122 F. 278 | W.D.N.Y. | 1903
This is a motion by certain petitioners directing the final disposition of a fund in the registry of the court as between the owners and the underwriters of the injured ship.
On October 19, 1896, the steamer Grand Traverse, owned by the libelant Lackawanna Transportation Company, collided in Lake Erie with the steamer Livingstone. Both vessels were under way. The Grand Traverse sunk in the channel about three miles east of Colchester Light, and became a total loss. Her owner libeled the Livingstone, attributing to that vessel the whole fault of the disaster. Claimants of the cargo of the Grand Traverse, and others sustaining
“The company has decided to abandon the ship, and hereby give notice of such abandonment, as provided in the policies issued from your office on said steamer Grand Traverse.”
The underwriters formally acknowledged this abandonment on January 5, 1897, in the following communication:
“We have your favor of the 31st ult. making abandonment of steamer Grand Traverse, which we hereby accept on behalf of underwriters. If you will send us proofs of loss and policies, we will at once proceed with settlement of total loss.”
On January 7, 1897, the policies and proofs of loss were duly filed with the agent of the underwriters. Subsequently, on January 23, 1897, a bill of sale of the Grand Traverse was executed and delivered to the assurers. It is admitted that the assurers paid the sum of $25,000 for and on account of the total loss of the ship, and that they sold the abandoned wreck for $300, which sum was expended for surveys and otherwise, and that later the vessel was blown up to clear the channel. The final recovery against the Livingstone in favor of the owners of the Grand Traverse, amounting to $37,500, was for the
It is contended, for the libelant, that the abandonment did not ipso facto pass to the assurers a right of action against the ship whose tortious act produced the total actual loss, beyond the amount of insurance paid in fulfillment of their contract, and that the choses in action against the Livingstone could not pass to the insurer, as the abandonment transferred only the physical property which was subject to the contract of insurance. It is vigorously insisted that the assurers’ remedy against the wrongdoer arises from the equitable doctrine of subrogation, and therefore the remedy open to the petitioners is only in the nature of indemnity and for reimbursement of the amount paid by them. These contentions cannot be maintained. It is a well-settled principle of law that, where the loss covered by marine insurance is absolute, the assured is entitled to recover the amount for which he was insured, without giving notice of abandonment. It is practically conceded on all sides that the Grand Traverse was a total loss, and that by the abandonment very remote opportunity was afforded the insurers to diminish the loss by salvage. Preliminary notice of abandonment, as held by the cases, is essential only where the insured elects to convert a constructive or technical loss into an absolute total loss. Fleming v. Smith, 1 H. L. Cas. 513; Hall & Long v. Railroad Cos., 80 U. S. 371, 20 L. Ed. 594. Under such circumstances it is implied that the property insured and partially destroyed is in danger of total loss by the perils insured against, and, further, that some hope or chance remains of rendering absolute destruction doubtful or problematical. The rights of the parties become fixed and determined by the abandonment. Peele v. Merchants’ Ins. Co., 3 Mason, 27, Fed. Cas. No. 10,905; Knight v. Faith, 15 Q. B. 647; Arnould on Marine Ins. § 1091; Bradlie v. Maryland Ins. Co., 12 Pet. 378, 9 L. Ed. 1123; 3 Kent’s Com. 321; Orient Ins. Co. v. Adams, 123 U. S. 67, 8 Sup. Ct. 68, L. Ed. 63. A recent well-considered English decision, Sailing Ship “Blairmore” Co. v. Macredie [1898] App. Cas. 593, holds that a'total loss is incurred when a ship
“Section 1045. If by reason of those perils the assured is permanently and irretrievably deprived, not only of all present possession and control over it, but of all reasonable hope or possibility of ever ultimately recovering possession of or further prosecuting the adventure upon it, that is a cause of absolute total loss, independently of the election of the assured to treat it as such. Notice of abandonment would in such case be a mere idle formality, because nothing remains to be abandoned. In such cases, therefore, no notice of abandonment is required; but if any remains of the wrecked ship or perished goods ultimately come to hand * * * are considered as a salvage to which underwriters are entitled after payment of total loss. Hence it is that absolute total losses are familiarly known in insurance law as ‘salvage losses;’ without abandonment.”
Nevertheless, whatever the status of the injured ship, she was actually abandoned by her owners, and the assurers accepted such abandonment. They paid the amount agreed upon in the policy of insurance as the value of the ship. As acts of abandonment must be judged from the circumstances of each case, the criterion established by the parties themselves is the test of abandonment, and from that standard the questions involved will be considered. What interest in the abandoned ship was acquired by the underwriters ? To what extent is such interest affected by payment of the value of the ship as fixed by the policies on account of which the loss is paid? The contract of insurance under consideration by its terms contemplates the payment by the assurers on the basis of the full value of the ship, as fixed in the policy, whenever a loss insured against shall have been sustained. It was the intendment of the assured and assurers that the subject of the insurance should have a stated, fixed, and determined value. The adjustment and determination of all loss and damages sustained were dependent upon the value stated in the contract of insurance. What the parties intended is therefore defined and controlled by the policy. It is not claimed that any of those conditions upon which a settlement of the loss is based is either fraudulent, inconsistent, or repugnant to the legal rights of the assured, and hence such valuation is conclusive upon the parties as the sum which the assured is entitled to receive at the hands of the assurers. This is the principle enunciated in Marine Co. v. Hodgson, 6 Cranch, 206, 3 L. Ed. 200; Barker v. Janson, L. R. 3 C. P. 303. The Providence & Stonington Co. v. The Phœnix Ins. Co., 89 N. Y. 560, and other well-considered cases. In Marine Ins. Co. v. Hodgson the court expressly decided that in an action upon a valued policy it is not competent to give parol evidence that the ship was of different value from that stated in the policy. In Columbian Ins. Co. v. Ashby, 29 U. S. 143, 7 L. Ed. 809, the Supreme Court held that the insured, by operation of law, became, after abandonment, the agent of the underwriters, and he was obliged to lighten the burden which was to fall on the underwriters by endeavoring to save from destruction such of the property insured as he could.
“Where the policy Is an open policy, and simply a policy of indemnity as to the actual value of the vessel, no difficulty would arise in such a case as this. It is only because it is a valued policy that these difficulties present themselves. I think we must still apply the old rules, and not make new; and if a party chooses to have his - vessel or his goods, as the case may be,, taken at a fixed value, instead of leaving the contract, as in an ordinary policy, simply one of indemnity to the extent of the real value, and if thereby any benefit accrues to the underwriters, the underwriters must be entitled; to it.”
In the same case Rush, J., stated as follows:
“If each of the parties agrees that a certain sum shall be deemed to be the value of the thing insured, the underwriter, in case of a total loss, is not to be at liberty to say the thing is not worth so much; he is bound to pay the amount fixed upon, whether it is a proper amount or not. And, on the*283 other hand, the assured is not at liberty to say it is worth more; he is-bound by that amount. * * * If the underwriters had got the wreck up, and if they had procured the wrongdoer to repair the vessel, the vessel so repaired would still belong to the underwriters. What difference can it make whether the wrongdoer repairs the thing in specie, or pays in money the amount it would take to repair? In either ease, whatever is recovered belongs to the underwriters, by reason of their having paid that which both parties agreed should be deemed to be the full value of the property insured.”
The essence of this rule is also based upon the contractual relations between insurer and insured fixing and determining the full value of the ship. I can see nothing unconscionable in the requirements of the law, where, as here, the vessel was abandoned with full knowledge of the legal rights and remedies which, by virtue of the transfer and claim for a total loss, vested in the underwriters. The English doctrine has been approved and followed by the courts of this country. Indeed, prior to the decision in the Armstrong Case, Justice Story, in Comegys v. Vasse, 1 Pet. 193, 7 L. Ed. 108, in speaking of the rights and remedies of the assured, said:
“The law gives to the act of abandonment, when accepted, all the effects which the most accurately drawn assignment would accomplish. By the act of abandonment, the assured renounces and yields up to the underwriters all his right, title, and claim to what may be saved; and leaves it to him to make the most of it, for his own benefit. The underwriter then stands in the place of the assured, and becomes legally entitled to all that can be rescued from destruction.”
Further on in the opinion he says:
“Whatever may be afterwards recovered or received, whether in the course of judicial proceedings or otherwise, as a compensation for the loss, belongs to the underwriters.”
See, also, Clark v. Wilson, 103 Mass. 219, 4 Am. Rep. 532; The Potomac, 105 U. S. 630, 26 L. Ed. 1194; Mobile, etc., Ry. Co. v. Jurey, 111 U. S. 594, 4 Sup. Ct. 566, 28 L. Ed 527; Phœnix Ins. Co. v. Erie Trans. Co., 117 U. S. 312, 6 Sup. Ct. 750, 29 L. Ed. 873; The St. Johns (D. C.) 101 Fed. 469; Mason v. Marine Ins. Co., 49 C. C. A. 106, 110 Fed. 452, 54 L. R. A. 700. In Mobile, etc., Ry. Co. v. Jurey, supra, the Supreme Court repeated the rule as follows :
“Insurers of a ship which has been run down and sunk by the fault of another ship are, upon their payment of a total loss, subrogated to the right of the insured to recover therefor against the owners of the latter vessel, and, if their policy was a valued one, their payment of this value will give them the whole spes recuperandi, and the right to the whole damages, though the insured vessel was in fact worth a larger sum than the valuation named in the policy.”
In Phœnix Ins. Co. v. Erie Trans. Co., 117 U. S. 312, 6 Sup. Ct. 750, 29 L. Ed. 873, the Supreme Court, having a similar question before it, said:
“From the very nature of the contract of insurance as a contract of indemnity, the insurer, when he has paid to the assured the amount of the indemnity agreed on between them, is entitled, by way of salvage, to the benefit of anything that may be received, either from the remnants of the goods, or from damages paid by third persons for the same loss.”
This was a case arising upon payment of a total loss upon the goods insured. It is evident that the entire current of authority is to the
Notwithstanding these decisions, a different rule is contended for by counsel for libelant. I am unable to perceive from the record how this court, upon any theory, can hold that the subrogated rights of the insurers simply arise by subrogation, and should not exceed the valuation paid. It may well be that the insurance companies ought not to receive more than they actually paid. Perhaps no profit- ought to be earned by them through the fate of the Grand Traverse, but, as has been observed, insurers are liable on valued policies for overvaluation of the thing insured. It would be, therefore, a peculiar rule which construed the plainly understood terms of a policy, formulated by the parties themselves, in a manner depriving the assurer of accrued benefits, simply because of the remarkably rare feature of a recovery in excess of the amount paid by the underwriters to the assured. Suppose the value of the Grand Traverse had been adjudged less than the value agreed upon, could it be successfully contended that the insurance companies were entitled to a return of the amount paid over and above the stipulated value? Clearly not. This question was again answered in the negative, by implication at least, in the St. Johns Case. The mere failure to find a case in the books where an insurance company, the ship having been abandoned, recovered damage against the tort feasor over and above the insurance paid on a valued policy, will not justify a departure from the principles laid down by the text-writers of marine insurance, and the many analogous decisions by the highest courts of England and this country. The rule found in the Armstrong Case, which has guided those who have taken and accepted insurable marine risks for many years, has been reaffirmed by our courts beyond all uncertainty and dispute. I do not regard myself at liberty to depart from an established principle which, to use the language of Judge Brown in International Navigation Company v. Atlantic Mutual Insurance Co. (D. C.) 100 Fed. 314, is “so long established as may well be deemed to enter into the contract as the understanding of the parties to it.”
The equities of the case. The insurance companies might have originally libeled the Livingstone to recover the damages to which they became entitled by the abandonment and payment of the agreed value of the sunken ship, or have permitted the owners of the Grand Traverse to prosecute the Livingstone in their behalf. The Keokuk, Fed. Cas. No 7,721. Instead of availing themselves of their legal rights to intervene, the libel having been instituted by the owners of the Grand Traverse, they attempted to prevent successful termination
1. See Insurance, vol. 28, Cent. Dig. §§ 1222, 1224, 1240, 1514.