General Mutual Insurance v. Sherwood

Mr. Justice CURTIS delivered the opinion of the court. This is a writ of error to the Circuit Court of the United States for the Southern District of -New York. The action was assumpsit on a time policy of insurance, subscribed by 'the plaintiffs in error, upon the brig Emily, during one year from the seventeenth day of October, 1843, for the sum of eight thousand dollars, the vessel béing valued.at the sum of sixteen thousand dollars. The policy, described in the declaration, assumed to insure against the usual sea perils, among which is barratry of the master and mariners. The declaration avers, that during the prosecution of h voyage, within the policy, while on the high seas, and near thé entrance, of the harbor of the city of New York, by and through the want of a proper look-out, by the mate of the said brig, and, by and through the erroneous order of the chief mate, who was stationed on the top-gallant forecastle of the said brig, who saw the schooner, hereinafter named, and cried out to the man at the wheel, “helm hard down — luff”—whereas, he ought not to ha,ve given the said order; and, by and .through the negligence and fault of the said brig Emily, the said brig ran into a schooner called the Virginian, and so injured her that she Sank, whereby the said brig Emily became liable 'to the owners of the' said schooner and her cargo, to make good their damages; which liability was a charge and encumbrance On the said brig. The declaration then proceeds to aver, that the brig was libelled, by the owners' of the schooner and her cargo, in the District Court of the United States; that a decree was there made, whereby it was adjudged, “ Thatthe'collisionin the pleadings mentioned, and’ the damages and- loss incurred by. the libellants, in consequence thereof, occurred by the negligence or faiilt of the said brig, and that the libellants were entitled to recover their damages by them sustained thereby;”’ that the.same having been assessed, a decre.e therefor was made by the District Court, which, on appeal, was affirmed by the Circuit Court, which found, “ That the hands, on. board the Emily, failed to. keep a proper look-out, and, that the said brig might have avoided, the collision, by the use of proper caution, skill, and vigilante.” The declaration further avers, that the plaintiff has paid divers sums *362 of money, to satisfy this decree and the expenses of making the defence, amounting'to the sum of eight thousand dollars. This statement of the substance of the declaration, presents the question which has been here argued, arid sufficiently shows how it arose; for, although there was a demurrer to. the first two counts in the declaration, and a trial upon the general issue .pleaded to the other counts, and a bill of exceptions taken to the ruling at the trial, yet the same question is presented by each mode of trial, and that, question is, whether, under a policy insuring against the usual perils, including barratry, the underwriters are liable to repay to th.e insured, damages paid by him to the owners of another vessel and cargo, suffered in a collision occasioned by the negligence of the master or mariners of the vessel insured. The great and increasing internal navigation of the 'United States, carried on over long distances, through the channels of rivers and other comparatively narrow waters, where the dar ger of collisions,, and the frequency of their occurrence, are much ■greater than on maritime voyages, renders the respective rights of underwriters and insured, growing out of such occurrences, of more moment in this than in any other civilized country; and the court has considered the inquiry presented by this case, with the care which its difficulty and its importance demand. .In examining, for the .first time, any question under a policy of insurance, it is necessary to ascertain whether the contract has received a practical construction, by merchants and underwriters; not through any partial or lo'cal usages, but by the general consent of the mercantile world. Such a practical construction, when. clearly apparent, is of great weight, not only because the parties to the policy may be presumed to have contracted in reference to it, but because such a practice is very high evidence of the general convenience ana substantial e'quity of it, as a rule... This is true of most commercial contracts; but it is especially true of a policy of insurance, which has been often declared to be' an “ obscure, incoherent, and very strange instrument,” and, “generally more informal than any other brought into a court of justice: ” (Per Buffer, J., 4 T. R. 210; Mansfield, C. J., 4 Taunt. 380; Marshal, C. J., 6 Cr. 45; Lord Mansfield, 1 Bur. 347); but which, notwithstanding the number Uhd variety of the interests which it embraces, and of the events by which it is affected, has been reduced to much certainty, by the long practice of. acute and well-informed' men in cpmmefcigd countries; by the decisions of courts in America arid in JEngland,.and by able writers on the subject, in this and other 'Countries. . .Arid it should not be forgotten, that, not-only in the introduc-. *363 tion of this branch of law into England, by Lord Mansfield, but i ^ its progress since, both there and here, a constant reference has been had to the usage of merchants, and the science of insurance law has been made and kept a practical and convenient system, by ayoidihg subtle and refined reasoning, however logical it may seem to be, and looking, for safe practical rules. Now, although cases like the present must have very frequently occurred, we are not aware of any evidence, that underwriters have paid such claims, or that, down to the time when one somewhat resembling it was rejected by the Court of King’s Bench, in De Vaux v. Salvador, (5 Ad. and Ellis,) decided in 1836, such a claim was ever made. And we believe that, if skilful' merchants, or underwriters, or lawyers, accustomed to the practice of the commercial law, had'been asked whether the insurers on one vessel were liable for damage doné to another vessel, not insured by the policy, by a collision occasioned by the negligence of those on board the vessel insured, they would, down to a very recent period, have answered, unhesitatingly, in the negative.- As we shall presently show, such, for- a long time, was the opinion of the writers bn insurance, on the continent of Europe, and in England and America. And this, alone, would be strong proof of the general Understanding and practice of those connected with this subject. Butj although this practical interpretation of the contract is entitled to much weight, we, do not consider it perfectly decisive. It may be, that, by applying to the case the settled principles of the law of insurance, the loss is within the policy; and, that it' has not heretofore been found, to be so, because an exact attention has not been given to the precise question. .Or, it may'be, that the weight of recent authority, and the propriety of rendering the commercial law as uniform as its necessities, should constrain us to adopt the rule contended for by the defendant in .error. And, therefore, we proceed to- examine the principles and authorities, bearing .on this question. Upon principle, the true inquiries are, what was the loss, and what was its cause ? ■ • The. loss was the existence of a lien on the vessel insured, securing a valid claim'.for damages, and the consequent diminution of the value of that vessel. In Other words,'by operation, of-law, the owners of the Virginian obtained a lien on the vessel insured, as security for the payment of damages, due to them for a marine tort, whereby their property -was injured. What was the cause of this loss ? We think it is correctly stated by this court, in the case of the Paragon, 14 Peters, 109. *364 In that case, it was said : “ In the common case of an action for damages for a tort done by the defendant, río one is accustomed to call the verdict of the jury and the judgment of the court thereon* the cause of the loss to the defendant. It is properly attributable to the original tort, which gave the right to damages consequent thereon.” The cases there spoken of, were claims in personam. But the language was used to illustrate the inquiry, what should be deemed the cause of a loss by a claim in rem, and is strictly.applicable to such a claim. Whether the owners of the Virginian would proceed in rem or in personam, was at their election. It affected only their, remedy. Their right, and the grounds on which it rested, and the extent of the defendant’s liability, and its causes, were the same in both modes of proceeding. And, in both, the cause of the loss .of the defendant would be the negligence of his servants, amounting to a. tort. The loss consisting in a valid claim on the vessel insured, we must look for the cause of the loss in the cause of the claim, and this is expressly averred by the declaration to have been the negligence of the servants of the assured. From the nature of the case, it was-absolutely necessary to make such an averment. If the declaration had stated simply a collision, and that the plaintiff had paid the damages suffered by the Virginian and her cargo, it would clearly have been bad on demurrer; because, although'it would show-a loss, it would staté no cause of that iloss. • It is only by adding the fact, that the damage done to the Virginian was caused by negligence, that is, by stating the cause of damage, that the cause of payment appears, and, when it appears, it is seen to be the -negligence of the servants of the assured. We know of no principle of insurance law which prevents us from looking for this sole operative cause, or requires us to stop short of it, in- applying the maxim causa próxima non remota speptatur. The argument is, that collision, being a peril of the séa, the negligence which caused that peril to occur is not to be inquired into; it lies behind the peril, and is too remote. This is true when the loss was inflicted by collision, or was by. law a necessary consequence of it. The underwriter cannot set up the negligence of the servants of the assured as a defence. But in this case he does not seek to go behind the cause-of loss, and defend himself by showing this cause was produced by negligence.- Thé insured himself goes behirid the collision, and shows, as the sole reason why he has paid the. money, that the negligence of his servants compelled him to pay it. It is true that an expense, attached by the law maritime to the subject insured, solely as a consequence of a peril, may be considered as proximately caused by that peril. But where the expense is attached *365 to the vessel insured, not solely in consequence of a peril, but in consequence of the misconduct of the servants of the assured, the peril per se is riot the efficient cause of the loss, and -cannot, in any just sense, be considered its proximate cause. In snch a case the real cause is the negligence, and unless the policy can be so interpreted as to insure against all losses directly referable to the negligence of the master and mariners, such a loss is not covered by the policy. We are of opinion the policy cannot be so construed. When a peril of the sea is the proximate cause of a loss, the negligence which caused that peril is not inquired into; not because the underwriter has taken upon himself all risks arising from negligence, but because he has assumed to indemnify the insured against losses from particular perils, and the assured has not warranted that his servants will use due care to avoid them. These views are sustained by many authorities, Mr. Arnould, in his valuable Treatise on Insurance, (vol. 2, 775,)' lays down the correct rule: “ Where the loss is not proximately- caused by the perils of the sea, but is directly referable to the negligence or misconduct of the master or other .agents of the assured, not amounting to barratry, there seems -little doubt that the underwriters would be thereby discharged.” -To this rule rmist be referred that class of cases, in which the misconduct of the master or mariners has either aggravated the consequences of a peril insured against, or been of itself the efficient cause of the wholé loss. Thus, if damage be done by a peril insured against, and the master neglects to repair that damage, and in consequence of the want of such repairs, the. vessel is lost, the neglect to make repairs, and not the sea damage, has been treated as the proximate cause of the loss.. In the case of Copeland v. The N. E. Marine Ins. Co. (2 Met. 432,) Mr. Chief Justice Shaw reviews many of the cases, and states that “ the actual cause of the loss is the want of -repair, for which the assured are responsible, and not the sea damage which caused the want of repair, for which it is-admitted the underwriters are'responsible.” And the same principles were applied by Mr. Justice Story, in the case of Hazard v. N. E. Marine Ins. Co. (1 Sum. R. 218,) where the lóss was by1 worms, which'got access to the vessel in consequence of her bottom being injured by stranding, which injury the master neglected to repair. So-.where a vessel has been lost or disabled, and the cargo saved, a loss caused by the neglect of the master to transship, or repair his vessel and carry the cargo, cannot be recovered. Schieffelin v. N. Y. Ins. Co. 9 Johns. 21; Bradhurst v. Col. Ins. Co. 9 Johns. 17; Am. Ins. Co. v. Centre, 4 Wend. 45; S. C. 7 Cow. 504; McGaw v. Ocean Ins. Co. 23 Pick. 405. So where condemnation of a neutral *366 vessel was caused by resistance of search; Robinson v. Jones, 8 Mass. 536; or a loss arose from the master’s negligently leaving the ship’s register on shore; Cleveland v. Union Ins. Co. 8 Mass. 308. So where a vessel was burnt by the public authorities of a place into which the master sailed with a false bill of. health, having the plague on board; Emerigon, (by Meredith,) 348; in these and many other similar cases, the courts, having found the efficient cause of the loss to be some neglect of duty by the master, have held the underwriter discharged. Yet it is obvious that in all such cases, one of the perils insured against, fell on the vessel. And they are to be reconciled with the other rule, that a loss caused by a peril of the sea is to be borneby the underwriter, though the master did not use due care to avoid the peril, by bearing in mind that in these cases it is negligence, and not simply a peril of the sea, which is the operative cause of the loss. It may sometimes be difficult to trace this distinction, arid mistakes have doubtless been made in applying it, but it is one of no small importance in the law of insurance, and cannot be disregardéd without producing confusion. The two rulés are in themselves consistent. Indeed, they ar.e. both but applications, to different cases, of the maxim, causa próxima non remqta spectatur. In applying this maxim, in ’looking for the proximate cause of the loss, if it is found to be a peril of the Spa, we inquire no further; we do riot look for the cause of that peril. But if 'the peril of the sea, which operated in a given case, was.not of itself sufficient to occasion, and did not-in and by itself occasion the loss claimed, if it depended upon the cause ■of that peril whether the loss claimed would follow it, and there-fore a particular cause of the .peril is essential to be shown by the assured, then we mus't look beyond the peril to its cause, to ascertain the efficierit cause of the loss. The case at bar presents an illustration of both rules. So far as the brig Emily was herself injured by the collision, the cause of the loss was the .collision-, which was a peril insured against, and the assured, showing that his. vessel suffered damage from that cause, makes a case, and is. entitled to recover. Blit he-.claims to recover not only for the damages done to his vessel, which was insured,-but for damages done to the; other vessel, riot insured. To entitle himself to recover these, he must* show not only that they were suffered by a peril of the sea, but that the- underwriter is resp.onsiblc for the consequences of that peril falling on a vessel. riot insured. . It is" this .responsibility which is the sole basis of his claim,' and to make out this responsibility he does not and cannot rest upon the occurrence of a collision.; this affords no ground for this claim ; he-mustshow a particular cause for that collision; and aver that by reason of *367 the existence of that cause, the loss was suffered by him, and so the -underwriter became responsible for it. This negligence is therefore the fact without which the loss would not have been suffered by the plaintiff, and by its operation the loss is suffered by him. In the strictest sénse, it causes the loss to the plaintiff.- The loss of the owners of the Virginia' was occasioned by a peril of the sea, by which their vessel was injured. But nothing connects the plaintiff with that loss, or makes it his, except the negligence of his servant’s. Of his loss this negligence is the only efficient cause, and in the sense of the law it is the proximate cause. The ablest writers of the continent of Europe, on the subject of insurance law, have distinctly declared, that, in case of damage to another vessel solely through the fault of the master or mariners of the assured vessel, the damage must be repaired by him who occasioned it, and the insurer is not liable for it. Pothier Traite d’Assurance, No. 49, 50; Boucher, 1500, 1501, 1502; 4 Boulay Paty, Droit Maritime, (Ed. of 1823,) 14, 16; Santayra’s Com. 7, 223; Emerigon, (by Meredith,) 337. If the law of England is to be considered settled by the case of DeVaux v. Salvador, (4 Ad. & El. 420,) it is clear such a loss could .not bé recovered there. Mr. Marshall is evidently of opinion that unless the misconduct of tire master and crew amounted to barratry, the loss could not be recovered. Marsh. on Ins. 495. And Mr. Phillips so states in terms. 1 Phil. on Ins. 636. It has been urged that, in the case of the Paragon, (Peters v. Warren Ins. Co. 14 Pet. 99,) this court adopted a rule which, if applied to the case at bar, would entitle the insured to recover. But we do. not so consider it. It was there determined that a collision without fault was the proximate cause of that loss. Indeed, unless the operation of law, which fixed the lien, could be regarded as the cause of that loss, there was no cause but the collision, and that was a peril insured against. We are aware that in the case of Hall v. Washington Ins. Co. (2 Story,) Mr. Justice Story to.ok a-different view of this question ; and we are informed that the Supreme Court qf Massachusetts has recently decided a case in conformity With his opinion, which is not yet in print, and which we have not been able to see. But with great respect for that very eminent Judge, and for that learned and able court, we think the rule we adopt is more in conformity with sound principle, as well as with the practical interpretation of the contract by underwriters and merchants; and that it is the safer’and more expedient rule. We cannot doubt that the knowledge by owners, masters, and seamen, that underwriters were responsible for all the damage done by collision with other vessels through then- negligence, *368 would tend to relax their vigilance and materially enhance the perils, both to life and property, arising from this case. The judgment of the Circuit Court must be reversed, and the cause remanded, with directions to render a,judgment for the defendants; ón the demurrer to the first two counts, and award a venire de novo to try the general issue pleaded to the other counts. • Order. This cause came on to be heard on the transcript .of the record from the Circuit Court of the United States for the Southern District of New York, and was argued by counsel. On consideration whereof, it is now here ordered and adjudged, by this court, that the judgment of the said Circuit Court in this cause be, and the same is hereby, reversed, with costs, and that this cause be, and the same is hereby, remanded to the said Circuit Court, with directions to enter a judgment for the plaintiff in error, bn the demurrer to the two first counts, and to award a venire facias de novo, to try the general issue pleaded to the other counts.