R e p o r te d b y M . W . McKe l l a r a n d H . H . Ho c k in o, E s tir s ., B a r r is t e r s - a t - L a w .
Saturday, June 24, 1871.
Lid g e t t v. Se c r e t a n a n d a n o t h e r.
Marine insurance— Particular loss sufferedby ship while insured under one policy, and total loss while insured tinder another—Merger of p a rtia l into total loss—Rights of insured.
P la in tiff insured his ship with various underwriters, among whom were defendants, fo r the voyage from L. to C., and thirty days after a rrival at 0.
Before the ship reached G. shesuffereda particular loss. P laintiff, not knowing of this, insured her While at C., and on the voyage from G. to I. ., under
0 . P . ] Lid s e t t v. Se c r e t a n a n d a n o t h e r. [C. P .
96 M A R IT IM E LA W CASES.
ava luedpolicy (the valuetaken fa ir ly representing the real value of the ship in an uninjured state) with various underwriters, among whom were defend
ants. On arrival at C., the ship was taken into ' dock, where i t was ascertained that considerable repairs were required. These repairs were set on fo ot; but before they were completed, and after the firs t policy had expired and the second policy had'
attached, the ship was totally destroyed by fire.
The two policies ivere altogether independent of each other.
Held, that p la in tiff was entitled, under the first policy, to recover, not only the cost of the repairs actually executed, but the whole amount that it would have cost to compílete the repairs rendered necessary by the damage sustained, and, under the second policy, the sum at which the ship ivas valued in the policy, without any deduction in respect of that part o f the sum claimable under the first policy, which had not been actually ex
pended in repairs. (a)
Th i s was an action brought by the owners of the ship Charlemagne upon two policies of insurance upon the ship, underwritten by the defendants, the one for a voyage out from London to Calcutta and for th irty days there after arrival in safety, and the other at and from Calcutta to London.
The vessel struck on a reef on the voyage out, and sustained a particular and general average lpss, and whilst at Calcutta, after her arrival, was totally destroyed by fire. The declaration contained counts claiming losses under both policies, includ
ing a general average loss under the outward policy, and to these counts the defendant pleaded a single plea of payment into court of 110?. in satisfaction of the plaintiffs’ claims. To this plea the plaintiffs replied that the sum paid in was not sufficient.
The cause came on for trial at the Guildhall, in the City of London, at the sittings after Michael
mas Term 1868, before the Lord Chief Justice and a special ju ry, when it was ordered by the court, w ith the consent of the parties, that a verdict should be entered for the plaintiffs for the amount claimed in the declaration, subject to the opinion of the court upon a special case to be settled by M r. Charles Pollock upon the question whether, when the ship was destroyed by fire, she was covered by the outward policy, and also as to the principle upon which the partial loss under the outward policy was to be calculated in the event of the plaintiffs being held by the court not to be en
title d to recover a total loss under the outward polioy; and i t having been decided by this court upon a case stated for that purpose that the plaintiffs were not entitled to recover for a total loss under the outward policy (see 22 L. T.
Rep. N. S. 272), the following further case was stated, in order to obtain the opinion of the court as to the principle upon which the partial loss is to be calculated under that property.
Ca s e.
In July 1866 the plaintiffs, who are shipowners carrying on business in London, were the owners of the iron sailing vessel the Charlemagne, then about to proceed on a voyage from London to Calcutta, and after a certain stay there, back again
(a) This case clearly shows th a t the righ ts of the parties to a policy are determined when the ris k under the policy is ended ; and, therefore, nothing th a t happens a fte r the term ination of the risk exempts them from lia b ility incurred previously to such te rm in a tio n .— Ed.
from Calcutta to London. To cover the vessel on the outward voyage, the plaintiffs effected a policy of insurance in the ordinary form w ith various underwriters to the amount of 18,000?. upon the ship, valued at 20,0001., and the defendants, who are underwriters at Lloyd’s, underwrote the policy fo r 150Z. In order to cover the ship upon the homeward voyage, the plaintiffs effected a further policy, in the ordinary form, w ith various under
writers, which was subscribed to the amount of 10,100?. on the ship, valued at 20,000?., and the de
fendant underwrote this policy for 100?. In the outward polioy the risk was expressed to be “ at and from London to Calcutta, and for th irty days after arrival.” In the homeward policy the risk was, “ at and from Calcutta to London.”
The Charlemagne, in thé course of her outward voyage, struck upon a reef or bank near the month of the River Hooghly, and remained aground for about an hour. The captain deemed i t best for the safety of the vessel, passengers, and cargo, to force the vessel over the bank, and for that pur
pose to throw overboard some of the cargo in order to lighten her. Accordingly a quantity of cargo was jettisoned, and the ship being thus lightened, gradually worked over the bank. The ship sustained considerable damage to her bottom and rudder, but the extent of this was not fu lly known u n til the survey hereinafter mentioned.
She continued her voyage, and reached Calcutta on the 28th Oct., and at once proceeded with the discharge of her cargo, which was completed by the 8th Nov.
On the 12th Nov. the Charlemagne was taken into dry dock for survey and repairs. The result of the survey made upon the Charlemagne in the dry dock showed that extensive repairs were necessary, in consequence of the damage done to the ship while aground. The repairs were accord
ingly commenced. W hilst they were in progress, the outward policy expired. Afterwards, on the 5th Dec,, the vessel was totally destroyed by fire.
According to the plaintiff’s evidence the ex
penses actually incurred amounted to a small proportion of the outlay which would have been required to complete the repairs.
The defendant admits that he is liable to a general and particular average loss under the outward policy, and for a total loss with benefit of salvage under the homeward polioy, and the amount paid into court has been calculated on the supposition that it covers the defendant’s propor
tion of the loss and general average, and other expenses actually incurred by the plaintiffs under the outward policy, and the total loss under the homeward policy. The plaintiffs do not admit the correctness of the calculation.
The plaintiffs, however, contend that they are entitled under the outward policy to recover for the whole amount of loss and damage sustained by the said ship by striking on the said reef, without regard to the extent to which the same was actually repaired and made good.
The plaintiffs also contend that in estimating the costs of repairs for which the defendant is liable under the outward policy, they are entitled to include the amount which the plaintiffs would have had to pay for dock dues, and other charges of a like nature for the time during which the vessel would have remained in the dry dock for the purpose of being repaired. The defendant contends that under the outward polioy he is only
M A R IT IM E LA W CASES. 97
0 . P .] Lid g e t t v . Se c b e t a n a n d a n o t h e r. [C . P.
liable for the amount of deck dues and charges actually incurred at the time of the fire.
In adjusting the amount of the salvage under the homeward policy, the dock dues incurred since the fire, and which must have been necessarily incurred before realizing the net salvage of the wreck, are deducted from the proceeds arising from the sale of the wreck.
The questions for the opinion of the court are, what are the true principles upon which the said losses are to be assessed.
The case is to be remitted to the said arbitrator to determine whether, adopting the principle so laid down as to the mode of calculating the parti- tioular average loss, the said sum of 1101. is suffi
cient to satisfy the plaintiffs’ claims in the action, and i f the arbitrator should find that i t is not sufficient, then the judgment is to be for the p la intiff for such sum as the arbitrator shall find that the plaintiffs are entitled to, with costs of suit, and i f the arbitrator shall find that the said sum is sufficient, then judgment is to be entered for the defendants with costs.
Sir George Honyman, Q.B. ( Watkin Williams and Cohen with him), for the plaintiff.—The rights of the parties ought to be determined at the time of the expiration of the risk. That being so, the defendants cannot allege, in answer to the claim under the first policy, anything that happened after the expiration of that policy. As to the claim under the second policy, Barker v. Janson (17 L. T. Rep. N. S. 473 ; L. Rep. 3 0. P. 303) is conclusive in favour of the plaintiff.
Sir John Karr slake, Q.O. (/. C. Mathew with him) for the defendants.—I f a contract of insurance be a contract of indemnity, then the assured cannot recover more than the value of the ship which he has lo s t; but if the plaintiff is to have awarded to him all that he now claims, he w ill get a great deal more than the value of the ship. The partial loss is merged in the subsequent total loss, although the one happened while the ship was under one policy and the other while she was under another. As is stated in Tudor’s Mercantile Cases (noteB to Lewis v. Rucker, p. 216, 2nd edit.), although a vessel may have sustained an average loss, if no expenses have been actually incurred in repairing it, the assured cannot recover anything for the average loss in addition to the subsequent total loss.” The reasoning of the court in L ivie v. Janson (12 East, 648) applies here.
Stewart v. Steele (5 Scott’s New Rep. 927) ¡is an authority for saying that the plaintiff can recover under the first policy only the amount that he actually expended on the repairs. But i f the plaintiff is entitled under the first policy to recover as much as it would have cost to have put his ship
!n proper repair, the defendants have a rig h t to an abatement in the amount payable by them under the second policy to the extent to which that money was not actually expended. The second policy being a voyage policy, there was implied in it a Warranty of seaworthiness. The case is precisely the same as i f the money had been expended on 1 . ship and some part of the ship had escaped, or as if i t had been spent in timber for the repairs, and the timber, though lying close to the ship, had not been burnt. In either case the insurers could nave claimed the benefit of the salvage.
Sir George Honyman, Q.C., in reply.
Vo l. I . N. S.
Wi l l e s, J.—In this case two questions are raised. They arise in this way—the vessel, which was first injured and afterwards destroyed by fire, was insured on one policy, which was a distinct contract, on the voyage from London to Calcutta, and for th irty days after arrival. I t was also in sured on another policy for the voyage back from Calcutta to London. The vessel appears to have been damaged during the time that the first policy attached, and in respect of that damage compen
sation as for a particular loss is claimed under the first policy. A fte r the second policy had attached, the ghip was totally destroyed by fire, the repairs rendered necessary by the injuries previously sustained having at that time been commenced, but not being finished. A t the time the vessel was burnt a substantial amount of repairs re
mained to be done, so that the injuries sustained materially detracted from the value of the ship at the time she caught fire. No reference is made in one policy to the existence of the other, but the two policies are distinct contracts relating to dis
tin ct periods of time. The first policy, which covers the period of the voyage out, and th irty days after arrival at Calcutta, stands by itself. In this first policy, neither party refers to another contract to be made to cover the subsequent period, and neither party claims, or can claim, to be absolved from liability on the first policy by reason of another distinct contract having been made to cover the subsequent period. The circumstances of the de
fendant having underwritten both policies is merely an accident, and forms no connection be
tween the two policies. Thus the rights of the parties under each policy have to be determined upon the true construction of that policy, and w ith
out reference to the other. The first question is raised on the first policy. What is the rig h t of the plaintiff under that P He claims to be com
pensated by the underwriters, for, not only the ex
pense he was put to in respect of the repairs actu
ally done to the ship, but also for the cost of the repairs that would have had to be done before the ship could have been said to have been properly and thoroughly repaired. As to the cost of the repairs actually done, the underwriters raise no question. To that extent, i t is conceded that pay
ment must be made. But the underwriters dis
pute their liab ility under the first policy to make good the cost of repairs that were never done, and that raises the question whether in any case of particular loss a shipowner can recover against the underwriters before expenses have been incurred in respect of the damage sustained; in other words, whether the owner is bound to repair the ship before he can bring an action. I t is further said that, even if the owner had completed the repairs, they would have done no good, be
cause the ship was subsequently burnt. That however, is reaching a long way, and specu
lating on results which it is assumed would have ensued,, but which i t is impossible to affirm would have taken place. The fact that the ship was kept a long time at Calcutta by reason of the damage she had sustained, may or may not have led to the fire taking place. We cannot affirm that it did or that i t did not. We are asked to have resort to the circumstance of the fire—which is apparently totally unconnected with the accident that happened to the ship while going up the river—to relieve the underwriters from lia b ility under the first policy. I f we look s till
H
98 M A R IT IM E LA W CASES.
C . P .] Lid g e t t v. Se c k e t a n an d a n o t h e r. [C . P.
closer into the circumstances connected w ith this part of the question, we find that the ship at the time that the first policy expired was reduced in value. A ship which, for the sake of argument, I w ill say was worth 5000?. was reduced in value to 4000?., and a policy of insurance is a contract of indemnity. That being so, i f the shipowner is worse oil by 1000?., he is entitled to be indemnified to that extent, and ifhe weredealing with an under
w riter who was disposed to settle at once, the loss, if atoncesettled, would be settled at 1000?. Supposing that in this case the last of the th irty days had been tbe 31st December, and the owner had made his claim on the 1st Jan. for the whole cost of the repairs rendered necessary by the accident, and that claim had been settled on the 2nd Jan., and the fire had taken place on the 4 th ; could the un
derwriter under such circumstances have brought an action to recover the value of his cheque, or stop payment of it i f not presented, and plead failure of consideration i f sued upon it ? I t would be strange if he could; and if he could not, the damages must be regarded as a liquidated sum, and as settled at the time the risk expires. I m ight take another case. Supposing that the ship insured is, through injuries sustained, worth only 4000?. instead of 5000?.; the risk expires on Dec. 31st, and on Jan. 2nd the ship is sold by the underwriter at her reduced value, 4000?., and on the 3rd Jan. is destroyed by fire, could, the under
writers say that the sale was not one of the perils insured against, and that he would not pay, be
cause the owner was only able to claim by reason of something happening after the policy had ex
pired P Could the underwriter, under such circum
stances, say that the particular loss was merged in the total loss which, on the supposition, does not happen t ill after the policy has expired ? I t is said that the underwriter would have such a defence, because a particular loss is not paid for if the ship is afterwards and during the risk totally lost. That is for one of two reasons. Either the underwriter agrees to pay as for a total loss, and does pay (except losses which come under the head of suing and labouring), and in so paying discharges the whole loss. I f he paid in respect of the particular as well as of the total loss, he would be paying more than the value of the ship. Another case which m ight arise is this. A ship, having suffered a particular damage by a peril insured against, is afterwards lost or destroyed by a peril not insured against, but as to which the owner is his own insurer. That was the case in Lbrie v. Janson. The result of such a state of things is that, as the assured has put himself in the same position as the under
w rite r would have been if he had taken that risk, the particular loss has to be borne by him, just as i t would have had to be be borne by the underwriter i f he had taken the risk through which the vessel was lost. Authority and reasoning go together on this point. Are we then to extend what is called the doctrine of merger to a case where the total loss occurs after the expiration of the policy ? On this point there is no authority? but I th ink the case put by my brother M. Smith very apposite in point of principle. A tenant, under covenant to
w rite r would have been if he had taken that risk, the particular loss has to be borne by him, just as i t would have had to be be borne by the underwriter i f he had taken the risk through which the vessel was lost. Authority and reasoning go together on this point. Are we then to extend what is called the doctrine of merger to a case where the total loss occurs after the expiration of the policy ? On this point there is no authority? but I th ink the case put by my brother M. Smith very apposite in point of principle. A tenant, under covenant to