Continental Insurance v. Ætna Insurance Co. of Hartford, Connecticut

Majority

p. 775

The Continental Insurance Co., Pl’ff, v. The Ætna Insurance Co. of Hartford, Conn., Def’t.

(Supreme Court, General Term, First Department,

Filed December 31, 1891.)

Headnote

Insurance (Marine)—Reinsurance.

■ On a policy of reinsurance made by defendant and two other companies with plaintiff there was an endorsement to the effect that it should cover

p. 776

plaintiff ‘ ‘ to the extent of one half of the amount of each and every risk which equals or exceeds in value the sum of $15,000 ” and which said company may have on one barge or lighter and insured by them under open policies issued to certain persons named. Held, that the limitation referred to the real value of the cargo insured, and not to the amount of liability specified by the assured.

Exceptions ordered to be heard in the first instance at general term.

Elihu Root and Samuel B. G lárice, for pl’ff; J. A. Shoudy, for deft.

This action is upon a policy of reinsurance, made by the defendant, jointly with two other companies, to the plaintiff. The,sole question is as to the proper construction to be placed upon the following endorsement, which was made upon the policy :

“ On and after this date this policy covers the Continental Ins. Co. as reinsurance, to the extent of one-half of the amount of each and every risk which equals or exceeds in value the sum of $15,000, and which the said Continental Ins. Co. may have on cargo of any one barge or lighter and insured by them under their open policies issued to the following named persons, viz: Twombly & Co., John H. Starin, H. Y. Lighterage & Transportation Co., New Jersey Lighterage Co., F. W. Jarvis & Co., Johhson & Hammond, S. Haff & Co., and F. Lawson. On cargoes of the value of $50,000 and upwards this policy is to cover the excess of $25,000, not exceeding the sum of $50,000 on any one cargo.”

The plaintiff claims that the words italicized refer to the amount of liability specified by the assured, while the defendant contends that they refer to the real value of the cargo insured. In other words, to the actual fact on that head rather than to the estimate of the assured. If the plaintiff’s construction is correct, then the restriction in question might be rendered practically useless. For the assured could then in all cases specify $15,000 as the amount of insurance, and that specification rather than the real risk would then serve as the sole guide. We agree with the plaintiff that the word “risk” in this connection does not mean “loss.” But does it for that reason mean any arbitrary sum which the assured, or reinsured, may fix? We think not. Force must be given to the words which here follow the word risk, namely, the words “ which equals or exceeds in value the sum of $15,000.” The plaintiff says this means in value to the insurer; that is, as a premium producing sum. The defendant construes it as though it read “which equals or exceeds in value of cargo $15,000.”

We think the latter is the true construction, and that this view not only gives real effect to the limitation plainly contemplated, but is in harmony with the rest 'of the contract. Thus, it is in harmony with the provision of the policy that the insured shall “ enter for insurance all goods at the full value thereof.” This expression negatives the idea that the assured may enter goods for insurance at any amount they please, however greatly in excess of the full value. The object is to specify the true value in advance of any disaster, as it is also the object, under another provision, to require payment, in case of loss, of the true value on

p. 777

the day of the disaster. By a previous endorsement upon this instrument, it is provided that the policy should cover “ one-half of the value of all cargoes shipped by Twombly & Co,” on certain barges. What is there meant is plain enough. The endorsement in question is apparently a supplement to this earlier endorsement. It extends the subject of re-insurance to others besides Twombly & Co. who are holders of the plaintiS’s open policies, but it limits such re-insurance to risks which equal or exceed in value the sum of §15,000. It is reasonable to conclude that the value contemplated in the latter endorsement is in substance the same as that specified in the previous. The subjects are cognate and the two endorsements are in pari materia. Again, the last words in the endorsement under consideration fortify this construction. Here again we find an extension combined with a limitation. And the extension is not to re-insurance based upon a specification of value by the assured, or upon a specification of the company’s outside liability to be impressed upon the face of the policy, but upon the real fact, namely: “ On cargoes of the value of $15,000 and upwards.” There is nothing whatever in the policy or in the endorsement thereon to justify the belief that it was the intention to re-insure one-half of the plaintiS’s liability to each of the assured whenever such assured chose, as between themselves and their insurer, to specify §15,000 or upwards as the value of the cargo laden. If such had been the intention, it would have been easy to expressit. The substitution of the words “face amount"’ for the word “ value ” would then have been natural; but, in that case, we would have expected to find in the last provision of this endorsement a similar change. That is, instead of the words “ on cargoes of the value of §50,000 and upwards,” some such words as “on insurance to the face amount of §50,000 and upwards.” As it is, the “value of the risk” was plainly the amount of actual liability assumed by the company, namely: “ the full value ” of the cargo. That is, the real and not the estimated value. Indeed, that risk attached as soon as the merchandise was laden, and it could not be varied by a subsequent specification of value in excess of the fact.

In the case at bar, it is conceded that in none of the instances referred to in the complaint did the value of the cargo equal the sum of $15,000. That fact brings the case within the restriction contained in the endorsement in question, and that restriction cannot be evaded by the act of the assured in specifying a value in excess of the “full value” of the merchandise laden. If even a substantial compliance with the requirement as to valuation, which is all that the law exacts, should lead to uncertainty in this business, then the reinsuring companies should at least be permitted to say whether they are willing to be bound blindly by the specification of value given by the assured. And the contract to that effect should be plain and conclusive.

The ruling at circuit was right, the exceptions should be overruled, with costs, and judgment should be entered accordingly.

Van Brunt, P. J., and Daniels, J. concur.