Snow v. . Mercantile Mutual Ins. Co. , 61 N.Y. 160 ( 1874 )

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] The general rule of law is well settled, that if intelligence of a fact enhancing the risk or of a loss is received after an order has been given for a marine insurance and before the contract is executed, it must be communicated to the underwriters with due diligence, or the order be countermanded. (1 Phillips on Ins., § 561.)

The question open to controversy in the above proposition is, the meaning of the expression "due diligence," or "due and reasonable diligence," as found in some of the authorities. It is claimed by the defendant that it means extreme diligence. To support this view a dictum in Andrews v. Marine Ins. Co. (9 J.R., 34), is referred to; also, 2 Duer on Insurance (note 4, p. 530).

In order to determine this question a general view should be taken of the authorities.

The defendant urges that the rules of morality require that the insured should use the same diligence to prevent the insurance as he would to prevent the payment of the premium if the vessel were safe, citing 2 Duer on Insurance (§§ 13 and 19, p. 410).

This consideration would address itself to us with much force if the question were new and open to be considered on purely theoretical grounds. The law on this subject seems to be easily ascertained from the decisions, and it is incumbent upon us to apply and enforce it as we find it.

One of the earliest cases on this subject is Grieve v.Young, in the Scotch Court of Sessions, reported in Millar on Insurance. On December 10, 1779, Grieve, a merchant in Eyemouth, wrote to his correspondent in Edinburgh to take out an insurance on his ship, which had just sailed, and was then out of danger. As Eyemouth was not a post town, Grieve sent the letter to a place on the London post road, whence it would be sent by post to Edinburgh. It was sent on the evening of the tenth, and arrived at six o'clock P.M. on the eleventh. The insurance was taken at eight o'clock. The ship was in danger on the evening of the tenth, and went to the bottom at ten o'clock of the morning of the eleventh. Grieve was aware of all the facts of the case. The court held that it was not incumbent upon him to send by express to Edinburgh to give information of the facts, but only to make use of the mail and post a letter at once, countermanding the order.

This case was approved in Watson v. Delafield (2 Caines, 224; S.C., 1 J.R., 150); and in the Court of Errors (2 id., 526). It was held in this case that if an insured, having written letters ordering an insurance, learns of a loss he is bound, if practicable, to countermand his order by the same mail.

The Supreme Court of the United States, through Mr. Justice STORY, lays down the correct rule upon this subject in the case of McLanahan v. The Universal Insurance Company (1 Peters, 170), as follows: Where a party orders insurance and afterward receives intelligence material to the risk, or has knowledge of a loss, he ought to communicate it to the agent by "due and reasonable diligence," to be judged under all the circumstances of each particular case, for the purpose of countermanding the order or laying the circumstances before the underwriters. The "extreme diligence" recognized in Andrew v. Marine Insurance Company may be reconciled with the views of Justice STORY by assuming that, in special cases, extreme care may be requisite to constitute due and reasonable diligence.

The case of Green v. Merchants' Ins. Co. (10 Pick., 402), presents this question in a clear light. The proposition is there laid down that if a person who has directed insurance to be procured at a distant place, on a risk already commenced, receives, before the contract is made, intelligence of a loss, he is bound to transmit the intelligence by the earliest and most expeditious usual route of mercantile communication, in order that it may be laid before the person requested to underwrite; but the omission to send by an unusual and extraordinary conveyance, although by possibility it might arrive before the policy was effected, will not vitiate the policy. The question whether a particular mode of communication is a usual one, is matter of fact, and must, in general, be found by a jury. (Green v. Merchants' Ins. Co., 10 Pick., 402; McLanahan v.Universal Ins. Co., 1 Peters, 186; Byrnes v. Alexander, 1 Brevard [S.C.], 213.)

Following these authorities we must hold that the plaintiff was not bound to resort to the telegraph to communicate the loss of the Sunda to the defendant, unless that was at the time a usual means of mercantile communication.

The statement of facts on which the court below acted contains no finding upon this subject. In fact, it seems studiously to avoid any such finding. Had there been a distinct proposition submitted that the telegraph was then a "usual mode of mercantile communication," the plaintiff must clearly have failed to establish a case for recovery. Instead of that the statement is, that the telegraph between said places (Liverpool and New York) was used by merchants and others as a mode of communication whenever, in their judgment, the interests of their business required the necessary expense for that purpose. This is, by no means, equivalent to a statement that it is a "usual" mode of mercantile communication. Nor do the statistics of the traffic help the case. At the time of the disaster the rates were very high between New York and Liverpool, and the telegraph messages were infrequent. All the messages between Valentia and Heart's Content, or in other words, between America and Europe, averaged but twenty-nine per day both ways, or fifteen from Europe to America. This was the entire telegraphic correspondence between the two countries for all forms of business, and for all the requirements of friendship and affection. This average had prevailed for three months. The messages for the last of the three months averaged ten less than for the first. Under this state of facts I can see no reason for finding that the telegraph was at that time a usual means of mercantile communication, within the meaning of the authorities that have been cited.

The case of Proudfoot v. Montefiore (L.R. [2 Q.B.], 513), is not opposed to this view. In that case the appellate court, by agreement of counsel, was authorized "to draw inferences of fact as they thought proper." It was held, accordingly, that as the entire telegraph between the places referred to in that case was in "general use" between agents and their employers, it was the duty of the insured to make use of it. That decision is in entire conformity with the principles followed in the case at bar, as it turns upon the special circumstances presented to the court. It would be followed in this cause if we could be satisfied (as the English court was on the facts submitted to it) that the telegraph between Liverpool and New York was, on October 31, 1866, a usual means of mercantile communication.

The judgment of the court below should be affirmed.