Byrnes and others against The National Insurance Company in the City of New-York

Byrnes and others against The National Insurance Company in the City of New-York. On assumpsit of "insurance^ 1” adjusting partiai loss, Y'101ie- ,any the ship s materiafe are sac'¡Mnt'nm for old “ to be dethe balance* of mr¡íc~ first deducting value*°*f the oltl materials. surer'"‘has tc> one third neixf mount of th@ the value of***'" the oU mate-* rials, and make the lase measureofthe damages, a "part’ of *tl'io °^coPPor taken “ii; ana n^laLng of topper ; held, that in adjusting the loss, you must first deduct the value of the old copper from the value of the new ; then deduct one third new for old from the balance, and that the remainder formca the measure of damages. The old materials, in such a ease, belong to the assured. The deduction of one third new for Old, is made, in this state, without regard to th'e áistinction which prevails in England, between a new and an old vessel, ° The contract of the underwriters is one of indemnity merely. Assumpsit, upon a policy of insurance. The ship Hercides, owned by the plaintiffs, was insured by the defendants, on a voyage from .New-York to Liverpool, and at and from thence to New-York, to the amount of $10,000, by policy in the usual form, dated Octoher 19th, 1820. In coming down the river, after leaving the dock át Liverpool, on her return voyage, she got aground, and was obliged to put back, unload her cargo, and repair. She had been copper sheathed about two years before, and some of the sheathing having been rubbed off by grounding, a part of it was taken off, and replaced by new sheathing, also of copper. The bills and costs of her repairs adjusted, and admitted, between the parties, to be particular average, after deducting the usual allowance of one third, new for old, amounted to $1812,76, all of which the defendants paid, except $279,26, their liability to pay which depended upon the determination of the question hereafter mentioned, and which sum was retained by them until the question should he decided by this Court. The tradesmen who furnished the copper for re-sheathing the ship, retained and credited, in their account, the value of the old copper tarl ken off the vessel, as lar as it went, m part payment. The new copper furnished, amounted to £358 5s. 8d. and the old copper, received by them, amounted to £188 10s. They rendered their bill, accordingly, charging the new copper furnished, and crediting the old copper received by them, which left a balance due them, of £169 15s. 8d. which the plaintiffs paid, and which balance, only, they charged in their account of particular average. Upon this balance the deduce |jon 0f gne ij^rci nezvyor was made. But the defendants insisted, that they had a right to claim the deduction, or allowance, of one third new for old, upon the whole amount of the bill for new copper used in the repairs, including the jgjgg 10s. which was paid for by the old copper taken by the tradesmen. On the other hand, the plaintiffs contended, that the deduction, in respect of the copper, ought to be made only on the balance of £l09 15s. 8d. paid by them to the tradesmen, and for which, only, they made their claim on the defendants. If the defendants were right in their position, then the particular average had been fully paid ; and it was agreed that they would be entitled to judgment; but that, if the plaintiffs were right, then they would be entitled to judgment for the $279,26, with interest, from 23d June, 1821; that being the amount of the deduction claimed, of the one third new for old, on the sum of £188' 10s. paid by the old copper. A copy of the tradesmen’s hill, as furnished, and of the adjustment between the parties, was annexed to the case ; and a cognovit was given to cover the amount, if the Court should be of opinion with the. plaintiffs. W. Slosson, for the plaintiffs. For the authorities and cases, establishing the rule of adjustment, upon a claim for a partial loss, where any of the ship’s materials are sacrificed, the Court are referred to Stevens on Average, 159; 1 Magens on Insurance, 156, 184; Dunham & Bool v. The Commercial Insurance Company of New-York, (11 John. 315;) 1 T. R. 408, 412, 413 ; and Ralston v. The Union Insurance Company, (4 Bin. 386.) The general principle is admitted, and its further examination will not be necessary. 1. The object of the. policy being to give a full indemnity to the assured, such rule of adjusting the partial loss, in ca<ses of this kind, should be adopted, as may both be uniform, in its application, and also give such indemnity. 2. The rule contended for, by the plaintiffs, does give such indemnity, and may be uniform in its application, to wit: to deduct from the hills, orjamount of the expenses for repairs the value of the old materials, and then deduct one-third from the balance, on account of new for old. This seems necessarily to follow, from the nature of the contract of insurance. It is one of indemnity merely ; and the construction must be in reference to that object. Another principle is, that the insurer has no interest in, or title to the subject of insurance, until an abandonment; and the damages must be considered in reference to the title continuing in the assured. (Church v. Bedient et al. and Hallett v. Peyton, 1 Caines’ Cas. Err. 21, 28, &c.) In all cases of this kind, the inquiry is, what are the damages which the plaintiff has sustained ? The property remains in the assured. The avails of the property injured are to be deducted; and, until the point of deduction is exhausted, there is no damage to the assured. The insurance is against loss and damage by accident; and he is damaged, in this instance, to the extent of the loss, after deducting therefrom the value of the old copper. In legal construction, he is, in all cases, made better, to the amount of one third, by the addition of the new materials. The old materials enable him to replace his loss to the extent of their value; and, in point of fact, he sustains no loss until their value is exhausted. 3. The contrary rule is iniquitous in its operation, and may often lead to palpable absurdity; making the assured, who has incurred heavy expenses, in fact, a debtor to the insurers. Suppose the old copper worth £250 ; and the new copper and labour £300. Then, if one third is deducted, it leaves £200 ; which is less than the old copper is worth, £50 3 and the assured, instead of receiving indemnity, would, apparently, be debtor to that amount: whereas, the opposite principle, of charging the insurer with the balance of the expenses, after deducting the value of the old materials, steers clear of any such difficulty. At the same time, it is the just and true rule ; because, we have seen, that, as far as, the old materials go, the insured is not damnified. 4. This results from the fact, that the property in the old materials remains in the assured. There can be no pretence for the rule contended for, by the defendants, except upon -the supposition that these are the property of the insurers ; in which case it might be said that they have made this par.tial payment with their own materials : but it is plain, that these materials cannot, in this manner, be vested in them,. This is not the case of an abandonment, to which it does not bear the remotest analogy. The assured have no right to abandon. 5. Upon every principle, therefore, the insurer can only claim the deduction of one third new for old, on the amount of the charge or claim against him: and, in this case, the claim is only for the balance, after deducting the value of the old copper. J. Wells, contra. He delivered to the Court the result of the two different principles of settlement, contended for by the parties, which was as follows: “ Principle of settlement contended for by the defendants : Amount of new copper. £358 5s. 8d. Ded. i new for old, 119 8 6 To be paid by underwriters, £238 17 2 But, as the proceeds of the old copper amounted to £188 10s. the under- ‘ writers claim credit for that amount, 188 IQ Amount actually to be paid, and which has been paid, £50 7 2 The assured, however, state the principle as follows : Amount of new copper, £358 5 8 Ded. proceeds of old copper, 188 10 £169 15 8 Ded. ^ new for old, 56 11 10 To be paid by underwriters,-£113 3 10- Ded. amt. paid, 50 7 2 62 16 8 Bal. claimed to be paid, ■Still=$279t7o” We cannot differ as to authorities and principles. The only difference is in their application. This is a case of repairs upon a vessel; and the rule of deducting one third new for old is settled. How is this to be done ? From what sum is the deduction to be made ? We say from the gross amount of the repairs,' whether the old materials have or have not produced any .thing. This is a uniform principle, always producing the same results. True, it may not always indemnify the insured—sometimes it will do more. No general rule can always produce individual justice. The object is general justice, to be found in some certain settled rule. The amount is not the object; but to settle a principle of commercial law, by which the insurance offices shall be governed. What we complain of is, that the one contended for by the plaintiffs, will fluctuate in its results, and consequently be difficult in its execution. We think the principle for which we contend, will be found, on examination, to be, at least, a century old. In the case already cited, of Da Costa v. Newnham, (2 T. R. 407) Buller, J. (p. 408) treats it as perfectly familiar and settled. He says, “ that one third of the sum charged for repairs was taken off, which was the usual sum allowed in respect of new work for oldN -The less the number of exceptions to the rule, the greater is the certainty and safety in commercial business. That this is so is evident from the policy adopted by our Courts, relative to this very subject, in another respect. In England the deduction of one third new for old, is not allowed, from the amount of repairs, upon a new vessel; and she is considered new, within this rule, until she has performed her first voyage. In Weskett on Insurance,- 456,* tit. Repair, it is said, that “ one. third is deducted from the repairs of a ship, if she has met with any accident, only in in her second voyage.” But this Court, to avoid multiplying exceptions, in Dunham <&• Bool v. The Commercial Insurance Company of the City of New York, cited on the other side, determined against this distinction, and left the rule to operate universally. • This being understood, works an indemnity, for the very reason. that every one does understand it. The case of Depeystex v. The Columbian Insurance Company, (2 Caines’ Rep. 85) was determined in the same spirit. The question was wheIher the assured could claim for repairs, which became necessary in consequence of defects existing in the vessel, previous to the voyage ; and the Court held that he might, unless they were such as to render the vessel unseaworthy. They refused to go into such a minute examination, as was there called for, and adopted the general rule, You cannot, with convenience or safety, multiply these exceptions. Precise and particular justice is not attended to in the cases mentioned, because is is impracticable. Where the object is to subject underwriters to unreasonable sums, the rule ought to be construed favourably to them, and the more so, as they cannot possess the means of promptly contesting the amount claimed. Stevens on Average, 159, lays down the rule very distinctly, that, “ In the adjustment of a. claim for a partial loss ; and, also, for a general average, (where any of the ship’s materials are sacrificed) it is customary tu deduct one third from the new materials and labour.” Here is no qualification of the rule, because it should always be a simple one. If you inquire what has become of the old materials ? you do what, it is confessed, no authority will warrant. Stevens, experienced as he was at Lloyd’s, would certainly have given us the exception, had it existed. And no such exception is made by the usages of business at the insurance offices. The rule, as laid down in Smith v. Bell et al. (2 Caines’ Cas. Err. 153) is, that, to constitute a technical total loss, by injury to the vessel, she must be damaged to the amount of half her value, or more, after deducting one third new for old. In other words, suppose the vessel worth $1000—the repairs $750. Then, by deducting $250, the one third new for old, you have the true sum. What is contended for by the plaintiff would destroy this rule. The moiety would be made up by them, upon a computation and deduction of the old materials ; making every case depend upen its own particular circumstances. In Da Costa v„ Newnham, Butter J. says, that “ the usage is founded upon the idea, that the owner gets the ship the better of the repairs.” Thus, in the case put, the $250 is to be borne by the assured, because his vessel is better to that amount. Whatever he gels of the old materials is beyond the sum deducted.' This is not mere indemnity, which is admitted to be all he can ask, from the nature of the contract. It is more. Upon what principle, then, can he ask the benefit of the old materials, and the sum deducted, also ? Again : In this case, the materials happen to be sold, and applied in payment for the repairs. Suppose that this had not been done; but they had remained at the place of repair: at whose risk, and on whose account, would they have thus remained ? Would not the claim have been the same ? The rule ought not to be fashioned to the circumstances of a given case. It is thereby rendered unequal. If the old materials had not been sold, they would have belonged to the underwriter; and the assured could not have sold them. The underwriter having paid the average loss, upon what principle is it, then, that he cannot apply them to his own benefit, when sold by the assured, to pay for repairs ? The amount of repairs was £358 5s. Bd. Now, to an inquiry—What were your repairs ? would any one think of answering, £169 15s. Bd.? Again: the undcrwiter is bound to repair. Suppose he had done these repairs himself. The amount he pays is £358 5s. Bd. Would he not be entitled to one third; and would the answer do—“ You have got the old materials ?” He might reply—“ Although I have taken the old materials, yet your vessel is £358 5s. 8<Z. better.” And shall the underwriter, because he cannot follow the vessel to a foreign port, and make the repairs in person, have the principle turned against him ? The assured undertakes to make these repairs, as the agent of the assurer, under the usual clause in the policy, stipulating that the assured, his servants, fyc. may labour, fyc. in and about the safeguard, 8/c. of the vessel, at-, the charge of the insurer, It may be said that the old materials do not belong to the underwriter, because the title to. the ship is in the assured. True, The, underwrite* cannot claim the vessel: but the old materials are separated, forra ^ no part of the vessel, and become a distinct subject of property.. The owner’s title applies to the substituted materia^sian^ he waives all claim to the old. The underwriter has placed the new materials there. The deduction of the one third new for old is not based upon the receipt of the old materials, but upon the fact that the new materials are one third better. It is an abandonment, pro tanto. Suppose an insurance of a house against fire; arid that the doors and windows, alone, are burned. The title applies to the subject repaired. And would the owner, in such a casé, have any title to the old materials ? Say the damages are $300—the payment of $200, by the assurer, operates as a full indemnity. The hypothetical case, making the assured indebted to the insurer,is an extravagant one ; and, probably, a claim never would be made under such circumstances. That case must bé provided for, when it arises. This is page 459, in the Dublin edition of 1783. Again : thé ruléis, that there can be no claim, unless there be a damage of 5 per cent. Now suppose the $358 5s. 3d. to exceed the 5 per cent, but the difference between that and the old materials to fall short of it: would the insured be willing to make this difference the tést of the 5 per cent. ? No. The gross amount would be the test. So of all general commercial rules. They operate sometimes against one—sometimes against the other party; but must be preserved, for the sake of certainty.- Slosson, in reply. The principle, for which we contend,' follows the very nature of the contract of insurance, as it is understood by all the authorities. And as to the usage mentioned, of settling according to the opposite rule, I am not aware that any such exists ; and do not believe that it has prevailed to any such extent as to form a rule. So far as'the old materials extend, the assured is not damnified. Suppose the old materials amount to as much as both the new labour arid materials, nothing could be claimed, because there would be no damage ; upon which must be put all claims under contracts of insurance. So far as the old materials, extend, the assured has expended nothing, nor is he benéfitted, for he is the owner of the materials. The argument upon the other side, has mainly rested upon the erroneous principle, that the act of repairing, per se, transfers the property of the old materials to the assurer : whereas there can be no abandonment, except in the case of a total loss. And even then it is in the election of the assured, whether he will abandon or not. This abundantly appears by cases already cited. Now, suppose these old materials had been saved and stored in Liverpool—could the underwriters have brought trover for them ? In every case of the adjustment of a partial loss, the real damage is always inquired into. You take an account of' the sound goods, at the port of destination. You then take an account of the damaged goods ; and the difference is the loss to be paid for. (Lawrence v. The New-York Insurance Company, 3 John. Cas. 217.) So, in this case, the balance, after deducting the old materials, is the measure of the damages. In case of a total loss, the whole is to be recovered, without deduction. That is not so here, because this case bears no analogy to one of a total loss. In the case of Church v. Bedient et al. (1 Caines’ Cas. Err. 21) the assured elected to retain, and the damages were, therefore, less. The actual damages were lessened, because the goods retained were held to form a deduction. It was not treated in the light of set off. Here the underwriter, by the deduction of one third, is holden to pay the actual damage. There is no more difficulty attending an adjustment, than in all cases of a partial loss. Even the illustration taken by the other side, from insurance against fire, is unfortunate for them ; for it is equally the case there, that the actual damage, alone, is to be paid, unless there be an abandonment of the premises. Vid, Miliar on Ins. 136, and the note ort that page', Vid. 2 Condy's Marsh. Addenda, 843. Vid. Stevens on Average, 206. [MAJORITY — Curia, per Sutherland, J.] Curia, per Sutherland, J. The general rule is unques.tionable, that, in the adjustment of a claim made by the insured upon the underwriters, for repairs put upon a vessel, the underwriters are entitled to a deduction of one third-, from the expenses of the repairs ; or, in other words, that they are bound to pay but two thirds of the expense. This deduction of one third new for old, as it is termed, is allowed upon the supposition that the vessel, after being re- , paired, is in better condition than she was at the commencemenj. 0f the voyage, in consequence of new materials having been substituted for old. And, as the contract of the underwriters is one of indemnity merely, it is equitable that a deduction should be made, in their favour, from the cost of the repairs, equal to the enhanced condition of the vessel. To avoid the inconvenience and embarrassment of an inquiry, in each particular case, into the difference in value between the present and former condition of the vessel, it has been established, as a general rule, that this difference shall "be estimated at one third of the cost of the repairs. In the English Courts, if the injury is sustained, and the ^epairs are made when the vessel is new, that is, in her first voyage, no deduction is allowed to the underwriters ; because, the vessel being new, it is not to be supposed that she is put in better condition by the repairs. But, in this Court, that distinction has not been adopted ; and the deduction is made alike, whether the vessel is new or old, This being the general principle, the Question is presented in this case, whether the value of the old materials, whatever it may be, is to be deducted from the gross amount of repairs, and the deduction of one third new for old made, from the balance ; or, whether the one third is to be deducted from the gross amount, and the old materials to belong to the underwriters. For instance : suppose the gross amount of repairs to be 400 dollars—the old materials to be worth 100 dollars. The assured contend that the amount is to be thus stated: Repairs, Deduct value of old materials,, O O O O UTICA, August, 1823. Balance, 300 Byrens V. National Insurance Company. Deduct one third new for old, 100 To be paid by underwriters, $200 " 400—100= 300—100= The underwriters, on the contrary, contend, that the true 200. principle of settlement is as follows: Repairs, $400 Deduct one third new for old, 133,33 400—133,33 Deduct, also, old materials applied to repairs, =266,67— 266,67 100=166,-100,00 671 $166,67 This question has never arisen, that I can find, either iñ the English Courts or our own; and, although cases will not frequently occur, in which the old materials will be of sufficient value to induce a discussion of it, some rule upon the subject ought to be established. It seems to me to resolve itself into the enquiry, to whom do the old materials belong ? If they belong to the assured, there is an end of the question ; for having been applied by them to the payment of the repairs, pro tanto, the assurer cannot possibly claim any further benefit from them. If there is any thing in the nature of an abandonment of them to the underwriters, then the principle contended for by the defendant may be well founded. But there is nothing like an abandonment. The assured do not, and could not claim, from the underwriters, the gross amount of the repairs. They can only claim the, difference between that amount and the value of the old materials ; for to that extent, only, are they injured: and an indemnity is all that they can claim. It is more analogous to the adjusting of a partial loss, in which case the title to the goods remains in the assured. The true rule, therefore, seems to me to be this—to apply the old materials towards payment for the new, and to allow the deduction of the one third neto for old, upon the balance. This rule is simple, and capable of universal application. It affords full indemnity to the assured, and gives to the underwriters all the benefit that the principle, upon which the practice of deducting one third new for old has been established, wfill justify. The plaintiffs are, therefore, entitled to judgment, for $279,26, with interest from the 3d day of' .June, 1821, as stated in the case. Judgment for the plaintiffs accordingly., 4) Stevens on Average, 159. Da Costa, v. Newnham, (2 T.R. 407.) Smith v. Bell and others, (2 Caines’ Cas. Err. 153.) Dunham & Bool v. The Commercial Insurance Company, (11 John. 315.) 11 John. 315. Vid. Lawrence v. The New-York Insurance Company, (3 John. Cas. 217.) Lewis v. Rucker, (2 Burr. 1170.) Johnson v. Sheddon, (2 East, 581.)