203 F. 558 | D. Maryland | 1913
The plaintiff is a French, the defendant a Maryland, corporation. There was, and doubtless still is, in Paris a body corporate styling itself Société d’Assurances Mutuelle des Agents
Plaintiff, however, was hopeful of recovering through the broker a salvage of 35,000 francs. It accordingly in the first instance admitted immediate liability for 216,956.18 francs only. This last mentioned sum was 32.4166 per cent., of the broker’s total loss. It was possible to determine the date at which the dishonest employé had taken each particular sum. There was, therefore, no difficulty in arriving at the total amount stolen during the period in which the reinsurance group remained as at first constituted, and the amount which was abstracted during each subsequent period in which there was no change in the reinsurers existing at the beginning of the period. The method of adjustment .adopted by the plaintiff was to hold each group of insurers liable as a whole for 32.4166 per cent, of the amount embezzled during the time such group remained unchanged, and then to
The difficulty is in determining how, under the special circumstances of this case, the benefit of the exemption from liability from at least 333,333 francs of any one embezzlement affects the obligation of successive reinsurers. The contract is French. By its express terms it is to be governed by the usage of Paris in matters of reinsurance. It follows that the French law controls if there is any such applicable law, and, if not, it is regulated by the custom of Paris if such custom exists. Experts in the French law and in the insurance practices of Paris have been examined. They do not in my judgment profess to state what the law of France or the usages of Paris pn this matter are. The witnesses express their individual' opinion as to what that law should be declared to be whenever the courts of France are called upon to make a declaration upon the subject, or as to what should be the usage of Paris, whenever any usage upon the subject shall be established.
Sitting as a jury, I find as a matter of .fact that it is not proved that there is any applicable French law or custom. The learned and diligent counsel for the respective parties have not been able to find that the precise question now under consideration, or any one having any marked analogy to it, has ever been passed upon in any reported case. My own researches and inquiries have had the same negative result.
There are at least three possible theories which may be adopted:
First. That the uninsured portion of the loss shall be deducted once for all from the total loss when ascertained and as of the date of its ascertainment, and that each successive reinsurer shall benefit by such deduction in proportion to the total amount embezzled during the time he was on the policy. This is the contention of the plaintiff.
Second. That each insurer shall have the full benefit of the total deduction to the extent of at least 333,333 francs. This theory treats each contract of reinsurance as complete in itself, and as having no privity or connection with that which went before it or that which may come after it. Each of such contracts is given its most strictly literal interpretation. A reinsurer has nothing to do with any sums embezzled before it assumed the risk or with any that may "be embezzled after its policy was canceled. It is bound only for its share
The net i esult would be that, while the plaintiff is liable for nearly a quarter of a million of francs, it would have had reinsurance for not much more than one-tenth of that sum. Had there been three successive reinsurers of the same portion of the risk, it might have found itself without any reinsurance. The consequences to which this theory leads are so manifestly fatal to the whole purpose of everything which the parties did that it may be rejected without further consideration.
The defendant takes its stand upon what may be called the third theory. This assumes that, while the broker’s one-fourth and the Brokers’ Society’s 250,000 francs can be deducted but once, they are, when the loss is finally discovered, to be treated as if such deductions had been made from day to day, or from period to period as the money ivas actually taken. Each successive reinsurer becomes hound for its share of the liability which attached to the plaintiff during the time it was upon the policy. As applied to the facts of this case, the defendant was never liable because when its policy was canceled, as was discovered, when the embezzlement took place, the amount taken was not sufficient, had the plaintiff’s own policy then terminated, to impose any liability upon the latter. During the five days over a year that its successor, the Berlin company, was on the policy of reinsurance, tlie broker's clerk kept on stealing, and as a consequence during this period, and during this period only, the plaintiff’s liability attached. For its
Which of these theories is the one which the.court should adopt? If the language of the contract between the plaintiff and the defendant plainly points to one of them, the discussion is closed. Like other contracts of insurance, it is “to be construed according to the sense and meaning of the terms which the parties have used.” Insurance Co. v. Coos County, 151 U. S. 463, 14 Sup. Ct. 379, 38 L. Ed. 231.
Defendant claims that its position is sustained by the language of the cancellation agreement. Its policy terminated on the date upon which'the cancellation took effect “subject only to the losses incurred prior to that date in case they be known and declared afterwards in conformity to the conditions of the contract” between the plaintiff and the Brokers’ Society. At the hearing, it was suggested that the phrase, “in conformity to the conditions of the contract,” had reference to those provisions of the original agreement by which plaintiff was exempted from liability for a theft which did not exceed 333,333 francs. Obviously, however, the words in question have quite another purpose and significance. In spite of the cancellation, the defendant was to remain liable for losses previously incurred, provided they were known and declared afterwards in conformity with the contract — that is, were known and declared before the expiration of the five-year term of the policy issued by the plaintiff to the Brokers’ Society. By that policy the plaintiff did not assume liability for any thefts not discovered and declared during its existence. The reservation in question, therefore, means precisely the same as if it had read, “Subject to losses incurred prior to March 13,, 1906 in case they be known and declared on or before March 13, 1908.” This language throws little light upon the question at issue. It certainly falls - far short of clearly answering it.
_ The strongest argument in'support of defendant’s contention is the simple and unquestioned fact that the contract was canceled. The purpose and effect of cancellation was to release it from all responsibility or liability for anything which might happen thereafter. If at the time of the cancellation it was not liable, it could not be made so by anything which might subsequently take place. Doubtless the defendant might expressly have bound itself, in spite of what it and the plaintiff called a cancellation, to answer for certain defaults which might be committed in the future, but in defendant’s view the language of the reservation which was actually made does not either by expression or by implication seek to hold it for anything for which it was not at the time of the cancellation liable if all that had then taken place had been then known.
The Brokers’ Society paid the plaintiff an annual premium of 38,000 francs. Plaintiff retained 10 per cent, of this as a compensation for the general responsibility accepted by it, and perhaps in some part as brokerage for getting the business for the other companies. The balance of 34,200 francs it divided among the reinsurers in the exact proportion to the percentage of the risk assumed by each of them and the time the policy of each remained in force. Thus the defendant assumed two-tenths or one-fifth of the risk. The annual premium in each of the three years its policy remained in force was two-tenths of 34,200 francs, or 6,840 francs. When the policy was canceled, it did not return any part of this sum, nor was it asked to. Its successor was offered and accepted the same annual premium. To everybody it appeared that the risk of being a reinsurer for the last two years of the original five was no greater than that of being a reinsurer for the first three. Obviously, however, if the defendant’s present contention is sound, there was a great difference. The reinsurer for the earlier priod had the full benefit of tlie broker’s one-fourtli and 1lie Brokers’ Society’s 250,000 francs, so far as they were necessary for its complete exoneration. All that remained available for the protection of its successor was so much of these, if any, as it did not need for its
The first of the three possible theories of adjusting the loss among successive reinsurers, therefore, seems to have been that which was in contemplation of the parties. It is a perfectly simple and logical theory. It requires nothing further than the assumption that the parties intended that the sum to be borne by the broker himself and by the Brokers’ Society should not be deducted until the total loss was ascertained, and then from the total loss. Obviously that is the only time at which the broker’s one-fourth could as against him be calculated. To my mind as applied to the facts of this case, it is far the most equitable of the three possible theories. It contravenes no positive rule of law. So far as I am aware, there is not a single authority opposed to it, although it is equally true that there is none in its favor. The defendant’s second prayer will accordingly be refused.
It will be remembered that the plaintiff did not at first pay 35,000 francs of the portion of the loss for which it was liable hoping that such sum could be recovered as salvage. It finally made an adjustment by which it received credit for 15,000 francs in lieu of such claim for salvage. It accordingly paid the Brokers’" Society an additional 20,000 francs. It claims from the defendant 1,776 francs as the latter’s share of this 20,000 francs.