Kerr v. Union Marine Ins. Co.

• Decision Date: 14 April 1904
• Docket Number: 178.
• Parties: KERR et al. v. UNION MARINE INS. CO.
• Court: U.S. Court of Appeals — Second Circuit

130 F. 415

KERR et al. v. UNION MARINE INS. CO.

No. 178.

United States Court of Appeals, Second Circuit.

April 14, 1904

Albert A. Wray, for appellant.

Wilhelmus Mynderse, for appellees.

Before WALLACE, LACOMBE, and TOWNSEND, Circuit Judges.

WALLACE Circuit Judge.

This is an appeal from a decree, in an action in personam, in favor of the libelants. In disposing of the case we do not find it necessary to consider whether there was any concealment of the loss of the vessel on the part of the libelants, as we are satisfied there was a misrepresentation which avoided the contract of insurance.

The insurance was against loss by perils of the sea upon a cargo of logwood on board the barque Elida, 'at and from Black River, Jamaica, to New York. ' It was obtained at New York City, where the libelants resided, upon an application made by a broker who was acting for them. Pursuant to instructions to make an inquiry for the rate of insurance, he applied to an agent of the underwriter at New York City on November 4, 1901, having prepared a formal inquiry upon an application blank. The application was made upon one of the printed blanks of the underwriter, containing various inquiries about the particulars of the insurance desired and the nature of the risk, and the answers were filled out by the broker for the libelants, in writing. Among the inquiries was one as to the time of the sailing of the vessel (from Black River), and to this inquiry the answer inserted was 'Not sailed.' Upon receiving the application from the broker of the libelants, the agent of the underwriter named the rate of premium, and indorsed it upon the application and placed the application on file. December 12th the libelants were advised by letter from Black River that 'the Elida clears to-day,' meaning December 3d, the date of the letter. They immediately instructed their broker to procure insurance at once, without regard to rates, but did not inform him that the vessel was ready to sail, or that they had received any advices. Thereafter, and on December 12th, their broker requested the agent of the underwriter to bind the insurance, and the latter indorsed the application 'binding,' erased the original date, which was November 4, and dated it December 12, 1901. The date, which was November 4, and dated it December 12, 1901. The effect of this was to create a present contract of insurance 'subject to the conditions of printed form of policy used by this company (the underwriters) and its New York agents at this date. ' The form of policy then in use would have covered the risk from the time of loading the cargo upon the vessel to its arrival at New York. At this time the vessel and cargo had been lost. She had sailed from Black River December 4th, and on December 7th had been wrecked on the southwest coast of Cuba.

If the representation as to the time of the sailing of the vessel had not been made in response to a specific inquiry on behalf of the underwriter, it would be difficult to conceive how the statement could have influenced the mind of the underwriter. If the vessel had sailed, the period of the risk would have been shorter, and so far as appears, the circumstances would not have affected the rate of insurance. In McLanahan v. The Universal Insurance Company, 1 Pet. 188, 7 L.Ed. 98, Mr. Justice Story said:

'That the time of sailing is often very material to the risk cannot be denied; that it is always so is a proposition that will scarcely be asserted, and certainly has never yet been successfully maintained.'

'There may be circumstances that would render the fact highly material; as, if the ship were a missing ship, or out of time. Foley v. Moline, 5 Taunt. 145. None appear by the proofs; and the testimony of the witnesses who were called upon to testify upon the subject is wholly undeterminative. If the question were one of concealment, we should incline to the opinion that the time of the sailing of the vessel was not a material fact. But the question, in our view, is not whether there was a concealment, but whether there was a misrepresentation; and this depends upon quite different considerations. When a representation is made spontaneously by the insured in the course of negotiations for insurance, it cannot be certainly known whether or not the underwriter has relied upon it, and its materiality, therefore, becomes a question of fact; and that question is whether it was one that would naturally and reasonably influence the insurer either in making the contract or in his estimate of the risk. When, however, the representation is elicited by a specific inquiry, a different rule obtains:

'If the misrepresentation is made in reply to a specific

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