The right, by way of subrogation, of an insurer upon paying for
a total loss of the goods insured to recover over against third
persons, is only that right which the assured has.
A common carrier may lawfully obtain insurance on the goods
carried against loss by the usual perils, though occasioned by the
negligence of his own servants.
In a bill of lading which provides that the carrier shall not be
liable for loss or damage of the goods by fire, collision, or
dangers of navigation, a further provision that the carrier, when
liable for the loss, shall have the full benefit of any insurance
that may have been effected upon the goods, is valid, as between
the carrier and the shipper, and therefore, in the absence of any
misrepresentation or intentional concealment by the shipper in
obtaining insurance upon the goods, or of any express stipulation
on the subject in the policy, limits the right, by way of
subrogation, of the insurer, upon paying to the shipper the amount
of a loss by stranding, occasioned by the negligence of the
carrier's servants, to recover over against the carrier.
This was a libel in admiralty against a common carrier by an
insurance company which had insured the owners upon the goods
carried, and had paid them the amount of the insurance and claimed
to be subrogated to their rights against the carrier. The defense
relied on was that, by a provision of the contract of carriage, the
carrier was to have the benefit of any insurance upon the goods.
The district court held that this provision was valid, and
therefore no right of subrogation
Page 117 U. S. 313
accrued to the libellant, and entered a decree accordingly. The
libellant appealed to the circuit court, which found the following
The respondent was a Pennsylvania corporation, authorized to
carry on the business of lake transportation, was engaged in
business as a common carrier, and owned a line of propellers
running between Erie and other ports on the lakes, called the
"Anchor Line," one of which propellers was the
On July 24, 1874, the firms of A. M. Wright & Co., owners of
16,325.34 bushels of corn, worth $8,000; Elmendorf & Co.,
owners of 800 bushels of corn, worth $600, and Gilbert Wolcott
& Co., owners of 370 bushels of corn, and 689 bushels of oats,
together worth $800, caused to be shipped on board the propeller
then lying at Chicago and bound for Erie, the
grain aforesaid, consigned to themselves at other places beyond,
and severally made oral agreements with the respondent by which, in
consideration of certain stipulated freight, the respondent agreed
to transport the several parcels of grain from Chicago, by way of
the lakes, to Erie, and thence forward them to their ultimate
destinations, and it was tacitly understood that bills of lading
for the shipments would be subsequently issued to the shippers, but
nothing whatever was said respecting the terms and conditions
After the goods had been received on board, and the propeller
had departed on her voyage, the respondent delivered to the
shippers, respectively, bills of lading, each of which described
the goods as shipped on the propeller Merchant,
addressed to the owners by name at their ultimate destination,
fixed the rate of freight from Chicago to that destination, and
contained an agreement that the goods should be
"transported by the Anchor Line, and the steamboats, railroad
companies, and forwarding lines with which it connects, until the
said goods shall have reached the point named in the bill of
lading, on the following terms and conditions,"
among which were these:
"The said Anchor Line, and the steamboats, railroad companies,
and forwarding lines with which it connects, and which receive said
property, shall not be liable . . . for loss or damage
Page 117 U. S. 314
by fire, collision, or the dangers of navigation while on seas,
bays, harbors, rivers, lakes, or canals, and where grain is shipped
in bulk, the said Anchor Line is hereby authorized to deliver the
same to the Elevator Company at Erie, as the agent of the owner and
consignee, for transshipment (but without further charge to such
owner and consignee) into the cars of the connecting railroad
companies or forwarding lines, and when so transshipped in bulk,
the said Anchor Line and the said connecting railroad company or
carrier shall be and is, in consideration of so receiving the same
for carriage, hereby exempted and released from all liability for
loss, either in quantity or weight, and shall be entitled to all
other exemptions and conditions herein contained."
"It is further agreed that the Anchor Line, and the steamboats,
railroads, and forwarding lines with which it connects, shall not
be held accountable for any damage or deficiency in packages, after
the same shall have been receipted for in good order by consignees
or their agents at or by the next carrier beyond the point to which
this bill of lading contracts."
"It is further stipulated and agreed that in case of any loss,
detriment, or damage done to or sustained by any of the property
herein receipted for, during such transportation, whereby any legal
liability or responsibility shall or may be incurred, that company
alone shall be held answerable therefor in whose actual custody the
same may be at the time of the happening of such loss, detriment,
or damage, and the carrier so liable shall have the full benefit of
any insurance that may have been effected upon or on account of
"And it is further agreed that the amount of the loss or damage
so accruing, so far as it shall fall upon the carriers above
described, shall be computed at the value or cost of said goods or
property at the place and time of shipment under this bill of
These bills of lading were received by the shippers, without
protest or objection, and were signed by Elmendorf & Co. and by
Wolcott & Co., but not by A. M. Wright & Co.
The bills of lading were received by the shippers without
specially reading the terms and conditions; their attention was
Page 117 U. S. 315
not directed to them, nor was anything said respecting them, and
no reduction of freight from the rate stipulated in the oral
agreement was made in consequence of those terms and conditions, or
other consideration paid therefor; but the shippers had often
before shipped goods by this line under similar contracts, and
thereby knew, or had every opportunity of knowing, the contents of
these bills of lading.
The propeller completed the lading of the goods during the
evening of July 24, 1874, and about midnight departed on her
voyage. About 10 o'clock, the next morning, in a dense fog, she was
stranded on the western shore of Lake Michigan, about ten miles
south of Milwaukee, through the negligence of those managing her,
and immediately filled with water, and all the grain became wet and
damaged; 1200 bushels of it were thrown overboard to get off the
vessel, and 5,188 bushels were brought into Milwaukee in a
perishable condition, and were there sold for the sum of $1,037.60,
which was retained by the respondent.
On said 24th of July, the libellant, a New York corporation,
authorized to transact a general lake and insurance business,
insured the shippers at their request and expense, against loss or
damage to these shipments from perils of the seas and other perils,
and issued to them certificates of insurance, for $8,000, $520, and
$700, respectively, in this form:
"No. 627. The Phoenix Insurance Company, New York. $8,000.
Chicago, July 24, 1874. This certifies that A. M. Wright & Co.
[are] insured, under and subject to the conditions of open policy
No. 2,263 of the Phoenix Insurance Company, in the sum of eight
thousand dollars, on corn on board the propeller Merchant
at and from Chicago to Erie. Loss payable to assured, order hereon,
and return of this certificate."
"CHAS. E. CHASE, Agent"
The policy of insurance referred to in these certificates
"Charles E. Chase, on account of whom it may concern, . . . lost
or not lost at and from ports and places to ports and places, on
cargo, premiums to be settled monthly, upon all kinds
Page 117 U. S. 316
of lawful goods and merchandise laden or to be laden on
any vessel or vessels, and was otherwise in the usual form of an
open policy of insurance for $1,000,000 against marine risks,
including perils of the seas,
"barratry of the master and mariners, and 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
and contained these provisions:
"The company are to be entitled to premium at their usual rates
on all shipments, reported or not. It is warranted by the assured
to report every shipment on the day of receiving advices thereof,
or as soon thereafter as may be practicable, when the rate of
premium shall be fixed by the president or the vice-president of
the company. . . . No shipment to be considered as insured until
approved and endorsed on this policy by C. E. Chase, agent."
The shipments were duly approved and endorsed on the policy. On
August 19, 1874, the shippers abandoned the goods to the libellant
as a total loss, by written instruments, substantially alike, the
material part of the one executed by A. M. Wright & Co. being
"Chicago, August 19, 1874"
"For and in consideration of the sum of eight thousand dollars,
the receipt whereof is hereby acknowledged, we do by these presents
assign, transfer, cede, and abandon to the Phoenix Insurance
Company all our right, title, and interest in and to the property
hereinafter specified, and to all that can or may in any way be
made, saved, or realized from the damage or loss reported to have
occurred, by reason of which a claim of payment has been made by
us, with full power to take and use all lawful ways and means (at
the risk and expense of the Phoenix Insurance Company) to make,
save, and realize the said property, to-wit, 16,325.34 bushels of
corn, as per bill of lading and invoice, shipped on board the
bound from Chicago for Erie, and
covered by insurance with the Phoenix Insurance Company by open
policy No. 2,263, certificate No. 627, under date of July 24,
In consequence thereof, the libellant paid to the shippers the
amount of the insurance as and for a constructive total loss.
Page 117 U. S. 317
A general average adjustment was made on September 2, 1874, and
readjusted on February 1, 1875, awarding to the libellant the sum
of $2,466.12 on account of these shipments.
The circuit court made and stated the following conclusions of
1. That the bills of lading were the contracts by which the
rights of the parties were to be governed.
2. That under them the respondent became liable to the shippers
for the value of the shipments, by reason of the negligent loss of
the same, and that the shippers had rights of action therefor.
3. That by the abandonments the libellant did not succeed to
those rights of action of the shippers, by reason of the
stipulation contained in the bills of lading that "the carrier so
liable shall have the full benefit of any insurance that may have
been effected upon or on account of said goods."
4. That the libellant was entitled to recover the sum of
$2,466.12, awarded to it in the general average adjustment,
readjusted as aforesaid, with interest thereon.
The circuit court entered a decree for the libellant for this
sum only, and the libellant appealed to this Court.
Page 117 U. S. 319
MR. JUSTICE GRAY, after stating the case as above reported,
delivered the opinion of the court.
It being found as matter of fact that the lading of the goods on
board the propeller was not completed until the evening of the 24th
of July, that she departed on her voyage about midnight, and that
the bills of lading were not delivered by
Page 117 U. S. 320
the carrier to the shippers until after her departure, it is
clear that the bills of lading were not actually delivered until
the 25th. But it being also found that oral agreements for the
carriage were made on the 24th, with the understanding that bills
of lading would be subsequently issued, and that the shippers,
having often before shipped goods by this line under similar bills
of lading, knew or had every opportunity of knowing their terms and
conditions, it is also clear that the bills of lading were but a
putting in form of the oral agreements made on the 24th, and took
effect as if they had been delivered and accepted on that day.
The certificates of the agent of the insurance company, without
which the policy of insurance did not attach to these goods, were
also made on that day, and described the goods as on board the
propeller. The contract of carriage and the contract of insurance
must therefore be treated as substantially contemporaneous, and
both made before the loss of the goods. There is nothing to show
any misrepresentation or intentional concealment by the assured in
obtaining the insurance, or that the insurer had or had not
knowledge or notice of the usual form of the bills of lading.
The policy of insurance contains no express stipulation for the
assignment to the insurer of the assured's right of action against
third persons. In the bills of lading, it is expressly stipulated
that the carriers whose railroad or vessels form part of the line
of transportation shall not be liable for loss or damage by fire,
collision, or dangers of navigation, and that each carrier shall be
liable only for a loss of the goods while in its custody, "and the
carrier so liable shall have the full benefit of any insurance that
may have been effected upon or on account of said goods."
The question is whether under these circumstances the insurer,
upon payment of a loss, became subrogated to the right to recover
damages from the carrier.
When goods insured are totally lost, actually or constructively,
by perils insured against, the insurer, upon payment of the loss,
doubtless becomes subrogated to all the assured's rights of action
against third person who have caused or are responsible for
Page 117 U. S. 321
the loss. No express stipulation in the policy of insurance, or
abandonment by the assured, is necessary to perfect the title of
the insurer. From the very nature of the contract of insurance as a
contract of indemnity, the insurer, when he has paid to the assured
the amount of the indemnity agreed on between them, is entitled, by
way of salvage, to the benefit of anything that may be received,
either from the remnants of the goods, or from damages paid by
third persons for the same loss. But the insurer stands in no
relation of contract or of privity with such persons. His title
arises out of the contract of insurance, and is derived from the
assured alone, and can only be enforced in the right of the latter.
In a court of common law it can only be asserted in his name, and,
even in a court of equity or of admiralty, it can only be asserted
in his right. In any form of remedy, the insurer can take nothing
by subrogation but the rights of the assured. Comegys v.
1 Pet. 193, 26 U. S. 214
Fretz v. Bull,
12 How. 466, 53 U. S. 468
17 How. 152, 58 U. S. 155
Garrison v. Memphis Ins.
19 How. 312, 60 U. S. 317
Hall v. Railroad
13 Wall. 367, 80 U. S.
-371; The Potomac, 105 U.
, 105 U. S.
-635; Mobile & Montgomery Railway v.
Jurey, 111 U. S. 584
111 U. S. 594
Clark v. Wilson,
103 Mass. 219; Simpson v.
3 App.Cas. 279, 286, 292-293. That the right of the
assured to recover damages against a third person is not incident
to the property in the thing insured, but only a personal right of
the assured, is clearly shown by the fact that the insurer acquires
a beneficial interest in that right of action, in proportion to the
sum paid by him, not only in the case of a total loss, but likewise
in the case of a partial loss, and when no interest in the property
is abandoned or accrues to him. Hall v. Railroad Cos., The
and Simpson v. Thomson,
The right of action against another person, the equitable
interest in which passes to the insurer, being only that which the
assured has, it follows that if the assured has no such right of
action none passes to the insurer, and that if the assured's right
of action is limited or restricted by lawful contract between him
and the person sought to be made responsible for the loss, a suit
by the insurer, in the right of the assured, is subject to like
limitations or restrictions.
Page 117 U. S. 322
For instance, if two ships owned by the same person come into
collision by the fault of the master and crew of the one ship and
to the injury of the other, an underwriter who has insured the
injured ship and received an abandonment from the owner and paid
him the amount of the insurance as and for a total loss acquires
thereby no right to recover against the other ship because the
assured, the owner of both ships, could not sue himself.
Simpson v. Thomson,
above cited; Globe Ins. Co. v.
25 Ohio St. 50, 68.
Upon the same principle, any lawful stipulation between the
owner and the carrier of the goods limiting the risks for which the
carrier shall be answerable, or the time of making the claim, or
the value to be recovered, applies to any suit brought in the right
of the owner, for the benefit of his insurer, against the carrier,
as for instance if the contract of carriage expressly exempts the
carrier from liability for losses by fire, York Co.
v. Central Railroad,
3 Wall. 107, or requires
claims against the carrier to be made within three months,
Express Co. v.
21 Wall. 264, or fixes the value for
which the carrier shall be responsible, Hart v. Pennsylvania
Railroad, 112 U. S. 331
the stipulation, not now in controversy, in the bills of lading in
the present case making the value of the goods at the place and
time of shipment the measure of the carrier's liability would
control although in the absence of such a stipulation the carrier
would be liable for the value at the place of destination, as held
in Mobile & Montgomery Railway v. Jurey, 111 U.
The stipulation in these bills of lading that the carriers
"shall not be liable for loss or damage by fire, collision, or the
dangers of navigation" clearly does not protect them from liability
for any loss occasioned by their own negligence. By the settled
doctrine of this Court, even an express stipulation in the contract
of carriage that a common carrier shall be exempt from liability
for losses caused by the negligence of himself and his servants is
unreasonable and contrary to public policy, and therefore void.
Railroad Co. v.
17 Wall. 357; Railroad
Co. v. Pratt,
22 Wall. 123; Bank of Kentucky v.
Adams Express Co., 93 U. S. 174
Railway Co. v.
Page 117 U. S. 323
U.S. 655. And it may be that, as held by Judge Wallace in a case
in the circuit court, a stipulation that "no damage that can be
insured against will be paid for" would not protect the carrier
from liability for his own negligence, because that would be to
compel the owners of the goods to insure against the negligence of
the carrier. The Hadji,
20 F. 875. But the stipulation
upon the subject of insurance in the bills of lading before us is
governed by other considerations. It does not compel the owner of
the goods to stand his own insurer or to obtain insurance on the
goods, nor does it exempt the carrier, in case of loss by
negligence of himself or his servants, from liability to the owner
to the same extent as if the goods were uninsured. It simply
provides that the carrier, when liable for the loss, shall have the
benefit of any insurance effected upon the goods.
It is conclusively settled in this country and in England that a
policy of insurance taken out by the owner of a ship or goods
covers a loss by perils of the sea or other perils insured against
although occasioned by the negligence of the master or crew or
other persons employed by himself. Waters v.
Merchants' Louisville Ins. Co.,
11 Pet. 213;
Copeland v. New England Ins. Co.,
2 Met. 432;
General Ins. Co. v.
14 How. 351, 55 U. S. 366
Davidson v. Burnand,
L.R. 4 C.P. 117, 121. Anyone who has
made himself responsible for the safety of goods has a sufficient
interest in them to enable him to insure them. Contracts of
reinsurance, by which one insurer causes the sum which he has
insured to be reassured to him by a distinct contract with another
insurer, with the object of indemnifying himself against his own
responsibility (though prohibited for a time in England by statute)
are valid by the common law, and have always been lawful in this
country, and in a suit upon such a contract, the subject at risk
and the loss thereof must be proved in the same manner as if the
original assured were the plaintiff. 3 Kent, Com. 278, 289; Sun
Ins. Co. v. Ocean Ins. Co., 107 U. S. 485
Mackenzie v. Whitworth,
L.R. 10 Ex. 142, and 1 Ex.D.
So a common carrier, a warehouseman, or a wharfinger,
Page 117 U. S. 324
whether liable by law or custom to the same extent as an insurer
or only for his own negligence, may, in order to protect himself
against his own responsibility as well as to secure his lien, cause
the goods in his custody to be insured to their full value, and the
policy need not specify the nature of his interest. Crowley v.
3 B. & Ad. 478; De Forest v. Fulton Ins. Co., 1
Hall, 94, 110; Waters v. Monarch Assur. Co.,
5 El. &
Bl. 870; London & Northwestern Railway v. Glyn,
& El. 652; Savage v. Corn Exchange Ins. Co.,
655; Joyce v. Kennard,
L.R. 7 Q.B. 78; Commonwealth v.
Shoe & Leather Ins. Co.,
112 Mass, 131; Home Ins. Co.
v. Baltimore Warehouse Co., 93 U. S. 527
North British Ins. Co. v. London, Liverpool & Globe Ins.
5 Ch.D. 569.
No rule of law or of public policy is violated by allowing a
common carrier, like any other person having either the general
property or a peculiar interest in goods, to have them insured
against the usual perils and to recover for any loss from such
perils, though occasioned by the negligence of his own servants. By
obtaining insurance, he does not diminish his own responsibility to
the owners of the goods, but rather increases his means of meeting
that responsibility. If it were true that a ship owner, obtaining
insurance by a general description upon his ship and the goods
carried by her, could, in case of the loss of both ship and goods,
by perils insured against, and through the negligence of the master
and crew, recover of the insurers for the loss of the ship only,
and not for the loss of the goods, some trace of the distinction
would be found in the books. But the learning and research of
counsel have failed to furnish any such precedent.
On the contrary, in one of the earliest cases in which the rule
that a policy of insurance covers losses by perils insured against,
though occasioned by the negligence of the servants of the assured,
was judicially affirmed, the assured, being the owner of a ship,
had chartered her for a West India voyage, and by the usages of
trade bore the risk of bringing the cargo from the shore to the
ship. The policy was upon the boats of the ship, and upon goods in
them, and the amount recovered of the insurer was for goods being
carried from the shore to the ship in
Page 117 U. S. 325
her boats, and lost by the wrecking of the boats in consequence
of the misconduct and negligence of some of the ship's crew. Such
was the state of facts to which Lord Chief Justice Abbott applied
the language, cited and approved by Mr. Justice Story in
Waters v. Merchants'
Louisville Ins. Co.,
11 Pet. 222, and by Chief
Justice Shaw in Copeland v. New England Ins. Co.,
"In this case, the immediate cause of the loss was the violence
of the winds and waves. No decision can be cited where, in such a
case, the underwriters have been held to be excused in consequence
of the loss having been remotely occasioned by the negligence of
the crew. I am afraid of laying down any such rule; it will
introduce an infinite number of questions as to the quantum of care
which, if used, might have prevented the loss. Suppose, for
instance, the master were to send a man to the masthead to look
out, and he falls asleep, in consequence of which the vessel runs
upon a rock, or is taken by the enemy, in that case it might be
argued, as here, that the loss was imputable to the negligence of
one of the crew, and that the underwriters were not liable. These
and a variety of other such questions would be introduced, in case
our opinion were in favor of the underwriters."
Walker v. Maitland,
5 B. & Ald. 171, 174-175.
So, in the recent case of North British Ins. Co. v. London,
Liverpool & Globe Ins. Co.,
it was assumed as
unquestionable that insurance obtained by a wharfinger would cover
a loss by his own negligence. 5 Ch.D. 569, 584.
As the carrier might lawfully himself obtain insurance against
the loss of the goods by the usual perils, though occasioned by his
own negligence, he lawfully stipulate with the owner to be allowed
the benefit of insurance voluntarily obtained by the latter. This
stipulation does not, in terms or in effect, prevent the owner from
being reimbursed the full value of the goods; but, being valid as
between the owner and the carrier, it does prevent either the owner
himself, or the insurer, who can only sue in his right, from
maintaining an action against the carrier upon any terms
inconsistent with this stipulation.
Nor does this conclusion impair any lawful rights of the
Page 117 U. S. 326
insurer. His right of subrogation, arising out of the contract
of insurance and payment of the loss, is only to such rights as the
assured has, by law or contract, against third persons. The policy
containing no express stipulation upon the subject, and there being
no evidence of any fraudulent concealment or misrepresentation by
the owner in obtaining the insurance, the existence of the
stipulation between the owner and the carrier would have afforded
no defense to an action on the policy, according to two careful
judgments rendered in June last, and independently of each other,
the one by the English Court of Appeal, and the other by the
Supreme Judicial Court of Massachusetts. Tate v. Hyslop,
15 Q.B.D. 368; Jackson Co. v. Boylston Ins. Co.,
In Tate v. Hyslop,
owners of goods insured against
risks in crafts or lighters had previously agreed with a lighterman
that he should not be liable for any loss in crafts except loss
caused by his own negligence, and did not disclose this agreement
to the underwriters at the time of procuring the insurance. The
sole ground on which it was held that the owners could not recover
on the policy was that this agreement was material to the risk,
because the underwriters, as the assured knew, had previously
established two rates of premium, depending on the question whether
they would have recourse over against the lighterman. Lord Justice
Brett observed that but for the two rates of premium established by
the underwriters and known to the assured, the omission of the
assured to disclose their agreement with the lighterman could only
have affected the amount of salvage which the underwriters might
have, and would have been immaterial to the risk, and consequently
to the insurance. 15 Q.B.D. 375, 376.
In Jackson Co. v. Boylston Ins Co.,
it was adjudged
that in the absence of any fraud or intentional concealment, the
undisclosed existence of a stipulation between the assured and the
carrier like that now before us afforded no defense to an action on
It may be added that our conclusion accords with the decision of
Judge Shipman in Rintoul v. New York Cent. R. Co.,
905, as well as with those of Judge Dyer
Page 117 U. S. 327
in the district court, and Judge Drummond in the circuit court,
in the present case. 10 Bissell 18, 38. See also Carstairs v.
Mechanics' & Traders' Ins. Co.,
18 F. 473; The
23 F. 88; Mercantile Ins. Co. v. Calebs,
MR. JUSTICE BRADLEY dissented.