Peters v. Warren Insurance Company
39 U.S. 99 (1840)

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U.S. Supreme Court

Peters v. Warren Insurance Company, 39 U.S. 14 Pet. 99 99 (1840)

Peters v. Warren Insurance Company

39 U.S. (14 Pet.) 99

ON CERTIFICATE OF DIVISION FROM THE CIRCUIT COURT OF

THE UNITED STATES FOR THE DISTRICT OF MASSACHUSETTS

Syllabus

Insurance. Insurance was made to the amount of eight thousand dollars on the ship Paragon, for one year. The policy contained the usual risks, and among others, that of the perils of the sea. The assured claimed for a loss by collision with another vessel, without any fault of the master or crew of the Paragon, and also insisted on a general average and contribution. The Paragon was in part insured; and in November, 1836, in the year during which the policy was in operation, she sailed from Hamburgh in ballast for Gottenburgh for a cargo of iron for the United States. While proceeding down the Elbe with a pilot on board, she came in contact with a galliot and sank her. She lost her bowsprit, jib boom, and anchor and was otherwise damaged, and put into Cuxhaven, a port at the mouth of the Elbe and in the jurisdiction of Hamburgh. The captain of the galliot libeled the Paragon, alleging that the loss of his vessel was caused by the carelessness or fault of those on board the Paragon. Upon the hearing of the cause, the court decided that the collision was not the result of the fault or carelessness of either side, and that therefore, according to the marine law of Hamburgh, the loss was a general average loss, and to be borne equally by both parties -- that is, that the Paragon was to bear one-half of the expense of her own repairs and to pay one-half of the value of the galliot, and that the galliot was to bear the loss of the half of her own value and to pay one-half of the repairs of the Paragon. The result of this decree was that the Paragon was to pay two thousand six hundred dollars, being one-half of the value of the galliot (three thousand dollars) after deducting one-half of her own repairs, being four hundred dollars. The owners of the Paragon, having no funds in Hamburgh, the captain was obliged to raise the money on bottomry. There being no cargo on board the Paragon and no freight earned, the Paragon was obliged to bear the whole loss. Held that the assured were entitled to recover.

A loss by collision, without any fault on either side, is a loss by the perils of the sea within the protection of the policy of insurance. So far as the injury and repairs done to the Paragon itself extend, the underwriters are liable for all damages.

The rule that underwriters are liable only for losses arising from the proximate cause of the loss, and not for losses arising from a remote cause, not immediately connected with the peril, is correct when it is understood and applied in its true sense, and as such, it has been repeatedly recognized in this Court.

The law of insurance, as a practical science, does not indulge in niceties. It seeks to administer justice according to the fair interpretation of the intention of the parties, and deems that to be a loss within the policy which is a natural and necessary consequence of the peril insured against.

If there be any commercial contract which more than any other requires the application of sound common sense and practical reasoning in the exposition of it and in the uniformity of the application of rules to it, it is certainly a policy of insurance.

It has been held by learned foreign writers on the law of insurance that whenever the thing insured becomes by law directly chargeable with any expense, contribution, or loss in consequence of a particular peril; the law treats the peril, for all practical purposes, as the proximate cause of such expense, contribution, or loss. This they hold upon the general principles of law applicable to the contract of insurance. In the opinion of the Supreme Court, this is the just sense and true interpretation of the contract.

In all foreign voyages, the underwriters necessarily have it in contemplation that the vessel insured must, or at least may be, subjected to the operation of the laws of the foreign ports which are visited. Those very laws may in some cases impose burdens, and in some cases give benefits, different from our laws, and yet there are cases under policies of insurance, where it is admitted the foreign law will govern the rights of the parties, and not the domestic law. Such is the known case of general average, settled in a foreign port according to the local law; although it may differ from our own law.

Page 39 U. S. 100

This was a case on a policy of insurance dated 1 April, 1836, whereby the defendants insured the plaintiffs, for whom it may concern, payable to them, eight thousand dollars on the ship Paragon, for the term of one year, commencing the risk on 15 March, 1836, at noon, at a premium of five percent. The declaration alleged a loss by collision with another vessel, without any fault of the master or crew of the Paragon, and also insisted on a general average and contribution.

The parties agreed that the verdict should be rendered by the jury for the plaintiff or for the defendants, according to the opinion of the court, upon the matters of law arising upon the following statement of the facts of the case. The plaintiffs are the owners of the ship Paragon, insured by the defendants in part.

On 10 November, 1836, the vessel sailed from Hamburgh, in ballast, for Gottenburgh, to procure a cargo of iron, for the United States.

Whilst proceeding down the Elbe, with a pilot on board, she came in contact with a galliot called Frau Anna and sank her. The Paragon lost her bowsprit, jib boom, and anchor and sustained other damages which obliged her to go into Cuxhaven, a port at the mouth of the Elbe, and subject to the jurisdiction of Hamburgh, for repairs.

Whilst lying there, the captain of the galliot libeled the Paragon in the Marine court, alleging that the loss of the vessel was caused by the carelessness or fault of those on board the Paragon. The ship was arrested but subsequently released on security's being given by the agents of the owners to respond to such damages as should be awarded by the court.

The captain of the Paragon, in his answer, denied the charges of carelessness or fault on the part of those on board of his ship, and the court, after hearing the parties and their proof, decided that the collision was not the result of fault or carelessness on either side and that therefore, according to article first, title eighth, of the Marine Law of Hamburgh, the loss was a general average loss, and to be borne equally by each party -- that is, the Paragon was to bear one-half of the expense of her own repairs and to pay one-half of the value of the galliot, and the galliot was to bear the loss of one-half of her own value and to pay one-half of the expense of the repairs of the Paragon. In conformity with this decision, a general average statement was drawn up by Mr. Oldermann, the Despacheur of Hamburgh, an officer appointed by law and by whom alone such statements can be prepared.

In this statement are charged first, the expenses of repairing the Paragon, after making the deduction of one-third new for old, saving one of her anchors and chains, which was lost at the time of the collision, wages and provisions of the captain and the crew, during the detention, and the expenses of surveys, protest, defending the suit, &c., amounting in all to about eight hundred dollars, and one-half of which is charged to the Paragon, and one-half to the galliot.

Page 39 U. S. 101

Secondly are charged the value of the galliot, as by appraisal under an order of court, of her freight and cargo, the expenses of surveys, protest, prosecuting the suit, &c., amounting in all to about six thousand dollars, one-half of which is to be charged to the Paragon.

The statement concludes thus:

Which according to the before mentioned ordinance

relating to insurance and average, is to be borne

by ship, cargo, and freight, as general average.

The ship Paragon has to claim from the Frau

Anna, for half the damages, say . . . . . . . . . . $ 400

And the Frau Anna from the Paragon, one-half the

damages, say. . . . . . . . . . . . . . . . . . . . $3,000

So that the Paragon must pay. . . . . . . . . . . . $2,600

Which amount the Tribunal of Commerce decreed should be paid instanter.

The owners of the Paragon, having no funds in Hamburgh, the Captain was obliged to raise the money on bottomry.

There being no cargo on board of the Paragon and no freight earned, the ship has to bear the whole of the general average loss.

The judges of the circuit court were opposed in opinion on the following point and question, viz.,

"whether, in this case, the contributory amount paid by the Paragon on account of the collision was a direct, positive, and proximate effect from the accident, in such sense as to render the defendants liable therefor upon this policy."

And on the point and question aforesaid, at the request of the defendants, the same was stated by the said judges, and under their direction as aforesaid it was ordered to be certified under the seal of the said circuit court to the Supreme Court of the United States at its next session, to be by the said Court finally decided.

Page 39 U. S. 107

MR. JUSTICE STORY delivered the opinion of the Court.

The defendant, by a policy of insurance, dated 1 April, 1836, insured the plaintiffs, for whom it may concern, payable to them, eight thousand dollars, on the ship Paragon, for the term of one year, commencing the risk on 13 March, 1836, at noon, at five percent. The policy contained the usual risks, and among others, that of perils of the sea. The declaration alleged a loss, by collision with another vessel, without any fault of the master or crew of the Paragon, and also insisted on a general average and contribution. The parties at the trial agreed upon a statement of facts, by which it appeared that the Paragon was owned by the plaintiffs, and was in part insured by the defendants, by the policy above mentioned. On 10 November, 1836, the Paragon sailed from Hamburgh, in ballast, for Gottenburgh, to procure a cargo of iron for the United States. While proceeding down the Elbe, with a pilot on board, she came in contact with a galliot called the Frau Anna and sunk her. By this accident, the Paragon lost her bowsprit, jib boom, and anchor, and sustained other damage, which obliged her to put into Cuxhaven, a port at the mouth of the Elbe, and subject to the jurisdiction of Hamburgh, for repairs. Whilst lying there, the captain of the galliot libeled the Paragon in the Marine court, alleging that the loss of the vessel was caused by the carelessness or fault of those on board of the Paragon. The ship was arrested, but was subsequently released on security being given by the agents of the owners, to respond to such damages as should be awarded by the court. Upon the hearing of the cause, the court decided that the collision was not the result of fault or carelessness on either side, and that therefore, according to the marine law of Hamburgh, the loss was a general average loss and to be borne equally by each party -- that is to say that the Paragon was to bear one-half of the expense of her own repairs and to pay one-half of the value of the galliot, and that the galliot was to bear the loss of one-half of her own value, and to pay one-half of the repairs of the

Page 39 U. S. 108

Paragon, the result of which was that the Paragon was to pay the sum of two thousand six hundred dollars, being one-half of the value of the galliot (three thousand dollars) after deducting one-half of her own repairs, (four hundred dollars). The owners of the Paragon having no funds in Hamburgh, the captain was obliged to raise the money on bottomry. There being no cargo on board of the Paragon and no freight earned, the Paragon was obliged to bear the whole loss.

Upon this state of facts, the question arose whether in this case the contributory amount paid by the Paragon on account of the collision was a direct, positive, and proximate effect from the accident in such sense as to render the defendants liable therefor. Upon this question the judges were opposed in opinion, and it has accordingly been certified to this Court for a final decision.

That a loss by collision, without any fault on either side, is a loss by the perils of the sea within the protection of the policy of insurance is not doubted. So far as the injury and repairs done to the Paragon itself extend, it is admitted that the underwriters are liable for all the damages. The only point is whether the underwriters are liable for the contribution actually paid on account of the loss of the galliot.

This point does not appear ever to have been decided in any of the American courts. It is proper, therefore, to examine it upon principle and to ascertain what is the true bearing of the foreign authorities upon it.

And first upon principle: that the owners of the Paragon have been compelled to pay this contribution without any fault on their side is admitted; that it constituted a proper subject of cognizance by the Marine court of Hamburgh, the collision having occurred within the territorial jurisdiction of that city, is also admitted; and that the claim constituted a charge or lien upon the Paragon, according to the local law, capable of being enforced by a proceeding in rem, is equally clear. Why then should not the loss be borne by the underwriters, since it was an unavoidable incident or consequence resulting from the collision?

The argument is that in the law of insurance, which governs the present contract, it is a settled rule that underwriters are liable only for losses arising from the proximate cause of the loss, and not for losses arising from a remote cause not immediately connected with the peril. Causa proxima non remota spectatur. The rule is correct when it is understood and applied in its true sense, and as such it has been repeatedly recognized in this Court. But the question in all cases of this sort is what, in a just sense, is the proximate cause of the loss?

The argument in the present case on the part of the defendants is that the law of Hamburgh is the immediate or proximate cause of the loss now claimed, and the collision is but the remote cause. But surely this is an over-refinement, and savors more of metaphysical than of legal reasoning. If the argument were to be followed

Page 39 U. S. 109

out, it might be said, with more exactness, that the decree of the court was the proximate cause, and the law of Hamburgh the remote cause of this loss. But law, as a practical science, does not indulge in such niceties. It seeks to administer justice according to the fair interpretation of the intention of the parties, and deems that to be a loss within the policy, which is a natural or necessary consequence of the peril insured against. In a just view of the matter, the collision was the sole proximate cause of the loss, and the decree of the court did but ascertain and fix the amount, chargeable upon the Paragon, and attached thereto at the very moment of the collision. The contribution was a consequence of the collision, and not a cause. It was an incident inseparably connected, in contemplation of law, with the sinking of the galliot, and a damage immediate direct, and positive, from the collision. In the common case of an action for damages for a tort done by the defendant, no one is accustomed to call the verdict of the jury and the judgment of the court thereon the cause of the loss to the defendant. It is properly attributed to the original tort, which gave the right to damages consequent thereon, which damages the verdict and judgment ascertained but did not cause.

But let us see how the doctrine is applied in other analogous cases of insurance to which, as much as to the present case, the same maxim ought to apply if there is any just foundation for it here. If there be any commercial contract which more than any other requires the application of sound common sense and practical reasoning in the exposition of it and in the uniformity of the application of rules to it, it is certainly a policy of insurance, for it deals with the business and interests of common men, who are unused to deal with abstractions and refined distinctions. Take the case of a jettison at sea to avoid a peril insured against. It is a voluntary sacrifice, and may be caused by the perils of the sea, but it is ascertained long afterwards, and that ascertainment, whether made by a court of justice or by an agreement of the parties, would, in the sense of the maxim contended for in the argument, be the immediate cause of the contribution, and the jettison but a remote cause, and the violence of the winds and waves a still more remote cause of the jettison. Yet all such niceties are disregarded, and the underwriters are held liable for the loss thus sustained by the jettison, as a general average. It is no answer to say, that this is now the admitted doctrine of the law, and therefore it is treated as a loss within the policy. The true question to be asked is why is it so treated? General average, as such, is not, eo nomine, insured against in our policies. It is only payable when it is a consequence, or result, or incident (call it which we may) of some peril positively insured against -- as, for example, of the perils of the sea. The case of a ransom after capture stands upon similar grounds. The ransom is, in a strict metaphysical sense, no natural consequence of the capture. It may be agreed upon long afterwards, and if we were to look to the immediate cause, it might be said that the voluntary act of the party

Page 39 U. S. 110

in the payment was the cause of the loss. But the law treats it as far otherwise, and deems the ransom a necessary means of deliverance from a peril insured against, and acting directly upon the property. The expenses consequent upon a capture, where restitution is decreed by a court of admiralty upon the payment of all the costs and expenses of the captors, fall under a similar consideration. In such cases, the decree of the court allowing the costs and expenses may be truly said to be the immediate cause of the loss, but courts of justice treat it also as the natural consequence of the capture.

A still more striking illustration will be found in the case of salvage decreed by a court of admiralty for services rendered to a vessel in distress. The vessel may have been long before dismasted or otherwise injured, or abandoned by her crew in consequence of the perils of the winds and waves, and the salvage decreed in such a case would seem at the first view far removed from the original peril and disconnected from it, and yet, in the law of insurance it is constantly attributed to the original peril as the direct and proximate cause, and the underwriters are held responsible therefor although salvage is not specifically and in terms insured against.

These are by no means the only illustrations of the danger of introducing such an application of the maxim into the law of insurance, as is now contended for. Suppose a perishable cargo is greatly damaged by the perils of the sea, and it should in consequence thereof, long afterwards and before arrival at the port of destination, become gradually so putrescent as to be required to be thrown overboard for the safety of the crew. The immediate cause of the loss would be the act of the master and crew, but there is no doubt that the underwriters would be liable for a total loss upon the ground that the operative cause was the perils of the sea. Suppose a vessel which is insured against fire only is struck by lightning and takes fire, and in order to save her from utter destruction she is scuttled and sunk in shoal water and she cannot afterwards be raised, it might be said that the immediate cause of the loss was the scuttling, but in a juridical sense it would be attributed to the fire, and the underwriters would be held liable therefor. Suppose another case -- that of a vessel insured against all perils but fire, and she is shipwrecked by a storm on a barbarous coast and is there burnt by the natives -- it might be said that the proximate cause of the loss was the fire, and yet there is no doubt that the underwriters would be held liable on the policy upon the ground that the vessel had never been delivered from the original peril of shipwreck.

Illustrations of this sort might be pursued much farther, but it seems unnecessary. Those which have been already suggested sufficiently establish that the maxim causa proxima non remota spectatur is not without limitations, and has never been applied in matters of insurance to the extent contended for, but that it has been constantly qualified and constantly applied only in a modified practical sense to the perils insured against. In truth, in the present

Page 39 U. S. 111

case, the loss occasioned by the contribution is (as has been already suggested) properly a consequence of the collision, and in no just sense a substantive independent loss.

In the next plea, how stand the authorities on this subject? The only authority which has been cited by the counsel for the defendants to sustain their argument is the case of De Vaux v. Salvador, 4 Adolphus & Ellis 420. That case is certainly direct to the very point now in judgment. It was a case of collision, where the assured had been compelled to pay for an injury done to another vessel by the mutual fault of both vessels according to the rule of the English Court of Admiralty which, in a case of mutual fault, apportions the loss between them, Lord Denman, in delivering the opinion of the court, admitted that the point was entirely new, and after referring to the above maxim, said

"It turns out that the ship (insured) has done more damage than she has received, and is obliged to pay the owners of the other ship to some amount under the rule of the court of admiralty. But this is neither a necessary nor a proximate effect of the perils of the sea. It grows out of an arbitrary provision in the law of nations; from views of general expediency, not as dictated by natural justice, nor (possibly) quite consistent with it; and can no more be charged on the underwriters than a penalty incurred by contravention of the revenue laws of any particular state which was rendered inevitable by perils insured against."

This is the whole reasoning of the learned judge upon the point, and, with great respect, if the views already suggested are well founded, it is not supported by the analogies of the law or by the principles generally applied to policies of insurance. The case of a penalty put by the learned judge does not strike us with the same force as it does his lordship. If any nation should be so regardless of the principles of natural justice as to declare that a vessel driven on shore by a storm should be forfeited because its revenue laws were thereby violated, it would then deserve consideration whether the underwriters would not be liable for the loss as an inevitable incident to the shipwreck. At all events the point is too doubtful in itself to justify us in adopting it as the basis of any reasoning in the present case.

The case before the King's Bench was confessedly new, and does not appear upon this point to have been much argued at the bar. It seems to have been decided principally upon the ground of the absence of any authority in favor of the assured and, as it appears to us, in opposition to the analogies furnished by other acknowledged doctrines in the law of insurance.

The same question, however, has undergone the deliberate consideration of some of the greatest maritime jurists of continental Europe, and the result at which they have arrived is directly opposite to that of the King's Bench. Pothier lays it down as in his opinion the clear result of the contract of insurance that the underwriters are bound to pay not only the direct loss occasioned by any peril insured against, but all the expenses which follow as a consequence

Page 39 U. S. 112

therefrom. Pothier, Traite d'Assurance, n. 49. Estrangin, a very excellent modern commentator upon Pothier (Estranpin's note), asserts that there is not the slightest doubt on the subject. Emerigon, whose reputation as a writer on the law of insurance is second to no one, unequivocally adopts the same opinion. Emerig.Assur. ch. 12, s. 14, 414-417. In short, all those learned foreigners hold the doctrine that whenever the thing insured becomes by law directly chargeable with any expense, contribution, or loss in consequence of a particular peril, the law treats that peril, for all practical purposes, as the proximate cause of such expense, contribution, or loss. And this they hold not upon any peculiar provisions of the French ordinance, but upon the general principles of law applicable to the contract of insurance. In our opinion, this is the just sense and true interpretation of the contract.

It has been suggested that there is a difference between our policies and the French policies, the latter containing an express enumeration of fortuitous collision, or running foul (abordage fortuit) as a peril insured against, while in our policies it falls only under the more general head of "perils of the sea." But this furnishes no just ground for any distinction in principle. The reasoning, if any, to be derived from this circumstance, would seem rather to apply with more force in favor of the plaintiff, since, even when the risk of collision is specifically enumerated, the expenses and contribution attendant upon it are treated as inseparable from the direct damage to the vessel itself, as a part of the loss. In short, whether a particular risk is specified in terms or is comprehended in the general words of the policy, the same result must arise, viz., that the underwriters are to bear all losses properly attributable to that peril, and no other losses.

It may be proper to remark, that the rule which we here adopt, is just as likely in actual practice to operate favorably as unfavorably to the underwriters. If by the collision the Paragon had been sunk and the galliot saved, the underwriters would have had the entire benefit of the reciprocity of the rule. It would sound odd that in such a case the underwriters should be entitled to receive the full benefit of the Hamburgh law for their own indemnity, and yet in the opposite case, that they should escape from the burden imposed by that law.

In all foreign voyages, the underwriters necessarily have it in contemplation that the vessel insured must, or at least may be, subjected to the operation of the laws of the foreign ports which are visited. Those very laws may in some cases impose burdens, and in some cases give benefits, different from our laws, and yet there are cases under policies of insurance, where it is admitted that the foreign law will govern the rights of the parties, and not the domestic law. Such is the known case of a general average, settled in a foreign port according to the local law, although it may differ from our own. Simonds v. White, 2 Barn. & Cresw. 805. In the present case, the policy was on time, and the vessel had, as it were,

Page 39 U. S. 113

a roving commission to visit any foreign port, and of course might well be presumed at different periods to come under the dominion of various codes of laws, which might subject her to various expenditures and burdens. The underwriters have no right to complain, that when those expenditures and burdens arise from a peril insured against, they are compelled to pay them, for they were bound to have foreseen the ordinary incidents of the voyage. Suppose a vessel injured by the perils of the sea puts into a foreign port to repair, and the license to repair, or the repairs themselves, are burdened with a heavy revenue duty; no one will doubt that the charge must be borne by the underwriters, as an expense incident to the repair, and yet it might truly be said not to be the natural result of the peril, but only a charge imposed by law consequent thereon.

Upon the whole, we are of opinion that it be certified to the circuit court that in this case, the contributory amount paid by the Paragon on account of the collision was a direct, positive, and proximate effect from the accident in such sense as to render the defendants liable therefor upon this policy.

This cause came on to be heard on the transcript of the record from the circuit court of the United States for the District of Massachusetts, and on the point and question on which the judges of the said circuit court were opposed in opinion, and which was certified to this Court for its opinion, agreeably to the act of Congress in such cases made and provided, and was argued by counsel. On consideration whereof, it is the opinion of this Court that

"in this case, the contributory amount paid by the Paragon on account of the collision, was a direct, positive, and proximate effect from the accident in such sense as to render the defendants liable therefor upon this policy."

Whereupon it is ordered and adjudged by this Court, that it be so certified to the said circuit court.

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