Supreme Court of Maryland, 1862

Prsdt. and Directors of Balto. Fire Ins. Co. v. Loney

Supreme Court of Maryland · Decided December 5, 1862 · Cocuran

20 Md. 20

Counsel

Wm. Schley , for the Insurance Companies: In support of the appeals, by the insurance companies , the following points will be maintained: I. The plaintiffs' 6th prayer ought to have been rejected. (1st.) It claimed interest from 7th May 1857. The fire occurred 14th April 1857. By the 9th condition of the policy of the Baltimore Fire Insurance Company, the loss is payable within 60 days , after the loss shall have been ascertained and proved. Computing, therefore, even from the very day of the fire, the term of 60 days would have extended to 13 th June 1857; computing from the affidavit of proof of loss, 18th August, the term of 60 days would have extended to 17th October. Even if the denial of liability to the extent claimed, on the 7th May, was improper, still the time of payment , as fixed by contract, was not thereby accelerated. If the principal was not due on the 7th May, interest could not accrue from that day. Allegre vs. Ins. Co. , 6 H. J., 413 . Newson's Adm'r vs. Douglas, 7 H. J., 417 . (2nd.) The 6th prayer refers to the 5th prayer for its hypothesis; and the 5th prayer refers to the 1st and 2nd prayers, which are dissimilar; and, in some respects, repugnant. It is impossible to decide, on what precise hypothesis of facts, the prayer was based. (3rd.) But, apart from minor objections, the 6th prayer is essentially wrong. It denies to the defendants any right of contribution, on any basis whatever, from the other insurances. The learned Judge granted the prayer, in reliance on the case of the Howard Ins. Co., vs. Scribner , 5 Hill , 298; a case, which has been cited, occasionally, in other Courts, but has never been followed or adopted in any reported case, and has been denounced as unsound. It declares that the covenant, limiting the liability of the insurer to a mere proportion of the loss, is inapplicable and in officious, where there is another insurance, covering the same property, but covering, also, additional property. Identity of the subject — without more and without less — identity in omnibus , precise and exact — is made the criterion of contribution; the sine qua non of the occurrence of the casus f[ILLEGIBLE TEXT]deris. In our Court, in the case of The Associated Fireman's Insurance Company, vs. Assum , 5 M d. Rep. , 165, its authority was disregarded; and the principle of the decision, in that case, is directly the other way. The companies will Insist, that the ether insurances covered the goods of the assured, belonging to them, as their own property, notwithstanding that said other insurances, also , covered property held in trust or on commission. Covering both classes of property, those other insurances covered each class. If property, belonging to either-class, was destroyed by fire, the assured was entitled to indemnity for such loss, from those other insurances, even if no part of the other class was injured. The risk assumed was not limited to a blended loss. Those other insurances covered every article of goods in the warehouse, whether belonging to the assured, as their own property, or held by them in trust. The covenant is unambiguous and comprehensive; plainly embracing "all merchandise — their own or held by them, in trust or on commission." (4th.) It is obvious, that if the defendants' third prayer ought to have been granted, then the plaintiffs' 6th prayer ought to have been rejected. But, even if the defendants' 3rd prayer was properly refused, still, if the theory of contribution en the basis of a double proportion, suggested by the witness, Coale, and affirmed by the plaintiffs' 5th prayer, was the true rule, then the 6th prayer ought not to have been granted. II. The defendants' third prayer ought to have been granted. The covenant is plain and unambiguous. The casus f[ILLEGIBLE TEXT]deris , making a proportionate liability, the basis of adjustment has occurred. The premises insured, by the defendants' policy, mean the assured's own goods. Now the other insurances clearly cover the defendants' own goods, notwithstanding those other insurances also cover goods held on commission. The policy of the defendants, and the other policies, therefore, cover the same subject; — the assured, whose interest is covered by the policy, have the same interest covered by the said other insurances; and, in all, the risk taken is the same, to wit: against loss or damage by fire. Suppose that the goods destroyed had been only those belonging to the assured in their own right, and further, that the said other insurances were the only insurances covering the same, would not the assured be entitled., as against said other insurances, to indemnity, notwithstanding said other insurances also covered property, held on commission ? And are not said other insurances still liable, notwithstanding the risk assumed by the defendant? And if this be so, are there not several insurances on the same premises? The following authorities will be relied on in support of this position. Angell on Fire Ins., secs. 26, 88. Whiting vs. Independent Mut. Ins. Co. , 15 Md. Rep., 297 , and cases there cited. Storer vs. Elliott Ins. Co. , 45 Maine 179 . Haley vs. Dor. Ins. Co. , 1 Allen, Mass. , 536. 1 Phil. on Ins., sec. 366. 2 Id., sec. 1263, note 2. On the appeals by the assured , the following points will be maintained, on the part of the insurance companies: III. The plaintiffs' 1st prayer was properly rejected. The policy of the defendants is to be construed by its terms. If not in conformity with the actual contract, relief should be sought in equity. Extrinsic facts, where there is no ambiguity, cannot vary the construction of the written contract. Even if facts had been given in evidence, which would afford ground for an action of deceit , or would justify an imputation upon the contract, as originating in fraud , still, such facts could not avail, in an action, founded exclusively on the contract, and having no other basis. The manifest meaning of the contract is, to limit the premises insured, to goods in which the assured had an interest as proprietors. Carpenter vs. Providence Co. , 16 Peters, 496 , 506, 509, 500. Parks vs. General Ins. Co. , 5 Pick., 34 , 36. Col. Ins. Co., vs. Lawrence , 2 Peters, 25 , 48, 49. 2 Marshall on Insurance , 789. Angell on Insurance, sec. 74, and note 4, page 115. H alhead vs. Young , 36 Law Eq. , 109. Hughes vs. Tindall, Id. , 415. Glendale Woollen Co. , vs. Protection Ins. Co. , 21 Conn. R. 19 . The same views and authorities apply to the plaintiffs' 2nd, 3rd and 5th prayers. IV. The plaintiffs' 4th prayer affirms the propriety and application of the rule of adjustment, as stated by Coale, in his testimony. In case of general average, in marine insurance, adjustment, on this principle, has been commended as just. But where there is a fixed amount of insurance on goods, (embracing goods belonging to the assured, himself, and goods held by him on commission.) without any apportionment, it is an insurance for its full amount, on each class; and the insurer takes the risk for the full amount, on each class, if loss of one class should happen to such amount. Abatement, from contribution, is a qualification of the consequences of such liability. Restriction, in case of loss of goods of both classes, to an amount not exceeding the amount insured, is another incident, qualifying the consequences of liability. But the construction of the contract does not depend on the actual or possible consequences; but upon the meaning and intention. If the proposition, asserted in the last preceding point, is not true, then the doctrine of the plaintiffs' 5th prayer would be correct. The difficulty of ascertaining the contributory amount of the other insurances results, as a consequence, from the confusion, introduced by the assured; and which ought not to enlarge the responsibility of these companies. It cannot affect the principle of contribution; although it may embarrass adjustment, in practice. R. Johnson and S. Teakle Wallis , for Loney Co. 1. Insurance is recognized by all writers as preeminently a contract of good faith, v. uberimce fidei. Policies ought, without too literal adherence to the language of them, to be held binding upon underwriters in the sense, and to the extent in which they knew at the time of issuing them, the assured understood them. It is immaterial how the defendants knew the manner in which the goods were held — if they actually did know it. If an underwriter looks at a house, and misdescribes it in the policy which he prepares, it is protected nevertheless. These policies, issued with a knowledge of what the plaintiffs meant to insure, were either intended by both parties to cover the goods held on commission, and if so meant, ought to be so construed — or the defendants, in bad faith, which the plaintiffs are unwilling to impute to them, had in view and concealed from the plaintiffs the condition requiring goods held on commission to be described as such, and purposely described them otherwise. If the latter, they ought not to be allowed the benefit of the condition so fraudulently concealed. An underwriter who insures a ship, which he knows has arrived, is compelled to pay back the premium, although nothing in the policy imposes on him such an obligation; because good faith requires it. Effect can only be given to the same principle here by nullifying the condition, in reference to which the bad faith was practised, or by allowing to the information, which the defendants are assumed to have had, the same weight as if it had been embodied in the written applications. National Fire Insurance Company vs. Crane , 16 Md. Rep., 260 . Perry County Insurance Company vs. Stewart , 19 Penna. R. , 45 and 46. Howard Fire Insurance Company vs. Bruner , 23 Penna. R., 50 , 56 and 57. Wilson vs. Genessee Mutual Insurance Company, 16 Barbour, N. Y. Sup. Ct. , 511, 512, c. Marshal vs. Columbia Insurance Company , 7 Foster, N. H. , 157. Franklin Ins. Co., vs. Hewitt , 3 B. Monroe, 231 . Ætna Insurance Company vs. Jackson , 16 B. Munroe , 242, 243, c. Duncan vs. Sun Ins. Co. , 12 La. An. Rep., 486 . 2. Even if the defendants had not knowledge of the facts relied on in the first prayer, the goods on which the plaintiffs had a lien for commissions and advances, were, within the meaning of the policies, to the extent of such lien, their own goods. Franklin Fire Insurance Company vs. Coates Glenn , 14 Md. Rep. , 285. Russel vs. Union Insurance Company , 1 W. C. C. R. , 409. Dc Forrest vs. Fulton Fire Insurance Company , 1 Hall N. Y. , 84. Lee vs. Barreda , 16 Md. Rep. , 198 and 99. Mut. Ins. Co., vs. Deale , 18 Md. Rep. , 47. 3. The policies, by their language, insured the plaintiffs from all loss on the goods in question. They are not so insured unless they are fully indemnified for all they would have made out of them; at least to the full extent of those belonging to them absolutely, and of their advances and commissions on those consigned. But, for the condition in reference to goods held on commission, the policies would have covered the interest of the consignors as well as consignees. That condition was only intended to guard against liability for the interest of strangers, of whose integrity the underwriters knew nothing. The plaintiffs were as much interested in protecting the consigned goods, to the extent of their claims against them, and their personal integrity was as good a guarantee therefore, as if they were their own absolute property. Waters vs. Monarch Ins. Co. , 85 E. C. L. , 870. De Forrest vs. Fulton Fire Ins. Co. , 1 Hall , 84. 1 Arnould on Ins. , 246, 247. 2 Am. L. Ca. , 575. Slitwell vs. Staples , 6 Duer , 63. Same case , 5 Smith , 401. 4. The plaintiffs were entitled to apply the amounts received by them from other companies, whose policies covered two classes of goods, to that class not covered by the defendants' policies, and the Court ought so to marshal them as to make all the policies together cover, as far as practicable, the entire loss. That contribution from "blended," or "non-concurrent policies," as they are called, is not allowed, when the effect of it would be to leave any part of the loss unpaid. The insured ought to suffer no loss so long as there is a specific policy unexhausted. Insurance Monitor , 111, 112. Kane vs. Commercial Ins. Co. , 8 Johnson, 229 . Bousfield vs. Barnes , 4 Campbell , 228. Minium vs. Columbian Ins. Co. , 10 Johnson, 75 . KcKim vs. The Phoenix Ins. Co. , 2 W. C. C. R. , 89. 1 Phillips on Insurance, secs. 367, 368, 124. 5. The clause in reference to apportionment of losses among-different companies, like the "American Clause" in marine policies, is only applicable to cases of partial loss, or of over insurance; not to a ease where all of the policies together amount to less than the loss sustained. 2 Philips on Insurance, sec. 1263. 2 Am. L. Co. , 651. 1 Philips on Insurance , 307 and 368. 6. The out of town policies, insuring a gross amount on the plaintiffs' own goods, and those held on commission, without specifying the amount intended to be insured on each, were not such as entitled the defendants to an apportionment of the loss with respect to them, and the defendants were therefore bound to the same extent as if such other policies had not been in existence. Howard Ins. Co. , vs. Scribner , 5 Hill , 298. 7. That if these be proper cases for apportionment, Coale's mode of adjustment was the proper one. Whiting , use of Sun Mutual Ins. Co., vs. Independent Ins. Co. , 15 Md. Rep., 297 . 8. Has interest been allowed from the proper period? Upon the positive refusal of the insurance company to pay the loss, the plaintiff, the insured, had the right to sue, viz: on the 7th of April 1857. If the contract was such as would at law bear interest, the right to claim interest arose simultaneously with the right to demand the principal. The question of interest is one for the jury. Newson vs. Douglas , 7 H. J., 453 . A minor is entitled to claim interest from the time when the guardian was bound to pay the principal. Fridge vs. State , 3 G. J., 117 . Dehnison vs. Lee Wife , 6 G. J., 385 , 386, affirms the case of Newson vs. Douglas. When the demand was made, the Baltimore Company offered to pay, but refused to pay more than the proportion of the insurance assumed by them to be the extent of their liability. If this offer had been accepted, Loney Co. would have sustained a heavy loss. Cui bono to have waited for the expiration of the sixty days? Under the case of Allegre vs. Ins. Co. , and Ins. Co. , vs. Coates Glenn , we were entitled to sue and claim interest at once. The Court would not send the case back if they should disagree with us on this point.

Opinion of the Court

Cocuran, J.,

delivered the opinion of this Court:

This suit was brought on a policy of insurance, issued by the appellant on tho 27th of August 1855, and continued *34 by successive renewals to the 1st of July 1857, by which the appellees, as co-partners, were insured to the amount of $5,000 against loss by fire on goods contained in the 3rd story of a brick warehouse on Hanover St., in the City of Baltimore. The policy contains a condition that it should not cover goods held in trust or on commission, unless they were so declared, and also clauses providing that other insurances on the same properly should be endorsed upon it; and in case of such other insurance and of subsequent loss, that the appellees should not be entitled to demand or recover any greater portion of the loss or damage sustained, than the amount thereby insured should bear to the whole amount of the several insurances effected* On the 25th of December 1855, the appellees obtained another insurance on the same goods to the amount" of $10,000, afterwards increased to $15,000, by a policy containing the same clauses and conditions, ijjmeckby the Fireman’s Insurance Company of Baltimore^Hthe property insured was subsequently removed, by permission of that company and the appellant, to No. 35, S. Charles St. Prior to the 14th of April 1857, the appellees had affected, and then held, in addition to these insurances, six other policies for an aggregate amount of $65,000, issued by foreign companies, containing clauses requiring goods held on commission to be so specified, and in which the goods insured were substantially described as their own, or held by them for sale on commission. On the date last mentioned, the stock of goods amounting in value to $88,113.38, on which these several insurances were obtained, was destroyed by fire. A portion of the goods amounting to $16,855.02, belonged to the appellees, and the remainder, valued at $71,258.36, on which they had a lien for commissions and advances to the amount of $36,909.39, were held by them for sale on commission. The loss was $3,113.38 in excess of the whole amount of insurance, and the portion covered by the foreign policies was paid without reference to apportionment or contribution, leaving the balance of the loss $23,113.38 *35 to be satisfied by the policies of the two Baltimore companies, to the extent of their respective liabilities. The conditions of the policy as to preliminary proof, were complied with, and a demand made for payment of the whole amount insured by it ou the Ith day of May 185T; but the appellant, contending that its liability was limited to loss on the appellees’ own goods, and proportional thereon to the aggregate amount of all the policies, offered, in satisfaction thereof, to pay the sum of $991.13, which the appellees refused to accept. Evidence was offered at the trial without exception, showing that the appellees were Commission Merchants chiefiy engaged in selling goods consigned to them for sale on commission, that they were generally known to be so engaged, and the custom of such merchants, of keeping large quantities of commission goods in store, and also tending to show, that the appellant received tlie application for this insurance, and issued this policy with a knowledge of these facts.

Several prayers, involving the construction of the policy, wore offered on both sides, all of which depend on the determination of two questions: 1st, as to the extent of the risk covered by the policy; and 2nd, as to fbe'amount of the appellants’ liability upon it.

The appellees contended, on the hypothesis that the appellant knew their application was intended to be for insurance on all the goods destroyed, both their own and those bold on commission, that the policy should be so construed as to give effect to that intention; or in other words, that the extent of the risk underwritten should be ascertained from that fact, and not from the terms of the policy. The rule presented in this proposition, we think, cannot he applied here. The authorities referred to in support of the construction sought, present facts so far different from those in this case, as to involve other principles. In all of them the construction turned either upon the moaning of terms, which by usage or custom had acquired a particular sense, or on evidence that the insurer, after a *36 full disclosure of facts material to the risk, and in violation of an obligation implied therefrom, neglected to ingerí in the policy such a reference to those facts as was essential to its validity as a contract of insurance. Parol evidence wqs admitted in one class, not to change or vary the contract, but to explain the meaning of the terms used, and in the other to prevent the insurer from obtaining the advantage of a .contract, which, through its default, would otherwise have been without obligation and void.

The policy in this case is entirely consistent with the terms of the application, free fyom ambiguity, and susceptible of a consistent construction in all its parts, and if there was mistake or error in the insurance effected, it does not appear to be ope attributable to the appellant, nor such as to authorize us to look beyond the terms of the policy in ascertaining its meaning and legal effect. We think it cannot be excepted from the operation of the general rule requiring written contracts to be interpreted by their own terms, without regard to extrinsic facts. Mumford vs. Hallet, 1 Johns., 439. Mellen & Nesmith vs. National Ins. Co., 1 Hall, 452. Phil. Ins., 47, 319.

The appellees appear to have obtained this insurance without making any specific statement of the nature of their interest in the goods destroyed, and had there been no express' condition to the contrary, their interest in the goods held on commission, might have been covered by the policy, for upon that state of fact, the material question would have been, whether the failure to inform the insurer that the goods were held on commission, would have affected the risk, and the admission, that the communication of that fact, would not have changed tlio rate of premium, might have been relied on as concluding it. But that is not the question here. This policy expressly provides that it was not to cover goods held on commission unless they were so declared, or as we understand it, so expressed as to appear, in some form, in the description of the goods intended to be covered by it. The. right of the insurer, to *37 limit tho extent of the risk by that condition, cannot be doubted. Phillips vs. Knox County Ins. Co., 20 Ohio, 174. Briehta, vs. Lafayette Ins. Co., 2 Hall, 312. 2 Am. L. Ca., 642. And as we must presume, from the acceptance of the policy by the appellees, that they had knowledge of that condition, wo think it should have the contemplated effect of limiting the risk to the goods which belonged to them.

The next inquiry is as to the amount of liability on tho policy, for tl|o loss sustained on those goods. As we hare before stated, the appellees held seven other policies, six of which, issued by foreign companies, covered tbe goods owned by them as well as those held on commission, on blended risks to tbe amount of $65,000, the remaining one for $15,000, issued by the Fireman’s Insurance Company of Baltimore, covering their own goods only. There is no question in regard to the latter policy, but as the others covered the goods of the appellees, although hi ended in the risk with those held on commission, the appellant insists that they are insurances within the meaning and effect of the covenant relating to other insurances; and, therefore, that it is not liable for any greater portion of the loss on those goods, than the amount insured on this policy hears to the aggregate amount of all the policies. In considering this proposition, it is proper to observo that the contract of insurance is one of indemnity, intended to protect the insured from loss, to the amount of the risk assumed, whether it he on one or several policies, and in general, that the provisions of the contract are favorably construed for the insured in furtherance of that principle.

The covenant in this policy limiting the liability upon it to a share of the loss in proportion to the amount of all the policies, was not intended to impair the right of the appellees to the full indemnity which would otherwise he afforded by them, hut to ascertain the amount of the appellant's liability, subject to that right, by an apportionment of the loss among such of tbe insurers of the same *38 goods,' as by the terms of their contracts should stand in the relation of co-sureties for any loss upon them. To establish that relation the policies should cover distinct and specific risks on the same subject, and in that sense constitute a double insurance, upon which, without the covenant in question, the liabilities of the several insurers, except as to the differences in the amounts underwritten, would be identical, and their rights to contribution reciprocal. The right to contribution is based upon the concurrence of the policies, and the necessary incident of its existence is that the several insurers should be bound with equal certainty, and in the same sense, for the same loss. Lucas vs. Jefferson Ins. Co., 6 Cow. 635. Angel Ins., 134, 135. As we understand the authorities, this covenant relates only to policies which constitute a double insurance, or in other words, it contemplates only such insurances as fix upon the insurers liabilities for this loss, which the insured could not resort to for the satisfaction of other losses, and the question here is, whether the foreign policies were insurances of that character. The loss of the appellees, on the goods held on commission, exceeded the whole amount of their insurance on those policies, and if the covenant relating to other insurances be permitted to have the effect claimed, it is obvious that the right of the appellees to indemnity upon them, would be defeated to the extent of the apportionment to them of the loss sustained on their own goods. Those policies, as we have seen, covered both classes of the goods without any specific apportionment of the amounts’insured to either, and the application of them under the covenant to one class only, in derogation of the right of the insured to indemnity for loss on the other, could be effected only by an arbitrary restriction of the scope and terms of the policies.

The covenant proceeds on the theory, that the insurers are to be discharged from some portions of their respective liabilities by an apportionment of the loss to the several policies. In that respect, it proposes a mutual and com *39 mon advantage to all the insurers affected by it, entirely consistent with the protection of the insured, and there is no apparent reason why it should be permitted to have effect upon other insurances, when from the nature of the case,the common advantage contemplated by if becomes impossible. An apportionment to the foreign policies of the loss on the goods covered by this policy, without any reciprocal operalioh in the way of releasing the foreign insurers from any portion of the amounts of their several liabilities, would eifect a disproportionment of the risks to the rates of insurances on the respective policies by a practical reduction of the appellant’s liability.

In that aspect of the case, the appellant alone would derive the benefits of a condition intended to operate for the common advantage of such other insurers as might he affected by it. It cannot he pretended in that view, that the the appellant and foreign insurers, were hound with equal certainty and in the same sense, for the loss on the appellees’ goods, or that there was any mutuality in their relations and rights, as insurers of the same subject. We do not wish to he understood as saying, that the insurers on the homo and foreign policies could under no circumstances have been equally hound and liable as co-sureties for that loss, for had the loss on the commission goods been less than the amount of insurance on the foreign policies, it might well he said that the excess of that insurance would have been applicable to the loss insured against by the home policies, and the liabilities and rights of the foreign insurers to tho extent of that excess, identical with those of the home insurers.' But in this case tho loss on the commission goods was sufficient to exhaust all the policies covering them, and as the insurers on the home and foreign policies, in view of the right of the insured to full indemnity, became subject to different liabilities by the loss as it accrued, we think the foreign policies were not within the effect of the covenant relating to other insurances, and that tho appellant is not entitled to any ahato *40 ment of its liability on this policy by reasori of them: Haley vs. Dorchester Mutual Ins. Co., 1 Allen, 536. Howard Ins. Co., vs. Scribner, 5 Hill, 298.

The objection made to the allowance of interest from, the 7th of May 1857, when payment was demanded, is founded on a clause contained in the 9th condition of the policy, providing for the payment of loss within sixty days after the same should be ascertained and proved. There was no dispute as to the right of the appellees, to interest after the time fixed for payment by that condition, it being an established rule that interest may be claimed from the time the principal sum becomes payable by the terms of the policy. McLaughlin vs. Wash. Co. Mutual Ins. Co., 23 Wend., 525. Hallet vs. Phoenix Ins. Co., 2 Wash. C. C. R., 279. The principle involved is the same as incases where, by the expiration of the time limited for the payment of a principal sum, interest becomes payable for the time the sum due may be withheld; and the objection made to the allowance of interest in this case, presents the question, whether the amount to be paid on this policy, was due and recoverable- on the day from which the interest allowed was computed. We have no doubt oh that point. It appears from the statement of facts made by ag'reement of the parties, that the conditions of the policy as to preliminary proof, were complied with, and a demand of jiayment made on the date mentioned, and that the appellant thereupon admitted the loss, and offered payment of what it assumed to be the amount of its liability, but in fact a less sum than it was bound for, and then, denying all further obligation on the policy, refused to pay any other or larger sum.

Upon these facts we must hold that the condition as to the time of payment was waived, and that the sum for which the appellant -\yas bound then became due and recoverable. In our opinion the allowance of interest is not open to objection.

From our examination of the whole case,- we conclude' *41 that the 1st and 2nd prayers of the appellant, and the 6th of the appellees, were properly granted, and that there was no error in the rejection of the others;

Judgment affirmed,.

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