U.S. Supreme Court Rhinelander v. Insurance Company of Pennsylvania, 8 U.S. 4 Cranch 29 29 (1807)
Rhinelander v. Insurance Company of Pennsylvania
8 U.S. (4 Cranch) 29
ON CERTIFICATE OF DIVISION OF OPINION AMONG
THE JUDGES OF THE CIRCUIT COURT OF PENNSYLVANIA
A capture of a neutral vessel as prize by a belligerent armed vessel is a total loss under a policy of insurance, and the assured is entitled thereon to abandon.
A capture by one belligerent from another constitutes, in the technical sense of the word, a total loss, and gives an immediate right to the assured to abandon to the insurers, although the vessel may be afterwards recaptured or restored.
An embargo or detention by a foreign friendly power, constitutes a total loss, and warrants an immediate abandonment.
The contract of insurance is a contract of indemnity, and therefore the assured can "only recover according to the damage he has sustained."
The state of the loss at the time of the offer to abandon, fixes the right of the assured and of the assurers.
To constitute a right to abandon, there must have existed a total loss, occasioned by one of the perils insured against, but this total loss may be real or legal. When the loss is real, a controversy can only respect the fact; but the circumstances that constitute a legal or technical loss yet remain, in many cases, open for consideration.
There are situations in which the delay of a voyage, the deprivation of the right to conduct it, produce inconveniences to the assured, for the calculation of which the law affords and can afford no standard. In such cases there is, for the time, a total loss, and in this state of things, the insured may abandon to the underwriter, who stands in his place, and to whom justice is done by enabling him to receive all that the insured might receive. A capture by an enemy and an embargo by a foreign power are admitted to be within this rule, and a complete arrest by a belligerent and not an enemy seems in reason to be equally within it.
This was a case certified from the Circuit Court for the District of Pennsylvania in which the opinions of the judges of that court were opposed to each other upon the question whether the plaintiff was entitled to recover upon a case stated, the material facts of which were as follows:
The defendants insured $12,500 on the freight of the plaintiff's American ship The Manhattan, which had been chartered by Minturn & Champlin for a voyage from New York to Batavia, and back to New York. The freight was valued in the policy at $50,000. The charter party contained a covenant that if any dispute should arise between the plaintiff and Minturn & Champlin respecting the freight, the cargo should not be detained by the plaintiff, provided they
should give good security to abide by the award of arbitrators, who were to be appointed to settle such dispute. On her homeward voyage on 10 February, 1805, the ship was taken and detained on the high seas by a British armed vessel, and the second mate and 21 of the seamen taken out, and two British officers and 15 seamen put on board, with orders to take her into a British port. The second mate was put on board another vessel, and arrived in New York on 26 February, when he gave the above information to the plaintiff, who, on 28 February, communicated it by his letter of abandonment of that date, to the defendants.
The Manhattan, with her cargo, was carried into Bermuda on 12 February, and libeled as prize of war. On 20 April, 1805, both vessel and cargo were acquitted. From this sentence, so far as it respected the cargo only, an appeal was prayed, which does not appear to have been decided, but on 8 May, the cargo was delivered to its owners, on their giving security, and on 8 July, the vessel and cargo arrived in New York; but before their arrival, the defendants having refused to give counter security, so as to relieve the owners of the cargo from the effect of the security which they had given upon getting possession of their goods, the plaintiff, on 6 June, 1805, after the vessel was liberated, brought the present suit. Upon the arrival of the vessel and cargo, Minturn & Champlin gave security to abide the award of the arbitrators concerning the freight, according to the covenant in the charter party, and obtained possession of the cargo.
MR. CHIEF JUSTICE MARSHALL, delivered the opinion of the Court as follows.
The Manhattan, a neutral ship, while prosecuting the voyage insured, was captured by a belligerent cruiser, the second mate and twenty-one of the hands were taken out, and two British officers and fifteen seamen put on board, and she was ordered into a British port. The mate soon afterwards arrived in the United States in another vessel. On 26 February, 1805, he gave information of these facts to the owner of the Manhattan, who on the 28th of the same month communicated it to the insurers, and offered to abandon to them. On 2 April, payment of the freight was demanded and refused. The Manhattan was carried into Bermudas, and libeled as prize of war. On 20 April in the same year, both vessel and cargo were acquitted. From this sentence, so far as respected the cargo only, an appeal was prayed, which does not appear to have been decided. The cargo was delivered to the owners on their giving security, and on 8 July the vessel and cargo arrived at the port of destination. The underwriters having refused to give counter security, this action was brought on 6 June, after the vessel was liberated, and before her arrival at the port of destination. The policy is on the freight.
The question referred to this Court is whether the facts stated entitle the insured to recover against the underwriters for a total loss.
In examining this question, the material points to be determined are
1st. Had the insured a right to abandon when the offer was made?
2d. Have any circumstances since occurred which affect this right?
These are important questions to the commercial interest of the United States, and ought to be settled with as much clearness as the case admits.
It is universally agreed that to constitute a right to abandon, there must have existed a total loss occasioned by one of the perils insured against, but this total loss may be real or legal. Where the loss is real, a controversy can only respect the fact, but the circumstances which constitute a legal or technical loss yet remain in many cases open for consideration.
It has been decided that a capture by one belligerent from another constitutes, in the technical sense of the word, a total loss, and gives an immediate right to the insured to abandon to the insurers, although the vessel may afterwards be recaptured and restored.
It has also been decided that an embargo or detention by a foreign friendly power constitutes a total loss and warrants an immediate abandonment. But the capture or taking at sea of a neutral vessel by a belligerent is a case on which the courts of England do not appear to have expressly decided, and which must depend on general principles on analogy and on a reasonable construction of the contract between the parties.
A capture by an enemy is a total loss although the property be not changed, because the taking is with an intent to deprive the owner of it, and because the hope of recovery is too small and too remote to suspend the right of the insured in expectation of that event.
If a neutral ship be captured as enemy property, the taking is unquestionably with a design to deprive the owner of it, and the hope of recovery is in many cases remote, since it may often depend on an appellate court, and though not equally improbable as in the case of capture by an enemy, is not so certain as is stated in argument by the counsel for the defendants.
The distinction between a capture by an enemy and by a belligerent not an enemy, has not been taken in the cases adjudged in England, so far as those cases have been laid before the court, and the best general writers seem to arrange them in the same class. 2 Marshall 422, 435.
It has been also determined that a total loss existed in the case of an embargo or the detention of a foreign prince.
In one case cited at the bar, Saloucci v. Johnson, the Court of King's Bench determined that an illegal arrest at sea amounted to a detention by a foreign prince, and although that case has since been overruled in England, so far as it decided that to resist a search did not justify a seizure, yet the principle that an arrest at sea was to be resolved into a detention by a foreign power, has not been denied. Marshall, after noticing the contrary decisions respecting the right of a neutral to resist a search, adds
"Yet the above case of Saloucci v. Johnson may nevertheless, I conceive, be considered as an authority to prove, that if a neutral ship be unlawfully arrested and detained by a belligerent cruiser, for any pretended offense against the law of nations, this would be a detention of princes."
That a detention of a foreign power by embargo, or otherwise, warrants an abandonment, is well settled. 2 Marshall 483.
The opinion given by the Court of King's Bench in the case of Saloucci v. Johnson goes not further than to establish that an unlawful arrest at sea is to be considered as the detention of a foreign prince. Whether the arrest can only be considered as unlawful when the cause alleged, if true, is not in itself sufficient to justify a seizure, or when, if true, it would be sufficient, but is in reality contrary to the fact, is not stated. In point of reason, however, it would seem that when an arrest is made at sea by a person acting under the authority of a prince, the detention is as much the detention of princes in the one case as in the other.
In the case of an embargo, the detention is lawful. The right of any power to lay an embargo has not been questioned. Yet it is universally admitted that an embargo constitutes a detention which amounts at the time to a total loss and warrants an abandonment.
In what consists the difference between a detention occasioned by an embargo and a detention occasioned by an arrest at sea of a neutral by a belligerent power?
An embargo is not laid with a view to deprive the owner of his property, but the arrest is made with that view. In the first case, therefore, the property detained is not in hazard; in the last it always is in hazard. So far the claim to abandon on an arrest is supported by stronger reason than the claim to abandon when detained by an embargo.
But it is argued that the duration of an embargo has no definite limitation, while a neutral vessel may count on being instantly discharged. Such is the rapidity of proceeding in a court of admiralty that its mandate of restoration is figuratively said to be "borne on the wings of the wind."
Commercial contracts have but little connection with figurative language, and are seldom rightly expounded by a course of artificial reasoning. Merchants generally regard the fact itself, and if the fact be attended to, an embargo seldom continues as long as the trial of a prize cause, where an appeal is interposed. The history of modern Europe, it is believed, does not furnish an instance of an embargo of equal duration with the question whether the cargo of the Manhattan be or be not lawful prize. The reasoning of the books in the case of a capture by an enemy and of an embargo applies in terms, but certainly in reason, to an arrest by a belligerent, not an enemy. 2 Marshall 483.
The reasoning of the English judges in all the cases which have been read at bar and their decisions on the question of abandonment have received the attention of the Court. To go through those cases would protract this opinion to a length unnecessarily tedious. With respect to them, therefore, it will only be observed that the principles laid down appear to be applicable to an arrest as well as to a capture or detention of foreign powers, and that a distinction between an arrest and such capture or detention has never been taken.
The contract of insurance is said to be a contract of indemnity, and therefore (it is urged by the underwriters, and has been repeatedly urged by them) the assured can only recover according to the damage he has sustained. This is true and has uniformly been admitted. But if full compensation could only be demanded where there was an actual total loss, an abandonment could only take place where there was nothing to abandon.
There are situations in which the delay of the voyage, the deprivation of the right to conduct it, produce inconveniences to the insured for the calculation of which the law affords and can afford no standard. In such cases there is, for the time, a total loss, and in this state of things the insured may abandon to the underwriter, who stands in his place and to whom justice is done by enabling him to receive all that the insured might receive. A capture by an enemy and an embargo by a foreign power are admitted to be within this rule, and a complete arrest by a belligerent not an enemy seems in reason to be equally within it.
It is therefore the unanimous opinion of the Court that where, as in this case, there is a complete taking at sea by a belligerent who has taken full possession of the vessel as prize and continues that possession to the time of the abandonment, there exists in point of law a total loss, and the act of abandonment vests the right to the thing abandoned in the underwriters and the amount of insurance in the assured.
2. Have any circumstances occurred since the abandonment which have converted this total into a partial loss?
Without reviewing the conduct of the assured subsequent to that period, it will be sufficient to observe that he has performed no act which can be construed into a relinquishment of the right which was vested in him by the offer to abandon.
In only remains, then, to inquire whether the release and return of the Manhattan deprives the assured of
the right to resort to the underwriters for a total loss which was given by the abandonment.
This point has never been decided in the courts of England.
In the case of Hamilton v. Mendez, Lord Mansfield leaves it completely undetermined whether the state of loss at the time the abandonment is made, or at the time of action brought, or at the time of the verdict rendered, shall fix the right to recover for a partial or a total loss.
A majority of the judges are of opinion that the state of loss at the time of abandonment must fix the rights of the parties to recover on an action afterwards brought, and the judge who doubts respecting it is of opinion that in this case, countersecurity having been refused by the underwriters, the question of freight is yet suspended.
It is to be certified to the circuit Court of Pennsylvania that in the case stated for the opinion of this Court, the plaintiff is entitled to recover for a total loss.