Aetna Ins. Co. v. United Fruit Co.
304 U.S. 430 (1938)

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U.S. Supreme Court

Aetna Ins. Co. v. United Fruit Co., 304 U.S. 430 (1938)

Aetna Insurance Co. v. United Fruit Co.

No. 773

Argued April 25, 26, 1938

Decided May 23, 1938*

304 U.S. 430




1. The purpose of a stipulation fixing the value of the vessel in a marine hull insurance policy undertaking to indemnify insured irrespective of the actual value is to dispense with proof of value in establishing the extent of liability assumed on the policy. P. 304 U. S. 434.

2. Such a valuation clause, beyond its controlling effect in determining the insurance liability, does not operate, either as an estoppel or by agreement, to exclude proof of actual value when relevant. P. 304 U. S. 435.

3. The valued policy, like an open policy, is a contract of indemnity; in either case the indemnitor is entitled to share in the insured's recovery of damages for loss of the ship only by

Page 304 U. S. 431

way of subrogation, the sole object of which is to make indemnity to the insured up to the amount of the policy the measure of the liability of the insurer. P. 304 U. S. 436.

4. There is no analogy between the insurer's right to be subrogated to the fruits of the insured's recovery from a wrongdoer and the insurer's right to a wreck which is his by abandonment. P. 304 U. S. 437.

5. Underwriters insured the hull of a vessel by policies in which the value of the hull was agreed upon at an amount stated, and each of which provided for a stipulated indemnity to the owner irrespective of the actual value of the vessel. The agreed value was less than the actual value of the hull, so that the owner was uninsured for the difference. As protection against the risk, the owner procured from English underwriters additional P.P.I. (policy proof of interest) policies which waived all right of subrogation and were "honor" policies payable only at the option of the insurers, because unenforceable under the applicable Act of Parliament. Upon a total loss of the vessel by collision with a vessel of the United States, all the policies were paid in full. Thereafter, the owner and the underwriters upon the valued policies joined in pressing their claims against the United States, and, in a suit under a special Act of Congress not allowing recovery of interest, there was recovery of the value of the vessel, much exceeding the total insurance. Held that, in the adjustment, the insurers upon the valued policies were entitled by way of subrogation to no more than the amounts they had paid on their policies, without interest, less their respective shares of the expenses attending the recovery. North of England Iron S.S. Ins. Assn. v. Armstrong, (1870) L.R. 5 Q.B. 244, disapproved. P. 304 U. S. 438.

The insurers submitted no interest computations and made no effort to sustain the burden of proving that the owner had received more than indemnity for the delay in payment of so much of the loss as was not covered by insurance.

92 F.2d 576 affirmed.

Certiorari, 303 U.S. 631, to review affirmances, with modifications, of judgments for interest and expenses recovered by three marine insurance companies in actions at law against the owner of a lost vessel. By agreement, the actions were tried together to the court and one juror. The trial court directed verdicts.

Page 304 U. S. 432

MR. JUSTICE STONE delivered the opinion of the Court.

The question for decision is how far hull insurers upon a valued marine insurance policy are entitled, in case of total loss, to participate by way of subrogation in a recovery by the insured against a tortfeasor responsible for the loss.

In 1918, petitioners, with several other underwriters, insured the hull of respondent's vessel, the Almirante, by policies in which it was agreed that the value of the hull was $632,610, materially less than its true value. The policies provided for a stipulated indemnity to the owner "irrespective of the value of the vessel," and that the owner was free to effect other insurance to any amount and without disclosure of the amounts so insured. As the total of the valued policies was $582,002.25, respondent was co-insurer for about $50,000, and, so far as the valued hull policies were concerned, it was uninsured to the extent of any loss in excess of the stipulated value. As protection against these risks, respondent procured from English underwriters additional P.P.I. (policy proof of interest) insurance, aggregating

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