Case Name: DUNCAN against THE GREAT WESTERN INSURANCE COMPANY
Court: New York Court of Appeals
Jurisdiction: New York
Decision Date: 1867-03
Citations: 5 Abb. Pr. 173
Docket Number: 
Parties: DUNCAN against THE GREAT WESTERN INSURANCE COMPANY.
Judges: 
Reporter: Abbott's Practice Reports
Volume: 5
Pages: 173–181

Head Matter:
DUNCAN against THE GREAT WESTERN INSURANCE COMPANY.
Court of Appeals ;
March Term, 1867.
Marine Insurance.—Time oe Loss.—Parties.— Change of Interest after Loss.
The loss of a vessel insured should be deemed effectual and certain from the time the vessel was so injured that her destruction became inevitable; and the claim for damage must be deemed to have then attached, although she was kept afloat for some time after such injury.
Those who had an interest in the vessel, at the time of such fatal injury, may . recover upon the policy, notwithstanding the fact of their having subsequently, and before the sinking of the vessel, made an assignment of their interest to others, who are not parties to the action.
Appeal from a judgment.
This action was brought by Charles C. Duncan, Theodore and William D. Crooker, Theodore Ripley, and twelve others, to recover upon a marine policy, issued by the defendants on the ship Adriana, of Bath, for $3,000 for one year from April 1, 1856.
The policy was obtained by C. C. Duncan, “on account of whom it might concern, in case of loss to be paid to them.” On April 12 the vessel sailed from the port oi' New York, bound to San Francisco, her first place of destination, with a cargo of coal. She was then in good condition and well manned. On the 16th, and also on the 18th of the same month, she encountered storms and severe gales, with squalls of wind, which strained upon her seams and wood-ends, producing openings and causing leaks, which injuries resulted in her total loss. By great exertion of the master and crew she was kept afloat until May 5, when she was abandoned in a sinking condition, and immediately went down. •
At the time of the inception of the risk, the plaintiffs were all interested in the vessel, part as owners—their im terest being subject to mortgage liens—and part as mortgagees ; and no change in the ownership occurred until after the vessel received its fatal injury, nor, indeed, until she sank, except that on April 24, three of the plaintiffs, David Crooker, William D. Crooker, and Theodore Ripley, executed and delivered a bill of sale of their interest —being one-fourth part—to Kendall and Richardson, who were not parties to the action.
Proofs of loss and interest were duly presented to the defendants for and in behalf of the owners, but no demand was made by or in behalf of the mortgagees before. suit.
On the trial, the defendants admitted their liability for three-fourths of the loss and claim, but défended as to the remaining fourth, solely on the ground that there had been a change of interest as to this fourth, after the inception of the policy, and before the loss occurred.
On the question of fact the jury found specially, that the vessel received a fatal injury prior to April 24—the time of transfer of the one-fourth'—which caused her subsequent loss, by sinking, on May 5. The superior court directed judgment against the defendants for the whole claim, holding that in legal construction the loss occurred prior to the transfer of the one-fourth of the vessel, on April 24.
The opinion of the superior court will be found reported under the title of Crosby v. New York Mutual Ins. Co. (5 Bosw., 369), a similar case determined by that court at the same time with this.
William M. Evarts, for the defendants, appellants.
—I. There being no proof that the insurance was effected for the interest of the mortgagees, and no preliminary proofs of their interest having been presented, they are not to be considered in the case. (1.) A policy “for whom it may concern ” will be applied only to the interest of the party or parties for whom it was intended by the person who effects or orders it (1 Phill. Ins., 383). (2.) No evidence was offered of any intention on the part of the insurer to include the mortgagees. (3.) If their claims under the policy are recognized in this action, still they have failed to ascertain and prove how much remained due on their mortgage. (4.) The three-fourths insurance, about which there is no dispute, is sufficient to pay all the mortgage debt proved.
II. The insurance was effected for the benefit of the part owners alone, they being the only parties intended, or on whose behalf proofs were presented, or demand made, or who can avail themselves of the defendant’s admission of liability for three-quarters. Whether or not the mortgagees have any security from the insurance, is matter of contract between them and their mortgagors. The defendants are under no contract with them.
, III. Of the part owners, those only can recover under the policy whose interest in the vessel subsisted at the time of the loss (2 Am. Lead. Cas., 451: Phill. Ins., 185, and cases cited; Powles v. Innes, 11 Mees. & W., 10 ; Carroll v. Boston Marine Ins. Co., 8 Mass., 515). The complaint in express terms claims on behalf of those plaintiffs “ who were, at the time of making the policy, and continually afterwards, and until and at the time of the loss, interested,” &c.
IV. The plaintiffs, Ripley, W. D. Crooker, and David Crooker, having, by their bills of sale to Kendall and Richardson, parted with their several portions of the quarter in question, can recover nothing on that account unless the vessel was a total loss before the bills of sale were delivered and recorded.
V. The vessel insured had not become a total loss when such change of interest was effected. (1.) The complaint alleges the loss to have taken place on May 6, and not before. (2.) When the transfer was made, she was still a ship water-borne, pursuing her voyage and transporting her cargo, and as to the one-quarter she was sold as such. (3.) At no time, between the discovery of the leak and the transfer, was the condition of the ship such as to j ustify an abandonment to the underwriters. For pri or to the storm of May 1 she could be kept free from water.
■ VI. If it were true that she was fatally damaged, or received her death blow upon April 16, or at any time before the transfer, still the fact that the quarter was sold and the price received, precludes the possibility of a recovery under the policy by the vendors as for a total loss. They have sustained no loss, and there is therefore nothing for which they can be indemnified. (1.) Having received their own price for the property as acknowledged in the bills of sale, they are now struggling to make the insurers pay them for it again. (2.) The purchasers of the quarter in question might have insured that portion, and would have been entitled to recover for a total loss. There cannot be two parties with an insurable interest as owners of the same subject, and so entitled to double indemnity for its loss. (3.) The fallacy consists in confounding the fatal damage to the structure of the ship wLh actual loss to its owners of their.property in it.
VII.—There was no evidence that a storm encountered by the Adriana, prior to the 24th of April, produced a fatal injury which caused her subsequent loss by sinking on the fifth or sixth of May following. (1.) Ho leak was discovered prior to the morning of the 19th of April, and up to that time the ship had encountered no unsual' perils whicli could have caused the leak. (2.) After the discovery of the leak, and before the storm of May 1, the ship met with no disaster, bad weather, or extraordinary peril, and was all the while kept free from water. (3.) ’During this whole interval she was daily within reach of assistance, but her officers spoke no vessel, and sought for no assistance until after the storm of the first of May. (4.) The proximate cause of the loss, the real death blow, was the gale of May 1, which continued till May 3; this first made the leak dangerous. It was followed by the bursting of the pump on the 4th of May, and not till then did the vessel become unmanageable.
VIII.—If the vessel became a total loss before the transfer of the quarter in dispute, the price received by the owners of that portion, as ascertained by the bills of sale, was in the nature of salvage, and went as such by abandonment to the underwriters, and this amount should have been accounted for to the defendants, and their proportion deducted from the verdict (Phill. Ins., § 1714 ; Knight v. Faith, 15 Q. B., 649).
Dexter A. Hawkins, for the plaintiffs, respondents.
—I. The change of interest, granting it to be after the inception of the risk and before loss, does not, even as to that one-quarter, terminate the policy ; but the same remains in full force for the benefit of the parties purchasing this one-quarter. (1.) There is nothing in the policy prohibiting a change of interest, or even requiring any notice of change, in case one takes place. On the contrary, the policy, in its terms, evidently contemplates a change of interest, and requires no notice of it. (3.) The defendants, by their own act in giving a policy for the “benefit of whom it may concern, ’ agree in the contract that it-is of no consequence-who the owners may be. (3.) When the company intend to make the parties of the essence of the contract, they require their names to be stated in the policy. (4.). As a further protection they make the loss payable to a party named, who, in receiving the money, acts as agent and trustee for all the parties in interest. (5.) The history of marine insurance and the distinction between it and fire insurance support this view. (6.) In this country the-few decisions on this point, at first view against plaintiffs,, may be disposed of under two heads, {a.) Fire policies : where the contract is with parties named and them only, and is to be judged with the strictness and severity of the common law inapplicable to marine insurance. The leading case in England (Lynch v. Dalzell, 4 Br. Parl. Cases, 431), is put upon, the ground that fire policies are- so framed as to be in terms, contracts only between the assurers and the parties owning the property at the date of the policy. (5.) Marine policies, like those in Massachusetts, that contain a clause prohibiting change of interest without consent in writing, first obtained of the insurance company. (7.) This clause deprives of authority all the Massachusetts decisions adverse to plaintiffs, on this point, since New York policies do not-contain any such clause. In Lazarus v. Commonwealth Ins. Co. (19 Pick., 81 ; S. C., 5 Pick., 76),-—which is a type of these decisions, the policy contained the following:—“It is also agreed, that this policy shall be void in case of its being assigned, transferred or pledged without the previous consent, in writing, of the assurers.” (8.) In that case there was a New York policy for $11,00.0, like the one now before the court, with, out this restrictive clause, and it was paid in full. Be. cause of this clause in Massachusetts policies, the only course left for the assured, was to show that the transfer was either conditional (not absolute) or after loss. As in Carroll v. Boston Marine Ins. Co. (8 Mass., 515); Gordon v. Mass. Fire & Marine Ins. Co. (2 Pick., 258). (9.) But even under this clause, a transfer of the property, without consent of the insurers, to trustees, does not terminate the policy. (10.) A marine policy is assignable in equity to the assignee to whom the subject-matter or interest thereby insured is assigned; provided the policy contains no provision to the contrary (Gourdon v. Ins. Co. of N. America, 3 Yeates, 327; 1 Phill. Ins., § 77, and cases there cited).. A verbal assignment, with delivery of the policy, gives to the assigned an equitable right to the proceeds where the policy contains no provision to the contrary (1 Phill. Ins., § 80 ; Lord Abinger and B. Parke, in 11 Mees. & W., 10 ; Wells v. Archer, 10 S. & R., 412). (11.) The mere delivery of the policy, without any other act' of ssignment, for the purpose of security, gives to the depositary a lien on the proceeds of the policy for the purpose (1 Phillips Ins.), § 98. (12.) Under an insurance on “goods,” the cargo may be changed several successive times on'the same voyage, and be still covered by the in surance taken out at the commencement of the voyage (1 Arnould, 211, § 98 ; Emerigon, 1 vol. ed. of 1827, p. 296 ; 3 Boulay Paty Droit de Com., p. 384 ; Hill v. Patten, 8 East, 377). (12.) The averment of interest relates to the date of the policy, and the action is properly brought in the name of the parties in interest at that time (Perchard v. Whitmore, 2 Bos. & Pul., 155). If the plaintiff had an insurable interest at the time the policy was effected, whatever change of interest may have taken place since, can have no effect in relieving the underwriters from their liability, as the plaintiff may sue on the policy for the 'benefit of the party to whom the property has passed (Sparkes v. Marshall, 3 Scott, 172 ; 2 Bing. N. C., 774). (14.) The plaintiffs in this suit held the whole interest at the date of the policy ; all still hold interest, but on April 24, 1856, three of them, not knowing that the ship was then a wreck, transferred parts of her as a ship, amounting to one-quarter, to Kendall & Richardson, who are not parties to the suit. No objection has been raised by either demurrer or answer as to any defect of parties ; hence, if there was, or is any, it is waived (Code, §§ 144, 147, 148). (15.) The policies were never in the hands of the parties who transferred the one-quarter, but were held by the parties to whom they were made payable in trust for every party in interest. If the loss occurred after Kendall & Richardson bought a quarter, then for this quarter, K. & R. are the parties to whom the payees must account in distributing the fund. If the thing sold was a wreck, not a ship, then K. & B., notwithstanding their bills of sale, have nothing to do with it.
II. Granting that the change of interest in the one-quarter on April 24, 1866, did, as to the owner’s interest conveyed on that day, terminate pro tanto the policy, it would still cover the mortgagees’ lien upon this one-quarter secured by the mortgage. For as to this, the interest remains the same as at date of policy (1 Arn., 219, 252 ; Irving v. Richardson, 1 M. & Rob., 153 ; B. & Ad., 293 ; Rogers v. Traders’ Ins. Co., 6 Paige, 583 ; Brown v. Bement, 8 Johns., 96 ; Ackley v. Finch, 7 Cow., 290 ; Jones v. Smith, 2 Vesey, Jr., 378 ; Langdon v. Bued, 9 Wend., 80 ; Furguson v. Lee, Id., 258 ; Case v. Boughton, 11 Id., 106: 2 Duer on Ins., 49, § 27; Russel v. Union Ins. Co., 4 Dall., 424 ; Glover v. Black, 3 Burr., 1394, Mansfield, J.; Wolff v. Horncastle, 1 Bos. & Pull., 316 ; Buller, J ; 6 Paige, 587.
III. The plaintiffs are entitled to recover the full amount of the policy, even granting that a change of interest terminates pro tanto the policy; for a total loss had accrued before the change of interest, and the liability of the defendant to these plaintiffs for a total loss had attached ; of this total loss and liability, plaintiffs gave defendants notice as soon as they heard of the loss. The parties to the transfer of the 24th, acted under a mistake of facts. One thought he was selling a ship when he had none to sell, and the other thought he was buying one when there existed only a sinking wreck in mid-ocean to be bought. It was for any beneficial purpose as completely out of existence as though it had sunk. It was of no more value than a house burned to the ground. Equity would release the purchaser (Belknap v. Sealey, 14 N. Y. [4 Kern.], 143 ; 2 Duer, 570). The ship may be totally lost within the meaning of a contract of insurance, and yet at the same moment exist sufficiently to be transferred as a ship ; for the two contracts proceed upon different principles. A loss for beneficial purposes is a loss within a contract of insurance (Barr v. Gibson, 3 Mees. & W., 390 ; 2 Duer on Ins., 5, 6). Constructive total losses are sustained upon this doctrine. (14.) Had the policy expired by its own limitation on the morning of the 24th April, 1856, the defendants would have been held to pay for a total loss. The rule is: "The claim for loss must be determined according to the injury sustained within the period of the policy, and the consequent condition of the subject at the conclusion of that period (Furneaux v. BradlyMarshall on Ins., 584 ; 1 Phill. on Ins., 706 ; Coit v. Smith, 3 Johns. Cas., 16 ; Howell v. Protection Ins. Co., 7 Ohio, 284 ; Stagg v. United States Ins. Co., 3 Johns. Cas., 34; Roux v. Salvador, 3 Bing. N. C., 286 ; 2 Arn., 1000, 2004 ; Mellish v. Andrews, 15 East, 15).

Opinion:
By the Court.—Bockes, J.
—(After stating the facts.) Accepting the facts to be as proved and found—that the vessel had received a fatal injury prior to the 24th April; that after such injury she was a mere wreck, kept afloat by the utmost exertion of the master and crew, unable to proceed on her voyage, or indeed to make headway toward any port, save under the most favorable circumstances of wind and tide—and the judgment of the court below was' obviously right.
As the case comes before us, we must regard these facts as definitely and conclusively established. Immediately after the injury was apparent, the vessel was directed toward the nearest accessible port; and although changes were afterwards made in'the direction, they were deemed necessary by reason of the shifting of the wind and the extremely hazardous condition of the ship ; and notwithstanding the exercise of the utmost prudence, and after exhausting efforts from all on board, she sank at sea. The loss should, therefore, be deemed effectual and certain from the time the vessel was so injured and crippled as that her destruction became inevitable ; and in this case the claim for damage must be deemed to have attached when the injury was received which ultimately, and before she could be brought to port, caused the destruction of the vessel (3 Johns. Cas., 16 ; 7 Ohio, 284 ; Phill. on Ins., 685-86 ; Arn. on Ins., 1000-1004). The sale of the one-fourth on the 24th April to Kendall and Richardson, the vessel then being a mere wreck, on the supposition and understanding of the parties that she was seaworthy, was of no force as a contract of sale. If the consideration was unpaid, it could not be recovered ; or, if paid, could be recovered back.
In my opinion the superior court ruled correctly in holding that the defendants were liable for the full amount of the insurance; and the judgment appealed from should be affirmed with costs.
Judgment affirmed. .