Whiting ex rel. Sun Mutual Insurance v. Independent Mutual Insurance

Bautor, J., delivered the opinion of this court. The policy on which this suit was brought was underwritten by the appellee, on the 10th of March 1854, and a partial loss having occurred from the perils insured against, the question presented for our decision is, whether the appellee is liable in this action for any portion of the loss? On a marine policy, the liability of the underwriter for loss, whether total or partial, is to pay that proportion which the amount, underwritten bears to the whole amount at risk. No authority need be cited in support of this rule; it is universally conceded to be the law governing such contracts, unless there be in the policy some stipulation to the contrary. In the case- before us, which is a policy on a ship valued at $22,000, the amount insured $7400, and the loss incurred, $2189.04:, the liability of the appellee, unless otherwise provided in the P0ÜC5T, would be -//«Vo of $2189.04. It is contended, however,, that by the true construction of the policy, the appellee never ivas in any manner answerable for the loss incurred; this leads, us to consider the first ground of defense taken by the appellee. On lire day before this policy was underwritten, Whiting, the owner, obtained insurance, on the same vessel, from the Sun Mutual Insurance Company, to the amount of $7300, and,, on the day following, another insurance from the Commercial Insurance Company, to the amount of $730Qj The vessel was valued at the same sum in each policy, and each was for the same period of time, and covering the same risks. Each of the policies contained the following clause: “Provided always, and it is further agreed, that if the said assured shall have made any other insurance upon the premises aforesaid, prior in date to this policy, then this insurance company shall be answerable only for so muck of the amount as such prior insurance may be deficient towards fully covering, the premises hereby insured, without any deduction for the insolvency pf all oj ad-31 of the underwriters, and this insurance — 310 — company shall return the premium upon so much of the sum by them insured, as they shall be by such prior insurance exonerated from. And in case of any insurance upon the said premises, subsequent in date to this policy, this company shall, nevertheless, be answerable for the full extent of the sum by them 'subscribed hereto, without right to claim contribution from such such subsequent assurers, and shall accordingly be entitled to retain the premium by them received, in the same manner as if no such subsequent assurance had been made.” It has been argued, on behalf of the appellee, that the effect of this clause is to make the first underwriter responsible for the whole loss, where it does not exceed the amount underwritten in the first policy, and in such case to exempt subsequent underwriters from all liability for contribution. In support of this construction the case of 2he American Ins. Co. vs. Griswold, decided by the Supreme Court of New York, and afterwards affirmed by the Court of Errors, 14 Wend., 399, has been cited and much relied upon. In that case, the construction of a clause similar to the one before us, was most ably and elaborately discussed and considered, and although in the opinion delivered by Chief Justice Savage, some sanction may be found for the position taken by the appellee, yet a careful examination of that case, and a mature consideration of the question, has confirmed us in the opinion, that the interpretation of the clause contended for by the appellee, cannot be supported upon any sound principles of construction. This proviso was first introduced into marine policies in the United States, and is generally called, “The American clause.” It is unnecessary to enter into any particular examination of the origin and ¡purpose of its adoption. It has been said that it was intended to restore the ancient rule of construction governing cases of double or over insurance, which had been disturbed by the decision of Lord Mansfield in Newby vs. Reed, 1 W. Black. Rep., 416. That decision was followed in the case of Thurston vs. Koch, decided in 1800 by the Circuit Court, of the United States, for the district of Penn — 311 — sylvania, 4 Dall., 348. This last decision, it is said, led to the adoption of the American clause in marine policies. 5 Sergt. & Rawle, 481. 14 Wend., 461, 482, 497. Tt may be conceded, however, that the purpose for which the clause was introduced, although it may afford some aid in arriving at its meaning, cannot 'control the construction of its language. As it was said by Chief Justice Savage, in 14 Wend., 473: “It is well settled that a policy of insurance is to be construed by its terms, in the same manner as any other written instrument; and if the fair and evident meaning of the language used, be to extend to all cases of prior and subsequent insurance, I know not what power the court has to limit the operation of the contract to double insurances only.’5. Adopting this method of construction, and looking at the words of the clause, we have had no difficulty in arriving at their meaning, and are clearly of of opinion that they can apply only to cases of double insurance. In the first part of the clause the stipulation is, that if there bo a prior insurance, the underwriter shall not be answerable on a subsequent policy except so far as the amount at risk may remain uncovered by the previous insurance; that is, if the prior policy is sufficient in amount to cover the whole value of the tiling at risk, then the subsequent policy does not attach, the underwriter is at no risk, and the premium is to be returned. So far as tile amount at risk remains uncovered by prior insurance, a subsequent policy does attach, and the second underwriter is pro tanto liable upon his policy, and entitled pro tanto to retain the premium. It will be obscived, that the stipulation is not, that the underwriter is to be exempt, from liability, if there has been prior insurance to an amount sufficient to cover the loss, but that he is not answerable at all upon his contract, unless there be something to which his policy can attach remaining uncovered by prior insurance. When we look at the latter part of the clause, which provides for the case of a subsequent insurance, the meaning of the whole is alike clear and free from difficulty. In that, it is stipulated, that, in case of any subsequent insurance, the underwriter shall remain answerable for the — 312 — amount underwritten, £‘without right to claim contribution from such subsequent assurers, and shall, accordingly, be entitled to retain the premium received, in the same manner as if no such subsequent assurance had been made.'1'1 rThese last words, which We have italicised,‘qualify the rvhole sentence, and are a key-to its construction. If, in the case before us, there had been no policy on the ship except the first, (that of the Sun Mutual Insurance Company,) it is clearly settled, that the liability of that company would have been for only ■¡rVoVV part of the loss. • The owner not having any other insurance, would stand as his own insurer, for that portion of the value of the ship remaining ¿uncovered by the policy, and the loss, whether total or partial-, Would be apportioned between him arrd the underwriter. This relation ¿between the assurer and assured is not changed, when the latter obtains a subsequent assurance, thereby substituting another underwriter for himself, as to that portion of the thing at risk, which is not covered by the first policy. According to the construction contended for by the appellee, the Sun Mutual Insurance Company, would be rendered liable for the whole loss, only in consequence of there being a subsequent assurance, which is directly in the face of the words -of the contract,-that it “shall be ansu>erable in the same manner as if no such subsequent assurance had been made.’ ’ On the construction of this clause, we concur in the views expressed by Senator Tracy, in his very able dissenting opinion, in 14 Wendell, 497 to 502; and also in the opinion on that subject, expressed by the Chancellor in the same case. 14 Wend., 482, 483. On page 482, he says: ££If the -object of the American clause was, to -restore this ancient-rule of apportionment between the underwriters in successive policies, as it original^ existed in the mercantile law of England, as well as the rest of Europe, it was hardly possible to do it in more appropriate and explicit language, than is used in the last paragraph of this clause.” The conclusion, from what has been said,is, that in the cases ■before us, the liability of the appellee,.- upon the .policy ¿sue.d-. — 313 — on. is not in any manner affected by the clause we have been -considering; and at the time this action was brought the appellant had, under the admitted facts in the cause, a clear right to recover in this suit, -¿t/e’H part °f $2189.04, being that proportion of the loss, for which the appellee was answerable on its policy. The remaining question for us to consider, is whether anything which has since occurred has operated to discharge the appellee from liability on its contract? We have seen that by the true construction of this policy, so soon as the loss occurred, the liability of the appellee to pay its just proportion of that loss was fixed; it became a debt due to Whiting, which like any other chose in action might be sued for and recovered, or assigned. As was said by Chief Justice Shaw, in the case of Wilson vs. Hill, 3 Metcalf, 69, after deciding that the transfer of the title to property insured against fire, did not confer upon the assignee any right to recover the insurance money: “These considerations, said he, however, do not apply to a case where the assured, after a loss, assigns his right to recover that, loss; it would stand on the same footing as the assignment of a debt, .or right to recover a sum of money actually due, which like the assignment oí any other chose in action, would give the assignee an equitable interest, and a right to recover in the name of the assignor, subject to set-off and all oilier equities.” Such was the nature of the debt due by the appellee to Whiting', at the time this suit was instituted. It is not pretended that the appellee has paid any part of it; no acquittance or discharge has ever been given to it; but it is contended that the money which the appellee owed, was paid to Whiting by the Sun Mutual Insurance Company, and the appellee cl aims the benefit of that payment, although this case has been transferred to the Son Mutual Insurance Company, and this suit is prosecuted for its benefit. In the consideration of the questions arising upon this branch of the case, it must be borne in mind that the several underwriters are strangers to each other; there is no privity whatever between them; each is liable upon its separate contract, for its just proportion of — 314 — the loss, according to the amount underwritten in its owu policy, and there would seem to be manifest injustice in al-' lowing any one to escape from the payment of its own just debt, in consequence of another debtor, who is an entire stranger, having paid to the creditor more than he was justly entitled to claim, and the injustice becomes the ‘more manifest, where, as in this case, the claim is assigned by the creditor to the use of the party who has thus overpaid his indebtment, and the suit is prosecuted for his benefit. In the case of Merryman vs. The State, at the instance of Harris, use of Murray, 5 H. & J., 423, Murray, who Avas not Merry-man’s surety, paid to Harris a debt of $162.36, which was in fact due from Merryman, and not, as Murray erroneously supposed, due from him. A suit Avas instituted in the name of Harris, for the use of Murray, to recover the amount from Merryman. The defense was urged that Harris’ debt had been paid and satisfied. Judge Earle, in delivering the opinion of the court, (page 426,) says: “If the payment of this $162.36, is at ail to be considered as payment for Merryman, it is manifest Murray Avas not liable to pay it for him, and not having paid it at Merryman’s instance, it presents the case of a stranger paying the debt of another, without his consent or knowledge. Such a payment does not necessarily discharge the debtor, and cannot be taken advantage of by him, without showing, by an acquittance or other means, that it was intended by the payer and receiver to operate a discharge. And, we think, there is great reason in this, for an action for money paid, laid out and expended, cannot be sustained by a stranger against a debtor, whose debt he has paid voluntarily and without directions, and, therefore, he (the debtor) shall not avail himself of such payment in a suit by his creditor, unless he can show an express intention to extinguish the debt. This is not the case before us. The payment was made by Murray to Harris voluntarily, and without the knowledge of Merryman, and certainly without any intention in Harris to discharge the debt of Merryman.” This language has been cited as expressing what we believe to be sound law, as it is plain jus — 315 — lice, and strictly applicable to the case before us. In the particular case of Mcrryman vs. The Slate, the adjudication did not rest, entirely upon the ground stated in the paragraph which we have quoted. In that case tire payment by Murray had been made through a mistake of fact, and therefore he had a legal claim against Harris to recover it back. This circumstance would have aggravated the injustice of construing the payment by Murray to be a discharge of Merryraan; but it is difficult to perceive how the legal obligation of Merryman could in tiny manner be affected by the legal rights existing between Harris and Murro,y, who was a stranger to him. - It is clear to ns that whether lire payment by Murray to Harris had been through mistake of fact or mistake of law, whether he would have had alega! right to recover it back from Harris or not, Merryraan would equally have been liable for his debt. This depended, not upon the legal rights between Harris and Murray, but upon whether the money was paid by Murray, and received by Harris, with the intention of discharging Mcrryman’s debt. Now, in this case, there is no pretence that the money paid by the Sun Mutual Insurance Company to Whiting, was paid for the purpose of satisfying and discharging the debt due by the appellee. This suit, which was then pending, remained upon the docket, and was entered to the use of the Sun Mutual Insurance Company, which is equitably entitled to be protected in its prosecution. See, 1 Wheaton’s Rep., 233. 13 Johns. Rep., 353. 2 G. & J., 344, 353. The payment of the premium by Whiting to the appellee, made after the satisfaction of the judgment against the Sun Mutual Insurance Company, which has been relied on by the appellee’s counsel as showing that the appellee was no longer held responsible on its policy, would rather evince the contrary, because, upon the construction of the policy, which would exonerate the appellee from responsibility, the assured would be entitled to a return of the premium. We have treated this question as if the amount, claimed in this suit, were an ordinary debt due from the appellee on contract. But it has been earnestly insisted, in argument. — 316 — that being a contract of insurance, it stands upon entirely different grounds; and although, if it were an ordinary debt, the appellee might remain liable, yet being a contract of indemnity, no action will lie upon it after the loss has been paid to the assured, no matter by whom or from what source. When it is said that a marine or fire insurance is a contract of indemnity, we understand the meaning to be, that in order to support it, there must be an insurable interest; the assured must have some interest in the thing insured which is at risk, and liable to be injured; and that there can be no action maintained upon the policy unless there has been some loss incurred. In the case of Godsall, and others, vs. Boldero, 9 East., 72, which was on a policy of insurance upon the life of William Pitt, obtained by the plaintiffs, who were his creditors, it appeared, that, after the death of Mr. Pitt, an appropriation was made by Parliament for the purpose of paying his debts, and out of the money thus appropriated his executors paid the debt due the plaintiffs'. The court in deciding the case treated the insurance as a contract of indemnity; the insurable interest of the plaintiffs was the debt due them by Mr. Pitt, and to secure them against the loss of that, the policy was executed; before the action was brought upon the policy, the debt had been paid; so that, in point of fact, no loss or damnification had been suffered by the plaintiffs, and it was held that they could not recover upon the policy. See Lord Ellenborough’s decision, page 81. See, also, the observations on the case of Godsall vs. Boldero, made by the YiceChancellor, Sir Thomas Plumer, in Ex-parte Andrews, in re, Emett, 1 Madd., 573, and 2 Smith’s Leading Cases, (American Edition of 1855,) pages 303 and 304. In subsequent cases overruling the decision of Godsall vs. Boldero, it has been repeatedly said, that the only error consisted in applying. to a case of life insurance the principles which are applicable to marine or fire insurance. In the case of Hamilton vs. Mendes, 2 Burr., 1210, upon which the decision of Lord Ellenborough, in Godsall vs. Boldero, Was based, Lord Mansfield made use of language — 317 — which has been cited by the appellee and rebec! upon as sustaining bis view in this case. Hamilton vs. Mondes was an action on a marine policy upon a ship and cargo, which had been captured, and was afterwards recaptured; the ship and cargo arrived safely and uninjured at the port of destination; but the assured attempted to abandon and brought his action on the policy. It was held that the assured liad no right to abandon, after the peril was over and the thing in safety, and no damage having been suffered the action would not lie. If, 'was with reference to that case, that the language of Lord Mansfield, cited by the appellee’s counsel, was used, and we need not say that the case of Godsall vs. Boldero, and that of Hamilton vs. Mendes, were wholly unlike the case before us. Here the loss has actually occurred. Upon the happening of the loss the responsibility of the appellee was fixed. The proportion due upon its policy became, according to the language of Chief Justice Shaw, in 3 Metcalf, before cited, a debt due from the appellee, like any other debt or chose in action, which has not been paid .or discharged by the appellee or by any one for it. Each of the insurance companies was bound, on its separate contract, to indemnify the insured for a certain portion or fractional part of his loss. They wore not co-sureties, neither was legally bound to pay the whole, with the right of then calling on the others, for their respective proportions; and as the appellee is not legally liable over to the Sun Mutual Insurance Company for contribution, it (the appellee) cannot claim the benefit of the overpayment made by that company, which was not made on behalf of the appellee, or for the purpose of discharging its debt, but solely for the purpose of paying the debt which the other underwriter-supposed it owed to the assured. In support of the view here expressed, we refer to the case of Lucas vs. Jeff. Ins. Co., 6 Cowen, 635, which is an express adjudication upon this point,. The question also arose in the : American Ins. Co. vs. Griswold, 14 Wend., 399. See the statement of the case, 400, 401, 402, 403, and the argument of counsel, 427 and 457. Whatever difference of opinion — 318 — there was upon other points involved in that case, on this question there was no dissent, either in the Supreme Court or the Court of Errors, On page 483, the Chancellor said: “If either of the subsequent underwriters have paid to the assured upon a compromise of the claims made upon them, more than they were legally bound to pay under their contracts, that is a matter with which the underwriters, ir\ the first policy, have no concern; since they are not bound to refund any thing to the subsequent underwriters, and never had any claim upon them for contribution. If the assured have received any thing, under such a compromise, which they cannot conscientiously retain, they should restore it to 'those from whom it has been received; but the American Insurance Company, or its stockholders, have no equitable right to insist that it shall be allowed to them in discharge of their legal liability under the first policy.” Believing these views to be correct, we are of opinion, that under the facts and circumstances of this case, the payment made to Whiting, by the Sun Mutual Insurance Company does not enure to the benefit of the appellee, and is no bar to a recovery in this action. One other ground of defense has been taken by the appellee. It is argued that the judgment rendered against the Sun Mutual Insurance Company was an adjudication by a court of competent jurisdiction, which conclusively settled the liability of that company, upon its policy, for the whole loss; and is a bar to this suit. This ground of defense, like that which we have just considered, is purely technical, and if it be sustained, would defeat the plain justice of the case. This consideration, however, while it may invite us to scrutinize the argument more closely, cannot be allowed to control our judgment, so as to lead us to disregard the principles of the law which are applicable to the subject; if they are found to support the appellee’s position, the defense must prevail, however technical it may be. We think, however, that this ground of defense is more ingenious than solid; and in this case, as in most others growing out of commercial contracts, it will be found that the rules of the law are consistent with the principles of justice. — 319 — No authority has been cited which sanctions the proposition, that the judgment rendered in the case of Whiting vs. The Sun Mutual Ins. Go., can in any manner affect the rights or liabilities of the appellee in this action; the appellee was no party to that suit; it was res inter alios, and the adjudication therein, could neither bind nor discharge the appellee. Inter partes, such a judgment is an estoppel; but it cannot operate upon strangers. To illustrate this, let us suppose that by the true const ruction of these several policies of insurance, the Sun Mutual Insurance Company had been legally responsible for the whole loss, and the appellee not liable for any part of it; and, in the suit against the former company, it had been erroneously adjudged that it was answerable for only a part, could it be for a moment maintained, that in a suit against the appellee, the judgment in the former case could be invoked as a judicial determination upon the construction of the policies, which would bind the appellee ? Such a proposition would not be tolerated for a moment, and yet the defense hero rests upon a proposition which is the same in principle. There is no doubt, that the judgment against the Sun Mutual Insurance Company, was a conclusive settlement of the rights between it and Whiting, whether that judgment was obtained upon a trial and verdict, or entered by voluntary confession. The defendant in that suit was thereafter conclusively bound to pay the amount of the judgment; and when paid would have no legal right to recover back any part of the money, no matter how erroneous the judgment might be. But its position in that respect would have been in no wise different if it had paid the whole of the money voluntarily, without suit, under a mistake of law; and yet, as we have before said, such a payment would not enure to the benefit of the appellee, which is a stranger to the transaction. In either case, the money so paid, beyond the amount clue, ought, in conscience, to be returned; the appellee has surely no right to insist that it shall be retained, so that it may be exonerated from the payment of fits .own debt. It follows from what has been said, that, in our opinion, none of the grounds of defense to this action — 320 — can be sustained, and that upon the whole case, as presented on the statement of facts, the appellant is entitled to recover. (Decided May 9th, 1860.) Believing that the court below erred in refusing the plaintiff’s prayer, and in the instruction given to the jury, the judgment must be reversed. Judgment reversed and procedendo oi'dered.