St. Paul Fire & Marine Ins. Co. v. Pure Oil Co.

• Decision Date: 13 March 1933
• Docket Number: No. 222,223.,222
• Citation: 63 F.2d 771
• Parties: ST. PAUL FIRE & MARINE INS. CO. v. PURE OIL CO. UNITED STATES MERCHANTS' & SHIPPERS' INS. CO. v. SAME.
• Court: U.S. Court of Appeals — Second Circuit

63 F.2d 771 (1933)

ST. PAUL FIRE & MARINE INS. CO. v. PURE OIL CO.

UNITED STATES MERCHANTS' & SHIPPERS' INS. CO. v. SAME.

Nos. 222, 223.

Circuit Court of Appeals, Second Circuit.

March 13, 1933.

Kirlin, Campbell, Hickox, Keating & McGrann, of New York City (Delbert M. Tibbetts and Richard L. Sullivan, both of New York City, of counsel), for appellants.

Hatch & Wolfe, of New York City (Carver W. Wolfe, of New York City, of counsel), for appellee.

Before L. HAND, SWAN, and AUGUSTUS N. HAND, Circuit Judges.

L. HAND, Circuit Judge.

This appeal arises in two consolidated actions to recover money paid under a mistake of fact. The plaintiffs are marine underwriters which had insured a cargo of oil aboard a lighter at Sinco, Texas, bound for a steamer in the harbor. Another steamer collided with and sank the lighter, and the oil was lost; for it the plaintiffs in May, 1922, settled with the defendant at $2.75 a barrel. Being subrogated to its cause of action against the steamer, they brought a suit in the admiralty, and succeeded on the merits. In settling the damages they were unable to find evidence of the value of the oil at more than $2.19, which they were forced to accept by way of compromise. They thereafter sued the defendant for the difference, on the theory that the settlement at $2.75 a barrel had been made under a mutual mistake of both parties. At the close of the evidence both sides moved for a verdict, which the judge directed for the defendant.

The plaintiffs had issued separate policies to the defendant, the only material part of which was as follows: "Valued, premium included, at sales price port of destination on date of sailing." The destination of the oil was Marcus Hook, Philadelphia, the date of sailing, December 14, 1921. Curtin & Brockie were insurance brokers and agents for the plaintiffs; they had issued the policies, which were approved by the home offices on November twenty-ninth and December fourteenth; neither party contends that the second policy was not in force when the loss occurred. On December 12, 1921, the defendant reported the proposed shipment to Curtin & Brockie, who made out two "provisional applications," one for each assurer. These contained the words, "valued at $2.75 per bbl. as per O. P." (open policy). Curtin & Brockie initialled these and sent them to the respective offices of the plaintiffs, and on February 20, 1922, issued and delivered to the defendant two "certificates of insurance," signed by the underwriters. One of these reads as follows: "This company insured The Pure Oil Company under and subject to the conditions of open policy No. 24817 in the sum of $107,729. on ½ interest on 78,348.36 bbls. Mexia crude oil Valued at $215,458. ($2.75 per bbl. vessel lost or not lost)"; the other was in substance the same. At the time when the two certificates were issued, the plaintiffs had learned of the loss and had received from the defendant a claim and an invoice of the cargo representing its value as $2.75. Later, but before paying the loss in May, 1922, Curtin & Brockie received from the defendant detailed information as to how the figure was reached; it was on the base of $1.60 as the price of crude oil in the Mexia field from which the cargo had come. On the trial the only evidence of the price of crude oil in the Mexia field was a small contract at $1.25 early in November, and the "posted" field price of two large companies. This "posted" price was that on which the companies settled with the lessors of wells they operated, and which they used in intercompany accounts. It had been seventy-five cents until December fifteenth, when it went up to one dollar, where it stayed for the balance of the month. The defendant had apparently fixed its price from a large contract at $1.50, which it had raised to $1.60 because it thought that oil was rising in value. But it made no proof as to value, and the contract cannot be considered.

Had the certificates been issued before the loss, and perhaps before knowledge of it, we may assume that the coverage would have been of a "valued risk." Though the mere statement of the amount of insurance does not create a valued policy, the phrase, "valued at," is the usual form for stipulating damages in advance. Snowden v. Guion, 101 N. Y. 458, 5 N. E. 322; cf. Williams v. Continental Ins. Co. (D. C.) 24 F. 767. Whether such a policy could be reformed for mutual mistake, or payment recovered, may depend upon what was intended. We might for example agree that if the parties had fixed the value by the list of quotations of a produce exchange, and it could be shown that they used one of a different date, the contract would not hold. That would be because they really have meant to take that publication as authoritative, and not the market price as ascertained from any other source. It does not follow that it is enough for an underwriter merely to show a disparity between the insurance and what the court may find...