Source: https://supreme.justia.com/cases/federal/us/302/556/
Timestamp: 2019-04-21 04:11:41+00:00

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Justia › US Law › US Case Law › US Supreme Court › Volume 302 › Lansa Fruit Co. v. Universal Ins. Co.
Lansa Fruit Steamship & Importing Co. v. Universal Insurance Co.
1. In deciding this case concerning the liability of an insurer for loss of a cargo of fruit, both courts below assumed that the fruit was in sound condition when shipped, and would have been merchantable at the end of the voyage had it not been for the stranding of the ship and consequent delay. Held that this Court, in reviewing the question decided, will make the same assumptions. P. 302 U. S. 559.
2. Application of a general coverage clause of a marine insurance policy held unaffected by a rider attached for an additional premium, after the policy had been long in effect but cancelled before the occurrence of the loss. P. 302 U. S. 560.
The rider covered losses not embraced in the marine perils against which the policy insured, and it also covered losses which were already covered by the policy, and there was room for difference of opinion as to exactly how far the rider overlapped.
3. Stranding of the ship is a peril of the sea. P. 302 U. S. 561.
4. The doctrine of proximate cause is applied strictly in marine insurance cases. P. 302 U. S. 562.
marketable upon arrival at destination, was spoiled by decay -- a total loss. Held that the stranding was the proximate cause of the loss, and that the loss was covered by insurance against perils of the sea. P. 302 U. S. 562.
6. In marine insurance cases, the proximate cause of loss is the efficient cause, not necessarily that cause, in a chain or series, which was nearest in time to the event. P. 302 U. S. 562.
Certiorari, post, p. 664, to review the affirmance of a judgment in favor of the respondent Insurance Company in an action on a policy of marine insurance. The case had been removed to the District Court from the Court of Common Pleas of Baltimore City.
This action was brought upon a policy of marine insurance. Judgment for respondent was affirmed by the Circuit Court of Appeals, 89 F.2d 545, and certiorari was granted.
Petitioner was the owner of a cargo of bananas aboard the Norwegian steamship Smaragd. While proceeding up Chesapeake Bay to Baltimore on July 21, 1935, the vessel stranded, and, before she could be floated, the entire cargo of bananas became overripe and rotted, causing a total loss. Petitioner held a floating policy of insurance which had been issued by respondent on June 23, 1933. The general coverage clause of the policy embraced perils of the sea.
To the declaration setting forth these facts and claiming that the loss was within the coverage of the policy, respondent filed four pleas, the first two pleading the general issue and the two others being special pleas. Petitioner joined issue on the first and second pleas and demurred to the third and fourth. The District Court overruled the demurrer to the third plea and, as that decision was considered by the parties and the court to be conclusive of the issue, final judgment was entered for respondent.
"free of particular average unless the vessel be stranded, sunk, burned, on fire, or in collision, in any, all, or several of which events, the insurers are liable for such loss by decay, injury, or damage to the fruit as is occasioned thereby or occurs during or in consequence of delay resulting therefrom."
The insurers also assumed liability for such loss in consequence of delay resulting from breakage of shaft, loss of blades from propeller, and derangement or breakage of machinery or rudder and/or stern post, "whether or not the vessel be stranded, sunk, burned or in collision," provided that the loss amounted to 10 percent after deducting 5 percent for ordinary loss.
On the cancellation of the rider, it was agreed that the policy should have the same coverage as prior thereto, and the premium rate was reduced from 60 cents to the original rate of 25 cents on the $100 of risk. 89 F.2d 545, at 546.
In affirming the judgment, the Circuit Court of Appeals observed that the judgment had been entered upon the pleadings, and that petitioner had conceded that its right to recover depended upon the construction of the policy.
89 F.2d at 545, 546. The appellate court then examined the policy, and, after a review of authorities in this country and in England, held that the loss was not within the general coverage clause relating to perils of the sea. The court, in concluding its opinion, referred to the rider as showing that the parties had interpreted that clause in the same way. Id., p. 549. We granted certiorari because of the importance of the principal question thus determined by the Court of Appeals, a question which had not been decided by this Court, and as to which the decisions of other courts were said to be in conflict.
We are met by two preliminary questions. The first of these is with respect to the sufficiency of the declaration. It is suggested that the declaration does not allege that the bananas were shipped in sound condition, and that they would have been merchantable at the end of a normal voyage, and that there is no allegation as to the duration of the delay. It does not appear that these questions were raised in the District Court, and they were not dealt with by the Court of Appeals, which evidently assumed the sufficiency of the declaration to present the main question as to the interpretation of the general coverage clause. Both courts below have decided the case upon the assumption that the fruit was in sound condition when shipped, and would have been merchantable at the end of the voyage had it not been for the stranding and the consequent delay. In view of this course of proceedings, we make the same assumption. If any question as to the condition of the cargo or length of the delay and its effect had been presented in the trial court, it might have been met by amendment of the declaration, and the issue could have been tried, and, if the main question, upon the assumption stated, has been wrongly decided and the case is remanded to the District Court, there will still be opportunity to try any other issues of fact or law which may properly be presented.
The other preliminary question is with respect to the effect of the rider above mentioned. We do not regard that indorsement as either controlling or persuasive. Manifestly, it did not affect the application of the general coverage clause. That clause had been in effect for a long period before the rider, and, by express agreement, that clause remained in effect after the rider was cancelled. The rider covered losses not embraced in the marine perils against which the policy insured, and it also covered losses which were already covered by the policy, and there was room for difference of opinion as to exactly how far the rider overlapped. The actual views of the parties when the rider was obtained, and the reasons for its cancellation, are not shown with any definiteness. For all that appears, the insured may have been advised, and may have assumed, that the coverage clause of the policy gave protection in such a case as is here involved, and may not have desired to continue to pay the additional premium for the other losses described. We are not called upon to speculate as to the state of mind of the insured's officers, and one asserted ambiguity is not to be cured by another. ,If the general coverage clause permits recovery, we see nothing to defeat it in what was done in connection with the rider.
Petitioner thus states the main question broadly: does the general clause of the marine cargo insurance policy, insuring for loss caused by perils of the sea, cover a loss where a marine peril -- viz., stranding -- has so delayed the voyage that the cargo has become a total loss?
of the vessel's forced departure from the course of her voyage -- as, for example, where the vessel has put into a port of distress and remained there for a period which constituted a virtual abandonment or frustration of the voyage.
In considering these contentions, we start with the fact that the vessel, while proceeding up Chesapeake Bay, stranded. That is alleged and conceded. Stranding is a peril of the sea. Liverpool & Great Western Steam Co. v. Phenix Insurance Co., 129 U. S. 397, 129 U. S. 438; Richelieu & Ontario Navigation Co. v. Boston Marine Insurance Co., 136 U. S. 408, 136 U. S. 421; Arnould on Marine Insurance, 11th ed., § 816; Winter on Marine Insurance, 2d Ed., p. 156. Loss through stranding was within the coverage of the policy. This, as the court below observed, was expressly recognized in the warranties against particular average in which loss by stranding was excepted. 89 F.2d 545 at 546, 547. And it was the stranding which caused the delay. The case is not one of the mere lengthening of a voyage due to the ordinary vicissitudes of wind and wave against which the underwriter does not insure, Jordan v. Warren Insurance Co., 1 Story 342, 352, and we are not called upon to determine in what circumstances other than those now presented delay may be considered to be due to a peril of the sea within the meaning of the policy.
for the delay due to the stranding of the vessel, the loss would not have occurred despite the perishable nature of the cargo.
We are not impressed by the argument that, to permit recovery, it must appear that the adventure was not merely delayed, but that it was frustrated through a forced departure of the vessel from the course of her voyage and the putting into a port of distress. So far as the cargo in question was concerned, the adventure was frustrated by the stranding, and the cargo became a total loss before the vessel could be floated. That loss was just as complete as if the vessel had been compelled to put into a port and the voyage had then been abandoned.
The sole question is whether, in these circumstances, the stranding should be regarded as the proximate cause of the loss. Respondent contends that decay or inherent vice was the proximate cause. It is true that the doctrine of proximate cause is applied strictly in cases of marine insurance. But, in that class of cases as well as in others, the proximate cause is the efficient cause, and not a merely incidental cause which may be nearer in time to the result. Aetna Insurance Company v. Boon, 95 U. S. 117, 95 U. S. 130; Arnould on Insurance, 11th ed., § 783.
infinitely. At the point where these various influences meet, it is for the judgment, as upon a matter of fact, to declare which of the causes thus joined at the point of effect was the proximate, and which was the remote, cause."
"What does 'proximate' here mean? To treat proximate cause as if it was the cause which is proximate in time is, as I have said, out of the question. The cause which is truly proximate is that which is proximate in efficiency. That efficiency may have been preserved although other causes may meantime have sprung up which have yet not destroyed it, or truly impaired it, and it may culminate in a result of which it still remains the real efficient cause to which the event can be ascribed."
There, in a policy insuring a ship, there was a warranty of exception in case of hostilities or warlike operations, and the question was whether the loss of the vessel fell within the exception. The vessel was torpedoed, and sustained severe injuries, but succeeded in making the outer harbor of the port of Havre. Notwithstanding all efforts by pumping and otherwise, she bumped, broke her back, and sank. It was contended that she perished by a peril of the sea because sea water entered the gash in her side which the torpedo made. The entry of the sea water was indeed a peril of the sea, and was proximate in time to the sinking. But, as "proximate cause is an expression referring to the efficiency as an operating factor upon the result," it was held that "the real efficient cause" of the sinking of the vessel was that she was torpedoed, and hence that the loss was within the exception.
repair, the water burst through the hole and she had to be run aground and abandoned. The contention was that the proximate cause of the damage was the excepted marine peril of the inrush of the sea water. But the Court of Appeal held that the proximate cause was the collision with the snag.
correct exposition of the rule. All the consequences naturally flowing from the peril insured against, or incident thereto, are properly attributable to the peril itself."
"Suppose a perishable cargo is greatly damaged by the perils of the sea, and it should, in consequence thereof, long afterwards, and before arrival at the port of destination, become gradually so putrescent as to be required to be thrown overboard for the safety of the crew. The immediate cause of the loss would be the act of the master and crew; but there is no doubt, that the underwriters would be liable for a total loss upon the ground that the operative cause was the perils of the sea."
And, in the same case, Justice Story took occasion to observe that, if there be any commercial contract which, more than any other, "requires the application of sound common sense and practical reasoning in the exposition of it," it is "certainly a policy of insurance." Id., 39 U. S. 109.
If we apply this principle of the "real efficient cause" to the instant case, it can hardly be doubted that, upon the facts assumed, the loss would be within the coverage of the policy. Indeed, this is not strongly contested, but it is insisted that the case is controlled by certain precedents to which we should give heed in dealing with an ancient form of words. These precedents are found in certain English cases to which the Circuit Court of Appeals referred. The court recognized that a number of American cases had taken a different view, but thought that, in the absence of a contrary decision by this Court or any federal court, the cited English cases should be followed in the view that, in the field of marine insurance, "it is highly desirable that our decisions be kept in harmony with those of England." 89 F.2d p. 549.
"be opening a door to claims for losses which never were intended to be covered by insurance, not only in the case of perishable goods, but in the case of goods of all other descriptions."
which proximately caused the damage to the fruit was the handling, though no doubt the cause of the handling was the repairs, and the cause of the repairs was the collision. According to the English law of marine insurance, only the last cause can be regarded. There is nothing in the policy to say that the underwriters will be liable for loss occasioned by that. To connect the loss with any peril mentioned in the policy, the plaintiffs must go back two steps, and that, according to English law, they are not entitled to do."
"With regard to the American authorities, the American law on the subject seems to differ materially from our law, and therefore it is not necessary to consider them. *"
English practice in that class of cases. Marine Insurance Act, 1906, § 55(2)(b). L.R. Statutes, 6 Edward VII, p. 227. There is no statute applicable here which so restricts the doctrine of proximate cause, as we understand it and as it is set forth in the Leyland case, and the weight of American authority is contrary to the doctrine of Pink v. Fleming.
In Williams v. Smith, 2 Caines 1, the action was on a policy of insurance covering a cargo consisting chiefly of naval stores, including tar in barrels, on a voyage from New York to Algiers. The vessel experienced severe weather which resulted in such serious damage that it was compelled to put into Cadiz as a port of distress. There, more than half of her landing was taken out, and the vessel moved to the usual place for repairing. While there, an epidemic fever broke out which prevented all business and made it impossible to obtain permits for taking the cargo from the place where it had been landed. Meanwhile, the vessel was driven to sea by a storm and sustained further injuries, and, on returning to Cadiz, it was found that the cargo, both on shore and on board, from the heat of the climate and violence of the gale, was deteriorated more than one half of its original value. As the whole would not have produced enough to fit the ship for the completion of her voyage, the vessel and the cargo were abandoned to the underwriters. The court charged the jury, among other things, that "any damages which arose in consequence of the fever at Cadiz were within the perils of the policy." The jury brought in a verdict for a total loss. The court denied a new trial, Judge Kent stating in his opinion "that the damage resulting from the pestilence at Cadiz" was covered by the policy. The court found it unnecessary to decide "whether a pestilence is a peril direct within the policy," but held that it formed "a sound excuse for delay at Cadiz," and "if the consequence of that delay was a deterioration of the subject insured, the insurer must be answerable for the loss."
"placed in such a condition that, in consequence of inevitable deterioration or decay, it cannot be carried to the port of destination, but will necessarily, before the completion of the voyage, be wholly destroyed, and it is accordingly sold at an intermediate port,"
this would constitute a total loss within the meaning of the policy. The court also held that the exception of the risk of ice "melting in consequence of putting into port" did not include "a loss occasioned by the melting of the ice from other causes, or a combination of other causes." The real cause was the injury to the vessel which made it necessary to take out the ice in a port in the tropics. See also Musgrave v. Mannheim Insurance Co., 32 Nova Scotia Rep. 405.
"for damage or injury to goods by dampness, rust, change of flavor, or by being spotted, discolored, musty or mouldy, unless the same be caused by actual contact of sea water with the articles damaged, occasioned by sea perils."
"that perils of the sea should be the efficient, and within the rule laid down in the previous decisions, the proximate cause, by which the sea water was shipped,"
but that the sea water "must come into actual contact with the articles, for the damage to which the underwriters are sought to be charged."
"[a]ll authorities agree that a protracted voyage is not a sea peril within a marine policy, because it is not an unusual event, but one of the natural incidents to sea transit;"
"must have great weight upon the fact as to whether the condition of the cargo, upon its arrival in New York, was other than what might have been expected from ordinary sea weather at that time of year,"
without any "unusual sea peril." The conclusion was that the principal damage to the cargo came "from its own inherent qualities, excited by the long-continued transit." Id., pp. 449-450.
In the case of Bond v. The Superb, 3 Fed.Cas. p. 845, No. 1,624, 1 Wall.Jr. 355, also cited by respondent and the court below, the decision of Mr. Justice Grier at circuit turned upon the question of liability for general average and in this view had distinguishing features.
"whether loss by natural deterioration, during a delay in the voyage caused by a sea peril, is a loss by sea perils, within the meaning and intent of the policy of insurance."
"The evidence indicates that, if the Corsicana had not been damaged by reason of sea perils, the potatoes would have arrived sound. The proximate cause of the loss therefore was the sea peril, because it was the efficient dominant cause, which, although incidentally involving delay, placed the cargo in such a condition that, because of inevitable deterioration or decay, it could not be reshipped and carried to its destination."
The Court of Appeals of New York stated the question in the same way, and affirmed the judgment.
We lay on one side cases of protracted voyages caused by storms, and the special questions to which their varied circumstances give rise. Such a case is not before us. The instant case is one of stranding, a sea peril insured against, and we think that the well settled doctrine of proximate cause, meaning the real efficient cause of the loss, requires the conclusion that, upon the assumptions of fact we stated at the outset, the loss of the cargo was within the general coverage clause of the policy.
MR. JUSTICE McREYNOLDS and MR. JUSTICE SUTHERLAND are of opinion that the case was correctly decided by the court below on grounds adequately stated.
* As to other English decisions cited below, Tatham v. Hodgson, 6 T.R. 656, and Inman Steamship Co. v. Bischoff, L.R. 7 App.Cas. 670, see Arnould on Marine Insurance, 11th Ed., §§ 781, 785.

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