US SUPREME COURT DECISIONS

The right, by way of subrogation, of an insurer upon paying for a total loss of the goods insured to recover over against third persons, is only that right which the assured has.

A common carrier may lawfully obtain insurance on the goods carried against loss by the usual perils, though occasioned by the negligence of his own servants.

In a bill of lading which provides that the carrier shall not be liable for loss or damage of the goods by fire, collision, or dangers of navigation, a further provision that the carrier, when liable for the loss, shall have the full benefit of any insurance that may have been effected upon the goods, is valid, as between the carrier and the shipper, and therefore, in the absence of any misrepresentation or intentional concealment by the shipper in obtaining insurance upon the goods, or of any express stipulation on the subject in the policy, limits the right, by way of subrogation, of the insurer, upon paying to the shipper the amount of a loss by stranding, occasioned by the negligence of the carrier's servants, to recover over against the carrier.

This was a libel in admiralty against a common carrier by an insurance company which had insured the owners upon the goods carried, and had paid them the amount of the insurance and claimed to be subrogated to their rights against the carrier. The defense relied on was that, by a provision of the contract of carriage, the carrier was to have the benefit of any insurance upon the goods. The district court held that this provision was valid, and therefore no right of subrogation chanrobles.com-red

Page 117 U. S. 313

accrued to the libellant, and entered a decree accordingly. The libellant appealed to the circuit court, which found the following facts:

The respondent was a Pennsylvania corporation, authorized to carry on the business of lake transportation, was engaged in business as a common carrier, and owned a line of propellers running between Erie and other ports on the lakes, called the "Anchor Line," one of which propellers was the Merchant.

On July 24, 1874, the firms of A. M. Wright & Co., owners of 16,325.34 bushels of corn, worth $8,000; Elmendorf & Co., owners of 800 bushels of corn, worth $600, and Gilbert Wolcott & Co., owners of 370 bushels of corn, and 689 bushels of oats, together worth $800, caused to be shipped on board the propeller Merchant, then lying at Chicago and bound for Erie, the grain aforesaid, consigned to themselves at other places beyond, and severally made oral agreements with the respondent by which, in consideration of certain stipulated freight, the respondent agreed to transport the several parcels of grain from Chicago, by way of the lakes, to Erie, and thence forward them to their ultimate destinations, and it was tacitly understood that bills of lading for the shipments would be subsequently issued to the shippers, but nothing whatever was said respecting the terms and conditions thereof.

After the goods had been received on board, and the propeller had departed on her voyage, the respondent delivered to the shippers, respectively, bills of lading, each of which described the goods as shipped on the propeller Merchant, and addressed to the owners by name at their ultimate destination, fixed the rate of freight from Chicago to that destination, and contained an agreement that the goods should be

"transported by the Anchor Line, and the steamboats, railroad companies, and forwarding lines with which it connects, until the said goods shall have reached the point named in the bill of lading, on the following terms and conditions,"

among which were these:

"The said Anchor Line, and the steamboats, railroad companies, and forwarding lines with which it connects, and which receive said property, shall not be liable . . . for loss or damage

Page 117 U. S. 314

by fire, collision, or the dangers of navigation while on seas, bays, harbors, rivers, lakes, or canals, and where grain is shipped in bulk, the said Anchor Line is hereby authorized to deliver the same to the Elevator Company at Erie, as the agent of the owner and consignee, for transshipment (but without further charge to such owner and consignee) into the cars of the connecting railroad companies or forwarding lines, and when so transshipped in bulk, the said Anchor Line and the said connecting railroad company or carrier shall be and is, in consideration of so receiving the same for carriage, hereby exempted and released from all liability for loss, either in quantity or weight, and shall be entitled to all other exemptions and conditions herein contained."

"It is further agreed that the Anchor Line, and the steamboats, railroads, and forwarding lines with which it connects, shall not be held accountable for any damage or deficiency in packages, after the same shall have been receipted for in good order by consignees or their agents at or by the next carrier beyond the point to which this bill of lading contracts."

"It is further stipulated and agreed that in case of any loss, detriment, or damage done to or sustained by any of the property herein receipted for, during such transportation, whereby any legal liability or responsibility shall or may be incurred, that company alone shall be held answerable therefor in whose actual custody the same may be at the time of the happening of such loss, detriment, or damage, and the carrier so liable shall have the full benefit of any insurance that may have been effected upon or on account of said goods."

"And it is further agreed that the amount of the loss or damage so accruing, so far as it shall fall upon the carriers above described, shall be computed at the value or cost of said goods or property at the place and time of shipment under this bill of lading."

These bills of lading were received by the shippers, without protest or objection, and were signed by Elmendorf & Co. and by Wolcott & Co., but not by A. M. Wright & Co.

The bills of lading were received by the shippers without specially reading the terms and conditions; their attention was chanrobles.com-red

Page 117 U. S. 315

not directed to them, nor was anything said respecting them, and no reduction of freight from the rate stipulated in the oral agreement was made in consequence of those terms and conditions, or other consideration paid therefor; but the shippers had often before shipped goods by this line under similar contracts, and thereby knew, or had every opportunity of knowing, the contents of these bills of lading.

The propeller completed the lading of the goods during the evening of July 24, 1874, and about midnight departed on her voyage. About 10 o'clock, the next morning, in a dense fog, she was stranded on the western shore of Lake Michigan, about ten miles south of Milwaukee, through the negligence of those managing her, and immediately filled with water, and all the grain became wet and damaged; 1200 bushels of it were thrown overboard to get off the vessel, and 5,188 bushels were brought into Milwaukee in a perishable condition, and were there sold for the sum of $1,037.60, which was retained by the respondent.

On said 24th of July, the libellant, a New York corporation, authorized to transact a general lake and insurance business, insured the shippers at their request and expense, against loss or damage to these shipments from perils of the seas and other perils, and issued to them certificates of insurance, for $8,000, $520, and $700, respectively, in this form:

"No. 627. The Phoenix Insurance Company, New York. $8,000. Chicago, July 24, 1874. This certifies that A. M. Wright & Co. [are] insured, under and subject to the conditions of open policy No. 2,263 of the Phoenix Insurance Company, in the sum of eight thousand dollars, on corn on board the propeller Merchant at and from Chicago to Erie. Loss payable to assured, order hereon, and return of this certificate."

"CHAS. E. CHASE, Agent"

The policy of insurance referred to in these certificates insured

"Charles E. Chase, on account of whom it may concern, . . . lost or not lost at and from ports and places to ports and places, on cargo, premiums to be settled monthly, upon all kinds

Page 117 U. S. 316

of lawful goods and merchandise laden or to be laden on board"

any vessel or vessels, and was otherwise in the usual form of an open policy of insurance for $1,000,000 against marine risks, including perils of the seas,

"barratry of the master and mariners, and all other perils, losses, and misfortunes that have or shall come to the hurt, detriment, or damage of the said goods and merchandises, or any part thereof,"

and contained these provisions:

"The company are to be entitled to premium at their usual rates on all shipments, reported or not. It is warranted by the assured to report every shipment on the day of receiving advices thereof, or as soon thereafter as may be practicable, when the rate of premium shall be fixed by the president or the vice-president of the company. . . . No shipment to be considered as insured until approved and endorsed on this policy by C. E. Chase, agent."

The shipments were duly approved and endorsed on the policy. On August 19, 1874, the shippers abandoned the goods to the libellant as a total loss, by written instruments, substantially alike, the material part of the one executed by A. M. Wright & Co. being as follows:

"Chicago, August 19, 1874"

"For and in consideration of the sum of eight thousand dollars, the receipt whereof is hereby acknowledged, we do by these presents assign, transfer, cede, and abandon to the Phoenix Insurance Company all our right, title, and interest in and to the property hereinafter specified, and to all that can or may in any way be made, saved, or realized from the damage or loss reported to have occurred, by reason of which a claim of payment has been made by us, with full power to take and use all lawful ways and means (at the risk and expense of the Phoenix Insurance Company) to make, save, and realize the said property, to-wit, 16,325.34 bushels of corn, as per bill of lading and invoice, shipped on board the propeller Merchant, bound from Chicago for Erie, and covered by insurance with the Phoenix Insurance Company by open policy No. 2,263, certificate No. 627, under date of July 24, 1874."

In consequence thereof, the libellant paid to the shippers the amount of the insurance as and for a constructive total loss. chanrobles.com-red

Page 117 U. S. 317

A general average adjustment was made on September 2, 1874, and readjusted on February 1, 1875, awarding to the libellant the sum of $2,466.12 on account of these shipments.

The circuit court made and stated the following conclusions of law:

1. That the bills of lading were the contracts by which the rights of the parties were to be governed.

2. That under them the respondent became liable to the shippers for the value of the shipments, by reason of the negligent loss of the same, and that the shippers had rights of action therefor.

3. That by the abandonments the libellant did not succeed to those rights of action of the shippers, by reason of the stipulation contained in the bills of lading that "the carrier so liable shall have the full benefit of any insurance that may have been effected upon or on account of said goods."

4. That the libellant was entitled to recover the sum of $2,466.12, awarded to it in the general average adjustment, readjusted as aforesaid, with interest thereon.

The circuit court entered a decree for the libellant for this sum only, and the libellant appealed to this Court. chanrobles.com-red

Page 117 U. S. 319