Scranton Steel Co. v. Ward's Detroit & Lake Superior Line

The first count in the declaration charges the defendant transportation company with having agreed to carry and to insure. The *870second count differs from the first only in its averment of agreement to carry and to procure insurance to the full value of the rails. The agreement was an oral one between Hammond, agent of the Erie road, at New York, and Ward, the manager of the defendant line. While the conversation is somewhat differently stated'by the two witnesses. I am satisfied, and have found as a fact, that Ward agreed to carry the rails, and to insure them, at two dollars per ton. The meaning of those words, then, becomes a question of construction for the court. Did Ward thereby intend that the defendant transportation company should insure these personalty, or was it the intention that he, acting as agent for this line, should procure them to be insured in some responsible company? The authorities recognize a clear distinction between a contract of insurance and a contract to insure, in the fact that the former is executed and the other is execu-tory. In the one case the action is upon the contract for the loss or damage sustained under the risk, while in the other the action is fora breach of the contract for not insuring, and the measure of recovery is the loss sustained thereby. The weight of authority is that a parol contract to insure will be enforced in equity even though the charter of the company requires its contracts of insurance to be in writing; the courts holding to a distinction between an executory and executed contract, and that the charter provisions can only be held to apply to the latter. This was the construction given by the supreme court of the United States to a statute of Massachusetts in Insurance Co. v. Insurance Co., 19 How. 318. See, also, Insurance Co. v. Shaw, 94 U. S. 574; Sanborn v. Insurance Co., 16 Gray, 448; First Baptist Church v. Insurance Co., 19 N. Y. 305; Wood, Ins. § 11; May, Ins. § 23. Most of the cases in which the distinction is taken have arisen in actions against fire insurance companies for failing to issue jjolicies in which the measure of damages is the same as if a policy had been issued. In such cases the courts would naturally interpret the contract to insure as a contract to issue a policy in the defendant company; but, where the promise is made by a person or corporation whose business is not to insure, the authorities indicate that it is satisfied by the promisor’s procuring a policy in some responsible company to the value of the property insured. There is no doubt that when a factor receives goods on commission, with instructions to insure, he satisfies those instructions by procuring policies in a responsible company. Mechem, Ag. §§ 510, 1011. And it is difficult to see why a different construction should be given to the receipt of goods under an agreement to insure. Thus, in Johnson v. Campbell, 120 Mass. 449, it was held that a letter issued by a firm of commission merchants, inviting consignments of goods, and stating that they “will be covered by insurance as soon as received in store,” did not import that they were personalty to be the insurers of such goods, and that the agreement was performed by their obtaining reasonable and proper insurance against fire. The court observes:

“The circular issued by the firm of Johnson & Co., inviting consignments of goods, does not import that they personally were to be the insurers of such goods against fire. It is simply a promise that the goods shall be insured, or, *871in the language of the circular, ‘ shall be covered by insurance as soon as received in store.’ A promise to insure is fulfilled by obtaining a reasonable and proper security against a contingent loss. The commission which they weie to charge upon sales was to compensate them for all their charges for guaranty, for effecting and maintaining insurance, and for certain incidental expenses, and services attending the reception and care of property that should be consigned to them.”

In the case under consideration the promise was made by an incorporated navigation company whose business is to carry, but not to insure. Indeed, it is questionable whether a contract of insurance would not be beyond the scope of its powers. The evidence of custom establishes the fact that the managers of such companies provide themselves with what are termed “blank policies,” running to themselves as agents, for account of whom it may concern; in pursuance of which they issue certificates upon all such cargoes as their customers may wish insured, deriving an incidental profit by the usual commission upon such certificates. Beyond this, the finding shows that four cargoes had previously been shipped under precisely the same circumstances; that similar certificates were issued and deposited with O’Shea, and received by him, without objection. To the argument that O’Shea was not the agent of the plaintiff to receive such certificates or to insure the cargo, it may be said that the cargo was intrusted to Hammond, acting as agent of the Erie road, to carry to Lake Superior and to insure; that neither Chamberlain nor Ward had any dealings whatever with the plaintiff, and I think discharged their entire duty in the matter of insurance by issuing certificates, and delivering them to the party of whom they received the cargo. The contracts to carry and to procure insurance were practically one contract, which was made with the Erie road, and plaintiff has no right now to step in and say that he is not bound by its acts in that connection. Wo think the receipt and retention of these certificates by O’Shea must be held to estop the plaintiff from making any objection to the form of the policy or to the amount of the insurance.

Aside from this, however, it is not shown that the plaintiff's loss was not fully covered by an insurance of which he was entitled to take the benefit. Had the loss been total, there might have been some question whether the obligation to insure would be satisfied by anything less than an insurance to the full insurable value of the property; but, as the insurance was more than double the .loss sustained, it is difficult to see how the plaintiff was prejudiced by failure to insure to its full value. The policy is in the usual form of cargo policies,- — the form which has been in use upon the lakes for 20 or 30 years,- — and the provision against suit after one year is now so invariable in insurance policies that the court certainly cannot take judicial notice of the fact that it is unusual. The same remark may be made with regard to the provision concerning proofs of loss. Had these proofs been promptly made, as soon as the plaintiff was informed of the loss, and suit begun within a year, we see nothing in the way of a recovery. It is true that the certificate was issued in the name of “Eber Ward, Manager,” and the loss, if any, payable “to assured *872or order; ” but the policy ran to “Eber Ward, Agent,” “ for account of whom it may concern;” arid" there is no question that, under the authorities, it may be shown whose interest was intended to be insured, iri the samé manner as if the plaintiff’s name had been mentioned. Extrinsic evidence may always be resorted to for the purpose of ascertaining the interests intended to be covered. Lee v. Adsit, 37 N. Y. 86; Castner v. Insurance Co., 46 Mich. 15, 8 N. W. Rep. 554. A policy upon a cargo •in the name of A., “on account of whom it may concern,” or with other equivalent terrhs, will inure to the interest of the party for whom it was intended by A.; provided he, at the time of effecting the insurance, had the requisite authority from such parties, or the latter subsequently adopted his ■ act, (Hooper v. Robinson, 98 U. S. 528;) and, if an agent procure a'policy of insurance .in his own name, either the agent or the principal may sue thereon, (Waring v. Insurance Co., 45 N. Y. 611.)

>. ;Erom- the above stateriient of facts we find, as a conclusion of law, that ,the;defendant has. performed the contract set forth by the plaintiff in his declaration, and is entitled to judgment.