Natchez Insurance v. Buckner

Mr. Chief Justice Sharkey delivered the opinion of the court. This action was instituted by the defendants in error against the plaintiffs in error on a policy of insurance to recover damages for an injury sustained on a quantity of cotton insured by the plaintiffs in error, and shipped on the steamboat Fort Adams from Grand Gulf and intermediate ports to New Orleans. The plaintiffs below recovered judgment for $10226 39, which the defend — 79 — ants say is greatly too much, and the cause comes up by writ of error on exceptions taken at the trial. It is admitted in argument that damages had been sustained, and that the plaintiffs below had a right to recover by a fair rule of computation, but the rule by which the damages should be estimated, is the principal subject of dispute. It is a valued policy in which each bale of cotton is valued at seventy dollars, and the. loss was only partial, by 266 bales being deteriorated in value. By first fixing the true rule by which the damage is to be estimated, and then by testing the various objections taken at the trial m reference to then’ application to, or effect on that rule, we shall be able to divest the case of much of the obscurity in which it has been involved by irrelevant matter. In fact, rightly considered, it presents but" little more than a mathematical proposition. Insurance is a contract for indemnity, by which one party engages for a consideration, that the goods insured shall arrive safe at the port of destination, or in case they should not, he will place the other party in as good a condition in reference to the thing insured as he was before he began the adventure, but not in a better situation. When goods are shipped under an open policy and lost, the only means by which he can be placed in such a situation is by paying the invoice price at the shipping port with the reasonable charges. When they arrive at the port of destination, but in a damaged state, the difference between their value in a sound and the damaged state at that port is to be paid, because that is the only criterion by which the extent of damage can be ascertained, or the proportion in value'of the damaged article to the good one. By first ascertaining the injury and then the value of the thing were it uninjured, the party is indemnified by making up the difference. In a valued policy the value of the thing is fixed by the contract of the parties, and requires no proof, and this constitutes the only difference between an open and a valued policy. The value being agreed on, it is binding on both parties, and cannot be opened unless the fixed value is so exorbitant as to make it a fraudulent or gambling policy. Although some authors at one time seemed to have inclined to the opinion that in partial losses a val — 80 — ued policy must be opened, yet the rule is now too firmly fixed both on authority and reason, to be shaken, that a valued policy cannot be opened, and that the agreed value must hold both in total and partial losses. The rule is stated with great clearness in the writings of Benecke and Stevens, as compiled by Phillips. The author, (Benecke,) says, “ whenever a valuation is made in such a manner that its validity cannot be disputed in case of a total loss, it ought to be the basis of indemnity also in case of a partial loss. The contract between the underwriter and the assured being that the former is to restore the latter, from any loss arising from the perils insured against, to the situation in which he was with regard to the value of his goods, before the adventure ; and the valuation in the policy being admitted to represent that value, there is not the least ground to depart from that stipulation when a part only has been destroyed, or which comes to the same when the whole is damaged.” Average and Marine Insurance, 48. After noticing many of the authorities, the same author in conclusion says, “ The opinion, therefore, of those who pretend that in case of a partial loss the valuation ought to be disregarded, seems to be as destitute of authority, as it is void of justice and sound reason.” Id. 52. The conclusion of Stevens is equally clear to the same point, id. 4; and Phillips in his own treatise on the law of insurance, after reviewing the authorities, holds to the same rule. 1 Phillips on Insurance, 314-15. It is also the rule which was adopted by Lord Mansfield in the case of Lewis v. Rucker, 2 Burrow, 1167, and admitted to be the true one by Lord Ellenborough in the case of Asher v. Noble. 12 East, 639. In the case of Lewis v. Ruckfer, Lord Mansfield said “ as the insurer pays the whole prime cost^ if the thing be wholly lost, so if it be only a 3d, 4th, or 5th worse, he pays a 3d, 4th, or 5th of the value of the goods so damaged.” The case in which this opinion was announced, differed not at all in principle from the one before us. A different mode of ascertaining the damage had been adopted from necessity. The sugar being damaged, it was necessary to sell immediately, but as the amount of sale furnished no criterion by which to fix the relative valued price insured at, it was necessary to ascertain the price of good sugar at the same time; when that was done the proportion which the — 81 — price of the damaged bore to the value of good sugar, was equal to the proportion which the quantity of injury bore to the insured price. The valuation in the policy furnishes no rule or criterion by which to arrive at the damage, or in other words it does not furnish in itself, the means to attain the end; but where the damage is ascertained, the proportion which it bears to the price insured is the sum to be paid; and it makes no difference whether the goods go to a losing or gaining market. The actual deterioration is all that the insurer has to pay. The interest of Stanton, Buckner & Co., in the cotton insured, was $70 per bale, and the proportion which the amount of damage on each bale bears to that sum constitutes their indemnity. Whenever it is ascertained how much injury has been done, the indemnity is complete by paying that amount. For instance, suppose a bale of cotton to be insured at $50, which is damaged on the voyage 10 per cent, which is five dollars: by paying this sum the party receives his own price for his cotton, and is in as good a condition as he was when he shipped it. Under this rule if we are furnished with the means of ascertaining the proportion which the damage bears to the interest or price insured, we shall be able to arrive at absolute certainty. Will either of the two plans furnished us supply the desideratum. The first mode taken to ascertain the extent of damage was to have it assessed or fixed by two cotton brokers; the second was to sell it at auction. When the cotton arrived in New Orleans from the wreck, the plaintiffs below called in two cotton brokers to estimate the damage, and they made their estimation after a thorough examination, by a per cent, valuation, without regard to any price, thus fixing the depreciation of every particular lot at a given per cent.; for example, the lot of thirty bales marked M. N. Brandon, had been depreciated 30 per cent. This 30 per cent, was of course in reference to the intrinsic value of the article, it being immaterial what that value was; thus, the thirty bales above mentioned, at $70 per bale, were worth $3100: thirty per cent, depreciation on that sum is $630, which deducted from the value leaves $1470, which gives the value in the damaged state. The assured have — 82 — declared and stipulated by the policy that the cotton undamaged was worth to them $70 per bale, but being damaged it is worth thirty per cent. less. The thirty bales therefore were worth to them in New Orleans only $1470 instead of $2100. Now what will indemnify them? The amount of the depreciation with the expenses which accrued in saving the .cotton from the wreck, of course. The cotton being worth to them in New Orleans $1470, add to that sum the amount of depreciation, $630 and the money expended in saving the cotton, and the assured is precisely in the same situation that he was when he started on the adventure. The damaged cotton may not in reality have been worth that sum to them, and yet they cannot complain, because that was its relative or comparative value resulting from their own standard, the valuation in the policy. Now let us see whether this appraisement of the brokers, was the best mode of arriving at the damage. We think it was. There can be no better way of ascertaining the value of an article, than from the opinions of those who are well acquainted with it, and whose daily business is to deal in it. The broker is a habitual, or, if I may use the term, professional cotton dealer. His habits, experience and occupation, qualify him to judge truly of the value of cotton. His opinion, especially under oath, as it was in this instance, may be safely adopted as a 'criterion of value. This must also be the best mode of ascertaining the injury, because it produces the greatest certainty in the result, by the greatest simplicity in calculation. The brokers said that the lot above mentioned was damaged thirty per cent.; thirty per cent, on a given value or sum is mathematical certainty. To apply the language of Lord Mansfield, in Lewis v. Rucker; he says, “ so likewise, if part of a cargo, capable of a several and distinct valuation at the outset, be totally lost, as if there be 100 hogsheads of sugar, and 10 happen to be lost, the insurer must pay the prime cost of those 10 hogsheads, without any regard to the price for which the other 90 may be sold. But where an entire individual, as one hogshead happens to be spoiled, no measure can be taken from the prime cost, to ascertain the quantity of such damage; but if you can ascertain whether' it be a 3rd, 4th, or 5th worse, the damage is fixed to a mathematical certainty.” • The brokers have ascertained the — 83 — very thing which Lord Mansfield said would produce this certainty. But their award is not alone recommended to us from the simplicity and ease by which it shows the true conclusion: it must be remembered that it was the first plan the plaintiffs below took to' ascertain their injury, and the first and only evidence presented to the company under the condition in the policy, which requires notice and adjustment sixty days before the money was payable. It was moreover proven to be correct at the trial, and the customary mode of estimating the damage. The insured, however, not content with this appraisement, proceeded to sell the cotton at auction, and offer the amount of the sale as the evidence of the value. An account was presented to the company sixty days before suit brought, in which they are charged with the damaged cotton at #70 per bale and all charges, and credited by the nett proceeds of the sale. To hold them liable by this rule would be to make them insure the market. For example, the thirty bales already mentioned were damaged only thirty per cent, and sold for #31 per bale; if the insurer is bound to pay for them at seventy dollars, he makes up more than the injury. The price for which it sold does not show how much it has been depreciated by the damage, and that is all the insurer engaged to make good. In addition to this they offered evidence of the price of good cotton shortly before and after the sale, with a view to claim, I suppose, the difference; but the difference still affords no criterion, unless it be to fix a proportion of the difference between the sound and damaged cotton, according to the rale in Lewis v. Rucker. But that rale, although it might lead to a correct result, if the sale had been properly made and the price properly proven, is still more objectionable than to take the award of the brokers; because it is more uncertain. To arrive at the proper conclusion the amount of the sale has to be proven, and then the value of the sound article. The proportion is then to be taken with reference to the value in the policy. In the case referred to, the defendant took the proportion of the difference between the sound and damaged article, and paid that proportion on the value specified in the policy. Although that was the rule adopted for arri — 84 — ving at the injury, it was so from necessity. The sugar had been sold without a per cent, valuation in consequence of the increasing damage. It is not to be regarded therefore as furnishing an authority against the efficacy of an appraisement by competent persons. That mode of arriving at the injury embraces two distinct facts, from which two calculations are to be made. 1. The price the article sold for, then the value of the undamaged article, and then the proportion which the price at sale bears to the value of the article undamaged, is equal to the proportion which the quantity of injury bears to the insured price. All this has to be done for the purpose of arriving at the per cent, damage. It is better to be able to arrive at a conclusion by proof of a single fact than by proof of many. As facts are multipled complexity is increased. This produced the difficulty in the case of Lewis v. Rucker. But there are other reasons for excluding the sale. Auction sales are not always the best evidence of value, and it was also incompatible with the first evidence furnished the company as to the amount of injury. Nor was it necessary to sell for any purpose. In a case reported in 1 Caine’s Rep. 49, the damage was estimated by the captain and prize-master; the insured afterwards sold at auction, and it was held that the sale was unnecessary for the purpose of ascertaining the value of the goods, and that therefore all the expenses of the sale should fall on the insured. S. B. & Co. had not abandoned to the insurers, nor could they have done so, the loss being only partial. The cotton was therefore theirs, and the sale must be considered as theirs, and-the insurers are not liable for any of the expenses attending it. It can not be considered as a sale for the benefit of the underwriters, for such sales can only take place when a vessel is forped to stop short of the port of destination, and it becomes necessary to sell to prevent further deterioration in the value of the goods insured; in which case the principle of abandonment is assumed and acted on. But when there is only a partial loss, and the goods arrive at the port of destination, they cannot be sold by the insured for the benefit of the insurer. In all average losses, whatever is saved is for the benefit of the insured, and not for the insurer.— See Average and Marine Insurance, 284—5, and notes 1 and 2. 4 Taunton, 303. — 85 — From this-view of the subject, it must follow that the testimony of Cenas, the auctioneer, in regard to the sale of the cotton, was improperly admitted. It is equally clear that the testimony of Poor, in relation to the ruling prices of cotton, the sales by Buckner, Stanton & Co. and the quality of particular brands, was also improper. So far as it goes to show that the cotton of the plaintiffs was damaged by the wreck of the boat, it was proper; that was a material fact. I differ with the counsel, however, in regard to the testimony of Ferriday, who was one of the appraisers. He must have been introduced to support and not to defend the appraisement. At all events, his answers have that effect, and considered in that light the testimony was proper. We think the testimony of Henry was properly ruled out. The object seems to have been to prove that the plaintiffs had no interest in the cotton. That the defendants had admitted by the written agreement, aiid they were thereby estopped from denying it. As regards the charges for which the insurers are liable, they are only the extraordinary charges which happened in consequence of the wreck. All the ordinary charges incident to the transportation of cotton to New Orleans, constituted a part of the insurable interest, and in an open policy, would be a part of the prime cost, and the subject of recovery, but in a valued policy they are supposed to be covered by the valuation, that being the criterion of the insured interest. From what has been said, it will appear that the extent of the right to recover can be certainly ascertained thus; value the damaged cotton at $70 per bale; charge the defendants with the amount of injury or per cent, damage, as ascertained by the brokers; add the necessary charges which arose in consequence of the wreck; deduct the 2 per cent, agreed in the policy to be abated, and all off-setts proved, and you have the true amount. The verdict greatly exceeds that sum, and must therefore be ■set aside. We have not noticed the errors assigned in detail, but they are all covered by the points settled, except the objection that the verdict does not cover the issues, and as the case will have to go to another trial, that point is immaterial. The judgment must- be reversed, the cause remanded, and a vehire de novo awarded.