HODGSON
v.
THE MARINE INSURANCE COMPANY OF ALEXANDRIA.
Supreme Court of United States.
February 24, 1809.*104 Swann, for the plaintiff in error.
E.J. Lee and C. Lee, contra.
*109 CUSHING, J. (Marshall, Ch. J. not sitting in the cause) delivered the opinion of the court,[*] as follows:
The insurance in this case being general, as well for the parties named as "for all and every other person or persons to whom the vessel did or might appertain," and containing no warranty of neutrality, belligerent as well as American property was covered by it. Some of the parties being described as of Richmond, does not necessarily imply that they all resided there; but if they did, mere residence would not make them citizens; and even then, an express warranty was necessary, if it had been designed to run only a neutral risk. This is an answer to the 7th as well as to the 4th plea; because there can be no undue concealment as to the parties interested, where the terms of the policy are so broad as to preclude the necessity, either of disclosing their names, or of inserting them in the instrument.
*110 The eighth plea is also bad. The defendants acknowledge, under seal, to have received a consideration of 17 1-2 per cent. for the insurance they made, which it appears was secured by a note, the amount of which was to be deducted from the sum to be paid for a loss, if any happened. On the face of the instrument, then, a valid consideration, if that be necessary, is stated, and if the note be never paid it cannot vacate the contract, or be relied on as a defence to an action on it. This court knows not why a court of equity has been applied to for an injunction. Its proceedings, therefore, can have no influence on the present suit, for notwithstanding its interposition in the way mentioned in this plea, the defendants cannot be deprived of the right they have reserved of deducting the amount of premium from whatever sum they may have to pay for the loss that has occurred.
Without deciding whether a material misrepresentation, not fraudulent, can be pleaded in avoidance of a sealed instrument, the court thinks there is no fact disclosed by either the fifth or sixth plea, which could vacate an insurance were it only a simple contract. In no part of the 5th plea is the misrepresentation alleged to be material. It is only to be inferred that it had some influence (but to what degree does not appear) in prevailing on the defendants to agree to so high a valuation. It will hardly, however, be insisted, that every over-valuation, however inconsiderable, or however innocently produced, will annul a contract of this nature. It would seem more reasonable, to let mistakes of this kind (if they are to have any operation at all) regulate the extent of recovery, and not deprive the party of his whole indemnity: for if an extravagant valuation be made, an underwriter cannot reasonably ask to be relieved beyond the excess complained of. The allegation that the vessel was worth, when insured, only 3,000 dollars, is also very unimportant, it being nowhere stated that the plaintiff represented her to be worth more, but only proposed that her value in the policy should be agreed *111 at ten thousand dollars. Now although she might not in fact have been worth this sum, it is impossible for the court to say that this difference was produced entirely by the mistake which was made in her age and tonnage. This would be to say that a difference of a year or two in the age, and of fifty or sixty tons in the burden of a vessel, must, in all cases, have the same effect on her value; a conclusion which, on investigation, would be found very incorrect. Nor, if it appeared on trial that her actual worth were no more than 3,000 dollars, would it necessarily avoid the contract, or restrict the damages to that sum; for she may, notwithstanding, have fairly cost her owners the whole amount of her valuation; who, in that case, would have honestly represented her as worth 10,000 dollars.
But a more fatal objection to this plea is, that the misrepresentation relied on is not stated to have been material to the risk of the voyage; and yet the only cases in which policies have been avoided for innocent misrepresentations are those in which the matter disclosed or concealed has affected the risk so as to render it different from the one understood at the time, and on which the premium was calculated.
Most of the remarks on the 5th apply also to the 6th plea: for although it be here alleged that the misrepresentation was material "in regard to the contract of insurance," it should have been stated in what particular, that it might appear whether the risk run were at all affected by it.
An objection is made to the declaration, but not much relied on, that no abandonment is averred to have been made. In covenant such averment cannot be necessary. If it be proved on the trial, it will be sufficient.
The judgment of the circuit court on the 4th, 5th, 7th and 8th pleas must be affirmed with costs; and its judgment in favour of the defendants on the *112 6th plea reversed; and judgment on that plea be also rendered for the plaintiff.
JOHNSON, J.
The difficulties in this case arise partly from the pleadings, and partly from the case presented by the pleadings.
This policy, having been effected by a corporation under its corporate seal, has been considered as imposing an obligation on the insured to bring covenant instead of assumpsit, as is usual on such contracts.
Thus the defendants have been obliged to plead specially; and the cause comes up on demurrer, which, of course; admits the case as made up on the pleadings.
Whether there is sufficient matter well pleaded why the plaintiff ought not to recover? is therefore the question before us.
I am of opinion that there is. I cannot for a moment suffer the sealing of the policy, or the form of the action, to impose any restriction upon the latitude of defence applicable to the contract of insurance. Such a doctrine would be fatal to every incorporated insurance company. I therefore maintain, that, in the action of covenant on a policy of insurance, every defence may be taken advantage of, in pleading, that could be introduced, in evidence, before a jury. It is an exceedingly inconvenient form of action for trying the merits of questions arising out of this species of contract, and I feel disposed, if possible, to diminish the inevitable difficulties, and the intricate and voluminous pleadings, which must grow out of this form of action, and to admit every facility which the rules of pleading will possibly sanction.
There are eight pleas filed to the present action. On the three first there are issues in fact, and the court below has given judgment on the remaining *113 five. I am disposed to concur in their decisions on each of these several pleas, although, perhaps, on some of them, for reasons not altogether the same with those by which they were influenced; but I shall confine my observations solely to the sixth plea, as that disposes of the case finally, if decided for the defendants, and has been the principal subject of the argument before this court.
The substance of this plea is, that the plaintiff misrepresented the age and tonnage of the vessel, whereby the defendants were induced to insure to a higher amount than they otherwise should; and concludes with averring, that the difference between the true age and tonnage of the vessel, and the represented age and tonnage, was material in regard to the contract of insurance.
The plaintiff replies that this misrepresentation was immaterial in regard to the seaworthiness of the vessel; her ability to perform the voyage, and the other risks insured against.
To me it appears that the plea presents the true turning point of the case, and that the replication draws towards questions very different from that which ought to control our decisions.
It is not on the doctrine of seaworthiness that a misrepresentation is held to vitiate the policy, because the insured is always held to guaranty the sufficiency of his vessel to perform the voyage insured. Nor is it an evident and necessary increase of the risk; but it is presenting such false lights to the insurer, as induce him to enter into a contract materially different from that which he supposes he is entering into. It is a rule of law introduced to protect underwriters from those innumerable frauds which are practised upon them in a contract which must of necessity be regulated almost wholly by the information derived from the insured.
I do not lay so much stress upon the misrepresentation *114 with regard to the age of the vessel; for that appertains much to her seaworthiness; but with regard to her size the misrepresentation was so enormous as leaves no doubt upon my mind that had the case been submitted to a jury, the court would have been bound to charge them in favour of the defendants. It had in its nature an immediate tendency to entrap the defendants into one of the most common and most successful snares laid for the unwary underwriter. To make it the interest of the insured rather to sink than to save his vessel. It can very well be conceived that an underwriter may be induced to insure a certain sum upon a certain vessel for a very moderate premium, when no premium would induce him to insure double that amount upon the same bottom. I am aware of a very considerable difficulty arising out of this case, viz. how we are to estimate the degree of misrepresentation with regard to tonnage which shall vitiate a policy? but it is a difficulty arising out of the mode in which we are drawn into a decision on the case, rather than out of the case itself.
If this question had been brought before a jury, the difficulty would have vanished; but shall the party lose the benefit of this defence because the pleadings have assumed such a shape as to force the court into a decision upon the point without a jury? I am of opinion that he ought not, if it can be avoided; an extreme case may be supposed in which the misrepresentation may be very inconsiderable, as of a single ton for instance; but, on the other hand, we may suppose an extreme case of a misrepresentation to the highest possible number of tons burden, say 1,000 tons; will it be said that, in the latter case, the misrepresentation would not avoid the policy?
From these considerations it seems to result that the court is driven to the necessity of deciding this case upon its intrinsic merits, and reserving its opinion upon successive cases as they shall occur. This necessity is forced upon us by the alternative either to decide that no misrepresentation, however gross, *115 of the size of the vessel will avoid a policy, or that any misrepresentation, however minute, will have that effect. It is to be hoped, in the mean time, that some statutory provision may be made, which will relieve the court from a similar embarrassment.
Judgment reversed.
NOTES
[*] Present, Cushing, Washington, Livingston and Johnson, justices.