Peters v. Warren Insurance Company/Opinion of the Court

This is the case of a division of opinion, certified to this Court by the judges of the Circuit Court for the District of Massachusetts.

The defendant, by a policy of insurance, dated the 1st of April, 1836, 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 13th of March, 1836, at noon, at five per cent. The policy contained the usual risks, and among others, that of perils of the sea. 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 at the trial agreed upon a statement of facts; by which it appeared that the Paragon was owned by the plaintiffs, and was in part insured by the defendants, by the policy above mentioned. On the 10th of November, 1836, the Paragon sailed from Hamburgh, in ballast, for Gottenburgh, to procure a cargo of iron for the United States. While proceeding down the Elbe, with a pilot on board, she came in contact with a galliot, called the Frau Anna, and sunk her. By this accident, the Paragon lost her bowsprit, jib-boom, and anchor, and sustained other damage, which obliged her to put 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 of the Paragon. The ship was arrested; but was subsequently released on security being given by the agents of the owners, to respond to such damages as should be awarded by the Court. Upon the hearing of the cause, the Court decided that the collision was not the result of fault or carelessness on either side, and that therefore, according to the marine law of Hamburgh, the loss was a general average loss, and to be borne equally by each party: that is to say, that 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 that the galliot was to bear the loss of one-half of her own value, and to pay one-half of the repairs of the Paragon: the result of which was, that the Paragon was to pay the sum of two thousand six hundred dollars, being one-half of the value of the galliot, (three thousand dollars,) after deducting one-half of her own repairs, (four hundred dollars.) 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 Paragon was obliged to bear the whole loss.

Upon this state of facts the question arose, 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 question the judges were opposed in opinion; and it has accordingly been certified to this Court for a final decision.

That a loss by collision, without any fault on either side, is a loss by the perils of the sea, within the protection of the policy of insurance, is not doubted. So far as the injury and repairs done to the Paragon itself extend, it is admitted that the underwriters are liable for all the damages. The only point is, whether the underwriters are liable for the contribution actually paid on account of the loss of the galliot.

This point does not appear ever to have been decided in any of the American Courts. It is proper, therfore, to examine it upon principle; and to ascertain what is the true bearing of the foreign authorities upon it.

And first upon principle: That the owners of the Paragon have been compelled to pay this contribution without any fault on their side, is admitted; that it constituted a proper subject of cognisance by the Marine Court of Hamburgh, the collision having occurred within the territorial jurisdiction of that city, is also admitted; and that the claim constituted a charge or lien upon the Paragon, according to the local law, capable of being enforced by a proceeding in rem, is equally clear. Why, then, should not the loss be borne by the underwriters, since it was an unavoidable incident or consequence resulting from the collision?

The argument is, that in the law of insurance, which governs the present contract, it is a settled rule that underwriters are liable only for losses arising from the proximate cause of the loss, and not for losses arising from a remote cause, not immediately connected with the peril. Causa proxima non remota spectatur. The rule is correct, when it is understood and applied in its true sense; and, as such, it has been repeatedly recognised in this Court. But the question, in all cases of this sort, is, what, in a just sense, is the proximate cause of the loss?

The argument in the present case, on the part of the defendants, is, that the law of Hamburgh is the immediate or proximate cause of the loss now claimed, and the collision is but the remote cause. But surely this is an over-refinement, and savours more of metaphysical than of legal reasoning. If the argument were to be followed out, it might be said, with more exactness, that the decree of the Court was the proximate cause, and the law of Hamburgh the remote cause of this loss. But law, as a practical science, does not indulge in such niceties. It seeks to administer justice according to the fair interpretation of the intention of the parties; and deems that to be a loss within the policy, which is a natural or necessary consequence of the peril insured against. In a just view of the matter, the collision was the sole proximate cause of the loss; and the decree of the Court did but ascertain and fix the amount, chargeable upon the Paragon, and attached thereto at the very moment of the collision. The contribution was a consequence of the collision, and not a cause. It was an incident inseparably connected, in contemplation of law, with the sinking of the galliot; and a damage immediate direct, and positive, from the collision. In the common case of an action for damages for a tort done by the defendant, no 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 attributed to the original tort, which gave the right to damages consequent thereon; which damages the verdict and judgment ascertained; but did not cause.

But let us see how the doctrine is applied in other analogous cases of insurance, to which, as much as to the present case, the same maxim ought to apply, if there is any just foundation for it here. If there be any commercial contract which, more than any other, requires the application of sound common sense and practical reasoning in the exposition of it, and in the uniformity of the application of rules to it, it is certainly a policy of insurance; for it deals with the business and interests of common men, who are unused to deal with abstractions and refined distinctions. Take the case of a jettison at sea, to avoid a peril insured against. It is a voluntary sacrifice, and may be caused by the perils of the sea; but it is ascertained long afterwards, and that ascertainment, whether made by a Court of justice, or by an agreement of the parties, would, in the sense of the maxim contended for in the argument, be the immediate cause of the contribution, and the jettison but a remote cause; and the violence of the winds and waves a still more remote cause of the jettison. Yet all such niceties are disregarded, and the underwriters are held liable for the loss thus sustained by the jettison, as a general average. It is no answer to say, that this is now the admitted doctrine of the law; and therefore it is treated as a loss within the policy. The true question to be asked is, why is it so treated? General average, as such, is not, eo nomine, insured against in our policies. It is only payable when it is a consequence, or result, or incident (call it which we may) of some peril positively insured against; as, for example, of the perils of the sea. The case of a ransom after capture stands upon similar grounds. The ransom is, in a strict metaphysical sense, no natural consequence of the capture. It may be agreed upon long afterwards: and if we were to look to the immediate cause, it might be said that the voluntary act of the party in the payment was the cause of the loss. But the law treats it as far otherwise; and deems the ransom a necessary means of deliverance from a peril insured against, and acting directly upon the property. The expenses consequent upon a capture, where restitution is decreed by a Court of Admiralty upon the payment of all the costs and expenses of the captors, fall under a similar consideration. In such cases, the decree of the Court allowing the costs and expenses may be truly said to be the immediate cause of the loss; but Courts of justice treat it also as the natural consequence of the capture.

A still more striking illustration will be found in the case of salvage decreed by a Court of Admiralty for services rendered to a vessel in distress. The vessel may have been long before dismasted or otherwise injured, or abandoned by her crew in consequence of the perils of the winds and waves; and the salvage decreed in such a case, would seem, at the first view, far removed from the original peril, and disconnected from it: and yet, in the law of insurance, it is constantly attributed to the original peril, as the direct and proximate cause; and the underwriters are held responsible therefor, although salvage is not specifically, and in terms, insured against.

These are by no means the only illustrations of the danger of introducing such an application of the maxim into the law of insurance, as is now contended for. Suppose a perishable cargo is greatly damaged by the perils of the sea, and it should, in consequence thereof, long afterwards, and before arrival at the port of destination, become gradually so putrescent as to be required to be thrown overboard for the safety of the crew: the immediate cause of the loss would be the act of the master and crew; but there is no doubt that the underwriters would be liable for a total loss, upon the ground that the operative cause was the perils of the sea. Suppose a vessel which is insured against fire only, is struck by lightning, and takes fire; and in order to save her from utter destruction, she is scuttled and sunk in shoal water, and she cannot afterwards be raised; it might be said that the immediate cause of the loss was the scuttling: but in a juridical sense, it would be attributed to the fire; and the underwriters would be held liable therefor. Suppose another case, that of a vessel insured against all perils but fire; and she is shipwrecked by a storm on a barbarous coast, and is there burnt by the natives: it might be said that the proximate cause of the loss was the fire; and yet there is no doubt that the underwriters would be held liable on the policy, upon the ground that the vessel had never been delivered from the original peril of shipwreck.

Illustrations of this sort might be pursued much farther, but it seems unnecessary. Those which have been already suggested sufficiently establish, that the maxim, causa proxima non remota spectatur, is not without limitations; and has never been applied in matters of insurance to the extent contended for: but that it has been constantly qualified, and constantly applied only in a modified practical sense, to the perils insured against. In truth, in the present case, the loss occasioned by the contribution is (as has been already suggested) properly a consequence of the collision; and in no just sense a substantive independent loss.

In the next plea, how stand the authorities on this subject? The only authority which has been cited by the counsel for the defendants, to sustain their argument, is the case of De Vaux vs. Salvador, 4 Adolphus and Ellis' Rep. 420. That case is certainly direct to the very point now in judgment. It was a case of collision, where the assured had been compelled to pay for an injury done to another vessel by the mutual fault of both vessels, according to the rule of the English Court of Admiralty; which, in a case of mutual fault, apportions the loss between them. Lord Denman, in delivering the opinion of the Court, admitted that the point was entirely new; and after referring to the above maxim, said, 'It turns out that the ship (insured) has done more damage than she has received, and is obliged to pay the owners of the other ship to some amount, under the rule of the Court of Admiralty. But this is neither a necessary nor a proximate effect of the perils of the sea. It grows out of an arbitrary provision in the law of nations; from views of general expediency, not as dictated by natural justice, nor (possibly) quite consistent with it: and can no more be charged on the underwriters than a penalty incurred by contravention of the revenue laws of any particular state, which was rendered inevitable by perils insured against.' This is the whole reasoning of the learned judge upon the point; and with great respect, if the views already suggested are well founded, it is not supported by the analogies of the law, or by the principles generally applied to policies of insurance. The case of a penalty, put by the learned judge, does not strike us with the same force as it does his lordship. If any nation should be so regardless of the principles of natural justice, as to declare that a vessel driven on shore by a storm should be forfeited because its revenue laws were thereby violated; it would then deserve consideration whether the underwriters would not be liable for the loss, as an inevitable incident to the shipwreck. At all events, the point is too doubtful in itself to justify us in adopting it as the basis of any reasoning in the present case.

The case before the King's Bench was confessedly new, and does not appear upon this point to have been much argued at the bar. It seems to have been decided, principally, upon the ground of the absence of any authority in favour of the assured; and as it appears to us, in opposition to the analogies furnished by other acknowledged doctrines in the law of insurance.

The same question, however, has undergone the deliberate consideration of some of the greatest maritime jurists of continental Europe; and the result at which they have arrived is directly opposite to that of the King's Bench. Pothier lays it down as, in his opinion, the clear result of the contract of insurance, that the underwriters are bound to pay not only the direct loss occasioned by any peril insured against, but all the expenses which follow as a consequence therefrom. Pothier, Trait e d'Assurance, n. 49. Estrangin, a very excellent modern commentator upon Pothier, (Estranpin's note,) asserts that there is not the slightest doubt on the subject. Emerigon, whose reputation as a writer on the law of insurance is second to no one, unequivocally adopts the same opinion. Emerig. Assur. ch. 12, s. 14, p. 414-417. In short, all those learned foreigners hold the doctrine that whenever the thing insured becomes by law directly chargeable with any expense, contribution, or loss, in consequence of a particular peril, the law treats that peril, for all practical purposes, as the proximate cause of such expense, contribution, or loss. And this they hold, not upon any peculiar provisions of the French ordinance, but upon the general principles of law applicable to the contract of insurance. In our opinion this is the just sense and true interpretation of the contract.

It has been suggested that there is a difference between our policies and the French policies; the latter containing an express enumeration of fortuitous collision, or running foul, (abordage fortuit,) as a peril insured against; while in our policies it falls only under the more general head of 'perils of the sea.' But this furnishes no just ground for any distinction in principle. The reasoning, if any, to be derived from this circumstance, would seem rather to apply with more force in favour of the plaintiff, since, even when the risk of collision is specifically enumerated, the expenses and contribution attendant upon it are treated as inseparable from the direct damage to the vessel itself, as a part of the loss. In short, whether a particular risk is specified in terms, or is comprehended in the general words of the policy, the same result must arise, viz. that the underwriters are to bear all losses properly attributable to that peril; and no other losses.

It may be proper to remark, that the rule which we here adopt, is just as likely, in actual practice, to operate favourably as unfavourably to the underwriters. If by the collision the Paragon had been sunk, and the galliot saved, the underwriters would have had the entire benefit of the reciprocity of the rule. It would sound odd that in such a case the underwriters should be entitled to receive the full benefit of the Hamburgh law for their own indemnity; and yet in the opposite case, that they should escape from the burden imposed by that law.

In all foreign voyages, the underwriters necessarily have it in contemplation that the vessel insured must, or at least may be, subjected to the operation of the laws of the foreign ports which are visited. Those very laws may in some cases impose burdens, and in some cases give benefits, different from our laws; and yet there are cases under policies of insurance, where it is admitted that the foreign law will govern the rights of the parties, and not the domestic law. Such is the known case of a general average, settled in a foreign port according to the local law; although it may differ from our own. Simonds vs. White, 2 Barn. and Cresw. 805. In the present case, the policy was on time, and the vessel had, as it were, a roving commission to visit any foreign port; and of course might well be presumed at different periods to come under the dominion of various codes of laws, which might subject her to various expenditures and burdens. The underwriters have no right to complain, that when those expenditures and burdens arise from a peril insured against, they are compelled to pay them; for they were bound to have foreseen the ordinary incidents of the voyage. Suppose a vessel injured by the perils of the sea puts into a foreign port to repair, and the license to repair, or the repairs themselves, are burdened with a heavy revenue duty; no one will doubt that the charge must be borne by the underwriters, as an expense incident to the repair: and yet it might truly be said not to be the natural result of the peril, but only a charge imposed by law, consequent thereon.

Upon the whole, we are of opinion that it be certified to the Circuit Court, that 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.

This cause came on to be heard on the transcript of the record from the Circuit Court of the United States for the district of Massachusetts, and on the point and question on which the judges of the said Circuit Court were opposed in opinion, and which was certified to this Court for its opinion, agreeably to the act of Congress in such cases made and provided; and was argued by counsel. On consideration whereof, it is the opinion of this Court that, '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.' Whereupon it is ordered and adjudged by this Court, that it be so certified to the said Circuit Court.