( 321 )
NOOBBHOY v. THE FEDERAL MARINE INSURANCE CO.
D. C., Colombo, 17,346.
Marine insurance—Duty of the assured to describe fully the risk—Consequenceof failure to do so.
Insurance is a contract upon speculation. The special facts uponwhich the contingent chance is to be computed lie most commonly inthe knowledge of the insured only. j *
The underwriter trusts to his representations and- proceeds upon confi-dence that he does not keep back <any circumstances in his knowledgeto mislead the underwriter into a belief that the circumstance does notexist, and to induce him to estimate the risk as if it did not exist. Thekeeping back such circumstance is a fraud, and therefore the policy is void.
Although the suppression should happen through mistake without anyfraudulent intention,yetstillthe underwriter is deceived and the policy
is void,because theriskrunis really different from the risk understood
and intended to be run at the time of the agreement.
N this case the plaintiff sued the defendant company to recoverthe sum of Rs. 6,241 -68 on a policy of insurance. The follow-
ing special case, containing the facts admitted by the parties, wassubmitted to the District Judge for decision: —
(1) On the 16th day of October, 1901, the plaintiff at Colomboeffected apolicy ofinsurance on 1,720 bags of rice valued at
Rs. 17,200, and 249 bags of gram valued at Rs. 3,112, shipped in goodorder andconditioninthess. “ Ileafee ” from Karachchi to
Colombo with particular average, all risks free of 5 per cent, onseries of 500 bags.
This policy was underwritten by the defendant company forRs. 20,312.'
On the 16th day of October, 1901, the plaintiff effecteda policy on-1,720 bags of rice valued at Rs. 17,200, and 249 bags ofgram valued at Rs. 3,112, with marks as per bill of lading in thess. ‘‘ Ileafee-” from Karachchi to Colombo, free from particularaverage. This policy was underwritten by the New ZealandInsurance Company for Rs. 20,322.
On the 15th day of October, 1901, the ss. Ileafe^” sailedfrom Karachchi to Colombo with the 3,440 »bags of rice and 498 bagsof gram which are the subject of this action, the amended billof lading being issued in connection with the same.
On the voyage from Karachchi to Colombo the ss. “ Ileafeeencountered -heavy weather, and Shipped a considerable amount, of
( 322 )
1904.Sen water. in consequence of which a large number of the bags
April 25.in paragraph 4 of this statement was wetted and
The ss. “ Ileafee ” arrived at Colombo on the 24th day ofOctober, 1901, and began to discharge cargo.
On the 29th day of October, 1901., the plaintiff informed thedefendant company that some of the bags mentioned in paragraph4 of this statement were damaged, and requested the defendantcompany to hold a survey.
On the 30th day of October, 1901, the master, the mate, andthe carpenter of the ss. “ Ileafee ” appeared before Arthur Alwis,Esq., Notary Public, and entered a protest on the damagedcai^o.
On the 11th day of November, 1901, a survey of the damagedcargo was made by Messrs. G. E. H. Symons and G. W. Suhren,and it was ascertained by them that 489 bags of rice and 46 bagsof gram were damaged by salt water and had to be destroyed.
The plaintiff claims from the defendant company the sumof Rs. 5,465, being the value of the bags of rice and gram sodestroyed.
The plaintiff further claims the sum of Rs. 776-.88 as
expenses incurred by him in connection with the landing, survey-ing, &c., of the damaged cargo.x
In the policy underwritten by the defendant companythe bags were not identified by any particular marks, nor was itstated that it formed pact of the bags shipped under the said billof lading mentioned in paragraph 4 of this statement, nor was itstated that the risk shall be on the entire cargo.
In the policy underwritten by the New Zealand InsuranceCompany the bags were not identified by any particular marks,except as aforesaid, nor was it stated that they formed part ofthe cargo shipped under the said bill of lading mentioned inparagraph 4 of this statement.
The plaintiff and the defendant company desire the Courtto determine—
(a) Whether in law the plaintiff can recover from the defendantcompany any sum whatever in respect of the said policy under-written by the defendant company.
«(b) It the Court holds that the plaintiff can recover, whetherthe defendant Company’S liability is as regards the whole or thehalf.
The amount of damages to be fixed, when the question oflaw has been decided, by a person to be agreed to by the partiej?,or if no agreement can be come tp bjr the Court.
( 323 )
The District Judge, after hearing counsel, found in favour ofthe plaintiff, holding that the defendant company’s liability wasas regards the whole and not only the half of the bags damaged.
The defendant company appealed. The case was argued on15th March, 1904.
Van Langenberg, for appellant, cited Arnold on MarineInsurance, p. 237; Philips on Marine Insurance, p. 217; Robertsv. French, 4 Ves 140; and Langhom v. Cologan, 4 Taunt., 330.
H. J. C. Pereira, for the plaintiff, respondent, cited 2 Parsonson Maritime Law, p. 197; Smi^li’t Mercantile Law, p. 396;Kewley v. Ryan, 2 Blackst., 343.
Van Langenberg replied.
Cur. adv. vult.
25th April, 1904. Layard, C J.—
The risk which forms the subject of the marine insurance in this
case must, in the ordinary course of business, have been described
by the plaintiff and accepted by the defendant company entirely
upon the plaintiff’s description. The accuracy and completeness
of this description thus becomes an essential condition of the
contract. I.t is essentially a contract uberrimce fidei, and the duty.
was cast upon the insured to inform the underwriter of. every
material fact within his knowledge of which the underwriter is
not already informed, so as to prevent any ignorance in the latter,
and the communication of all material facts is a condition of the
validity of the contract. The plaintiff failed to disclose and truly
represent to the underwriter, the defendant company, that the risk
extended to a partial loss out of 3,440 bags of rice and 498 bags of
gram, but left the defendant company under the impression that
they were liable to pay for a partial loss of a consignment of only
720 bags of rice and 249 bags of gram, and the non-disclosure of
the greater extent of the risk gives the defendant company an
election to avoid the contract, as in the case of fraud, although not
accompanied with any fraudulent intention (see Carter v. Boehm,
■3 Burr. 1905;- Botes v. Hewjtt, L.R. 2, Q.B. 604: and Ionidcs
v. Pender, L.R. 9, Q. B. 531). In his judgment in the first case
above cited Lord Mansfield lays down'—
“Insurance is a contract upon. speculation. The special'factsupon which the contingent chance -is to ,be computed lie mostcommonly in the knowledge of the insured onfv. The under-writer trusts to his representations and proceeds upon confidencethat he does not keep back any circumstances ■ in' his knowledge tomislead the underwriter into a belief that the circumstance doesnot exist and to induce him to estimate the risk as if it did not
( 324 )
exist. The keeping back such circumstance is a fraud, and there-April 25. fore the policy is void. Although the suppression should happenLayabd, O.J. through mistake without any fraudulent intention, yet still theunderwriter is deceived and the policy is void, because the riskrun is really different from the risk understood and intended tobe run at the time of the agreement.
The risk intended and understood by the defendant companyto be run at the time the defendant company entered into thecontract of insurance is dearly different from the risk in respect ofwhich the plaintiff now brings action. The plaintiff suppressedfrom the defendant company that the liability he wished defendantcompaKy to undertake, and in respect of which he now attemptsto enforce payment was for a partial loss, out of 3,440 bags of riceand 498 bags of gram, instead of out of only 1,720 bags of rice and249 bags of gram, and the defendant company never undertook thelarger risk. As the defendant company never accepted the greaterrisk, the plaintiff cannot succeed in this action. I would set asidethe judgment of the District Judge and dismiss the plaintiff s actionwith costs in both Courts.
On 15th October, 1901, the “ Ileafee ” sailed from Karaehchicarrying 3,440 bags of rice and 498 bags of gram to be deliveredat Colombo to the order of the plaintiff. The bags were in eachcase undistinguishable one from the other. On arrival at Colomboit was found that 489 bags of rice and 46 bags of gram weredamaged and -they were destroyed. On the 16th October theplaintiff insured with the defendant Company 1,720 bags of rice and249 bags of gram for Es. 20,312 “ with particular average, all risksfree of 5 per cent, on series of 500 bags.” The remainder of theconsignment—1,720 bags of rice and 249 bags of gram—wasinsured for Es. 20,322 with the New Zealand Insurance Company,“ warranted free from particular average, unless the vessel be sunk,burnt, stranded, or in collision. ” Tlfe plaintiff says to the defendantcompany:“ Under the particular average clause your contract was
to pay for partial loss on a consignment of 1,720' bags of rice and♦149 hags of gram. 489 bags of rice and 46 bags of gram were lost,and for these< you must pay. ” The defendants reply: “ Ourcontract was to pay for bags lost out. of a consignment of 1,720 bagsof rice and 249 bags of gram. Your consignment was one of3,440 bags of rice and 498 bags of grain, and you are trying tomake us pay for any bags wrflch may have been lost out of theselarger quantities. ” The plainKff r/storts:“ That was your contract.
( 325 )
I know and you did not know that the quantity" of undistinguish-able bags was double of what I insured with you, and you mustpay on the loss of any. bags from the total consignment so long as Moncbeiff,the loss falls within the limit of your liability, this has come J‘about because I am so much more clever than you. You will readilyunderstand why I took no steps to earmark the cargo I. insuredwith you, and why I did not tell you that the consignment ofundistinguishable bags was twice as great as you thought. If Ihad earmarked the bags I insured with you, I could only haveclaimed against you for loss occurring among those bags. And ifI had told you the true quantity of the total consignment, youwould have refused the risk or demanded a higher premium.
This isnot agoodanswer. Thecontract of inst/rance* is
vberrimee fidei. ■ If the insurers had known the truth, I think .theywould have been bound to pay. But no instance has been citedin which a party, having insured a specified quantity and qualityof cargo, contended that the insurers were liable to pay fora loss out of double the specified quantity of cargo of the samequality. Nor does any such contention appear to have been heldto be sound. Unless they have contracted to be otherwise bound,insurers can only be liable to pay for goods which are ascertain-able. Inthis case it is impossible to identify the lost goods
as partof thecargo insured withthe defendants. If the
defendants were to be fixed with the liability set up by theplaintiff, it was material to them to know the true quantity of theconsignment before undertaking the risk. We have been givenno reason for thinking that when one insures 1,720 bags he isinsuring any bags of that number forming part of a consignmentof (say)20,000bags.The practicalresult of the plaintiff's
astuteness is that the defendants are not liable under this policy'for partial loss. It is impossible to identify the goods which arethe subject of a partial loss, as being part of the goods insuredwith the defendants.
I think that the plaintiff’s action should have been dismissed.
NOORBHOY v. THE FEDERAL MARINE INSURANCE CO