A cargo of wheat shipped on a British steamer at New York, for
Lisbon, was insured by an English assurance company through its
agents in Philadelphia "free of particular average unless the
vessel be sunk, burned, stranded or in collision;" all losses to be
paid in sterling at the offices of the corporation in London,
"claims to be adjusted according to the usages of Lloyds." The
cargo was loaded and the lines were cast off, ready to sail, when
it was found that there was a defect in the machinery, which
detained.them a few hours. During the detention, a lighter, being
towed out of the dock, ran into the steamer, breaking two plates in
the bulwarks and doing other damage. This resulted in a farther
detention of two days. After sailing, the steamer encountered heavy
gales and seas. She took large quantities of water on her decks,
some of which came through the cracks caused by the collision, and
was so strained that the water got into the wheat. The machinery
becoming strained, the captain made for Boston, and on arrival
there had a survey made, which resulted in the taking out of the
cargo, and its sale for the benefit of all concerned. This libel
was then filed by the owners of the cargo to recover for their
loss. The district court gave judgment in favor of the owners, and
referred it to a commissioner to assess the damages, and gave
judgment accordingly. The court of appeals having affirmed that
judgment, it was brought here by writ of certiorari, for
review.
Held:
Page 167 U. S. 150
(1) That under the circumstances, the contract of insurance was
to be interpreted according to English law.
(2) That if a ship be once in collision during the adventure,
after the goods are on board, the insurers are, by the law of
England, liable for a loss covered by the general words in the
policy although such loss is not the result of the original
collision, and, but for the collision, would have been within the
exception contained in the memorandum, and free from particular
average as therein provided.
(3) That the question whether the law of this country does or
does not accord with the law of England in this matter does not
arise in this case, and no opinion is expressed on that
question.
(4) That under the facts stated in the opinion of the court, the
cargo was necessarily sold at the port of refuge, and the loss,
under such circumstances, should be adjusted as a salvage loss.
The respondents herein duly filed their libel in admiralty
against the appellant, the London Assurance, in the United States
District Court for the Eastern District of Pennsylvania, in a cause
of marine insurance, to recover upon a policy of insurance issued
by the company upon some 33,000 (being part of a cargo of about
80,000) bushels of wheat, of which the respondents were the owners,
the 33,000 bushels being valued in the policy at $40,887. The
policy was dated December 8, 1890, was issued for $20,000, and
covered the wheat when shipped on board the steamer
Liscard at New York, bound for Lisbon, Portugal. There was
another policy upon the same wheat as that covered by the policy in
suit, issued by another company, for $20,887, the total of the two
making up the value of the wheat as mentioned in the policy. The
policy now before the Court contained the usual language as to the
adventures and perils the assurers were contented to bear, among
them being
"perils of the seas . . . and all other perils, losses, and
misfortunes that have or shall come to the hurt, detriment, or
damage of the said goods and merchandise, or any part thereof."
As representing the policy, the insurers issued what is termed
"its certificate" or "memorandum," wherein it was stated that the
certificate
"represents and takes the place of the policy, and conveys all
the rights of the original policy holder (for the purpose of
collecting any loss of claims) as fully as if the property was
covered by a special policy, direct to the holder of this
certificate. "
Page 167 U. S. 151
It certified that, on the 8th of December, 1890, the corporation
insured under policy No. 427, for Lawrence Johnson & Co. (who
were the agents for the libelants), $20,000 in gold on 33,000
bushels of wheat, valued at $40,887, shipped on board the steamship
Liscard at and from New York to Lisbon, Portugal. In the
body of the certificate, and directly under the subject of the
insurance (33,000 bushels of wheat), stamped in red ink, are the
words:
"Free of particular average unless the vessel be sunk, burned,
stranded, or in collision."
On the face of the certificate, and on the right-hand side
thereof and at a right angle with the body of the certificate, the
following language is printed:
"It is hereby understood and agreed that in all cases of loss or
damage to the interest insured under this certificate, the same
shall be reported to the corporation in London as soon as known or
expected, and be paid in sterling at the offices of the
corporation, No. 7 Royal Exchange, London, at the rate of four
dollars and ninety-five cents ($4.95-100) gold to the pound
sterling. Claims to be adjusted according to the usages of Lloyds,
but subject to the conditions of the policy and contract of
insurance."
Immediately underneath, and also printed in red ink, in the
following:
"Notice. To conform with the revenue laws of Great Britain, in
order to collect a claim under this certificate, it must be stamped
within ten days after its receipt in the United Kingdom."
The certificate is signed by the agents of the company at the
Philadelphia agency.
The cargo was received on board the steamship in New York
Harbor, and the loading of the vessel had been completed, and she
was ready on December 12, 1890, to proceed on her voyage. The lines
had been cast off, and the steamer would have then left the dock,
but that at the last moment some little derangement to her
machinery occurred, and she was temporarily delayed in order to
remedy the difficulty, which was accomplished in a very short time
-- some few
Page 167 U. S. 152
hours. While thus fully loaded and in readiness to proceed on
her voyage, a collision occurred, which is thus described by the
chief officer, and entered in the log book by him:
"At 8:15 p.m. a lighter, being towed out of the dock by the tug
George Carnie, ran into us, breaking two plates in the
bulwarks, bending stanchions, starting main rail, etc. Anchor watch
kept all night."
The two plates referred to were of iron half an inch thick. The
damage to the ship was surveyed before she left New York by one of
Lloyds' surveyors, who made a written report in regard to it. The
break in the bulwarks caused by the collision was on the port side
of the steamer, about abreast of her mainmast. As described by a
witness:
"The break was of an irregular shape, and eleven feet six inches
long, where the measurements followed in the line of the break. The
break was a continuous one in two of the iron plates of the
bulwarks. . . . It began a little above a fore and aft line, half
way between the deck and the top of the bulwarks, and descended to
about eight inches above the deck at its lowest point. For the
first two feet, beginning from the forward end of the break, it
showed an opening of from one-half an inch to one inch; for the
next three feet, the break was open one and a half inches; for the
next four feet, the break was open from one-half to one and a
quarter inches, and the after-end of the break for one foot and six
inches was open but slightly. A spur extended from about the middle
of the break upwards for one foot."
Another witness said:
"The broken plates showed signs, at the time I examined them, of
having been pressed, driven, or pounded together in such a way as
to reduce the size of the opening, and the carpenter of the ship
stated to me at the time that such had been in fact done. The
collision break was in the bulwarks of the vessel, and, in my
opinion, as the deck of that ship is arranged, the bulwarks form an
important and essential part of the hull of the steamer. In some
cases the bulwarks are dispensed with, and an open rail used; but
those are cases of flush-deck vessels, the entire length of whose
deck stands well out of the water. Such
Page 167 U. S. 153
vessels have, as a rule, but a comparatively small portion of
their houses, engine rooms, galleys, etc., above deck; but in the
case of a vessel like the
Liscard, where all her houses
are upon the deck, and her main deck is, comparatively speaking,
low -- and I mean low as compared with the upper deck of flush-deck
vessels -- the bulwarks form an important part of, and a protection
to, the ship in keeping the water off the decks and protecting the
houses and seamen. . . . Among other things, a large quantity of
water in a gale accompanied by high seas would go through the break
in the steamer's bulwarks which I inspected, and with the break
open to the extent shown in the survey and drawing made by Mr.
Candage, many seas which would not be high enough to go over the
rail would send a large quantity of water through this break, and
if the storm were extraordinarily severe, would overtax the
capacity of the scuppers to relieve the deck. Except in such case
of extraordinary weather, the break would be unimportant; it would
not render the ship unseaworthy."
Other witnesses called by the company gave their opinion that
the bulwarks were sometimes a detriment to the ship in relation to
her safety, as they kept the water on the deck longer than would be
the case in their absence, and sometimes that might be a very
serious occurrence.
There seemed to be a general agreement, however, among the
witnesses that in steamers built as the
Liscard was, the
bulwarks were necessary in heavy weather for the safety of the crew
that was working her. The bulwarks are a part of the hull of the
vessel, and are built by the shipwright in constructing the hull,
and are a part of the design of the vessel when she is modeled. In
the class of vessels to which the
Liscard belonged, the
testimony seems to show that the bulwarks are indispensable.
A claim for damages to the amount of $250 was made by the
captain of the
Liscard, and paid by the offending
vessel.
The steamer was detained by reason of the collision, and sailed
a couple of days thereafter. She encountered very heavy gales soon
after leaving port. The seas continuously
Page 167 U. S. 154
swept over her, and finally started the seams in her decks,
washed off the tarpaulins which had been placed over the hatches
and battened down, and resulted in great damage to the wheat from
the sea water pouring over it through the deck seams and hatches of
the ship. Her seams opened on account of the excessive straining of
the ship caused by the heavy gales of wind. Some of the water that
came on her decks came through the cracks in the plates
constituting a portion of the bulwarks already mentioned. After
experiencing very heavy weather for a number of days, the
high-pressure engine became disabled, and, proceeding then with the
low-pressure engine, the captain decided to make for the nearest
port, which was Boston. When they arrived at that port and examined
the machinery, it was found that the high-pressure piston had been
bent, and the bending was caused by the excessive straining of the
ship caused by her laboring and rolling in the seas. Upon his
arrival in Boston, the captain requested a survey to be made, which
was done, and the cargo taken out, and a written report and
recommendation made. It was found that the wheat had been damaged
by sea water in all the holds of the ship, and after considerable
negotiation between the agents of the ship, the owners of the
cargo, and the insurers, an agreement was made for the breaking up
of the voyage at Boston, and part freight on the cargo was paid the
steamer, with the written assent of the insurance company.
The cargo was sold for the benefit of all concerned, and a claim
made upon the insurers under the policy, who denied any liability
whatever. The owners of the wheat thereupon filed their libel in
admiralty in the district court to recover for the loss sustained
by reason of the facts above mentioned. The district court gave
judgment in favor of the owners of the wheat, 56 F. 44, and
referred it to a commissioner to assess the damages, who adopted a
rule for the adjustment of the loss, which is referred to in the
following opinion. The company appealed to the United States
Circuit Court of Appeals for the Third Circuit, which court
affirmed the judgment of the district court. 68 F. 247. The
insurance
Page 167 U. S. 155
company then applied to this Court, and obtained a writ of
certiorari to review the judgment.
MR. JUSTICE PECKHAM, after stating the facts in the foregoing
language, delivered the opinion of the Court.
Two questions arise in this case in regard to the liability of
the insurers upon the policy in suit -- the one being whether what
took place before the vessel left her berth in New York amounted to
a collision within the meaning of the policy; the other being
whether, in case there was a collision, the company is liable for a
subsequent loss which did not in any way occur by reason or arise
out of the collision.
As to the first, we think that the vessel was "in collision,"
within the meaning of the language used in the certificate, which
represented and took the place of the policy. It was not necessary
that the vessel should itself be in motion at the time of the
collision. If, while anchored in the harbor, a vessel is run into
by another vessel, it would certainly be said that the two vessels
had been in collision, although one was at anchor and the other was
in motion. We see no distinction, so far as this question is
concerned, between a vessel at anchor and one at the wharf, fully
loaded, and in entire readiness to proceed upon her voyage, with
steam up, and simply awaiting the regulation of some insignificant
matter about the machinery before moving out. If, while so
stationary (at anchor or at wharf), the vessel is run into by
another, we should certainly, in the ordinary use of language, say
that she had been in collision. How important or material were the
results of the collision in regard to the condition in which the
vessel was left would be a matter of further and more detailed
description. The ordinary meaning of the words "in collision,"
Page 167 U. S. 156
when applied to a vessel, does not require that the result of
the impact shall be so far-reaching as to impair her seaworthiness.
Very serious results, in the matter of expense of repairing at
least, might follow from the impact wherein the seaworthiness of
the vessel would not be at all impaired, and yet no one would doubt
that, within the ordinary meaning of the words, such a ship had
been in collision.
It is impossible, as we think, to give a certain and definite
meaning to the words "in collision," or to so limit their meaning
as to plainly describe in advance that which shall and that which
shall not amount to a collision, within the meaning of this policy.
The difficulty of limitation or description is much the same in
kind as that pertaining to another expression in the same
memorandum in regard to when a vessel is "burned." It is, however,
obvious that a vessel would be said to have been in collision when
the effect upon the vessel, or the evidence of such collision,
might be very much less than would be necessary to exist in a case
of fire before one would describe a vessel as a
burned
vessel. In the case of
The Glenlivet (1893, Prob. 164;
same case on appeal, 1894, Prob. 48), the question arose as to
whether the vessel was "burned," within the meaning of this
language in the memorandum. There had been a fire on three several
occasions among the coals in the bunkers of the ship, and some
small damage to the ship by fire took place on two voyages, and the
question was whether, under the circumstances, the ship was burned,
within the meaning of the memorandum. Lord Justice Smith, in the
Court of Appeals, in the course of his judgment, said:
"Suppose the cabin curtains were burnt, he should have told the
jury that that did not constitute a 'burnt' ship. But suppose the
afterpart of the ship was burnt altogether, and the forepart was
not burnt at all, I think he should have told them that they might,
if they liked, find that was a 'burnt' ship, although there was
only a partial burning. It seems to me impossible to lay down
absolutely in the affirmative or the negative as to whether a
partial burning does constitute a 'burnt' ship or not within this
policy. It
Page 167 U. S. 157
may or may not, according to the actual facts appertaining to
the partial burning."
Further on in the course of his judgment, in speaking in regard
to the directions to be given to the jury, he said:
"My own view is that you would have to tell the jury what I have
already said about partial burning, and then you would have to tell
them that a partial burning may, under some circumstances,
constitute a 'burnt' ship, and may not, under other circumstances;
and, having given that direction, you would have to ask them: has
the fire been such as to bring the ship to such a condition that
you consider her a 'burnt' ship within the ordinary meaning of the
English language? This, in my judgment, is the nearest direction
which can be given as to what is meant by a 'burnt' ship in the
memorandum. It is not possible to lay down any hard and fast rule
upon the subject."
Lord Justice Davey said:
"Counsel for the plaintiffs says that the clause applies if a
fire breaks out in any part of a ship or stores, although it is got
under before any great amount of damage is done to the ship. I
cannot bring myself to think that any person would, either in the
accurate use of language or in ordinary parlance, say that in such
a case as that the ship has been 'burnt.'"
The learned judge also said: "I think that it is really a
question to be answered by the jury -- has the ship, in the
circumstances of this case, been burnt?"
The English court took the view that, as to a burned vessel, it
must be such a burning as would constitute the vessel a burned
vessel within the ordinary meaning of the English language. The
language is used in regard to the vessel as a whole. "The company
is to be free from average unless the ship be burned." That
language would seem clearly to indicate some essential burning of
the vessel itself, and not such a case, as put by one of the
judges, of the burning of the cabin curtains. The case is referred
to for the purpose of showing that the English court held the
expression was to be defined according to the ordinary meaning of
the English language.
Page 167 U. S. 158
This leaves each case to be decided with reference to its own
peculiar facts.
We perceive the same difficulties which confronted the English
court, in the case mentioned, in defining and in accurately and
precisely limiting the meaning to be given to the words "in
collision," and we agree with those judges that the words contained
in the memorandum are intended to be used, as Davey, L.J. said, "in
accordance with the ordinary use of language," or, as said by Lord
Justice Smith, "within the ordinary meaning of the English
language." Taking the meaning of the words in that sense, while we
cannot state in advance and in all cases what shall amount to a
collision, but must leave each case for determination upon its own
facts, yet it seems to us there can be no doubt that the vessel in
this case had been in collision, although her seaworthiness was not
impaired in the slightest degree as a result thereof. Being run
into by another vessel, as a result of which cracks were made from
half an inch to an inch and three-quarters wide in the iron plating
of her bulwarks (which were half an inch thick) for a distance of
eleven feet, certainly shows a somewhat serious impact -- what
would be called in plain English "a collision." It shows that there
was no mere "grazing," but that a force sufficient to crack iron
half an inch thick was exerted upon the hull of this steamship, and
that it was sufficiently serious in its nature to cause the captain
to have an examination of it made and a claim for damages asserted,
resulting in the delay of the vessel in proceeding on her voyage of
two days, and the payment of $250 as damages occasioned by such
collision. In the ordinary use of the English language, would it
not be proper and appropriate to describe the results to the
steamship as "arising from a collision"? We think it would.
So in relation to the use of the word "stranded" in the same
memorandum. It is said that if a ship "touches and goes," she is
not stranded,
McDougle v. Royal Exchange Assurance, 4
Camp. 282; but if she "touches and sticks," she is -- that is, in
places in which she, in the ordinary course of her navigation, is
not suffered to touch. A distinction
Page 167 U. S. 159
between what is regarded as a stranding and what is held not to
be a stranding has been in many cases held to be a very narrow
one.
In the above-cited case, decided in 1815, where a ship, in the
course of her voyage in going out of the harbor of New Grimsby,
with a pilot in board, struck upon a rock about a cable and a
half's length from the shore, and remained there on her beam end
for a minute and a half, Lord Ellenborough held that it was not a
stranding, and added: "There has been a curiosity in the cases
about stranding not creditable to the law. A little common sense
may dispose of them more satisfactorily."
Taking what seems to us to be the common sense view, we should
say that this steamer had, as a matter of fact, been in collision,
although the consequences of the collision were not serious enough
to affect the seaworthiness of the steamship. It is enough if,
within the ordinary use of language, the circumstances could be
fairly described as amounting to a collision. We think this is the
case here. If anything more than that is required -- if it must be
a collision of so serious a nature as to impair the seaworthiness
of the vessel, or such as might naturally lead to further injury to
the ship or cargo -- it is at once seen how large and broad is the
field of investigation in order to determine whether the vessel has
in fact been in collision within the meaning of the policy. If this
be its true meaning, it is neither fairly nor reasonably expressed
by the words used. It leaves open for construction in each case a
question that may require long and expensive investigation to
determine whether it be covered by, or is outside of, the policy.
If the company, by the use of the expression found in the policy,
leaves it a matter of doubt as to the true construction to be given
the language, the court should lean against the construction which
would limit the liability of the company.
National Bank v.
Insurance Company, 95 U. S. 673.
In the case cited, MR. JUSTICE HARLAN, in delivering the opinion
of the Court, uses this language at page
95 U. S. 679:
"The company cannot justly complain of such a rule. Its
attorneys, officers, or agents prepared the policy for the purpose,
we
Page 167 U. S. 160
shall assume, both of protecting the company against fraud and
of securing the just rights of the assured under a valid contract
of insurance. It is its language which the court is invited to
interpret, and it is both reasonable and just that its own words
should be construed most strongly against itself."
If a serious collision only were meant, the company could say
so. We do not think it did intend to so limit the meaning of the
words. We solve the problem, therefore, in regard to the
construction to be given to the language used in the policy by
holding that, within the fair meaning of that language, the
steamship was in collision after the risk had attached under the
policy.
The next question is whether the subsequent damage to the wheat
caused by the perils of the sea, and in no wise resulting from the
collision, can be recovered from the insurers under this
policy.
Under the circumstances, we think that this contract of
insurance is to be interpreted according to the English law. The
appellant is an English company. It made the contract in
Philadelphia, by its agents, and that contract, by its terms, was
to be performed in England. The parties to it understood and agreed
that, in case of loss or damage to the interest insured under the
certificate, the same was to be reported to the corporation at
London, and be paid in sterling at its office in the Royal Exchange
in the City of London, and the claims were to be adjusted according
to the usages of Lloyds, but subject to the conditions of the
policy and contract of insurance.
Generally speaking, the law of the place where the contract is
to be performed is the law which governs as to its validity and
interpretation. Story, in his work on Conflict of Laws, section
280, says:
"But where the contract is, either expressly or tacitly, to be
performed in any other place, there the general rule is, in
conformity to the presumed intention of the parties, that the
contract, as to its validity, nature, obligation, and
interpretation, is to be governed by the law of the place of
performance. This would seem to be a result of natural justice. . .
. The rule was fully recognized and acted on in a recent case by
the Supreme Court of the United States,
Page 167 U. S. 161
where the Court said that the general principle in relation to
contracts made in one place to be executed in another was well
settled -- that they are to be governed by the law of the place of
performance."
The case referred to in the above section is
Andrews v.
Pond, 13 Pet. 65, in which Mr. Chief Justice Taney,
in delivering the opinion of the Court, said:
"The general principle in relation to contracts made in one
place to be executed in another is well settled. They are to be
governed by the law of the place of performance, and, if the
interest allowed by the laws of the place of performance is higher
than that permitted at the place of the contract, the parties may
stipulate for the higher interest without incurring the penalties
of usury."
In
Bell v. Bruen,
1 How. 169, a letter of guaranty was written in the United States
and addressed to a house in England, and this Court held that "it
was an engagement to be executed in England, and must be considered
and have effect according to the laws of that country," citing
Bank of the United States v.
Daniel, 12 Pet. 54,
37 U. S. 55.
In
Scudder v. Union National Bank, 91 U. S.
406, the broad statement of the foregoing cases was
somewhat narrowed, and it was stated that the law prevailing at the
place of the performance of a contract regulated matters connected
with its performance, and that matters bearing upon the execution,
interpretation, and validity of the contract were determined by the
law of the place where it was made. Even upon that limitation of
the doctrine, we think the interpretation of the contract was
intended by the parties to depend upon the principles of English
law as they obtained and were recognized in England by the usages
prevailing at Lloyds. This is what the parties expressly stipulated
for, and it is no injustice to the company to decide its rights
according to the principles of the law of the country which it has
agreed to be bound by, so long as, in a case like this, the foreign
law is not in any way contrary to the policy of our own.
See
Liverpool & Great Western Steam Co. v. Phoenix Ins. Co.,
129 U. S. 397,
129 U. S. 446,
129 U. S.
453.
It appears in evidence also that there were in use two well
known
Page 167 U. S. 162
forms of particular average clauses by maritime insurance
companies, one or the other being usually stamped on the insurance
certificates. One clause reads, "Free of particular average unless
caused by stranding, sinking, burning, or collision;" the other
clause reads, as in this case, "Free of particular average unless
the vessel be stranded, sunk, burned, or in collision." The clause
in use in this certificate was termed the "English clause." Many
agents of English companies offered either clause, and the form in
use in this case was regarded as a better clause for the insured
than the "caused by" clause. It did not appear, however, that the
London Assurance Company used any other than the clause found in
the memorandum in this case.
Referring, then, to the English law upon the question as to the
meaning of this language, the English courts, many years ago,
decided it, and that decision has been adhered to ever since. The
English courts have held, and do now hold, that the expression
"free of particular average unless the vessel be stranded" meant
that if a loss occurred during the adventure, although from a cause
not related in any way to the stranding of the ship, the insurers
were liable upon the general language of the policy.
Lord Mansfield, in one or two decisions at
nisi prius,
had stated that it meant that the loss should arise out of the
stranding. These cases were subsequently referred to in the leading
case in the King's Bench of
Burnett v. Kensington, decided
in 1797, and reported in 7 T.R. 210. The case was as much
considered as almost any in the books. It was four times tried, and
upon the last occasion of its appearance in the court in banc
judgments were delivered by Lord Chief Justice Kenyon, Mr. Justice
Ashhurst, Mr. Justice Grose, and Mr. Justice Lawrence. The Chief
Justice referred to the case of
Cantillon v. The London
Assurance Company, tried in 1754, where the jury was formed of
merchants, and the trial was presided over by Lord Chief Justice
Ryder. In that case it was held that if the ship stranded, the
insurer was let in to claim his whole partial average loss without
regard to the fact that the loss was not occasioned by the
stranding. It was said that the great insurance companies in London
altered
Page 167 U. S. 163
the form of their policies in consequence of the decision in the
Cantillon case. Subsequently the words were restored. The
Chief Justice, in the course of his judgment in the
Burnett case, continued:
"If it had been intended that the underwriters should only be
answerable for the damage that arises in consequence of the
stranding, a small variation of expression would have removed all
difficulty. They would have said, 'unless for losses arising by
stranding.'"
And he held, and the court agreed with him, that the meaning of
the memorandum "free from average unless general, or unless the
ship be stranded" was that in case the ship were stranded, the
insurers were to be answerable for the average loss although the
loss did not occur in the slightest degree by reason of the
stranding.
Mr. Justice Ashhurst stated that the memorandum was certainly
couched in doubtful words, and that it was difficult to determine
when the ship was stranded, or whether or not the damage to the
cargo arose from the stranding, or how much the damage was owing to
that cause, and he said that:
"It seems as if this memorandum were introduced to avoid that
inquiry, and that, when the ship had been stranded the underwriters
consent to ascribe the loss to that cause. . . . Those authorities
having decided the point, there is now not only no reason to
overset them, but a very strong reason to induce us to support
them, namely, that this construction of the policy will tend to
prevent litigation."
Mr. Justice Grose said:
"And that brings it to the true construction of the memorandum,
and of the exception to it, whether the underwriters be or be not
liable for an average loss where there is a stranding, though no
part of the loss arise from the stranding of the ship. I have had
great difficulties in bringing my mind to decide this, because the
consequence of considering this as an exception to the memorandum,
as the words import, is this: that, if a ship be stranded, and the
cargo suffers no damage whatever, and afterwards the ship meets
with bad weather, and the cargo sustains an average loss of 90
percent, the underwriters are answerable for the whole of that
average loss when it is admitted that no
Page 167 U. S. 164
part of it happened in consequence of the stranding. . . . If we
were to determine that the assured could only recover for the loss
that happened by the stranding, it would introduce all that doubt
and difficulty that the memorandum intended to remove. Therefore it
seems to me best to decide this case on the plain import of the
words, notwithstanding the absurdity which I at first pointed out
will follow. Besides, if the parties had intended that the insurers
should not be liable to the average loss unless part of the loss
happened by the stranding, they would have added words to this
effect: 'unless part of the loss happen by the stranding,' and the
omission of such words strongly induces me to determine strictly
according to the words that are inserted in the memorandum."
Mr. Justice Lawrence said that:
"In a case where the words of the policy are inaccurate, and
where there are inconveniences attending each construction, if the
case has ever been decided, I think that we ought to be guided by
it."
He then refers to the case of
Wilson v. Smith, 3 Burrow
1550-1556, in the King's Bench, in which Lord Mansfield considered
that the loss must arise by reason of the stranding, and he said
that Lord Mansfield in that case went beyond the facts of the case
then before the court. Continuing his judgment, he referred to the
case already mentioned of
Cantillon v. The London Assurance
Company, in which the point had been decided, and he said, in
conclusion:
"Therefore, as the very question has once been decided, I think
it ought to govern our decision in this case, especially as the
question arises on the construction of an instrument so
inaccurately penned as a policy of assurance."
It thus appears that the learned judges of the court of King's
Bench a hundred years ago deliberately decided that the damage need
not be the result of the stranding of a vessel. It also appears
from the report of the case that they were fully alive to what Mr.
Justice Grose called the absurd result of the construction in one
aspect of the case; and, while appreciating the fact, they held
that, taking all things into consideration, the true meaning of the
language of the memorandum
Page 167 U. S. 165
permitted a recovery, provided there were a stranding, though
the loss was not occasioned by it.
Although the original language of the memorandum confined the
exception to a stranding of the ship, it was afterwards extended so
as to read, "Free of particular average unless the vessel be sunk,
burned, stranded, or in collision." The same rule applies to all,
and if the vessel be either sunk, burned, stranded, or in
collision, it is sufficient to render the insurer liable, although
the loss does not result therefrom.
In
Harman v. Vaux, 3 Campbell 429, Lord Ellenborough
held that the stranding is a condition precedent, and, when that is
fulfilled, the warranty against particular average ceased to have
operation.
In
Barrow v. Bell, 4 B. & C. 736, decided in 1825,
the insurer was held liable although the cargo was not injured by
the stranding, the injury having resulted from striking upon an
anchor in the harbor. Abbott, Chief Justice, Bayley, Holroyd, and
Littledale, JJ., held the case of
Burnett v. Kensington,
above cited, as entirely controlling, and that the insurers were
liable.
In
Kingsford v. Marshall, 8 Bingham 458, decided in
1832, although the court held that in that case there was no
stranding, yet Tindal, Chief Justice, recognized the general rule,
and said:
"The question is whether, as the goods insured fall within those
in the memorandum enumerated, the present case is taken out of the
exception contained in such memorandum by reason of the ship being
stranded, inasmuch as it has long been settled that the words 'if
the ship be stranded' are words of condition, and that, if such
condition happens, it destroys the exception, and lets in the
general words of the policy. . . . For if the ship was
stranded in
Dunkirk harbor, an average loss upon
the whole would be equally recoverable though it had happened from
perils of the sea at any former time, or any other place, in the
course of the voyage insured."
And he referred to
Burnett v. Kensington as
authority.
In
Thames & Mersey Marine Insurance Co. v. Pitts, 1
Q.B. 476 (1893), the court, in giving judgment, said:
"It is clear
Page 167 U. S. 166
that it is immaterial whether the actual mischief can be traced
to the stranding. . . . If the stranding takes place within the
time contemplated by the parties, the insured can recover in
respect of a particular average whether the damage can be traced to
the particular stranding or not. This proposition is not only in
accordance with common sense, but is abundantly supported by
authority."
And he quotes from the judgment of Tindal, Chief Justice, in
Roux v. Salvador, 1 Bing.N.C. 526, in which the Chief
Justice said:
"The general principle laid down in
Burnett v.
Kensington, that if the ship be stranded, the insurer is
liable for any average damage though quite unconnected with the
stranding, is not disputed. The policy, after the stranding, must
be construed as if no such warranty had been written on the face of
it."
In the
Thames & Mersey case,
supra,
however, the court decided that where the stranding took place
before the cargo was laid and the risk commenced, and the loss
occurred after the loading, the insurer was not liable. In other
words, the court held that the stranding must take place in the
course of the adventure, and that where it occurred before the
goods were loaded, and when the cargo was not at risk in the ship,
the insurer was not liable.
In
The Glenlivet, 1894, Prob., p. 48, the rule as
stated by the former cases is recognized, but the court held that
the clause referring to a burned ship meant that the injury by fire
was such as to constitute a substantial burning of the ship as a
whole.
The English text writers on marine insurance recognize the rule
to be as above stated.
See 1 Marshall on Insurance (2d
Amer. from 2d London ed.), pp. 222, 234; Lowndes on Marine
Insurance, secs. 317, 319; McArthur on Marine Insurance, p.
245.
It is further urged in argument that such a collision as
occurred in this case ought not to be held as included in the words
of the memorandum because, if it were, the greater and more serious
the collision might be, extending possibly so far as to render the
vessel unseaworthy, the more certainly it would appear that the
company would be liable for the
Page 167 U. S. 167
subsequent loss, and hence the underwriter might be held for a
loss happening by reason of the unseaworthiness of the vessel
existing at the time she commenced her voyage, which would overturn
the well settled rule in such case. The answer to this argument is
that the warranty that the ship is seaworthy applies to every
insurance for a voyage, including insurance on cargo,
notwithstanding the owner of the cargo has no power to make the
ship seaworthy. The warranty is absolute, and a breach of this
implied condition makes the policy wholly void, so that it is
immaterial whether the loss claimed was in any way connected with
the unseaworthiness or totally independent of it. (Lowndes on
Marine Insurance, sec. 170; McArthur on Marine Insurance, p. 24;
Marshall on Insurance, 153, 160.)
From this review of the authorities in England, there can be no
doubt that if a ship be once in collision during the adventure,
after the goods are on board, the insurers are, by the law of
England, liable for a loss covered by the general words in the
policy, although such loss is not the result of the original
collision and, but for the collision, would have been within the
exception contained in the memorandum, and free from particular
average as therein provided. It is not material now to inquire as
to the course of reasoning by which this construction of the
language of the memorandum was reached. Having decided more than a
hundred years ago what the meaning was, that meaning has been
continuously attributed to the memorandum by the English courts up
to the present time. The fact that the underwriters still continue
its use under such circumstances shows that they have adopted this
construction, and that they intend this meaning. Any additional
exception which they have placed in the memorandum since the first
decision, and which forms a part of the original exception, must be
given the same meaning. Originally, the exception contained only
the word "stranding," but subsequently, and at different times, the
words "burned, sunk, or in collision" were added to it, and they
must all be given the same construction as an exception that has
been given to the word "stranding." and, if any of them
Page 167 U. S. 168
occur, the memorandum is struck out, and the general words of
the policy come in force. The question of whether the law of this
country does or does not accord with the law of England in this
matter does not arise in this case, and we express no opinion upon
that question.
Our conclusion is that the underwriters are liable for the loss,
under proper rules of adjustment.
The remaining question relates to the correctness of the method
for the adjustment of the loss which has been adopted by the courts
below. This depends upon the special facts, which will now be
referred to in some detail. The cargo consisted of about 80,000
bushels of wheat, all owned by the libelants. Of that total, the
underwriters named in this action had insured 33,000 bushels, as
already stated. After the arrival of the vessel at the port of
Boston, in distress, the wheat was discharged into lighters for
examination. A formal survey was made, and the wheat was found
badly damaged by sea water, and unfit for reshipment in its then
condition. The owners of the cargo gave notice of abandonment to
the underwriters, which was not accepted by them, and the care of
the cargo was assumed by the owners. A second survey was made on
the 16th of January, 1891, and after it was made, it was
recommended that none of the grain be reshipped in its then
condition, and it was also recommended that, as there were no
facilities for reconditioning the grain at the port of Boston, it
ought to be promptly sold for the benefit of all concerned.
Nevertheless, arrangements were entered into with persons at
Boston, and such of the grain as was capable of being so treated
was cleaned, separated, and generally reconditioned, so far as
possible, and a survey made on the 21st of February showed that, as
the result of this treatment, the wheat had been considerably
improved, and saved from further deterioration, making it of
greater market value than before the treatment. On February 28th
another and last survey was held on the cargo, from which it
appeared that about 50,000 bushels were in fair merchantable
condition, though slightly damp, and having a slight smell. About
17,000 bushels were slightly damp, and had a smell caused by slight
mixture of
Page 167 U. S. 169
damaged grains. The opinion of the surveyor was that
"constant care is required to keep the property from further
deterioration; therefore, should a shipment to Lisbon be
contemplated, would advise that the above-mentioned lots be kept in
separate holds or bins while in transit, and think by so doing
would carry to Lisbon without further deterioration."
From the time of the arrival of the ship at Boston, negotiations
had been carried on between the agents of the libelants and the
agents of the ship, and also with the insurers, for breaking up the
voyage at Boston, on the theory that the disaster which had
overtaken the vessel had so damaged the cargo with reference to the
port of destination that the venture was practically frustrated,
and that it would cost more to carry the grain to Lisbon, after
being reconditioned, and paying all the charges upon the cargo,
than the whole grain would be worth upon its arrival. The agents of
the ship had been disinclined to permit the voyage to be broken up
without full payment of freight. On February 20, 1891, all the
underwriters on the cargo, including this company, agreed in
writing that the payment of a certain amount of freight on the
damaged cargo, and the acceptance and sale of the cargo by the
owners, should be without prejudice to any of the rights or claims
the shippers of the cargo might have against the insurers, and
should not be considered a waiver or acceptance of an abandonment,
nor should it prejudice any defense that the insurers of the cargo
might have under their contract of insurance. It was also agreed
that the amount of the freight agreed upon was to be a recoverable
item in any claim except for general average, but that,
notwithstanding, the cargo owners might demand its allowance in
general average. On the 27th of February, 1891, the agents of the
ship entered into an agreement with the agents of the owners of the
cargo to surrender the cargo to its owners free from liens in
consideration of the payment of $3,600 as full freight on the
cargo. Some other conditions were imposed, not material.
It also appears that the condition of affairs in relation to the
shipment of wheat to Portugal was very peculiar. There was a very
high duty on wheat imported into that country,
Page 167 U. S. 170
which apparently applied as well to damaged as to sound wheat.
Damaged grain was unsalable there, and in many cases the
authorities have not permitted in to be landed. It was difficult to
establish a market price in Portugal, because but little wheat was
sold there in open market, most of it being imported by millers to
be ground into flour, and millers were only allowed to import and
grind a certain fixed quantity of foreign wheat. Other ports of
Europe, such as Liverpool and Antwerp, to which some of this wheat
was subsequently shipped by its purchasers, were not subject to the
same conditions. In them it seems that damaged grain might be
disposed of, and that it possessed a market value.
Of the wheat covered by the policy issued by this particular
company, there were sold at Boston, for the benefit of all
concerned, 32,740 8-60 bushels, the net proceeds of which amounted
to $28,554.15, which, being deducted from the value of the 33,000
bushels, as named in the policy, $40,887, left $12,332.85 as the
amount of the loss claimed by the libelants, as covered by the two
policies upon this particular wheat, about one-half of which was
claimed under the policy in suit, to which were added several other
charges, and then some deductions were made, making the total
amount of the claim against this company $10,451.34.
The commissioner to whom it was referred by the district court
to assess the damages sustained by the libelants held, upon the
facts given in evidence before him (most of which are above set
forth), that it was proper to break up the voyage and sell the
cargo in Boston, and that it was also proper to adjust the loss by
deducting the amount for which the wheat sold at Boston from the
value as named in the policy, and he held the insurers liable for
the difference, and added other items not necessary at this time to
state in detail. The commissioner treated the loss as one which is
technically called a "salvage loss." He found that while it was not
certain that the whole cargo, after being reconditioned, would have
been seriously deteriorated, or have been wholly spoiled in a
physical sense if reshipped to Lisbon, because it had been greatly
improved by the reconditioning process, and possibly
Page 167 U. S. 171
might have arrived without further serious deterioration, yet,
in consideration of the facts applicable to this case, including
all the circumstances surrounding it and above stated, the cargo
should in fact be regarded as wholly spoiled in that practically it
would have been almost valueless at Lisbon owing to the peculiar
laws governing that port, and he adds:
"Taking the decisions of the cases and the definitions of the
text writers together, a fair statement of the law applicable to
this case would seem to be that, the whole cargo having been
necessarily sold in Boston for the benefit of all concerned, the
underwriters are liable for the differences between the sums
realized at the sale and the valuation in the policies."
The insurance company claims, if liable at all, that its
liability should be adjusted with reference to the rules which
obtain in cases of a particular average loss; that although in most
cases, that kind of a loss is adjusted at the port of destination,
yet as in this case the wheat was sold in Boston at the urgent
request of its owners, and the voyage broken up at that port,
Boston should therefore be treated the same as if the policy had
named that place as the port of destination instead of Lisbon, for
all purposes of the risk, and in such case, where the port of
destination has been reached, and only a part of the cargo is
damaged, the rule of adjustment must be that which obtains in the
case of a particular average loss.
The rule for computing a technical particular average loss has
been in existence for over a hundred years, and is well known and
understood. The case of
Lewis v. Rucker, 2 Burrows 1167,
was decided by the Court of King's Bench, Lord Mansfield delivering
the judgment, in 1761, and the case of
Johnson v. Sheddon,
2 East 581, was decided by the same court in a judgment delivered
by Mr. Justice Lawrence. Those cases hold that the damaged goods,
upon reaching their destination, must be at once sold for the best
price that can be had. It is then to be determined what the goods
would have been worth in the same market had they been sound, and
the difference between the sound value and the proceeds of the
Page 167 U. S. 172
sale of the damaged article gives the ratio of deterioration,
and the underwriter is to pay this ratio or percentage of loss on
the policy value.
See 2 Marshall on Insurance (2d Am. from
2d London ed.) 623; Lowndes on Marine Insurance, sec. 269
et
seq.; Marshall on Marine Insurance 207.
The company also insists that the libelants, at the time they
filed their libel, did not claim as for a constructive total loss,
or, in other words, did not claim a salvage loss, but that, in
their libel, they described their loss as a partial one, and the
company says that it was upon such issue that the question was
tried before the commissioner, and that it appeared from the
evidence taken before him that it was a case for the application of
the strict technical rule adopted in the adjustment of a particular
average loss.
We think there is no substantial ground for the contention that
the libelants had not claimed a salvage loss in their libel. It is
true that, in the fourth clause of the libel filed by the
libelants, they describe the loss for which the company were bound
to pay as a partial as well as a total loss, but in the third
paragraph, they allege an abandonment by them after the damage to
the wheat and its arrival at the port of Boston, and the refusal to
accept such abandonment by the company, and in the sixth paragraph
of the libel they claim the right to recover the difference between
the amount realized upon the sale of the wheat and the value of the
wheat as stated in the policy, which they allege amounts to the sum
of $10,451.34, together with claims for general average and special
charges as therein stated. This is, in substance, a claim as for a
salvage loss. In their claim before the commissioner, the libelants
also showed their purpose to obtain damages upon the same
theory.
In regard to these conflicting claims as to the proper theory
upon which the loss should be adjusted, we think, under the
peculiar facts of this case, that the method adopted by the
commissioner was proper. It is not denied that, if a ship at an
intermediate port sells a part of her cargo which has been so
injured by perils insured against as that it is unfit to be carried
further, it may be sold at that port, and the loss be adjusted
Page 167 U. S. 173
as a salvage loss; that is, the value of the goods stated in the
policy is to be paid after deducting the amount realized on the
sale of the damaged goods.
The case here presented, however, is one where the whole cargo
has been sold by the assured, the cargo owner, in an intermediate
port (where the voyage was broken up by common consent), and where
the sale was for the benefit and with the consent of all concerned,
and for the purpose of preventing greater loss. Boston cannot and
ought not to be regarded as the port of destination for any
purpose. It was a port of refuge, where the whole cargo was sold,
instead of but a part, and it was sold in order to make the loss as
small as possible. Under such circumstances, is the rule of
adjustment to be the same as where a part of the cargo has been
damaged, and necessarily sold at an intermediate port, or must the
loss be adjusted by reference to the rule adopted in cases of
particular average?
The voyage, it must be recollected, was not broken up, or the
cargo delivered to its owners for their sole benefit. Very probably
they were the prime movers in proceedings for its sale -- that is,
in obtaining the consent of all parties interested in the cargo for
its sale at Boston -- but it is evident that the sale was in fact
made for the mutual benefit of all. The peculiar law in relation to
the importation of damaged wheat into Portugal, and the seeming
certainty that to carry it there under the circumstances would
result in a greater loss to the insurers then to sell the wheat in
Boston, renders it quite clear that it was to the interest of the
insurers, as well as the owners, to terminate the voyage and sell
the wheat for the benefit of all concerned at Boston.
Under these facts, it would seem to be true that this cargo,
being partly damaged, was necessarily sold at the port of refuge,
and that, in making such sale, the insurers sustained no damage,
but, on the contrary, received benefits. In this state of the case,
we see no reason why the sale of the whole cargo should not be made
upon the same principles that obtain in case of the sale at a port
of refuge of that portion of the cargo which has been damaged and
is unfit for transportation to
Page 167 U. S. 174
the port of destination. In other words, we think a loss under
such facts should be adjusted as a salvage loss. The court below,
speaking by Acheson, Circuit Judge, in this case said:
"We have carefully examined the evidence, and the legal
authorities cited, and are not convinced that the commissioner
erred either in his findings of fact or in his method of estimating
the loss on the cargo. The breaking up of the voyage and the sale
of the cargo at the port of distress were not for the benefit of
the insured solely. What was thus done was really for the advantage
of all persons interested, including the underwriters. As we have
already seen, the wheat was all more or less damaged. Now it
appears that the condition of affairs in Portugal with respect to
the importation of wheat is peculiar, and that damaged grain is
unsalable there. The finding of the commissioner is that the
Liscard's wheat would have been almost valueless at
Lisbon. The evidence certainly warrants the conclusion that the
loss to the appellant would have been greater had the cargo gone to
Lisbon. We agree with the commissioner and the court below in the
view that the adventure was practically frustrated, and hence
justifiably abandoned, and that under the special circumstances,
the sale of the wheat at Boston may fairly be considered to have
been made from necessity for the benefit of all concerned. Mr.
Parsons (2 Marine Insurance 411) says that if a ship at an
intermediate port finds a part of its cargo so injured by sea
damage that it is unfit to be carried on, it may be sold at that
port, and the loss adjusted as a salvage loss. Mr. Phillips (2
Insurance sec. 1480) says, speaking of an adjustment as upon a
salvage loss:"
"The underwriter is liable for such an adjustment of a
particular average only in cases where the sale at an intermediate
port is obviously expedient, and made on account of damage by the
perils insured against, where, if the subject were forwarded to the
port of destination, it would be greatly diminished in value, or be
of no value, on arriving there."
We think that the present case falls within the rule even as
thus laid down, and that the appellant is justly chargeable with
the difference between the valuation in the
Page 167 U. S. 175
policy and the sum realized by the sale, and that the adjustment
upon that basis was correct.
We agree with the views thus expressed, and hold that the method
of adjustment pursued by the commissioner and affirmed by both
courts below was, under the special circumstances of this case, a
proper and correct one.
We have examined the other objections taken to the
commissioner's report, and are of opinion that they are not well
founded. The decree must be
Affirmed.