Callaghan v. Atlantic Insurance

Upon the facts in this case it will be perceived, that the dispute is not whether there was a contract of insurance entered into between the owner and underwriters, (for it is conceded there is enough to constitute a valid and binding contract) but, what are the terms of it; so that, if they were to be embodied in the form of a policy of insurance, what ought the policy to contain ?

The great point in determining this question is, the force and operation of a few simple words contained within a parenthesis in the application for insurance ; which states the ship then to be at the port of Gibraltar. If these words amount to a*74Warrailty of the vessel’s being then in safety at Gibraltar or' physically existing there, they must necessarily have a place jn ^g ag forming a part of the contract. But if they are merely words of representation, they do not enter into the contract or form any part of it and are to be considered only as inducement to the contract; and their influence upon it will then depend upon the materiality of the fact which they represent, should it pro* to be untrue, and upon the good faith in which such representation was made.

The distinction in the law of insurance, between an express warranty and a representation, is generally well understood. The former is the affirmance of some fact always inserted in a policy and forming a condition which must be strictly.complied with by the assured; while the latter is a statement of some collateral circumstances not embodied in the policy, although made before the contract is completed. In' order to determine whether the words in question amount to a warranty, and were so intended, (for, as in every other case, they must be construed according to the intent of the parties, to be gathered from the whole instrument,) we must look at all the circumstances, the occasion of using the words, and the object of them.

The owner had sent his ship with a cargo to Gibraltar and from thence she was to proceed on a trading voyage to the Pacific—first going up the straits, not further than Marseilles, for the purpose of obtaining a change of cargo or for some other object necessary to'the success of the voyage—and from the result of which he anticipated large profits. Under these circumstances he applied for insurance, not upon the vessel or any particular cargo which she had or might take on board or earnings under the denomination of freight, but upon the profits which he expected would result to him from the goods and merchandize which might be taken on board and be sold, bartered, or disposed of in the course of the intended voyage. So far, therefore, as the insurance was concerned, it was a voyage to commence at Gibraltar; it was at that port the policy was to attach ;' and there the risk which the defendants agreed to assume was to begin.- It was unnecessary; in shewing the *75■commencement of the voyage, to say more than that the insurance was to be “ at and from the port of Gibraltarbut if the policy contained the usual words “ lost or not lost,” the risk would extend to a time previous to the date of the policy, and the underwriter would be rendered liable for a loss previously accrued. The consequence to an underwriter, from the use of these general words in a policy, may be a reason for enhancing the premium or perhaps for his declining the risk; and, therefore, in order to induce him to underwrite a policy at a less premium, the insured might be willing to exempt the underwriter from the chance of any antecedent loss. Hence, in a variety of cases, words amounting to a warranty of the vessel’s safety on a particular day, or at a certain 'place, or that she would sail on a day mentioned, have been introduced into policies for the purpose of obtaining the insurance upon more favorable terms, by narrowing the risk and restricting the liability of the underwriter: Reade v. Commercial Ins. Co. 3 J. R. 360.; Dougl. 12. n, (4.); Hughes, 307, 308; 3 Kent's Com. 236. And hence, in the present case, the object of inserting the words “ where she now is,” may have been to limit the operation of the contract to a prospective loss -and thereby induce the defendants to assume the risk at a less rate of premium than they otherwise would perhaps have charged.

But whatever was the object, we find these words inserted; and they amount to an averment of the vessel’s being at Gibraltar on the 12th of November. I think the defendants were’ entitled, in making out the policy, to insert these words as a part of the contract. There can be no doubt they would have amounted to a warranty in case they had been inserted. Hughes, in his excellent treatise on the law of Insurance p. 307, lays it down as a settled rule, that any “ positive avermentlor “ allegation on the face of the instrument, and making a part “ of the written contract, whether inserted in the body of it, 61 or written in the margin transversely or otherwise, amounts “ to a warranty or condition.” He is fully supported in this position by authority; I must, therefore, consider it as amounting to a warranty.

It is strongly urged against this conclusion, that, as there is *76one warranty in terms contained in the application—namely, “ property warranted American, to be proved in Philadelphia „ onjy» therefore, it is not to be supposed any other express warranty was intended. This argument is not well founded. founded upon separate and distinct facts; and it is immaterial in There certainly may be several warranties in the same policy, %vhat part of the policy they are inserted; one may be in the body of the policy, and another in the margin by way of memorandum merely; and although the one or the other may not be in the formal words of a warranty, still, if the words contain a direct or even an incidental allegation of a fact relating to the risk, they will be considered as amounting to a warranty: Phillips on Insurance, 25. I can, therefore, see no reason for saying, because one formal technical warranty is expressed in the writing, constituting the basis of the agreement, that the other statement contained in it may not also be considered a warranty. The maxim, “ expressio unius, est “ exclusio alterus” can have no application to such a case.

But, suppose I am wrong in my cbnclusions, and that the words in dispute are not to be taken as a warranty, but are to be looked upon as a representation merely:—The question then arises as to their eifoct upon the contract, although not forming a part of,it? From the view which I have already taken of the subject, it is unnecessary for me to undertake the settlement of this question.- Yet, as it has been discussed by the counsel, I am unwilling to pass it by without a brief examination. It must be admitted that the words .used by the owner, in his application, convey a positive and unequivocal assertion of the ship’s being then at Gibraltar, There is no qualification of the terms to leave the mind in doubt or uncertainty on the subject of the vessel’s safety. It is true he could not have known the fact of the vessel’s safety: and yet from the unqualified manner in which it is stated, the defendants had a right to repose upon it as a truth. It could make no difference to them whether he knew it to be true or not. He states it to be so, and thereby takes upon himself exclusively the chance of it, being otherwise. If he wished to throw a portion of that chance upon the defendants, he should have qualified *77Ms expression, by saying,66 the ship was at Gibraltar by the last “ advicesor “ she arrived there on the 6th day of September, , . , , . A , , . “ and intended to remain until that tune; and even it he had said “ where the ship now is, according to the last advices,” it would have been sufficient to have put the risk of the vessel’s safety upon the defendants, provided the representation was made in good faith—the owner being ignorant of any thing to the contrary. The principle in the cases before Lord Ellen-borough, in 3 Campbell, 312, and 10 East, 415, (strongly relied upon by the complainant’s counsel) is in accordance with this view. In those cases it will be seen, the representations related to mere probabilities or expectations as to the time of the vessel’s sailing, which the parties could not know with certainty, having no control over the event; and they were held by the learned judge not to vitiate the policies, provided the representations were made in good faith—which point he submitted to the jury. While, therefore, on the one hand, a representation fairly made will not vitiate a policy, although it be in some degree erroneous, yet, on the other, if the representation contain the assertion of a material circumstance which the insured makes in an unqualified manner, without knowing whether it be true or not, it will vitiate the policy, if it turns out to be untrue. Thus, “ a misrppresentation,” says Hughes, p. 347, “ by the insured, or Ms agent, of a material fact, will “ vitiate a policy, whether the party asserts a fact which he “ knows to be false or positively makes an assertion which he “ does not know to be trueand he refers to the case of Macdowal v. Fraser, Doug. 260, wMch fully supports Ms position. So C. J. Marshall, in Livingston and Gilchrist v. The Maryland Insurance Company, 7 Cranch, 535, says, “ a false “ representation, though no breach of the contract, if material, “ avoids the policy on the ground of fraud or because the in- “ surer has been misled by it.” It appears to me these principles apply directly to the present case, even considering it one of representation and not of warranty. What then would be the result, if the complainants had a. policy made out according to their own interpretation of the contract ? The representation of the vessel’s being at Gibraltar at the date of the policy would *78be falsified by the fact of her previous destruction; and, being deemed material, for the reasons before mentioned, it would be j^pogg^Q for insured to sustain an action at law for the recovery of the loss.

Again: if this court should decree thejcomplainants a policy, containing what I hold to be a warranty in regard to the existence or safety of theship at the time of the contract, it would still more decidedly be unavailing to them.

There were other questions raised and discussed upon the hearing, in relation to the nature of an insurance upon profits and the commencement of the risk, by the lading of a cargo at Gibraltar, which it is contended was necessary, before any policy upon profits could attach. It is entirely unnecessary to examine that branch of the case. The view I have taken of it upon the other grounds, are conclusive, in my judgment, against the complainants’ right to an indemnity from the defendants on account of the loss. I might decree to them the delivery of a policy, but it would be unavailing for any beneficial purpose, and I shall, on that account, refuse it.

The bill must be dismissed; but as-the complainants have brought the suit in a representative capacity, as assignees, for the general benefit of creditors under a deed of assignment of the whole of an insolvent’s estate, I shall excuse them from the payment of costs.