Sun Mutual Ins. Co. v. Ocean Ins. Co.
107 U.S. 485 (1883)

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U.S. Supreme Court

Sun Mutual Ins. Co. v. Ocean Ins. Co., 107 U.S. 485 (1883)

Sun Mutual Insurance Company v. Ocean Insurance Company

Decided January 22, 1883

107 U.S. 485

Syllabus

1. Where, in a suit in admiralty by one insurance company against another upon a contract of reinsurance, it became essential for the libellant to show that the risk which it had assumed was the same as that insured against by the policy sued on, and the circuit court asserted the identity of the insurances not in the findings of fact, but as a conclusion of law, the question on appeal is not whether that might be true as a presumption or inference of fact from the circumstances stated in the findings, but whether, upon the facts found, it must be true as a matter of law.

2. The rule established in United states v. Pugh,99 U. S. 265, as to findings of fact in cases from the Court of Claims, applies to appeals from decrees in admiralty under the Act of Feb. 16, 1875, c. 77.

3. It is the duty of the assured to communicate all material facts, and he cannot urge as an excuse for his omission to do so that they were actually known to the underwriters unless the knowledge of the latter was as full and particular as his own information.

4. The exaction of information in some instances may be greater in a case of reinsurance than as between the parties to an original insurance. In the former, the party seeking to shift the risk he has taken is bound to communicate such information within his knowledge as would be likely to influence the judgment of an underwriter.

This was a libel in admiralty, filed in the District Court of the United States for the Southern District of New York by the appellee upon a policy of marine insurance. A decree dismissing the libel was rendered in that court, which, on appeal, was reversed by the circuit court, and a decree entered in favor of the libellant. From that decree the present appeal has been prosecuted. The findings of fact made by the circuit court as the basis of its conclusions of law are as follows:

1. At the several times hereinafter mentioned, the libellant and the defendant were insurance companies engaged in the business of insuring against losses by perils of the sea. The libellant, to be referred to herein as the Ocean Company, was incorporated under the laws of the State of Maine, and had its principal place of business at Portland in that state. The

Page 107 U. S. 486

defendant, to be referred to as the Sun Company, was incorporated under the laws of the State of New York, and had its principal place of business in the City of New York.

2. On or about January 19, 1864, the Sun Company issued its open policy, No. 51,564, to the Ocean Company in the usual form for the insurance of cargoes at and from Cuba to Boston or Portland, it being, however, expressly understood and agreed that no risk would be taken under it unless the Ocean Company "take or have an amount on same risk equal to one-half the amount covered by" the Sun Company. On the 9th of February, 1864, it was agreed in writing noted upon the policy that the policy should "cover such other risks as this (the Sun) company may approve and endorse" thereon. Under this new arrangement, the clause limiting the risks to such as the Ocean Company retained an interest in to the extent named, to-wit, an amount equal to one-half that of the Sun, was kept in force; but February 24, 1864, the president of the Sun Company wrote to the Ocean Company as follows:

"We are willing that you be not obliged to retain a half of risk when you do not wish to do so, but we reserve the right to object to amounts returned, which it is not probable will be too great very often."

The policy issued is as follows:

"No.51,564.] By The Sun Mutual Insurance Company [Cargo"

"The Ocean Insurance Company, on account of whom it may concern, loss payable to them, do make insurance and cause to be insured, lost or not lost, at and from Cuba to Boston or Portland, on property."

"This company not to be liable for more than fifteen thousand dollars by any one vessel at one time, unless otherwise agreed upon at the time of endorsement."

"It is understood and agreed that this company does not take any risk unless The Ocean Insurance Company take or have an amount on same risk equal to one-half the amount covered by this company _______ upon all kinds of lawful goods and merchandise, laden or to be laden on board the good vessel or vessels _______ , whereof is master for this present voyage, _______ , or whoever else shall go for master in the said vessel, or by whatever other name or names the said vessel, or the master thereof, is or shall be named or called

Page 107 U. S. 487

______. Beginning the adventure upon the said goods and merchandise from and immediately following the loading thereof on board of the said vessel at ______ aforesaid, and so shall continue and endure until the said goods and merchandise shall be safely landed at ______ aforesaid. And it shall and may be lawful for the said vessel in her voyage to proceed and sail to, touch, and stay at any ports or places if thereunto obliged by stress of weather, or other unavoidable accident, without prejudice to this insurance. The said goods and merchandise hereby insured are valued at ______. Touching the adventures and perils, which the said Sun Mutual Insurance Company is contented to bear and takes upon itself in this voyage, they are of the seas, men-of-war, fires, enemies, pirates, rovers, thieves, jettisons, letters of mart and counter-mart, surprisals, takings at sea, arrests, restraints, and detainments of all kings, princes, or people, of what nation, condition, or quality soever, barratry of the masters and mariners, and of all other perils, losses, and misfortunes that have or shall come to the hurt, detriment, or damage of the said goods and merchandises or any part thereof. And in case of any loss or misfortune, it shall be lawful and necessary to and for the assured, ______ factors, servants, and assigns to sue, labor, and travel for, in and about the defense, safeguard, and recovery of the said goods and merchandises, or any part thereof, without prejudice to this insurance, to the charges whereof the said insurance company will contribute according to the rate and quantity of the sum herein insured, having been paid the consideration for this insurance by the assured or _____ assigns at and after the rate of two percent nominal ______, subject to such addition or deduction as shall make the premium conform to the established rate at the time the return is made to the company. Property on deck warranted free from claims for damage by wet, exposure, breakage, or leakage. And in case of loss, such loss to be paid within thirty days after proof of loss and proof of interest in the said _____ (the amount of the note given for the premium, if unpaid, being first deducted), but no partial loss or particular average shall in any case be paid unless amounting to five percent, provided always, and it is hereby further agreed, that if the said assured shall have made any other assurance upon the premises aforesaid, prior in date to this policy, then the said Sun Mutual Insurance Company shall be answerable only for so much as the amount of such prior assurance may be deficient towards fully covering the premises hereby assured, and the said Sun Mutual Insurance Company shall return the premium upon so much of the sum

Page 107 U. S. 488

by them assured as they shall be by such prior assurance exonerated from. And in case of any insurance upon the said premises subsequent in date to this policy, the said Sun Mutual Insurance Company shall nevertheless be answerable for the full extent of the sum by them subscribed hereto, without right to claim contribution from such subsequent assurers, and shall accordingly be entitled to retain the premium by them received in the same manner as if no such subsequent assurance had been made. It is also agreed that the acts of the insured or insurers in recovering, saving, and preserving the property insured, in case of disaster, shall not be considered a waiver or acceptance of an abandonment. It is also agreed that the property be warranted by the assured free from any charge, damage, or loss which may arise in consequence of a seizure or detention, for or on account of any illicit or prohibited trade, or any trade in articles contraband of war."

"If laden on board a vessel of a belligerent nation, warranted free from loss or expense arising from capture, seizure, or detention, or the consequences of any attempt thereat; or if by a neutral vessel, warranted not to abandon in case of capture, seizure, or detention, until after condemnation of the property insured, nor until ninety days after notice of said condemnation is given to the company; also warranted not to abandon in case of blockade, and free from any expense in consequence of capture, seizure, detention, or blockade, but in the event of blockade to be at liberty to proceed to an open port, and there end the voyage, any stipulations in this policy to the contrary notwithstanding."

"In case of claims for damage on dry goods or hardware exceeding fifteen percent, the company to have the privilege of settling upon the principle of a salvage loss, paying to the assured the sum insured, with the freight and the duties."

"In witness whereof, the president or vice-president of the said Sun Mutual Insurance Company hath hereunto subscribed his name and the sum insured, and caused the same to be attested by their secretary in New York, the sixteenth day of January, one thousand eight hundred and sixty-four."

"MEMORANDUM -- It is agreed, that bar, bundle, rod, hoop and sheet iron, wire of all kinds, tin plates, steel, madder, sumac, wickerware and willow, manufactured or otherwise, salt, grain of all kinds, tobacco, Indian meal, fruits (whether preserved or otherwise), cheese, dry fish, vegetables and roots, rags, hempen yarn, bags, cotton bagging and other articles used for bags or bagging, pleasure carriages, household furniture, skins and hides, musical

Page 107 U. S. 489

instruments, looking-glasses and all other articles that are perishable in their own nature are warranted by the assured free from average unless general; hemp, tobacco stems, matting and cassia, except in boxes, free from average under twenty percent, unless general, and sugar, flax, flax seed and bread are warranted by the assured free from average under seven percent unless general, and coffee in bags or bulk, pepper in bags or bulk, and rice free from average under ten percent unless general."

"Warranted by the assured free from damage or injury from dampness, change of flavor, or being spotted, discolored, musty or moldy, except caused by actual contact of sea water with the articles damaged, occasioned by sea perils. In case of partial loss by sea damage to dry goods, cutlery, or other hardware, the loss shall be ascertained by a separation and sale of the portion only of the contents of the packages so damaged and not otherwise, and the same practice shall obtain as to all other merchandise as far as practicable."

"This company is not liable for leakage on molasses or other liquids unless occasioned by stranding or collision with another vessel."

"If the voyage aforesaid shall have been begun and shall have terminated before the date of this policy, then there shall be no return of premium on account of such termination of the voyage."

"In all cases of return of premium in whole or in part, one-half per cent upon the sum insured is to be retained by the assurers."

"100,000 (one hundred thousand dollars)."

"S. WHITEHEAD, Vice-president"

"E. R. ANTHONY, Secretary"

"1864. February 2. Additional $100,000 (one hundred thousand dollars), subject to same conditions as above."

"S. WHITEHEAD, Vice-president"

"E. R. ANTHONY, Secretary"

Written on margin opposite additional subscription the following:

"Warranted by the assured free from all claim for loss or damage arising from any warlike or belligerent act, or from capture, seizure, restraint, or detention by any privateer, cruiser, or armed vessel whatsoever."

3. This policy was issued with the expectation that it would be used by The Ocean Company for the purposes of reinsurance,

Page 107 U. S. 490

an arrangement for such a business on the part of the company having been made.

4. December 24, 1863, Charles S. Pennell, as an owner and agent of the ship C. S. Pennell, of 975 tons burden, and then lying in the harbor of Portland, Maine, chartered the whole of the vessel, including the staterooms in cabin not used by the officers, and deckrooms not used for the crew or for sails and stores, to Sutton & Co. for a voyage from New York to San Francisco. No cargo was to be received on board except with the written consent of the charterers, and they were to pay "for the charter or freight," on the good and proper discharge of the cargo in San Francisco, $26,500, less two and one-half percent commission. George M. Melcher was at the time master of the ship, and his primage on the freight money, if earned, would have been $1,325. This charter will be referred to as the San Francisco charter.

5. After the making of this charter, the vessel sailed from Portland to New York, and was there put up and advertised by Sutton & Co. as a general ship for San Francisco. That firm at that time represented what was known as the Dispatch Line of San Francisco packets.

6. January 30, while the ship was in New York, loading under her San Francisco charter and advertised for that voyage, her master chartered her again to the Peruvian government. By the terms of this charter, she was to sail from New York on or before June 1, 1864, to San Francisco, and thence proceed with all convenient dispatch to Callao, Peru, and from thence, if on inspection she should be found to be well conditioned for the voyage, to the Chincha Islands for a cargo of guano to be taken to Hamburg or Rotterdam. The freight to be paid was at the rate of

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