Calmar Steamship Corp. v. Scott/Opinion of the Court

This is a suit in admiralty against British underwriters on a war-risk policy issued to cover the Calmar Corporation's S.S. Portmar for a voyage, in the winter of 1941-1942, from the United States to a port or ports in the Philippine Islands and return to an Atlantic or Pacific port in the United States. After the voyage had commenced Australia was duly substituted for the Philippine Islands as the outbound destination. The Portmar was under charter to the United States. This suit, based on damage inflicted by enemy aircraft, was tried together with a libel against the United States claiming recovery for the same damage as well as additional charter hire. See Calmar Steamship Co. v. U.S., 345 U.S. 446, 73 S.Ct. 733. The District Court held the underwriters liable for a constructive total loss of the vessel. Calmar Steamship Co. v. U.S., 103 F.Supp. 243. The Court of Appeals reversed. 2 Cir., 197 F.2d 795. We granted certiorari, 344 U.S. 853, 73 S.Ct. 92, because wide use, so the Court was advised, of the clauses of this policy makes their construction, a necessary issue here, a matter of more than individual concern.

Pursuant to the charter agreement between the Calmar Corporation and the United States, the Portmar left San Francisco for Manila on November 28, 1941. She carried high-octane gasoline, ammunition and other military supplies and equipment. She was some 600 miles southeast of the Hawaiian Islands on December 7, when Pearl Harbor was attacked. Her master at that time put her on a southerly course so as to avoid the combat area. On December 11, United States naval routing orders were received by radio on the Portmar. From that day until she was damaged and abandoned, a little over two months later, her every movement was in obedience to orders issued by competent United States and Australian authorities. The Portmar, which flew the American flag, was subject to these orders.

On December 30, the Portmar arrived at Sydney, Australia. Without being permitted to discharge cargo, she was dispatched up the coast to Brisbane. There her cargo was unloaded and sorted, part of it was put back on her, and she was sent almost half-way around the island to Port Darwin. She had been in Brisbane a week and had left on January 9, 1942. She was in Darwin on the 19th and lay at anchor till the 31st, waiting to dock and discharge cargo. This she then did, in part. Still carrying two thousand drums of her original load of gasoline, she left on February 4 for a relatively short trip across Joseph Bonaparte Gulf to Wyndham, where she arrived on the 8th. She returned empty to Darwin on the 12th. She then took aboard troops with equipment and armament and joined an exceedingly perilous expedition to Koepang, on the Island of Timor, some 500-odd miles northwest of Darwin. This expedition ran into heavy air attacks and turned back. On the 18th of February, the Portmar was at Darwin again, awaiting her turn to dock and discharge the personnel and equipment she had taken on. While thus at anchor on the morning of the 19th, she underwent bombing and strafing by Japanese airplanes and sustained the damage which forced her master to beach her and caused him to abandon her.

Article 2.17 of the charter agreement under which the Portmar sailed provided that her owners might obtain war-risk insurance, to be paid for by the United States. Before commencement of the voyage, Calmar took out the war-risk policy now in question on the hull and machinery of the Portmar, valued at $860,000. This policy insured 'only against the risks of war, strikes, riots and civil commotions.' It was assembled-that seems an appropriate word-by superimposing on the age-old Lloyd's form layer upon layer of warranties and riders. Warranties free the underwriters from obligations imposed by riders, and subsequent riders then reimpose obligations thus avoided.

'Touching the Adventures and Perils which we the Assurers are contented to bear and do take upon us in this Voyage,' the basic Lloyd's policy states, 'they are, of the Seas, Men-of-War * *  * Enemies *  *  * Takings at Sea, Arrests, Restraints and Detainments of all Kings, Princes and People *  *  * .' The policy is then 'warranted free from *  *  * capture, seizure, arrest, restraint or detainment, or the consequences thereof *  *  * or any taking of the Vessel, by requisition or otherwise *  *  * also from all consequences of hostilities or warlike operations *  *  * .' This warranty is known as the capture and seizure warranty. It is superseded by a war-risk rider, which provides:

'It is agreed that this insurance covers only those risks     which would be covered by the attached policy *  *  * in the      absence of the C. & S. warranty *  *  * but which are excluded      by that warranty.

'This insurance is also subject, however, to the following     warranties and additional clauses:-

'The Adventures and Perils Clause shall be construed as     including the risks of piracy, civil war, revolution,      rebellion or insurrection or civil strife arising therefrom,      floating and/or stationary mines and/or torpedoes whether      derelict or not and/or military or naval aircraft *  *  * and      warlike operations and the enforcement of sanctions by      members of the League of Nations *  *  * but excluding arrest *      *  * under customs or quarantine regulations, and similar      arrests, restraints or detainments not arising from actual or      impending hostilities or sanctions.'

A further warranty, known as the free of British capture warranty, carves a specific exception out of the war-risk rider. It holds the underwriters

'free of claims arising from Capture, Seizure, Arrest,     Restraint, Detainment, Requisition, Nationalization or      Condemnation by or under the authority of the government of      Great Britain or any of its dominions *  *  * or allies, or by      any forces acting in cooperation with or under the control of      them or any of them.'

But a saving clause, following immediately, provides that

'unless the insured Vessel is condemned this warranty shall     not exclude losses otherwise covered by this policy which are      caused by gunfire, torpedoes, bombs, mines or other      implements of war, or by stranding, sinking, burning or      collision, provided such losses would not be covered by a      marine insurance policy (in the form hereto attached)      warranted free of claims arising from Capture, Seizure or      Detention.' Construing such conglomerate provisions requires a skill not unlike that called for in the decipherment of obscure palimpsest texts. A judicial sigh recently uttered at the seat of Lloyd's evokes a sympathetic echo. 'Freight insurance entered into on the old form of marine insurance policy with deletions or additions to adapt the form to the intended contract (has) almost invariably given rise to difficulties, and the present case (is) no exception.' Mr. Justice Sellers in Atlantic Maritime Co. v. Gibbon, Law Report, March 16, 1953, The Times, March 17, p. 11. One envies not merely the perceptiveness of Lord Mansfield in matters of commercial law but his genial means of informing himself. We cannot resort to the elastic procedure by which Mansfield sought enlightenment at dinners with 'knowing and considerable merchants,' nor have we any Elder Brethren of Trinity House to help us. To be sure we have in this case the benefit of the views of the most experienced of admiralty judges. Considering the scanty contact this Court has these days with maritime law, we pay especial deference to the weighty judgment before us. But since it is before us, we cannot abdicate the duty to decide and must in the end exercise our own judgment however unsure it be.

Assuming that the policy was in force when the Portmar was attacked, there is no doubt whatever that the underwriters would be liable for the damage under the basic adventures and perils clause taken alone. Cf. Standard Oil Co. of New Jersey v. United States, 267 U.S. 76, 45 S.Ct. 211, 69 L.Ed. 519. The capture and seizure warranty, on the other hand, would, of course, hold the underwriters free. We understand the war-risk rider to provide as follows: Risks which are covered by the adventures and perils clause, but which are excluded by the capture and seizure warranty, and only such risks, remain covered. These risks include, in the language of the adventures and perils clause, 'Restraints and Detainments of all Kings, Princes and People,' or, in that of the capture and seizure warranty, 'restraint or detainment, or the consequences thereof * *  * or any taking of the Vessel, by requisition or otherwise.' The free of British capture warranty would, in turn, again very likely avoid liability in this case. But the war-risk rider makes the loss of the Portmar one which is 'otherwise covered by this policy' within the terms of the saving clause in the British capture warranty. The loss is 'otherwise covered by this policy' because it is insured against elsewhere within it, that is, in the war-risk rider. Since the Portmar had not been 'condemned' when she was damaged by 'implements of war,' the saving clause thus reinstates, in this case, coverage avoided by the free of British capture warranty, still assuming, of course, that the policy was in force at the time of the loss.

The underwriters contend that the phrase 'losses otherwise covered by this policy' in the saving clause refers to losses which the policy would cover if they were not the consequences of an Allied restraint or detainment. A loss such as that of the Portmar, they say, is not otherwise covered because it followed a deviation which, had it not occurred pursuant to naval orders, would not be excusable and would have terminated coverage. The phrase in its context precludes such sophistical reading. It is plainly intended, together with the proviso at the end restricting the clause to losses which the capture and seizure warranty would exclude and which the war-risk rider therefore takes in, to make certain and doubly certain that the coverage of the policy as a whole is in no event enlarged. Moreover, if the sense were given to the 'otherwise covered' phrase which the underwriters press upon us, the saving clause as a whole would be left quite devoid of any meaning. It would then uselessly preserve coverage only for losses which are securely covered anyway, despite the presence of the free of British capture warranty.

The underwriters resort to a second argument concerning the saving clause. They contend, not quite consistently with the earlier argument, that the clause was meant to save losses which occur while a vessel is under certain Allied restraints, limited in number, but not under others. The underwriters, upon the trial, offered to prove as much by an expert witness. No more need be said than that to vary the terms of the saving clause so as to make it mean what the expert in the District Court said it meant which on its face it cannot mean-would be to reform the contract, and that the requirements of the equitable doctrine of reformation are not met in this case.

We thus read the provisions of this policy as insuring against a loss such as that of the Portmar, though it be the consequence of seizure by a British ally. So, reasoning substantially along these lines, did the District Court, and it proceeded to hold the underwriters liable. The Court of Appeals assumed that the 'labyrinth of verbiage, within which lurks whatever contract was made, is to be understood to agree that, although the ship might at the time be under the 'restraint of princes,' the policy should cover her loss * *  * .' But it held that 'the policy was no longer in force when the loss occurred, the insured voyage having before then come to an end and the policy with it.' 197 F.2d at page 796. The voyage had ended, the court said, because the dominion exercised over the Portmar by Allied authorities was complete, and was very probably intended to continue indefinitely. The policy, in turn, was no longer in force because it was written for a voyage and could not outlast it, any more than a voyage charter would. Precisely as frustration of the voyage would end the latter, so it releases an underwriter from further liability.

The facts from which the Court of Appeals deduced that the detainment of the Portmar was to be prolonged indefinitely are these. When the Portmar reached Sydney, the Japanese had a working naval command of the Pacific, and Australia was threatened with invasion. The need for shipping was dire, as the use made of the Portmar herself shows. Indeed, after she was damaged and beached, military authorities salved her and patched her up hastily. The United States eventually requisitioned title to her, and she was used till finally destroyed. An American colonel in charge of transportation in Australia when the Portmar was there testified at the trial to the serious shortage of shipping, which, he said, continued throughout the year 1942. But as late as January 19, when the Portmar was in Darwin, the owners learned from an agent of the United States Maritime Commission that she would load chrome ore late in February and could be expected in Philadelphia in April. Australia was not, of course, the only place where there was a dearth of shipping at the time, and there is nothing in the record to show that a colonel on the spot had the last word as to the future use of an oceangoing vessel; if there were, it would strain credulity. Two further points are to be noted. First, when the Army salved and used the Portmar after she was damaged, she was no longer in any condition to make ocean voyages, and could not readily be returned to such a condition. And it was at that time that the United States formally requisitioned her-at that time for the first time. Second, there was testimony indicating that other vessels detained in Australia early in 1942 were held through the year. But there is no testimony that any vessel similar to the Portmar were so held. The witness-the Army colonel in charge-spoke of '(s)ome 21 small Dutch vessels.'

In point of time, the Court of Appeals fixed frustration of the voyage as having taken place at Brisbane, during the period of January 5 to 9, 1942. And so the underwriters contend here. Part of the Portmar's cargo, which was unloaded at Brisbane for sorting, was, as we have seen, put back on her there, and she was sent with it to Darwin. It can hardly be maintained that the vessel's trips along the Australian coast after Brisbane, while she was still carrying parts of her original cargo, or the trip from Sydney to Brisbane, constituted a departure from her voyage, whether or not excusable. For the voyage specified in the Portmar's insurance policy was not to a single port as the outbound destination, but to a 'port or ports' and back, 'via port or ports in any order.' That being so, we cannot find that the voyage ended at Brisbane on the theory that it was there that dominion over the Portmar by requisitioning authorities became complete and hence there that the intention to cause her to abandon her voyage was formed or manifested. It is not maintained, nor could it be, that an explicit decision, objectively provable, not to allow the Portmar to continue on her voyage was ever reached by the authorities, and there is no showing whatever that her owners or charterer had any intention of discontinuing the voyage. On the evidence, this is not a case in which a change of voyage, releasing the underwriters, can be shown before the vessel is overtly employed in a manner inconsistent with the purpose or route of the original voyage. Compare Thellusson v. Ferguson, 1 Doug. 360, with Tasker v. Cunninghame, 1 Bligh 87, and Woolridge v. Boydell, 1 Doug. 16; see 1 Arnould, Marine Insurance (13th ed., by Lord Chorley 1950) §§ 381, 385. Consequently, dominion or no, the Portmar was covered by her insurance at Brisbane and later, till she started on the Koepang expedition, or just before, as she is conceded to have been covered before Brisbane, while under equally complete dominion of naval authorities. Cf. Rickards v. Forrestal Land, Timber and Railways Co. (1942) A.C. 50, 80.

The Koepang expedition was undoubtedly a venture inconsistent with the voyage specified in the Portmar's insurance. We are prepared to assume, though of course we do not decide, that the Koepang trip would have terminated, on grounds of abandonment of voyage, the coverage of a policy warranted free of war risks or of one warranted completely free of British capture, and that, under such a policy, had the Portmar subsequently sustained damage not attributable to war causes, cf., e.g., Standard Oil Co. of New Jersey v. United States, 340 U.S. 54, 71 S.Ct. 135, 95 L.Ed. 68, there would have been no recovery. We assume that in those circumstances the Court of Appeals could have inferred as it did, on the basis of the Koepang venture and of the military situation, that the Portmar was to be retained indefinitely under requisition, and that her voyage was therefore over. But the point of this policy is that here the underwriters, by virtue of the saving clause, did insure against risks of British requisition. They insured, in other words, against consequences of a forced interruption of the voyage, which must necessarily throw into doubt the chances of completing the voyage as planned. Circumstances which may make out a change of voyage and cause termination of coverage under a policy warranted free of risks arising from seizure need not do so under one of insurance against such risks. In one as in the other, if they are both written for a voyage, there is an implied warranty that no different voyage will be undertaken. But it is a warranty which must be construed in light of the express provisions of the policy, and which may mean different things in different policies.

If, in the circumstances of this case, an owner who bought insurance against damage resulting from Allied requisition and one who bought a policy excluding such losses entirely stand on no different footing in respect of a sovereign's intention to retain their vessels indefinitely, they hardly stand on a different footing in any substantial respect. And the one received very little, if anything, more than the other. For inferences of permanence, as strong as those in this case, will surely be permissible from most every requisition by a friendly sovereign for military uses. It is hard to imagine a military situation serious enough to lead a commander in the field to take it upon himself to requisition a friendly vessel, which is not sufficiently serious to make that requisition of presumptively indefinite, or at least uncertain, duration in his mind. Thus the difference between a policy containing a free of British capture warranty with a saving clause, such as we have in this case, and one without a like saving clause narrows down, under the holding of the Court of Appeals, to this: On the first policy, underwriters may be held liable for losses attributable to a small class of Allied restraints which are by their nature limited in duration, the most common example being detainment for inspection. On the second policy, underwriters may not be so held. This, of course is exactly the result which would flow from the construction placed on the saving clause by the underwriters' expert witness, a construction contrary to that assumed by the Court of Appeals to be the correct one. As to other restraints, the Court of Appeals would normally allow no recourse against the underwriters to either owner, the one who bought the first type of policy or the one who bought the second; to one on one theory, to the other on another; to one because he expressly agreed himself to bear all risks arising from Allied restraints, to the other despite the fact that he paid for insurance against such risks and could have had every expectation, on the face of the policy written for him, that he had effectively obtained it. Thus a significant part of the coverage of war risk insurance, which is purchased separately, over and above ordinary insurance, and at great expense, would be rendered nugatory.

The provisions of the policy contain no time limitations on the detainments against which they insure. The District Court consequently, although recognizing that '(i)ndeed, that is broad coverage!', felt constrained to hold that coverage would extend throughout the period of a detainment, no matter what its nature, and past the time when the voyage insured for had definitely been frustrated. The court thus, in effect, read the implied warranty concerning changes of voyage as referring, in this policy, to voluntary changes of voyage only. Rickards v. Forrestal Land, Timber and Railways Co., (1942) A.C. 50, may support the position of the District Court. It is persuasive authority, since '(t)here are special reasons for keeping in harmony with the marine insurance laws of England, the great field of this business * *  * .' Queen Ins. Co. v. Globe & Rutgers Fire Ins. Co., 263 U.S. 487, 493, 44 S.Ct. 175, 176, 68 L.Ed. 402. But we are not required to accept the broad ground on which the District Court rested. It is not contended here that anything done by any officer or official on the scene or elsewhere before the Portmar was damaged made it explicit-and now objectively provable-that she would be detained indefinitely or even for such a period of time as might be thought to postpone her return voyage unreasonably. Such an explicit decision might at least more likely have come to the prompt attention of the owners, whereas in its absence, as here, no owner, whether on the scene or not, could so much as make an informed guess concerning the fate of the voyage. We do not decide that case, but we do hold that if a policy such as this is to provide any appreciable and safely predictable protection over and above that of a policy which does not insure at all against consequences of Allied detainments, coverage cannot be said to have ended before an unambiguous, objectively provable decision has been made by the requisitioning sovereign to cause abandonment of the voyage.

A number of subsidiary questions in the case were all decided in favor of the owners by the District Court. The most important is raised by the contention that the vessel was never a constructive total loss and was not validly abandoned as such. The Court of Appeals, in view of its disposition of the case, found it unnecessary to consider any of these questions. They are not related to the major issue in the case, and so we remit them to the Court of Appeals.

The judgment of the Court of Appeals must be vacated and the cause remanded to that court for proceedings not inconsistent with this opinion.

It is so ordered.

Judgment of Court of Appeals vacated and cause remanded with directions.

Mr. Justice MINTON dissents for the reasons stated in the opinion of Circuit Judge Learned Hand, 197 F.2d 795.

Mr. Justice DOUGLAS, with whom The CHIEF JUSTICE concurs, dissenting.