Sorenson v. Boston Ins. Co.

• Decision Date: 05 July 1927
• Docket Number: No. 2533.,2533.
• Citation: 20 F.2d 640
• Parties: SORENSON et al. v. BOSTON INS. CO. OF BOSTON, MASS.
• Court: U.S. Court of Appeals — Fourth Circuit

20 F.2d 640 (1927)

SORENSON et al. v. BOSTON INS. CO. OF BOSTON, MASS.

No. 2533.

Circuit Court of Appeals, Fourth Circuit.

July 5, 1927.

Frank B. Ober, of Baltimore, Md. (Janney, Ober, Slingluff & Williams, of Baltimore, Md., and Bigham, Englar & Jones and D. Roger Englar, all of New York City, and Robert France, of Baltimore, Md., on the brief), for appellants.

George W. P. Whip, of Baltimore, Md. (Lord & Whip, of Baltimore, Md., on the brief), for appellee.

Before WADDILL, PARKER, and NORTHCOTT, Circuit Judges.

PARKER, Circuit Judge.

On July 6, 1923, a lighter belonging to Graham & Co. undertook to transport a cargo of coffee belonging to Sorenson & Nielsen and J. Aron & Co. from the steamship Comac, then lying in the port of Baltimore, to a warehouse at Belt's wharf. The lighter sank by reason of its unseaworthiness, and limitation of liability was denied on the ground that this unseaworthiness existed with the privity and knowledge of the owner. This suit was instituted by the owners of the coffee, to recover on a policy of insurance which had been issued by the Boston Insurance Company to Graham & Co. "on account of whom it concerns," which covered the cargo of the lighter which sank. The policy contained the following provisions:

"15. This insurance is to cover for account of the assured, as owners, common carriers, forwarders, bailees, custodians, or otherwise, and is also to cover on account of all such owner or owners of the property transported as may be after any loss designated by the assured as having been intended by it to have been insured hereunder, such designation so made in any proof or proofs of loss to be conclusive on all parties hereunder and the said assured are hereby recognized as agents and trustees of and in behalf of such owner or owners of the said property as may be designated for all purposes of this insurance with authority to bring suit in their own name to recover loss or damage thereto, and without any right on the part of the insurer to set up any exemption of carrier from liability by reason of anything contained in their bills of lading or contracts of affreightment or otherwise.

"16. It is however especially agreed that this policy is not intended to insure any parcel of merchandise on any of the lighters, barges and/or scows owned or used by said assured, upon which the owner, owners and/or shippers thereof have effected specific insurance, but in all such cases the insurance hereunder shall be limited to the property rights of the assured therein and to the earned freight and advanced charges due the assured and/or its connecting lines, and the legal liability of said assured for the loss of or damage to such merchandise should any such liability exist; and in the event of any loss or damage this policy shall be forthwith reinstated and continue to cover for its original amount and an additional premium pro rata at the rate of this policy on the amount so reinstated shall be due this company for the unexpired term of this policy."

Shortly after the sinking of the lighter, the owner, Graham & Co., became bankrupt, and thereafter libelants were designated by its president and also by the trustee in bankruptcy under order of court as having been intended by the owner to have been insured under the policy. The cargo of coffee belonging to libelants was covered by specific insurance, and the companies interested therein have made loans to libelants and taken loan receipts therefor under an arrangement similar to that which was approved in Luckenbach v. McCahan Sugar Co., 248 U. S. 139, 39 S. Ct. 53, 63 L. Ed. 170, 1 A. L. R. 1522. The loss sustained by libelants was $28,634.55, but by the eighth paragraph of the policy it is provided that "this insurance shall not be called upon under the terms of this policy for any greater claim on the cargo of any one scow or lighter by any one disaster than $8,000."

The contentions of the underwriter, the Boston Insurance Company, are: (1) That libelants are not protected by the policy sued on, because they had effected specific insurance; (2) that there has been no sufficient designation of libelants as required by the policy; and (3) that the sinking of the lighter through unseaworthiness, which existed with the privity and knowledge of the owner, avoided the policy. The learned District Judge sustained the last of these contentions and dismissed the libel. 10 F.(2d) 563.

The first question is whether the fact that libelants had effected specific insurance would preclude their suing on this policy. It is settled that such insurance would not preclude their suing to enforce the personal liability of the carrier for the loss sustained. On the contrary, the holding is that, after being advanced the amount of such insurance, they might sue the carrier to enforce its liability, although recovery would in reality be for the benefit of those who had insured them. Luckenbach v. McCahan Sugar Co., supra; Inman v. South Carolina Ry. Co., 129 U. S. 128, 9 S. Ct. 249, 32 L. Ed. 612; The Turret Crown (C. C. A. 2d) 297 F. 766, 780. In this case, therefore, it is clear that, if the bankruptcy of the carrier had not intervened, libelants might have recovered their loss from the carrier. And it is clear, also, that in such event the carrier in turn might have recovered from the underwriter on the policy in suit; for the policy expressly provides that it shall cover "the legal liability of said assured for the loss of or damage to such merchandise, should any such liability exist." The policy, however, is not one of mere indemnity against loss, but covers the legal liability of the assured (see 36 C. J. 1096), and is for the benefit of owners of cargo as well as of the carrier. Under such circumstances, we do not think that the bankruptcy of the carrier can defeat the recovery under the policy, but that under the clause covering the carrier's legal liability, the owners of cargo may recover for loss which they have sustained, and for which the carrier is liable.

It is only under the clause covering legal liability, however, that a recovery by the owners who have effected specific insurance can be had. If the policy did not contain this provision, undoubtedly the existence of the specific insurance would bar recovery. The purpose of the clause with regard thereto was to guard against double insurance on the cargo, in view of the practice on the part of carriers to provide that in case of loss the carrier should have the benefit of shipper's insurance. But, as shown above, there would be no double insurance as to the legal liability feature of the policy; for, notwithstanding specific insurance, the cargo owner could recover his loss from the carrier. On the other hand, if specific insurance by the cargo owner be held to bar recovery under the liability clause, then as to liability there is no insurance at all, and the carrier...