Case Name: WALN against THOMPSON
Court: Supreme Court of Pennsylvania
Jurisdiction: Pennsylvania
Decision Date: 1822-12-23
Citations: 9 Serg. & Rawle 115
Docket Number: 
Parties: WALN against THOMPSON.
Judges: 
Reporter: Reports of cases adjudged in the Supreme Court of Pennsylvania (Sergeant & Rawle)
Volume: 9
Pages: 115–122

Head Matter:
[Philadelphia,
Dec. 23d, 1822.
WALN against THOMPSON.
A valued policy of insurance was made of supposed profits, on a cargo of goods, on a voyage from Canton to Philadelphia, free from average, and without benefit of salvage-. The ship sailed from Canton with a carg’o, but in consequence of bad weather, put into the Isle of France for repairs; part of the cargo was so much damaged, that it was thrown overboard; part being also damaged, was sold, and the proceeds reinvested, and these, with the sound part, arrived at Philadelphia, where it’was found that pait of those considered sound, were damaged.. The sound teas Were sold at a very considerable profit, but on the whole cargo there wa's no profit: and there was a loss of more than fifty per cent-, on the whole goods shipped. Held, that the underwriter was discharged.
This was an action on a policy of insurance, brought by William Wain against Edward Thompson, and was tried before Duncan J., at Nisi Prius, when a verdict was taken for the plaintiff, subject to the opinion of the Court.
The policy was declared to be, “ on supposed profits on a cargo of goods in the ship Bengal, on a voyage from Canton to Philadelphia — warranted free from average, and without benefit of salvage. Amount valued at 20,000 dollars.” The ship sailed from Canton the 25th December, ÍS15, with a cargo of teas, cassia, .china, &c. • On the 27th January, 1816, she met with a gale of wind, by which she suffered considerable damage, in consequence of which, she put into the Isle of France for repairs. On a survey, the whole cargo being unloaded, part of the teas was found so much damaged, that it was ordered to be thrown into the sea. Another part being damaged, and in a perishable state, was sold for the benefit of the concerned, and the proceeds invested in other goods,- which, with the sound part of the cargo, were shipped on board the Bengal, who, after receiving the necessary repairs, resumed her voyage to Philadelphia, on'the 9th April, 1816, and arrived there the 1st July following. At Philadelphia, it was found, that part of the teas taken on board at the Isle of France, as sound, was in fact, damaged at that time. The sound' teas were sold at Philadelphia, at a very considerable profit, but upon the whole cargo there was no profit, and there was a loss of more than fifty per cent, on the whole amount of the goods shipped at Canton. The plaintiff abandoned, and claimed for a total loss.
J. R. Ingersoll and C. I. Inger.soll, for the plaintiff.
The question is, whether there was not in this case a total loss of profits, occasioned by perils of the sea, within the meaning of the policy, and of the warranty. There may be an average loss in an insurance upon profits, as well as upon other subjects of insurance, TLbbott v. Sebor, 3 Johns. Cas. 39 ; but if there be nothing else in the case, the claim is precluded by the warranty. There must be a total loss, or the plaintiff cannot recover. We contend, that there was such a total-loss. There was no profit whatever derived by the plaintiff from the cargo shipped: so that it was, in fact, to him, a total loss of profits. The literal meaning of the memorandum is, that if any profit is made, though less than 20,000 dollars, the underwriter is discharged : there shall be no average. But if there be no profit whatever, the loss is total, provided always, that the loss is occasioned by a peril insured against. No other sensible meaning can be given to this policy ; there can be no salvage, for there is nothing to abandon when there is no profit. A more liberal interpretation may be given; that if the goods arrive in safety, although no profits be made, the underwriter is discharged. But where all the goods shipped do not arrive, and the profit that would have been made is thereby sunk) the underwriter becomes responsible.
An insurance of profits On g!oods, partakes of the character of art insurance on goods: and the rule is well settled, that if the damage amounts to fifty per cent., or more, it is not an average, but a total loss.. .Gardiner v. Smith, 1 Johns. Cas. 141. In the present case the fact is admitted in the argument, that there was a loss of more than fifty per cent, on the goods shipped at Canton: so that it falls within the general rule. If less than one half the goods had been lost, it would then have been a case of average, and the warranty would have barred the plaintiffs claim. If nothing is a total loss under this policy, but an absolute actual loss of the whole car-.go, then the safety of a single article would defeat the plaintiffs recovery, In.Jlbbott v. Sebor, 3 Johns. Cas. 39, Kent, C. J. seems to think, though he does not expressly decide the point, that the usual rule as to ship and cargo, of a loss of more or less than one half the subject, is the criterion applicable to profits, in determining whether it is a total or average loss.
In policies on corn, and other perishable articles, it is usual to introduce a memorandum, warranting them' “ free from average, unless general, or the ship be strandedand they are thence termed memorandum articles. It is true, the cases that have arisen on the words free from average, in these policies, have decided, that the underwriter is discharged, if there be not an actual total loss, though the loss exceed fifty per cfent, Wilson v. Smith, 3 Burr. 1550. Masony. Sfcurry, Condy’s Marsh. 226. Cocking v. Fraser, lb. 227. Dyson v. Rowcroft, 3 Bos. & Pull. 474. Marcadier v. ' The Chesapeake Insurance Company, 8 Crunch. 39. Biays v. The Chesapeake Insurance Company, 7 Cranch. 415. Moreen v. The United States Insurance Company, 1 Wheat. 219. ■ But the reason that governed the decision of these cases, does not apply in this. It was because the articles’ were easily deteriorated by various causes, and were of a perishable nature : whereas here they are of a different character, and it is not to be supposed, the parties intended to use the word average in the sense in which it is applied to memorandum articles, but in that in which it is used in construing insurances on ordinary goods, or vessels, namely, a loss under fifty per cent. To this point is the case of Judah v. Randal, 2 Caines3 Cases in Error, 324. A chariot was insured to be carried on deck, among other perils, against jettison, and free'from average: the box estimated at two thirds of the price of the whole, was thrown overboard in a storm : the insured may abandon for a total loss, as, by the loss of the box, the subject no longer remained in specie.
At all events, there was a total loss of part of this cargo, for which the plaintiff is entitled to recover. There was an entire destruction of some of the goods, and of course, of all profits that might have'been made of them, In Davy v. Milford, 15 East. 559, there was a'policy of insurance on flax, put up in different packages, with the warranty of free from average, unless general, &c. Some of the packages were sunk and totally lost: others were partially damaged. The court decided that the insured should recover for those which were totally lost. In Hodgson v. Glover, 6 East. 316, there was an insurance on the profits of a cargo of slaves. • In consequence of tempests,, which injured the ship, some of the slaves were lost: the rest arrived safe, and were sold, but on the whole, there were no profit. ■ The plaintiff was not allowed to recover; but the reason of the court was, that he had not shewn, that if all had arrived, there would have been some profit.
A further ground of claim is, that by this policy the voyage from Bengal to Philadelphia was insured: but this voyage was not performed according to the intent.of the policy, in consequence of perils insured against. The entirety of the voyage was broken. The ship and cargo did not arrive at Philadelphia when they ought to have arrived.
Binney and Hopkinson for the defendant.
It is now well settled, that profits are an interest capable of being insured: though such insurances are in some countries forbidden by express ordinances. They stand ■ on the same footing as policies on other interests, and may be subject to a total or partial loss. Barclay v. Cousins, 2 East. 544. The difficulty of the calculations that may arise, cannot affect the question of interest, or the legality of the contract. Eyre v. Glover, 16 East. 217. In Hodgson v. Glover, 6 East, 316,' there was, on the whole, no profit from the slaves, yet the court considered it as an average loss ; because it appeared that a part of the slaves got to the market, and might have yielded a profit for aught that appeared. In Loomis and Tillinghast v. Shaw, 2 Johns. Gas. 36, there was an insurance on the profits of goods on a voyage from New- York to Havre, and the plaintiff was allowed to recover only for an average loss on three eighths ‘of the goods, though the ship was captured, having accepted five eighths of the goods, and appropriated them to his own use. In Jlbbott v. Sebor, 3 Johns. Cas. 39, it is expressly laid down by Keiít, C. J., that considering a policy on profits as an interest policy, it follows, that there may be an average loss. With respect to what shall be the criterion of an average or total loss as to profits, he merely suggests, that, perhaps, the established rule, in respect to ship and cargo, of a loss of more or less than half the subject in value, may be applicable, but expressly waives the decision of it. It is said, in one casein New-York, Mum ford v- Hallet, 1 Johns. 433, that an insurance on profits is ex necessitate, a valued policy. If so, it is a gambling policy, and then there can be no recovery for an average loss.
But the memorandum in this policy, warranting free from average, and without benefit of salvage, was introduced for the very purpose of preventing all questions about average and salvage. . It is upon this memorandum the case must be decided: and the effect of it is, that the plaintiff can recover only on a loss total in its nature, not on a technical total loss, arising on a damage of more than fifty per cent. Throwing out of the question that part of the clause relative to salvage, the meaning of the part relative to average is to , be ascertained. Average means any partial loss, whatever may be its extent. All damage, short of destruction, is average. The insured may consider it as average, though it exceed fifty per cent. “A partial loss,” says Sergeant Marshall, “is any loss or damage, short of, or not amounting to a total loss. If a ship arrive, however great the injury done to her may be: if goods specifically remain, however damaged, unless they are rendered of no value, and altogether useless, it is a partial loss.” “ Partial losses are sometimes denominated average losses, &c.” 2 Condy’s Marsh. 486. In speaking of the right of abandoning, the same book quotes Le Guidon, where it'is laid down, that the insured may abandon, where there is an average loss or damage, which exceeds half the value of the goods insured, &c. lb. 563. Which shows that such loss is really an average loss in strict language, though at other times, called a technical total loss, if the insured choose su to consider it.
In Fitzgerald V. Pole, 5 Br. Pari. Ca. 131. Willes 641.' Cit. 2 Condy’s Marsh. 585, these words, free from average, were considered : and the House of Lords were of opinion, with the majority of the Judges, that the insured, being by the terms of the policy, free from all average, the plaintiff could not be entitled to recover, but in case of a total loss. In the case of perishable articles, these words have received a settled construction, that the insured cannot convert a partial into a total loss by election, and that a total loss can never happen, where the subject insured, or a part of it, has reached the original port of destination, though the loss sustained in the whole, exceeds fifty per cent. Maggrath v. Church, 1 Caines, 196. Nelson v. The Columbia Insurance Compány, 3 Caine’s, 108. Moreen v. The United States Insurance Company, 1 Wheat. 219. Biays v. 2%e Chesapeake Insurance Company, 7 Crunch. 415. Anderson v. Boyal Exchange Assurance Company. Wilson v. 27ifi same, 2 Campb. 623. Thompson v. 7%e same, 16 East. 213. Glennie v. The London Assurance Company. 2 Maulé. & Ñei. 371. In bottomry and respondentia, where there is no average, in the English law, nothing short of a total loss will discharge the borrower ; the obligation remains, however the thing may be damaged by the perils of the sea. 2 Marsh. 754. Though in Philadelphia, by an express clause in the policy, the lender is liable to average. Gibson v. The Philadelphia■ Insurance Company, 1 Binn: 405. It is true, there is a difference in the articles embraced in this policy, and memorandum articles : but the parties may introduce what articles they please, and the construction must remain the same, without regard to .the nature of the article. That construction has been so well settled, that it must be considered to have been in the view of the parties, in using similar language.'
It is said there was a total loss of part of the cargo. The case of Davy v. Milford, 15 East. 559, sets up a new doctrine : but it is in direct contradiction to Biays v. The Chesapeake Insurance Company,7 Crunch. 415 ; and Moreen v. The United States Insurance Company, 1 Wheat. 219. It is further alledged, that though some of the goods arrived safe, yet the voyage was lost. That temporary interruption is no loss of the voyage. Manheim v. Newman, 2 Marsh, 586. Anderson v. Wallis. 1 Maulé & Sel. 240.

Opinion:
The opinion of the court was delivered by
Til ohm AN, C. J., (after stating the case).
It was contended by the counsel for the plaintiff, in the first place, that there was a total loss of the voyage by the very great interruption, and delay, which took place, in consequence of the damage at sea, which obliged the ship to put into the Isle of France. But this argument is not sustainable — the interruption of a voyage, is not the loss of it. The insurers engage that the voyage shall be accomplished, but not in any particular time. The ship is. to be repaired at their expense, and then to prosecute her voyage. She did so in this instance, and arrived safe at the port of destination. If it were necessary to cite authority on this point, I might refer to the cáse of Anderson, &c. v. Wallis, 2 M. & S. 240, which is much- stronger than the one now under consideration: In that case, the voyage insured, was from London to Quebec, and the ship, having reached the banks of Newfoundland, was obliged to put back,- and made a port in Ireland. There she was repaired,' but the Season was so far advanced, that the voyage to Quebec could, not be prosecuted till the next year. Still it was held that the voyage was not lost. But the d if- 1 ficulty in the present case arises on the plaintiff's second point, which is, that the loss was total, because it exceeded fifty per cent. In general, that is the rule. If goods are damaged to the amount of more than fifty per cent, the insured may abandon, and claim for a total loss. But this is an insurance on profits, and by the express agreement, the defendant is to be free -from all average loss, and to have no benefit of salvage. This is a very important part of the contract. The case turns on it. There can be but two kinds of loss ; total and partial, (commonly called average). Every loss, less than total, must be partial, however great its amount. That kind of total loss which arises from damage, to an amount greater than fifty per cent., is merely technical, ' It is, in truth, as much a partial loss, as if the damage were only five per cent. And although the rule has been adopted for convenience, yet it is at the option of the assured, to wave it; he may abandon, and claim for a total loss, or decline an abandonment,- and recover, according to his actual loss, be it what it may. The question is then, whether,, when the insured discharges the insurer from all average loss, he does not discharge him from all .loss which may be properly called average, without regard to its amount. Although this is an insurance on profits, yet it partakes something of the nature of an insurance on the goods from which the profits are to arise. The profits are valued. at 20,000 dollars. Yet it cannot be considered as an undertaking that the insured shall in all events make profits to that amount. If the cargo had arrived in good condition, at Philadelphia, the underwriters would have been discharged, though it had sold at a loss. In order, therefore, to ascertain the meaning of this expression, " free from average," it will be important to inquire whether it has been used,'and acquired a definite signification, in insurances upon goods. And we find that it has. In almost every policy, the words " free from average, except general," are applied, in a memorandum, to certain articles, (thence called memorandum articles,) which by nature, are apt to be deteriorated from other causes, than perils of the sea. Concerning the meaning of those words, there have been frequent disputes. I shall mention some of the cases, from which it will appeal', that it is now well settled, that although the memorandum articles are damaged to a greater, amount than fifty per cent., the insurer .is not liable, because the loss is but partial. In Wilson v Smith 3 Burr. 1550, the goods were damaged more than fifty per cent., yet the underwriters were held not liable. Anderson v. The Royal Exchange Assurance Company, (7 East. 38) was a stronger case; the ship was stranded, and the goods remained some time under water, during which the insured might have abandoned,' because the loss was total; but having waited till they were recovered from the water, although very much damaged, and then abandoned, it was held that he was too late, and the insurer were discharged, because the loss though great, was but partial. The same law is to be found in 16 East. 214. Thompson v. The Royal Assurance Company, and in Glamie v. The London Insurance Company, (2 M. & S. 371,) and Wilson v. The Royal Exchange Insurance Company, (2 Camp. 623.) The courts of the United States have held-the same principle as appears in Marcardier v. The Chesapeake Insurance Company, (8th Cranch. 39.) and in Biays v. The Chesapeake Insurance Company (7 Cranch. 415) also in Moreen v. The United States Insurance Company, (1 Wheat. 219.) From all these'authorities, it is quite clear, that in an assurance on goods " warranted free from average unless general," the insured "cannot recover for any partial loss, though exceeding fifty per cent. But this is an insurance on profits. When first this kind-of insurance was introduced, its legality was questioned. But although it is. in its nature productive of difficult questions, and therefore forbidden by the laws of several countries in Europe, yet its legality is not now to be questioned here, having been long ago firmly established. The disputes which spring from it, are not always easy to be comprehended; yet we may understand without difficulty that there may be a partial loss of profits by an absolute loss of part of the goods from which the profits were expected to arise, or from damage sustained by part of the goods or all of them.. In the case of Hodgson v. Glover, (6 East. 316,) there was an. insurance on profits of a cargo of slaves. The ship was injured by tempests, in which some of the slaves were lost, the rest arrived safe and were sold; but upon the whole there were no profits and the insured claimed for atotahloss. The plaintiff .did not recover, for a reason not. applicable to the case before us, but both Lawrence and Le Blanc, Justices, in delivering their opinions, remarked, that it was clearly only an average loss. In this present case, the teas which arrived in good condition, were sold at great profit, although upon the whole adventure there was a loss. In that respect, it resembles the case of Hodgson v. Glover, and both cases are alike in another circumstance, viz. that the ¡profits were valued at the sum insured. Taking for granted then, that whatever loss was suffered in the present case, was. but partial, how is the plaintiff to recover against his warranty, free from, average? And what reason can be assigned, for giving these words a different construction when applied to profits, from that which has been established, when applied to goods? Ought we not rather to suppose, that the construction which had been applied to goods, long before insurances onprofitsvsreve introduced, was understood by both parties, and intended to be adopted, when an insurance on profits was first made? In both instances the warranty, in question appears to have been introduced, for- the purpose of avoiding all dispute upon a'subject capable of producing dispute, and that too of a difficult nature. I am therefore of opinion, that in both cases there should be the same construction,
There was another question raised by the plaintiff's counsel, which remains to be considered. Some of the teas were totally lost. Is he entitled to recover for loss of profits on them? It is contended, that he should recover, because in such case, if the insurance had been on goods, he would have recovered. For this the case oí Davy v. Milford, (15 East. 559) is relied on. That was an insurance on flax) put up in different, packages, warranted free from average, except general. Some of the packages were sunk and totally lost; others were partially, injured. The Court of King's Bench held, that for those which were totally lost, the insured was entitled to recover. This is the only English ease in support of that position, and it is in direct contradiction to the case of Biays v. The Chesapeake Insurance Company, (7 Crunch 415.) That was an insurance on a cargo of hides, warranted free from average, except general. Sorqe of the hides were sunk and totally lost, and the question was, whether the plaintiff could recover for them. The court, on full consideration, decided) that he could not recover; because those hides, being part of the cargo, the loss, on the whole, was but partial, although part was totally destroyed. The decisions of the Supreme Court of the United States have no obligatory authority over this court, except in cases growing out of the constitution, of which this is not one. Yet so great is the importance of preserving uniformy of commercial law, throughout the United States; and so great the respectwhieh I feel for the highest tribunal in the union, that I shallalways be inclined to adopt its opinions, rather than those of any foreign court, unless when I am well satisfied, it is in the wrong. That is more than I can say on the present occasion; for whoever examines the reports of the two cases I have referred to, will perceive, that the question underwent more discussion, and was decided after more deliberate consideration, in our own country, than in England. I think, it will be perceived, that the principle set up by the English court, although recommended at first view, by an appearance of equity, will have a tendency to introduce some of those very disputes, and difficulties, which it was the object of this warranty to prevent. Upon, the whole, it is my opinion, that the plaintiff, having proved only an average loss, and' having warranted against all avérage losses, is not entitled to recover. .