Allemannia Fire Insurance Company of Pittsburg, Pennsylvania v. Firemen Insurance Company of Baltimore, To the Use and Benefit of Francis Wolfe

Citation28 S.Ct. 544,52 L.Ed. 815,209 U.S. 326
Decision Date06 April 1908
Docket NumberNo. 180,180
PartiesALLEMANNIA FIRE INSURANCE COMPANY OF PITTSBURG, PENNSYLVANIA, Plff. in Err., v. FIREMEN'S INSURANCE COMPANY OF BALTIMORE, TO THE USE AND BENEFIT OF FRANCIS E. S. WOLFE, Receiver
CourtUnited States Supreme Court

This action was brought by plaintiff, who is the defendant in error, in the supreme court of the District of Columbia, for the purpose of recovering an amount alleged to be due the plaintiff from the defendant (plaintiff in error) on a policy of reinsurance. The plaintiff obtained judgment in the trial court, which was affirmed in the court of appeals of the District.

The plaintiff had originally insured the property which was destroyed, and had, prior to the loss, reinsured a proportion of the original insurance with the defendant company. After such reinsurance the plaintiff suffered heavy losses by reason of the great fire in the city of Baltimore in the month of February, 1904, for which losses it became liable, and was rendered thereby insolvent, and is unable to pay the same, unless the plaintiff is able to collect the amount due it from the defendant by virtue of its reinsurance policies, and from other corporate fire insurance companies with which plaintiff had contracts of reinsurance. By reason of the insolvency of the corporation a receiver was appointed by a decree of the circuit court of Baltimore city, prior to the commencement of this action.

Upon the trial the plaintiff proved a cause of action against the defendant, unless the facts, which it also proved, that it had become insolvent by reason of the losses sustained by it incident to the Baltimore fire in 1904, and that a receiver had been appointed for it by the court in Maryland, and that the receiver had paid to its creditors, after this suit was brought, but 55 per cent of the amount of its liability, amounted to a defense.

The contract between the plaintiff and defendant was described therein as a 'reinsurance compact,' and in it the defendant agreed to 'reinsure the Firemen's Insurance Company' in the amounts and manner therein stated.

There were contained in the compact, and forming part thereof, the following subdivisions:

'10. Upon receiving notice of any loss or claim under any contract hereunder reinsured, the said reinsured company shall promptly advise the said Allemannia Fire Insurance Company, at Pittsburg, Pennsylvania, of the same, and of the date and probable amount of loss or damage, and after said reinsured company shall have adjusted, accepted proofs of, or paid such loss of damage, it shall forward to the said Allemannia Fire Insurance Company, at Pittsburg, Pennsylvania, a proof of its loss and claim against this company, upon blanks furnished for that purpose by said Firemen's Insurance Company, together with a copy of the original proofs and claim under its contract reinsured, and a copy of the original receipt taken upon the payment of such loss; and, upon request, shall exhibit and permit copies to be made of all other papers connected therewith, which may be in its possession.

'11. Each entry under this compact, unless otherwise provided in this compact, shall be subject to the same conditions, stipulations, risks, and valuation as may be assumed by the said reinsured company under its original contracts hereunder reinsured, and losses, if any, shall be payable pro rata with, in the same manner, and upon the same terms and conditions, as paid by the said reinsured company under its contracts hereunder reinsured; and in no event shall this company be liable for an amount in excess of a ratable proportion of the sum actually paid to the assured or reinsured by the said reinsured company under its original contracts hereunder reinsured, after deducting therefrom any and all liability of other reinsurers of said contracts or any part thereof.'

The defendant gave no evidence, but requested the court to instruct the jury as follows:

'No. 2. The jury are instructed that proof of mere liability on the part of the plaintiff under the original contracts or policies involved in this suit is not sufficient to entitle it to a verdict against the defendant; and the jury are therefore further instructed that they must return a verdict in favor of the defendant, unless they shall find from the evidence that the plaintiff has actually paid the whole or some part of one or more of the claims against it, enumerated in the schedule annexed to the contract of reinsurance here sued upon.

'No. 3. The jury are instructed that, if they find for the plaintiff, their verdict must not be for an amount in excess of a ratable proportion of the various sums actually paid by it to its policy holders under the original contracts or policies enumerated in the schedule attached to the declaration filed herein.'

These instructions were refused and the refusal duly excepted to. Thereupon the jury, under instructions, returned a verdict in favor of the plaintiff for $12,613.24, being the amount which it was conceded was due under the reinsurance compact, provided the fact of insolvency and nonpayment by the reinsured did not constitute a defense.

Messrs. H. Prescott Gatley, Andrew Y. Bradley, and Charles H. Bradley for plaintiff in error.

[Argument of Counsel from pages 329-331 intentionally omitted] Messrs. William F. Mattingly and T. Wallis Blackistone for defendant in error.

[Argument of Counsel from pages 331-332 intentionally omitted]

Mr. Justice Peckham, after making the foregoing statement, delivered the opinion of the court:

The only question before the court is as to the construction of the language of the reinsurance compact. The term 'reinsurance' has a well-known meaning. That kind of a contract has been in force in the commercial world for a long number of years, and it is entirely different from what is termed 'double insurance,' i. e., an insurance of the same interest. The contract is one of indemnity to the person or corporation reinsured, and it binds the reinsurer to pay to the reinsured the whole loss sustained in respect to the subject of the insurance to the extent to which he is reinsured. It is not necessary that the reinsured should first pay the loss to the party first insured before proceeding against the reinsurer upon his contract. The liability of the latter is not affected by the insolvency of the insured or by its inability to fulfil its own contract with the original insured. The claim of the reinsured rests upon its liability to pay its loss to the original insured, and is not based upon the greater or less ability to pay by the reinsured. If the reinsured commenced his action against the reinsurer before he had himself paid the loss, the reinsured took upon himself the burden of making out his claim with the same precision that the first insured would be required to do in an action against him. But there is no authority for saying that he must pay the loss before enforcing his claim against the reinsurer. These propositions are adverted to an enforced in Home v. Mutual Safety Ins. Co. 1 Sandf. 137, where the authorities upon...

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