Consolidated Real Estate & Fire Insurance v. Cashow

This is an action upon a policy of re-insurance issued by the appellant to the Fulton Fire Insurance Company of New York. The Fulton Company had insured Newhall, Borie Co. to the amount of $10,000, on their sugar refinery, in Philadelphia, and subsequently re-insured itself against loss or damage by fire on the same property, in the appellant's company, to the amount of $5,000. The fire and loss occurred while both policies were in force. The right to recover on this latter policy is resisted upon several grounds, which appear in the exceptions, and have been very fully and forcibly argued in this Court.

1st. It is first contended that the re-insurance effected by this policy is void because prohibited by the 4th section of the Statute of 19 Geo. II, ch. 37, which has been adopted, and is in force in Maryland.Kilty's Rep. of Statutes, 252; Alexander's British Statutes, 760. The appellee, on the other hand, insists that that Statute and this section of it refers exclusively to marine insurance, and this is the first question to be determined. — The section in question provides "that it shall not be lawful to make re-assurance unless the assurer shall be insolvent, become a bankrupt, or die." This language standing by itself would be broad enough to cover fire as well as marine re-insurance, but it must be construed with reference to the provisions of the preceding and subsequent sections of the same law. So construed and looking to the whole Statute and all its provisions, we are of opinion, after a careful consideration of the question, that the appellee's position must be sustained. By its title it professes to be "An act to regulate insurance on ships belonging to the subjects of Great Britain, and on merchandise or effects laden thereon," and the mischiefs recited in the preamble, to remedy which the Statute was passed, all have reference to injuries which Parliament supposed had resulted to ships and their cargoes, and to British commerce from the practice of making such insurance. Though this would not control any express provision of the enacting part of the Statute clearly evidencing the legislative intent to give it a more extended operation, yet it requires such intent to be apparent and expressed in plain language, and confines expressions not thus plain, but ambiguous or susceptible of a narrower construction, to the subject-matter embraced by the general purview of the Act. After the preamble, the first section enacts that "no insurance shall be made on any ship belonging to his majesty or any of his subjects, or on any goods, c., laden or to be laden thereon, interest or no interest, or without further proof of interest than the policy, or by way of gaming or wagering, or without benefit of salvage to the assessor, and every such insurance shall be null and void to all intents and purposes." The second section allows such insurance on private ships of war, and the third on merchandise or effects from any ports or places in Europe or America in the possession of the crowns of Spain or Portugal. Then comes the 4th section, which prohibits re-assurance except in case of the insolvency, bankruptcy or death of the assurer, and all the subsequent sections except the 7th, plainly refer to marine insurance. In the seventh section, introduced for the wholly different and foreign purpose of regulating the practice of the Courts in actions on insurance policies, the language used is, that if a party be sued "in any action on any policy of insurance, he may bring into Court any sum or sums of money, c." Here the purpose of the provision is apparent, and the intent to take it out of the purview of the Act, and give it a more extensive and general operation, is expressed in appropriate and plain terms. When the practice under this section came in review inSolomon vs. Bewicke, 2 Taunt., 318, which was a suit upon a fire policy, it was contended that this clause came within the general purview of the Act, and was to be confined, like its other provisions, to marine insurance, the whole purpose of the Statute being to facilitate and protect the maritime commerce of Great Britain, but, said Sir JamesMansfield, "how does the seventh clause, construe it as you will, relate to marine insurances or regulate them ? It is quite out of the title to the Act. It probably occurred to some person while the Act was pending in Parliament, that it was a very hard thing that defendants could not pay money into Court in actions on policies, and he therefore inserted this clause. It has nothing to do with the purview of the Act. The mischief is exactly the same in cases of marine and other insurances, and possibly the person who framed the clause might have had that in contemplation and it is hard to believe that there would not have been, by this time, another Act of Parliament to redress this grievance, if it had not been supposed the existing law already applied to it. Here is a clause certainly general, and the words are large enough to extend to all policies of insurance, and the question is, whether there be anything in the Act which necessarily confines it to marine insurance. The general purview of the Act relates certainly to marine insurances, but how many cases are there, as it has been properly admitted, where Acts of Parliament extend to things wholly foreign to their purview." But the very opposite reasoning applies to the fourth section. Its purpose and language are fairly within the general purview of the Act, and the re-insurance there made unlawful may well be held to mean re-insurances on marine risks. From the tenor of his opinion we cannot doubt that learned Judge would have so decided if that section had been before him for construction. In Thellusson vs. Fletcher, 1Doug., 315, the policy (one of those described in the first section) was on goods on board a foreign ship, and it was held not to be a policy within the first section, as foreign ships had not been included therein. Andree vs. Fletcher, 2 Term Rep., 161, was a case of re-insurance under the fourth section, effected in England on a foreign ship, and the Court held that every re-insurance in England effected either by British subjects or foreigners, whether on British or foreign ships, was made void by that section. But that was a marine insurance, and the case throws no light on the question we are now considering. These are all the English decisions we have been able to find in which this Statute has been before the Courts for construction. The Statute was repealed by 27 and 28 Vict., ch. 56, and the repealing Act gives a plain legislative construction of the meaning and effect of this original fourth section. It recites the title of the original

Act, and that by its fourth section it is prohibited to make re-assurance, except in cases therein mentioned, which restriction it is expedient to remove, and then enacts "that notwithstanding anything contained in the said Act, it shall be lawful to make re-assurance upon any ship or vessel, or upon any goods, merchandise or other property on board any ship or vessel, or upon the freight upon any ship or vessel, which may he lawfully insured, and such re-assurance shall be deemed to be the insurance of ``interests which nay lawfully be insured, within the meaning of the Act imposing stamp duties on policies of sea insurance." This latter Statute was itself ``repealed by 30 and 31 Vict., ch. 23, and the legality of re-insurance is provided for by the new Statute, by the simple expedient of including re-insurance under sea insurance, when defining that term for the purposes of the new Act. Arnould on Marine,Ins., 94. It is scarcely possible these repealing Acts would have been couched in these terms if it had ever been supposed by the English bench and bar that the original prohibition applied to re-insurance on fire as well as on marine risks. But apart from this, and upon the plain rules governing Courts in the construction of ``statutes, it is, we think, very clear the language of this fourth section must be confined to marine re-insurance. Apart from any statute making it unlawful, there can be no question of the validity of such a contract. The original insurer by his insurance acquires such an interest in the property insured as to enable him to insure it for his own protection, and such contracts of re-insurance are in common use, and have always been upheld as legitimate and valid in this country.

2nd. The next question of most importance relates to the extent of liability under the policy, and it arises in this way. The Fulton Company, before paying the loss, became insolvent, was dissolved by legal proceedings, and its assets and effects on being sold by a receiver, paid to its creditors a dividend of only twenty per cent. On this state of facts the appellants insist there can, in no event, be a recovery on this policy for more than half the sum paid by the receiver to the parties originally insured by the Fulton Company. But from the nature of the contract of re-insurance, the insolvency of the original insurer in no wise affects or limits responsibility under it. There is no privity of contract between the original assured and the re-insurer. The contract of re-insurance is totally distinct from, and unconnected with the original insurance; the original assured has no kind of claim against the re-insurer; the re-assured remains solely liable on the original insurance, and alone has any claim against the re-insurer. Hence, if the original insurer becomes bankrupt and the assured be paid but a small dividend out of his estate, the re-insurer is still liable to pay the whole amount of the re-insurance to the trustee of the original insurer without deducting the dividend, and the original assured has no claim in respect of the money so paid. This view of the nature and character -of this contract was early adopted by the maritime nations of continental Europe, where it originated, and has been recognized and followed by all the treaties and decisions on the subject since. We confine our references to Arnould on Marine Ins., 94;Marshall on Ins., 112, 113; Hone vs. The Mutual Ins, Co., 1 Sandf.Superior Court Rep., 137, affirmed in 2 Coms. 235; Herckenrath vs. TheAmerican Mutual Ins. Co., 3 Barb. Ch., Rep., 63; Eagle Ins. Co. vs. The Lafayette Ins. Co., 9 Indiana, 443, andBlackstone, Receiver, c. vs. The Alemannia Ins. Co., 56 New York, 104.

This being the unquestioned law of such contracts generally, the question then is, have the parties modified it by any express stipulation of the policy in suit ? It is argued that the clause "Loss, if any, payable pro rata to them" (the Fulton Company,) "at same time, and in the same manner as they pay," has this effect. In another part of this policy the loss is made payable within ninety days, and in that of the Fulton Company, within sixty days after due notice and proof of the same. In the case of Blackstone vs. The Alemannia Ins. Co., just referred to, a clause almost identical in terms with this, was relied on for the same purpose. That clause was, "Loss, if any, payable prorata, and at the same time, with the re-insured," and with respect to it and the argument founded thereon, the Court say, "By virtue of the first part of this clause the defendants are not bound to pay the full amount re-insured by their policy, but only such a proportion of the amount of the loss as is the ratio of the amount of the re-insurance to the amount originally insured. Thus the defendants' re-insurance being for half the amount of the original insurance, the defendants are to pay half the loss. In regard to the latter part of the clause in question which says, that the loss is payable ``at the same time with the re-insured,' it is not possible to conclude from it that actual payment by the re-insured is in fact to precede or to accompany payment by the re-insurer. It looks to the time of payability and not to the fact of payment. It has its operation in fixing the same period for the duty of payment by the reinsurer as was fixed for payment by the re-insured. To give to it the construction contended for by the defendants, would, in substance, subvert the whole contract of re-insurance as hitherto understood in this State." We discover no essential difference between the clause there construed, and the one before us. The same reasoning applies to the latter, and when we consider the distinct and independent nature of this contract, and that it is wholly unaffected by the insolvency of the original insurer, there is, we think, no escape from the force of that reasoning. We cannot, therefore, sustain this position of the appellants.

3rd. Another defence is failure to pay the premium before the loss occurred. It was not tendered until after the loss, when it was refused. But the policy was issued and delivered, and it contains an acknowledgment of the receipt of the premium. This precludes such a defence unless controlled by some plain stipulation in the instrument itself. The only condition of the policy that can possibly affect this question, is the fifth, which says: "No order for insurance will be of any force unless the premium be first paid to the secretary of the company." But this is very different from the conditions of the policy in Bradley's Case, 32 Md., 108, upon which that decision was rested. There the conditions provided that the company should not be held liableunder the policy, or any renewal thereof until the premium in full therefor was actually paid, and if not paid within fifteen days thepolicy should be null and void. Here, whatever may be the meaning of the terms "order for insurance," we cannot construe them as meaning the same thing as the policy itself. In its common acceptation, au order for insurance is something that precedes the issuing of the policy, and the probable purpose of this condition was to prevent the applicant from acquiring any right, and any liability attaching to the company, under such an order, unless preceded or accompanied by payment of the proposed premium. But at all events, it does not mean the same thing as the policy, the solemn sealed contract between the parties. If a policy be executed and delivered containing an acknowledgment that the premium has been received, the company will not be permitted to allege a want of consideration for their promise when sued thereon after a loss has happened.Marshall on Ins., 240; 1 Phillips on Ins., sec. 514. That is the general rule, and the condition relied on does not exempt this policy from its operation.

4th. Failure to furnish preliminary proof of loss, is also set up as a bar to a recovery. The policy contains the usual condition respecting such proof. It likewise contains all the other usual conditions of an insurance policy as if it were an original insurance and not a re-insurance. The inartificial and slovenly manner in which contracts of this character are often made, frequently give rise to much difficulty, and more than once have drawn from the Courts strong expressions of censure. By the careless use of printed forms, conditions applicable to the one class of insurances are embodied in contracts for the other, where they have but little significance or meaning. In this case, however, the parties have used more caution, and the difficulty is obviated by the insertion of a clause peculiarly appropriate to a contract of re-insurance. By this policy the appellants have stipulated that their insurance of $5000, is part of the "sum or sums insured by the Fulton Fire Insurance Company of New York, as above, for Newhall, Borie Co., by their policies, Nos. 2335, and 2779, and to be subjectto the same risks, valuations, conditions and mode of settlement as areor may be adopted or assumed by said company." This, in our opinion, overrides the condition relating to preliminary proof and renders the furnishing of such proof to the appellants wholly unnecessary; and it not only dispenses with such proof, but fastens the responsibility of the re-insurer to the settlement and adjustment made by the original insurers with the original assured, as to the amount of loss. We are unable to impute any other intent to the parties in inserting this clause in their contract. The proof shows the Fulton Company were sued on their policy in the Circuit Court of the United States for the Eastern District of Pennsylvania, and a verdict and judgment rendered against them for $9206.16. The mode in which this amount was ascertained, is described by the witness Newhall, one of the original insured parties, and there is no imputation of fraud or bad faith on the part of any one in making it. The Fulton Company assumed this as the amount of the loss they were liable to pay, and by so doing, in the absence of fraud or bad faith, fixed the liability of the appellants at one-half of that sum; and that was the measure of recovery allowed against them in the Superior Court. This was in strict conformity with the contract of the parties embodied in this policy. The appellants relied upon the Fulton Company to require all necessary proofs, whether preliminary or other, and to investigate any claim that might be made in the event of loss, and submitted themselves to such settlement as the Company might in good faith adopt or assume. It therefore makes no possible difference that the settlement took the shape of judgment by confession, or that that judgment was rendered without notice to the appellants of the proceeding. It follows from what has been said on this point, that the testimony of Newhall, stating the mode in which this sum was arrived at, was properly admitted by the Superior Court.

5th. The remaining question relates to the appellee's title. It is contended there has been no valid assignment of the policy or of any claim under it, to him, and he cannot, therefore, maintain this action. One condition of the policy is that if it shall be assigned without the consent of the company obtained in writing thereon, it shall be null and void. But this evidently refers to an assignment before loss, and we did not understand the appellants' counsel as resting his objection to the validity of the assignment on any failure to comply with this condition. It appears from the proof, that the Fulton Company was dissolved upon proceedings instituted according to the laws of the State of New York, where and under which it had been incorporated, and John M. Furman was appointed its receiver, "with all the usual powers of receivers in like cases, to take charge of the property and effects of the company, and to collect, sue for and recover the debts and demands due, and the property belonging to it." The receiver, on the 7th of August, 1872, sold at public auction the claim of the Fulton Company against the appellants under this policy to the appellee, and that is his title. Its validity depends upon the construction and effect of certain parts of the revised statutes of New York, which it was agreed should be read from the printed volumes, and whether the proceedings of the receiver in making the sale have been in conformity therewith. Under these statutes receivers in that State are, by express provision of law, empowered and directed "from time ``to time to sell at public auction all the estate, real and personal, vested in them, or which shall come to their hands, after giving at least fourteen days' public notice of the time and place of sale, and also publishing the same for two weeks in a newspaper printed in the county where the sale shall be made, if there are any.'' We do not find any provision similar to those in our insolvent laws requiring such sales to be reported to and ratified by the Courts, and the purchaser's title is not made to depend upon such report and ratification. The receiver advertised on the 24th of July, and sold on the 7th of August. If we are to construe this statute as it' it were an Act of our own Legislature, we should hold the receiver had complied with its requirement as to notice. If we are to determine whether his action would be so regarded by the Courts of ``New York, we must have recourse to the testimony of witnesses competent to testify on that subject. The evidence of the witness Lee, on this point, who swears that the sale was made "after due public notice and advertisement as required by the laws of the State ofNew York," settles the question, provided he is shown to be sufficiently an expert to give such testimony. He states that he is thirty-four years of age, and resides in New York City, and is by occupation a lawyer. This we regard as sufficient to enable him to testify as he has done. The objection, that he is not shown to be a lawyer practicing in New York, or informed of the law of that State, but merely that he is a lawyer andresides in New York, and for aught that appears, may have practiced in another State only, is too refined to be tenable. The facts that he resides in New York, and is a lawyer by profession, authorizes, in the absence of opposing proof, the inference that he practices his profession in the State or city of his residence, and this makes him competent to testify respecting the matter about which he was examined.

This disposes of all the several grounds of defence. The rulings of the Superior Court being in accord with the views we have thus expressed, it follows there is no error in them, and the judgment appealed from must be affirmed.

Judgment affirmed.