Insurance. Insurance was made to the amount of eight thousand
dollars on the ship
Paragon, for one year. The policy
contained the usual risks, and among others, that of the perils of
the sea. The assured claimed for 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
Paragon was in part insured; and in
November, 1836, in the year during which the policy was in
operation, she sailed from Hamburgh in ballast for Gottenburgh for
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 and
sank her. She lost her bowsprit, jib boom, and anchor and was
otherwise damaged, and put into Cuxhaven, a port at the mouth of
the Elbe and in the jurisdiction of Hamburgh. The captain of the
galliot libeled the
Paragon, alleging that the loss of his
vessel was caused by the carelessness or fault of those on board
the
Paragon. Upon the hearing of the cause, the court
decided that the collision was not the result of the fault or
carelessness of 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 both parties -- that is, 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 the half of her own value and
to pay one-half of the repairs of the
Paragon. The result
of this decree was that the
Paragon was to pay 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, being 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 the
Paragon and no freight earned, the
Paragon was obliged to bear the whole loss.
Held
that the assured were entitled to recover.
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. So far as the injury and repairs done to the
Paragon itself extend, the underwriters are liable for all
damages.
The 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, is
correct when it is understood and applied in its true sense, and as
such, it has been repeatedly recognized in this Court.
The law of insurance, as a practical science, does not indulge
in 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 and necessary
consequence of the peril insured against.
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.
It has been held by learned foreign writers on the law of
insurance 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 the peril, for all practical
purposes, as the proximate cause of such expense, contribution, or
loss. This they hold upon the general principles of law applicable
to the contract of insurance. In the opinion of the Supreme Court,
this is the just sense and true interpretation of the contract.
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 the
foreign law will govern the rights of the parties, and not the
domestic law. Such is the known case of general average, settled in
a foreign port according to the local law; although it may differ
from our own law.
Page 39 U. S. 100
This was a case on a policy of insurance dated 1 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
15 March, 1836, at noon, at a premium of five percent. 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 10 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 sank 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 libeled 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's 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.
Page 39 U. S. 101
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 its next session, to be by the said Court finally
decided.
Page 39 U. S. 107
MR. JUSTICE STORY delivered the opinion of the Court.
The defendant, by a policy of insurance, dated 1 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 13 March, 1836, at noon, at
five percent. 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 10 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 libeled 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
Page 39 U. S. 108
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, therefore, 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 cognizance 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
recognized 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 savors more of
metaphysical than of legal reasoning. If the argument were to be
followed
Page 39 U. S. 109
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
Page 39 U. S. 110
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
Page 39 U. S. 111
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 v.
Salvador, 4 Adolphus & Ellis 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 favor 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
Page 39 U. S. 112
therefrom. Pothier, Traite 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, 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 favor 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 favorably as
unfavorably 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 v. White, 2 Barn. &
Cresw. 805. In the present case, the policy was on time, and the
vessel had, as it were,
Page 39 U. S. 113
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.
