Relief Fire Insurance Company of New York v. Shaw

• Decision Date: 01 October 1876
• Citation: 24 L.Ed. 291,94 U.S. 574
• Parties: RELIEF FIRE INSURANCE COMPANY OF NEW YORK v. SHAW
• Court: U.S. Supreme Court

94 U.S. 574

24 L.Ed. 291

RELIEF FIRE INSURANCE COMPANY OF NEW YORK v. SHAW.

October Term, 1876

ERROR to the Circuit Court of the United States for the District of Massachusetts.

Mr. J. G. Abbott for the plaintiff in error.

Mr. E. F. Hodges, contra.

MR. JUSTICE BRADLEY delivered the opinion of the court.

The principal question in this case is, whether a parol contract of insurance, made on behalf of the plaintiff in error by its agent in the city of Boston, was valid.

That a contract of insurance can be made by parol, unless prohibited by statute, or other positive regulation, has been too often decided to leave it an open question. That it is not usually made in this way is no evidence that it cannot be so made. To avoid misunderstandings in a contract of such importance and complexity, it is undoubtedly desirable that it should always be in writing; and such is the requi ement of many codes of commercial law. But the very existence of the requirement shows that it was deemed necessary to make it. The question came before the Supreme Judicial Court of Massachusetts in 1860, on a contract made under circumstances very nearly similar to those of the present case; and it was adjudged that a parol contract of insurance can be made. Sanborn v. Firemen's Insurance Co., 16 Gray, 448. The court in that case says:——

'No principle of the common law seems to require that this contract, any more than other simple contracts made by competent parties upon a sufficient consideration, should be evidenced by a writing. No statute of Massachusetts contains such a requirement. Upon principle, therefore, we can find no authority in courts to refuse to enforce an agreement which the parties have made, if sufficiently proved by oral testimony.'

This decision being directly in point, and being made by the highest court of the State where the present contract was made, is entitled to the highest consideration. The Court of Appeals of New York held the same doctrine in 1859, in the case of The Trustees of the First Baptist Church v. Brooklyn Fire Insurance Co., 19 N. Y. 305. Judge Comstock, delivering the opinion of the court, after briefly and accurately stating the history of policies of insurance, in regard to this point, says:——

'The contract, as I have said, had its origin in mercantile law and usage. It has, however, become so thoroughly incorporated into our municipal system, that a distinction which denies the power and capacity of entering into agreements in the nature of insurances, except in particular modes and forms, rests upon no foundation. The common law, with certain exceptions, having regard to age, mental soundness, &c., concedes to every person the general capacity of entering into contracts. This capacity relates to all subjects alike, concerning which contracts may be lawfully made, and it exists under no restraints in the mode of contracting, except those which are imposed by legislative authority. There is nothing in the nature of insurance which requires written evidence of the contract. To deny, therefore, that parol agreements to insure are valid would be simply to affirm the incapacity of parties to contract where no such incapacity exists, according to any known rule of reason or of law.' See also May on Insurance, sects. 14-23, and Kelly v. Commonwealth Insurance Co., 10 Bosw. 82.

We have been referred to the case of Cockerill v. Insurance Company, 16 Ohio, 148, in which it is held that a parol contract of insurance is not recognized as valid by the commercial law, but must be expressed in a written policy. We have also been referred to Duer on Insurance, p. 60, and to Millar on Insurance, p. 30, which are to the same purport as the Ohio case. On examination of the books on maritime law, on which these authorities rely, we find that the requirement of a written policy, though almost if not quite universal in maritime codes, is always by positive regulation; and we find those regulations as far back as the subject of insurance is discussed or legislated upon. But whilst this is true, the considerations referred to by Judge Comstock, in the New York case last cited, are unanswerable. And the numerous cases in which a parol contract for a policy of insurance has been sustained are conclusive that there is nothing in the nature of the subject which renders it insusceptible of a parol agreement. And whilst a statutory regulation requiring a writing may be very expedient, in the absence of such a statute it cannot be held that a parol insurance is void.

It is contended, however, that the present case is subject to, and is to be governed by, certain express relations, which take it out of the general rule of the common law. The charter of the defendant company is referred to as restraining its power to enter into contracts of insurance in any other manner than by a written instrument. The company was forme in 1856, under the General Fire Insurance Companies Act of New York, passed in 1853, by which any association proposing to be organized under its provisions was required to file a copy of its charter in the office of the comptroller, and therein 'set forth the name of the company, the place where its business should be located, the mode and manner in which the corporate powers granted by the act are to be exercised, &c.' The company in this case filed such a charter, by the first article of which it was declared as follows:——

'The name of this company shall be the Relief Fire Insurance Company. The principal office for the transaction of its business shall...