Norton v. Lexington Fire, Life & Marine Insurance

Catón, J.

On the first day of April, 1850, the Lexington Eire, Life and Marine Insurance Company executed a policy of insurance on the schooner Buena Vista, valued in the policy at six thousand dollars. The risk taken on the schooner was four thousand dollars, to continue until the first day of December, 1850. On the night of the twenty-seventh of December, 1850, while upon a voyage from Buffalo to Waukegan and Chicago, with a cargo of pig iron and coal, the vessel went ashore on the point of False Presque Isle, in lake Huron, and was soon after abandoned by the captain and crew. On the twenty-sixth day of February following, Norton & Company abandoned tho schooner to the underwriters, by the following notice of abandonment, which was served on Mr. Dodge, their agent:

“ To the Lexington Fire, Life and Marine Insurance Company:

“ The schooner Buena Vista, Moses W. Humphrey, Master, bound on a voyage from the port of Buffalo, in the State of New York, to the port of Waukegan, in the State of Wisconsin, and the port of Chicago, in the State of Illinois, laden with a cargo of pig iron and coal, when off or near Point Aux Barque on Lake Huron, was discovered to be in a leaky condition, on the night of the twenty-seventh day of November, eighteen hundred and fifty; the wind increased to a gale, which carried away a part of her sails and disabled her, and all efforts to clear the land proving impossible, an anchor was let go, and said schooner went ashore and stranded, with from four to five feet water in her hold, at False Presque Isle, Lake Huron. All efforts to pump her out and get her off, have proved unsuccessful. She lies hard over among the rocks and boulders, as we are informed, in an exposed condition, and will no doubt go to pieces as soon as the ice disappears in tho spring.

In consequence of the disaster, the loss and breaking up of the voyage she was pursuing, the improbability of the recovery and repairing said vessel, at least at an expense not exceeding fifty per cent., and the long delay that must necessarily attend such recovery and repair, if successful, from the remote and inconvenient place where she is ashore, we are under the necessity of abandoning our interest therein to the underwriters, and you will therefore please take notice, that we accordingly abandon to you so much of said schooner as you have insured, and that we shall claim from you thereunder, a total loss. We send herewith a copy of the protest of the captain and crew of said schooner.

Very respectfully, yours, etc.,

Chicago, Feb. 26, 1851. H. NORTON & COY

Mr. Dodge refused to accept the abandonment for the Insurance Company.

In the spring following, Mr. Dodge and Mr. Raymond, as agents of the underwriters, employed Capt. Scoville to raise and repair the vessel. He started for the wreck on the ninth of May, with one man, but he did not actually commence operar tions until the latter part of June. He says he found the vessel about half a mile from the harbor at False Presque Isle, and within two or three hundred feet of the shore. She was lying at her anchors, with her chains and cables slack, and heading-off shore, her bow lying in about eight feet of water, and her stern in six or seven feet of water. When the sea rolled in, her bow would rise and fall a few inches, from which cause she had become weakened a few feet aft her foremast, and the plank on the bottom had become chafed and much injured. The shore where she lay was stony, mostly small stone, the largest not more than eighteen inches in diameter. The place where she lay was about two hundred and forty miles from Detroit, and about three hundred and fifty-six miles from Milwaukee. The nearest town was Mackinack, distant about seventy-four miles. One family resided on False Presque Isle, and there were a few settlers on Presque Isle proper, about seven miles distant. Beyond these, the entire country was a wilderness, and was only accessible in the winter on snow shoes.

Within less than two days after Capt. Scoville got alongside of the wreck with another vessel, he discharged her cargo and raised and towed her into the harbor, where he again sunk her in about eight feet water, till he could get means of talcing her away for repairs. Capt. Scoville then went to Chicago, and procured a propeller, with which he towed the wreck to Malden, where he repaired her. He arrived with her at Malden on the twenty-eighth of June, and the repairs were completed and the vessel taken to Detroit on the seventh day of August following. The cost of the repairs amounted to between twenty-seven and twenty-eight hundred dollars. No witness states the value of the vessel after she was repaired, but it was not strenuously contended on the argument, that the repairs amounted to fifty per cent, of the value of the vessel, when repaired. Soon after the vessel arrived at Detroit, the agent of the underwriters tendered her to Norton & Company, who declined to accept her. The Insurance Company then caused her to be brought to Chicago, where she was again tendered to Norton & Company, who never received her, but gave evasive answers, and objected that her capacity to stow lumber was diminished.

Capt. Scoville says : “I consider the schooner was thoroughly repaired, with this exception, that there was a small leak in the vessel’s bottom.” He says he superintended the repairs, and that they were well and properly made. His last answer in his second deposition is as follows: “ I think that her hull was in a better condition before she was wrecked than after she was repaired. I think she was badly wrecked, and in order to strengthen her, we had to put additional heavy knees in the vessel’s hold, which would interfere some with the stowage of freight. Her sails and rigging were better after repairing her than before she went on the beach. Being forced to leave the vessel on account of sickness, before any trial of her, I feel incompetent to say how much, if any, she was worse, after she was repaired than before she was wrecked.”

In answer to the question as to what was a reasonable time to get the vessel off and repair her, Capt. Scoville says: “A reasonable time, I think, would be about six weeks. The Buena Vista was not got off and repaired as soon as she could have been. My instructions did not permit me to commence work on the vessel until some time after the ice was out, and the lake clear from it.” Again, in another place, he says, partly in explanation of this: “ I think the schooner Buena Vista could have been repaired in less time than she was, if we had known her precise condition, but after we ascertained it, there was no unnecessary delay. There was no place in the neighborhood of False Presque Isle, where she could have been repaired, except at an increased expense of time and money.”

On the 13th of October, 1851, Norton & Company sued out an attachment again! the Insurance Company, and levied it upon the schooner Buena Vista, as the property of the underwriters, on the 14th of October, and the same day, Hixon sued out an attachment against the same defendants, which was at the same time levied on the same vessel. On the 16tli day of November, 1851, Norton & Company interpleaded in the suit of Hixon against the Insurance Company, claiming that the vessel was-theirs, and not the property of the Insurance Company, at the time the attachment was issued and levied upon her. Thus, it will be seen, that Norton & Company in this controversy have assumed the position ordinarily occupied by the underwriters in contests of this nature, and that Hixon occupies the position ordinarily occupied by the assured.

Of the instructions asked for by the claimants, the court refused to give the following: “ If the jury believe from the evidence, that after the notice of abandonment was given, the vessel was hauled out, and repaired and returned, and offered to the claimants, that then, there was no valid abandonment, and Norton & Company are entitled" to recover.

Second. “ That under the policy of insurance, in this case, no valid abandonment could be made until it should be ascertained that the recovery and repair of the schooner was impracticable.

Third. “ If the jury believe from the evidence, that the recovery and repair of the schooner was practicable, then Norton & Company. could not legally abandon her, and the verdict should be for the claimant, Norton & Company.”

Exceptions were taken to the refusal of the court to give these instructions.

At the request of Hixon, the court instructed the jury as follows : “ If the jury believe from the evidence, that the capacity of the Buena Yista was materially lessened by the repairs of the Insurance Company, then Norton & Company were not bound to receive her back, if she had been previously rightfully abandoned by Norton & Company, under the terms of the policy.

Second. “ If the jury shall believe from the evidence, that the Buena Yista was wrecked on the 27th of November, 1851, and that to all human appearances, all reasonable efforts would have proved unavailing to get her off and repair her, and the Insurance Company did not, within a reasonable time thereafter, repair her so that she was of substantially the same capacity and goodness as she was before she was wrecked, and that Norton & Company, within a reasonable time abandoned her to the Company, the law is for Hixon.

Third. “ If the jury shall believe from the evidence, that the Buena Yista was wrecked at the time and under the circumstances stated by Norton & Company in their abandonment, and shall further believe, that under the circumstances in which said vessel was wrecked, all reasonable and practicable efforts were made by the captain and servants of Norton &.Company, without effect, and the voyage was broken up, and that Norton & Company abandoned within a reasonable time, and that she was not properly repaired and returned within a reasonable time to Norton & Company, then the law is for Hixon in the issue.”

To the giving of these instructions, Norton & Company excepted.

The court also gave the jury the following instructions : “ If the jury believe from the evidence, that the schooner Buena Yista was driven ashore, as stated in the affidavit of Rogers, and that the Lexington Fire, Life and Marine Insurance Company, within a reasonable time after, under all the circumstances, repaired the vessel, so that the vessel was substantially as good as she was before she was driven ashore, and was within a reasonable time after being so repaired, tendered by the said Insurance Company to the claimants, Norton, Walter & Rogers, the law is for Norton, Walter & Rogers.”

Second. “ If the jury believe from the evidence, that the schooner Buena Vista was driven ashore, as stated in the affidavit of Rogers, and that the vessel was not repaired so as to be substantially as good as she was before she was driven ashore, within a reasonable time, under the circumstances, or was not tendered to the claimants within a reasonable time after she was repaired, and that Norton, Walter & Rogers did abandon the vessel to the Lexington Eire, Life and Marine Insurance Company within a reasonable time after they had notice of her condition, the law is for Hixon.”

To the giving of these instructions, the claimants also excepted. ,

The jury returned a verdict that the vessel was the property of the Insurance Company, on the day of the levy of the attachment. The claimants filed a motion for a new trial, which was overruled by the court, to which an exception was also taken.

By this record several important questions are presented, as connected with the law of marine insurance, upon which this court has not hitherto been called to pass. The first is, to determine when the assured may abandon as for a total loss by the common law, and how far that right is modified or affected by the terms of this policy.

The assured may not only claim for a total loss of the vessel insured when the vessel has been actually destroyed, as by the wreck and breaking up of the ship, or entirely lost to the owner as in consequence of capture by an enemy and condemnation, so that there is no chance of recapture, but he may also claim as for a technical total loss, where the vessel is so much damaged by any of the perils insured against, that the damage amounts to one-half the value of the vessel, or, in other words, when the cost of getting her off and repairing her, amounts to fifty per cent, of the value of the vessel after she is repaired. These principles are recognized by all courts, but some diversity of opinion exists as to the application of them in particular cases. In order to entitle the assured to recover for a technical total loss, where the thing still remains in specie, the owner must, within a reasonable time after he is informed of the disaster, formally abandon to the underwriter, the thing insured, advising him of the facts of the disaster, so far as known, and the situation of the property. If this abandonment is accepted by the underwriter, the title to the property is at once'changed to the insurer, and he is liable upon his policy precisely the same as if the thing were actually destroyed. If, however, he declines to accept the abandonment, the question arises whether such a. state of things existed at the time when the abandonment was made, as authorized the owner to abandon, and if that was the case, then the title to the thing actually passed to the underwriter, even against his will, and his liability as well as Ms title, is the same as if he had accepted the abandonment. In the English courts of admiralty it is held, that although an abandonment may be rightfully made at the time, so as to pass the title to the underwriter and render Mm liable as for a total loss, yet subsequent events may so change the rights of the parties as to defeat an abandonment rightfully made, and limit the liability to a partial loss instead of a total one; as, for instance, suppose the vessel at the moment of abandonment has been captured by and is in the hands of an enemy, if she is subsequently recaptured and restored to the owner within a reasonable time, his right to recover as for a total loss, is by such subsequent event defeated. This principle, however, has never met with the sanction of any court in this country, either State or federal, but is repudiated by all, as being unsound in principle, and leaving the rights of the parties too indefinite and uncertain. In this country it is universally held, that if the state of facts at the time of the abandonment be such as to justify it, the rights of the parties are thereby fixed in law, and that no subsequent event can render ineffectual an abandonment which was at the time rightful. It is admitted everywhere that an abandonment rightfully made, transfers the title to the underwriter at the moment. As a consequence of this it is immediately liable for Ms debts, and may be seized upon an execution against him, and thus the title be again transferred by operation of the law and its agents. Property thus liable to legal process ought to be fixed and certain. It is right that the assured should know with certainty what his rights are, and that when his claim has once become fixed to a legal demand for money, he may make his calculations upon that state of affairs, and not be liable to have such legal claim for money defeated by a subsequent tender of the property insured. We recognize this as the well-settled principle of law in this country.

The greatest difficulty has been to ascertain when it is that the party has a right to abandon, as for a technical total loss. All agree that the facts as they exist at the moment of abandonment, must determine the right to abandon, and that the right to abandon. arises when the cost of getting off the vessel and repairing her, will amount to more than fifty per cent, of the value of the vessel when she is repaired, and yet this latter fact can never be known with absolute certainty till the vessel is got off and repaired; while the law -also requires that the abandonment shall be made within a reasonable time after the owner is advised of the disaster, so that the underwriter may take possession of the wreck and save as much of it as he can. Hence, from this rule, and the reason upon which it is founded, the owner shall not wait until the vessel is got off and repaired before he exercises his right of abandonment. To do so would defeat the very object of the abandonment, so far as the underwriter is concerned, which is, to enable him to take possession and save as much of the wreck as possible. To do so would be an unreasonable delay, by which the right to abandonment, as for a technical total loss, would be forfeited. It would seem to follow, as an unavoidable consequence, that the right to abandon must be determined by the judgment of experts, applied to the condition of things existing at the time of abandonment. That is, when in the opinion of judicious men, skilled in the business, there is no reasonable probability that the vessel can be got off and repaired for one-half her value, the right to abandon exists: although by some fortunate and unforseen event, the vessel may be saved and repaired for less than one-half her value. It is true the case must be apparently a desperate one which will authorize an abandonment, where subsequent events show that the vessel was actually got' off and repaired for less than half her value. Upon this subject the supreme court of the United States, in the case of Brodlie v. Maryland Insurance Company, 12 Peters, 378, said: “In cases where the abandonment is-founded on a supposed technical total loss, by a damage or injury exceeding one-half the value of the vessel, although the facts of such damage or injury must exist at the time, yet it is necessarily open to proofs to be derived from subsequent events. Thus, for example, if the repairs, when subsequently made, clearly exceed the half value, it is plain that this affords one of the best proofs of the actual damage or injury. On the other hand, if the subsequent repairs are far below the half value, this, so far as it goes, affords an inference the other way. But it is not, and in many cases cannot be, decisive of the right to abandon. In many cases of stranding, the state of the vessel at the time may be such, from the imminency of the peril, and the apparent extent of the expense to deliver her from it, as to justify an abandonment, although by some fortunate occurrence she may be delivered from her peril without an actual expenditure of one-half her value after she is in safety. Under such circumstances, if, in all human probability, the expenditures which must be incurred to deliver her from her peril, are at the time, so far as reasonable calculations can be made, in the highest degree of probability, beyond half value, and if her distress and peril be such as would induce a considerate owner, uninsured, upon the spot, to withhold any attempt to get the vessel off because of such apparently great expenditures, the abandonment would doubtless be good.” In Massachusetts alone, the doctrine here laid down, has been questioned. Wood v. Lincoln and Kennebec Insurance Company, 6 Mass. 479. There it was said, that after an abandonment the underwriters might offer to indemnify "the owner if he would repair, and in the event of his declining to do so, might take possession of the vessel and get her off and repair her, and if this was done at less than half the value, might return her within a reasonable time, and thus defeat the abandonment. This doctrine was controverted by Mr. Justice Story, in the case of Peele v. Merchants’ Insurance Company, 3 Mason, 27. After discussing the merits of the doctrine as held in Massachusetts, he says: “ If the facts then present a case of extreme hazard, and of probable expense exceeding half the value of the ship, the party may abandon, although in the event it turn out that the ship is gotten off at a less expense.” And in a very late case, which was decided about the time this case was argued, Sprague, District Judge, says: “ In the State courts of Massachusetts the doctrine is, that the underwriter may, after an abandonment, refuse to accept it, and take possession of the vessel and repair her, and if the loss is proved to be less than fifty per cent., may return her to the former owner within a reasonable time. This doctrine is peculiar to Massachusetts. I believe it is not to be found anywhere else, either in the decisions of the federal courts, or in the State courts of any other State, or in the law of England, or of the continent of Europe. But the other principle is the law of the courts of the United States and of the other States of the Union.” 3 American Law Register.

There is another principle which seems to be well settled, but' which may not be applicable to this case, owing to the peculiar phraseology of the policy of insurance, and that is, if after an abandonment the underwriter take possession of the vessel, although under protest, and get her off and repair her, no matter at what or how little expense, the very act of taking possession is of itself an acceptance of the abandonment. (Sec particularly the two last cases referred to.) The following is the clause in the policy referred to: “ And in case of loss or misfortune as aforesaid, it shall be the duty of the assured, their agents or assigns, to use every practicable effort for the safeguard and recovery of the said schooner, and if recovered, to cause the same to be forthwith repaired, and in case of neglect or refusal on the part of the assured, their agents or assigns, to adopt prompt and efficient measures for the safeguard and recovery thereof, then the said insurers are hereby authorized to interpose and recover the said schooner, and cause the same to he repaired for account of the assured, to the charges of which the said insurance company will contribute,” etc. It seems to me that this language clearly indicates the intention of the parties to allow the underwriters to take possession of the vessel and repair her without prejudice to their right to deny the propriety of the abandonment, so that their having taken possession of and repaired the vessel, is not, in this case, conclusive evidence of an acceptance of the abandonment, as it would have been had the policy been silent on the subject.

It now becomes necessary to examine the instructions of the court, and see whether they were conformable to the law as we find it to be settled.

Th'ere can be no doubt that the court properly refused to give the first instruction asked for by the claimants. Were that instruction correct, the insurers were not bound to repair and return the vessel within a reasonable time, while it is agreed by all, that if they retained the vessel an unreasonable time, the assured were not bound to take her back.

The second and third instructions, which were refused, are to the same point, and are substantially in the language of the contract, and might, without error, have been given. The clause of the contract to which they refer, is as follows: “ But in no case whatever shall the assured have the right to abandon until it shall be ascertained that the recovery and repairs of the said schooner are impracticable,” etc. Now this clause of the contract cannot be understood as suspending the right to abandon absolutely, until it is actually demonstrated beyond a contingency, that the vessel could not possibly be got off and repaired, else the right to abandon could never arise until the vessel had actually gone to pieces, for, until that time, some fortunate and unexpected event might deliver her from her peril. The word ascertained in the contract does not mean demonstrated. The recovery and repair of the vessel would be ascertained to be impracticable Avhen, in the opinion of judicious men acquainted Avith the subject, there was no reasonable probability that she could be got off and repaired. If the parties were not bound to Avait till it Avas absolutely certain that the vessel could not be got oil" and repaired, then they were entitled to abandon. When the vessel was in such a condition that a prudent man Avould not venture to spend money in attempting to relieve her, although the instruction Avas draAvn substantially in the language of the contract, yet it was the province and the duty of the court to construe and explain the meaning of the contract to the jury; it Avas proper to embody in the instruction such exposition, and thus Arary the instruction from the language of the contract, so as it served to explain its true meaning. The court was therefore justified in refusing the two first instructions asked by the claimants, and in giving their third, which was as follows: “ That under the policy of insurance in this case, no notice of abandonment could be made until it should be, within a reasonable time, under all the circumstances, ascertained that the recovery and repair of the schooner was impracticable.” Upon this branch of the instructions, we think the claimants had no cause to complain.

The next instruction, which was given for the claimants, was upon the same point as the first instruction, which was refused, and states the law correctly.

But little was said upon the propriety of the first instruction given for Hixon. If there is anything well settled in the law of insurance, it is that the owners were not bound to receive the vessel back when tendered after she was repaired, if by the repairs her capacity was materially lessened. The law requires that she should be made substantially as good as she was before the damage, and this could not be the case if her capacity was materially lessened, although she may have been as strong as formerly. It requires neither testimony nor argument to prove that the value of a vessel must essentially depend upon her capacity. A slight diminution of her capacity might not deprive the insurers of the right to return her, but a material diminution necessarily would. It was proper, therefore, for the court to refer this question of fact to the jury, which was done.

It is hardly necessary to recapitulate the two remaining instructions, which were given at the request of Hixon, which have already been copied into .this opinion. They were certainly justified by the principles of law which have been already stated.

Of the instructions given to the jury it only remains to consider the two which were given by the court without the request of either party, which have already been set forth. The first of these instructions was drawn by the court upon an hypothesis favorable to the claimants, and the other favorable to Hixon, and it may be justly said that they are drawn with great fairness, and they really embody the whole law of the case in a very accurate and concise form, and were eminently calculated to enable the jury clearly and intelligibly to understand the duty which the law imposed upon them, and to arrive at a correct conclusion. Of these neither party could have the least cause of complaint.

The propriety of the verdict only remains to be considered. Is the record destitute of sufficient evidence to sustain it? The common pleas thought it was not, and we have arrived at the samo conclusion. It may be doubtful whether there was, originally, sufficient cause for abandonment, and there was certainly very great delay in serving the notice of abandonment after the owners had notice of the disaster; a delay which, under ordinary circumstances, would undoubtedly be unreasonable. It may be said, however, that this delay could work no possible wrong to the underwriters, as the vessel, during the whole time, was frozen up in the ice, and was in an inaccessible wilderness, and that it was absolutely impossible for anybody to do anything for her relief until the ice broke up in the spring, and hence this delay could have worked no possible injury to the insurers; that the notice was served in time to make every arrangement to relieve the vessel as soon as it was possible to commence operations in the spring. The reason why the law requires an early and prompt notice of abandonment, is to enable the insurers to adopt prompt measures to save the wreck, and there may be some propriety in saying that if the delay oí the notice cannot tend to defeat this object, it becomes immaterial ; that where the reason of the rule fails, the .rule itself ceases to exist. But waiving this point, it is not to be denied that the testimony of Captain Scoville affords very strong evidence to show, not only that the vessel was not got off and repaired and returned within a reasonable time, but also, that in the course of the-repairs he was obliged to introduce timbers which did materially diminish the stowage capacity of the vessel. She was probably free from ice by the first of May. She was not repaired and tendered to Norton & Company, at Chicago, her home port, till September. They were thus kept out of the use of the vessel for more than four months, while it is manifest from the testimony of Captain Scoville, that had his instructions permitted, and with proper facilities and energy, the vessel might have been repaired and returned in about half that time. If the insurers took the vessel to repair her under the clause of the policy which authorized them to do so, and failed to return her within a reasonable time, they must be held to have retained her under the abandonment. Thus retaining her is an acceptance of the abandonment, although they were not bound by the abandonment when made. Peele v. Ocean Insurance Company, 7 Pick. 259 ; Reynolds v. Same, 1 Metcalf, 160. Even if there had been no abandonment, and the insurers had taken possession of the vessel after she was stranded, under the clause in the policy referred to, and failed to return her properly repaired within a reasonable time, they would thereby render themselves liable as for a total loss. Upon a general verdict as this was, we can never know upon what particular point it was determined. Indeed, some of the jurors may have found for the plaintiff for one cause, and some for another, either of which being found in his favor, would entitle him to the verdict. We think there is evidence enough to sustain the verdict upon either or both the points above suggested, laying out of view entirely the fact that Norton & Company subsequently attached the vessel, and treated her as bclonging to the Insurance Company, and the question of estoppel, so much relied upon at the bar.

We are of opinion that the judgment of the common pleas should be affirmed.

Judgment affirmed.