Case ID: johns-cas_1/html/0143-01.html
Source: Caselaw Access Project
Author: {"author": "Lansing, Ch. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

*Gahn & Mumford against Broome.
    In an action on an open policy of insurance on goods at and from Baltimore to the Havana, the insured recovered for a total loss ; and it was held, that the plaintiffs were entitled to recover the invoice price of the goods, without any deduction for the drawback allowed on exportation.(a)
    
      ^a) Minturn cf* Champlin v. Columbian Ins. Co. 10 Johns. 75.
    This was an action on a policy of insurance upon the cargo of the American ship M’Gilva, Driscoll, master, at and from Baltimore to the Havana, warranted American property. It was an open policy, and subscribed by the defendant, for 7000 dollars, at a premium of 10 per cent. The plaintiffs declared for a total loss by the perils of the sea.
    On the trial before Mr. Justice Kent, at the last March circuit, in the city of New York, the policy was admitted, and • it was also admitted that the ship sailed on the voyage insured, laden with 11,214 bushels of salt, the property of the master, Driscoll, who was an American, and for whose benefit the insurance was effected $ that at the time of effecting the insurance, the plaintiffs delivered to the defendant an account of the salt, stating the price at which it had been purchased, with the charges thereon, arid the premium of insurance proposed to be given, making in the aggregate, the sum of 6908 dollars, and 18 cents, as the interest intended to be insured, and which was thereupon insured, as being worth 7000 dollars; that the salt was wholly lost, as stated in the declaration ; that notice of the loss was given on the 27th June, 1798, and proof thereof, and of the interest of the assured, and an abandonment were at the same time duly made to the defendant.
    It was further admitted, that the owner of the salt was entitled to a drawback of 3183 dollars, on exportation, for which a debenture was given by the collector of the port of Baltimore, but at the time of receiving the debenture, Driscoll, the owner, was obliged to give a bond with sufficient sureties to the collector, in double the amount of the drawback, conditioned to produce to the collector certain proofs of the delivery of the said salt at some place without the [*121J United States, as by law required ; that *these proofs were necessary to be made within one year from the date of the bond; but that in case of loss by the dangers of the sea, or by capture, other proofs were allowed to be substituted, to procure a discharge of the bond ; that such proofs had been supplied, and the bond was cancelled; and that Driscoll had received the amount of the debenture.
    A verdict was taken for a total loss, on t-he sum insured, subject to the opinion of the court, whether the plaintiffs were entitled to recover the full price of the goods without deducting the amount of the debenture, and if not, that the verdict should be reduced accordingly.
    S. Jones, jun. for the plaintiff,
    insisted that they were entitled to recover the full price of the goods at the place of exportation, which was the sum subscribed by the defendant. The drawback did not constitute a part of the price in the market here, but was intended as a bounty to the merchant,, and, therefore, ought not to operate in favor of the insurer, to diminish his responsibility.
    
      B. Livingston, for the defendant.
    On an open policy the prime cost of the goods is the sum to be recovered. The amount of the debenture was a certain deduction, which the owner was at all events entitled to receive from the government, and so far diminish the value to the insurer. The owner, therefore, had no interest to be insured equal to the sum in the policy. The real price or value was1 that sum, deducting the debenture. If more were allowed, the assured, instead of obtaining an indemnity merely, which is the sole object of the contract, would gain by the event, which would, afford a strong temptation to fraud.
   Lansing, Ch. J.

delivered the opinion of the court. The general rule is settled and admitted, that in an open policy, the invoice price is the value which, upon a total loss, the insured is entitled to recover. The defendant contends, that on account of the drawback, this case ought to form an exception to the rule.

*The drawback is intended as a benefit to the mer- [*122] chant, on the exportation of certain goods, and not for the advantage of the assurer; and although it may enter into the estimate of the value of goods, with a view to exportation, it is no part of their actual price in the market here.

The invoice price has been adopted, as affording not only an equitable but a certain rule, not influenced by the fluctuations of value, which subsequent circumstances mayproduce. If the drawback were also certain, and in every event payable to the shipper, the exception in this case would seem to be reasonable; but that is not the fact. To entitle the goods to drawback, they cannot be relanded within the United States, and the shipper is obliged to. give security that they shall not be relanded. The drawback is, therefore, contingent, and in the case of relanding by barratry, the ' assured would not only lose the amount of the drawback, but be exposed to inconvenience and additional loss on account of the security. Against the risk of barratry he would surely be unprotected; and yet, that is a risk within the express terms of the policy, and for which the assurer has received his premium.

To permit the drawback to reduce the value to be recovered would, therefore, confer a benefit on the insurer, and impose on the insured a burthen and a risk without an indemnity, a burthen by giving the security, and a risk in the ease of barratry, as has' been mentioned.

The plaintiffs may be gainers by the event, and temptations to fraud may in some cases exist; but we cannot depart from the sense of the contract, and the rule which has been long established.

Judgment for the plaintiff. 
      
       The actual or market value at the port of departure, may frequently be different from the invoice price or prime cost, and when that happens or can be ascertained, it is to be preferred. Snell et al. v. Delaware Ins. Co. 4 Dallas, 430; S. C. 1 Wash. C. C. R. 509. Carson v. Marine Ins. Co. 2 id. 468. 3 Kent’s Comm. 336. It seems that in estimating a total loss on an open policy of insurance, the value of the goods at the outset or commencement of the risk with the usual charges, is what the insurer ought to pay; and that the prime cost is generally the safest and best rule of ascertaining such value ; especially where the goods are purchased for exportation. Le Roy v. United Ins. Co. 7 Johns. R. 343. In this case, the goods consisting of hides were invoiced at twelve cents per pound, being the value thereof exclusive of charges ; the price paid by the plaintiffs, was ten cents per pound, and the court thought that in computing the loss, the hides must be estimated at the cost price. S. P. Minturn v. Columbian Ins. Co. 10 Johns. R. 75. Marshall on Ins. 621. Lewis v. Rucker, 2 Burr. 1167, 1170. See the rule laid down by Lord Ellenborough, in Usher v. Noble, 12 East, 639, 646. Stevens v. Columbian Ins. Co. 3 Caines’ R. 43,47, per Thompson, J. But in Coffin v. The Newburyport M. Ins. Co. 9 Mass: R. 436, where the risk on cotton was to commence at the Isle of France, and it was invoiced at the value there, which was more than the cost to the assured ; the court held, that the interest was to be estimated according to the invoice. In South Carolina, it is stated to be an invariable rule, that the loss must'be calculated according to the prime cost, adding all duties and expenses, and the p/eminm of insurance. Bailey v. South Carolina Ins. Co, 1 Tr. Con. R, 381. Emerigon (tom. 1, p. 261,1 says the actual cost is the rule, though the goods have fallen since the purchase. ' „