Stacey v. Franklin Fire Insurance

The opinion of the Court was delivered by Rogers, J. This is an action of covenant on a policy of insurance for $10,000 against fire, dated the 26th of July 1833, for a premium of $22 for one year from the date, “ upon merchandise generally, including liquors and groceries contained in the store No. 37 South Wharves, for account of whom it may concern, say merchandise without exception.” The 7th of January 1834, merchandise included in the policy to the value of $13,000 and upwards, was destroyed by fire. The plaintiffs claim for a total loss; and inasmuch as the full premium has been paid to the defendants, the plaintiffs are entitled to recover, unless something has occurred subsequently which alters the relative situation of the parties. The defendants deny that they are liable for a total loss, but admit that they are responsible for two-fifths of the loss, amounting to $5400, which has been already paid. In support of this position the defendants say that the plaintiffs, subsequently to the date of their policy, viz. on the 22d of November 1833, effected a policy of insurance against fire for $15,000 with the North America Insurance Company of Philadelphia, upon the same goods, in the same store, for the period of four months then next ensuing. That consequently, according to the sixth condition, which is part of the policy, and which is in the following words; “ that persons insuring at the Franklin office must give notice of any other insurance made on their behalf by the same, and shall cause such other insurance to be endorsed on their policies ; in which case each office shall be liable to the payment only of a rateable proportion of any loss or damage which may be sustained; and unless such notice is given, the insm’ed will not be entitled to recover in case of loss;” they are liable to an average loss only. If the latter insurance was on the same goods, it is not pretended that any notice was given; but of this the defendants take no advantage, but have already paid their proportion of the loss; but they insist that this is the extent of their liability. In answer, the plaintiffs contend, first, the clause in the policy of the Franldin office does not apply, because, by the terms of the condition, on which reliance is had, it is not required to give notice of a subsequent policy, but of an insurance made at the time of effecting the insurance; or, in other words, applies only to a prior and subsisting insurance. Secondly, that to avoid the first policy, the latter must be such a policy as would.enable the plaintiffs to'recover, upon it; and thirdly, they deny that the second was a policy on the same goods. It is admitted that the plaintiffs are entitled to an indemnity to — 542 — an amount equal to $10,000, either from the defendants, or in a rateable proportion from the defendants and the North America Insurance Company. This is therefore substantially a contest between the respective underwriters, as to their proportions of the loss; and the plaintiffs, with a show of reason, complain that they are made the victims of a law-suit, with which they ought to have no concern. It is nothing to them whose fault it is, as it is very certain, that if there had been that spirit of accommodation and fair dealing which ought to actuate those companies, and which it were their interests to observe, they would not have been placed in this unpleasant predicament. The controversy might have been settled, as it was just and right it should be, in a suit between the conflicting underwriters. So much was I struck with the obvious injustice of this proceeding, that, at the first argument, I was of the opinion, and I still remain so, that the plaintiffs were at all events entitled to recover from the defendants, as for a total loss, leaving the defendants to their remedy against the North America Insurance Office. And such at one time was undoubtedly the law, for on a marine insurance, if the policy contains no stipulation upon the subject, the insured may insure with different underwriters to any amount, and recover indemnity from any of the underwriters. It is well settled, that upon a double insurance, though the assured is not entitled to two satisfactions, yet, in the first action, he may recover the whole sum insured, leaving the defendant to recover a rateable satisfaction from the other insurers. In such cases, the two policies are considered to make but one insurance. The assured may sue the underwriters on both policies, but he can recover only the real amount of his loss, to which all the underwriters shall contribute in proportion to their several subscriptions. He can receive but one indemnity, but the different underwriters are made Sureties for each other. But it is said, that the clause in the policy to which reference has been made, alters the law in this respect, and exempts the underwriters from any more than their proportion of the loss. This idea has taken its rise from an observation of Mr Condy, in his edition of Marshall on Insurance, page 152, who, speaking of the case of Thurston v. Koch, (4 Dall. 348), which was a marine insurance, says, “ This decision, being contrary to the practice of the merchants in Philadelphia, a clause was added to the policies effected there, which it is believed has been generally followed in the United States, by which it is expressly stipulated, that the loss shall be paid by the different policies, according to their respective dates, first exhausting those of the earliest dates. This, and a dictum in Peters v. The Delaware Insurance Company, (5 Serg. & Rawle 481), which is also a marine insurance, is all the authority that we have for the prevalent notion, that the assured can recover no more from the first underwriter, who has received a full premium, than his proportion of the loss when the property — 543 — is doubly insured. In the case of Thurston v. Koch, the English rule was adopted (contrary to the rule on the continent), that where a double insurance is made, and the underwriters in the first policy pay the whole loss, they are entitled to recover from the underwriters in all subsequent policies, on the same risk, a rateable proportion, which shall divide the loss equally among all the underwriters, on the same risk, without relation to the date of the policies, or the time of subscribing. The first underwriters had paid the whole loss, and the question was, whether a subsequent underwriter was liable to pay more than the amount of the loss beyond the sum previously insured. The court decided that he was, adopting the English rule, that upon a double insurance, though the insured is not entitled to two satisfactions, yet upon the first action, he may recover the whole sum insured, and may leave the defendant therein to recover a rateable satisfaction from the insurers. A recovery may be had of the first and subsequent underwriters, and those who-pay the loss may demand a proportionable contribution from the other insurers. The different underwriters were in effect made insurers for each other. “ And this,” says Phillips, in his treatise on the Law of Insurance, citing 5 Serg. & Rawle 475, “is one reason for introducing the clause respecting prior insurances.” It does not appear to me from a fair interpretation of the clause in a fire insurance, it was intended to alter the right to recover against the first underwriter, the whole loss, according to the agreement, leaving him to recover against the subsequent underwriters, their rateable proportions. It was intended to prevent fraud, and also from being insurers for each other, which is the effect of recovering from any one of the underwriters without regard to date; and, as is said in 5 Ohio Rep. 467, to apprise the assurer of his right to claim a contribution from his co-insurers. And this, rightly understood, is • the opinion of Mr Condy, who ;■ says that, under this clause, the loss shall be paid by the different policies, according to their respective dates,'first exhausting those of the earliest. They are only liable to their rateable proportions, as between themselves, nor can the assured select a subsequent underwriter so as to throw the whole loss on him. If the underwriters intended to make such an entire revolution in the law, as to declare that they would not be liable according to the contract to the assurer, who had.paid a full premium, the intention should have been expressed in much more express and unambiguous terms. A double insurance is not to be discouraged, except as an instrument of fraud; but -where the transaction is fair, it can have but one effect on a prior underwriter, and that a beneficial one, by enabling him to recover from a subsequent insurer, an average proportion of the loss. It is but fair, however, to say, that this is my opinion only. The cause will be put on other grounds. The second ground is, that the condition applies to a prior and — 544 — not a subsequent insurance. And, in the absence of all authority, I should have inclined to that opinion, because, where an insurance company uses ambiguous language, capable of different grammatical constructions, it should be construed in the sense most favourable to the assured. But words precisely similar in a policy have received an interpretation in a sister state; and as it is desirable that the rules which regulate the commercial intercourse of citizens of the Union, should conform to each other as nearly as possible, I do not feel myself at liberty to depart from it. Harris v. Ohio Insurance Company, (5 Ohio Rep. 467). It is further contended that to make the defence available, the defendant must show that the plaintiff not only made a double insurance on the same goods, but that the plaintiffs were entitled to recover a rateable proportion of the loss from the subsequent underwriter. And this, he insists, is not the case here, for admitting, for the sake of argument, the policies are on the same goods, it is provided in the policy of the North America Company “ that it (the policy) shall not take effect, or be binding to the said corporation, in case the assured shall have already made, or shall hereafter make, any other assurance upon the property aforesaid, unless the same shall be allowed of and specified on the policy, in which case, this company will bear rateably, and no more, of any loss from the perils hereby insured against, which may happen to said property, in proportion to the several insurances then existing thereon.” The defendants’ defence rests on this, that the plaintiffs are doubly insured; but if the plaintiffs could, at no time, have recourse to the North America Insurance Company, it cannot, with i any pi-opriety, be said that he was doubly insured. If the plaintiffs have failed to perfect their contract with the subsequent underwriter, by omitting to have the prior insurance allowed of and specified on the policy as is required, it is difficult to imagine in ¿what way the prior insurance can be invalidated or affected. It is a vain, nugatory, void act. And this is the view taken of the question in Jackson v. The Massachusetts Mutual Insurance Company, (23 Pick. 423). An assurance to avoid the policy must be a valid and legal policy, and effectual and binding upon the assurers. It is not pretended the proviso in the North America Insurance Company has been complied with; but unless the prior policy is allowed of and specified on the policy, it is wholly inoperative and void, and of course, upon every principle of fair reasoning, it cannot avail the defendants, as a defence, in this action. And thus the matter stands, without doubt, on the face of the policies; but the defendant insists that this doctrine, the force of which cannot be controverted, does not apply, because J. G. Stacey, who was examined as a witness for the plaintiff, in despite of an objection by the defendants, says, that he had given Mr Smith notice of the insurance at the Franklin office, although he immediately adds, of other property insured at the Franklin office. — 545 — Taking all the testimony together, I cannot suppose that the witness intended to say that he told Mr Smith he had insured the same goods at the Franklin office, and that he mentioned this at the time with the view of having it endorsed on the latter policy. It is certain that Mr Smith could not have so understood it; it would be difficult to imagine, if such was the fact, why the indemnity which is required was not made in conformity to the intimation. To make the policy valid, two things are required. 1st. It must be allowed of; and secondly, it must be specified on the policy. It requires ah act of the company, or its authorized agent, and it may admit of doubt, whether a notice simply, without more, would enable the assured to recover. Give the testimony its utmost force, the existence of a prior policy was mentioned, but there was no request or intimation that he desired it should be noted on the subsequent policy. Doubtless, when the company, or its agent, consented to specify it on the policy, and omitted to do so, they would not be allowed to set-off their own laches as a defence. But that does not appear to be the case here; such laches has not been proved as would enable the plaintiff to recover from the North America Insurance, on the ground that the agent of the company had omitted to do that which by law he was required to do. It must be remembered, that to defeat the action against the first underwriter, the defendant must give the plaintiff a right of action against the subsequent insurer. He must, in effect, show a double insurance, which it cannot be, unless it gives the plain-**' tiff a right of action for a proportion of his indemnity. It is contended that this is not a double insurance for another reason, that is, that the latter insurance is on the specific goods brought by the John Sergeant. The insurance in the Franklin office is “ upon merchandise general!}', including liquors and groceries contained in store No. 37, South Wharves, for account of whom it may concern; say merchandise without exception.” In the North America Insurance Office it is “ on coffee and other merchandise, without exception, either on board the John Sergeant in this port, or in the brick store No. 37, South Wharves, in the city of Philadelphia.” We cannot but be struck with the total absence of precision in the language of both policies; and as the great object is to discover the intention of the parties, it would be unsafe to take the words in their literal sense. So without going into the question of whether parol testimony of what takes place at the time may be admitted to explain a policy of insurance, yet it may be safely said that the subject-matter of marine and fire insurance, and other mercantile contracts, makes it necessary to go out of the written instrument, in order to interpret it, more frequently than in most other contracts. Policies are to be construed largely, according to the intention of the parties, and for the indemnity of the assured, and the advancement of trade. 1 Burr. 345; 2 Binn. 373. Facts and cir — 546 — cumstances dehors the instrument may be proved, in order to discover the intention of the parties. We are therefore at liberty to advert to the first, that the Messrs Staceys were commission merchants, and that the object of inserting in the first policy, “ merchandise without exception,” was to dispense with the restriction upon what was considered as hazardous risks, enumerated in the 1st, 2d, and 3d sections of the 13th article. The plaintiffs insured to the amount of $10,000, a sum supposed to be sufficient to cover the ordinary risks to which their property, and the property of their consignees would be exposed from fire. Under these circumstances the John Sergeant arrived in port, having on board coffee principally, and some other articles of comparatively small value, which it was thought prudent also to insure; and as it was uncertain whether the cargo would be suffered to remain on board or whether it would be stored in whole or in part, it was insured as coffee either on board the John Sergeant or in the brick store No. 37, South Wharves. If this was all, it would, I think, be held to be a specific insurance on coffee to the amount of $15,000, whether it remained altogether on board or was altogether or in part removed into the store. But such is the looseness of expression, that even this construction would be doing some violence to the language. The insurance is on coffee and other merchandise without exception, either on board the John Sergeant or in the store. What is the meaning of the words, “ and other merchandise without exception,” connected with the other parts of the assurance ? The defendants say that they apply to the subject-matter of insurance, and that it is an insurance on coffee and other merchandise, whether on board vessel in the port or in store; whether imported in the ship or received in store from other sources. If this be so, it is on the same goods embraced in the Franklin Insurance, and the defendants are only entitled to their proportion of the loss, viz. two-fifths, that is, as $10,000 is to $25,000. Tim plaintiff insists, that being sufficiently insured already to cover ordinary risk to the general business as commission merchants, the object of the second insurance was to effect a specific insurance on the coffee brought by the John Sergeant, whether it remained on board or was stored. That the reason for inserting the words, “and merchandise without exception,” (which were taken from the policy of the defendants themselves, where they were used for a similar purpose) was to prevent the policy being avoided by having on the premises what they would be likely to have, in their business, certain goods enumerated in the policy as hazardous risks, or, in other words, they were desirous of having what has been denominated, a clean policy. Although, it must be confessed, there is some doubt about it, yet we incline to adopt the latter construction. If, as is alleged, the first insurance was sufficient to cover all probable risks to which the goods, usually in the store might be exposed from fire, it is difficult to imagine why an additional insurance, to — 547 — so large an amount, should be effected, as it has not been intimated that any doubts were entertained of the entire solvency of the first underwriters. The fairness of the transaction has not been questioned. No fraud has been insinuated; and if, as is supposed, it was intended as a double insurance, it seems strange it should not have been endorsed on the last policy at least, as the Messrs Staceys have, it is believed, ordinary intelligence, and must have been aware of the necessity of it to validate these contracts. And it is still more difficult to conjecture why Mr Smith did not endorse it on the latter policy, if he was informed, as the defendants say, that there was another policy on the same goods in the Franklin office. He must have been aware that this was absolutely essential by express terms of the policy of the office, and that the omission to endorse it would endanger both policies. But all this is susceptible of easy explanation, if we suppose the first policy covered the goods generally in the store, and the second the specific goods imported in the John Sergeant. He might well say that he had given Mr Smith notice of the insurance at the Franklin office of other property, without intending to say, or having the least idea that the latter was an insurance on the same goods. And Mr Smith must have so understood it, as otherwise, occupying the situation he did in the office, the endorsement would have been made; for we are not to suppose him so extremely negligent of his duty as to omit doing what was absolutely necessary to the validity of the contract, much less can we believe the omission was wilful, which would be a gross fraud. But it is said that upon the removal of the goods from the ship into the store, the policy of the Franklin office immediately attached, so as to render them liable for their proportion of the loss of the goods which were imported in the John Sergeant. But this is not so clear, for I see nothing to prevent assurers, after a general insurance, to effect a specific insurance on particular goods, on which alone another subsequent underwriter would be liable without contribution. Under the views which have been taken of this cause, it is obviously unnecessary to perplex ourselves with a consideration of the numerous errors which have been assigned to the admission and rejection of testimony. This is a motion for a new trial, and if any error has been committed (of which I am not convinced), as it would not alter the result, no new trial will be ordered. This cause has been twice tried, and twice the verdict has been in favour of the plaintiffs: it is therefore time there should be an end to the controversy. The defendants should be compelled to do justice to the plaintiffs by paying them the amount of the insurance, for which they have received a full premium. Rule discharged, and judgment for the plaintiff on the verdict. . Mr Justice Sergeant did not sit in this cause, being a stockholder in the Franklin Fire Ins. Comp.