Hodgson v. Mississippi Insurance

Mathews, J. delivered the opinion of the court. This is an action on a policy of insurance of freight, valued a(; 5000 dollars. Judgment was rendered against the plaintiffs in the court below, from which they appealed. The insurance was made on the brig Naiad, at and from New-Orleans to Mobile, and at and from Mobile to Liverpool. The vessel sailed from the first mentioned port in balast, and was lost previous to her arrival at the second. She sailed under charter party. The liability of the insurers to indemnify the claimants for the loss sustained, is resisted on two grounds : first, that they had no insureable interest at the time, when the accidents occurred, which occasioned the loss : 2d, that if they had such interest, it depended solely on the charter-party, which was concealed from -or not disclosed to the insurers, when application was made to them to assume the risk. It is clear, from the authorities cited, that, had the brig sailed from New-Orleans without charter party and without any cargo, the evidence of the case shews the loss to have occurreci at such a time, and in such a manner, as to exo- ’ ... norate the underwriters from all responsibility for freight, . , . . ". . It is equally clear, from the same authorities, that m sailing under a charter party, the owners had an insureable interest in freight, commencing at the time the vessel left New-Orleans; which renders the insurers liable to pay the whole amount stipulated in the policy as valued therein. — See Phillips on Insurance, from page 51 to 54 ; and 3d Kents Commentaries, p. 118, and the cases cited by these authors. This view of the case dispenses with all other considerations, except those which relate to the failure on the part of , , ,, .. . the insured, to communicate to the insurers the circumstance of the brig sailing under charter party. Is this such a concealment or failure to disclose a fact so materially . ^ affecting the risk assumed, as to annul the policy ? We think not. It is the duty of persons wishing to obtain in [343] surance, to make a faithful representation of all facts sup-1 , • , 1 . , . , . , , , , , posed to be particularly within their knowledge, which might have an effect on the contract, by increasing the risk to be tallen by the insurers ; and a suppression or concealment of such facts, whether through negligence or design, will generally avoid a policy. Freight lato sernu, means either compensation for the use of a ship ; or compensation for the transportation of merchandise. An insurance effected on freight eo nomine, embraces 'either kind. The first species is generally created by a contract of charter party j and so soon as the vessel breaks ground, its hire is at risk, and constitutes a legal subject of insurance. The right to the secured commences only when the goods are put on board, &c. — Phillips Ins. p. 52. The knowledgé or information ma-ver to know and communicated to contractis madeS a question of fact, and the materiah-tyof the information is to be determined under a consideration of all the circumstances which belong to thecase. [343] In the present case, the insurance was made on freight at and from New-Orleans to Mobile, and at and from the latter place to Liverpool. If cargo had been put on board at the first port a quo, the underwriters would be most clearly liable under their contract, and the risk would have been equally as great, if not greater, than that which occurred by the circumstance of the brig sailing in ballast from New-Orleans to Mobile; where, according to the charter party, cotton was to have been taken in to be transported to Liverpool. If, then, they were willing to insure freight on the whole voyage, as stated to them in the application for insurance at one and a half per cent., it cannot be supposed that they would have required a greater premium, had the fact been communicated, that the cargo was to be taken in at Mobile. The course of the voyage to be insured, was sufficient in itself, to have put them on inquiry as to the place where the vessel was to be loaded. The knowledge or information material for the insurer to know, and necessary to be communicated to him, when the contract is made, is a question of fact, and the materiality of the information is to 1 . . . be determined under á consideration of all the circum [344] stances which belong to the case. — 3 Kent’s Com. p. 232.— Now, in addition to the circumstances already stated, which lead us to the conclusion that the fact of the vessel sailing-under charter party, if it had been communicated, would not have prevented the insurers from making the contract which they did. We have the testimony of several clerks or secretaries of insurance companies that, in their opinion, this fact would not have been considered as a circumstance calculated to increase the risk, and, consequently, could not have afforded ground for an increased premium. If we add further, the known frequency of vessels sailing under charter parties, no doubt can remain, that there was not an indispen-sible obligation on the part of the applicants for insurance, in the present instance, to communicate their charter party to the insurers. In other words, the neglect to make such a communication does not amount to a legal fraud, sufficient to avoid the policy. t It is, therefore, ordered, &c. that the judgment of the District Court be avoided, reversed and annulled ; and it is further ordered, adjudged and decreed, that the plaintiffs and appellants do recover from the defendants and appellees the sum ‘of five thousand dollars, with interest at the rate of five per cent, per annum, from the judicial demand, with ■costs in both courts.