Lamb-Weston, Inc. v. Oregon Auto. Ins. Co.

• Citation: 346 P.2d 643,219 Or. 130
• Decision Date: 25 November 1959
• Docket Number: LAMB-WESTO,INC
• Parties: , and Oregon corporation, and St. Paul Fire and Marine Insurance Company, a Minnesota corporation, Respondents, v. OREGON AUTOMOBILE INSURANCE COMPANY, an Oregon corporation, Appellant.
• Court: Supreme Court of Oregon

Page 643

346 P.2d 643

219 Or. 130

LAMB-WESTON, INC., and Oregon corporation, and St. Paul Fire and Marine Insurance Company, a Minnesota corporation, Respondents, v. OREGON AUTOMOBILE INSURANCE COMPANY, an Oregon corporation, Appellant.

Supreme Court of Oregon, In Banc.

Nov. 25, 1959.

Fabre, Collins & Kottkamp, Pendleton, for appellant.

Helm & Neely, LaGrande, Minnick & Hahner and James B. Mitchell, Walla Walla, Wash., and Rhoten, Rhoten & Speerstra, Salem, for respondents.

PERRY, Justice.

The plaintiffs have petitioned this court for a rehearing solely upon that portion of our decision that states the loss as between the plaintiff and defendant insurance companies should be borne equally.

It is the position of the plaintiff St. Paul Fire and Marine Insurance Company that since its applicable limit was $25,000 for property damage and the defendant's limit was $5,000, the loss should be prorated between them in proportion to these applicable limits of liability. For example, in this case the plaintiff insurance company would pay 5/6ths and the defendant 1/6th of the loss.

The plaintiff company properly states that this postion taken is against its monetary interest in this case, but that in general the courts under similar situations have followed a rule of prorating the losses on the basis of the limits of liability of each company; that this rule has been followed and relied upon generally in the insurance industry and should not be changed.

The defendant's brief submitted upon the petition for a hehearing also urges this position.

Independent of the briefs submitted, our limited research discloses that the law of apportionment is of very ancient origin. In the second book of the Bible, revised standard version, Exodus, ch. 21, para. 35, it is said:

'When one man's ox hurts another's, so that it dies, then they shall sell the live ox and divide the price of it; and the dead beast also they shall divide. Or if it is known that the ox has been accustomed to gore in the past, and its owner has not kept it in, he shall pay ox for ox, and the dead beast shall be his.'

Similar rules were recognized by the most ancient civilizations. 3 Select Essays in Anglo-American Legal History, Assoc. American Law Schools, 101.

The first appearance in Anglo-American law of the principles of pro rata contribution seems to be under the heading of Admiralty, where the principles of general average have been used for at least 500 years. Hopkins, Average and Arbitration, 4th Ed., p. 6. In cases where one merchant's goods were jettisoned or destroyed on a sea voyage for the purpose of saving the rest of the venture from imminent peril, the loss was borne by all interests in proportion to the value of their goods which were saved. Hopkins, supra, p. 47. The pro rata contribution which was applied in these cases can easily be justified on an unjust enrichment basis, since each owner was required to make a contribution which was proportional to the benefit which he received.

It is generally believed that in England the contract of insurance was first used in underwriting marine risks, since insurance was introduced by maritime traders from the Italian cities. 3 Select Essays in Anglo-American Legal History, Assoc.American Law Schools, 107. All early insurance disputes were settled by merchant courts, or arbitrators. For example, in the record of the proceedings before Admiralty prior to 1570 there is a petition by the owner of insured goods asking that arbitrators be appointed and the underwriters made to pay, "forasmuche as your said rater hath noe remedye by the ordre and course of the common lawes of the realme, and that the ordre of insurance is not grounded upon the lawes of the realme, but rather a civill and maritime cause to be determined and decided by civilians or else in the highe courte of Admiraltye." 3 Select Essays in Anglo-American Legal History, supra, 111. Since insurance disputes were settled by marine traders in their merchant courts, it seems likely that they imported the law of general average into the law of marine insurance. If one merchant should be compelled to contribute to another because his wares were saved through the sacrifice of the second merchant's goods, it would seem equally logical that one insurance company which had its risk saved through the abandonment of goods insured by another, should be compelled to share the loss according to the relative value of the goods preserved. This later became the law. 11 Arnould, Marine Insurance and Average, 12th Ed., 1224.

There is, however an even more direct connection between the law of general average and land insurance. This link is the case of Deering v. the Earl of Winchelsea, 126 Eng.Rep. 1276 (1787), 2 Bos. & Pul. 270. In 1778, Thomas Deering was appointed receiver of fines and forfeitures of the customs of the out ports. Sir Edward Deering and the two defendants entered into three separate bonds of 4,000 pounds each to assure that Thomas Deering would duly account for funds received. Thomas lost the King's money while gaming and left the realm. His accounts were short nearly 4,000 pounds. Judgment was obtained against Sir Edward for this amount. Thereupon Sir Edward brought a suit against the other two sureties for contribution on their separate bonds. They argued that as the bonds were separate, they were under no contractual obligation to reimburse Sir Edward. They also asserted it was Edward who had led Thomas into his evil habits and that Edward could not recover on that account. To the defendant's first contention the court replied, pages 1277 and 1278:

'* * * the bottom of contribution is a fixed principle of justice, and is not founded in contract * * *.

* * *

* * *

'There is an instance in the civil law of average, where part of a cargo is thrown overboard to save the vessel, Show.Parl.Cas. 19 Moor, 297. The maxim applied is qui sentit commodum sentire debet et onus. In the case of average there is no contract express or implied, nor any privity in an ordinary sense. This shews that contribution is founded on equality, and established by the law of all nations.'

To the argument that Sir Edward did not have clean hands the court said, page 1277:

'* * * There might indeed be a case in which a person might be in a legal sense the author of the loss, and therefore not entitled to contribution; as if a person on board a ship was to bore a hole in the ship, and in consequence of the distress occasioned by this act is became necessary to throw overboard his goods to save the ship * * *.'

Apparently, the court applied principles derived from the law of general average in this case which closely approximates the present controversy. However, it is here submitted that the case of Deering v. Earl of Winchelsea, supra, was not directly analogous to the average cases. In the insurance cases involving general average, there are two insurers and two separate risks. A sacrifice of one risk saves the other. If there is no contribution, the one whose risk is saved is enriched at the expense of the one whose goods were jettisoned. But in the Deering case, as in the present case, there was only one risk which was concurrently covered by separate insurers. Any right to contribution must be established on the basis of such equitable maxims as 'Equity is equality,' etc. As the court said in the Deering case, supra, 'the bottom of contribution is a fixed principle of justice.' Considering the case on...