In re Insurance Co. of State of Pennsylvania

• Decision Date: 01 January 1884
• Parties: In re Petition of INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA for the Proceeds of the Barge Waubaushene.
• Court: U.S. District Court — Northern District of New York

22 F. 109

In re Petition of INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA for the Proceeds of the Barge Waubaushene.

United States District Court, N.D. New York.

1884

Benjamin H. Williams, for petitioner.

Willis O. Chapin, for respondent.

COXE J.

The petitioner is a marine insurance company of the state of Pennsylvania, doing business at Buffalo, in this state, where Crosby and Dimick are its general agents. They are also agents, either individually or as a firm, of three other marine insurance companies. The companies represented by them are known as the 'Big Four.' The barge Waubaushene is a Canadian vessel, registered at Toronto, Ontario. Her owner Milton S. May, of London, Canada, applied in March, 1883, to A. H. Dalziel, an insurance agent and broker at Sarnia Canada, for insurance upon her and other barges owned by him. The barge having been inspected at Buffalo, it was concluded to apply to Crosby and Dimick for insurance, it being understood that no one of their companies would write all the policies, that an application made to one would answer as well for each of the other three, and that the agents reserved the privilege to divide the risk according to the amount which each company would consent to assume. The application for the Waubaushene was made to the Thames &amp Mersey Marine Insurance Company, (one of the 'Big Four,') and was dated March 30, 1883. The insurance asked for was $5,700, the applicant agreeing to give a note for the premium ($384.75) at six months, indorsed by J. C. Miller and Robert Moat, payable at the Bank of Montreal. The application, made on one of the company's printed blanks contained the following:

'This application to be considered binding until rejected and due notice given the applicant; or approved, and the contract of insurance perfected by the issue of the company's policy.'

The application was filled up by Dalziel, and sent by him to Crosby and Dimick. In all this he acted for May. Crosby and Dimick received the application, and in response issued two policies,-- one in the Pennsylvania Company, (this petitioner,) for $1,700, the other in the Thames & Mersey Company, for $4,000. The policies, together with the premium notes, ready for signature, were sent to Dalziel by mail. The policies were delivered to May, and the notes, signed by him, but not indorsed, were returned to Dalziel, who mailed them to Crosby and Dimick. The notes so signed were accepted and retained. The policy in question contains a provision that it shall not be binding until countersigned by the general agents at Buffalo. It was so countersigned at the time of delivery. It also provides, in substance, that in case of loss or misfortune, if the insurer is required to pay for repairs, etc., more than its just proportion, the surplus (with the premium note, if unpaid) shall be a lien upon, and shall be recoverable against, the vessel, or against the insured at the option of the insurer. The policy also contains the following receipt:

'The assured hereby acknowledges the receipt of a note, at 6 months from May 1, '83, for the amount of the consideration of this insurance, which, at the rate of 6 3/4 per cent. on $1,700, is $114.75.' The words 'A. H. Dalziel, Agent at Sarnia, Ont.,' are indorsed on the policy in the same handwriting, apparently, which appears on its face. The premium note is dated at Sarnia, Ontario, May 1, 1883; is made payable, not to the order of either of the persons proposed in the original application as indorsers, but to the order of the insurance company itself. The note recites that it is given for 'premium of insurance on schooner barge Waubaushene, policy No. 611, of Sarnia, Ontario, A. H. D. (A. H. Dalziel) Agency, Insurance Co. of the state of Pennsylvania,' and that if it is 'not paid at maturity the full amount of premium shall be considered as earned, and the said policy becomes void, while the amount remains overdue and unpaid. ' The note was indorsed by the company, Crosby and Dimick general agents. The policy extended from May 1 to November 30, 1883, and was by special clause confined to 'total loss and general average only.'

Upon the hearing before the commissioner the note was surrendered. It has never been paid. The barge having been sold by order of the court in another proceeding, the petitioner now seeks to have the amount of the premium paid from the surplus in the registry of the court. The respondent, as mortgagee, resists this attempt, insisting that the debt is a mere personal contract of the owner, carrying with it no privilege against the ship.

The questions which the court must examine are these: First, was the contract made in the state of New York or in Canada? In other words, is the controversy to be determined by the law of this country or Canada? Second, has the law of New York, creating a lien in favor of underwriters for unpaid premiums, any application to this case? Third, is a general lien created by the maritime law of this country? The commissioner to whom the cause was referred decided--First, that the contract of insurance was made in New York; second, that the New York law has no application to a Canadian vessel; third, that a maritime lien for unpaid premiums does exist in favor of the insurer. That the commissioner was correct as to the second proposition I have little doubt, but am constrained to disagree with him as to the other two.

Where was the contract made? It cannot be said that any binding contract was entered into when the policy was made out and mailed at Buffalo, for the reason that it differs wholly from the application. Eliason v. Henshaw, 4 Wheat. 225. The minds of the parties did not meet. They did meet, however, when, at Sarnia, Ontario, May accepted the contract and signed the note in the precise form adopted by the company. It is argued for the petitioner that as May agreed to give an indorsed note and did not do so, the minds of the parties did not come together until the unindorsed note was accepted by the agents at Buffalo. Hence the contract was made there. The provision for an indorsed note was for the benefit of the insurers. Unquestionably, they could waive it. That they did waive it there is little doubt. They sent to Dalziel, who for this purpose was their agent, made so by this act, a policy of insurance and a note, with instructions to deliver the one and return the other properly signed. The departure from the application was made, in the first instance, by the insurers. They knew that the owner of the Waubaushene had made no application to insure her in their company, that he had not even mentioned its name in this connection, and it may well be questioned whether they were in a position to demand from him any unusual conditions. But let it be assumed that, under the peculiar circumstances attending this application, they were justified in exacting an indorsed note. They did not do so, and the evidence seems to warrant the conclusion that they did not intend to do so. Mr. Marshall, who, on behalf of the company, sent the papers to Dalziel from Buffalo, testified:

'My purpose in sending the note was to have Dalziel procure it to be signed by the insured and to return to us. This was done. This is the way we always do with Dalziel or any other applicant, and he is expected to have the note executed and returned. * * * The general instructions to all our agents and brokers are to have the note signed when they deliver the policies, and Dalziel was included in this number.'

There is no pretense that Dalziel has any special instructions in this case. Certainly he was not asked to obtain an indorsed note. Had he entertained any doubt on the subject, the form of the policy and the note must have removed it. The policy was complete and ready to deliver. It acknowledged receipt of the note in the ordinary form. The note, made payable to the company's own order and not to the order of the proposed indorser, completely negatived the idea that anything but the signature of May was required. If the insurers intended to rely upon the agreement in the original application, would they not have made the note payable to the order of Miller or Moat? Most certainly. They had departed from many of the provisions and stipulations of the application. They waived others. This was one of them. In the application the note was to be made payable at the Bank of Montreal. In the note sent Dalziel the space designed for the insertion of the place of payment was left blank. This was a waiver of that condition, and can it be successfully argued that had May inserted some other bank the contract would have been incomplete till the agents at Buffalo had assented to the change? It is thought not. But assuming that they did not intend to issue the policy until an indorsed note had been executed, are they in a position to maintain such a proposition? Are they not concluded by their own acts? They made Dalziel their agent to deliver the policy and return the note to the company. They refer to him on the back of the policy as 'Agent at Sarnia, Ont.' In the note they refer to the policy as of the 'Sarnia, Ont., A.H.D. Agency.' They held Dalziel out to May as the person with whom he was to deal, at least so far as the delivery of the policy and the return of the note was concerned. And when to this is added the fact that they gave May a receipt 'for the amount of the consideration of this insurance,' it is, indeed, difficult to understand upon what theory they can now be heard to say that no contract was consummated at Sarnia.

It has frequently been held that a delivery of the policy to the assured containing a receipt for the premium estops the company, for the reason that the receipt is conclusive evidence of payment, to the extent at...