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