219 A.D. 636 | N.Y. App. Div. | 1927
On December 31, 1919, plaintiff entered into a contract of marine insurance with Loechner & Co., by which it insured a shipment of lily of the valley pips on board the steamship Keresan, which sailed from Hamburg on December 13, 1919. The contract was subject to particular average making the insurer liable for partial loss only in case of stranding, sinking, burning,
There are three causes of action. The first is based upon the contract of reinsurance alone; the second upon the contract of reinsurance as strengthened by the alleged estoppel resulting from the acquiescence in the settlement; and the third upon the acquiescence in the settlement treated as a new contract.
On the first cause of action standing alone the plaintiff is not entitled to succeed. The relationship between insurer and insured on marine insurance is one which calls for uberrima fides. The applicant is required to disclose to the underwriter all known facts material to the risk. (1 Arnould Marine Ins. [11th ed.] § 575; Sun Mutual Ins. Co. v. Ocean Ins. Co., 107 U. S. 485; M’Lanahan v. Universal Ins. Co., 1 Pet. 170, 184; Ely v. Hallett, 2 Caines, 57.) The English codification of the law of marine insurance (British Marine Insurance Act of 1906, 6 Edw. VII, chap. 41; 2 Arnould Marine Ins. 1672) expressly provides that a contract of marine insurance is based upon the utmost good faith (§ 17); that the assured must disclose every material circumstance which is known to the assured, and the assured is deemed to know every circumstance which in the ordinary course of business ought to be known by him, and if the assured fails to make such disclosure the insurer may avoid the contract (§ 18); and that every circumstance is material which would influence the judgment of a prudent insurer in fixing the premium, or determining whether he will take the risk (§ 18). While these sections of this statute have ipso facto no binding force, they are a fair codification of the case law and custom. The plaintiff here concealed two material facts which it knew or should have known — the nature of the cargo, with the incidental existence of the prolongation clause, and the date of the sailing of the vessel. It was a matter of common knowledge among underwriters that lily of the valley pips constituted a specially hazardous risk. If a particular average warranty were opened, an underwriter became liable for the damage to these pips irrespective of the cause of the damage. The perishable nature of the cargo was strongly brought home to the plaintiff by the insertion of the prolongation clause, which made it liable at all events for mere delay. The omission to disclose the existence of tins prolongation clause standing alone might not have constituted a material concealment, because,'if the F. P, A. Institute warranty were opened,
The respondent cites Arnould on Marine Insurance (§ 223) for the proposition that except under the law of France the general law is that the word “ merchandise ” in a policy covers perishable articles and contraband of war. The question here, however, is not whether the word “ merchandise ” in the policy covers perishable articles, but whether the nature of the merchandise should have been disclosed to the underwriter. This distinction is made in the very section cited, where the author writes: “As to contraband of war, although the underwriter might avoid the insurance, unless he was told of the nature of the ^ intended risk, yet it has never been decided that the contraband character of the cargo must' be specified in the policy.” The risk under a form of policy which made the underwriter liable for deterioration, irrespective of cause, if the particular average warranty were opened, was greater if the article insured was essentially perishable.
The nature of the cargo was thus a material circumstance, to the disclosure of which the defendant was entitled in determining whether it would accept the proffered business. The effect of this concealment was accentuated by a concealment of the fact that the ship was already nineteen days at sea. The representative of the brokers for Loechner & Co., who placed the initial insurance with the plaintiff, testified that he had ascertained the date of sailing from the trade journal known as the Maritime Register and informed the plaintiff’s representative, Town, of that date. Town’s testimony was taken by deposition. In his testimony as originally given, he stated that the broker’s representative had not told him the date of sailing, but that he had searched for it in the Maritime Register and had not found it there. When he came to sign his deposition he materially altered over fifteen answers and deleted therefrom a somewhat circumstantial account of his search through the files of the Maritime Register and substituted for this the blunt statement that he did not look at the Maritime Register at all, but relied on the good faith of the brokers to tell him that the ship had already sailed, if in fact she had. The testimony of the defend
For these reasons the plaintiff cannot recover unless an estoppel was worked or a new contract arose because of defendant’s acquiescence in the settlement made by the plaintiff with Loechner & Co.
In assenting to this settlement the defendant was justified in relying on the good faith of the plaintiff in its assertions that the captain’s protest showed both that the ship had been afire and had stranded. Using language in its conventional sense, the ship had never been on fire. There had been imminent danger of fire from the overheating of the bunkers, and there is authority for the contention that in a direct suit by the assured, Loechner & Co., this overheating of the bunkers, necessitating their discharge, might be treated as coming within a clause insuring against “ perils of the sea, fire,” etc. (The Knight of St. Michael, L. R. [1898] Probate, 30.) It remains none the less true, however, that an unequivocal statement that the protest showed that the ship was on fire did not fairly apprise the defendant of the controversial nature of the claim. The casualty which opened the F. P. A. warranty was not fire. The warranty was that the insurance was free from particular average, unless the vessel be “ burnt.” There was room for serious dispute as to whether this overheating, which might constitute a peril of fire, fairly came under a requirement to open the warranty that the ship be “ burnt.”
A similar situation existed with respect to the unequivocal statement that the captain’s protest claimed that the ship had stranded. This protest was substantially in the form of a ship’s log. It actually stated that the ship came to anchor at ten p. m.
In view of the debatable nature of the claims of burning and stranding, the validity of which was a prerequisite to this plaintiff’s liability, good faith required that the defendant be apprised, not only of the facts, well known to plaintiff, upon which these claims were based, but also that the plaintiff had a conflicting interest and was prompted to settle by the existence of the prolongation clause, which made it liable wholly irrespective of any marine casualty whatever. The defendant, or the informatioR giveR it by the plaintiff, up to the time that it was requested to approve the settlement, was led to believe that there was a clear stranding and burning, at least in the opinion of the plaintiff. If it had known the facts of the alleged stranding and burning and the existence of the prolongation clause which actuated the plaintiff to settle, irrespective of marine casualty, it is not conceivable that it would have instantly acquiesced in this settlement on the mere request of the plaintiff. The estoppel which would otherwise be worked by this assent is vitiated by this concealment of these three sets of facts, which, taken together, cumulatively constitute material misrepresentation.
The judgment and order appealed from should be reversed on the law and the facts, with costs, and judgment directed for the defendant, with costs.
Dowling, P. J., Merrell, Finch and McAvoy, JJ., concur.
Judgment and order reversed, with costs, and judgment directed in favor of defendant, with costs.