Taber v. China Mutual Insurance

131 Mass. 239 | Mass. | 1881

Gray, 0. J.

The barque Joseph Maxwell, while on a whaling voyage, by a succession of sea perils, continuing for nearly four months, with no opportunity to repair, first coming in contact with the ice in the Arctic Ocean, then going upon a shoal, and afterwards meeting a succession of heavy gales and cross seas, which made her leak badly, was greatly injured in her hull and rigging, and at last put into Honolulu, and being found upon a survey to have suffered damage by perils insured against to such a degree as, after all due allowances, to exceed half her valuation in the policies, and to justify an abandonment of the ship, was there condemned and sold.

1. In order to constitute a constructive total loss, and consequent right to abandon, on account of damage and expense merely, the ship, according to the English rule, must be in such condition that, if recovered or repaired, she will not be worth the expense necessary to be incurred for the purpose of recovering or repairing her. According to the American rule, it is enough that, when recovered or repaired, she will not be worth half her value, making all proper allowances. 2 Phil. Ins. §§ 1534-1536.

Under either rule, it is not necessary for the assured to prove that any one peril caused damage sufficient to justify an abandonment. It is enough that, by the result of perils insured against, the vessel is in such a condition that she is not worth repairing within the rule. The construction for which the defendants contend would defeat the main purpose of every contract of marine insurance, and, in a large proportion of cases of total loss, would make it impossible to supply the necessary proofs. As was said by Chief Justice Marshall in speaking of a similar question, “ The case has frequently occurred, and a direct decision might be expected on it, if a construction so foreign from the contract had really been made.” Alexander v. Baltimore Ins. Co. 4 Cranch, 370, 376. And it is inconsistent with what has always been assumed to be the law, although for that reason there is little direct authority upon the point.

In Wood v. Lincoln & Kennebeck Ins. Co. 6 Mass. 479, Chief Justice Parsons said : “ When a ship becomes a wreck, by any of the perils insured against, it is generally a total loss, and the owner may abandon. And a ship becomes a wreck, when, in consequence of the injury she has received, she is rendered absolutely innavigable, or unable to pursue her voyage, without repairs exceeding the half of her value. In this last case, she is not worth repairing, by reason, not of age or natural decay, but by reason of the injury received from some peril. For although the materials, or most of them, may remain, yet such is the disabled state of the ship which they composed, that she can no longer retain her character of a navigable vessel.” And he added, by way of illustration, that although, “ when a ship is stranded, the assured cannot, for that cause merely, immediately abandon,” but may recover for a partial loss, yet, “ if she be wrecked by a subsequent storm, while she remains stranded, the owner may abandon.”

In Dickey v. New York Ins. Co. 4 Cowen, 222, and 3 Wend. 658, a ship, by a succession of squalls, gales of wind and heavy cross seas for a fortnight, became, so broken and leaky as to be obliged to put into port; and three weeks later, after she had been there surveyed and partly unladen, was driven on shore by a hurricane, and sustained great additional injury. Chief Justice Savage in the Supreme Court of New York, and Chancellor Walworth in the Court of Errors, were clearly of opinion that the assured had the right to abandon for a total loss. 4 Cowen, 247. 3 Wend. 662. And the case was decided in favor of the underwriters upon the sole ground that the assured, by after-wards repairing the ship, had waived that right.

In Read v. Bonham, 6 J. B. Moore, 397; S. C. 3 Brod. & Bing. 147; a ship, in coming from Calcutta down the river Hoogly, on July 20, sustained an injury in her rigging by coming in collision with a brig at anchor, but on the same day repaired that injury and proceeded on her voyage ; about the end of the month, she became leaky; on August 10, she encountered a squall, and bore up for Calcutta, making a foot of water per hour and having to be pumped every hour without intermission, until the 18th, when a storm arose which split her sails; the pump was kept constantly going, and from the continuance of the gale the whole of her rigging became unserviceable; on the 22d, the windlass was carried away, and an anchor and cable lost; and on the 29th, she arrived in a shattered state at Calcutta, and was there afterwards sold by the master, and he testified that he attributed the leaking of the ship in the first instance to her having run foul of the brig in the river. Sir John Copley, Solicitor General, (afterwards Lord Lyndhurst,) and Mr. Serjeant Taddy, for the underwriter, did not even suggest that the fact of the condition of the ship having been caused by successive and distinct perils affected the question whether there had been a constructive total loss; but placed the defence solely upon the points whether there had been such a necessity as to justify the sale, and whether there had been a due abandonment; and the assured had judgment.

If, by the result of perils insured against, the vessel is so injured as not to be worth repairing within the rule, it is settled by decisions of high authority, that even the fact that her unfitness to be repaired is owing in part to her previous defective condition by reason of wear and tear and ordinary causes affords no ground of deduction in computing the degree of the injury, if she was not unseaworthy. Depeyster v. Columbian Ins. Co. 2 Caines, 85. Depau v. Ocean Ins. Co. 5 Cowen, 63. Hyde v. Louisiana Ins. Co. 2 Martin (N. S.) 410. Peele v. Merchants’ Ins. Co. 3 Mason, 27, 77. Phillips v. Nairne, 4 C. B. 343. Dudgeon v. Pembroke, L. R. 9 Q. B. 581.

The defendants at the argument relied on that clause of the policy which provides that the insurers shall not be liable for any partial loss on goods, or on the vessel or freight, unless it amounts to five per cent. It may well be doubted whether that clause, the object of which is to prevent dispute and litigation about losses of trifling amount, arising from the perishable nature of goods, or which might reasonably be borne by the assured as coming within the common wear and tear of the ship, has any application to a claim for a constructive total loss. Paddock v. Commercial Ins. Co. 104 Mass. 521, 532. Lincoln v. Hope Ins. Co. 8 Gray, 22, 25. Kettell v. Alliance Ins. Co. 10 Gray, 144. But no question as to the effect of that clause is presented for our determination. The defendants, at the hearing before the auditor, admitted that the ship had suffered damage, by the perils insured against, sufficient to justify an abandonment of the ship, and contended only that the facts proved that this damage had been caused by several distinct sea perils, and failed to prove that any one of them had caused damage sufficient to justify an abandonment; and the only question, on this part of the case, reserved by the auditor, or by the justice of this court before whom the trial was had, is whether “it is necessary for the plaintiffs to prove that damage to that extent had been caused by any one of such perils.”

2. The constructive total loss of the ship was not a constructive total loss of the outfits.

The outfits of a whaling voyage are not covered by a policy of insurance on the ship; and whether they would be covered by an insurance on cargo is doubtful. Hoskins v. Pickersgill, 3 Doug. 222. Hill v. Patten, 8 East, 373, 375. Wolcott v. Eagle Ins. Co. 4 Pick. 429, 433. Paddock v. Franklin Ins. Co. 11 Pick. 227, 230. Macy v. Whaling Ins. Co. 9 Met. 354, 366. Mutual Ins. Co. v. Munro, 7 Gray, 246. 1 Phil. Ins. §§ 463, 496, 497. They differ from cargo in the fact that they are not to be carried to the port of destination, but are intended to be used, and in great part consumed, in the course of the voyage. But, like cargo, they are specific articles, having an existence and a value distinct from the ship, and differ in their nature from freight, which is the earnings of the ship itself. See Thwing v. Washington Ins. Co. 10 Gray, 443.

An insurance on ship or outfits or cargo, whether for a particular voyage or for a certain time, is not an insurance on the voyage, but only that, during the term of the policy, the ship, outfits or cargo insured shall not be lost or injured by the perils insured against. Lawton v. Sun Ins. Co. 2 Cush. 500, 518. Greene v. Pacific Ins. Co. 9 Allen, 217, 224, 225, and authorities cited. 3 Kent Com. 328. A constructive total loss of the ship is not a constructive total loss of the cargo, if the cargo arrives in safety at a port at which it may be sold or transshipped. Anderson v. Wallis, 2 M. & S. 240. Hunt v. Royal Exchange Assurance, 5 M. & S. 47. Robinson v. Commonwealth Ins. Co. 3 Sumner, 220, 224. Bryant v. Commonwealth Ins. Co. 6 Pick. 131, and 13 Pick. 543.

In the policies before us, the outfits are valued and insured as a distinct subject from the ship. The plaintiffs, not contending that they can be taken together as one subject of insurance in estimating the amount of damage necessary to make out a constructive total loss, yet insist that by reason of the constructive total loss of the ship there was also a constructive total loss of the outfits. But the outfits, having been separately insured, and having arrived in safety at Honolulu, a large whaling port at which whaling outfits can be bought and sold, cannot, consistently with the well-settled rules of law, be held to have been totally lost by the breaking up of the voyage and the loss of the ship.

The testimony of an adjuster of marine losses in New Bed-ford that, when a constructive total loss of a whale-ship has occurred abroad in the prosecution of her voyage, the outfits have always been treated as following the ship, and as being constructively totally lost also, was clearly incompetent. Evidence of usage is sometimes admissible to explain the words of the policy describing the subject matter insured. Macy v. Whaling Ins. Co. 9 Met. 354. Rogers v. Mechanics' Ins. Co. 1 Story, 603. But it is never admissible to control fhe rules of law as to the mode in which a loss shall be computed. Eager v. Atlas Ins. Co. 14 Pick. 141. Dickinson v. Gay, 7 Allen, 29, 33, 34. Thwing v. Great Western Ins. Co. 111 Mass. 93, 109. Matheson v. Equitable Ins. Co. 118 Mass. 209, 214. Seccomb v. Provincial Ins. Co. 10 Allen, 305.

3. The next question, which affects the Commercial Insurance Company only, is stated on the defendants’ brief to be whether the insured is required by the provisions of the policy and the law of insurance to present to the underwriter before action brought, in a case of constructive total loss for amount of damage merely, an adjustment of the loss as of a partial loss.

That being the only question, and it having been distinctly found by the auditor that the statement furnished by the plaintiff to the defendant “was in proper form as a total loss or constructive total loss statement,” the defendants’ position cannot be maintained. A statement of the loss as a partial loss would be inconsistent with the plaintiff’s claim, and the want of such a statement could not prevent the plaintiff from suing for a constructive total loss. Fuller v. Kennebec Ins. Co. 31 Maine, 325. An “ adjustment,” within the meaning of the policy, implies that the loss has been adjusted between the parties, and loes not contemplate a statement made by a person employed by the assured alone, although he may be called by himself and by them an adjuster. Clark v. United Ins. Co. 7 Mass. 365, 368. M’Lellan v. Marine Ins. Co. 12 Mass. 245, 252. Barlow v. Ocean Ins. Co. 4 Met. 270, 276, 277. 2 Phil. Ins. c. 21. All that the assured can do towards such an adjustment is to present to the underwriters a proper statement, which, if assented to by them, may constitute an adjustment. If they make .no objection to the form of his statement, and suggest no modification of it, after reasonable opportunity to do so, they cannot afterwards set up any omission or imperfection in it to defeat his right of action on the policy.

The result is, that in each of the actions brought by Taber, Read & Co. they are entitled to recover for a total loss of the ship, and, according to the terms of the report of the justice before whom the trial was had, those cases are to be recommitted to the auditor, to report salvage details and exact amounts, and to ascertain the amount of the partial loss upon the outfits.

4. Upon the further question made in the action brought by Howland, whether the abandonment was too late, and especially whether, under the circumstances, any abandonment was necessary, the court desires a Further argument,

Upon this question additional briefs were afterwards submitted by the same counsel.

Gray, C. J.

The judgment already given determines all the questions presented in Howland’s case, except that of abandonment.

' As the declaration alleges, and the answer denies, that an abandonment was duly made, there can be no doubt that this question is open under the pleadings.

The letter of the defendants to the plaintiff, declining to accept the abandonment, distinctly takes the ground that the vessel should not have been condemned and sold; both the declaration of the plaintiff and the report of the auditor assume that an abandonment was necessary; the plaintiff does not appear to have contended before the auditor, or at the trial, either that the sale was made under such circumstances as to excuse him from making an abandonment, or that the defendants had waived the right to object that the abandonment was not seasonably made; and he consented to the reservation for the determination of the court of the single question whether the abandonment was made too late.

But, assuming it to be open to the plaintiff to contend that upon the facts reported by the auditor no abandonment was necessary, the court, upon consideration, is unanimously of opinion that those facts do not support his contention.

Notwithstanding the dicta in Smith v. Manufacturers’ Ins. Co. 7 Met, 448, 451-453, and in Graves v. Washington Ins. Co. 12 Allen, 391, 395, it appears to be settled by authority, in accordance with the plainest principles of justice, that when a vessel has been so injured by perils insured against as to become a constructive total loss, and has been lawfully sold by the master, so as to leave nothing in the assured to abandon, no abandonment is needful to perfect his right to recover a total loss from the underwriters. Gordon v. Massachusetts Ins. Co. 2 Pick. 249, 261, 265, 267. Shaw, C. J., in Peirce v. Ocean Ins. Co. 18 Pick. 83, 88 ; and in Lord v. Neptune Ins. Co. 10 Gray, 109, 116, 124. Putnam J., in Orrok v. Commonwealth Ins. Co. 21 Pick. 456, 464. Patapsco Ins. Co. v. Southgate, 5 Pet. 604, 623. Fuller v. Kennebec Ins. Co. 31 Maine, 325. Potter v. Rankin, L. R. 5 C. P. 341, and L. R. 6 H. L. 83. But the difficulty in this case is that there was no sufficient proof of such necessity as would justify a sale by the master without notice to the underwriters, and that an abandonment was therefore necessary to enable the plaintiff to recover for a constructive total loss.

The rule upon this subject is well settled in this Commonwealth. In Gordon v. Massachusetts Ins. Co. 2 Pick. 249, a vessel insured in Boston had been sold by auction by the master in San Domingo, after surveyors, who had examined her, and directed her to be unloaded and hove down, had upon a further examination reported that, from the damage she had sustained by a gale, and by being driven upon the rocks, she could not be repaired at that place, by reason of the want of materials and the extraordinary cost of making repairs there, without incurring an expense that would exceed the value of the vessel, and therefore they condemned her to be publicly sold for the interest of whom it might concern. The judge presiding at the trial instructed the jury that, if the master acted in good faith, and the surveyors conducted themselves honestly in examining the vessel and in reporting their opinion, the sale was justifiable. But the full court held that the certificate of the surveyors, though entitled to weight, was not conclusive, and that the instruction was too favorable to the assured; and Chief Justice Parker, in delivering judgment, said: “ It is certain that a master of a vessel, as such, has no authority to sell the vessel or the cargo, unless in a case of extreme necessity.” 2 Pick. 262. In Hall v. Franklin Ins. Co. 9 Pick. 466, the court, speaking by that most learned and accurate commercial lawyer, Mr. Justice Putnam, reaffirmed this rule, and added: “ There must be something more than expediency in the case; the sale should be indispensably requisite. The reasons for it should be cogent. We mean a necessity which leaves no alternative; which prescribes the law for itself, and puts the party in a positive state of compulsion to act. The master acts for the owners or insurers, because they cannot have an opportunity to act for themselves. If the property could be kept safely until they could be consulted, and have an opportunity, in a reasonable time, to exercise their own judgment in regard to the sale, the necessity to act for them would cease.” 9 Pick. 478. The rule thus laid down has been uniformly upheld by this court in subsequent cases. Winn v. Columbian Ins. Co. 12 Pick. 279, 282, 286. Bryant v. Commonwealth Ins. Co. 13 Pick. 543, 554. Peirce v. Ocean Ins. Co. and Orrok v. Commonwealth Ins. Co., above cited. Stephenson v. Pacific Ins. Co. 7 Allen, 232, 235. To the same effect are the decisions of the Federal courts in Patapsco Ins. Co. v. Southgate, 5 Pet. 604, 620, 621; in The Sarah Ann, 2 Sumner, 206, 215, and 13 Pet. 387, 401, 402; and in The Amelie, 6 Wall. 18, 27; and of Dr. Lushington in The Bonita, Lush. 252, 563.

In the present case the vessel arrived at Honolulu on December 2, 1874. A survey was immediately called, and the surveyors, after an examination, reported that she* had sustained severe and extensive damage, and advised that she be discharged and hove down for further examination, which being done, and a further examination had, they on December 11 made a report, particularly stating her condition, and the nature and extent of the repairs which she needed, and expressing their opinion that it would be for the best interest of all parties concerned that she should be sold as she was. Knowledge that the vessel had arrived at Honolulu, and had been condemned, reached the plaintiff at his residence in San Francisco within such time that a telegram from him stating those facts was received by Taber, Read & Co. (the assured in the other cases argued with this) at New Bedford on December 21, ten days after the final report of the surveyors ; and on December 31 Taber, Read & Co. and other parties insured on the vessel and outfits made abandonments of their interests to the underwriters. Honolulu was a safe harbor, and there is no evidence whatever of any danger of further injury to the vessel by postponing the sale until the underwriters could be informed of the facts and have opportunity to instruct some one in Honolulu to protect their interests.

The plaintiff therefore wholly fails to prove that the sale made by the master on December 22 had any validity or effect as against the defendants; and he was under the same obligation to make an abandonment as if the vessel had not been sold.

As soon as the assured has, or using due diligence can obtain, knowledge of the facts constituting a constructive total loss, he is bound promptly to elect whether to treat the loss as partial or as total; and, in the latter alternative, to abandon within a reasonable time, in order that the underwriters may take immediate steps to protect the interest in the property which vests in them by virtue of the abandonment. As was said by Lord Kenyon in an early and leading case, “ The assured must make his election speedily, whether he will abandon or not, and put the underwriter into a situation to do all that is necessary for the preservation of property, whether sold or unsold.” Allwood v. Henckell, Park Ins. (8th ed.) 399, 400.

As we have already seen, the plaintiff had knowledge of the condemnation of the vessel within ten days after it took place; and other parties interested in the subject insured made abandonments only ten days later. The protest, survey, bills and other papers relating to the condemnation and sale reached New Bed-ford on February 3, (although it does not appear that this was known to the plaintiff during that month,) and the underwriters themselves obtained from Honolulu by February 9 all the information that they required. The plaintiff made no abandonment until February 22, two months after he knew of the condemnation ; and he has produced no evidence having any tendency to show that the delay was necessary to enable him to ascertain the real extent of the injuries to the vessel, or that he was in fact prosecuting any inquiries upon that subject. The defendants have in no wise waived the necessity of an abandonment, but on the contrary promptly refused to accept it. That they were not prejudiced by the plaintiff’s delay does not excuse him from the duty of making an abandonment seasonably. Mellen v. Louisiana Ins. Co. 5 Martin (N. S.) 563. Upon the undisputed facts of the case a jury would not be warranted in finding that the abandonment was made within a reasonable time. Livermore v. Newburyport Ins. Co. 1 Mass. 264. Smith v. Newburyport Ins. Co. 4 Mass. 668. Orrok v. Commonwealth Ins. Co. 21 Pick. 456. Reynolds v. Ocean Ins. Co. 22 Pick. 191. Gernon v. Royal Exchange Assurance, 2 Marsh. 88, 91; S. C. 6 Taunt. 383, 387. Hunt v. Royal Exchange Assurance, 5 M. & S. 47. Aldridge v. Bell, 1 Stark. 498. Kaltenbach v. Mackenzie, 3 C. P. D. 467.

The result is, that the plaintiff Howland is not entitled to recover for a total loss, and, according to the agreement of the parties and the terms of the report, his case must be recommitted to the auditor to ascertain the amount of the Partial loss.