Globe & Rutgers Fire Ins. v. Cities Service Co.

SWAN, Circuit Judge.

The steamship Halo, owned and operated by Cities Service Company, undertook to tow *137the Crew Leviek Company’s barge, Crew Levick No. 5, from Key West to Philadelphia. - During the voyage the barge sank and became a total loss. Finding that her loss was caused by the negligence of the master of the Halo, the District Court entered an interlocutory decree in favor of Globe & Rutgers Fire Insurance Company. Thereafter appellant filed its intervening petition, alleging that it had insured Crew Levick Company against perils of the sea “upon the tow-age and trip expenses of the barge,” and had paid the insured the amount of said policy, with interest thereon. Liability of the appellant under said policy was established by court decree in prior litigation brought by the insured.1 By virtue of such payment appellant claims to be subrogated to the rights of the insured and asserts the right to intervene in this suit and to share with libelant in such recovery as may be made against the Halo and Cities Service Company. For the opinion below, see The Halo (D. C.) 42 F. (2d) 565.

It must be conceded that appellant Is not entitled to intervene unless it insured property for the destruction of which appellee must pay the insured, Crew Levick Company; for, if the insured had no right of action, none can pass by subrogation to the insurer. Phœnix Ins. Co. v. Erie & W. Transp. Co., 117 U. S. 312, 6 S. Ct. 750, 29 L. Ed. 873; In re Columbia S. S. Co., 28 F.(2d) 540 (D. C. N. D. Ohio); Globe & Rutgers Eire Ins. Co. v. Hines, 273 F. 774, 777 (C. C. A. 2). At the threshold of the appeal, therefore, lies the question, what was the subject-matter of the insurance issued by appellant? If it insured the hull of the lost barge, it is entitled to subrogation; if, however, its insurance was on “towage and trip expenses” only, and if the loss of such expenses could not be recovered by the insured from the tort-feasors, the decree below was right.

The appellant contends that, regardless of what the policy covered, the prior litigation between the insured and appellant is conclusive that the insurance was hull insurance, because the pleadings in that litigation so described it. That description, however, was merely a manner of referring' to the policy, and the real subject-matter of the insurance was immaterial to the issue there litigated, namely, whether the loss of the barge was due to a sea peril. Upon decision that it was, appellant was bound to pay the amount of its valued policy, whatever the interest insured. Hence that litigation is of no aid to appellant in the present suit, and the cases it relies upon, such as The Monticello v. Mollison, 17 How. 152, 155, 15 L. Ed. 68, are beside the point.

We must turn to the terms of the policy to determine the subject-matter of the insurance. Appellant used a printed form evidently adapted for hull insurance; but, where the form provided that the insurance was upon “body, tackle, * * * and other furnishings, boilers and machinery,” the quoted words were stricken out, and the words “towage and trip expenses” of the barge were inserted. Further down a similar deletion and substitution was made, followed by “Valued at total sum insured on this interest.” The amount insured was $7,500, and by a rider (“binding in honour”) it was provided “full interest admitted; the policy being deemed sufficient proof of interest.” The rider by clause 4 also provided,

“Warranted free from all average, being against the risk of total loss of vessel only. A total loss or constructive total loss, or compromised total loss paid by Underwriters on Hull and Machinery to constitute a total loss under this policy.”

While the use of a hull form has resulted in a very confused document, with some provisions remaining undeleted and more appropriate to insuring the hull than any other interest, a majority of the court cannot read the policy without reaching the conviction that the subject-matter of the insurance was not the barge, but “towage and trip expenses,” the value of which, admitted to be $7,500, was to be paid in case of a total loss of the vessel.

It is a recognized rule of construction to attribute greater effect to inserted written words than to the printed part of such a contract, because they are the terms presently chosen by the parties, whereas the others are but a general formula. Providence-Washington Ins. Co. v. Bowring, 50 F. 613, 614 (C. C. A. 2). In that case insurance “on advances” was held not to be insurance upon the vessel itself, though printed portions of the policy described generally the body, tackle, apparel, and goods of and in the ship. Judge Wallace gave the matter very careful consideration, and said in his opinion (pages 614, 615 of 50 F.):

“ * * * The sensible construction, therefore, of a policy like that now in controversy is that it insures advances against *138risk from loss of the skip, and the advances thus insured are something independent of and' distinct from the ship herself. It is proved that the advances which were intended to be insured in this ease were moneys advanced by the managing owners of the vessel in the business of the vessel, and which were in no sense represented by the vessel herself. They consisted largely of premiums for keeping her insured, and they represented other expenditures, such as for coal, other supplies, pilotage, etc., for which the co-owners were liable to account to the managing owners. The amount thus advanced may be deemed the capital of the owners at risk in conducting the business of the ship. As it was fluctuating in amount, the balance at any one time depending upon the difference between expenses and receipts, the sum fixed in the valuation .clause was intended to cover the balance which would probably be found existing at any time during the period of the risk. In case of a loss, if the balance proved to be larger than the valuation, the owners would lose the difference; if less, they would gain. It cannot be doubted that the capital invested in carrying on the business of the ship is a proper subject of insurance. As the loss of a ship involves the loss of the money which has been advanced in carrying on her business, to the extent that her owners are deprived of reimbursing themselves from her earnings, the money invested is a marine risk. Expected profits may be insured. Eyre v. Glover, 16 East, 218; Stockdale v. Dunlop, 6 Mees. & W. 224. So moneys expended for the ship’s use by the master, his commissions, and his privileges, are subjects of marine insurance. King v. Glover, 2 Bos. & Pul. (N. S.) 206. It may be that an insurance on such advances is, in substance, an insurance upon the earnings of the ship, and that where the freight, ‘chartered or otherwise,’ is insured on a time risk, an insurance on advances would be double insurance; and it is doubtless true that insurances on advances offer a cover for frauds upon the underwriters, as, when the ship is also insured, the interest of the assured- in the safety of the property is diminished.”

In British American Assur. Co. v. Law & Co., 21 Can. Sup. Ct. 325, insurance of the owners “on advances upon the body, tackle, etc., of the good barque” was held to be insurance on the vessel itself. But the two eases are not inconsistent and were in fact distinguished at the end of Judge Wallace’s opinion on the ground that, in the Canadian ease, the advances represented repairs upon the vessel by which her value was enhanced to the extent of the sums advanced. “In such a ease the insurance is in the concrete upon the vessel herself.” This distinction was accepted by at least one member of the Canadian Supreme Court, being mentioned at the conclusion of Judge Strong’s opinion.

In the case at bar no evidence was introduced to show what “towage and trip expenses” the insured had incurred. If such expenses represented money paid out for repairs or reinforcements to fit the barge for the towage trip, the interest insured might properly be deemed insurance on the hull, as in the Canadian ease; on the other hand, if such expenses represented, for example, premiums paid out to keep the barge insured during the trip, the result would be otherwise, as in Judge Wallace’s decision. The policy being a valued policy, we do not see that any inference as to the nature of the expenses covered by the insurance can be drawn from the amodnt of the policy. Presumptively, the written words “towage and trip expenses” mean a different interest from printed words of the policy referring to the hull. Without any showing as to what the expenses were, there is no proof that the insured has any right of recovery against the tort-feasors on account of the interest which appellant-insured, and consequently it has failed to show any right of subrogation to a cause of action against them.

No ease has been cited relating specifically to insurance upon “towage and trip expenses.” It is suggested in argument that such a policy is similar to “disbursement” insurance. In International Nav. Co. v. Atlantic Mut. Ins. Co., 100 P. 304, 307 (D. C. S. D. N. Y.), Judge Brown said:

“ ‘Disbursement’ policies are often issued where the hull is fully covered by other policies; they are against total loss only, and are deemed a different interest from a policy on hull, and in case of total loss have no benefit of salvage, such as ordinary policies have. * * *

“The description of the subject insured, namely ‘disbursements,’ it cannot b'e doubted, was deliberately chosen to signify a wholly different risk from that upon ‘hull, machinery and equipment,’ and in order to distinguish the two as wholly different classes. of insurance.” '

Accordingly it was held that disbursement policies were not included as hull insurance for the purpose of computing the proportionate loss to be borne by an insurer of *139the hull in a case of partial loss. The decree was affirmed in (C. C. A.) 108 F. 987, certiorari denied 181 U. S. 623, 21 S. Ct. 926, 45 L. Ed. 1033. In Brown v. Merchants’ Marine Ins. Co., 152 F. 411 (C. C. A. 9), the policy was on “disbursement and/or increase value,” and the insurer was allowed to share in the fund recovered from the tort-feasor. But the “increase value” was a subject-matter as to which the insured could recover from the wrongdoer. As already stated no evidence was presented that Crew Levick Company could recover anything from appellee on account of “towage and trip expenses.” Consequently no right to subrogation was established by appellant, and the decree below should be affirmed.

Disposal of the case upon this ground renders unnecessary a discussion of the policy provision “without benefit of salvage.”

Decree affirmed.

Decree affirmed without opinion in North British & Mercantile Ins. Co. v. Crew Levick Co., 25 F. (2d) 1021 (C. C. A. 2).