A general policy insuring every person having an interest in the
thing insured and containing no warranty that the property is
neutral covers belligerent as well as neutral property
In an action of covenant on a policy, it is no defense to say
that the premium has not been paid, but is enjoined by a court of
chancery.
A misrepresentation, not averred to be material, is no bar to an
action on a policy. A misrepresentation, to have that effect, must
be material to the risk of the voyage.
It is not necessary, in an action of covenant on a policy, that
the declaration should aver that the plaintiff had abandoned to the
underwriters.
Error to the Circuit Court of the District of Columbia in an
action of covenant upon a sealed policy whereby the Marine
Insurance Company of Alexandria, in consideration of seventeen and
a half percent premium paid by the plaintiff Hodgson, for "George
F. Straas and others, of Richmond," covenanted with the plaintiff
for the said
"George F. Straas and others, of Richmond, as well in his own
name as for and in the name and names of all and every other person
and persons to whom the same did, might, or should appertain, in
part or in all,"
to insure eight thousand dollars on the brig Hope "a prize
vessel," lost or not lost, at and from her last port of lading in
St. Domingo to a port of discharge in the Chesapeake. The vessel
was valued in the policy at $10,000. The declaration averred the
vessel to be of that value, and that in prosecution of the voyage
insured she was seized by certain British vessels and carried into
Jamaica, where she was libeled, condemned, and sold, whereby she
was totally lost. In one count of the declaration the vessel was
averred to be the property of George F. Straas and Jeremiah Leeds,
of Richmond; in the other it was averred to be the property of
Leeds alone.
The defendants, after oyer, pleaded eight pleas. Upon the three
first there were issues in fact.
The 4th plea, in substance, was that the vessel, at the time of
the capture and sale was the property of the enemies of Great
Britain, and as such was captured, libeled, condemned and sold.
That Richmond was the capital town of the State of Virginia, a
neutral state. That Straas and Leeds were of Richmond, and citizens
of Virginia, and were
Page 9 U. S. 101
known to be so to the parties to the policy at the time of
insurance. That the insurance was made by the contracting parties
upon the property of American citizens in which no belligerent
subject or citizen was interested, and that at the time of
insurance, capture, condemnation, and sale of the vessel, there was
open war between France and Great Britain.
To this plea there was a demurrer, and the following causes were
stated:
1. Because the plea alleges that the vessel was the property of
the enemies of Great Britain, but does not show in particular who
were the owners thereof.
2. Because the plea is double in this, 1st, that it tenders an
issue upon the fact of its being enemies' property; 2d, that it was
condemned as such; 3d, that the insurance was made upon the
property of American citizens.
3. Because it alleges that the insurance was made upon the
property of American citizens, which is matter of law, and not of
fact.
4. Because, as the policy contained no warranty of neutrality,
it is wholly immaterial whether the property was neutral or
belligerent.
5. Because the plea is no answer to the plaintiff's
declaration.
6. Because it admits Straas and Leeds to be owners of the
property insured and to be American citizens, and it does not state
any other person or persons to be the owners thereof.
7. Because the defendants were estopped by the policy from
alleging that the insurance was made upon the property of American
citizens.
Page 9 U. S. 102
The 5th plea, in substance, was that it has always been and is
the rule and practice of the defendants never to make an insurance
upon a vessel beyond her reasonable and just value according to the
representation and description given of her, especially as to her
age, tonnage, and equipment, which rule and practice were well
known to the contracting parties at the time of the contract, at
which time the plaintiff proposed to the defendants that the value
of the vessel should be agreed in the policy to be $10,000, and
that at the time of executing the policy, the plaintiff, to induce
the defendants to execute it, thereby insuring to the value of
$8,000 upon the vessel, represented that she was "about 250 tons
burden," "and from six to seven years old." That the defendants, in
consequence of that representation, and placing full faith and
credit therein, executed the policy. That the representation was
untrue in this, that the vessel was not of two hundred and fifty
tons burden, but less than one hundred and sixty-five tons burden,
and was not from six to seven years old at the time of the
representation, but much older,
viz., more than eight and
a half years old. That the vessel was not of the value of $8,000,
but of the value of $3,000 only. That the misrepresentation
respecting the age and tonnage of the vessel induced the defendants
to execute the policy, whereby the value was agreed to be $10,000,
and whereby insurance was made to the amount of $8,000, "and so the
said deed is void as to them, and this they are ready to
verify."
To this plea also there was a demurrer, and the following causes
were stated:
1. Because the plea does not aver the misrepresentation to be
material.
2. Because it is not alleged to have been fraudulently made.
3. Because the matter of the plea is not sufficient to annul or
make void the policy.
Page 9 U. S. 103
4. Because the misrepresentation alleged is not of a definite
fact, but that the vessel was of about 250 tons burden, &c.
5. Because the plea is double in this that it puts in issue the
custom of the defendants, the representation touching the vessel,
the age, the tonnage and the value of the vessel.
6. Because the defendants are estopped by the policy from
averring that the vessel was of less value than $10,000.
The 6th plea was like the 5th except that the averment
respecting the rule and practice of the defendants was omitted, and
that it contained an averment that the difference between the true
and the represented age and tonnage of the vessel "was material in
regard to the contract of insurance," in the policy set forth, and
so the policy was void as to them.
To this plea the plaintiff, protesting that the vessel was
seaworthy and that he did not knowingly and fraudulently state any
misrepresentation, and admitting that the vessel was of less than
165 tons burden and was eight and a half years old, replied that
the difference between the true and the represented age and tonnage
of the vessel was not material in regard to the seaworthiness of
the vessel and her ability to perform the voyage insured, and did
not increase the probability of loss by means of any of the risks
insured against, but was altogether immaterial in regard to those
risks.
The rejoinder of the defendants set forth their rule and
practice as stated in the 5th plea, and averred that the
misrepresentation induced and deceived the defendants into the
agreement as to the value of the vessel and as to the sum insured,
and that the sum insured was more than double the value of the
vessel, and so the defendants say that the difference between the
true and the represented age and tonnage of the vessel was
material.
Page 9 U. S. 104
To this rejoinder the plaintiff demurred, and stated causes of
demurrer nearly like those to the 5th plea.
The 7th plea was in substance that the vessel was in part owned
by one Alexander Burot, a French citizen, and an enemy of Great
Britain, and that this fact was not disclosed to the defendants at
the time of executing the policy.
To this plea there was a general demurrer.
The 8th plea was in substance that the plaintiff had not paid
the premium, but had obtained a perpetual injunction from the Court
of Chancery in Virginia against the defendants to prevent the
recovery thereof.
To this plea also there was a general demurrer.
The judgment of the court below was in favor of the defendants
on the demurrer to the 6th plea and in favor of the plaintiff upon
all the other demurrers.
Page 9 U. S. 109
CUSHING, J. (MR. CHIEF JUSTICE MARSHALL not sitting in the
cause) delivered the opinion of the Court as follows:
The insurance in this case being general, as well for the
parties named as "for all and every other person or persons to whom
the vessel did or might appertain," and containing no warranty of
neutrality, belligerent as well as American property was covered by
it. Some of the parties being described as of Richmond does not
necessarily imply that they all resided there, but if they did,
mere residence would not make them citizens, and even then, an
express warranty was necessary if it had been designed to run only
a neutral risk. This is an answer to the 7th as well as to the 4th
plea, because there can be no undue concealment as to the parties
interested where the terms of the policy are so broad as to
preclude the necessity either of disclosing their names or of
inserting them in the instrument.
Page 9 U. S. 110
The eighth plea is also bad. The defendants acknowledge, under
seal, to have received a consideration of 17 1/2 percent for the
insurance they made, which it appears was secured by a note, the
amount of which was to be deducted from the sum to be paid for a
loss, if any happened. On the face of the instrument, then, a valid
consideration, if that be necessary, is stated, and if the note be
never paid it cannot vacate the contract, or be relied on as a
defense to an action on it. This Court knows not why a court of
equity has been applied to for an injunction. Its proceedings,
therefore, can have no influence on the present suit, for
notwithstanding its interposition in the way mentioned in this
plea, the defendants cannot be deprived of the right they have
reserved of deducting the amount of premium from whatever sum they
may have to pay for the loss that has occurred.
Without deciding whether a material misrepresentation, not
fraudulent, can be pleaded in avoidance of a sealed instrument, the
Court thinks there is no fact disclosed by either the fifth or
sixth plea which would vacate an insurance were it only a simple
contract. In no part of the 5th plea is the misrepresentation
alleged to be material. It is only to be inferred that it had some
influence (but to what degree does not appear) in prevailing on the
defendants to agree to so high a valuation. It will hardly,
however, be insisted that every overvaluation, however
inconsiderable or however innocently produced, will annul a
contract of this nature. It would seem more reasonable to let
mistakes of this kind (if they are to have any operation at all)
regulate the extent of recovery, and not deprive the party of his
whole indemnity, for if an extravagant valuation be made, an
underwriter cannot reasonably ask to be relieved beyond the excess
complained of. The allegation that the vessel was worth, when
insured, only $3,000 is also very unimportant, it being nowhere
stated that the plaintiff represented her to be worth more, but
only proposed that her value in the policy should be agreed
Page 9 U. S. 111
at $10,000. Now although she might not in fact have been worth
this sum, it is impossible for the Court to say that this
difference was produced entirely by the mistake which was made in
her age and tonnage. This would be to say that a difference of a
year or two in the age and of fifty or sixty tons in the burden of
a vessel must in all cases have the same effect on her value -- a
conclusion which, on investigation, would be found very incorrect.
Nor, if it appeared on trial that her actual worth were no more
than $3,000, would it necessarily avoid the contract or restrict
the damages to that sum, for she may notwithstanding have fairly
cost her owners the whole amount of her valuation, who in that case
would have honestly represented her as worth $10,000.
But a more fatal objection to this plea is that the
misrepresentation relied on is not stated to have been material to
the risk of the voyage, and yet the only cases in which policies
have been avoided for innocent misrepresentations are those in
which the matter disclosed or concealed has affected the risk so as
to render it different from the one understood at the time, and on
which the premium was calculated.
Most of the remarks on the 5th apply also to the 6th plea, for
although it be here alleged that the misrepresentation was material
"in regard to the contract of insurance," it should have been
stated in what particular that it might appear whether the risk run
were at all affected by it.
An objection is made to the declaration, but not much relied on,
that no abandonment is averred to have been made. In covenant, such
averment cannot be necessary. If it be proved on the trial, it will
be sufficient.
The judgment of the circuit court on the 4th, 5th, 7th and
8th pleas must be affirmed with costs, and its judgment in favor of
the defendants on the
Page 9 U. S. 112
6th plea reversed and judgment on that plea be also rendered
for the plaintiff.
JOHNSON, J.
The difficulties in this case arise partly from the pleadings,
and partly from the case presented by the pleadings.
This policy, having been effected by a corporation under its
corporate seal, has been considered as imposing an obligation on
the insured to bring covenant instead of assumpsit, as is usual on
such contracts.
Thus, the defendants have been obliged to plead specially, and
the cause comes up on demurrer, which, of course, admits the case
as made up on the pleadings.
Whether there is sufficient matter well pleaded why the
plaintiff ought not to recover is therefore the question before
us.
I am of opinion that there is. I cannot for a moment suffer the
sealing of the policy or the form of the action to impose any
restriction upon the latitude of defense applicable to the contract
of insurance. Such a doctrine would be fatal to every incorporated
insurance company. I therefore maintain that in the action of
covenant on a policy of insurance, every defense may be taken
advantage of in pleading that could be introduced in evidence
before a jury. It is an exceedingly inconvenient form of action for
trying the merits of questions arising out of this species of
contract, and I feel disposed, if possible, to diminish the
inevitable difficulties, and the intricate and voluminous pleadings
which must grow out of this form of action, and to admit every
facility which the rules of pleading will possibly sanction.
There are eight pleas filed to the present action. On the three
first there are issues in fact, and the court below has given
judgment on the remaining
Page 9 U. S. 113
five. I am disposed to concur in their decisions on each of
these several pleas, although perhaps on some of them for reasons
not altogether the same with those by which they were influenced;
but I shall confine my observations solely to the sixth plea, as
that disposes of the case finally, if decided for the defendants,
and has been the principal subject of the argument before this
Court.
The substance of this plea is that the plaintiff misrepresented
the age and tonnage of the vessel, whereby the defendants were
induced to insure to a higher amount than they otherwise should,
and concludes with averring that the difference between the true
age and tonnage of the vessel and the represented age and tonnage
was material in regard to the contract of insurance.
The plaintiff replies that this misrepresentation was immaterial
in regard to the seaworthiness of the vessel, her ability to
perform the voyage, and the other risks insured against.
To me it appears that the plea presents the true turning point
of the case, and that the replication draws towards questions very
different from that which ought to control our decisions.
It is not on the doctrine of seaworthiness that a
misrepresentation is held to vitiate the policy, because the
insured is always held to guarantee the sufficiency of his vessel
to perform the voyage insured. Nor is it an evident and necessary
increase of the risk; but it is presenting such false lights to the
insurer as induce him to enter into a contract materially different
from that which he supposes he is entering into. It is a rule of
law introduced to protect underwriters from those innumerable
frauds which are practiced upon them in a contract which must of
necessity be regulated almost wholly by the information derived
from the insured.
I do not lay so much stress upon the misrepresentation
Page 9 U. S. 114
with regard to the age of the vessel, for that appertains much
to her seaworthiness; but with regard to her size, the
misrepresentation was so enormous as leaves no doubt upon my mind
that had the case been submitted to a jury, the court would have
been bound to charge them in favor of the defendants. It had in its
nature an immediate tendency to entrap the defendants into one of
the most common and most successful snares laid for the unwary
underwriter. To make it the interest of the insured rather to sink
than to save his vessel. It can very well be conceived that an
underwriter may be induced to insure a certain sum upon a certain
vessel for a very moderate premium when no premium would induce him
to insure double that amount upon the same bottom. I am aware of a
very considerable difficulty arising out of this case,
viz., how we are to estimate the degree of
misrepresentation with regard to tonnage which shall vitiate a
policy, but it is a difficulty arising out of the mode in which we
are drawn into a decision on the case, rather than out of the case
itself.
If this question had been brought before a jury, the difficulty
would have vanished; but shall the party lose the benefit of this
defense because the pleadings have assumed such a shape as to force
the court into a decision upon the point without a jury? I am of
opinion that he ought not, if it can be avoided; an extreme case
may be supposed in which the misrepresentation may be very
inconsiderable, as of a single ton, for instance; but on the other
hand, we may suppose an extreme case of a misrepresentation to the
highest possible number of tons burden, say 1,000 tons; will it be
said that in the latter case the misrepresentation would not avoid
the policy?
From these considerations it seems to result that the Court is
driven to the necessity of deciding this case upon its intrinsic
merits and reserving its opinion upon successive cases as they
shall occur. This necessity is forced upon us by the alternative
either to decide that no misrepresentation, however gross,
Page 9 U. S. 115
of the size of the vessel will avoid a policy, or that any
misrepresentation, however minute, will have that effect. It is to
be hoped, in the meantime, that some statutory provision may be
made which will relieve the Court from a similar embarrassment.
Judgment reversed.
