Case Name: The Mutual Safety Insurance Company, plaintiffs in error, vs. Philip Hone et al., receivers of the American Mutual Insurance Company, defendants in error
Court: New York Court of Appeals
Jurisdiction: New York
Decision Date: 1849-05
Citations: 2 N.Y. 235
Docket Number: 
Parties: The Mutual Safety Insurance Company, plaintiffs in error, vs. Philip Hone et al., receivers of the American Mutual Insurance Company, defendants in error.
Judges: 
Reporter: New York Reports
Volume: 2
Pages: 235–244

Head Matter:
The Mutual Safety Insurance Company, plaintiffs in error, vs. Philip Hone et al., receivers of the American Mutual Insurance Company, defendants in error.
In fire policies of reinsurance, the subject of the insurance is the interest of the original underwriters in the preservation of the property; and a clause inserte/ in the policy, providing, that in case there is any other insurance, prior or sub sequent, on the property insured, the reinsured shall be entitled to receive, ir the event of a Joss, only a proportionate part thereof, refers to a double insurance on the same interest, in other words, to a doable reinsurance; am? therefore, where there is no other reinsurance, the reinsurer, notwithstanding such a clause, is liable, in the event of a loss, to pay the full amount thereof if it do not exceed the sum mentioned in his contract.
And where, in a policy of reinsurance, the underwriter agrees to “reinsure” an«t to “ make good unto the reinsured all such loss or damage (not exceeding th& sum specified) as shall happen by fire, the loss or damage to be estimated according to the true and actual cash value of the property at the time the sami shall happen,” the contract imports on its face that the reinsurer is to make o full indemnity within me amount of risk taken by him; and, there being no ambiguity in the terms used, evidence of a local custom among insurers to pay-only such a proportion of the loss as the amount of reinsurance bears to the original policy, cannot be received to control the contract or reduce the amouu of a recovery thereon.
Mutual Safety Ins. Co. v. Hone, I Sandf. 137, affirmed.
*The American Mutual Insurance Company, on the 3d of May, 1845, insured Messrs. Hackenrath & Van Damme against loss "by fire, to the amount of $22,000, on merchandise in a store in Broadway, in the city of Hew York. On the 7th of May, 1845, the said company caused themselves to be reinsured by The Mutual Safety Insurance Company, to the amount of ten thousand dollars, against loss by fire, on the same merchandise, for one year from the 4th of May in that year. In the policy of reinsurance, the underwriters engaged to “reinsure" to the amount of $10,000, and to “make good unto the reinsured all such loss or damage, not exceeding that sum, as should happen-by fire " to the property specified; “ the loss or damage to be estimated according to the true and actual cash value of the property at the time the same should happen.” The policy last mentioned also contained the following clause: “ In ease of any other insurance upon the property hereby insured, prior or subsequent to the date of this policy, the insured shall not, in case of loss or damage, be entitled to recover on this policy any greater proportion of the loss or damage, than the amount hereby insured shall bear to the whole amount insured on the same property.” On the 19th of July, 1845, the said merchandise, to the value of $14,373,36, was destroyed by fire. On the 29th of November, in that year, the American Mutual Insurance Company was dissolved by a decree of the court of chancery, and the defendants in error were appointed receivers of the estate "ana effects of the company; and they afterwards commenced this action, in the superior court in the city of New-York, against The Mutual Safety Insurance Company, upon the aforesaid policy of reinsurance. With the plea of the general issue, the defendants gave notice that, on the trial, they would prove that “ there exists a general usage and custom among underwriters in the city of New-York, in cases of reinsurance, for the insurers not to pay the full amount named in the policy of reinsurance, but only in proportion to the amount of the loss and the original insurance, that is to say, a sum which shall be in the same proportion to the amount of property destroyed as the policy of reinsurance bears to the original policy.”
*On the trial, in February, 1847, before Oakley, C. J., the defendants offered to prove the usage mentioned in the *- said notice; the counsel for the plaintiffs objected to the admission of the evidence, but it was received subject to the objection; and Matthias B. Edgar, a witness on the part of the defendants, proved that he, as the agent of the defendants, had settled one los.s in which they were reinsured by the Howard Insurance Company, on the principle stated in the aforesaid notice; and that the policy of reinsurance in that case AVas in form like the one in this case. It was also proved by other witnesses, that they had settled many losses on the same principle, as to some of which there was a special agreement in the policies, that the insurer and reinsurer should bear the loss fro rata.
When this evidence was closed, the counsel for the plaintiffs moved that it should be struck out, on the grounds: 1. That under the circumstances of the case, no evidence of usage was admissible to control the policy of reinsurance. ' 2. That the policy of reinsurance was a distinct and solemn contract, and that, parol evidence was inadmissible to contradict it. The chief justice granted the motion, and directed the jury to disregard that evidence. The counsel for the defendants excepted, and then requested the court to charge the jury, among other things, that the evidence of usage was admissible and proper, and that if the jury believed from the same that the usage in question existed at the time the policy was effected, they must regulate the amount of the verdict accordingly.
The court refused so to charge the jury ; and on the contrary charged, that the plaintiffs were entitled to recover the full amount insured in the policy made by the defendants. The defendants excepted, and under that charge the jury gave a verdict for $10,962,11. The superior court, on bill of exceptions made, refused to set aside the verdict, and gave judgment for the plaintiffs.
The defendants brought error to this court.
J. Duer, for plaintiffs in error.
B. ¡Silliman, for defendants in error.

Opinion:
Gardiner, J.
The structure of the contract upon which this action is brought is exceedingly inartificial. An ordinary policy against loss by fire has, by the substitution of the word "reinsure" for insure, without any other alteration, been converted into a contract of indemnity against the risk incurred by The Mutual Insurance Company, by a previous insurance of the property of Hackenrath & Van Damme.
The contract in its present form is one of reinsurance. So much appears upon the face of the instrument. The defendants for the consideration stated, say that they " do reinsure The American Mutual Ins. Co. against loss or damage by five, to the amount of ten thousand dollars, on" &c. The risk therefore incurred by the assured in their previous insurance is really the subject of the contract. Against that the defendants agree to indemnify the assured to the amdunt of $10,000. The loss which the latter have sustained in consequence of that risk, and which they have paid or are liable to pay, exceeds that sum : and the question is, are the plaintiffs entitled to the_ whole or a part of the sum mentioned in their policy 1 The question when stated suggests the true answer. For whatever may be the rule in reference to marine policies, it was admitted by the counsel for the defendants, that the mode of "estimating losses under fire policies, proceeds upon the principle of a full indemnity, without regard to the question whether the reinsurance was partial or for the entire sum set down in the original policy.
But it was argued that, in this case, the defendants were only liable for such proportion as the sum reinsured bears to the whole amount covered by the first policy, in consequence of a special clause in the contract, which provides " That in case of any other insurance upon the property hereby insured, the insured shall not, in case of loss or damage, be entitled to recover on this policy any greater portion of the loss or damage sustained than the amount hereby insured shall bear to the whole amount insured on the same property." The defence is thus made to depend upon the import of the phrase " property hereby insured." According to the views of the defendants, it refers to the merchandise stated in the policy to be the property *of (-*239 Hackenrath & Van Damme; the same property that was L covered by the original insurance. Hence it is said that in addition to the sum of $10,000 reinsured, there was at the time of the loss another insurance on the same property to the extent of $22,000. If this is the correct exposition of the clause, it follows, 1st. That if the reinsurance had been for the full sum covered by the original policy, the loss must have been equally apportioned between the underwriters upon the two policies respectively. A second consequence of this construction would be that in no way consistently with the clause in question, could the underwriters indemnify themselves against the risk incurred by executing the primitive policy. They could not reinsure to a larger amount than the $22,000 covered by the first insurance, because that was confessedly the whole extent of their interest in the goods: and by a reinsurance of that amount in case of total loss, they would be compelled to pay $22,000 and could receive but $11,000.
I am aware that the counsel for the defendant claimed that the rule of apportionment upon which they insisted was only applicable, to a case of reinsurance for a part 'of the amount covered by the first policy. If the whole amount was reinsured, it was conceded that the whole might be recovered in the event of a'total loss. But the clause which is the only foundation of this claim of apportionment will not admit of this distinction. The language is general and explicit, that in case of " any other insurance upon the property hereby insured, pri- or or subsequent, no greater portion of the loss shall be recovered than the amount hereby insured bears to the whole amount insured in said property." The phrase "property hereby insured," I apprehend, refers to the interest of the insured acquired by them as underwriters upon the original policy, in respect to the merchandise of Hackenrat.h & Van Damme. The damage to that property by fire was the measure of their liability upon the primitive policy, and of the defendants upon the second within the sum mentioned. That liability did not in strictness give the first insurers a property in the merchandise insured, but only an interest in its preservation. It gave them a claim to the stipulated premium, and was the sole ground of "^eir right to a reinsurance. It was an insurable interest, the nature of which appeared upon the face of the second policy.
The meaning of reinsurance is, an indemnity against a risk incurred by the assured in consequence of a prior insurance up on the same property or some part of it. (3 Kent, 279.) We find this word in the policy characterizing the contract, and pointing to the object of the indemnity, together with a reference to the merchandise of Hackenrath & Tan Damme, designating the property on account of which the hazard was incurred against which the indemnity was sought.
That the above is the sense in which the parties use the word " property" in the clause in question, is obvious from that which immediately precedes it—which provides, " that in case the insured shall have already any other insurance against loss by fire on the property hereby insured, not notified .to the corporation, or if the said insured shall hereafter make any insurance on the same property, and shall not give notice thereof to the corporation, and have the same acknowledged by them in writing, the said policy shall be void. What interest or property had the insured, which could be the subject of a prior or subsequent insurance? For to them alone this complex prohibition applies. The answer must be, the interest acquired in consequence of tire primitive insurance, and no other. The object of these provisions was to guard against double insurance; which is a second insurance of the same interest. (Godin v. London Ins. Co. 1 Burr. 495; 3 Kent, 281.) Both the clauses above quoted relate to the same subject, the interest of the insured; they for bid a double insurance of that interest without due notice to the underwriters, and when it is made and notice given, they provide fora ratable apportionment of the loss. By this construction they can be made to harmonize, and each is rendered sensible.
There is nothing, therefore, in these special provisions, or an) of them, that restricts or qualifies the agreement of the defend ants, "to make good unto the insured all such loss not exceeding in amount- the sum insured," as they might sustain by reason of the original insurance.
The evidence of usage was properly rejected. The offer of *the defendants was, to prove the existence of a general usage and custom among underwriters in the city of NeYork, in cases of reinsurance, not to pay the full amount named in the policy of reinsurance, but only a sum which shall be in the same proportion to the amount of property destroyed, as the policy of reinsurance bears to the original policy. The usage went to contradict the plain, unequivocal language of the policy, and was therefore inadmissible. (1 Phil. Ev. 37.) The evidence was not offered with a view to ascertain the meaning of particular terms, to explain the subject of the contract; in a word, to place the court, by means of parol evidence, in the situation of the parties, to enable them to construe their agreement ; but to show the practical construction as to their legal effect given to all policies for reinsurance without distinction, by underwriters in the city of Nexv-York. Such evidence would he equally admissible to diminish a recovery upon any other contract.
We all think it properly overruled, and that the judgment of the supreme court must be affirmed.
Cady, J.
If the words " and in case of any other insurance upon" the property hereby insured, whether prior or subsequent to the date of this policy," in the policy of reinsurance, include the original policy, then the same words .in the original policy . must include the policy of reinsurance ; and if so, then the first insurer, by procuring a reinsurance, would destroy, in a great degree, the value of the first policy. Suppose a man insures against fire to the. amount of $10,000, and then procures a reinsurance for $10,000, and then a loss to that amount happens -—will not the insured be entitled to recover for the whole loss ; or can the insurer say to the insured, I have a policy of reinsurance on the same goods to the amount of ten thousand dollars, and you, therefore, are entitled, according to the- terms of your policy, to recover no greater proportion of the loss than the amount in your policy bears to the whole amount insured on the said property ? To this the insured might answer, the meaning of that clause in the policy is, that if I had before, or should, after you insured me, get an insurance on the same property, should look to each of my insurers for only a proportion of the loss. If that would be the correct construction of the clause in the original policy, the same construction would be given to the same words in the policy of reinsurance; the clause would be without effect, unless the original insurer procured more than one policy of reinsurance. The original policy is a contract made between the insurer and the insured ; and it must be understood as relating only to the acts of the parties to the contract, unless express reference is made to the acts of others. So in relation to the policy of reinsurance, when it speaks " of other insurance on the property," it has reference to an insurance to which the insured can resort for a part of his indemnity. The clause was inserted in the policy to restrain the insured, if he had more than one policy, from recovering more than a proportional part of the loss on any one policy ; but unless the insui'ed has more than one policy, he must have an indemnity on that, unless the loss be greater than the sum insured.
This construction was given to. this clause in the policy by. the court for the correction of errors, in the case of The Ætna Insurance Company v. Tyler, (16 Wend. 390.) In that case, a Mr. Shafer, the owner of a dwelling house and out-buildings, procured an insurance on the property from the Merchants' Insurance Company of Albany. While that policy was in force he contracted to sell the property to Tyler, who paid a part of the purchase money, and took possession of the property, and then procured a policy from the AEtna Insurance Company, in which policy was a clause like the one set forth, after which the property was destroyed by fire. The plaintiffs in error insisted that Tyler was entitled to recover only such proportion of the loss as the amount insured by them bore to the whole amount insured by them and the other company; but that construction was rejected by the court; and the chancellor, whose opinion is published, held that " the clause in the policy related only to double insurance, and that to constitute a double insurance, Doth policies must be upon the same insurable interest, either in the name of the owner of that interest, or in the name of some other person for his benefit."' In the case under consideration, *there is no double insurance upon the same insurable interest. The American Mutual Insurance Company had but one policy on their insurable interest, and upon that they were entitled to a full indemnity, not exceeding the sum insured.
Did the superior court err in rejecting the evidence of the usage among the underwriters in the city of Nerv-York, for re-insurers not to pay the full amount named in the policy of reinsurance, but only a sum which shall be in the same proportion to the amount of property destroyed as the policy of reinsurance bears to the original policy ? The words of the contract in this '.ase are, "The Mutual Safety Insurance Company, by this policy of insurance, in consideration of thirty-five dollars to them paid by the insured hereinafter named, the receipt whereof is hereby acknowledged, dd reinsure the American Mutual Insurance Company against loss or damage by fire, to the amount vf ten thousand dollars, on merchandise, hazardous and not hazardous, property of Hackenrath & Van Damme, or held by them in trust," &c. " And the said company do hereby promise and agree to make good unto the said insured, their executors, administrators and assigns, all such loss or damages, not exceeding in amount the sum insured, as should happen by fire to the property above specified during" &c., "the loss or damage to be estimated according to the true and actual cash value of the said property at the time the same shall happen." The construction of a contract in these words has long been adjudged to be a contract of indemnity not exceeding the sum insured. And it is asserted in the 5th point submitted on the part of the plaintiffs in error, that when the reinsurance covers the whole amount insured by the first policy, the first underwriter is entitled to recover of the reinsurer the whole loss, whether partial or total, for which he is himself liable. But it is insisted that in case the sum reinsured be less than the sum mentioned in the original policy, then the reinsurer is not to pay the sum reinsured unless the loss equals the sum mentioned in the original policy. No adjudged case, however, has been referred to, showing the existence of any such distinction. So far as adjudged cases have been referred to, the contract of insurance, or reinsurance *against loss by fire, has uniformly been held fo be a contract of indemnity not exceeding the sum insured.
The words of the contract in this case are free from any ambiguity. The contract is to make good all loss or damage by fire not exceeding $15,000. Judging from the words of the contract it would seem that no two men could differ as to its construction. And for what purpose is the usage insisted on by the plaintiffs in error introduced ? To prove that the words 11 all loss or damage btj fire?' mean in this case, that the rein-surer will make, good only ten out of twenty-two parts of the loss. In the case of the Schooner Reside, (2 Sumn. 367,) the bill of lading specified that the goods were " to be delivered in good order and condition, damages of the seas only excepted." And the point was, whether a local usage between New-York and Boston, (the termini of the voyage,) might be admitted to influence the contract so far as to exempt the carriers from liability for all damage, save what arose from their own neglect. Mr. Justice Story excluded the usage, on the ground that, if admitted, it would go, not to interpret or explain, but to vary and contradict the contract. (Cowen & Hill's Notes, p. 1411.) So in this case, the usage insisted on is to vary and contradict the contract. It is, if admitted, to prove that the word all iu this case means less than half, written contract, if a usage in a dence to vary and contradict it. There could be no security m a single city can be given in evi-
The judgment of the superior costs. court ought to be affirmed with
Strong, J., also delivered an stantially the same ground. opinion for affirmance on sub-
Judgment affirmed.
Hancox v. Fishing Ins. Co., 3 Sumn. 132; 1 Phillips on Insurance, ed. of 1840, 43, et seq.; Lorent v. South Carolina Ins. Co., 1 Nott & McCord 505; Winthrop v. Union Ins. Co., 2 W. C. C. 7; Turner v. Burroughs, 5 Wend. 541; s. c. 8 Id. 144; Sleight v. Hartshorne, 2 Johns. 531; Mumford v. Hallert, 1 Id. 433; Sleight v. Rhinelander, Id. 192; Coit v. Commercial Ins. Co., 7 Johns. 385; Moliere v. Pennsylvania Ins. Co., 5 Rawle 342.