Standard Oil Co. of NJ v. United States , 71 S. Ct. 135 ( 1950 )

Mr. Justice Black

delivered the opinion of the Court.

These are admiralty proceedings involving the Government’s liability on a policy of war risk insurance by which it insured petitioner’s steam tanker John Worthington against “all consequences of hostilities or warlike operations.” ¹ Stipulated facts show that on December 16, 1942, there was a collision between the Worthington and the YMS-12, one of three United States Navy mine sweepers clearing the channel approaches to New York harbor.² Both vessels were at fault in failing “to comply with the applicable rules” of good seamanship “under the circumstances.”

In the District Court the United States conceded that mine sweeping is a “warlike operation” but urged that the evidence failed to show that the collision was a “consequence” of the mine sweeping within the meaning of the insurance contract. Petitioner contended that the mere showing of loss from collision with the moving warship established liability under the policy as a matter of law. It argued that this was the English rule which should be followed by American courts. The District Court did not accept petitioner’s view of the English rule. It read both the American and English authorities as conditioning the underwriter’s liability on proof of facts showing that the “warlike operation” was the “proximate,” “predominant and determining” cause of the loss. The court held for petitioner, finding as a fact that this burden of proof had been met. 81 F. Supp. 183. The Court of Appeals reversed. 178 F. 2d 488. It recognized that some language in certain English opinions possibly indicated that the facts relied on would make the war underwriter liable as a matter of law. Nevertheless, it refused to go that far and, contrary to the District Court, found as a fact that petitioner’s evidence failed to show that the warlike phase of the mine sweeper’s operation had caused the collision.³ Petitioner sought certiorari here without relying on the divergence below in the findings of fact on the question of causation. Its- ground was that the Court of Appeals had failed to hold for petitioner as a matter of law as the English cases allegedly required. We granted the writ, 339 U. S. 977, because of asserted conflict on this one point with General Ins. Co. v. Link, 173 F. 2d 955.

We are asked only to determine whether as a matter of law the provision insuring against “all consequences of . . . warlike operations” covered the loss resulting from collision between the Worthington and the mine sweeper. Of course, the intention of the contracting parties would control this decision, but as is so often the case, that intention is not readily ascertainable. Losses from collisions are prima facie perils of the sea covered by standard marine risk policies.⁴ To take such a loss out of the marine policy and to bring it within the coverage of the provision insuring against “all consequences of” warlike operations, common sense dictates that there must be some causal relationship between the warlike operation and the collision. Courts have long so held in interpreting what was meant by use of the phrase “all consequences” in war risk policies.⁵ In turn, the existence or non-existence of causal connection between the peril insured against and the loss has been determined by looking to the factual situation in each case and applying the concept of “proximate cause.” ⁶ Proximate cause in the insurance field has been variously defined. It has been said that proximate cause referred to the “cause nearest to the loss.” ⁷ Again, courts have properly stated that proximate cause “does not necessarily refer to the cause nearest in point of time to the loss. But the true meaning of that maxim is, that it refers to that cause which is most nearly and essentially connected with the loss as its efficient cause.” ⁸

In view of the foregoing, can it be said that the Court of Appeals erred in failing to hold as a matter of law that the mine sweeping, a warlike operation, was the “predominant and determining” cause of the collision? As we read the record, the facts are susceptible both of the inference that the mine-sweeping activity of the YMS-12 had some relation to the collision and that it did not. That is to say, reasonable triers of fact considering all of the circumstances of this collision might differ as to whether the loss was predominantly or proximately caused by usual navigational hazards (and therefore an ordinary marine insurance risk) or whether it was caused by extraordinary perils stemming from the mine sweeping (and therefore a war insurance risk).⁹ Indeed, the District Court and the Court of Appeals did differ on this factual determination. Since certiorari was not granted to consider that divergence in the findings of fact, we need go no further than to hold that the courts below properly considered the case as depending on the resolution of factual questions.

Petitioner nevertheless contends that (1) we are bound by certain decisions in the House of Lords and (2) these opinions have announced a rule-of-thumb construction of the phrase “all consequences of . . . warlike operations” under which the facts in this case result in war risk liability as a matter of law. We cannot accept these arguments. It is true that we and other American courts have emphasized the desirability of uniformity in decisions here and in England in interpretation and enforcement of marine insurance contracts.¹⁰ Especially is uniformity desirable where, as here, the particular form of words employed originated in England. But this does not mean that American courts must follow House of Lords’ decisions automatically. Actually our practice is no more than to accord respect to established doctrines of English maritime law.¹¹

The difficulties inherent in the rigid conformity rule urged by petitioner are obvious to those familiar with the search for state decisional law under-the Erie-Tompkins doctrine. In this very case, we, like the Court of Appeals, cannot be sure what conclusion the House of Lords would reach were this case presented to it. Some of their decisions indicate that they would-have held as a matter of law that the collision was the “consequence” of the warlike operation;¹² other cases cannot easily be reconciled with such a result.¹³ Indeed, in one decision, Lord Wright declared that “In many cases reconciliation is impossible. What matters is the decision.”¹⁴ And even in those decisions implying that proof of certain facts results in liability as a matter of law, the House of Lords has spoken in terms of factual proximate cause.¹⁵ Their most recent decision construing the words before us states that cases applying the “question of law” technique should be carefully restricted to their holdings; and Lord Normand warned, “The numerous authorities cited can therefore have only a limited bearing on the present issue. . . . [T]hey will easily lead to error if it is attempted to extract from them a principle of law to solve what .is a question of fact.” ¹⁶

This Court, moreover, has long emphasized that in interpreting insurance contracts reference should be made to considerations of business and insurance practices.¹⁷ The particular English cases relied on by petitioner produced such an unfavorable reaction among that country’s underwriters that they revised the clause here involved to avoid the injurious effects of those decisions.¹⁸ The terms of American war risk policies have also been altered.¹⁹

The proximate cause method of determining on the facts of each case whether a loss was the "consequence” of warlike operations may fall short of achieving perfect results. For those insured and those insuring cannot predict with certainty what a trier of fact might decide is the predominant cause of loss. But neither could they predict with certainty what particular state of facts might cause a court to discover liability “as a matter of law.” Long experience with the proximate cause method in American and English courts has at least proven it adaptable and useful in marine and other insurance cases. There is no reason to believe that its application in this case will disappoint the just expectations of insurer or insured.

The judgment of the Court of Appeals is

Affirmed.

1 The quoted language comes from the “F. C. & S. Clause” (“Free from Capture and Seizure”) and is incorporated by reference in the war risk policy. War risk insurance is written in the following manner: the marine policy, which covers common perils of the sea, generally contains an “F. C. & S. Clause” eliminating from coverage certain named war risks, one of which is “all consequences of hostilities or warlike operations.” The excepted risks are insured against either by adding a rider to the original marine policy, or by buying coverage from another underwriter — here the Government — who insures the perils excluded by the “F. C. & S. Clause.” The opinions below set out more fully the documents on which the present insurance obligation rested. For a history of the development of the “F. C. & S. Clause” which originated in England, see 18 Halsbury’s Laws of England (2d ed. 1935) §439; Ionides v. Universal Marine Ins. Co., 14 C. B. (N. S.) 259, 273 (1863).

2 Counsel described the operation this way: “A mine sweeping operation ... is a formation of vessels, each of which streams out behind it a device on a long cable which, towed along a certain distance under the water, is designed to cut the cable of any mine and bring it to the surface, where it can be destroyed by gunfire and .the like.”

3 We do not read the Court of Appeals decision as meaning that when negligence is present, the resulting loss can never be a war risk. The District Court held (and the Court of Appeals approved) that “ ‘ “Proximate” here means, not latest in time, but predominant in efficiency.’ ‘[T]here is necessarily involved a process of selection from among the co-operating causes to find what is the proximate cause in the particular case.’ It is true that the causes of an event are all the preceding circumstances which brought the event to pass — and they are myriad.” 81 F. Supp. 190. If the “warlike operation” was the “proximate cause” of the collision, then the fact that the “warlike operation” was negligently conducted does not relieve the war risk underwriter of liability. Cf. General Mut. Ins. Co. v. Sherwood, 14 How. 351; 1 Phillips on Insurance (5th ed. 1867) ¶ 1049.

4 Cases collected, 1912 D Ann. Cases 1038, 1040; 2 Arnould, Marine Insurance and Average (13th ed., Lord Chorley, 1950), § 827a.

5 Ionides v. Universal Marine Ins. Co., 14 C. B. (N. S.) 259 (1863) ; see Queen Ins. Co. v. Globe & Rutgers Fire Ins. Co., 263 U. S. 487, 491. 2 Arnould, Marine Insurance and Average (13th ed., Lord Chorley, 1950), §790.

6 Insurance Co. v. Boon, 95 U. S. 117; 3 Kent’s Commentaries (14th ed., Gould, 1896) 302; cases are collected in 6 Couch, Cyclopedia of Insurance Law, § 1463.

7 Queen Ins. Co. v. Globe & Rutgers Fire Ins. Co., 263 U. S. 487, 492. Cf. Insurance Co. v. Transportation Co., 12 Wall. 194, 197-199.

8 Dole v. New England Mut. Ins. Co., 7 Fed. Cas. 837, 853 (C. C. Mass. 1864) decided by Mr. Justice Clifford on circuit. Accord: Insurance Co. v. Boon, 95 U. S. 117; Lanasa Fruit S. S. & Importing Co. v. Universal Ins. Co., 302 U. S. 556, 561-565; 3 Kent’s Commentaries (14th ed., Gould, 1896) 302, n. 1; 1 Phillips on Insurance (5th ed. 1867) ¶ 1132.

9 Ordinary marine insurance covers losses due to fortuitous perils of the sea. War risk insurance covers losses due to perils superimposed on usual marine perils by war. As Lord Wrenbury put it, “The question is whether the loss was occasioned by a new risk arising by reason of warlike operations.” Attorney-General v. Ard Coasters, Ltd., [1921] 2 A. C. 141, 154.

10 Queen Ins. Co. v. Globe & Rutgers Fire Ins. Co., 263 U. S. 487, 493. See New York & Oriental S. S. Co. v. Automobile Ins. Co., 37 F. 2d 461, 463. The desire for uniformity in interpretation of the war risk clause may now be more academic than real. Since 1942, policies issued in England and in the United States have not contained similar provisions in this regard so that uniformity is no longer possible. Compare 1945 Am. Mar. Cas. 1035 with 1945 Am. Mar. Cas. 1036.

11 Aetna Ins. Co. v. United Fruit Co., 304 U. S. 430, 438.

12 E. g., Attorney-General v. Adelaide S. S. Co., [1923] A. C. 292; Board of Trade v. Hain S. S. Co., [1929] A. C. 534; cf. Yorkshire Dale S. S. Co. v. Minister of War Transport, [1942] A. C. 691.

13 E. g., Clan Line Steamers, Ltd. v. Board of Trade, [1929] A. C. 514; Liverpool & London War Risks Assn. v. Ocean S. S. Co., [1948] A. C. 243.

14 Yorkshire Dale S. S. Co. v. Minister of War Transport, [1942] A. C. 691, 708.

15 See cases-cited in note 12, supra. England has enacted the proximate cause test into its statutory law. Marine Insurance Act of 1906, 6 Edw. VII, c. 41, § 55 (2).

16 Liverpool & London War Risks Assn. v. Ocean S. S. Co., [1948] A. C. 243, 270.

17 General Mut. Ins. Co. v. Sherwood, 14 How. 351, 362.

18 2 Arnould, Marine Insurance and Average (13th ed., Lord Chorley, 1950), § 905h.

19 See note 10, supra.