Patapsco Insurance Company v. Coulter

ERROR to the circuit court of the district of Maryland.

This action was instituted in the circuit court on a policy of insurance, executed by the plaintiffs in error, on profits upon goods on board the ship Nancy, 'at and from Philadelphia to Gibraltar and a port in the Mediterranean, not higher up than Marseilles, and at and from thence to Sonsonate, in the province of Guatemala, Pacific ocean, with the liberty of Guayaquil: beginning the adventure upon the said goods, from the loading thereof on board the said vessel at Philadelphia, and continuing the same until the said goods shall be safely landed at the ports aforesaid.'

The insurance was in the amount of five thousand dollars, with this clause: 'this insurance is declared to be on profits, warranted to be American property, to be proved at Philadelphia only, valued at twenty thousand dollars.'

The vessel, with a cargo of flour, proceeded from Philadelphia to Gibraltar, at which place the cargo was destined to be sold, and the proceeds to be invested at Marseilles in the purchase of various specified dry goods. These dry goods were to be sent by the vessel from Marseilles to Sonsonate or Guayaquil. While the vessel lay at Gibraltar, before the discharge of her cargo, she and her cargo were totally lost by fire. Evidence was taken at Philadelphia, as to the circumstances of the destruction of the property, and one witness (Mr Fulford) was examined in addition as to those circumstances at the trial. The testimony of this witness went to show that with proper diligence on the part of the captain and crew, the fire might have been extinguished and the vessel and cargo saved; and the evidence obtained at Philadelphia was not inconsistent with that conclusion. It appeared from Mr Fulford's testimony, that, soon after the fire commenced, the captain called upon the crew to leave the ship, exclaiming that there was gunpowder aboard, and that the vessel would be blown up; and the captain and crew did then leave the vessel. It was in evidence that there was a small quantity of gunpowder on board, but that that ought not to have deterred exertions to save the property; an officer and a number of men from two British frigates having in fact, a considerable time after the vessel was deserted by her captain and crew, boarded her and used all efforts to put out the flames, but unsuccessfully, in consequence of their reaching the scene so late. There was evidence to infer that the fire originated from the carelessness of the captain with a candle used by him for sealing letters, or from negligence of the crew.

Evidence was had at Philadelphia, of Mr Clark, concerning the markets at Sonsonate and Guayaquil, for the specified articles at Marseilles. His testimony tended to show that these articles would have been sold with profit at Guayaquil, at the time the vessel might have reached there. It was proved, that at Gibraltar the flour would have sold without loss, but without profit.

The defendants prayed the court to direct the jury,

1. That if they should believe from the evidence, that the fire, which occasioned the destruction of the ship and her cargo, proceeded from the carelessness or negligence of the captain of the ship, or any of her crew, the plaintiff was not entitled to recover.

2. That if they should believe that the fire which occasioned the ship's destruction originated from accident, and without any want of due care and attention on the part of the captain or crew, and if they should further find that the captain and crew, after the discovery of the fire, might, by reasonable and proper exertions, have prevented the spreading of the same, and have preserved the said vessel and cargo from destruction, and that they omitted to use said exertions, then the plaintiff was not entitled to recover.

3. That the plaintiffs had offered no evidence that the sales of the flour at Gibraltar would have yielded the plaintiff a profit, and that therefore they were not entitled to recover.

These prayers the court refused; but as to the second of them directed the jury as follows: 'that the plaintiff is entitled to recover, unless they should be of opinion, from the evidence in the cause, that after the vessel was discovered to be on fire, the master and crew might have extinguished the same, and preserved the vessel and cargo. The master was bound to extinguish the fire, if practicable. If he stood aloof, without making any exertion to extinguish the fire, and suffered the vessel to be destroyed, it would have afforded evidence of such gross negligence as to amount to barratry.'

To the refusal of the prayers, and opinion and direction of the court, the defendants, now plaintiffs in error, excepted.

Mr Mayer, for the plaintiffs in error, contended.

1. That they are not answerable, under the policy, for any loss by fire, if occasioned by the negligence of the captain and crew of the Nancy; that the risk of fire bears on the insurers as other risks in the policy; that the assured being bound to the exercise of reasonable skill and care in his agents to guard the property insured against the perils stated in the policy, under the implied warranty of seaworthiness, the underwriters ought not to suffer loss from a fire which the captain or crew might with ordinary care have prevented taking place.

2. That if it was the duty of the captain and crew to prevent the fire, it was equally their duty to extinguish it; and the consequences of their negligence in this particular ought not to fall upon the insurers; and that even the gross negligence of the captain and crew, in regard to a duty of this kind, is a mere nonfeazance, and is not to be considered barratry; that the remissness of the captain, in this case particularly, is not so to be considered, because, however weak his conduct may have been, he was acted upon by inordinate fears only, and by no motives of interest or any views of unauthorised discretion or wilful delinquency.

3. That the profits here insured were incident to the cargo shipped at Philadelphia, and not to any property that might be substituted for it, though acquired with the proceeds of the original cargo; that the contemplated adventure from Marseilles to Guatimala was therefore foreign to the insurance. That even in a valued policy on profits, evidence must be given of some profit likely to result, and that without such evidence the insurance has no subject to operate upon; that the flour being destined to be sold at Gibraltar, and not affording there a profit, as was proved, there is in effect no insurable interest whatsoever shown in the defendant Coulter; and that he cannot, therefore, recover under a valued policy on profits.

Underwriters are not liable for any loss arising from gross negligence or want of skill of the captain and crew. The object of insurance is to guard against extraordinary perils. They necessarily beset every mercantile adventurer, and there must be skill and diligence to meet them. It is a part of the business of the voyage that those who are on board of the vessel shall be on the alert, and if they are not, the underwriters are exonerated. Marsh. on Ins. 156, 487, 690. 5 Mass. 1. 8 Mass. 321, 436. 13 Johns. 180, 187. Phillips on Ins. 225. If the first cause of the accident which produces the destruction of the vessel was not within the policy, its consequences do not attach to the policy. There is nothing in the terms of the policy against fire which exempts them from the operation of these principles.

If the captain and crew omitted reasonable exertions to extinguish a fire which had occurred from accident, the insurers are not liable; gross negligence in both is not barratry; and if they stood aloof without making proper and sufficient efforts to prevent the ravages of the fire, the court should have left these facts to the jury, from which they could have inferred for the assurers. Abbot on Ship. 128, note. 8 Cranch, 49. 5 Mass. 1. 8 Mass. 531. Marsh. on Ins. 515. Phill. on Ins. 230. 8 East, 133.

The cargo would have produced no profit, and the plaintiff offered no proof that profits would have been obtained on the cargo sent from Philadelphia; and the insurance attached only to the cargo shipped there. Some profits must be proved before the underwriters are answerable, as this cannot be left to inference. 6 East, 315. 12 East, 124. 16 East, 218. The policy is a contract of indemnity for actual injury or loss; and the principles of the law of insurance are against wagering policies. 2 Mass. 1. 12 Wheat. 288. Phill. 69. It is admitted that a party may cover a series of adventures, and expected profits on them; but if he has omitted to do this in explicit terms, he must sustain the loss himself. The terms of this policy are not broad enough to cover all the profits anticipated, and which are claimed from the underwriters, the plaintiffs in error. Marsh. on Ins. 323. Phill. 166. 2 Mass. 409. 4 Camp. 294. 12 East, 283. 1 Taunt. 463. 12 Wheat. 283. 6 Mass. 197. 2 Mass. 420.

Mr Wirt, for the defendant in error, argued, that the facts of the case made out a loss by accident or misfortune, and of innocence on the part of the master; and that from the situation of the vessel, part of the crew being absent, and the fact of there being powder under the cabin floor when the fire broke out, no other efforts than those which were made to save her would have been prudent or proper; all the skill that could be expected was employed. According to the established principles of the law of insurance, there must be ignorance so gross as to amount to unseaworthiness to excuse the insurer, but not otherwise.

It would be the introduction of a new principle in the law of insurance, if the want of more than common care and usual skill would discharge the underwriters. Every loss would be traced to such a proximate cause. A ship is left in a storm; would proof that setting another sail would have placed her beyond the peril excuse the underwriters? The seaman at the mast head, whose duty it is to look out for land, as a coast is approached falls asleep, and the vessel is lost; this, under the principle claimed, would release the assurers. The underwriters will undertake to inquire whether the captain and crew should have resisted longer, before they submitted in battle. Human infirmities are at the risk of the insurers, as well as the perils of navigation.

The cases decided in England repudiate the doctrine asserted by the plaintiff in error, and for the reasons and on the principles now submitted to the court. 2 Barn. & Ald. 72. 5 Barn. & Ald. 171. 7 Barn. & Cress. 217. 14 Com. Law Rep. 33. 7 Barn. & Cress. 794. 14 Com. Law Rep. 129.

Gross negligence is, upon adjudged cases, barratry; and thus, if such should have occurred in this case, the underwriters would be liable. 2 Camp. 149. 8 East, 126. 11 Petersdorf, 268. 2 Phill. on Ins. 237. 2 Camp. 620. 1 Taunt. 227. 2 New Rep. 336. 4 Taunt. 226. Peake, 212. 1 Camp. 123.

The policy attached to the whole voyage, and was intended to cover the profits upon it. The interruption or breaking up of the voyage, preventing the earning of those profits; and in whatever part of it the occurrence took place, entitled the assured to recover the amount of the policy. An insurance on profits has been settled to be legal and proper. In the American courts it is not necessary to prove what the profits would have been, but in England the rule is otherwise.

Courts construe the policy liberally, to include all the objects and intentions of the parties, according to the nature of the voyage. In this case, the subject of insurance was the profits on the whole voyage, and the cargo which was taken on board at Philadelphia was to furnish the means of proceeding with the adventure. By its loss, the whole of the profits were lost. Catlett vs. The Columbian Insurance Company, 12 Wheat. 383. Phill. on Ins. 319, 29, 70, 46. 47.

Mr Justice JOHNSON delivered the opinion of the Court: