claim for its insured value, La Reunion filed this action seeking to rescind the insurance contract because Barnes failed to disclose on his application that several of his trucks, automobiles, and motorcycles had been stolen. Barnes filed a motion to dismiss under Fed.R.Civ.P. 12(b)(6) which also challenged the court's subject matter jurisdiction. The district court dismissed the claim for lack of jurisdiction, and La Reunion filed this timely appeal.
II. STANDARD OF REVIEW
We review de novo a district court's dismissal for lack of subject matter jurisdiction. See Brady v. United States, 211 F.3d 499, 502 (9th Cir.2000), cert. denied, ___ U.S. ___, 121 S.Ct. 627, 148 L.Ed.2d 536 (2000). The district court's findings of fact relevant to its determination of subject matter jurisdiction are reviewed for clear error. See United States ex rel Newsham v. Lockheed Missiles & Space Co., 190 F.3d 963, 968 (9th Cir.1999), cert. denied, 530 U.S. 1203, 120 S.Ct. 2196, 147 L.Ed.2d 232 (2000).
We must determine whether a federal court has admiralty jurisdiction over a marine insurance policy that, besides covering damage to a boat while on the water, requires the policyholder to store his boat on land for half the year, insures against theft while on land, and limits navigation of the boat to inland waters of California.
"A contract is within admiralty jurisdiction if its subject matter is maritime." Royal Ins. Co. of America v. Pier 39 Ltd., 738 F.2d 1035, 1036 (9th Cir.1984); Aqua-Marine Constructors, Inc. v. Banks, 110 F.3d 663, 671 (9th Cir.1997) ("It is ... the subject matter (rather than the place of execution or place of performance) of a contract which determines the existence of federal maritime jurisdiction over a contractual claim."). There is no clear test for whether the subject matter of a contract is maritime. Instead, we look to precedent and reason by analogy. See Kossick v. United Fruit Co., 365 U.S. 731, 735, 81 S.Ct. 886, 6 L.Ed.2d 56 (1961) ("Precedent and usage are helpful insofar as they exclude or include certain common types of contract: a contract to repair or to insure a ship is maritime, but a contract to build a ship is not." (citations omitted)); Royal Ins. Co., 738 F.2d at 1036.
Barnes contends there is no admiralty jurisdiction over the policy because its limitation to the "inland waters of California only" means he is not allowed to use his boat on navigable waters. This argument clearly fails. Even if admiralty jurisdiction over marine insurance contracts depended on the navigability of the waters involved, jurisdiction would be proper in this case. California's inland waters include the Sacramento River and the San Joaquin River, see Gray v. Reclamation Dist. No. 1500, 174 Cal. 622, 163 P. 1024, 1027 (1917), both of which are navigable. Nevertheless, the navigability of the waters is dispositive only in the tort context.
Generally, the subject matter of a contract must be "wholly maritime in nature to be cognizable in admiralty." Id. at 1442. However, there are two exceptions to this rule. If the nonmaritime elements of a contract are "merely incidental" to its primary maritime nature, or if the maritime obligations in the contract can be severed from the nonmaritime provisions and adjudicated separately without prejudice to the parties, then the case can be heard in admiralty. Id. The district court dismissed La Reunion's claim because it failed to prove the policy was wholly maritime in nature or that provisions
After reviewing the entire contract, we conclude that the subject matter of this insurance policy is wholly maritime in nature. The fact that Barnes is required to store his boat on land for six months of the year and that the policy provides coverage for theft on land does not change the policy's essential character. These provisions are maritime in nature in that they "relate[ ] to a ship in its use as such, or to commerce or to navigation on navigable waters, or to transportation by sea, or to maritime employment." Aqua-Marine, 110 F.3d at 670-71. As the Second Circuit recognized in finding admiralty jurisdiction over a similar policy:
Sirius Ins. Co. v. Collins, 16 F.3d 34, 36-37 (2d Cir.1994). Storing a boat on land and insuring against theft during transport both concern how to protect the boat for its use on the water. Moreover, requiring storage for half the year and limiting use of the boat to inland waters minimizes the risk to the insurer from damage to the boat "in its use as such." Aqua-Marine, 110 F.3d at 670.
Based on the maritime nature of the insurance policy, we reverse the order dismissing this case and remand to the district court to exercise its admiralty jurisdiction over La Reunion's claim.