Patapsco Insurance v. Biscoe

7 G. & J. 293

• Court: Court of Appeals of Maryland
• Decided: December 15, 1835
• Status: Published

Opinion

Stephen, Judge,

delivered the opinion of the court.

The decision of the question involved in this case, depends upon the true construction of the contract of insurance entered into between the parties; and that construction must essentially depend upon their intention at the time the contract was made; for such intention, when it does not violate, or conflict with the principles of law, ought to be respected and carried into effect, as well in a contract of this description, as in all others which may be made in the various dealings and intercourse between man and man. What then is the legal effect, and operation of the contract of insurance in this case, in relation to the freight covered by it? Was it an insurance separately of the freight of each voyage marked out and described in the policy, at the valuation of $1000; or was it an insurance of the aggregate freights of both voyages at that valuation? Whether the one or the other of these constructions shall prevail is deeply interesting to the parties, whose rights are involved in the determination of this controversy, and therefore demands the careful and attentive examination of this court; and more especially as the principle involved in the decision of their rights, will have an important bearing upon the law of insurance generally, and the interests of the mercantile community at large. After the best consideration which we have been

able to bestow upon the subject, we have come to the conclusion that the voyage in this case, is not to be considered as one entire voyage from Baltimore to Aux Cayes, and at and from Aux Cayes, with the privilege mentioned in the policy, back to Baltimore; but that it is a case of separate and distinct voyages, during the prosecution of which distinct freights were at risk; to each of which, as they successively came into existence, the valuation in the policy ought to be applied. It is admitted in the case stated, that freight to the amount of $500 was earned on the outward voyage to Aux Cayes, and received by the assured; and that the vessel there took on board a full cargo, and was lost on her homeward passage to Baltimore. From this admission it would seem to follow as a necessary consequence, that the vessel was not engaged in one continuous and entire voyage for the whole circuit, from Baltimore to Aux Cayes and back again to her port of departure; and consequently that the risk assumed by the policy was not an unbroken and entire risk; but that the voyages were separate and distinct in their character, and that separate and distinct freights were at risk during each voyage; for it appears to be clear, that upon no other hypothesis, than that the voyages were distinct, could freight have been earned and received at the port of Aux Cayes, where she first arrived. Freight is a compensation received for the transportation of goods and merchandise from port to port; and is never claimable by the owner of the vessel until the voyage has been performed and terminated. The admission of the fact that the vessel earned freight, by the transportation of the outward cargo to the port of Aux Cayes, is an admission that the outward voyage there terminated; and consequently that when she there took on board her homeward cargo, for the purpose of returning with the same back to Baltimore, she was engaged in the, earning of a new freight, the right to which would have been consummated on her safe arrival at that port. If the voyages were separate and distinct, the freights to be earned by the prosecution and completion of them, must, we think, partake of the same character; and the question then arises, could the policy attach and operate upon the freight to he earned by the completion of the second voyage, before the cargo was laden on board at the outward port, or as far as appears from the case stated, had even been contracted for.

We think it could not, because at the time the policy was executed, the assured had not such an interest in the freight, as would make it the subject matter of an insurance, according to the well established principles of the law. In 1 Phillips on Insurance, 52, in treating upon the subject of insurable interest in freight, the principle is stated to be, that “ if the freight be derivable from the transportation of merchandise, the right commences when the goods are put on board; or at farthest, when a part have been received, and the rest are ready to be shipped,” and in support of such principle, the author refers to the case oí Riley vs. The Hartford Insurance Company, 2 Con. Rep. 373. So, in the same book and same page, he says, “ the freight of goods laden, or to be laden, being insured, a part of the cargo was taken on board at Gibraltar, and the ship was proceeding towards the Cape de Verd Islands, with funds on board to purchase salt there to make up the cargo, when she was lost. It was held, that the insurable interest had commenced only in respect to the goods shipped at Gibraltar.” From these cases, it appears, that in the case of an insurance upon freight, the assured had no right to call upon the underwriters for an indemnity, unless the goods have been put on board, or at least have been contracted for, and are ready to be put on board when the loss occurs.

In the case now pending before this court, when the contract of insurance was entered into, no part of the homeward cargo had been put on board, or contracted for, consequently the assured had not at that time such an interest in the freight to be earned in the homeward voyage, as could legally be made the subject matter of an insurance. In giving then a legal construction to this contract, the valuation in the policy must he understood to apply in the first instance, only to the freight in which he then had an insurable interest, and that as to the freight on the homeward voyage from Aux Cayes to Baltimore, it was prospective in its operation, and could only attach upon the homeward freight, when the assured acquired an insurable interest therein. A premium was taken for the freight at a valuation of a thousand dollars for the voyage round, of course the policy covered both risks, and must, we think, be construed in such a manner, as to give it an operation, that will make it harmonize with the established principles of law. This can only be done by expounding it to be a contract of indemnity for the freights of each voyage, terminating in its operation upon the freight of the first voyage, upon the safe, arrival of the vessel at Aux Cayes, and attaching upon the freight of the return cargo, so soon as the assured had acquired an insurable interest therein. Upon the earning of freight by the transportation of the outward cargo to its destined port, the policy had performed its office for that voyage, and then commenced its operation as a contract of indemnity upon the freight of the homeward voyage.

In a treatise on Average and Marine Insurance by Stevens and Benecke, 37, it is said “ a question has arisen, whether a valuation of freight for a voyage consisting of successive passages, from and to successive ports of loading and discharge, is applicable to the aggregate freight of the successive passages, or to the freight pending at any one time. For example, freight is insured and valued on a voyage to the West Indies and back, and the ship earns freight outward, and is lost on the homeward voyage. Does the assured recover one half, or the whole amount insured in the policy ? It was held in Mew York that he was entitled to recover the whole amount.”

Davis vs. Hallett, 3 Caine, 16. — “ In a case that arose in Boston, on an open policy on freight, for a similar voyage, in w'hich the outward freight was earned, and the vessel then lost, it was decided by a referee skilled in insurance, that the insurers was liable, for the whole amount insured by them. This was in conformity to the above case.”

The case above referred to, of Davis vs. Hallett, was an insurance on the freight of the sloop Hannah, valued at $2000, at, and from Philadelphia to Omoa and Gol fo Dulle, and at, and from thence to Philadelphia. The vessel sailed on the voyage insured, and arrived in safety at Gol fo Dulee, having earned freight to the amount of $2000. She there took in a return cargo for Philadelphia, the freight of which was equal to $2000 more, and sailed on her homeward voyage, during which she was captured by a British man-of-war. This case would be identical with the case now pending before this court, but for two distinguishing features, which it is supposed mainly influence the decision of it. The freight at risk in that case, both upon the outward, and the homeward voyage, was fully equal to the valuation in the policy, and it was admitted, that the premium on the outward voyage only, wrould have been about one half of that paid. These, it is true, are circumstances, which might have had an influence upon the minds of the court, in the exposition which they gave to the policy in that case; but it by no means follows, we think, that the decision would not have been the same, in the absence of those circumstances.

Kent, Chief Justice, says, “ in the present instance there was, when the vessel was captured, an inchoate freight attached, equal to $2000. There was some freight already earned, when the capture took place ; but the amount of it becomes immaterial, as the valuation in the policy precludes inquiry into the value; and this valuation is to be adhered to, if the case be fair and honest between the parties, notwithstanding events in the course of the voyage may render the loss even advantageous to the assured. It is sufficient, if there be freight at risk equal to the sum insured, when the loss happens, and that some freight has been already earned for the insured.

If w?e were to sustain an inquiry into the value of the freight, it would he doing away the effect of the valued policy.” Again he says — “ To apportion the loss and gain in this case, so as to make the gain of one moiety of the outward freight enure to the insurer, and the loss of one moiety of the homeward freight to fall upon the insured, would be an arbitrary rule, and would not give the plaintiff his just indemnity. It would be changing the legal operation of this contract, and making it an insurance of one moiety only of the outward, and one moiety of the homeward freight; instead of an insurance to the amount of the valuation, on so much freight pending when the loss arose. The payment of the double premium is a pretty sure index to the intent of the parties, that the policy should attach on the outward or homeward freight, according to events. The policy was to be valid and operative as long as there was aliment to keep it alive.”

It is true that the judge relies upon the double premium as aiding in the construction of the contract, and as indicative of the intention of the contracting parties; but we do not think that it would be doing justice to the decision, to consider it as founded exclusively upon these considerations.

He says an apportionment of the loss and gain between the insurers and insured, would be an arbitrary rule, and would not give the plaintiff his just indemnity. It would be changing the legal operation of the contract, and making it an insurance of one moiety only of the outward, and one moiety of the homeward freight, instead of an insurance to the amount of the valuation on so much freight pending when the loss arose.

The policy was to be valid and operative as long as there was aliment to keep it alive. It must be borne in mind, that he was then deciding upon the case of a valued policy. That the valuation unless a fraudulent one, is always binding and conclusive upon the parties, and that unless it be a case of fraud, the valuation agreed upon estops the parties ¡from looking behind it for the purpose of changing the legal operation of the contract. In case of a claim for a total loss upon such policy, the only legitimate inquiry is, has such a loss occurred, and has it been occasioned by one of the perils insured against, while the policy was operating upon the subject matter insured by it. Upon any other principle of construction, it would be divested of all the attributes of a Valued policy, and the door would be open to an inquiry, unwarranted by the solemn agreement of the parties, and which is only admissible in the case of an open one.

It would be subjecting the assured to all the delay, expense, and inconvenience, which the valuation in the policy was intended to prevent, and would be at war with the best established principles of the law of insurance.

If the title of the underwriters to the freight earned upon the outward voyage, is to be tested by the law of abandonment, it is clear beyond controversy, that they can establish no title to it, because an abandonment can only operate upon the property or thing saved, at the time the loss occurs, and not upon that which is safe, and no longer exposed to the perils insured against. In 1st Phillips, 356, it is said — “ In regard to freight, as far as the freight insured has been earned, and become absolutely due, the contract of insurance has been satisfied. If freights between different ports successively, and becoming absolutely due at the several ports of delivery, are insured in one policy, and after one or more of the freights is earned, a total loss upon this interest takes place, an abandonment can have relation only to the freight pending at the time of the loss. In respect to the freights previously earned, they have either been paid to the insured, or his claim for them has become absolute, and thus have ceased to be exposed to the perils insured against. In respect to such freights therefore, the insurers are discharged, since all that they agreed in the policy to he answerable for has been accomplished. An abandonment accordingly, has no operation upon freight earned.”

Several cases were referred to in the argument, for the purpose of aiding in the exposition of this policy, which we do not deem it necessary to examine further to illustrate this subject, because we think that the construction given the policy by the court below was correct, and that their judgment ought to be affirmed.

judgment affirmed.