Imperial Fire Ins. Co. of London v. Home Ins. Co. of New Orleans

Decision Date17 June 1895
Docket Number370,371.
Citation68 F. 698
CourtU.S. Court of Appeals — Fifth Circuit

E. H Farrar, B. F. Jonas, E. B. Kruttschnitt, Hewes T. Gurley, W A. Blount, A. C. Blount, Jr., and D. B. H. Chaffe, for appellants.

R. H Browne, B. F. Choate, and Thomas J. Semmes, for appellee.

Before PARDEE and McCORMICK, Circuit Judges, and BRUCE, District judge.

McCORMICK Circuit Judge.

These cases will be considered together in this opinion. The appellants, the Royal Insurance Company of Liverpool and the Imperial Fire Insurance Company of London, will be referred to respectively as the Royal and the Imperial, and the Home Insurance Company of New Orleans, the appellee in each case will be referred to as the appellee.

In November and December, 1891, the appellee applied to the appellants for reinsurance, and duly received the respective policies which are the subjects of this litigation. The applications to the Royal were made on printed forms, with certain blanks filled in writing. The application to the Imperial does not appear to have been in writing, but was substantially to the same effect as those made to the Royal, the features of which material to note here were and are that the applicant warranted to retain $25,000, and described the property applicant had insured as 'cotton subject to coinsurance clause.' The Royal has now abandoned any contention on the retention clause. The Imperial still insists on its construction of that clause, but the proof abundantly supports the action of the circuit court on the issues made on the warranty by the Home to retain $25,000 or more on the risk. During the life of these policies of coinsurance, a large amount of the cotton was destroyed by fire. At the time of the fire, the appellee had written and in force, on the cotton subject to the fire, policies with the coinsurance clause to the amount of $97,700, and policies without the coinsurance clause to the amount of $25,000. The loss on the cotton covered by the first-named class of these policies was $38,707.58, and the loss on the other exceeded the amount of the policies. There is substantially no issue as to what were the actual facts as to the contracts and the loss; and there can be no dispute that, if the contention of the appellee as to the construction of the contract of coinsurance is correct, the decree of the circuit court should be affirmed. Having found that its construction of the retention clause is correct, it only remains to consider the other clauses of the policies on which issue is joined. The judgment and decree of the circuit court construe these clauses in favor of the appellee, and a majority of the judges of this court concur in that conclusion. The questions here involved are so well stated, and the authorities, so far as any authority exists bearing on the question, are so soundly applied, and the argument so full, fair, and well expressed in the brief of counsel for the appellee, that, in justice to ourselves and to him, we must adopt and use his reasoning almost literally, and to substantially the full extent that he has advanced it, there being left little or nothing to add to or qualify what he has said:

It is urged that the defendants are not liable for the losses paid by the plaintiff to Frankenbush and Borland, because the policies issued to them did not contain the coinsurance clause. It is urged that the two slips pasted on the policies of reinsurance are descriptive of the risk assumed by the reinsurer. The defendants are driven to take this ground because the reinsurer has insured the liability of the original insurer, whatever that be, unless in the contract of reinsurance there can be found some clause whereby the reinsurer stipulated that it assumed no risk, unless the original insurance contract contained the co-insurance clause. It is observed that the policies of reinsurance bear the following dates: That of the Imperial is dated November 23, 1891, and those of the Royal dated November 12, 1891, and December 26, 1891. The Frankenbush and Borland policies are dated: October 12, 1891; November 19, 1891; February 9, 1892; February 11, 1892; February 26, 1892. Only one of the policies is dated before those of the Royal, and only two are dated before that of the Imperial. Three of them are dated after all of the policies of reinsurance were issued. The description of the risk in the reinsurance policies is that the Home Insurance Company are insured on $10,000 of their liability as insurers under their various policies, issued to various parties, for various amounts, and covering as follows: Ten thousand dollars on cotton in bales their own or held by them in trust or on commission while contained in the yard No. 1, Shippers' Press, New Orleans, La. A part of this description is clearly inapplicable to the reinsurance, for the words 'their own or held in trust or on commission' have no meaning as between the insurer and the reinsurer. The cotton itself was not the subject of insurance as between the insurer and reinsurer, but as between them the subject of insurance was the liability of the insurer, as an insurer, on cotton in yard No. 1, Shippers' Press, owned or held in trust by the original insured. Now, this policy was issued to last for a year, and was intended to cover any liability that the insurer during the year might assume as insurer of cotton in the designated press. It was not restricted to liability then existing, but extended to future liability which might be incurred by the Home Insurance Company on cotton in the Shippers' Press, yard 1. What was the stipulation as to the risk assumed by the reinsurer? He agreed to cover any risk which the insurer might be willing to take, for that is the meaning of the words, 'This policy to be subject to the same risks, conditions, valuations, indorsements, and modes of settlement as are or may be assumed and adopted by the reinsured, and the loss, if any, payable pro rata at the same time and in the same manner as by said company,' etc. Any printed stipulation having reference to the property itself, or the cash value thereof, cannot be applied to the contract of reinsurance between the reinsurer and the reinsured, because the property is not the subject-matter of their contract.

It is true that the contract of reinsurance must apply to the subject-matter of insurance specified in the original policy that is to say, to cotton in Shippers' Press, yard 1, and to risks of the same kind as those specified in the original policy. In other words, if the original policy is a contract of insurance against loss by fire, the reinsurance must be against loss by fire, and not against loss by tempests or storms on land or at sea. But the specific risk in the policy of reinsurance need not be identical with that in the original policy; that is to say, an original insurance may be effected on a vessel for six months, with use of all of the ports of the world except those of Texas. The reinsurance may be for a single voyage within the bounds not prohibited, and for a less amount. This was decided in the case of Philadelphia Ins. Co. v. Washington Ins. Co., 23 Pa.St. 250. Such is the law in the absence of stipulations contained in the lower printed slip annexed to the policies sued on. That slip provides that this policy is to be subject to the same risks, conditions, and valuations, indorsements, etc., that are or may be assumed or accepted by the original insurer. Hence reinsurance under these policies is reinsurance against any of the fire risks assumed by the original insurer, in any of its policies on cotton in Shipper's Press, yard 1, and on the same conditions as those contained in any of the original policies issued by the original insurer, to the original assured, on cotton thus located. This clause gives to the original insurer the privilege of taking such risks on cotton in the designated place as it may choose. The reinsurer says: 'I will reinsure whatever contract you make, and, to protect me from any imprudence on your part, you must retain at least $25,000 on the same risk. ' This is the view taken of this clause by the supreme court of Massachusetts in Manufacturers' Fire & Marine Ins. Co. v. Western Assur. Co., 145 Mass. 424, 14 N.E. 632. The court said: 'It is often doubtful how far provisions which relate to the conduct of an assured person as general owner of that which is the subject of the contract shall be given effect in a policy to indemnify against a risk which the assured has taken upon the property of another. * * * The nature of the risk against which it insured, if there was no special stipulation pertaining to it, would suggest troublesome questions with reference to the applicability of these provisions of this peculiar kind of insurance, some of which it might be necessary to decide. ' But, in connection with the statement of the risk, the following sentence was inserted, which relieves the court of this difficulty: 'This policy to be subject to the same risks, conditions, valuations,' etc. The language of the clause is almost identical with the language used in the lower slip or rider attached to the policies sued on in these cases. The court said: 'By this language the defendant bound itself by what had been done, and by what might be assumed and adopted by the plaintiff, properly pertaining to the risk which it was reinsuring. This agreement rendered nugatory many printed portions of the policy in which it was inserted. This was special and peculiar, pertaining directly to the subject-matter of the contract, and it controlled those parts of the policy which were inconsistent with it. It assumed knowledge on the...

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  • People ex rel. Sea Ins. Co. v. Graves
    • United States
    • New York Court of Appeals Court of Appeals
    • May 25, 1937
    ...That was the method employed in the case at bar. 9 Cooley, Briefs on the Law of Insurance, 2d Ed., pp. 6741-6760; Imperial Fire Ins. Co. v. Home Ins. Co. (C.C.A.) 68 F. 698. The agreement for the latter type of reinsurance is sometimes called a ‘reinsurance compact.’ German-American Ins. Co......

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