1. Where a written contract is susceptible on its face of a
construction that is "reasonable," resort cannot be had to evidence
of custom or usage to explain its language. And this general rule
of evidence applies to an instrument so loose as an open or running
policy of assurance, and even to one on which the phrases relating
to the matter in contest are scattered about the document in a very
disorderly way. NELSON and FIELD, JJ., dissenting from the rule, or
from its application in this case, in which there was a clause
that, as they conceived, made the evidence of usage proper.
2. The expression "rate," or "rating" of vessels, as used in
policies of assurance, means relative state in regard to insurable
qualities. Hence, where a policy requires that a vessel shall not
be below a certain �"rate," as,
ex gr., "not below A 2,"
this rate is not, in the absence of agreement to that effect, to be
established by the rating register alone of the office making the
insurance -- certainly not unless the vessel was actually rated
there -- nor by a standard of rating anywhere in the port merely
where that office is. There being, as yet, no "American Lloyds,"
the party assured -- if not actually rated on the books of the
office insuring -- may establish the rate by any kind of evidence
which shows what the vessel's condition really was, and that, had
she been rated at all at the port where the office was, she
would have rated in the way required. He may even show how
she would have rated in her port of departure, or in one where the
company insuring had an agency through which the insurance in
question was effected, this being shown, of course, not as
conclusive on the matter of rate, but as bearing upon it, and so
fit for consideration by the jury.
3. Evidence is not admissible of a general usage and
understanding among shippers and insurers of the port in which the
insuring office is that in open policies the expression used, as,
ex gr., "not below A2," refers to
Page 68 U. S. 457
the rate of vessels or the register of vessels making the
insurance. SWAYNE and DAVIS, JJ., dissenting on the facts of the
case as to this last point.
These were actions brought by Wright against two insurance
companies in New York -- "The Orient Mutual" and "The Sun" -- on
two policies of insurance, called open or running policies, a sort
of policy which has been described in this Court [
Footnote 1] as one enabling the merchant to
insure his goods shipped at a distant port when it is impossible
for him to be advised of the particular ship upon which they are
laden and which therefore cannot be named in the instrument of
assurance. The insurer upon this class of policies, of course, has
no opportunity to inquire into the character or condition of the
vessel, and agrees that the policy shall attach if she be
seaworthy, however low may be her relative capacity to perform the
voyage, and, for the additional risks he may thus incur, he finds
his compensation in an increase of premium. [
Footnote 2]
The two suits brought on the two policies here were tried
together in the court below, and so argued and disposed of here,
the principles in each case being confessedly, and so declared by
the court, the same.
The policies professed to insure Wright against loss on
one-fourth of five thousand bags of coffee, to be shipped on board
of "good vessel or vessels" from Rio de Janeiro to any port in the
United States. Thus far the case was plain. The difficulty arose
from certain clauses relating to the premium, of which clauses
there were several scattered about the instrument. One such, just
after the declaration of insurance made, was thus: "
To add an
additional premium if by vessels lower than A 2, or by foreign
vessels; to return 1/4 of 1 percent if direct to an Atlantic port."
The policies also contained this clause:
"Having been paid the consideration for this insurance by the
assured at the rate of 1 1/2 percent,
the premiums on risks to
be fixed at the time of the endorsement,
Page 68 U. S. 458
and such clauses to apply as the company may insert, as the
risks are successively reported."
The companies here sued, though New York companies, had an agent
in Baltimore through whom they effected insurances there, and it
was through this agent that the present insurances were made. His
testimony went to prove that when applications were made to enter
risks on running policies, the application was endorsed at once by
him, and a report made to the company in New York, which named the
premium, and that this was made known to the assured; that the
premiums specified in the body of the policies are nominal, and the
true premiums to be charged are fixed by increasing or reducing the
nominal premiums, and that the nominal premiums taken on the
delivery of a running policy are returned if no risks are
reported.
On the back of one or both the policies here, were entries as
follows, which, it was argued, explained this alleged custom:
1855. Aug. 13. Bank
Maine Law, from Rio to New Orleans,
$15,750, at 1 1/2 percent
1855. Aug. 13. Brig
Windward, from same place to
Baltimore, $4,750, at 1 1/4 percent
1855. Nov. 20. Brig
T. Walters, from same place to
Philadelphia, $2,375, at 1 1/4 percent
In the present cases, the plaintiff applied, in the latter part
of August, 1856, to the agent in Baltimore for an endorsement on
the policy of the coffee in question, laden or to be laden on board
a vessel called the
Mary W., from Rio de Janeiro to New
Orleans, which application was communicated to the company in order
that they might fix the premium. The company at first declined to
acknowledge the vessel as coming within the description of a "good"
vessel, on account of her alleged inferior character, but the
plaintiff, insisting on her seaworthiness and his right to insure
within the terms of the policy, the company replied to his
application: "We shall charge the same rate as the Sun does,
viz., 10 percent, subject to average, or 2 1/2 percent
free of average." This the plaintiff refused to pay. The
Page 68 U. S. 459
company thereupon claimed to be released from the risk. The
plaintiff asserted that there was still a subsisting contract.
The coffee had been shipped on the
Mary W. at Rio, for
New Orleans, 12 July, 1856, when she started on her voyage. The
vessel was lost on the 29th of the month upon rocks, the master
being some seventy miles out of his course.
The cases had been already before this Court in 1859,
64 U. S. 23 How.
401,
64 U. S. 412,
[
Footnote 3] by writ of error
from a former trial.
On that trial it was conceded that the
vessel rated below A 2, or that the testimony might lead the
jury to this conclusion. And on review here, this Court held that
if this were true, then inasmuch as no rate of premium had been
fixed by the agreement of the parties and the plaintiff had refused
to pay the additional premiums which the companies had demanded,
there was in reality no contract of insurance consummated as to the
goods on that vessel. As the instructions of the court below had
assumed that the contract was complete, although the vessel might
rate below A 2 and although no agreement had been made for the
increased premium, the cases were reversed and a new trial ordered.
On this second trial, the plaintiff sought to establish, and
contended that he had established, that the vessel was within the
rate prescribed, and in fact was not a vessel lower than A 2.
On this second trial, the defendants having given testimony
(much the same testimony as that above mentioned as given on the
first), tending to establish a usage that the premium named in the
policy was in all cases a nominal one, and that the insured had a
right, when the risk was reported, to vary the rate of premium as
he might wish -- asked the court for eleven instructions, the
material parts of the seventh, eighth, and ninth being as
follows:
"
Seventh. That if they found from the testimony and
course of dealing of the parties, that the premium specified in the
body of the policy was a nominal premium only, to which no
attention
Page 68 U. S. 460
was paid in fixing the true premium to be paid, then the company
had the right to fix the premium at the time of endorsement,
whether the vessel rated A 2 or not."
"
Eighth. That by the true interpretation of the policy,
in the custom referred to in the preceding prayer, the insurer had
the right, in good faith, to fix the real premium above or below
the nominal premium, where the vessel rated A 2 or above it."
"
Ninth. That by the true interpretation of the policy,
the real or actual premiums on risks were to be fixed by the
companies at the time of return or endorsement of the risk, and
that the premiums so fixed by them in the case of the
Mary
W. not having been assented to by the assured, the premiums in
that case cannot now be fixed by the court or jury, and further
that by the true interpretation of the policies, the real premiums
on risks are not fixed therein without action by the parties,
whether the vessel rates A 2 or above or below that rate."
These instructions the court refused to give, and the only
question submitted to the jury was whether the vessel in which the
loss occurred did or did not rate below A 2 within the meaning of
the policy.
But another question here arose -- the question, to-wit, by what
standard was this fact, whether the vessel did or did not rate
below A 2, to be fixed? Was it by that of Rio, whence she sailed?
Or by that of Baltimore, where the application for insurance was
made? Or by that of New York, where the policy was issued? Or by
the register of the company which made the insurance? -- with a
conclusion that if
that were silent, the vessel was not A
2 within the meaning of the contract at all. It was proved that the
standard of rating was different at Rio and Baltimore from what it
was at New York, being higher in the last-named city than it is in
either of the former ones, so much so, indeed, that a vessel might
be rated A 2 at Rio and Baltimore which would fall below that rate
at New York. It was also proved that each of the marine companies
of New York keeps constantly in its employment a salaried officer
whose business it is to examine and rate vessels, and that the
rates of the vessels thus examined by him are reported to the
company and entered
Page 68 U. S. 461
upon a book kept for that purpose. Mr. Swan, of the house of
Grinnell, Minturn & Co., large shipping merchants of New York,
testified that
"the business of rating is a special one; that the companies all
have inspectors to ascertain the rating of vessels, and that when a
policy speaks of the rate of vessels, it is the rate of the
company, and refers to that standard."
There was other testimony to the same effect. Testimony was
given also, however, showing that this rating differs materially on
the registers of different companies, and that we have not yet
established in this country any institution similar to that of the
British Lloyds, though there is one in New York calling itself the
American Lloyds, and now attempting to establish for itself here
the same position as the one in England, which has its inspectors
in all ports of the United Kingdom, whose reports are forwarded to
a board in London, which fixes the rate of all vessels which are
known to it, and whose owners are willing to have them examined. In
fact, with regard to this particular vessel, it appeared that in
1849 she had three different ratings out of five which it was
proved had been made of her; that she left New York in the year
last mentioned for California, and has never been in the port of
that Atlantic metropolis since; that 1849 was the last year in
which she was rated on the books of the "Sun Mutual" at all; while
the "Orient Mutual" had not been established until 1854, and of
course had her not upon any register of theirs, and shown finally
that a rating seven years old is regarded by all insurers as no
rating at all. [
Footnote 4]
Page 68 U. S. 462
The plaintiffs were allowed to give evidence that at Baltimore
and at Rio she was rated A 2, and particularly to give in evidence
a memorandum in writing, signed by the counsel of the insurance
companies, and which they had given in order to expedite a trial,
that the vessel in question, at the time she left Rio, "was in a
seaworthy condition, fit for any voyage, and especially for the
transportation of coffee," and by reason of thorough repairs at
Rio, was "entitled to rate, and did in fact rate, at A 2
there." There was evidence also tending to prove that she
so rated elsewhere, and ought to have so rated in New York, but
much testimony also tending to prove the reverse.
The court below allowed the above-mentioned memorandum to go in
along with other evidence, both evidence in favor of the plaintiff
and evidence against him, including, in the former, evidence of
this vessel having been newly and thoroughly repaired, and the
testimony of seamen long engaged in the trade of this part of South
America, and including the testimony of marine experts, and proof
of the mode in which the vessel had been rated more than seven
years before the policy issued. And disregarding the prayers of the
defendants presented in some five or six different forms, and
praying instructions that the standard of rate was to be determined
by the books of the defendants and of other insurance companies in
New York, charged them essentially as follows:
"If the jury should find that the rating of vessels on the
registers of companies in New York, was always from personal
examination by inspectors of the different companies, and should
further find that by the long absence of the said vessel from New
York, she had, in the understanding and usage of underwriters in
New York, no fixed rating on the registers of any of
Page 68 U. S. 463
the insurance companies of that city in 1856 (the date of the
contract); but would have been rated there not lower than A 2 --
owing to her thorough repair, had she been there for examination --
then the plaintiff is entitled to recover, although the jury may
find that the said vessel was rated in 1848 or 1849, on the books
of the defendant, below A 2, and that
it was the general usage
and understanding of underwriters and commercial men in New York
that the words in their policies 'not rating below A 2' refer to
the rate of vessels on the register of the company making the
insurance."
The rejection by the court of the defendant's seventh, eighth,
and ninth prayers, given on pp. <|68 U.S. 459|>459-60, and
its refusal to submit, in interpretation of the contract, the
practice and course of dealing between the insurance companies and
its customers, as shown by the Baltimore agent, in regard to the
nominal premiums, were the errors relied on in the first part of
the case, as were the instructions as to the evidence of rating and
the admission of the memorandum and other evidence at Rio, those
relied on in the second.
Page 68 U. S. 468
MR. JUSTICE MILLER delivered the opinion of the Court, and after
stating principal facts, proceeded as follows:
The only question submitted to the jury on the second trial, the
record of which is now before us, was whether the
Mary W.,
the vessel in which the loss occurred, did or did not rate below A
2 within the meaning of the policy. Some of the instructions prayed
by the defendants and refused by the court proposed to submit to
them another question. Having given testimony which tended to
establish a usage that the premium named in the policy was in all
cases a mere nominal one, and that the insurer had a right, when
the risk was reported, to vary the rate of premium as he might
wish, they asked the court to instruct the jury that if such a
usage were proved, then the defendants had the right to demand, as
they had done, an increased rate, which plaintiff had refused to
give, without any regard to the rating of the vessel above or below
A 2, and that plaintiff could not recover. This is the substance of
the
seventh and
eighth instructions prayed by
defendants.
Their
ninth prayer assumed that such was the
construction of the policy without any aid from usage to assist in
its interpretation.
We do not think that the policy on its face can be so construed.
It is signed by the defendant, and not by the plaintiff. All its
promises are made by the defendant in its own language. All its
exceptions and reservations are those of defendant. The rule is
that when in such cases the language requires construction, it
shall be taken most strongly against the party making the
instrument.
The various phrases which relate to this matter of premium, are
scattered through the policy "in most admired disorder." They may
be brought together and stated thus: the plaintiff is insured on
one-fourth of five thousand bags of coffee from Rio de Janeiro to a
port or ports of the United
Page 68 U. S. 469
States. The consideration of the insurance is acknowledged to be
paid at the rate of 1 1/2 percent, an additional premium if shipped
by vessels lower than A 2 or by foreign vessels; a return of 1/4
percent if shipped direct to an Atlantic port, the premium on risks
to be fixed at the time of endorsement, and such clauses to apply
as the company may insert, as the risks are successively reported.
As it was not known that the coffee had been shipped, or on what
vessels it had been or might be shipped, they were to be reported
as soon as the owner received advices. Then the premium on the
risks was to be fixed. But by whom and by what rule? The policy, we
think, answers this except in the case of a foreign vessel or one
rating below A 2. In either of these cases, the premium was to be
increased. If the shipment was direct to an Atlantic port, 1/4 of 1
percent was to be deducted. But if the vessel was not a foreign
vessel nor one that rated below A 2, nor the shipment direct to an
Atlantic port, then the premium was already fixed, and the money
paid, and nothing more remained to be done in that respect.
This provision, that the premium shall be fixed at the time of
the endorsement of the risk on the policy, has its full use and
function in the three contingencies above-mentioned, wherein it is
expressly stipulated that the rate shall differ from one and
one-half percent. The very fact that these three contingencies are
expressly named, in which a different rate of premium may or shall
be charged, excludes the idea that one of the parties may vary the
rule in
all cases, or in
any other case.
Much weight is attached in the argument in this connection, to
the phrase "such clauses to apply as the company may insert, as the
risks are successively reported." It is not necessary to determine
here what is the character of the clauses referred to, or what
effect that phrase might have under certain circumstances. A war, a
blockade, or some other change of affairs occurring after the
policy was signed might justify the company in inserting some
clause for its protection, but we do not think it can be so
construed as to authorize a clause changing the rate of premium in
a case
Page 68 U. S. 470
where it is fixed by the other terms of the contract. No such
clause was added, or proposed to be added to the policy by the
company, and it is useless to speculate on what might or might not
have been successfully claimed, in a case where no claim was
made.
We have thus shown that the instrument has a well defined
meaning in reference to the rate of premium, and that it does not
justify the ninth instruction asked by the defendants.
When we have satisfied ourselves that the policy is susceptible
of a reasonable construction on its face, without the necessity of
resorting to extrinsic aid, we have at the same time established
that usage or custom cannot be resorted to for that purpose. In
speaking of usages of trade, Greenleaf says: [
Footnote 5]
"Their true office is to interpret the otherwise indeterminate
intentions of parties and to ascertain the nature of their
contracts, arising not from express stipulation, but from mere
implications and presumptions, and acts of doubtful and equivocal
character, and to fix and explain the meaning of words and
expressions of doubtful and various senses."
Again, he says, [
Footnote 6]
"But though usage may be admissible to explain what is doubtful, it
is not admissible to contradict what is plain." In the case of the
Schooner Reeside, [
Footnote 7] Mr. Justice Story after using language
strongly condemning the tendency to introduce and rely on usages in
courts of justice, and defining their true office in the language
just cited from Greenleaf, proceeds to say:
"But I apprehend that it can never be proper to resort to any
usage or custom to control or vary the positive stipulations in a
written contract, and
a fortiori not in order to
contradict them. An express contract of the parties is always
admissible to supersede or vary or control a usage or custom, for
the latter may always be waived at the will of the parties. But a
written and express contract cannot be controlled or varied or
contradicted by a usage or custom, for that would not only be to
admit parol evidence to control, vary, or contradict written
contracts,
Page 68 U. S. 471
but it would be to allow mere presumptions and implications,
properly arising in the absence of any positive expressions of
intention, to control, vary, or contradict the most formal and
deliberate written declarations of the parties."
These views, in addition to the high source whence they came,
commend themselves to our judgment by their intrinsic
soundness.
"Not only is a custom inadmissible which the parties have
expressly excluded, but it is equally so if the parties have
excluded it by necessary implication. For a custom can no more be
set up against the clear intention of the parties than against
their express agreement, and no usage can be incorporated into a
contract which is inconsistent with the terms of the contract.
[
Footnote 8]"
Tested by these principles, the usage attempted to be set up in
the case at bar cannot be sustained. It contradicts directly the
written contract. It proposes to set aside all that is said about
the rate of premium and substitute the discretion of one of the
parties to the instrument. It goes upon the assumption that all
that is written in the contract which fixes or ascertains or limits
the amount that may be claimed for premium of insurance by the
company is nugatory, and that the whole field is left open and the
power placed in the hands of one of the parties exclusively. No
such usage can be admitted thus to contradict, vary, and control
this contract.
The court below was right in refusing the prayers of the
defendants which we have been considering and in submitting as the
only question for the jury to determine the rating of the vessel in
reference to A 2.
Upon this question the defendants below, in some five or six
forms, prayed that the jury be instructed that it must be
determined by the rating of the vessel on the books of the
defendants and other insurance companies in New York. The court
refused the prayers, but told the jury that
"if
Page 68 U. S. 472
they should find that the rating of vessels on the registers of
the companies in New York was always from personal examination by
inspectors of the different companies, and should further find that
by the long absence of the said vessel from New York, she had, in
the understanding and usage of underwriters in New York no fixed
rating on the registers of any of the insurance companies in that
city in 1856 [the date of the contract], but would have been rated
there not lower than A 2 owing to her thorough repair, had she been
there for examination, then the plaintiff is entitled to recover,
although the jury may find that the said vessel was rated in 1848
and 1849 on the books of defendant, below A 2, and that it was the
general usage and understanding of underwriters and commercial men
in New York that the words in their policies 'not rating below A 2'
refer to the rate of vessels on the register of the company making
the insurance."
It is claimed by the plaintiffs in error that the proposition
submitted to the jury as to the rating of the vessel must be
determined exclusively by a reference to the books of the company
making the policy. Although no such instruction was asked in the
court below, it is urged upon this Court that such is the true
construction of the contract, and that the charge of the court was
in conflict with this position.
There is nothing in the language of the policy itself to
indicate the source to which we are to look for the determination
of the rating of the vessel. The reasonable inference would seem to
be that, like any other question of value or quantity or quality
left open in a written contract, it should be decided by a
reference to all the sources of information which enable the jury
to fix the rate correctly. What is meant by the rating of vessels
in insurance policies?
It means the determination of their
relative state or condition in regard to their insurable
qualities. It is a matter which has excited much interest in
the commercial world, although we are not aware that it has been
often before the courts. In Great Britain there was established, in
the year 1834, a department at the British Lloyds devoted to this
very business. They
Page 68 U. S. 473
have their inspectors in all the ports of the three kingdoms,
whose reports are forwarded to a board at London, and this board
fixes the rate of all vessels which are known to it and whose
owners are willing to have them examined. The register thus kept is
the one used and referred to in all contracts of insurance in that
country. They, however, have a mode of rating entirely different
from any adopted here. [
Footnote
9] The testimony in this case shows that there is in New York
an institution calling itself the American Lloyds, which is now
attempting to establish the same position as the one referred to in
England. But the proof is that its rating is not generally adopted
as yet, either by insurers or insured, and that each company in New
York which does any considerable amount of business has its own
inspectors and its own register for rating vessels. The evidence
shows that this rating differs very materially on the registers of
the different companies. None of these registers has or can have
any right to determine conclusively the rate of a vessel when that
question comes to be determined in a court of justice. It would
seem that in a question of this kind, left open by one of these
insurance companies and the party whom it has professed to insure,
equity would require the matter to be determined, if by the
register of any company, by some other than that of the party
interested. These registers are the private books of the companies.
They are not for public use, and can only be seen by the courtesy
of the companies' officers. Under these circumstances, the justice
of the principle which would refer the rating of the vessel
exclusively to this register of a party to the suit, when no such
provision is inserted in the policy, is not perceived. If they make
their contracts intending to assert such a claim, fair dealing
requires that they insert it in their policy.
But testimony was introduced tending to show that, by the usage
of underwriters and merchants in New York, the rating referred to
was the rating on the register of the company which made the
policy, and the court instructed the
Page 68 U. S. 474
jury to disregard this usage, if they should find that there was
no rating of this vessel on the books of one of the defendants, and
none since 1849 on the books of the other company.
The testimony shows that the
Mary W. left New York in
1849, and has never been there since, and that was the date of the
last rating on the books of the "Sun Mutual Insurance Company," one
of the defendants, and that the "Orient Mutual," the other
defendant, came into existence in 1854, and the
Mary W.
never had a rating on its register.
It was also proved by several witnesses, and is uncontradicted,
that a rating seven years old is regarded by all insurance men as
no rating at all. Here is a case, then, where a party is seeking to
incorporate into his contract a usage that the rating mentioned in
his policy must have exclusive reference to his own register when
the vessel supposed to be insured is not on that register at any
rating whatever. It must be remembered that we are now trying to
arrive at the intent of the parties at the time the policy was
made, and that this usage is introduced to assist us in that
effort. Can it be believed that the contracting party, who paid his
money at that time for insurance on coffee, to be shipped on any
vessel that was seaworthy, whether below A 2 or above it, whether
foreign or domestic, had any idea that he was limited in the
selection of his vessel, to such as might be found on the register
of the company he was dealing with? Or that the company, which
professed to insure the coffee on home vessels or
foreign
vessels, on vessels rating above or below A 2, on shipments to
Atlantic ports or Gulf ports from Brazil, intended to limit the
plaintiff to the use of vessels whose names might be found on their
register? And this too when one of the companies had no register
reaching back more than two years. Yet we must believe this if we
hold the usage mentioned in the instrument as controlling the
case.
It is not, however, necessary to go any further in this case
than to decide, as we do, that such usage, if it were admissible at
all, could only apply to the case of a vessel which
Page 68 U. S. 475
had an actual rating on the books of the company so recent as to
be recognized by insurers as a valid rating. And that as the
Mary W. had no such rating on the books of the defendants,
the usage cannot apply to these contracts. Such was evidently the
view of the court below, in which we think it was correct.
But the court was asked by the defendants below to instruct the
jury that in determining the rate of the
Mary W., they
must confine themselves to the registers of the defendant
and
the other insurance companies of New York.
The vessel had no rating on the books of any insurance company
in New York later than 1849, which was more than seven years before
the risk was claimed to attach in these cases. It was, as we have
already said, fully proved that such a rating was wholly
disregarded by all insurance companies as being of no value. The
effect of the instruction would have been to confine the jury to
testimony which would give them no light on the subject they were
directed to consider -- indeed to that which could not be called
evidence at all. And the argument that plaintiff could not be
supposed to have contracted with reference to any such rule as this
is quite as forcible as it is in regard to the claim to confine the
evidence to defendants' own books. In this instance, there is no
claim that the rule is supported by any usage. These registers
differ among themselves, and those offered in evidence show that at
the time the
Mary W. left the Atlantic coast for
California, in 1849, she had as many as three different ratings on
the books of the five companies whose registers were offered in
evidence. Which of these should prevail, even if they were recent
enough to be admissible? Shall the jury be excluded from all other
evidence to explain these differences, or to show the relative
value or reliability of these different estimates? Can any sound
reason be given for such exclusion? It is supposed that the few
companies which may happen to have a vessel on their register have
exhausted the means of information as to her character, and that no
one else can throw any light on it? So far from restricting the
jury in this manner, it seems to
Page 68 U. S. 476
us that as the true object of inquiry is to fix the insurable
character or status of the vessel, they should be at liberty to
hear any testimony which would tend to show her capacity for
resisting the perils insured against. It is therefore our opinion
that when the court instructed the jury to base their verdict on
the fact to be ascertained by them, whether the
Mary W.
would or would not have rated below A 2 in New York had she been
there for examination, the rule was stated quite as favorably to
plaintiffs in error as sound principle will justify.
It is objected that the testimony of certain persons in Rio, and
especially the agreed statement that she was entitled to rate as
high as A 2 at that place, was not competent under the issue. We
think this fact might well be submitted to the jury with many
others, none of which was conclusive, but all bearing on the
question before them. The fact that she had been newly and
thoroughly repaired, had been surveyed before and after the
repairs, and the results of these surveys, the results also of
examinations made by seamen long engaged in the trade between Rio
and the United States, were the best, perhaps the only, evidence of
her then condition and insurable status. When the court, in
addition to these facts, admitted on the part of plaintiffs in
error the opinion of New York experts on this testimony to go with
it, and also the seven years' old rating of the plaintiffs in error
and other insurance companies, we cannot but conclude that the case
went fairly to the jury on the testimony. None of it was held
conclusive. No instruction was asked of the court or given as to
its relative value, and as none of it was absolutely irrelevant, we
see no error in its admission to the prejudice of the plaintiffs in
error.
We have thus examined in detail, and with much caution, the
points raised against the verdict below, and, as we find none of
them tenable, the judgments are
Affirmed.
[
Footnote 1]
Per NELSON, J.,
Orient Mutual Insurance
Company v. Wright, 23 How. 405.
[
Footnote 2]
Ibid.
[
Footnote 3]
See Orient Mutual Insurance Co. v. Wright and
Sun
Mutual Insurance Co. v. Same Defendant.
[
Footnote 4]
The position of the vessel in 1856, with the Sun Company, as to
her "rating" as an insurable risk was as follows:
She was rated in 1847, on the books of the Sun Company, "A 2
1/2," being then between one and two years old, and then first
appearing on the company's books. In 1848, she was again examined
by the inspector of the company and her condition noted, the same
rate being retained. In 1849, she having been remodeled, she was
again examined by the inspector and noted in the books of the
company thus: "January, 1849, docked, caulked, and coppered; the
center-board taken out; the bottom planked, repaired.
California; let her go." The inspector explained the
words, "California; let her go" thus:
"I mean that she was bound to California, and by the words 'let
her go' that she was not insurable for a sea voyage; as a mark to
indicate for the company to let her alone; to let her slide,"
and said that the remodeling of the vessel, by taking out the
center-board, would degrade her rate from 2 1/2 to 3. He said that
in 1855 and 1856, the vessel would have had no insurable rate in
the Sun Company -- that is, for a foreign voyage; she had a rate
for coastwise voyages all the time; that rate was A 1/2.
[
Footnote 5]
On Evidence, vol. 2, § 251.
[
Footnote 6]
Ibid., § 292.
[
Footnote 7]
2 Sumner 567.
[
Footnote 8]
2 Parsons on Contracts 59;
Blivin v. N. E. Screw
Co., 23 How. 431;
Atkins v. Howe, 18
Pickering 16;
Bogert v. Cauman, Anthon N.Y.R. 70;
Allegre v. M. Ins. Co., 2 Gill & Johnson 136.
[
Footnote 9]
See McCulloch's Commercial Dictionary, p. 1169.
MR. JUSTICE NELSON:
The policy in this case underwent a very full examination
Page 68 U. S. 477
when it was formerly before the Court.
* The evidence in
that case showed, and the argument of the counsel proceeded upon
the assumption, that the vessel rated in New York, the place of the
contract, below A 2, and inasmuch as the policy provided, in case
of that rating, for an additional premium, the principal question
was whether or not the company had a right to fix the additional
premium or, in case of dissent by the insured, it was a question to
be determined by the court and jury. This Court held, upon a true
construction of the policy, that the right belonged to the company.
The judgment of the court below was reversed and the cause remanded
for a new trial. On this second trial, which is now before us for
review, the plaintiff placed his right to recover upon the ground
that, at the time the
Mary W. was reported to the company
for endorsement on the policy, she in point of fact rated A 2, and
hence came within the description of vessels in the policy that
were to be insured for the premium paid when it was issued, which
was 1 1/2 percent. This ground was denied by the company, and in
addition they also maintained that even if, as claimed, the vessel
rated A 2 at the time of the report for endorsement, they had a
right to add to the premium of the one and one-half percent, and
inasmuch as the plaintiff had refused to pay this additional sum,
no insurance of the coffee was effected. This latter position of
the company assumed that, upon the true construction of this
running policy, no binding contract of insurance existed in respect
to a vessel reported for endorsement, whether she rated A 2 or not,
until the company had fixed the rate of premium and the insured had
assented to it, and further that whether the vessel rated A 2 or
above that rate, they had a right to demand an additional premium
to that mentioned in the policy.
We will reverse the order of the questions as stated and inquire
first whether or not the company are bound by the terms and
conditions of the policy to insure a vessel for the
Page 68 U. S. 478
premium mentioned on the report of her for endorsement if at the
time she rates at or above A 2.
The article insured, as specified in the policy, is coffee, to
be shipped from Rio de Janeiro to a port or ports in the United
States, the company to add an additional premium if by vessels
lower than A 2 or by foreign vessels, 1/4 percent to be returned if
shipped direct to an Atlantic port. The premium paid as the
consideration for the insurance, as recited in the policy, is at
and after the rate of one and one-half percent
If there were no other provisions in this policy relating to the
premium than those above stated, it would seem to be plain the
coffee shipped in a vessel rating A 2 or above would come within
the description required by its terms as a condition of its binding
effect, for the right of the company to add an additional premium
is limited to the case of a vessel rating below A 2. If A 2 or
above, no addition is to be made, and if not, the moment the vessel
is reported for endorsement, the contract is complete. The whole of
the premium that could be demanded had been already received by the
company.
But there is another clause in this policy, which it is supposed
qualifies the above construction, and which is as follows: "The
premiums on risks to be fixed at the time of endorsement." The
company rely upon this clause as securing to them the right in all
cases to fix the premium at the time the risk is reported; and
consequently, unless that rate is assented to by the insured, there
is an end to the incipient contract, and, as we have already said,
the company claims also under this clause to add to the premium in
the policy even if the vessel rates A 2 or above, even if she
should rate A 1.
In order to understand the force and effect of this clause, it
will be useful to refer for a moment to the usage of the company in
taking these risks on their running policies, as proved in this
case. The premiums specified in the body of the policies are
regarded as nominal, or rather as average premiums, and the true
premiums to be charged are fixed
Page 68 U. S. 479
by increasing or reducing the average premiums when the risk is
reported. This usage explains what is meant by the clause, "The
premiums on risks to be fixed at the time of the endorsement," for
by recurring to the terms of the policy it will be seen they
provide for the case when an addition to the premium may be made --
namely when the vessel rates below A 2, and also, when the
reduction is to be made -- namely in case the vessel rates A 2 or
above and the shipment of the coffee is to an Atlantic port, the
reduction then is to be 1/4 percent. This usage has been carried
out, practically, during the running of this policy. The following
vessels are endorsed on it:
"August 13, 1855, Bark
Maine Law, from Rio de Janeiro
to New Orleans, $15,750 at 1 1/2 percent; Brig
Windward,
from same place to Baltimore, $4,750 at 1 1/4 percent; Nov. 20,
Brig
T. Walters, from same place to Philadelphia, $2,375
at 1 1/4 percent."
This usage and the practice under it furnish a full explanation
of the clause in question, and reconcile it with the previous parts
of the policy, which were supposed to be in contradiction to it. It
is true, the premiums are to be fixed at the time the risks are
reported, but they are to be fixed in accordance with the
stipulations in the policy, which, as we have seen, have specially
provided for them. The company can make no additions to the premium
except the vessel rates below A 2. If at or above this rate, they
are bound to deduct the 1/4 percent when the risks are reported if
shipment be to an Atlantic port.
As to the other provision relied on -- namely "And such clauses
to apply as the company may insert as the risks are successively
reported." I agree that they have no reference to the questions
involved in this case, and may be left for construction when a case
arises under them.
The next point in the case, and the only difficult one in my
judgment, arises out of the position taken by the plaintiff in the
court below, that the vessel Mary W., in point of fact, rated as
high as A 2 at the time she was reported to the company.
We lay out of view all questions, so fully discussed on the
Page 68 U. S. 480
argument, whether or not the rating of vessels referred to in
the policy, related to the rating in the books of the company, or,
if not, to the books of other companies in the City of New York,
and whether resort must be had exclusively to these books for the
purpose of ascertaining the rating of the vessels, for it appears
from the evidence, and is not to be denied, that neither the books
of the Orient, or of the Sun company, nor of any other of the
insurance companies in the city, contained in contemplation of law
a rating of the
Mary W. at the time she was reported to
the two companies that could be of any controlling weight on the
question. She was not rated in the books of the Orient at all, and
had not been in those of the Sun for some seven years, and the same
is true in respect to the other companies. There is not evidence in
the case, therefore, to raise the questions as to the effect to be
given to the rating of a vessel in the books of the company at the
time of the insurance, and hence it would be premature to express
any opinion upon them or upon the effect to be given to the like
evidence in respect to the books of other companies at the place of
the contract. These are important and interesting questions, and
may well deserve the deliberate and careful consideration of the
Court when properly presented for decision.
The evidence, with a view to ascertain the rate of the
Mary
W. at the time she was reported for endorsement on the policy,
23 August, 1856, must of necessity be derived as well from other
sources as from the books of insurance companies, and the questions
are, in this posture and condition of the case, whether the court
below admitted improper evidence against the objections of the
defendants and whether the charge of the court in submitting the
case to the jury is subject to any of the exceptions taken to
it.
As we have seen, there being no evidence in the record of this
rating of the vessel on the books of the Orient company at all, nor
upon those of the Sun at the time she was reported, within the
period of some seven years, after the lapse of which time the
rating bound neither the company nor the insured, the question
whether the
Mary W. rated at
Page 68 U. S. 481
the time reported not lower than A 2 of necessity depended upon
general evidence of the character and condition of the vessel, and
could not be restrained to the rating in the books, so in respect
to the other insurance companies in the City of New York, as the
rating in these books was made also some seven years prior to this
insurance transaction. And as it respects this general evidence,
the appellate court can only look at such parts of it as were
objected to and exceptions taken at the time offered at the
trial.
The only exception we find taken is in respect to the competency
of the testimony on a commission to Rio de Janeiro, or rather to
the admission of evidence as the substitute for the commission, and
which is that the
Mary W., at the time she left Rio on the
voyage in which she was lost, was in a seaworthy condition, fit for
any voyage, and especially for the transportation of coffee, and
was, by reason of thorough repairs at Rio, entitled to rate and did
rate A 2 there. We agree that the rating of the vessel at Rio was
not the criterion to determine the question before the court and
jury. But it was competent testimony, tending to prove the quality
and condition of the vessel at the time of her report to the
company. The proof of the rating of a vessel consists not only of
testimony as to her construction, materials, age, &c., but also
of the opinion of experts, such as shipbuilders and shipmasters and
others familiar with the subject. The record in this case is full
of examples of this description of evidence, and the opinion of the
witnesses as to the rating of a vessel is but the expression of the
result of their examination of her. The rating by official
inspectors, with a view to an entry in the books of a company, is
evidence of the same character.
Then as to the charge of the court. It is certainly very
comprehensive and involved, and must have been difficult for a jury
to understand; but we will endeavor to state the substance of it,
which is this: that if the jury should be of opinion from the
evidence that the
Mary W. at the time she left Rio was
seaworthy and in good condition, and after her repairs was
specially fit for the transportation of coffee, and
Page 68 U. S. 482
rated there A 2; and shall further find that by the long absence
of said vessel from the City of New York, there was no fixed rating
on the registers of any of the insurance companies in that city in
1856, but that she would have been rated there not lower than A 2,
owing to her thorough repairs, had she been there at the time, then
the plaintiff was entitled to recover notwithstanding she rated in
the City of New York in 1848-1849 on the books of defendants below
A 2, and notwithstanding it was the usage and understanding of
underwriters and commercial men in that city that the phrase "not
below A 2" referred to the rate of vessels on the books of the
company making the insurance.
If this charge is examined with reference to the evidence in the
case, we think it is unexceptionable. It must be remembered that
there is no testimony found in the record of a rating in the books
of the companies, defendants, or in other insurance companies in
the City of New York, that could in any aspect of the case be
controlling. It was necessary, therefore, to go outside of these
companies and resort to general evidence of the character and
condition of the vessel in order to find her rate at the time of
the report for endorsement, and in this view of the case, and which
we think the true one, the court instructed the jury if upon this
evidence they find that the
Mary W. would have rated in
the City of New York at the time of the report, the plaintiff was
entitled to recover -- otherwise not. We do not see how the case
could, consistently with the evidence, have been put to the jury
more favorably to the defendants. If these companies will undertake
to insure vessels according to their rate when no fixed rate is
found in their books at the time and no fixed standard exists, such
as the British Lloyds in England, by which to ascertain the rate,
resort must necessarily be had to general evidence of the character
and condition of them at the time of the insurance, with a view to
the rate that would be assigned to her in the City of New York, the
place of the contract.
For the reasons above given we think the judgment of the court
below right, and should be affirmed.
MR. JUSTICE FIELD concurred in the opinion of MR. JUSTICE
NELSON.
Page 68 U. S. 483
*
Vide Report,
64
U. S. 23 How. 401,
64 U. S. 412.
MR. JUSTICE SWAYNE, dissenting:
Finding myself unable to concur in the conclusions at which a
majority of my brethren have arrived, I will state briefly the
grounds of my dissent. My remarks will be confined to the case of
the Orient company. The same objections apply in both cases.
[His honor here quoted the language of the policy, and stated
the principal facts already set forth in the statement of the case,
and proceeded]:
When the case was here, as reported in
64 U. S. 23 How.
401, this Court held that if the
Mary W. were of a rate
lower than A 2, "unless the assured paid or secured the additional
premium fixed by the underwriters, the contract of insurance did
not become complete and binding." The judgment of the court below
was reversed and a
venire de novo awarded. That
adjudication is before us for our guidance, not for review. The
reasoning of the Court commands my assent.
Upon the retrial of the case in the court below, the main
question necessarily was whether the
Mary W. was or was
not below the rate of A 2. This proposition involved the further
inquiry by what standard the rate was to be determined? Was it by
that of Rio de Janeiro whence she sailed? Was it by that of
Baltimore, where the application for insurance was made? Was it by
that of the City of New York, where the policy was issued? Or was
the question whether she was A 2 to be answered only by the
register of the company, and if that were silent, the consequence
to follow, that she was not A 2 within the meaning of the contract.
It was proved that the rules of rating at Rio and Baltimore were
different from those of New York; that the standard at New York was
the highest, and that a vessel might be rated A 2 at Rio and
Baltimore, which would fall below that rate at New York. It was
also proved that each of the marine companies of New York keeps
constantly in its employment a salaried officer whose business it
is to examine
Page 68 U. S. 484
and rate vessels, and that the rates of the vessels thus
examined by him are reported to the company and entered upon a book
kept for that purpose. Mr. Swan, of the house of Grinnell, Minturn
& Co., of New York, a witness examined in behalf of the
plaintiff, testified as follows:
"The business of rating is a special one. The companies all have
inspectors to ascertain the rating of vessels. When a policy speaks
of the rate of vessels, it means the rate of the company and refers
to that standard."
Other testimony to the same effect was given.
Upon the last trial, the court instructed the jury that if they
should find (1),
"That by the long absence of the said vessel from New York, she
had, in the understanding and usage of underwriters in New York, no
fixed rating on the registers of any of the insurance companies in
that city in 1856, but would have been rated there not lower than A
2, owing to the thorough repairs, had she been there for
examination, then the plaintiff is entitled to recover in this case
. . . (2), although the jury find that it was the general usage and
understanding of underwriters and commercial men in New York, that
the words in these open policies of insurance, 'not below A 2,'
refer to the rate of vessels on the register of the company making
the insurance."
For the present, I pass by the second part of these
instructions. A majority of my brethren hold both parts to be
correct. Conceding the first to be so, then the testimony should
have been
confined to facts tending to show what the rate
of the vessel would have been in New York, if she had been there
for examination.
The plaintiff was permitted to prove that she was "A 2"
according to the rating of Rio and Baltimore. The defendants
objected and excepted. I think this testimony was incompetent and
irrelevant. It was wholly immaterial what the rate of the vessel
was according to the rules of rating at any other port than New
York. The testimony must have tended strongly to mislead the jury.
Having found that the vessel was "A 2" at Rio and Baltimore
according to the standard of those places, it was but one step
further to the
Page 68 U. S. 485
conclusion that she ought to have been and would have been rated
A 2 at New York.
There are no cases in which it is more important to the right
administration of justice that the rules of law should be carefully
applied in trials by jury than in those of the class to which this
case belongs. The admission of this testimony, in my judgment, was
an error. If such a usage existed as the second part of the
instruction supposed, it entered into the contract. In that case it
enlightens the ambiguity and ascertains the meaning of terms "A 2"
as used in the policy.
"It may also be laid down as clear law that if a man deals in a
particular market, he will be taken to act according to the
custom of that market, and if he directs another to make a
contract at a particular place, he will be presumed to intend that
the contract shall be made according to the usage of that place.
[
Footnote 2/1] . . . Witnesses
conversant with the business, trade, or locality to which the
document relates are called to testify that according to the
recognized practice and usage of such business, trade, or locality,
certain expressions contained in the writing have in similar
documents a particular conventional meaning. [
Footnote 2/2] . . . In resorting to evidence of usage
for the meaning of particular words in a written instrument, no
distinction exists between such words as are purely local or
technical -- that is, words which are not of universal use, but are
familiarly known and employed, either in a particular district, or
in a particular science, or by a particular class of persons -- and
words which have two meanings, the one common and universal and the
other technical or local.
In either case, evidence of
usage will be alike admissible to define and explain the technical,
peculiar, or local meaning of the language employed. Though in the
latter case it will also be necessary to prove such additional
circumstances as will raise a presumption that the parties intended
to use the words, in what the logicians call the second intention,
unless this fact can be inferred from reading the instrument
itself. [
Footnote 2/3] "
Page 68 U. S. 486
The learned judge, instead of directing the jury to disregard
the custom, should have instructed them that if established to
their satisfaction, and especially if known to the assured, from
his previous transactions with the company or otherwise, it
determined the meaning of the terms A 2, and was fatal to the right
of the plaintiff to recover.
The construction claimed by the underwriters involved no
hardship to the defendant in error. When the parties failed to
agree as to the premium, he was at liberty to insure elsewhere. He
refused to pay the premium demanded, yet insisted they were bound.
The company had a right to guard against the alternative of
submitting the rate of the vessel to the judgment of a jury; I
think they intended to do so. In any view which I can take of the
subject, there was error in the second part of the instructions.
For these reasons, in my opinion, the judgment should be reversed
and the cause remanded for further proceedings.
I am requested to say that MR. JUSTICE DAVIS concurs in this
opinion.
[
Footnote 2/1]
1 Taylor on Evidence 178, and authorities cited.
[
Footnote 2/2]
2
id. 984.
[
Footnote 2/3]
2
id. 984-985.
