Peters v. Warren Insurance Company

ON a certificate of division from the Circuit Court of the United States, for the District of Massachusetts.

This was a case on a policy of insurance, dated the 1st of April, 1836, whereby the defendants insured the plaintiffs, for whom it may concern, payable to them, eight thousand dollars on the ship Paragon, for the term of one year, commencing the risk on the 15th day of March, 1836, at noon, at a premium of five per cent. The declaration alleged a loss by collision with another vessel, without any fault of the master or crew of the Paragon; and also insisted on a general average and contribution.

The parties agreed that the verdict should be rendered by the jury for the plaintiff or for the defendants, according to the opinion of the Court, upon the matters of law arising upon the following statement of the facts of the case. The plaintiffs are the owners of the ship Paragon, insured by the defendants in part.

On the 10th of November, 1836, the vessel sailed from Hamburgh, in ballast, for Gottenburgh, to procure a cargo of iron, for the United States.

Whilst proceeding down the Elbe, with a pilot on board, she came in contact with a galliot called Frau Anna, and sunk her. The Paragon lost her bowsprit, jib-boom, and anchor, and sustained other damages, which obliged her to go into Cuxhaven, a port at the mouth of the Elbe, and subject to the jurisdiction of Hamburgh, for repairs.

Whilst lying there, the captain of the galliot libelled the Paragon in the Marine Court, alleging that the loss of the vessel was caused by the carelessness or fault of those on board the Paragon. The ship was arrested; but subsequently released on security being given by the agents of the owners, to respond to such damages as should be awarded by the Court.

The captain of the Paragon, in his answer, denied the charges of carelessness or fault on the part of those on board of his ship; and the Court, after hearing the parties and their proof, decided that the collision was not the result of fault or carelessness on either side; and that therefore, according to article first, title eighth, of the Marine Law of Hamburgh, the loss was a general average loss, and to be borne equally by each party: that is, the Paragon was to bear one-half of the expense of her own repairs, and to pay one-half of the value of the galliot; and the galliot was to bear the loss of one-half of her own value, and to pay one-half of the expense of the repairs of the Paragon. In conformity with this decision, a general average statement was drawn up by Mr. Oldermann, the Despacheur of Hamburgh; an officer appointed by law, and by whom alone such statements can be prepared.

In this statement are charged, first, the expenses of repairing the Paragon, after making the deduction of one-third new for old, saving one of her anchors and chains, which was lost at the time of the collision; wages and provisions of the captain and the crew, during the detention, and the expenses of surveys, protest, defending the suit, &c., amounting in all to about eight hundred dollars, and one-half of which is charged to the Paragon, and one-half to the galliot.

Secondly, are charged the value of the galliot, as by appraisal under an order of Court, of her freight and cargo, the expenses of surveys, protest, prosecuting the suit, &c., amounting in all to about six thousand dollars, one-half of which is to be charged to the Paragon.

The statement concludes thus: 'Which according to the before mentioned ordinance relating to insurance and average, is to be borne by ship, cargo, and freight, as general average. The ship Paragon has to claim from the Frau Anna, for half the damages, say $400

And the Frau Anna from the Paragon, one-half the damages, say $3,000

So that the Paragon must pay $2,600'

Which amount the Tribunal of Commerce decreed should be paid instanter.

The owners of the Paragon, having no funds in Hamburgh, the Captain was obliged to raise the money on bottomry.

There being no cargo on board of the Paragon, and no freight earned, the ship has to bear the whole of the general average loss.

The judges of the Circuit Court were opposed in opinion on the following point and question, viz. 'whether, in this case, the contributory amount paid by the Paragon on account of the collision, was a direct, positive, and proximate effect from the accident, in such sense as to render the defendants liable therefor upon this policy.'

And on the point and question aforesaid, at the request of the defendants, the same was stated by the said judges, and under their direction as aforesaid, it was ordered to be certified under the seal of the said Circuit Court to the Supreme Court of the United States, at their next session, to be by the said Court finally decided.

The case was submitted to the Court on printed arguments by Mr. Webster for the plaintiff; and Mr. Theophilus Parsons for the defendants.

Mr. Parsons for the defendants.

The principal question in this case is, whether the amount paid on account of the collision between the vessels, is a direct, positive, and proximate effect from the accident.

We do not undertake to say that there are no contracts in which the remota causa spectatur, but certainly the law of insurance looks only at the proximate cause. Is the collision, then, in this case, a remote, or a proximate cause? If the law of Hamburgh is the proximate cause, and the collision the remote cause, then we are clearly discharged; because we do not insure against the law of Hamburgh, nor against any remote cause. But we do insure against collision, and the question, therefore, now takes this shape: is the law of Hamburgh, with its requirement of contribution, to be taken as a part of the act of collision?If these questions are to be settled rather by the common sense than by the metaphysics of the law, then it would seem to be clear, that the collision here is the remote cause; for another cause, to wit, the law of Hamburgh, comes between the collision and the contribution; and not only so, but it is this law which actually causes the contribution. The collision, then, is not the proximate cause, for that is proximate which lies nearest; and here another cause is interposed, and thus lies nearer.

How are the authorities? In this country it is a new question, and there are no cases which bear very strongly upon it. But in England, just this question occurred very recently, and was fully reported in the fourth volume of Adolphus and Ellis, p. 420, De Vaux vs. Salvador. This case, interesting both from its novelty and its importance, was fully considered, first, by Lord Denman, and then by the Court of Queen's Bench, on a motion for a new trial; and the decision was fully and pointedly for the defence, on precisely the grounds we have taken here. Nothing can be more exact than the analogy between that case and this; nothing more precise and definite; and as we think, nothing can be more reasonable, than the principles upon which this case is decided in England. Will this Court decide precisely the same case, on precisely opposite grounds? Some of the continental authorities may seem to be against us. But, not to dwell on the circumstance, that their whole 'doctrine of contract' rests upon the civil law, and that the difference, in this respect, between their law and ours, greatly weakens their authority, as precedents for us; not to dwell on this; it is very important to remember, that they, as Emerigon and the rest, decide that insurers shall repay the contribution; but they decide under the influence of the law which requires the contribution. That is, on the continent, generally perhaps, a rule like that of Hamburgh, dividing the loss from collision, between two innocent vessels, prevails. To the continental writers it is familiar; they are accustomed to the law, and to all the usages going with the law, which law is perfectly well known there by everybody; and it is very natural that they should hold insurers liable for the contribution, as if it were a component part of the collision: very natural, and perhaps, very right. Not so with the English Courts, or our own: for here the law so dividing this loss, is unknown; we have none here, and our citizens make their bargains under no such contemplation; and therefore, the Courts of England decide rightly there, and our Courts should decide like those of England, and unlike the continental writers, because our laws and usages are like those of England, in respect to the liabilities of vessels in cases of collision, and unlike those of the continent. And our laws in respect to the liabilities of the vessels being alike, so should our laws be in respect to the obligations and implied contracts of insurers, in regard to that contract. We insured against damage to the Paragon; but we did not insure against damage to any other vessel.

But there is another view of this subject, which seems to us perfectly decisive. The continental authorities not only decide under the influence of their laws, but their policies differ from ours in this precise particular. They all contain, in the enumeration of the risks, 'accidental running foul.' A French policy is in this form, and the Court are respectfully referred to it. In this policy, the phrase is, 'abordage fortuit;' and phrases of similar import are in the policies of Amsterdam and Hamburgh; which are all the continental policies we have seen.

From this it will be obvious, that the only authority where policies like our own were before the Court-that is, the high authority of the English Courts-is directly and most explicitly adverse to the claim of the plaintiffs. While the continental authorities, when they seem to favour it, are adjudicating upon policies which differ from ours in this precise respect, they refer to policies which, unlike ours, provide expressly for this very case. It would seem, therefore, that the force of these continental authorities is at once annihilated.

The rule, causa proxima non remota spectatur, is stronger in England than on the continent; stronger here than in England: the Supreme Court at Washington having settled it repeatedly and firmly. See Petapsco Insurance Company vs. Coulter, 3 Peters, 222. Also, Columbian Insurance Company vs. Lawrence, 10 Peters, 507. Also, Waters vs. Merchants' Louisville Insurance Company, 11 Peters, 213.

But let us look at these foreign authorities more closely.

The ordinances which make the insurers liable are the same which require equal contribution in the case of collision without fault. And this may be right. Thus, in the Modern Code of Commerce, in France, article 50 touches the insurer; article 407 regulates the effects of collision. This is right. The liability of the insurer should be conterminous with the liability of an innocent vessel. Where an innocent vessel is held by law liable for half the injury of collision, there the insurer should be held to make it good. But nowhere else. It seems, however, that a very serious question exists in France, as to the liability of insurers to pay for damages, where the collision arises from a fault which cannot be clearly put upon either party: and this doubt has arisen from the fact that the Code does not speak precisely upon this point, but expressly makes the insurers liable only where the collision is wholly fortuitous or without any fault. This doubt, or difference of opinion, goes strongly to show that the opinion of the continental writers is based upon, and most closely connected with their own ordinances; and thus it takes greatly, if not entirely, away the force of their authority over contracts made in countries where no such law is known; and it leaves in full power the distinct English authority, which is made under laws and usages, and upon policies that are like our own.

If this case is to be likened to other cases of injury from supposed causes, we should suppose any such analogy favourable to us. Thus, it is perfectly well known, that at Buenos Ayres, and in the East, at Sumatra, and in a Chinese port, it has actually happened, and more than once, and the newspapers of the land were full of the story, that for a collision of some mischief done or supposed to be done, by officers or crew, the ship has been seized, and only restored on payment of a heavy ransom; but nobody ever heard of a call on an insurance company for any such loss. Can the case be supposed to resemble rather a case of salvage? It is true, that the loss by salvage, or by costs of Court, is always cast upon underwriters; though there the peril of the sea may be thought, in some sense, the remote cause, and the law the proximate cause. But there is a very great difference between these cases, and one that wholly destroys the analogy. The costs of Court, and the payment of salvage, belong to the universal law of insurance. Every man who insures or is insured anywhere, does so under the law of salvage; and his contract, therefore, acknowledges and respects this law. But it is just otherwise in the present case.

There is another material difference. In the present case, the contribution is in the nature of penalty, or at least, a satisfaction and compensation made by this vessel to the other. Not so with salvage. That proceeds wholly upon the theory, that it is for the benefit of the wrecked or endangered vessel, and therefore, for the insurers upon the vessel: and this principle is repeated in almost every case of salvage, as the reason why more is given to the salvors then mere wages, or compensation for time and labour. And these remarks lead us to the more general view of the case, and to what, we cannot but think, ought to be the governing and determining principle of it, namely, that where an accident occurs which is clearly insured against-a collision for instance-then all those consequences thereof are to be taken as parts of the same thing and as belonging to the collision, which flow from it by as natural and obvious, or inevitable consequences, or which are caused by a universal or general law, to which all parties to the insurance are supposed to refer equally in their contract. And all other consequences of the collision, except such as these, are to be considered as not necessary and component parts of the accident, but as connected with it by some local law, or some peculiar circumstance; and are, therefore, not to be considered as insured against by parties, who could not be supposed to have contemplated or anticipated them. This last point seems to us to contain the whole gist of the matter; nor can we perceive how the Court can admit the plaintiff's claim, without distinctly contravening their own uniform and well-established decisions.

It may be proper to advert briefly to one other point. It may be suggested that the defendants are bound by the settlement in Hamburgh, as by a foreign adjustment of general average. But the distinction upon that point is perfectly clear and well settled. It is this: No foreign adjustment can determine for us, what is a general average; but it may settle, definitively as between all the parties, that general average which is one by our own law, and has certainly happened. In other words, we can always go behind a foreign adjustment of general average, and deny that the facts happened, or that, if they happened, they constituted a general average; but if facts certainly occurred, which by our own law of insurance constitute a general average, then the adjustment in the foreign port is binding upon all the interests. But it is perfectly clear that this is not the present case, and that by our law of insurance, the facts in the present case would not constitute a general average.

Mr. Webster, in reply to the argument for the defendants, submitted to the Court, that it appeared to him that the first positions maintained by the counsel for the insurance company were questionable, to the extent claimed by him. He says, that however it may be in regard to some other contracts, the law of insurance looks only at the proximate cause of loss. That this is generally true, may be admitted; but it is not universally true.

If the proposition were universal, it would certainly exclude salvage. Mr. Parson's answer to this, is, that the payment of salvage is a loss, by the universal law of insurance. This is so: and this proves, not that no case of loss by a remote cause is within the law of insurance, but, on the contrary, that one such case, at least, is within that law by universal consent. The same may be said of costs incurred in the course of judicial proceedings, and of payments on account of general average.

Mr. Parsons admits that collision is insured against, and that all consequences may be regarded as belonging to it which flow naturally from it, or which are caused by a general law, to which all parties may be supposed to have referred. But how can he distinguish, or what reason is given for a distinction, between consequences which immediately arise from natural causes, and those which arise as immediately from the operation of the laws of the place? A ship suffers collision; the immediate natural effect is injury to her frame. The necessity of an expenditure for repairs is immediately inflicted upon her; and for this expenditure, the underwriter is liable. Another ship suffers a collision, and does injury to the vessel in which she has come in contact, without fault. The immediate consequence, by the law of the place, is a charge on the ship, creating a lien, for a contribution to the loss; and this charge causes the necessity of an expenditure. It is not easy to perceive a reason why one of these cases should be within the policy, and the other not within it. The loss, in the latter case, is a consequence of the accident, as necessary, as certain, and as unavoidable as that in the first. The charge becomes attached to the ship; is an encumbrance, hindering her from the prosecution of her voyage; keeping her where she is, and removable only by an expenditure. It is an obvious consequence of the accident; and, in the language of Mr. Parsons, an 'inevitable' consequence. The party entitled to the contribution is as sure to claim it, as the carpenter who makes repairs is to demand payment. The expenditure is an inevitable in one case as in the other.

Mr. Parsons supposes that the continental authorities are the less to be regarded, as the policies in those countries are different. Thus, he says, that 'accidentally running foul' is one of the specifically enumerated causes of loss in a French policy. Be it so. But that fact does not help to settle the question, what loss is to be regarded as the proper consequence of running foul. 'Running foul,' or collision, it will not be denied, is as completely within this policy, as within a French policy; and the form or particular words of the policy, in either case, do not affect or touch the question now in controversy. How can it be said that the French policies provide for this very case? Do they expressly provide for the case of contribution for collision? They certainly do not. They only mention collision, leaving the law to settle what losses arise from it, and how these losses are to be settled. 'This very case,' in the language of my learned brother, is not a case in which any question is made, whether a loss by collision is within a policy, American, English, or French. It is admited to be within them all. The question, and the only question, in this case, is, whether the loss which has actually happened, is or is not a loss by collision. And how, then, is the force of those continental authorities, which declare that losses like this are losses by collision, annihilated? The slightest reason is not seen to suppose that the decisions of the continental writers have been founded, either on the forms of the policies in use on the continent, or on any ordinances. The law of the place imposes contribution in cases of collision. The continental writers are authorities to show that it follows, not from and ordinance or from any particular words in continental policies, but from the general law of insurance, and the reason of the thing, that the discharge of this contribution is a loss, occasioned by collision.

Many cases might be put to establish the construction for which we contend.

The case of capture is one. If a neutral ship, insured against capture, be actually captured, carried in, and released, on payment of costs and expenses to the captors, (a very common case,) these costs and expenses are always held to be within the policy.

Suppose, again, that perishable articles, like provisions, are slightly injured by a storm, less than to the extent of five per cent., but that, before the vessel reaches her port, the effect of time, acting on the goods thus slightly injured, is such as to destroy all their value. Is there any doubt that, in such a case, the whole loss is to be referred to the storm, and so brought within the policy?

And, in regard to the converse of the case now before the Court, allow the inquiry, what would have been thought of the rights of the parties, if the galliot herself had not been injured, but had injured the Paragon to the extent of a thousand dollars: and suppose the owners of the galliot paid one-half of this sum to the matter of the paragon; could the plaintiffs in this suit have recovered more than the balance? Could they pocket what they had received from the galliot, and recover the whole amount of the injury from the defendants?

With a general remark, these observations are closed.

This vessel was insured on time. The commerce of the world was open to her. She was to choose her own track, from nation to nation, or from zone to zone. She was expected, therefore, to fall under the dominion of various codes, and different laws; and to conform, as of necessity she must, to them all, as she should come within the sphere of their respective influences. She must encounter the dangers which belong to the place where she is, or where she goes; and while acting fairly, and in good faith, ought to be protected, as within the policy.

Mr. Justice STORY delivered the opinion of the Court.