Majority
p. 275AUGUST RÖLKER et al., Plaintiffs, v. THE GREAT WESTERN INSURANCE COMPANY, Defendants. [Decided April 30, 1870.] Before Jones, Freedman, and Spencer, JJ.
Headnote
When an open policy on such risk as may be approved and ihdorsed thereon, provides that the consideration of the insurance shall be at and after the nominal rate of two per cent., the premium on each risk to be fixed at the time of indorsement, with additions and deductions to conform to the rates of the company when the character of the vessel and time of sailing are known; and the underwriter, on being applied to, refuses to approve or indorse a risk or fix the premium therefor; he cannot, on being sued for a loss on the risk, introduce evidence in support of an answer seeking to counterclaim a demand for a premium on the risk designed to show either—1. That neither he nor any prudent underwriter would have taken the risk under the circumstances; or
2. What under the circumstances would be a fair and proper rate, or usual and market rate of premium; or
3. What rate was in use by him applicable to an insurance on the risk in question.
(a) This because the answer does not set forth that there was any such rate, and does not seek to counterclaim a rate fixed by it; or
4. That there was no rate in use applicable to the risk in question, with a view of showing what would be a fair and reasonable rate.
(a) This because the insured was only bound to pay a premium fixed by the rates of the company, and not one ascertained in any other manner.
A witness who has no knowledge or recollection that a paper ever existed, and has never had any connection with its custody, is incompetent to testify as to what has become of it.
Under a clause in a policy that in case of a prior insurance the underwriter shall be liable only for the amount which such prior insurance shall be deficient towards fully covering the loss, no claim can be made by him arising out of a prior policy existing at the time of the application to him, but which was cancelled before he issued his policy; unless perhaps he issued his policy with the knowledge, and on the faith, of the existence of the prior insurance.
This was an action on a policy of insurance to recover for a loss alleged to have been insured against. The parts of the policy which bear on this controversy are as follows: No. 5,812.
By the Great Western Insurance Company, A. Rolker, Mollmann & Co., on account of whom it may con-
p. 276
cern, for outward shipments and homeward, to he for account of themselves, and to be consigned to them by invoice and bill of lading, in case of loss to be paid to them, do make insurance and cause to be insured, lost or not lost, at and from Mew York to port or ports in the'West Indies, and vice versa ;
Also at and from
St. Domingo to Philadelphia and Boston, on specie and merchandise, or either, under and on deck, or either, on deck free from leakage, breakage, or damage by wet. Mo outward shipment to be considered insured until approved and indorsed on this policy by this Company. This policy to be deemed continuous until otherwise directed by either party, due notice being given. Homeward shipments to he reported as soon as ascertai/ned. ' To apply to one third of each shipment. It" is agreed that this policy shall also cover freight per brig John Boynton, on all her passages, to the extent of five hundred dollars, being one third. Also to cover such other rishs as may he approved and endorsed on this policy.
“ It is understood that either party is at liberty to cancel this policy at any time, on giving notice to that effect, which is not, however, to prejudice any risk then pending.
£: It is agreed that this policy shall also cover shipments consigned to A. Rolker, Mollmann & Co., and addressed to Yeuve A. Mirentie & Co., upon all kinds of lawful goods and merchandises, laden or to be laden on board the good vessel or vessels, including risk of lightei’s in loading, whereof is master for this present voyage, or whoever else shall go for master in the said vessel, or by whatever other name or names the said vessel, or the master thereof, is or shall be named or called.
“ Beginning the adventure upon the said goods and merchandises, from and immediately following the loading thereof on board of the said vessel at as aforesaid, and so shall continue and endure until the said goods and merchandises shall be safely landed at as aforesaid. The said goods and merchandises, hereby insured, are valued at 25c. the dollar of invoice, unless other
p. 277
wise ordered by shippers before loss occurs / St. Domingo coffee at 11c. per lb.
“ Touching the adventures and perils which the said Great Western Insurance Company is contented to bear, and takes upon itself in this voyage, they are of the seas, men-of-war, ****** S11bject however to such clauses, terms, and rates of average as are contained in the printed tariff of this company, and in the memorandum in this policy, unless otherwise agreed on in writing ****** having been paid the consideration for this insurance by the assured, or assigns, at a/nd after the nominad rate of two per cent. / the premium on each rish to be fixed at the time of indorsement, with additions a/nd deductions to conform to the rates of the company, when the character of the vessel and time of sailing are known.”
The policy further provides that if the said assured should have made any other assurance upon premises aforesaid, prior in date to this policy, then the said Great Western Insurance Company should be answerable only for so much as the amount of such prior assurance might be deficient toward fully covering the premises hereby assured, and the said Great Western Insurance Company should return the premium upon so much of the sum by them assured as they should be, by such prior insurance, exonerated from.
The policy further provided as follows:
“ All approved indorsements on the pass-book given by this company under this policy, are to apply in all respects to this policy, the same as if indorsed hereon, and not otherwise. Risks applicable hereto to be reported to this company for indorsement as soon as known to the assured.”
This policy was issued January 17,1857.
The loss claimed for was on certain coffee shipped as a consignment to the plaintiffs as factors for sale by and on account of the firm of Edward Lloyd & Go., and one Joseph Maunder. The coffee was shipped in the brig Delafield at Port an Prince for the city of Rew York.
The brig sailed from Port au Prince about December 21, 1856, and has never been heard from since.
p. 278
On the 17th of January, 1857, plaintiffs received a letter from Edward Lloyd & Co., which contained the following:
“ Per Delafield we intend to ship to your consignment about 800 bags of coffee; the vessel will sail in two or three days.”
On the 5th of February, 1857' plaintiffs received a letter from Edward Lloyd & Co., a letter containing bill of lading and certified invoice for 835 bags of coffee per Delafield for their account, and bill of lading and invoice for 275 bags per account of Hr. Haunder per Delafield.
This last letter came by the brig Delhi, which brig sailed from Port au Prince after the Delafield.
On the 6th of February, 1857, plaintiffs sent to defendants the following notice:
“ Great Western Insurance Company.
“ Enter on open policy of A. Bolker, Mollmann & Co.,
Bo. $5,485 on merchandise.
Subject to average, as per memorandum in the policy, or the printed tariff of this company, unless otherwise agreed upon.
-g- of shipment, valued at
on board the brig Delafield, at and from Port au Prince to blew York.
Bill of lading dated—
Time of sailing—December 21,1856. Master’s name—Gray.
Hew York, February 6,1857.
Where built—Williamsburgh, L. I.
When built—1854.
Tonnage—175. Premium—
When last coppered—’55.
When last inspected—’56.
Present condition—fair.
Bate—2. Good. Approved.
(Signed)
J. O. L.
(To be approved in accordance with the terms of the policy.)” —and requested that the risk be approved and entered on the above-mentioned policy. ■
p. 279
. The President of the defendants refused to approve the risk or enter it on the policy, on the ground that the risk had never been taken by the defendants, and that the defendants were not on it.
Prior to the issuing of the above policy by defendants, plaintiffs held an open policy on outward and homeward shipments to be for account of themselves, and to be consigned to them by invoice and bill of lading for Sew York, to port or ports in the West Indies and vice versa, also at and from St. Domingo to Philadelphia and Boston, issued by the Mercantile Insurance Company.
This policy was cancelled January 15, 1857, prior to the issue of the policy by defendants, but after plaintiffs had made application therefor.
The defendants in this action, among other defenses, set up, by way of counterclaim, a demand for the premium of insurance upon the shipment by the brig Delafield.
The questions determined on the appeal arose out of the issue of the policy by the Mercantile Insurance Co. and its cancelment, and out of the rejection of evidence offered by defendants.
The points sufficiently appear in the opinion.
Exceptions ordered to be heard at General Term.
Mr. Joseph M. Choate for defendants.
By the true construction of the open policy issued by the defendants to the plaintiffs under the terms of which unknown and future risks might be reported, and, if approved, indorsed, the rate of premium in the policy being merely nominal, and the actual premium on each risk to be fixed at the time of indorsement, with additions and deductions to conform to the rates of the company when the character of the vessel and time of sailing are known, it is well settled that the contract is not complete as to any risk until, upon its being reported, the underwriter has exercised his right to fix the premium to conform to the rates of the company, when the character of the vessel and the time of
p. 280
sailing are known; and the risk having been rejected by the defendants, when reported, was never insured under the policy. The contract of insurance in respect to this particular shipment never became complete or binding.
The learned court below erred in refusing to permit the defendants to prove the circumstances under which the policy was issued, and that at the time of making it it was expressly agreed between the parties that it should not apply to any shipments which-had been made before the date of the policy unless such shipments, being reported, should be accepted and indorsed. The contract containing nothing to determine explicitly whether it was intended by the parties to apply to risks then pending, the evidence that there were or might be such risks, and the agreement that they were not to be included unless expressly indorsed, was clearly admissible, and should have been received, and the question left to the jury to determine.
But if the company, in this case, are to be considered as bound by the terms- of them policy to accept the risk in question when reported, nevertheless, since by the terms of the policy the premium on each risk is to be fixed at the time of indorsement, with additions and deductions to conform to the rates of the company when the character of the vessel and the time of sailing are known, the exclusion by the learned court of the defendants’ evidence, offered to show what would have been the proper and fair rate of premium to charge upon the risk in question when it was reported, and when the character of the vessel and the time of sailing were known, was clearly error, and the case should be' sent back for a new trial. The plaintiffs failed to report the risk by the Delafield, as a risk applicable to the policy, as soon as it was known to them. This provision is clearly inserted for the benefit of the company: “ Bisks applicable hereto to be reported to this company for indorsement as soon as known to the insured and again, “ homeward shipments to be reported as soon as ascertainedthe latter in writing. If this provision were faithfully acted upon, the company would have the full benefit and protection of whatever reinsurance they might see fit to ob
p. 281
tain, and that upon the earliest intelligence of the risk, when the obtaining of reinsurance would be practicable upon the same terms, at least, as those at which they themselves received it.
At any rate this question of delay in reporting the various intelligence received by the plaintiffs of the risk by the Delajield should have been left to the jury to determine they did report it as soon as ascertained or as soon as known to the assured.
The defendants, if held upon the risk, are certainly by the terms of the policy entitled to a premium, proportioned to the great hazard and danger of it, from the fact of its being so long out of time and not heard from ; and the case should be sent back for the jury to determine, as they only can determine, what was a fair rate under those circumstances.
The learned court below erred in allowing the plaintiffs to add 8 per cent, to the invoice weight in order to make a larger weight in pounds upon the standard of American weights. There is no such right reserved by the policy. On the contrary, it insures the risk in question, if at all, as a risk to be consigned to the plaintiffs by invoice and bill of lading, and declares that San Domingo coffee shall be valued at eleven cents per pound, and the bill of lading and invoice are in pounds, French weight, and there is no stipulation in the policy, like that which had been iu the Mercantile policy, allowing an addition of 8 per cent, to the French weight. Parties to the policy are making an agreement relating to shipments, .by French weight, of an article so invoiced and entered in bills of lading, and must be held to have intended the weight usually meant in reference to that particular article, and coming under such documents.
In a policy “ for. account of whom it may concern,” which has been repeatedly held by this court to cover the interest, and only the interest of those parties who not only had an actual interest but who were intended by the party obtaining the insurance to be covered, the plaintiffs, even though the policy is made in their name, and payable in case of loss, to them, cannot recover without proving both the fact of interest in the parties intended to be covered, and that they applied for the insurance with the
p. 282
intent to cover those parties; and inasmuch as the plaintiffs offered no evidence on the latter of these points (for the preliminary proofs cannot be regarded as evidence in chief on the point of intention), their action must fail (Crosby v. N. Y. Mut. Ins. Co., 5 Bosw., 369 , 377; Forgay v. Atlantic Mut. Ins. Co., 3. Rob., 79, 90).
Mr. Augustus F. Smith for plaintiffs.
The policy in question is an open policy, by which, for a nominal premium of two per cent., the defendants insure all goods of the plaintiffs, or goods consigned to them, from Yew York to the West Indies, and from the West Indies to Yew Y ork. In respect to outward shipments, they were not insured until approved and indorsed. In respect to homeward shipments, they were insured immediately, and the risks were only required to be reported as soon as ascertained.
Under the old form of policy, the thing at risk was specified; under this form, every thing is at risk which comes within the description (1 Phillips on Ins., § 438).
Besides the nominal premium of two per cent., for which the plaintiffs gave their note, the defendants reserved the right to themselves to fix or adjust at the time of indorsement the premium on each risk; but this was no arbitrary power, but the rate to be fixed must conform to the rates of the company as they existed at the time of the sailing of the vessel, and were to depend upon the then character of the vessel.
It has been claimed that the defendants had a right to fix the rate of premium with reference to the state of things as they existed when notice to enter the risk was given. In other words, that if the vessel was then lost, that they could fix a rate of 100 per cent., so that, practically, the assured would have no policy of any value to them until they had reported the risk and had it entered.
Such a construction of the policy would be a fraud upon the assured, and would defeat the purpose of such open or running
p. 283
policies, which is to indemnify the assured in cases in which they anticipate shipments, but have not received advices.
On the other hand, to fix a rate of premium as of the time when the vessel sailed, and looking to the then character of the vessel, is precisely what would do justice to both parties.
If there be any difficulty in construing the words of the policy on this subject, the well known rules are to look to the situation of the parties; to give the words a reasonable construction; to carry out the obvious intent of the parties, and, if need be, to construe them most strongly against the party whose contract is under construction (2 Parsons on Contracts, 11, 18, 22, note (v.); Gates v. McKee, 3 Ker., 232; Hoffman v. Etna Ins. Co., 32 N. Y., 405 -413).
The fair meaning of the words is—The premimn on each risle to be fixed at the time of indorsement, with additions a/nd deductions to conform to the rates of the company which they were accustomed to cha/rge at the time the risle began, had they then lenown the cha/racter of the vessel and time of sailing.
But whatever the rights of the defendants were in fixing the premium, they were bound to exercise those rights, and when they refused, it is but reasonable to hold that they acquiesced in the sufficiency of the rate of two per cent, named in the policy.
The motion for a nonsuit was rightly denied.
The first ground of this motion was, that when the notice was presented to enter the risk, there was no obligation on the company to do it.
This can hardly have been serious, for it seems to be based only upon the idea that the plaintiffs were insured, whether the defendants entered the risk or refused to enter it.
Ho doubt they were insured in either event. But, nevertheless, the defendants, impliedly at least, bound themselves to enter the risk.
The second ground was, that if the policy was a contract, it was only an executory agreement to fix a reasonable and usual rate of premium, and for such a premium to enter the risk; and that for the breach of such an agreement no damages are
p. 284
proved, and from the nature of the case there could be no damages.
Now the contract was an insurance of all risks within the description of the policy. It was, especially in respect to homeward risks, an executed as distinguished from an executory agreement. The plaintiffs were covered the moment the risk began; but for the safety of the defendants, and to prevent fraud, the defendants were entitled to notice of a risk as soon as known, and they had then the right to adjust the premium.
The third ground was, that if the company was bound to accept the risk from the date of the policy, nevertheless, since the premium is to be fixed at the time of indorsement, and the rate of that premium was never fixed, no right of action on this policy ever accrued to the plaintiffs (See Audubon v. Excelsior Ins. Co., 27 N. Y., 217 ).
The plaintiffs are without fault; the defendants have not availed themselves of a privilege, and say they will not therefore fulfil a contract express in its terms, and having an ample consideration actually paid (1 Parsons’ Marine Ins., p. 321; E. Carver Company v. Mfgs. Ins. Co., 6 Gray, 214 ).
The fourth ground was that the plaintiffs refused to report the risk as soon as the information was obtained.
The testimony showed that the plaintiffs received their letters late in the afternoon, and too late for notice that day, and gave notice the next morning.
The fifth ground was that upon the true construction of the policy it did not cover a risk pending when the policy was made.
The policy is “ lost or not lost ” (3 Keyes, 17).
The defendants stated an additional ground for a non-suit after all the evidence was in, viz.: that the policy in the Mercantile Company was pending when the application was made to the defendants, and though cancelled before the policy was issued, that it was a prior insurance, and that the defendants were not liable.
The answer to this is, that the policy is the contract, and that the application is obsolete from the time the policy was given. When
p. 285
the policy was issued the Mercantile policy had been cancelled (Date of this policy, January 17, Mercantile policy cancelled January 15, 1 Phil. on Ins., section 16).
The valuation in the policy of 11 cents a pound, was the American pound. The contract must be construed with reference to Hew York, where it was made.
The exceptions to the admission of evidence were none of them well taken.
The offer to prove a parol agreement made at the time of the contract of insurance, was the first of these, and was properly overruled.
This was not an offer to prove a mistake with a view to have the contract reformed.
By the Court:
I think all the grounds on which the defendants moved for a dismissal of the complaint at the close of the plaintiffs’ testimony were decided adversely to it by the Court of Appeals when this case was before.it on an appeal from a judgment rendered dismissing the complaint.
The same evidence that is now before the court was then before the Court of Appeals, and that court, in reversing the judgment of dismissal, necessarily held that on that evidence the plaintiff was entitled to recover.
The terms of the policy and the facts that the vessel was out of time, that the defendants had refused to enter the risk in the pass-book or to fix a premium, as well as evidence as to the time when the plaintiffs reported the risk, were all before the Court of Appeals, and that court commented on them and held that they had not the effect of relieving defendants from liability on the policy for the loss of the shipment in question; and held that, notwithstanding all these matters, the defendants were forced to accept the risk.
That decision is controlling on us. It seems to be the result of that decision, that if the company desired to protect themselves from an obligation to take a risk that is out of time, they must insert in the policy a special clause of exemption.
p. 286
The evidence introduced on the part of the defendants at the last trial does not alter the aspect of the case, except so far as the question arising out of-the insurance in the Mercantile Insurance Company is concerned.
As that insurance was cancelled prior to the issue of the one by the defendants, the defendants cannot claim from its having at one time existed.
The only questions left arise out of the rejection of evidence.
The questions, objections to which were sustained, were designed (except as hereinafter mentioned) to establish:
First.—A parol agreement made at the time of making the contract of insurance represented by the policy.
As it was not proposed to prove a state of facts which authorize a court of equity to reform the policy, mere proof of a parol contract made before or at the time the policy was issued ' was properly excluded.
Second.—To establish that neither the defendants nor any prudent underwriter would have taken this risk if, when the policy was applied for, it was known that the vessel had sailed on December 21 and had not since been heard from.
The question being not what the defendants or a prudent underwriter would do under such circumstances, but simply what contract the defendants did, in fact, enter into, without any fraud or imposition practised by the plaintiffs, the evidence was properly excluded.
Third.—To show what, under the circumstanees, would be a fair and proper rate, or the Usual and market rate, of premium to charge on this vessel on the 6th of February.
The premiums the plaintiffs agreed to pay were those that should conform to the rates of the company; consequently it was inadmissible to prove any other rate of premium.
There are two other .questions and an offer, objections to which were sustained, to be noticed.
The first is:
State what has become of that paper ?
It appeared that the witness had no recollection of the paper, and it did not appear that he had searched for it. It is necessary
p. 287
that a witness should have some knowledge or recollection of the fact that a paper did once exist, and have some connection with its custody, before he is in a position to testify to what has become of it.
The second is:
Was there any rate in use by your company applicable to a vessel reported forty-seven days out from Port an Prince and not heard from ?
This would have been proper if the defendants had pleaded that there was such a rate, and asked to counterclaim a premium fixed by it. As there is no such pleading, it was properly excluded.
It may be suggested that the object of this question was to prove that there was no such rate, and so to let in proof as to what would be a fair and reasonable rate, for otherwise the company would be liable on a risk without receiving any adequate premium therefor.
The answer is, that if they have neglected to provide for these exceptional cases in their contract, they must take the consequences of their neglect, if it deprives them of an adequate compensation.
If there are no rates to meet a case like this, then the company are entitled to the rate of two per cent., as fixed by the policy.
The offer was to prove what the printed form of application was.
I understand this to be an offer to prove what the ordinary printed blank in use by the company was. I so understand because the witness who was under examination at the time the offer was made had testified to all that he recollected about the contents of the application sent in for the policy in question, and no other witness is suggested as having any knowledge or recollection of the contents of that particular application. The evidence offered was, in this view of the offer, inadmissible.
I perceive by the defendants’ points that they claim that the court below erred in allowing the plaintiffs to turn the French weight, in which the bill of lading and invoice is made, into American weight.
p. 288
I discover no objection or exception taken in the court below which raises this point. This might be sufficient to prevent any review of the verdict on this ground. It perhaps, however, is as well to say that the word pound used in this sentence in the policy—“ St. Domingo coffee at 11c. per lb ” is to be construed as meaning American pounds.
Exceptions overruled and judgment ordered for plaintiffs on the verdict, with costs.