Court Opinion

ID: 8852872
Source: CourtListenerOpinion
Date Created: 2022-11-26 17:19:49.595888+00
Date Added: 2024-06-11T17:05:33.523228
License: Public Domain

PARDEE, Circuit Judge
(dissenting). In a reinsurance policy the description of the risk reinsured is just as material as is the description of the property insured in an ordinary policy. False representations affecting the risk reinsured have the same effect as false representations affecting the property insured. There were two several applications made hy the Home Insurance Company to the Royal Insurance Company upon which the policies in this suit were issued. The lirst, in Xovember, 1801, was for reinsurance, wherein the exact lisle insured hy the Home and desired to he reinsured was precisely set forth, as follows:
“4.524,712.
“On $10,000 of tlieir liability as Insurers under tlieir Policy No. --VARIOUS -Issued to --VARIOUS PARTIES-Por $-VARIOUS -for a term of 1 YR. from NOV. 12/05. Rate 1%, and covering as follows:
“$10,000 on cotton in hales, their own or held hy them in trust or on commission, while contained in the Yd. 1, Shippers’ Press.
“And it is agreed and understood to he a condition of this insurance that this policy shall not apply to or cover any cotton which may at the time of loss he covered in whole or part hy a marine policy; and it is further agreed to he a condition of this policy that only actual payment, by check or otherwise. for cotton purchased, shall constitute delivery of cotton from- the seller to the buyer; and it is further agreed that tickets, checks, or receipts delivered to bearer shall not be considered as evidence of ownership ; and it is further agree,d that this company shall be liable for only such proportion of the whole loss as the, sum hereby insured bears to the cash value of the whole property hereby insured at the time of fire.
“Other insurance permitted without notice, until required.
“Attached to and made a part of policy No. • — — of Home Insurance Company of New Orleans.
“This policy to he subject to the same risks, conditions, valuations, indorse-ments, assignments, and mode of settlement as ara <?r may he assumed or adopted by the HOUR INSURANCE OO., and the loss, if any, payable pro rata, at the same time and in the same manner as by said company.
“REINSURED CO. RETAINS $25,000. H.”
*706The other, in December, 1891, was on a different form, and called for reinsurance on various policies issued and to be issued by the Home “on cotton yard 1, Shippers’ Press, subject to coinsurance clause”; the provision as to coinsurance being written in by hand.
It is conceded that these applications thus made by the Home to the Royal for reinsurance asked for reinsurance only upon risks of the Home under policies which contained the coinsurance clause. The two policies issued by the Royal on the above applications describe the risks reinsured exactly, word for word, as the risk desired to be reinsured was described by the Home in the November application. Therefore, that the policies issued by the Royal described no other risks for reinsurance than those insured by the Home in policies issued upon the specific property named, and containing the coinsurance clause, seems to be a proposition too plain for argument.
The undisputed evidence in the case is to the effect that the difference in the premium between reinsurance on policies containing the coinsurance clause and reinsurance on policies not containing the coinsurance clause was one-half of 1 per cent. To illustrate: The application in the present instance by the Home was for insurance on policies containing the coinsurance clause, and, on acceptance, the premium was 1 per cent. If the application had been made for reinsurance upon policies upon the same property, but not containing the coinsurance clause, and that had been accepted, the premium would have been per cent. It is not disputed that the coinsurance clause affects the liability of the Royal about 100 per cent.; that is to say, the amount for which the Royal is liable, if the liability is not restricted to risks of the Home containing the coinsurance clause, is about twice as much as it would be if the liability should be restricted to risks of the Home containing the coinsurance clause. As I understand the opinion of the majority, they do not deny that the applications were for policies containing the coinsurance clause, or that the policies of the Royal in describing the risks reinsured describe only risks of the Home under policies containing the coinsurance clause; but, by reasoning which seems to me to be unsound, they reach the conclusion that the limitation of the risk is not material in this case. If representations affecting the amount of the premium and a stipulation restricting the liability of the reinsurer are not material in a reinsurance policy, the text-books on insurance ought to be rewritten, for .now they are liable to confuse the bar and mislead some judges. It is true that the evidence shows that some insurance companies will not reinsure risks not subject to the coinsurance clause, and that some cotton men will not take insurance which contains such clause. The majority apparently deduce from this that a stipulation restricting reinsurance to risks subject to the coinsurance clause is immaterial. I do not think that the insurers and the insured would both make so much opposition on an immaterial matter.
The very ingenious brief of the learned counsel for the appellee, which seems to have compelled the judgment of the majority, and which is adopted as their opinion, has been carefully considered, but *707I fail to lind therein either argument or authority sufficient to overthrow the plain propositions of fact which ought to control the decision of 1his case. It is true, that, by reason of the blanks used, there are in the policies sued on many provisions not applicable to reinsurance; but is that any reason for rejecting those provisions which not only do apply, but which the parties were insistent in having inserted? The cases cited in the brief relate only to questions not disputed, and tend rather to cloud than enlighten the really disputed question. The fact ig there are no adjudged cases which throw any light whatever upon the disputed questions in this case, and it is probably because no insurance company ever before disputed the materiality of the coinsurance clause as affecting the liability of a reinsurer who had stipulated therefor. The brief of counsel adopted by the majority further tends to confuse because it does not discriminate between the stipulation which was intended to regulate and control the adjustment between the Royal and the Home in case of loss and the stipulation describing the contract of the Home which was to he reinsured, and which pertained directly to the risk, treating the latter as immaterial in so far as they assume that there is a conflict.
It appears to be seriously contended by the learned counsel that “the Royal agreed to cover any risk that the Home might be willing to take,” and they say that that is the meaning of the clause: “This policy to be subject to the same risks, conditions, valuations, indorse-ments, and mode of settlement as are or may be assumed or adopted by the Home Insurance Company, and the loss, if any, payable pro rata, at the same time and in the same manner as by said company.''' And this contention is only limited by allowing that the contract of the Royal must be applied to cotton in Shippers’ Press, yard 1, and to losses by lire. The court has reformed the Royal's policy so as to excuse the Home from retaining any risk on cotton in Shippers’ Press, yard 1, provided it holds risks on other property in the immediate neighborhood; and the court, further holds that the coinsurance clause and differences in rates of premium were immaterial. Why not follow the argument of Messrs. Semines and Browne to its logical conclusion, and hold broadly, as declared by them, that “the Royal agreed to cover any risk the Home might he willing to take”? Why should not die court say the contract of the Royal is reinsurance, and “it is agreed to cover any risks which the insurer might be willing to take,” and “any printed stipulation having reference to the property itself, or the cash value thereof, cannot: be applied to the contract between the reinsurer and reinsured, because the property is not subject-matter of their contract”? And, further, that whether the cotton insured by the Home was in one press or another really made no difference to the Royal, for the subject-matter of the reinsurance was risk, and not property, and wherever the latter was located was immaterial, because the Royal would have issued its policy of reinsurance just the same? If the opinion of the court is sound, but one good reason suggests itself for confining the liability of the Royal to cotton in Shippers’ Press, yard 1, .and that is that (he *708exigencies of the Home’s case do not require that the liability should be extended to cotton elsewhere..
The result reached by the circuit court, and affirmed here, pérmits the Home Insurance Company to recover from the Royal Insurance Company reinsurance for which the Home Insurance Company never asked, for which it never paid, and upon risks never insured by the Royal Insurance Company, and which the Home agreed that the Royal should not insure.
The case of the Imperial Insurance Company against the Home Insurance Company presents the same questions, and should be ruled the same way.
For these reasons, I dissent from the opinion of the court in both cases.