Case Name: George A. Knight v. The Eureka Fire and Marine Insurance Co.
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1875-12
Citations: 26 Ohio St. 664
Docket Number: 
Parties: George A. Knight v. The Eureka Fire and Marine Insurance Co.
Judges: Welch, C. J., White, Rex and Gilmore, JJ., concurred.
Reporter: Ohio State Reports, New Service
Volume: 26
Pages: 664–673

Head Matter:
George A. Knight v. The Eureka Fire and Marine Insurance Co.
1. A part owner of a vessel, in whose name a policy of insurance on the whole vessel, for account of the owners, is issued, becomes a trustee for all the owners, and, in case of loss, may sue on the policy in his own name alone.
2. A part owner of a vessel has no authority, hy reason of the joint ownership, to insure the interests of the other owners; hence, a policy taken upon the whole vessel in his own name, without previous authority or subsequent ratification by the other owners, is invalid, except as to the interest of the part owner obtaining it.
3. Where such policy was intended by the insurer to cover the whole vessel for the benefit of all concerned, but is invalid, except as to the interest of the part owner procuring it, the insurer is only liable to such part owner for such portion of the sum insured as his interest bears to the whole.
4. Where a policy of insurance contains a condition of avoidance on account of additional or over-insurance, such policy is not avoided by a contract for additional insurance, where it is shown that such contract is invalid as to all excessive insurance.
Motion for leave to file a petition in error to the Superior Court of Cincinnati.
The action in the court helow was brought by plaintiff in error against the defendant in error, to recover á balance of $1,500 claimed to be due upon a policy of insurance against loss by fire, for one year, issued on the 20th of September, 1870, by the defendant to the plaintiff for $3,000, on the steamboat Lightwood, on account of the owners—loss, if any, to be paid to the assured. The then owners of the boat were the plaintiff, George A. Xnight, Joseph Eisher, James M. Barker, William Barker, and John Barker—each owning one-fifth interest.
The policy of insurance contained the following condition : “ This policy shall become void, if any further insurance has been or shall be made on said vessel, which, together with this insurance, shall exceed the sum of six thousand dollars.”
On the 10th of March, 1871, the boat was totally destroyed by fire.
In defense to this action the defendant alleged a breach of the above condition. And on the trial of the cause in the court below, at special term, the admissions of the parties .and the tendency of the testimony offered were to the effect following : The policy sued on, when issued, was taken in the name of the plaintiff' under authority from the then owners of the boat; afterward, on the 9th of February, 1871, the three Barkers sold and transferred their respective interests in the boat to one Isaac N. George, for the sum of $4,500, one-third of which was paid in cash, and the balance was secured by the acceptance of the firm of Fisher,. Johnson & Co.; on the same day, George, being then owner of three-fifths of the boat, obtained a policy of insurance against loss by fire in his own name, but stated to be for the benefit of those concerned, for the sum of $4,500, on the whole boat, from the Louisiana Mutual Insurance Company—loss, if'any, payable to Fisher, Johnson & Co. This latter insurance was affected without the knowledge or authority of either the defendant or the' owners of the other two-fifths of the boat, nor has either of them since assented to or ratified the same. On the 22d of February, 1871, the plaintiff", having learned of the purchase by George of the Barkers’ interests in the boat, but being ignorant of the insurance by the Louisiana Mutual Insurance Company, presented the policy sued on to the defendant, with information of the sale to George, and thereupon the defendant, by its secretary, indorsed on the policy: “February 22, 1871. For account of present owners. E. E. Townley, Secretary.” This indorsement was procured without the knowledge of or authority from I. N. Geoi’ge, for whose use it was intended, nor does it appear that he has at any time since assented to or ratified the same.
After the loss of the steamboat, the Louisiana Mutual Insurance Company paid the amount of its policy to the parties named in the policy to receive it; and upon proof of the loss being made to defendant, it paid to the plaintiff the sum of $1,500, but refused to pay the balance of amount insured, because of the alleged breach of the condition in its policy.
The Louisiana Mutual Insurance Company issued ita policy upon the following application:
“ To the Louisiana Mutual Insurance Company, Please-enter $4,500 on open policy No. 1,877, for Isaac N George, on the hull and tackle, and loss, if any, payable to Fisher, Johnson & Co., of the steamboat Lightwood, valued at $6,000, at and from February 9, 1871, to May 9,1871—• privilege to navigate between New Orleans and Bayou Bartholomew. If stored waiting to be reshipped, this insurance does not cover the fire risk while on shore. Premium six per cent., $270. I. N. Ge)rg-e.”
Thereupon the plaintiff requested the court to charge the jury, “that if they found from the evidence that at the time. Isaac N. George procured the said insurance of forty-five hundred dollars, he, the said Isaac N. George,, represented himself as the sole owner of the boat insured, and that the Louisiana Mutual Insurance Company issued said policy to him as the entire owner, and thought he was the entire owner, when in fact said George was the owner of only three-fifths part of said boat, then he was entitled to recover no more in law than three-fifths-of the sum insured, and that no more than three-fifths of said sum of $4,500 could be estimated in making up the additional sum of insurance on said boat.” This instruction the court refused to give, but did charge the jury as follows :
“ This suit is brought to recover a balance of $1,500, with interest, as prayed for in the petition, on a policy of insurance issued by defendant' to the plaintiff, for the benefit of all the owners, on the steamboat Lightwood, which was burned. "When the insurance was affected, or by purchase shortly afterwards, it is admitted the plaintiff 'owned two-fifths of the boat, and other parties three-fifths. The latter sold their three-fifths interest to one George ; and afterward the .defendant indorsed on the policy its consent to such part change of ownership.
“ The policy contained a provision that if the boat should be insured for more than $6,000, without the defendant’s consent, the policy should be void. But since the loss, and with a full knowledge of all the facts, the defendant paid the plaintiff on account of the loss $1,500, and has refused to pay any more.
“ George, without the plaintiff’s knowledge or consent, .and without the knowledge and consent of the defendant, the Eureka Insurance Company, procured an insurance upon the boat (the entire boat) in a New Orleans company, in the sum of $4,500, for the benefit of Fisher, Johnson & Co., of New Orleans, his creditors for that sum, which policy had the same provision, as to becoming void if insurance should be effected without the company’s consent, beyond $6,000 ; of which forfeiture clause, I may here say, no one but the New Orleans Insurance Company, can take .advantage. The defendant had no .knowledge, as is admitted, when it indorsed on the policy here sued on its consent to the change of ownership from the original owners to George. It is admitted that, ‘after the loss, the New •Orleans company paid the $4,500 in full, according to the terms of its policy, and that the defendant has paid this plaintiff $1,500 on the policy now7 sued on.
“ You will thus see that the boat became insured for .$7,500, or $1,500 over the limited sum of $6,000. Now, if this $3,000 was the only insurance upon the boat, the plaintiff'would be entitled to $1,200 only, as between him .and George, and Geoi’ge $1,800; or the plaintiff $600 in this suit, and George $900. But George obtained $4,500 from the New Orleans company, when he was entitled, as between him and the plaintiff, to $2,700—$1,800 being received by him as money had and received for the use of the plaintiff. The plaintiff’ has been paid by this defendant $300 more than his individual portion of this entire policy; .and upon the above facts I charge you that he is not, in law, entitled to recover anything further, for such would be for the three-fifths interest of George, which has been fully paid to George.”
To the refusal to charge as requested, and to the charge ,as given, the plaintiff excepted.
Verdict and judgment were given for the defendant, and on error, in the general term of the court, the above-judgment was affirmed.
Leave is now asked to file a petition in error to reverse the judgment below, for error in refusing to charge as requested, and in the charge as given to the jury.
Lonham 8¡ Foraker, for the motion,
cited 4 Mass. 647; 8 Met. 348; 2 Cranch, 419; Lucas v. Jefferson, 6 Cow. 635.
Lincoln, Smith ‡ Stevens, contra :
On account of over-insurance, the defendant’s insurance was wholly void. Columbus Ins. Co. v. Walsh, 18 Mo. 229; Conioay Tool Co; v. Hudson Liver Ins. Co., 12 Cush. 144 ; Mussey v. Atlas Mutual Ins. Co., 14 N. Y. 79; Insurance Co. v. Stockbower, 26 Pa. St. 199.

Opinion:
McIlvaine, J.
The questions raised on the record before us should be determined by the following principles' and rules of law:
1. A part-owner of a vessel, in whose name a policy of insurance on the whole vessel, for account of the owners, is issued, becomes a trustee for all the owners, and, in case of loss, may sue on the policy in his own name alone.
2. A part-owner of a vessel has no authority, by reason of the joint-ownership, to insure the interests of other1 owners ; hence, a policy taken upon the whole vessel in his own name, without previous authority or subsequent ratification by other owners, is invalid, except as to the interest of the part-owner procuring it.
3. Where such policy was intended by the insurer to cover the whole vessel for the benefit of all concerned, but is invalid except as to the interest of the part-owner procuring it, the insurer is only liable to such part-owner for such portion of the sum insured as his interest in the vessel bears to the whole.
4. Where a policy of insurance contains a condition of avoidance on account of additional or over-insurance, such policy is not avoided by an alleged contract for other in surance, when it is shown that such contract is invalid as to all excessive insurance.
When the refusal to charge as requested, and' the charge as given by the court below are tested by these rules, manifest errors appear. The instruction requested should have been given. The suggestion that it was an abstract proposition is not well made. The testimony tended to prove the facts named in the request. The rules of law embodied in this request are founded on the soundest principles. An insurer may implicitly rely on the information received from the applicant, in relation to the subject-matter, and the persons to be insured. If the Louisiana Mutual Insurance Company undertook to insure George in the sum of $4,500, upon the whole boat, believing from the representations of George, that he was the sole owner, while in truth he had an insurable interest only in three-fifths of the boat, it would be palpably unjust to hold the company as an insurer to the full amount named upon only a fraction of the property intended to be covered. If such representations had been fraudulently made, there is no doubt the policy would have been void in toto, and, being innocently but carelessly made, the contract should not be enforced for more than the proportion of the risk assumed which George's interest bore to the whole vessel. It was upon the whole vessel, estimated to be worth $6,000 (in the application), that the company assumed a risk of $4,500. Upon three-fifths of the vessel it assumed the risk of no more than $2,700. There was, therefore, no valid insurance upon this boat or any of its parts, under the Louisiana Mutual Insurance Company's policy, for more than $2,700. And by looking further into the record, we find that when this request was refused, the case, as it stood upon the admissions of the parties, showed that George had no authority from the owners of two-fifths of the vessel to insure their interests; hence, if the policy were to be construed as an insurance for the benefit of all the owners in the sum -of $4,500, it would still be invalid as to the two-fifths of the amount of the risk. Eor I take it to be perfectly clear, that if the parties to this policy intended two-fifths of the risk assumed for the benefit of part-owners of the vessel who were not represented in the contract, and who never ratified it, George would have no right to apply to losses sustained by him on account of his three-fifths of the vessel, that part of the sum insured which was intended to -cover losses on account of the two-fifths, which, by want of authority or ratification, were not insured at all.
Now, the limitation upon the aggregate insurance, contained in the condition of the policy sued on, was $6,000. The amount of valid insurance obtained on the vessel, and on its parts, was $5,700, while the amount named in the two policies was $7,500. The former sum being less than the amount limited, and the latter in excess of it. To which of these amounts does the condition in the policy sued on relate ? If to the former, the policy has not been avoided under the condition ; if to the latter, it is void. The condition is: " This policy shall become void if any further insurance has been or shall be made on said vessel, which, together with this insurance, shall exceed the sum. of six thousand dollars." An agreement for insurance made by an unauthorized agent, unratified, is no contract of the principal. Invalid insurance is no insurance. We must, therefore, construe this condition as referring to valid insurance.
It is said that the evils intended to be avoided by conditions against over-insurance are as likely to result from invalid agreements for excessive insurance as from valid contracts. This may be so in some instances; and we have no "doubt a stipulation against such evils, in either case, might be made; but the question here is not as to what stipulations might be imposed by insurers, but what is the stipulation in this condition ?
It is true, the terms of this condition should be construed fairly; and it is but fair to say that they must also be strictly construed. The condition was intended to provide for a forfeiture of the contract of insurance, and a forfeiture should not be declared by construction, when the strict terms of the condition do not require it.
I should here add that the fact, that the Louisiana. Mutual Insurance Company paid the full amount of its policy, has nothing to do with the question before us. If the policy sued on was not made void by the obtaining of the policy from the Louisiana Mutual Insurance Com'pany, it was not avoided by the payment of it.
We think the court below also erred in the charge given, in assuming in the face of the admissions upon the record,.' that two-fifths of the money paid by the Louisiana Mutual Insurance Company to George were received by him for the use of the plaintiff below. Also in holding that George had already received his full share of the insurance effected under the policy sued on.
With regard to George's interest in the policy sued on, it is thought proper to remark that the principles above stated are generally applicable to it.
The facts in relation to George's insurance under this policy are not fully set forth in the record.' It does appear, however, that the insurance was originally obtained upon three-fifths of the boat for the benefit of the Kirkers, who afterward sold all their insurable interests in the boat toGtorge. By this alienation the policy lapsed as to three-fifths of the insurance. The subsequent effort of the plaintiff, Knight, to revive the lapsed insurance for the benefit of George, may or may not have been successful. That. Knight had no authority from George to insure his interest at the time the policy was revived in favor of the then owners, to wit, on the 22d of February, 1871, is shown;, but whether or not that act was afterward ratified by George does not appear. If this policy became effective as an insurance in George's favor, the plaintiff as his trustee-may rightfully prosecute this action for his benefit. But if George was not insured by this policy, it is clear that the-plaintiff has no remaining right of action under it, as it is admitted that he has already received from the defendant-11,500, which is more than the ratable share of the insur -anee upon two-fifths of the boat owned by himself and Eisher at the time the insurance was first effected and at "the time of the loss.
Motion granted. Judgments reversed, and cause remanded.
Welch, C. J., White, Rex and Gilmore, JJ., concurred.