Mallory v. Commercial Insurance — 22 N.Y. Super. Ct. 101

Majority

p. 101

Charles Mallory et al., Plaintiffs, v. The Commercial Insurance Company, Defendants.

Headnote

1. Where a policy of insurance upon freight of a vessel, which at the time of issuing the policy was in the China seas,, provided that the voyage should be “confined to the trade between Atlantic ports of the United “ States, or the ports of London, Liverpool and Havre, and the Pacific “ Ocean, China seas, including Australia, Tan Dieman’s Land and ports in “the Indian Ocean;”

Held, that this did not, as matter of law,, extend to a voyage made by the vessel in question from Liverpool to Hew York, on her return from the China seas.

2. In an action on such a policy, to recover for a loss upon such voyage, it is for the plaintiffs to show either that there is a single trade between the

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Pacific Ocean and China seas, <fec., as one terminus, and both the Atlantic ports of the United States and the specified European ports, indiscriminately, as the other terminus; or that the language of the policy, by usage, is understood to include a direct voyage between the Atlantic ports of the United States and the specified European ports.

(Before Woodruff, Moncrief and Robertson, J. J.)

Heard, October 17th, 1861;

decided, December 28th, 1861.

This case came before the Court upon exceptions taken on the trial of the cause, before Mr. Justice Pdereepomt and a Jury, on the 13th day of January, 1860, and which were directed to be heard in the first instance at the General Term, judgment being in the meantime suspended.

The action was brought by Charles Mallory, Charles H. Mallory, Charles Grinnell, Elihu Spicer, Jr., Samuel Willetts, Robert Willetts and David S. Willetts, against The Commercial Mutual Insurance Company, upon a policy of insurance on freight, valued and on time. The form of the policy employed was the ordinary printed one on freight, with printed warrantees therein against the use of certain ports in Europe, British North-America, the West Indies, America and Asia, and against the carriage of grain in bulk, from certain Atlantic ports of the United States. It also contained a written clause limiting the voyages to which the risks insured against were to attach, in these words: “ To be confined to the trade between “ Atlantic ports of the United, States, or the ports of London, “ Liverpool and Savre, and the Pacific Ocean, China Seas, “ including Australia, Van Dieman’s Land and ports in “ the Indian Ocean.” It contained no other description or limitation of the voyage or voyages covered by the policy. At the time of makingAhe insurance in question, the vessel, freight of which was insured, was on a voyage from Singapore to Bombay; from thence she sailed to Liverpool, discharged her cargo, and took on board a new cargo for New York, for which place she sailed, and during the voyage thitherward she was lost. ■

The complaint alleged the insurance to have been made against loss on freight of the vessel in question for the time specified “ in the trade between any of the followi

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ng ports and places,” viz: “ Atlantic ports of the Untied States, the ports of Liverpool, London and Havre, the “ Pacific Ocean, China Seas, including Australia, Van “ Dieman’s Land, and ports in the Indian Ocean,” alleging it to have been made by the policy produced on the trial. It also alleged the employment in such a trade of numbers of registered merchant vessels, for many years before the making of such policy, and at that time; a usage for insurers in the City of Hew York, to insure persons interested in such vessels, their cargo or height in such trade, against loss, and to describe such trade substantially by the words used in the policy; and an understanding between insurers and insured that such form described and covered such trade. The complaint, however, did not allege that, if the places between which the trade intended by the policy was to be carried on, were only either the American, Atlantic or European ports named in the policy, on the one hand, and places or ports in the Pacific and Indian Oceans, and China Seas therein designated, on the other, the voyage between Liverpool and Hew York, in which the vessel was lost, came within such trade.

The answer denied any insurance by the defendants between each and every of the ports and places named in the complaint, as therein alleged, took issue upon the practice, usage and understanding set out in the complaint, and claimed the only voyages upon which the freight was intended to be, or was insured, to he those between Atlantic ports of the United States and the oceans and seas mentioned in the written clause in the policy, and those between the European ports named therein and such oceans and seas.

The policy in question was a renewal of a precisely similar one, except as to premium, ending on the day the former took effect, both of them having been issued on written applications by the plaintiffs’ agents; in such applications no mention was made of any trade or voyage to which the risk on the freight to be insured was limited;

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but in answer to a question addressed to the assured, at the foot of the first of such applications, the words “ 7 pr. ct. to be employed ” was written, and in answer to a similar query at the foot of the second, the words “ Eight per cent clause, 7.” A book of rates of premiums on risks, established before the making of either policy, was received in evidence “ prepared by the underwriters of the City of “ Few York, and printed for their guidance as to the rate “ of premiums to be charged, as agreed upon between “ them,” .not sold, but open for inspection in every insurance office by persons desirous of being insured. The pages in such book were divided into three large columns: the first containing descriptions of the proposed employment of the vessel, and, of the other two, one containing opposite to such descriptions, the rates of insurance for vessels known as clippers, and the other those for vessels which were not so. Each of the last two of such columns were subdivided into four, according to the tonnage of the vessel, the limits of which were placed at the head of such smaller columns. The tonnage of the vessel, the freight of which was insured in this case, did not come between any of such limits. Another similar book of established rates of premium was received in evidence, but its adoption w;as subsequent to the making of the last policy.

In the first of such books of rates of premiums, the rate of insurance for voyages between the Atlantic ports of the United States and the European ports of London, Liverpool and Havre was one per cent less than that for those between the same Atlantic or European ports, and. the oceans, seas and ports mentioned in the policy in question, designating the latter in the same language as is used in such policy; a like difference of premiums was made in the second book, for the same voyages. In such second book, also,, opposite to the seventh description of voyages, was written in pencil “ Fo. 7,” and also a clause dated several months after the making of the policy in question, excepting from the risk “ coastwise, or freighting “ voyages, in the China Seas or Indian Ocean, disconnected

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“ from her original voyage, out and back to a port in the “ United States or a port in Europe.”

More than six months after making the policy in question, an insurance was made by the defendants on the vessel, for the voyage from Liverpool to Hew York; and a conversation was held at the same time, in which the defendants, being informed that they were insurers on the freight, stated their willingness to increase their line to the amount of both insurances. The agent of the assured was not advised of, and, of course, did not report, on making such second insurance, in what voyages the vessel had then been engaged.

Ho evidence was given respecting any trade between the ports of the United States or Europe and the ports in the Pacific or China seas; but four questions were put by the defendants’ counsel bearing on such trade, which were excluded, and their exclusion excepted to; these were:

I. What, at the date of the policy in question, was the general course of trade pursued by clipper ships of the class of that whose freight formed the subject of insurance in this case, sailing from Hew York to San Francisco?

II. What, at such date, was the general course of trade of clipper ships of such class, on voyages described in the terms of the policy ip question ?

III. What, during the time covered by the policy, was the average amount of freight on voyages from Liverpool to Hew York, of ships .of such class ?

IV. Whether any practice had grown up under policies, containing clauses similar to that in the policy in question, for the assured to obtain permission to make voyages from the European ports named therein to an Atlantic port of the United States ?

An offer was rejected, which was made on the part of the defendants, to prove that the valuation of freight in the policy would be excessive for voyages between Liverpool and Hew York, by vessels of the class of that

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in question, but would conform to the average amount of freight of similar vessels on voyages either between the United States’ Atlantic ports and the Pacific ocean and Indian seas, including the places named in the policy, or between the ports of Liverpool, London and Havre, and such ocean and seas. An exception was taken to the rejection of this offer.

The Judge before whom the cause was tried, charged the Jury, that it did not appear by the evidence that the shiji in question was, at the time of the loss claimed, employed outside of any trade to which she was confined by the policy; to which charge the defendants excepted. A verdict was taken for the plaintiffs for the amount claimed, and the exceptions taken by the defendants on the trial were ordered to be heard, in the first instance, at General Term.

Daniel Lord for the defendants.

I. The terms of the policy are express and unambiguous, giving the termini of the trade on one part to be Atlantic ports of the United States, or three named Atlantic ports of Europe, and on the other part to be the Pacific Ocean and its subordinate seas and ports.

1. There was no evidence showing that the trade limited by the policy could embrace a doubling of Atlantic ports on both sides of that ocean.

2. A voyage between the Atlantic-European ports,'not shown to be connected with a trade to the Pacific, would not have been within the policy.

3. Kor would a voyage between Atlantic ports of the United States, not shown to be connected with a trade to the Pacific.

Therefore, a voyage between Atlantic ports on both sides of the ocean is equally without the policy.

II. Even if the voyage between Liverpool and Kew York had been shown to be connected with a particular adventure commencing in the Pacific, the policy would not

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have covered it, unless this were a known and common course of trade.

1. “ The trade ” expressed in the policy meant a known trade, not any extraordinary and unusual adventure.

2. By reference to “ the trade,” &c., as a definite thing, the underwriters would be able to determine the voyages, which, in its known course, it would embrace, and they would rate the premium to these risks.

3. The most broad liberties are construed in subservience to the general trade to which the policy is applicable. (1 Arn. on Ins., 373, § 141, and cases cited; Hamilton v. Sheddon, 3 Mees. & Wels., 49 ; Williams v. Shee, 3 Camp., 469; Hammonds. Reid, 4 Barn. & Ald., 72; Solly v. Whitmore, 5 Barn. & Ald., 45 ; Bottomley v. Bovill, 5 Barn. & Cress., 210.)

III. The plaintiffs showed affirmatively that the voyage from Liverpool to Hew York was not connected with the voyage to or from the Pacific Ocean.

1. In Liverpool she took in a full cargo for Hew York, as a new and independent voyage.

2. It had not even that semblance of a connection with a Pacific voyage, which a final return home might have given it. The insurance was to continue until Hovember 15,1857, with a power to renew for three months, if on a passage; whereas the Liverpool voyage was to have ended at Hew York in July.

IV. The evidence offered by the defendants to show what “the trade” between the termini in the policy was, ought to have been received. It was clearly admissible to determine the subject to which the policy applied. (1 Arn. on Ins., 336, § 133, and cases cited; Uhde v. Warlters, 3 Camp., 16; Robertson v. Clarke, 1 Bing., 445.)

V. The effecting of the policy on the ship from Liverpool to Hew York, in June, 1857, could not be held to affect the previous policy in question.

VI. The loose conversation at the time of this insurance on ship could not vary the effect'of the existing policy.

Charles O’Conor for the plaintiffs.

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I. The primary terms of the policy having authorized the plaintiffs to employ their ship in any trade whatever, the restriction upon that right subsequently imposed by the defendants, must be strictly construed as against the defendants. (Palmer v. Warren Insurance Company, 1 Story’s C. C. R., 362; 1 Duer on Ins., p. 161, §§ 5 and 6; 5 Cranch, 342 ; 2 Sumner, 375, 380; Notman v. Anchor Ins. Co., 22 Jur. R.,p. 714; 1 Burr., 347; 2 Cr. & Jervis, 251.)

The particle “OB” slipped into the clans e of restriction by the defendants, cannot have effect to prejudice the plaintiffs.

1. Giving to that particle the effect claimed for it, and necessary to the defense, would render the clause exceedingly obscure and ambiguous.

The acts of the parties under this policy is perfect evidence that the defendant’s construction would render it “ a mockery, a delusion and a snare.” (2 Curtis O. C. R., 616.)

III. The clause of restriction is either insensible and void or it must be construed as allowing a trade between any of the points named. In order to develop this intent, it is only necessary to read “ or” as “ and.” That is frequently done; and it is quite" apparent that the Hew York Board of Underwriters on two occasions, years apart, printed and issued, for the guidance of all insurers, precisely such a clause, using the conjunctive particle in the place where these defendants have inserted the disjunctive.

It is plain from the language of the written clause in the policy in question, which determines the employment of the vessel whose freight is the subject of insurance therein, that such employment is controlled by a trade and not mere voyages. A trade between places comprehends voyages between them, but may include something more; especially when so wide a latitude is given to its boundaries as the principal ports in the United States and Europe^ and the Pacific and Indian oceans and Ohina seas.

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The principal if not only embarrassment in interpreting the clause in question, arises from the difficulty of determining whether a single trade or two trades are described in it. Two different trades, one between the United States’ Atlantic ports and the Pacific and other oceans spoken of in such clause, and the other between the therein designated European ports and the same oceans, may be known to dealers in insurance, (Coit v. Commercial Ins. Co., 7 J. R., 385,) or there may be but one kind of trade, in which the same oceans may furnish one of the termini of the voyages in such trade, and the same American or European ports, indiscriminately, the other; and the word “trade,” in the singular, may have- been employed for that reason. It would also be possible that the course of trade might permit a reinvestment in Europe of the proceeds of a cargo brought from Asia to Europe, in a cargo for the American market so as to preserve the continuous unity of the trade; or it might be only necessary and sufficient for the same purpose to bring to the United States part of the cargo shipped in Asia, after landing another part in Europe; or, vice versa, the reinvestment in Europe of the proceeds of a cargo brought from America, in a cargo suited for the Asiatic market, or a reservation of part of it for the final port, might still keep the adventure single, or a round voyage. The Court, however, cannot take judicial notice of the character of such trade or trades, (Child v. Sun Mut. Ins. Co. 3 Sandf., 26 ,) and no evidence was furnished on the trial relating to them; indeed, the defendant was precluded from introducing any evidence on the subject.

On the other hand the plaintiffs did not introduce any evidence, either to show that the loss occurred in any special trade, or to sustain the allegation in the complaint that a trade between each and all of the places or ports named in the policy was usually designated by the terms employed therein. They rest their right to recover, therefore, solely on the position that the word “or,” which creates an alternative, is to be read “and,” (or rather, perhaps, as there is a subsequent copula, be actually omitted,)—and then, voyages

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between any of .the places and ports named, and any other of them are to be assumed as intended by “ the trade” between them i and they claim that without such a change the clause would be insensible and void, because it contains an alternative without affording the means of determining it.

I do not perceive that the proposed change of substituting “ and ” for “ or,” or even dropping the last altogether, without some other change, would materially aid the plaintiffs without some other change, as there are no- less than three other “ ands” in the sentence, which seriously affect its construction ; that one which connects the three named European ports together, literally construed, requires the particular trade to be conducted by voyages between all those ports, and any other named place; while the last one would require the trade to be conducted by voyages between the Pacific ocean, Ohina seas (including the places named) and ports in the Indian ocean, and any other named place. To make the sentence complete, so as to read as the plaintiffs’ case demands, it requires the words “or any one or more of them” to be added after the enumeration of the European ports named, and the words “or any where in such oceans, “ seas, or ports,” after the names of the specified sea or ocean. It would then read, “ Between the Atlantic ports “of the United States and the ports of London, Liverpool “and Havre, or any one or more of them, “and the Pacific ocean, Ohina seas, (including, &c.,) and “ports in the Indian' ocean, or any where in such oceans, “ seas or ports.” The voyage in which the vessel in question was actually lost was not in a trade between America and the ports of London, Liverpool and Havre, but between it and Liverpool alone, being only one of such ports. The changes and additions thus rendered necessary for the plaintiffs’ purposes seem to be too extensive for any rule of mere interpretation to justify.

But the whole basis of the argument for the necessity of change is removed, if the law furnishes a means of determining the apparent alternative. A right of electing, vested in either party to the contract, would do so. Lord Coke lays

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it down, that “ in case- an election be given of two several " things, always he that is the first agent, and which ought to do the ‘ ‘ first act, shall have the election/’ (Co. Litt., 145, a;) and the right of election has been, in numerous cases, held to be conferred on the party to be benefited by a contract, where he is the active party, and such contract is silent as to the party who shall make the election. (Disborough v. Neilson, 3 J. Cas., 81; Smith v. Sanborn, 11 J. R.,59; Layton v. Pearce, Doug., 16; Small v. Quincy, 4 Greenl., (1 Bennet’s ed.,) 497.) In regard to policies of insurance, it must essentially be so, and has been adopted without demur; thus, in Kane v. The Columbian Ins. Co., (2 Johns. R., 264,) it was held that where an insurance is to several places, and the assured intends to go to but one of them, he may go there first, at his election, although, if to more than one, he must observe the order in which they are mentioned in the policy. In Tredenburgh v. Gracie, (4 J. R., 444, n,) the insurance was “ at and from any port or ports in the West Indies, and at “ and from thence to Yew York,” without the policy containing anything to determine whether the voyage should be from one port or more; and the cargo was held to be covered on a voyage from one port to another in the West Indies. In Gilfert v. Hallet, (2 J. C,, 296,) liberty was given in the policy to touch at one or two places, the adventure to continue until the landing of the cargo insured, at one or two ports, no mode being specified of determining whether it should be one, or two, and the risk was held to continue after the landing of part of the cargo in one place. By analogy to such cases, a policy of insurance on freight in a trade between the Pacific ocean and American or European ports, or vice versa, as in the case before us, could hardly be held to be detached from the freight of that part of a cargo originally brought from the Pacific ocean or America, which should remain after the vessel bearing it should stop and land part of her cargo at a European port, particularly in case of a valued policy. If the vessel was engaged in either of the trades (if there were two) when the loss accrued, the policy should be considered as still attached,

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as the stoppage at a port mentioned in the policy with part of the cargo could not well be considered a deviation as to that part which might afterwards be lost in a voyage to another port, (Keeler v. Fireman's Ins. Co., 3 Hill, 250 ,) particularly where the voyages insured are trading voyages. (Gilfert v. Hallet, 2 J.C., 296.) The election to be made may be considered as made when the vessel parts with all the cargo which can characterize the voyages in which she is engaged, as being in the trade between the Pacific ocean and European or American ports, or, as is possible, when she fails to continue that trade, after parting with such cargo, by taking on board a new cargo and sailing on a new voyage in such trade, after which the assured may be considered as having divested himself of the protection of the policy on the freight.

If the order of the termini of the trading voyages had been inverted in the clause under consideration, which, of course, would not alter the sense, I think no doubt could be entertained as to its legal effect.. If the employment of the vessel had been confined to a trade between the Pacific ocean, &c., and specified American or European ports, the most natural suggestion to add would be, whichever the assured may select; so that if the insurance was intended to cover the freight only while the vessel was engaged in one of those trades, both parties might allow and agree upon the price of incurring such risk, and fix a corresponding premium. If the vessel should be employed in any other trade of greater or less risk, during the allotted period, her freight could be withdrawn from the protection of such insurance, to be regained upon her re-employment in the specified trade.

Even the rule that words are to be construed in a policy of insurance most strongly against the underwriters, as the promisors,'is not applicable upon the question of the obligatory character of the contract as at present worded, and the necessity of a change to give it any effect; such rule is only of value when two interpretations may be given to. the same words, and the question is between

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them, and not when it is to be determined that no interpretation can be so given to the words as they stand, so as to make a binding contract.

The clause in question does not appear to be capable of the interpretation, that the two trades intended, if there were two, might have been, one between American ports alone, and another between the specified European ports and the Pacific ocean, &c.: Such a construction would require a repetition of the proposition “ between,” immediately before the names of the European ports, so as to separate the oceans and seas enumerated from the American ports, and prevent the application of the first “ between ” to them. A contest between Americans or Europeans and Ohinese.could never be construed, grammatically, to mean a contest between Americans among themselves, or between Europeans and Ohinese, and substituting trade for contest, and taking ports instead of people, will not alter the sense.

I do not find, therefore, a necessity existing, in order either to sustain the policy as a binding contract, or to carry nut an otherwise manifest intention in the instrument, that there should be a change of the disjunctive into the conjunctive conjunction, or any other alteration in the language. As a commercial instrument in reference to a subject perfectly well understood between the parties themselves, although not expressed with the utmost fullness and accuracy, it is sufficiently capable of definite construction.

I have heretofore examined the question of the con.struction of the clause in controversy, without the aid of, or reference to, any extrinsic evidence-; but what little appears in the case gives some support to the view that, among underwriters and assured, the trade insured was considered as one and entire; in the book of rates introduced by the plaintiffs, a voyage by clippers such as the vessel in question, between London, Liverpool, or Havre and America, was considered a different voyage from those specified in the clause in such book similar to the one under consideration, and subject to a higher rate

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of premium; while the voyages, if there be more than one composing the trade or trades in question, if there be several, are mentioned in one clause; indeed, the underwriters seemed so much to look upon it as one trade or venture, that they originally connected the mention of the European ports with that of the American by an “and,” and afterwards changed it to an “or,” perhaps through apprehension' of the application of the very construction now contended for by the plaintiffs. The description also of the voyage as being “ one out and bad: to a port in die United States or a port in Europe,” in the exception after-wards adopted,-is very significant; it is very clear, however, that in such book of rates, the underwriters, by the clause similar to that in question, did not intend to insure voyages to and fro between Hew York and Liverpool, disconnected from a trade with the Pacific, Ohina, the East Indies and Australasia. The question, therefore, put by the defendants’ counsel, as to the course of trade of such vessels as that in question, on voyages between either the United States Atlantic ports or the European ports named in the policy, and the Pacific ocean and other places named therein, was pertinent to show what was meant by the trade mentioned in the policy, whether there was one trade or two, or one was part of the other, and it should have been allowed. Perhaps the plaintiffs were bound in the first place to show what the trade was, and thafthey were within the terms of the policy,, in order to recover at all; and, perhaps, they may be able to establish the allegation in the complaint, that a trade, such as they were engaged in at the time of the loss, was usually described by underwriters and assured in the terms of the policyboth these matters can be better determined on a new trial. If the defendants do not choose to rely upon the interpretation of the clause as it stands, as giving the plaintiffs an election to choose the trade in which they would employ the vessel, if there were two mentioned, they also have a right to introduce testimony to show whether there are not two distinct trades known to persons dealing in insurance, or

Concurrence

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only one, and that there is in fact no alternative in the clause in controversy.

There must, therefore, be a new trial, with, costs-to. abide the event.

I concur in the conclusion that there must be a new trial, on the ground that if the construction of the defendants’ contract is to be determined by the mere terms of the policy, according to what appears to me their natural and obvious signification, the trade in which the vessel was to be employed, while the insurance should operate, was that wherein the termini were, on the one hand, Atlantic ports of the United States, or the ports of Liverpool, London and Havre; and, on the other hand, the Pacific ocean, China seas, and ports in the Indian ocean.

A well established course of “ trade ” may have given a construction to the terms employed, so that trading voyages from port to port, in either ocean, and permission to touch or lie at such ports, would be included, or so that United States vessels insured here might begin and terminate their voyages when entering upon or ending their trade between the Atlantic ocean and the other oceans mentioned, by going first from an Atlantic port in the United States to London, Liverpool and: Havre, and by returning from the latter ports to the United States; (such passage across the Atlantic being connected with and forming a part of the trade between the Atlantic and" Pacific ports, and being only incidental to the main purpose of the adventure or adventures.)

If the terms employed have, by usage, acquired a technical meaning more comprehensive than their natural and ordinary import, I think it was not necessary that the defendants should give the evidence thereof, but they might safely rest on the language of the policy, and leave the plaintiffs to proof that a trade such as the policy describes includes, as incidental to or forming part of it, a direct voyage between Liverpool, London or Havre and Hew York, or other United States port on the Atlantic.

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If the proper preliminary foundation for giving parol evidence to vary the construction of the language of the policy was made, then it might be received; but, on the case, as it was presented to the Court on the trial, I think it was erroneous to declare, as a judicial construction of the policy, that a voyage from Liverpool to Hew York was not outside of any trade to which the vessel was confined by the policy, and at the same time exclude evidence of the course of trade.

Hew trial ordered.