Connecticut Fire Ins. Co. v. Davison Chemical Corp., 2648.

• Decision Date: 15 February 1944
• Docket Number: No. 2648.,2648.
• Parties: CONNECTICUT FIRE INS. CO. v. DAVISON CHEMICAL CORPORATION.
• Court: U.S. District Court — District of Maryland

54 F. Supp. 2

CONNECTICUT FIRE INS. CO. v. DAVISON CHEMICAL CORPORATION.

No. 2648.

District Court, D. Maryland.

February 15, 1944.

Robert W. Williams (of Ritchie, Janney, Ober & Williams), of Baltimore, Md., for libelant.

Richard F. Cleveland (of Semmes, Bowen & Semmes), of Baltimore, Md., for respondent.

CHESNUT, District Judge.

The only new point in this case is the proper meaning of the phrase "a pro rata monthly premium" as it appears in the "continuation clause" of the American Institute Time Hull Form of Marine Insurance Policy. The whole clause reads as follows:

"Provided, however, should the Vessel at the expiration of this Policy be at sea, or in distress, or at a port of refuge or call, she shall, provided previous notice be given to the Underwriters, be held covered at a pro rata monthly premium to her port of destination."

The particular marine policy was issued by the Connecticut Fire Insurance Company to the Davison Chemical Corporation as owner of the barge "Portsmouth". It covered the barge in the amount of $30,000 at a premium rate of 12% ($3600) for the period of one year from June 10, 1941 at noon, to June 10, 1942 at noon. The barge was valued at $100,000 and was insured to the whole amount in several marine policies.

In the instant case notice was duly given in accordance with the "continuation clause"; the vessel did not arrive at the port of destination until after the stated expiration of the policy as originally written; and the latter was thus extended in time; but the vessel did arrive safely at destination at 6 P. M., June 10, 1942, only 6 hours after noon on that day, the time of expiration of the policy as originally stated. The libelant, the Connecticut Fire Insurance Company, is suing to recover a monthly premium of $300 which is one-twelfth of the whole premium for the time policy of one year. It construes "pro rata monthly premium" to mean a monthly premium pro rated to the amount of the whole year premium stated in the policy. The insured, Davison Chemical Corporation, has refused to make this payment on its contention that the proper meaning of the phrase "pro rata monthly premium" means—a pro rata premium, calculated on a daily basis, payable monthly. It therefore says the additional premium must be limited to an amount of about $2.50, being one-fourth of a day's premium. Although the "continuation clause" has been in customary use for many years, counsel state that the particular phrase here involved has not heretofore been judicially construed or applied in any reported case.

The facts are not in dispute and appear in the brief pleadings in the case including the interrogatories and answers thereto. The particular marine policy was obtained for the insured by Hutchinson, Rivinus & Co., as its insurance brokers. Their principal office is in Philadelphia, but their representative obtained the policy from the managers of the insurer (Carpenter & Baker) in New York City. On June 4, 1942 the insured vessel was at sea and it was not known whether she would arrive at her destination before noon June 10, 1942, when the policy by its terms expired. In accordance with the continuation clause above quoted, the brokers so notified Carpenter & Baker and obtained their approval of an endorsement for the policy reading as follows: "In the event the barge `Portsmouth' is enroute on date of expiration, i. e., June 10, 1942, E.S.T., she shall be held covered, subject to the full terms and conditions of the above numbered policy, until her safe arrival at port of destination, in consideration of a pro rata monthly premium as provided for therein." Similar endorsements were obtained from the other insurers on the risk. On June 24, 1942, (and thus after the ship had arrived safely at destination) the brokers prepared and submitted to Carpenter & Baker and obtained their written approval of a further endorsement for the policy reading as follows:

"New York, June 24, 1942

"Endorsement to be attached to and made a part of Policy No. 34025, Connecticut Fire Insurance Company, issued to the Davison Chemical Corporation.

"For and in consideration of an additional premium of $300, being the monthly pro rata of 12% per annum, it is hereby understood and agreed that the above numbered policy is extended, subject to its full terms and conditions, to cover the barge `Portsmouth' until her safe arrival at Port Sulphur, Louisiana or vicinity on June 10, 1942.

"A.P. $30,000 "Monthly P/R of 12%—$300."

The brokers sent this endorsement to their customer, the insured, together with the insurer's bill for $300 for the additional monthly premium, but the Davison Chemical Corporation declined payment for the reason above stated.

There was uncontradicted parol evidence in the case that the phrase "pro rata monthly premium" in the "continuation clause" has a well understood meaning and application in the business of marine insurance as known to and practiced by both underwriters and brokers for insured owners. This meaning is that if the policy is extended by notice given under the continuation clause and the risk as so extended attaches for any part of the month after the original expiration date of the policy, the whole of a month's premium becomes due and payable, and that the amount of the monthly premium is that proportion of the whole premium which the month bears to the whole time period of the policy, which of course in this case was one-twelfth of the year, that is $300. The evidence was further to the effect that if the vessel did not arrive at destination within the first month after the original expiration date of the policy, but during the second month thereafter, two monthly payments so calculated would become due and payable, and similarly for succeeding months for which the policy was continued. Counsel for the insured objected to this parol evidence of the customary understanding of the phrase on the ground that while it may have been perfectly well established from the standpoint of the underwriters it was not binding on the insured owners. However, this contention overlooks the fact that the evidence shows that the phrase is well understood in meaning not only by the underwriters but also by brokers acting for the insured owners and in this case there were such brokers acting for the insured who, it appears from the evidence, well understood the phrase to have the meaning and application contended for by the insurer. Eagle Star v. Tadlock, D.C.Cal., 22 F.Supp. 545, 548; 12 C.J. S., Brokers, § 125, at page 323; Vol. 2, Couch Cyc. of Insurance Law, s. 466, p. 1327; Federal Intermediate Credit Bank v. Globe & Rutgers Fire Ins. Co., D.C.Md., 7 F.Supp. 56, 66; Franklin Sugar Ref. Co. v. Egerton, 4 Cir., 288 F. 698, 702; Western Pet. Co. v. Tidal Gas Co., 7 Cir., 284 F. 82; Couch, Vol. 8, § 2185; 25 C.J.S., Customs and Usages, § 23, p. 111; Vol. 5, Wigmore on Evidence, 2nd Ed., § 2464; Richards on Insurance, 4th Ed., § 73.

But apart from this parol evidence of the trade understanding of the phrase, I think there can be little difficulty in giving it properly the meaning contended for by the underwriters, when the policy as a whole is...