Federal Ins. Co. v. Detroit Fire & Marine Ins. Co.

• Decision Date: 07 January 1913
• Docket Number: 2,226.
• Citation: 202 F. 648
• Parties: FEDERAL INS. CO. et al. v. DETROIT FIRE & MARINE INS. CO. et al.
• Court: U.S. Court of Appeals — Sixth Circuit

202 F. 648

FEDERAL INS. CO. et al. v. DETROIT FIRE & MARINE INS. CO. et al.

No. 2,226.

United States Court of Appeals, Sixth Circuit.

January 7, 1913

Hermon A. Kelley, of Cleveland, Ohio (Hoyt, Dustin, Kelley, McKeehan & Andrews and I. L. Evans, all of Cleveland, Ohio, of counsel), for appellants.

F. S Masten, of Cleveland, Ohio, F.H. & G. L. Canfield, of Detroit, Mich., and Harvey D. Goulder, of Cleveland, Ohio for appellees.

Before WARRINGTON, KNAPPEN, and DENISON, Circuit Judges.

WARRINGTON Circuit Judge.

The issues in this case concern the distribution of money recovered by reason of a collision between the steamer Etruria (owned by the Hawgood Transit Company) and the steamer Amasa Stone (owned by the Mesaba Steamship Company) which occurred on Lake Huron June 18, 1905. The question of liability was disposed of by this court in Hawgood Transit Co. v. Mesaba S.S. Co., 166 F. 697, 92 C.C.A 369, and the facts there involved appear in the report of the case. The collision resulted in the total loss of the Etruria, with her cargo and freight and the personal effects of her crew, and also in injury to the Stone. It was held that both vessels were in fault, and the damages were divided. Stated in a general way, the present controversy began when the one as to liability ended.

At the time of her loss, the Etruria was insured in 16 companies holding risks in varying sums amounting to an agreed valuation, and the shipowner was paid such value by the insurers. The cargo and pending freight were separately insured by 2 of these underwriters, and these losses were likewise paid. Thereupon, as it now appears, 7 of these insurers (including the insurers of cargo and freight) requested, and 8 of them declined to request, the owner of the Etruria to bring the suit, which resulted in settling the question of liability, and, while the case was pending on appeal in this court, the remaining insurer gave its assent to the libel suit. The sums contributed by all the companies in payment of the losses, whether for hull, cargo, or freight, as also the amount of the fund for distribution, definitely appear in the record and are not in dispute.

The present issues were made up by intervening petitions of the nonconsenting insurers, answer of the original libelant, petitions of the requesting insurers, and a stipulation of facts, filed in the original cause after decree was entered below upon the mandates of this court. By the decree now in question, the fund was ordered to be distributed in substance as follows: (1) To libelant, the Hawgood Transit Company, its costs and expenses; (2) to such of the insurance underwriters as joined in the request to bring the suit, the amounts of insurance severally paid by them on account of cargo and hull, with interest; (3) to libelant, for the benefit of the crew, the amount of their losses; (4) after payment of such sums, which were declared to be 'first claims and liens upon the damages,' the balance proportionately to the nonrequesting underwriters. By this distribution the first three classes would each be paid in full, with interest; but the fourth class would receive only a comparatively small percentage of the sums they respectively paid as losses on the Etruria. The nonrequesting insurers appealed to this court, and the requesting companies are here as appellees; and, for reasons appearing later, the names of all are given in the margin. ^[1]

This controversy relates mainly to the second and fourth of the foregoing paragraphs. Of the appellants, the Firemen's Fund Insurance Company, the London Assurance, and the Union Insurance Society were insurers only of the Etruria. The other appellants were insurers of both vessels, but of the Stone in larger sums, respectively, than they were of the Etruria, except only the New Zealand Insurance Company, which had something over $700 more on the Etruria than on the Stone. It should be noted, too, that of the appellees, the Western Assurance Company and the British America Assurance Company were insurers of the Stone, as well as the Etruria; both having less insurance on the Etruria than on the Stone, even though the insurance of the former upon the pending freight of the Etruria be included. The other appellees had underwritten the Etruria alone.

Before filing its libel against the Stone, the owner of the Etruria caused notice to be given to all of its insurers that, upon request of some of them, it was about to proceed against the Stone, and also caused request to be made of all of them to notify it whether they desired this to be done and were willing to share the risk and expense thereof, stating among other things:

'The claim will be made against the Stone in the name of the insured for the entire damage, whether all of the insurers of the Etruria authorize the litigation or not. In the event litigation shall result in the Etruria being held solely at fault, the Etruria interests not authorizing the proceedings will not be asked to contribute to the expense incurred in prosecuting the claim; if, however, the action shall result in the Stone being held solely at fault or in a division of damages, the Etruria interests authorizing the proceedings will claim, before returning any part of the recovery to the Stone, or accounting to the Etruria interests not authorizing the proceeding for the share of the recovery which would otherwise fall to them, the right to deduct the expense of the litigation.'

To this an answer was made by one of appellants (the Federal Insurance Company) that it had insured 17 1/2 per cent. of the value of the Stone as against its insurance of 9 per cent. of the value of the Etruria, and that if the owner of the Etruria made claim for her entire value, and the Federal, as insurer of the Stone, were required to pay 17 1/2 per cent. of the Etruria's value, it 'would expect to receive, as insurer of the Etruria, 9 per cent. of the recovery without deduction for expenses. ' It does not appear that the other appellants made specific answer to the request. Both the appellants and appellees having risks on the Stone contributed to the expense of her owner in the libel proceeding.

It appears by stipulation that the 'Etruria was an actual total loss, and that no abandonment was made or was necessary'; and so far as this involves a legal conclusion, it is rightly admitted in the argument for appellees. Hall & Long v. Railroad Co., 13 Wall. 367, 371, 20 L.Ed. 594; The St. Johns (D.C.) 101 F. 472. Since the insurers of the Etruria admittedly paid her owner as for a total loss, it results that such insurers were, to the extent of the losses severally paid by them, subrogated to rights corresponding to those of the owner in any damages recoverable by it against the Stone. This is properly admitted. The Potomac, 105 U.S. 630, 634, 26 L.Ed. 1194; Liverpool Steam Co. v. Phenix Ins. Co., 129 U.S. 397, 462, 9 Sup.Ct. 469, 32 L.Ed. 788; Mason v. Marine Ins. Co., 110 F. 452, 49 C.C.A. 106, 54 L.R.A. 700 (C.C.A. 6th Cir.); The St. Johns (D.C.) 101 F. 472, 473.

Most of the insurers obtained subrogation receipts from the owner upon paying their shares of its loss, some of which in terms provided for full subrogation, and others 'to the extent only and as provided in' the policies, although the policies do not appear to have contained any provision for subrogation. However, we do not regard this as important, nor do counsel for either side, because it is settled that such provisions are not necessary. The right of subrogation arises from the very nature of the contract of insurance as a contract of indemnity. Phoenix Ins. Co. v. Erie Transportation Co., 117 U.S. 312, 321, 6 Sup.Ct. 1176, 29 L.Ed. 873; Liverpool Steam Co. v. Phenix Ins. Co., supra, 129 U.S. 462, 9 Sup.Ct. 469, 32 L.Ed. 788; North England Ins. Ass'n v. Armstrong, L.R. 5 Q.B. 244; Comegys v. Vasse, 1 Pet. 193, 212, 7 L.Ed. 108. It is true, as claimed, that such right is not founded on contract, but is a creature of equity (Memphis, etc., R.R. v. Dow, 120 U.S. 301, 302, 7 Sup.Ct. 482, 30 L.Ed. 595); still it is none the less a right that is entitled to protection, and, as Justice Harlan said in that case, is enforced for the purpose of 'accomplishing the ends of substantial justice.'

Admittedly the subrogated rights of all the insurers of the Etruria were, when acquired, entitled to equal protection; but it is urged that the nonconsenting insurers destroyed this equality by waiver. Certainly the right of subrogation, like many other rights, may be waived. The theory of appellees is that the appellant insurers, when requested to authorize the libel suit and share in its expense, were put to an election either to prosecute the suit or to waive equality in their subrogated rights as to the Etruria. The intent to waive is said to be strengthened as to the five appellant insurers of the Stone, because they contributed to the expenses of her owner in the libel litigation. It is worthy of notice that no suggestion of this kind is made respecting the two appellee insurers of the Stone, who made like contribution, and yet were permitted to share ratably with the other appellees in the sum recovered of the Stone.

Was it necessary that these two appellees should place themselves on both sides of the libel proceeding, in effect sue themselves in order to avoid waiver of their subrogated rights respecting the Etruria? To say the least, it would be more consonant with well-known rules of procedure to defend one interest, with either a declared or an undeclared, though actual, purpose to hold the other, than to resort to the method adopted by these two appellees. After all, it is the existence of the interest in the vessel proposed to be libeled, rather than the declaration of purpose,...