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Ps bought a small houseboat to use for commercial carriage of passengers on nearby Lake Texoma, an artificial inland lake between Texas and Oklahoma. D insured the boat against loss from fire and other perils. While moored on the lake the boat was destroyed by fire. D refused to pay for the loss. Ps sued D in a Texas state court. After the removal of the case because of diversity, D answered admitting issuance of the policy, payment of premiums, and destruction of the boat. Liability was denied because of alleged breaches of printed policy terms or 'warranties' providing that, without the written consent of the company, the boat could not be sold, transferred, assigned, pledged, hired, or chartered, and must be used solely for private pleasure purposes. Ps urged that all questions concerning alleged policy breaches be controlled by Texas law. If Texas law does govern, the policy provision against pledging may be wholly invalid. Also, no breach by the insured of the provisions of a fire insurance policy is a defense to any suit under Texas law unless the breach contributes to the loss (the proximate cause of the loss). The court refused to give State law any effect at all, holding that since a marine policy is a maritime contract, federal admiralty law -- not state law -- governed. It then held that an established admiralty rule requires literal fulfillment of every policy warranty so that any breach bars recovery, even though a loss would have happened had the warranty been carried out to the letter. The Court entered judgment for D. The Court of Appeals affirmed holding that, 'It is the settled doctrine that a marine contract of insurance is 'derived from' is 'governed by', and is a 'part of' the general maritime law of the world.' Ps appealed.

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