Buck & Hedrick v. Chesapeake Insurance Company
26 U.S. 151 (1828)

Annotate this Case

U.S. Supreme Court

Buck & Hedrick v. Chesapeake Insurance Company, 26 U.S. 1 Pet. 151 151 (1828)

Buck & Hedrick v. Chesapeake Insurance Company

26 U.S. (1 Pet.) 151

ON DIVISION OF OPINION OF THE JUDGES OF THE CIRCUIT

COURT OF THE UNITED STATES FOR THE DISTRICT OF MARYLAND

Syllabus

Insurance. To affirm that "in policies for whom it may concern, there can be no undue concealment as to the parties interested in the property to be insured" is obviously going much too far, since the underwriter has an unquestionable right to be informed if he makes the inquiry. The assured may be silent, it is true, if he will, and let the premium be charged accordingly, but if the inquiry, when made, should be responded to by information contrary to the verity of the case, this obviously, gives a conventional signification to the terms of the, policy which may differ from the known and received signification in ordinary cases.

A policy "for whom it may concern" will, in ordinary cases, cover belligerent property.

A knowledge of the state of the world -- of the allegiance of particular countries -- of the risks and embarrassments affecting their commerce, of the course and incidents of the trade on which they insure, and of the established import of the terms used in their contracts, "must necessarily be imputed to underwriters."

The term "interest," as used in application to the right to insure, does not necessarily imply property, in: the subject of insurance.

The master of a vessel to whom property shipped on board the vessel under his command is to be consigned, in the absence of proof that the owner of the property had not given authority to order insurance, has an insurable interest in the property on board his vessel, and this interest is sufficient to authorize the recovery of a loss on the policy.

As to the effect of certain instructions in a letter relative to insurance and circumstances connected with the same constituting a representation to vitiate a policy made under the authority and directions of the letter.

This case came before the Court, upon a division of opinion of the judges of the Circuit Court of the United States for the District of Maryland. The action was brought upon two policies of insurance, upon a cargo of sugar on board the brig Columbia in the name of the plaintiffs for the use of Daniel Fitch, who was an American citizen, a sea captain, sailing out of the port of Baltimore, and the owner and commander of the Columbia, and of Gregorio Medina, of Ponce, in the Island of Porto Rico.

The plaintiffs were the agents of Daniel Fitch, and, by two distinct orders under different dates, had policies effected upon their application by the Chesapeake Insurance Company.

The amount of the separate interests of captain Fitch and G. Medina was shown by the following statement, which was admitted to be correct:

Page 26 U. S. 152

The entire cargo embraced in the two policies,

was . . . . . . . . . . . . . . . . . . . . . . . . . $8,413.75

All marked F. in the bill of lading, belonging to

captain Fitch, viz., thirteen hogsheads, five

tierces, and ninety-two barrels of sugar, amounting to 2,076.75

Add charges -- 198.50

---------

Amount of the absolute and legal or equitable

property of captain Fitch $2,275.25

The residue belonged to G. Medina, the legal title

to which, was in captain Fitch, amounting to -- $5,610.65

Add charges -- 527.55

---------

$8,413.75

Amount of the two policies -- 8,000.00

---------

Not covered -- $ 413.75

The Columbia, with her cargo, sailed from Porto Rico for Baltimore, the cargo consigned to captain Fitch and documented as such, G. Medina being on board of the vessel on a visit to the United States. Both vessel and cargo were totally lost near Norfolk by the perils of the sea.

The circumstances attending the insurance and the facts out of which the controversy arose were as follows:

On 6 May, 1822, the plaintiff presented to the office the following order:

"Insurance is wanted against all risks for account of whom it may concern, $3,000 on the brig Columbia, Daniel Fitch master, and on cargo, $6,000 as interest may appear at and from Ponce, Porto Rico, to Baltimore, by a letter from captain Fitch dated 19 April; he says he expects to sail about 5 to 10 May, that the brig is in good order, perfectly tight and seaworthy -- what premium?"

"1 1/4 percent (written on the order by the office)."

"Accepted, BUCK & HEDRICK"

A policy was executed on the same day on cargo, $6,000, insuring Buck & Hedrick, "for whom it may concern." The perils insured against are

"of the seas, men of war, fire, enemies, pirates, rovers, thieves, letters of marque, arrests, taking at sea, restraints of princes, and all other perils, losses, and misfortunes for which assurers are legally accountable."

No inquiry was made by the office for the letter of 19 April, alluded to in the above order, nor was any warranty or representation of any kind made or asked for in regard to said cargo, but the office executed said policy on said order.

Page 26 U. S. 153

On the 24 May, Buck and Hedrick made application for further insurance on cargo, and the following letter from Captain Fitch, dated 27 April, was presented to the office with an order written on the back of said letter, and a like policy was executed for "whom it may concern," without any inquiry for the said letter, of 19 April and for the same premium.

"Ponce, April 27, 1822"

"Messrs. BUCK & HEDRICK:"

"Gentlemen -- I wrote you a few days ago, by the brig Ospray, Captain Perkins, direct for Baltimore, requesting you to have insurance done for me on the brig Columbia and her cargo, owned and commanded by me, to sail from this for Baltimore, about 5 to 10 May with a cargo of sugar. When I wrote to you by the Ospray, I could not say what amount of cargo to have insured for me; I now think I shall have on board about 130,000 lbs. valued at $8,000, which amount I wish you to have insured for me at as low a premium as you can. I wish you to understand that the above sum of $8,000 is not in addition to that mentioned in my last. The whole amount I want insured is $8,000 on cargo and $3,000 on the vessel and freight. She is in perfect good order, tight in every part, built in New Jersey in 1814, and well found."

"Your attention to the above will oblige"

"Your obedient servant,"

"DANIEL FITCH"

On the back of this letter was written the following:

"What will $2,000 be insured at, agreeable to within letter, on cargo, of which you have $6,000 insured some time since."

"BUCK & HEDRICK"

"1 1/4 percent (agreed as interest may appear)."

"BUCK & HEDRICK"

Buck and Hedrick applied to the defendant for payment on said policies, and all the papers to prove the distinct interests of Medina and Fitch were shown, but the office declined to pay either on the ground that said policy covered no one but Fitch, and that the letter of 27th April was a representation that the whole cargo was Captain Fitch's, and therefore affected both policies.

The plaintiff, on the trial, prayed the court to charge the jury:

"1st. That as the policies of insurance in this case purport to insure the plaintiff 'for whom it might concern,' they are not bound to prove that at the time of effecting said insurance or any other time, they disclosed to the defendants that Spanish

Page 26 U. S. 154

property was intended to be covered by said insurance, and that in policies of such description, there can be no undue concealment as to the parties interested in the property to the insured."

"2d. That if the jury believed the policy of 6 May, 1822, was founded on the order of the same date, the policy being 'for whom it may concern,' does cover belligerent as well as neutral property."

"3d. That if the jury believed that the policy dated 24 May, 1822, was founded on the letter of 27 April, 1822, and the order written therein, the policy being 'for whom it may concern' does cover belligerent as well as neutral property."

"4th. That if the said Daniel Fitch, at the date of said policies, was legal and equitable owner of a part of the cargo insured and the legal, though not equitable owner of the residue, the policies 'for whom it may concern' do cover the entire cargo, and said Daniel Fitch is competent in law to recover the whole in his own name, though the belligerent character of a part of the said cargo was not disclosed at the time of effecting said policies of insurance."

"5th. That the court instruct the jury that the letter of 27 April, 1822, with the order written thereon, do not in law amount to a representation that the property to be insured was the sole property of Daniel Fitch or that the whole or any part thereof was not belligerent."

Upon these several prayers, numbered in the record, 1, 2, 3, 5 and 6, the Judges of the circuit court differed in opinion and certified the same to this Court.

Page 26 U. S. 158

MR. JUSTICE JOHNSON delivered the opinion of the Court.

The suit below was instituted on two policies of insurance, the one for $6,000, the other for $2,000, upon the brig Columbia, Daniel Fitch master, at and from the Spanish Island of Porto Rico to Baltimore, for whom it may concern. Buck & Hedrick were the agents of Fitch, and the policies were made in their name. The first policy was executed on 6 May, 1822, and stands unimpeached by any circumstances occurring at the time of its execution. But when application was made for the second policy, which was on 24 May, the agents laid before the underwriters a letter dated Ponce, April 27, 1822, to this effect:

"Messrs. BUCK & HEDRICK:"

"I wrote you a few days ago by the brig Ospray, Captain Perkins, direct for Baltimore, requesting you to have insurance done for m on the brig Columbia and her cargo, owned and commanded by me, to sail from this for Baltimore, about 5 to 10 May with a cargo of sugar. When I wrote you by the Ospray, I could not say what amount of cargo to have insured for me. I now think I shall have on board about 130,000 pounds, valued at $8,000, which amount I wish you to have insured for me,"

&c.

The rest has no material bearing upon the cause. On the back of this letter was written the following inquiry:

Page 26 U. S. 159

"What will $2,000 be insured at, agreeable to within letter, on cargo, of which you have $6,000 insured some time since?"

"BUCK & HEDRICK"

The vessel and cargo were totally lost by the perils of the sea, and the interest proved at the trial consisted of above $2,000, the property of Fitch, and above $6,000 the property of G. Medina, a Spanish subject, of Porto Rico, at that time affected with the character of a belligerent.

The whole cargo was consigned to Daniel Fitch and documented as his -- Medina himself being on board on the voyage.

The order for insurance, on which the policy of 6 May was effected, was in the following words:

"Insurance is wanted against all risks, for account of whom it may concern, $3,000 on the brig Columbia, Daniel Fitch master, and on cargo, $6,000, as interest may appear, at and from Ponce, Porto Rico, to Baltimore; a letter from Captain Fitch, dated 19 April, says he expects to sail about 5 to 10 May -- that the brig is in good order, perfectly tight and seaworthy. What premium?"

Both policies, it appears, were done at a premium of 1 1/4, and on neither occasion was the letter of 19 April called for by the office, nor was any warranty or representation of any kind made or asked for respecting the cargo; beyond what was voluntarily made, and has been stated.

The first instruction on which the court below divided was prayed for by the plaintiffs in these words:

"That as the policies of insurance in this case purport to insure the plaintiffs 'for whom it might concern,' they are not bound to prove that at the time of effecting the insurance or any other time they disclosed to the defendants that Spanish property was intended to be covered by the insurance, and that in policies of such description, there can be no undue concealment as to the parties interested in the property to be insured."

Dangerous as it always is in a court of justice to generalize in the propositions which it decides, it is peculiarly so in questions arising on policies of insurance.

The present proposition is obviously couched in terms too general to admit of an answer in the affirmative without restriction or modification. And as courts of justice are not bound to modify or fashion the instructions moved for by counsel so as to bring them within the rules of law, if this cause had come up on a writ of error to the judgment of the court below for refusing the instruction as prayed, it would be difficult to say that in the terms in which it is presented, the court was bound to give this instruction.

To affirm "That in policies of such description, there can be no undue concealment as to the parties interested in the

Page 26 U. S. 160

property to be insured" is obviously going much too far, since the underwriter has an unquestionable right to be informed if he makes inquiry -- the assured may be silent, it is true, if he will, and let the premium be charged accordingly -- but if the inquiry then made should be responded to with information contrary to the verity of the case, this obviously gives a conventional signification to the terms of the policy, which may differ materially from the known and received signification in ordinary cases. He, for instance, who should insure "for whom it may concern" under an express assurance that there is no belligerent interest in the cargo could not upon any principle be held to have made assurance upon belligerent interest.

This is no more than the application of the general principle that insurance is a contract of good faith, and is void whenever imposition is practiced.

That a policy "for whom it may concern" will in ordinary cases cover belligerent property has been fully conceded in argument. Nor is it contested that previous representation will be sunk or absorbed or put out of the contract where the policy is executed in obvious inconsistency with those representations. But the ground here insisted on for defendants is that the letter of April 27 was a representation that the whole cargo was Captain Fitch's, and that it thereby operated as an imposition upon the underwriters, and as such avoids both policies, or that it affixes a conventional meaning to the phrase in these policies which limits its ordinary import.

Is there anything in the case sufficient to except these policies from the ordinary import and effect of the phrase "for whom it may concern?"

We are of opinion there is not.

Whatever turn of expression may be given to the question or in whatever aspect it may be presented, it is obviously, at last, no more than the simple question have these underwriters been entrapped or imposed upon or seduced into a contract of the force, extent, or incidents of which a competent understanding cannot be imputed to them?

A knowledge of the state of the world, of the allegiance of particular countries, of the risks and embarrassments affecting their commerce, of the course and incidents of the trade on which they insure, and the established import of the terms used in their contract must necessarily be imputed to underwriters. According to a distinguished English jurist Lord Mansfield, in Pelly v. The Royal Exchange, &c., 1 Bur. 341,

"the insurer, at the time of underwriting, has under his consideration the nature of the voyage and the usual manner of conducting it. And what is usually done by such a ship with such a cargo in such a voyage is

Page 26 U. S. 161

understood to be referred to by every policy. Hence, when a neutral, carrying on a trade from a belligerent to a neutral country, asks for insurance 'for whom it may concern,' it is an awakening circumstance. No underwriter can be ignorant of the practice of neutrals to cover belligerent property under neutral names, or of the precautions ordinarily resorted to that the cover may escape detection. The cloak must be thrown over the whole transaction, and in no part is it more necessary than in the correspondence by other vessels, so often overhauled by an enemy, for the very purpose of detecting covers on other cargoes. Letters thus intercepted have often been the groundwork of condemnation in admiralty courts, and underwriters to whom the extension of trade is always beneficial must and do connive at the practice in silence. They ask no questions, propose their premiums, and the contract is as well understood as the most thorough explanation can make it."

There is nothing in the letter in evidence, calculated to mislead an insurer of ordinary vigilance but what was fully explained away by concomitant circumstances. It is true that in the letter Fitch writes to have insurance done for him on "the brig Columbia and her cargo" that he cannot say what amount of cargo to have insured for him. Yet when the offer was submitted, it was endorsed on the back of this letter, and expressly declared to be upon the same cargo, of "which you have $6,000 insured some time since."

The insurance alluded to, was made "for whom it may concern," and this second policy is expressed in the same terms.

Here, then, was a neutral professing himself to be owner of a cargo consisting of produce of the hostile island on a voyage having for its object, to find a market for that produce -- most unnecessarily if himself the real owner or if there were no owners but neutrals -- most unwisely subjecting himself or them to an increase of premium which could not but result from such an offer.

This was a circumstance calculated to induce inquiry. The defendants had a right to make what inquiries they pleased as to the real character of the cargo, and if they did not make those inquiries, the law imputes to them the use of the phrase "for whom it may concern" in its ordinary effect and signification. We are therefore of opinion that this instruction, if so modified as to be confined to the case before the Court, ought to have been given.

The second prayer, amounting only to an affirmance of the general proposition as relates to the policy of 6 May, we are of opinion ought to have been given.

The third prayer, having the same bearing upon the policy

Page 26 U. S. 162

of the 24th May, we are of opinion, for the reasons expressed in the first prayer, ought also to have been given.

By the fifth prayer, the plaintiffs ask of the court to instruct the jury

"That if the said Daniel Fitch, at the time of said policies, was legal and equitable owner of part of the cargo insured, and the legal, though not equitable owner of the residue, policies, 'for whom it may concern' do cover the entire cargo, and said Fitch is competent in law, to recover the whole in his own name -- though the belligerent character of a part of said cargo was not disclosed at the time of effecting said policies."

The language in which this prayer is couched obviously imports two propositions: 1st, that a policy, "for whom it may concern," will cover the whole cargo -- though the assured had only the legal, without the equitable interest in part, and a legal and equitable interest in the residue; and 2d, that Daniel Fitch is competent in law to recover the whole in his own name -- though the belligerent character of part was not disclosed when the policies were executed.

It is a very great objection to this prayer that the language used is too general and abstracted, and not adapted to the case with that studied precision which the law requires -- thereby rendering it scarcely possible for the court to meet it with a simple, positive, or affirmative answer.

To the first of the two propositions, it may be further objected that it is difficult to perceive how it came to be introduced into the cause. Abstracted from the effect of belligerent interest in the cargo, the defense admits that the policy covers all other interests, whether legal or equitable.

And with regard to the second, it is not easy to perceive why the court should be called upon to charge the jury that Daniel Fitch was competent in law to recover the whole in his own name when the suit is in fact prosecuted in the name of the agents and they count upon the interests of both Medina and Fitch.

But the cause has been argued upon the assumption that this prayer brings up the question of insurable interest in Fitch, by whose instructions Buck & Hedrick effected this insurance, and as it is better to follow out the concessions of counsel than to let the cause come up here again upon this point, we will consider that question as being raised by this in connection with the other prayers.

And here, we think, the facts make up a clear case of insurable interest. The only doubt probably arises from one of the most prolific grounds of uncertainty on many subjects, viz., the use of terms, originally unaptly selected, but now rendered legitimate by use. It is only necessary to inspect a few cases

Page 26 U. S. 163

on this doctrine to be satisfied that the term "interest," as used in application to the right to insure, does not necessarily imply property in the subject of insurance.

In the case of Crawford v. Hunter, 8 D. & E. 13, the plaintiffs were commissioners appointed by the Crown under an act of Parliament to superintend the transportation, &c., of Dutch vessels seized in time of peace without any present designation for whom -- whether to be held in trust for the original owners, the Crown, or the captor. The vessel had been carried into St. Helena, and the policy was effected with a view to her safe transportation from that island to England, and after much consideration it was adjudged that this was a good insurable interest, and the plaintiffs recovered.

The same point was afterwards decided in Lucena v. Crawford, 3 Bos. & Pul. 75, on a writ of error to the Exchequer after three arguments and great deliberation -- yet the seizures were made before declaration of war, and the interest of the plaintiffs amounted to nothing but a power over the subject with a claim by quantum meruit for their services.

Putting down the present case, therefore, to its lowest grade of insurable interest, it is equal to that of the plaintiffs in the two cases alluded to -- for Daniel Fitch was at least the agent or trustee of Medina to transport his goods from Porto Rico to a market and to secure them from the chances of capture and loss.

But this case is stronger than the English cases cited, for by the act of Medina himself, Fitch was exhibited to the world, clothed with all the national documents which evidence an absolute property, and for many purposes the real owner would have been estopped to deny it.

We will instance the payment of duties, for which, either as owner or consignee our laws held Fitch absolutely liable. We have therefore no doubt of the sufficiency of the insurable interest in this case.

The last prayer, on which the court below divided, is in these terms:

"That the court instruct the jury that the letter of 27 April, 1822, with the order written thereon, does not in law amount to a representation that the property to be insured was the sole property of Daniel Fitch or that the whole or any part thereof was not belligerent."

We have already expressed our opinion on the proposition here presented. It is to be regretted that this prayer also is so defective in precision. But, it was obviously intended, and so argued, to be confined to a representation, which would vitiate the policy. With relation to the first policy, we are all of opinion that it was unaffected by the letter specified, and

Page 26 U. S. 164

with regard to the second policy, whatever might have been the effect of this letter, had it stood alone -- yet, taken in connection with the concomitant circumstances, it was not fatal to the contract.

On this point, a majority of the Court would be understood to express the opinion that this letter, connected with the order endorsed upon it, the previous insurance referred to, and considered in relation to the state of the world and the nature, character, and ordinary conduct of the voyage insured, was not such a representation as, per se, vitiated the policy.

And this opinion will be certified to the court below.

This cause came on, &c., on consideration whereof, this Court is of opinion

1. That as the policies of insurance in this cause purport to insure the plaintiffs "for whom it may concern," they are not bound to prove that at the time of effecting the said insurance or any other time, they disclosed to the defendant that Spanish property was intended to be covered by the said insurance unless inquiries on the subject were propounded by the insurer prior to the insurance.

2. That if the jury believes the policy of 6 May, 1822, was founded on the order of the same date, the said policy being "for whom it may concern," does cover belligerent as well as neutral interest.

3. That if the jury believes that the policy dated 24 May, 1822, was founded on the letter of 27 April, 1822, and the order written thereon, the policy, being "for whom it may concern," does cover neutral as well as belligerent property.

4. That if the said Daniel Fitch, at the time of the date of the said policies, was legal and equitable owner of part of the cargo insured and legal, though not equitable owner of the residue, the policies, being "for whom it may concern," do cover the entire cargo, and that the said Fitch had a good insurable interest in the whole cargo, and the plaintiffs, as his agents, are competent to recover the whole sum insured thereon on proof of such legal and equitable interest in the said Fitch.

5. That the letter of 27 April, 1824, whatever might be its effect if taken alone, yet taken in connection with the endorsement thereon, with the previous policy to which it refers, the actual state of the world, &c., and the nature of such transactions, is not such a representation as vitiates the policy. All which is ordered and adjudged by this Court to be certified to the said circuit court.

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