Standard Oil Co. of New Jersey v. United States
340 U.S. 54 (1950)

Annotate this Case

U.S. Supreme Court

Standard Oil Co. of New Jersey v. United States, 340 U.S. 54 (1950)

Standard Oil Co. of New Jersey v. United States

Nos. 27 and 28

Argued October 13, 1950

Decided November 27, 1950

340 U.S. 54

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

Syllabus

1. A government war risk insurance policy insuring a ship against "all consequences of hostilities or warlike operations" does not, as a matter of law, cover a loss resulting from a collision occurring during wartime between the insured vessel and a Navy minesweeper engaged in minesweeping operations, where both vessels were at fault. Pp. 340 U. S. 55-61.

(a) To take a loss resulting from a collision out of the category covered by standard marine risk policies and bring it within the coverage of a war risk policy insuring against "all consequences of" warlike operations, the "warlike operation" must be the proximate cause of the collision. Pp. 340 U. S. 57-58.

(b) The courts below did not err in failing to hold as a matter of law that the "warlike operation" of minesweeping was the proximate cause of the collision, and they properly considered the case as depending on the resolution of factual questions. Pp. 340 U. S. 58-59.

(c) While uniformity of decisions here and in England in the interpretation and enforcement of marine insurance contracts is desirable, American courts are not bound to follow House of Lords' decisions automatically. The practice is no more than to accord respect to established doctrines of English maritime law. P. 340 U. S. 59.

(d) This Court cannot be sure what conclusion the House of Lords would reach were this case presented to it. Pp. 340 U. S. 59-60.

2. Since this Court was asked only to determine whether, as a matter of law, the provision insuring against "all consequences of . . . warlike operations" covered the loss resulting from the collision here involved, and certiorari was not granted to consider the divergence between the two courts below in their findings of fact, this Court does not review their findings of fact. Pp. 340 U. S. 57, 340 U. S. 59.

178 F.2d 488, affirmed.

In an admiralty proceeding arising out of a collision between petitioner's ship and a Navy minesweeper, the District Court found that the loss was covered by a government policy of war risk insurance. 81 F.Supp. 183. The

Page 340 U. S. 55

Court of Appeals reversed. 178 F.2d 488. This Court granted certiorari. 339 U.S. 977. Affirmed, p. 340 U. S. 61.

MR. JUSTICE BLACK delivered the opinion of the Court.

These are admiralty proceedings involving the Government's liability on a policy of war risk insurance by which it insured petitioner's steam tanker John Worthington against "all consequences of hostilities or warlike operations." [Footnote 1] Stipulated facts show that, on December 16, 1942, there was a collision between the Worthington and the YMS-12, one of three United States Navy minesweepers clearing the channel approaches to New York harbor. [Footnote 2] Both vessels were at fault in failing "to comply

Page 340 U. S. 56

with the applicable rules" of good seamanship "under the circumstances."

In the District Court, the United States conceded that minesweeping is a "warlike operation," but urged that the evidence failed to show that the collision was a "consequence" of the minesweeping within the meaning of the insurance contract. Petitioner contended that the mere showing of loss from collision with the moving warship established liability under the policy as a matter of law. It argued that this was the English rule which should be followed by American courts. The District Court did not accept petitioner's view of the English rule. It read both the American and English authorities as conditioning the underwriter's liability on proof of facts showing that the "warlike operation" was the "proximate," "predominate, and determining" cause of the loss. The court held for petitioner, finding as a fact that this burden of proof had been met. 81 F.Supp. 183. The Court of Appeals reversed. 178 F.2d 488. It recognized that some language in certain English opinions possibly indicated that the facts relied on would make the war underwriter liable as a matter of law. Nevertheless, it refused to go that far, and, contrary to the District Court, found as a fact that petitioner's evidence failed to show that the warlike phase of the minesweeper's operation had caused the collision. [Footnote 3] Petitioner sought certiorari here without

Page 340 U. S. 57

relying on the divergence below in the findings of fact on the question of causation. Its ground was that the Court of Appeals had failed to hold for petitioner as a matter of law, as the English cases allegedly required. We granted the writ, 339 U.S. 977, because of asserted conflict on this one point with General Ins. Co. v. Link, 173 F.2d 955.

We are asked only to determine whether, as a matter of law, the provision insuring against "all consequences of . . . warlike operations" covered the loss resulting from collision between the Worthington and the minesweeper. Of course, the intention of the contracting parties would control this decision, but, as is so often the case, that intention is not readily ascertainable. Losses from collisions are prima facie perils of the sea covered by standard marine risk policies. [Footnote 4] To take such a loss out of the marine policy and to bring it within the coverage of the provision insuring against "all consequences of" warlike operations, common sense dictates that there must be some causal relationship between the warlike operation and the collision. Courts have long so held in interpreting what was meant by use of the phrase "all consequences" in war risk policies. [Footnote 5] In turn, the existence or nonexistence of causal connection between the peril insured against and the loss has been determined by looking to the factual situation in each case and applying the

Page 340 U. S. 58

concept of "proximate cause." [Footnote 6] Proximate cause in the insurance field has been variously defined. It has been said that proximate cause referred to the "cause nearest to the loss." [Footnote 7] Again, courts have properly stated that proximate cause

"does not necessarily refer to the cause nearest in point of time to the loss. But the true meaning of that maxim is that it refers to that cause which is most nearly and essentially connected with the loss as its efficient cause. [Footnote 8]"

In view of the foregoing, can it be said that the Court of Appeals erred in failing to hold, as a matter of law, that the minesweeping, a warlike operation, was the "predominate and determining" cause of the collision? As we read the record, the facts are susceptible both of the inference that the minesweeping activity of the YMS-12 had some relation to the collision and that it did not. That is to say, reasonable triers of fact, considering all of the circumstances of this collision, might differ as to whether the loss was predominately or proximately caused by usual navigational hazards (and therefore an ordinary marine insurance risk) or whether it was caused by extraordinary perils stemming from the minesweeping (and therefore a war insurance risk). [Footnote 9] Indeed, the District Court and the Court of Appeals did differ on this factual determination.

Page 340 U. S. 59

Since certiorari was not granted to consider that divergence in the findings of fact, we need go no further than to hold that the courts below properly considered the case as depending on the resolution of factual questions.

Petitioner nevertheless contends that (1) we are bound by certain decisions in the House of Lords, and (2) these opinions have announced a "rule of thumb" construction of the phrase "all consequences of . . . warlike operations" under which the facts in this case result in war risk liability as a matter of law. We cannot accept these arguments. It is true that we and other American courts have emphasized the desirability of uniformity in decisions here and in England in interpretation and enforcement of marine insurance contracts. [Footnote 10] Especially is uniformity desirable where, as here, the particular form of words employed originated in England. But this does not mean that American courts must follow House of Lords' decisions automatically. Actually our practice is no more than to accord respect to established doctrines of English maritime law. [Footnote 11]

The difficulties inherent in the rigid conformity rule urged by petitioner are obvious to those familiar with the search for state decisional law under the Erie-Tompkins doctrine. In this very case, we, like the Court of Appeals, cannot be sure what conclusion the House of Lords would

Page 340 U. S. 60

reach were this case presented to it. Some of their decisions indicate that they would have held as a matter of law that the collision was the "consequence" of the warlike operation; [Footnote 12] other cases cannot easily be reconciled with such a result. [Footnote 13] Indeed, in one decision, Lord Wright declared that, "[i]n many cases, reconciliation is impossible. What matters is the decision." [Footnote 14] And even in those decisions, implying that proof of certain facts results in liability as a matter of law, the House of Lords has spoken in terms of factual proximate cause. [Footnote 15] Their most recent decision construing the words before us states that cases applying the "question of law" technique should be carefully restricted to their holdings, and Lord Norman warned,

"The numerous authorities cited can therefore have only a limited bearing on the present issue. . . . [T]hey will easily lead to error if it is attempted to extract from them a principle of law to solve what is a question of fact. [Footnote 16]"

This Court, moreover, has long emphasized that, in interpreting insurance contracts, reference should be made to considerations of business and insurance practices. [Footnote 17] The particular English cases relied on by petitioner produced such an unfavorable reaction among that country's underwriters that they revised the clause here involved

Page 340 U. S. 61

to avoid the injurious effects of those decisions. [Footnote 18] The terms of American war risk policies have also been altered. [Footnote 19]

The proximate cause method of determining on the facts of each case whether a loss was the "consequence" of warlike operations may fall short of achieving perfect results. For those insured and those insuring cannot predict with certainty what a trier of fact might decide is the predominant cause of loss. But neither could they predict with certainty what particular state of facts might cause a court to discover liability "as a matter of law." Long experience with the proximate cause method in American and English courts has at least proven it adaptable and useful in marine and other insurance cases. There is no reason to believe that its application in this case will disappoint the just expectations of insurer or insured.

The judgment of the Court of Appeals is

Affirmed.

[Footnote 1]

The quoted language comes from the "F.C. & S. Clause" ("Free from Capture and Seizure"), and is incorporated by reference in the war risk policy. War risk insurance is written in the following manner: the marine policy, which covers common perils of the sea, generally contains an "F.C. & S. Clause" eliminating from coverage certain named war risks, one of which is "all consequences of hostilities or warlike operations." The excepted risks are insured against either by adding a rider to the original marine policy or by buying coverage from another underwriter -- here, the Government -- who insures the perils excluded by "F.C. & S. Clause." The opinions below set out more fully the documents on which the present insurance obligation rested. For a history of the development of the "F.C. & S. Clause," which originated in England, see 18 Halsbury's Laws of England § 439 (2d ed., 1935); Ionides v. Universal Marine Ins. Co., 14 C.B. (N.S.) 259, 273.

[Footnote 2]

Counsel described the operation this way:

"A minesweeping operation . . . is a formation of vessels, each of which streams out behind it a device on a long cable which, towed along a certain distance under the water, is designed to cut the cable of any mine and bring it to the surface, where it can be destroyed by gunfire, and the like."

[Footnote 3]

We do not read the Court of Appeals decision as meaning that, when negligence is present, the resulting loss can never be a war risk. The District Court held (and the Court of Appeals approved) that

""Proximate' here means, not latest in time, but predominate in efficiency. . . ." "[T]here is necessarily involved a process of selection from among the cooperating causes to find what is the proximate cause in the particular case." It is true that the causes of an event are all the preceding circumstances which brought the event to pass -- and they are myriad."

81 F.Supp. 190. If the "warlike operation" was the "proximate cause" of the collision, then the fact that the "warlike operation" was negligently conducted does not relieve the war risk underwriter of liability. Cf. 55 U. S. Ins. Co. v. Sherwood, 14 How. 351; 1 Phillips on Insurance (5th ed. 1867)

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