Incomplete or false information or concealment vacates the policy.
Allan, and Others, v. Young, Ross, Richardson, and Company
Date: 24 June 1803 Case No. No 14.
What concealment sufficient to vacate the policy.
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On the morning of the 5th March, 1801, the ship Lady Stormonth sailed from the roads of Dundee for London. Two days afterwards, the ship Duchess of Athole likewise sailed on the same voyage, and reached London on the 14th, without having been able to hear any intelligence of the other vessel. This circumstance was communicated to Mess. Young, Ross, Richardson, and Company, merchants in Perth, the owners of both vessels, in the following letter from the wharfinger, (14th March, 1801.) “I wrote you by last post, to which refer. I am exceedingly sorry to hear that the Lady Stormonth has not yet appeared, nor any tidings of her. Her fate is now almost certain. The Duchess of Athole arrived this day at noon, and Captain Gilbert neither saw nor heard any thing of the Stormonth, which is almost complete confirmation of her capture; but I sincerely hope my decision may prove premature. Should any thing favourable happen to-morrow, I will be happy to hand you the intelligence,” &c.
This letter was not sent to the insurance brokers; but, immediately on receipt of it, the following was written to them: 'We have some printed goods on board the Lady Stormonth, George Tod Master, which left Dundee for London on the 5th; and not having heard of her arrival, we incline to have part covered; and request you will get us insured L. 700, if you can obtain it at two to five guineas per cent. At all events, cover for us L. 400 or L. 500, though the premium should be high.' The insurance was effected at 20 per cent.; and the policy underwritten by Alexander Allan, and others.
The Lady Stormonth having been captured and carried to France, the underwriters refused to make up the loss, in terms of this policy, because the wharfinger's letter had not been communicated to them; and the insured commenced an action in the Court of Admiralty, to compel them to abide by their policy.
The Judge Admiral (22d January, 1802,) “found the alleged concealment not of such a nature as would be sufficient, if instructed, to vacate or vitiate the policy.”
Again, on advising a reclaiming petition, with answers, he pronounced this interlocutor, (18th June, 1802,) “In respect the situation of the vessel in question was, in point of risk, fairly and correctly represented by the insured; in respect the non-arrival of the vessel was implied in the very nature of the risk; and, in respect that the arrival of the ship Duchess of Athole was an event which the insured were not bound to communicate, and which could have little weight in the calculation of the risk to be incurred, refuses the petition.”
Against this judgment the underwriters presented a bill of suspension, which was refused. The underwriters petitioned the Court; and
Pleaded, The leading principle in the law of insurance is, that every concealment on the part of the insured renders the policy void and null. Insurance is a contract of speculation. The facts upon which the risk is to be computed, lie, for the most part, within the knowledge of the party concerned only; and, as the underwriter relies upon him for information, if any thing be concealed, which makes him form a wrong estimate, even though without any fraudulent intention, the contract must be annulled; Park on Mar. Insurance, p. 174. 177.; and opinion of Lord Mansfield, in Carter against Boehm, in Burrow's Reports, p. 1905.
In the wharfinger's letter are two facts material to be known, which led him to a conviction that the Lady Stormonth was lost; that she had not arrived on the 14th; and that another ship, which had sailed two days later, had arrived and could give no account of her. The owners had thus not only not heard any thing of her arrival, but they had positively heard that she had not arrived; and that a vessel, sailing in the same route, had not heard any thing of her on the passage, and had arrived, though she had sailed some days later. These are circumstances materially entering into the calculation of risk. They were not bound, indeed, to give speculations; but they were bound to give all the facts on which these speculations were founded; and, had they done so, the underwriters would just have formed the same opinion as the wharfinger, and would not have touched the policy at any premium.
The premium taken is high, and is that for a missing ship, which is in the case of a vessel of which no intelligence has been received. There is a chance that she may have put into another port; or she may have actually arrived at the place of her destination, though no certain accounts of this have been received. The case, however, is very different, where certain accounts have been received that she had not arrived, and that another vessel, sailing some days afterwards, by the same track, had arrived, without having heard any thing of the other.
Answered, The question in all similar cases is, Whether there has been such a concealment, designed or not, as varies materially the object of the policy, and changes the risk understood to be run? The risk in this case was that of a vessel which had not arrived at her destination, so far as was known to either of the parties at the time, although the time occupied had been longer than vessels usually take to perform a voyage of that kind. The circumstances concealed, which are alleged to be material, and to vary the risk, are the knowledge of the vessel not having arrived, and that the Duchess of Athole had arrived. But the not-arrival was necessarily implied and understood, and was involved in the very definition of the risk; it was the very circumstance, the underwriters saw, which led the owners to make the insurance; and it was upon this supposition, also, that the high premium, ten times the usual amount, was calculated: And, while the underwriters exact this exorbitant premium, they cannot surely vacate the obligation they thus came under, upon the pretence that information was not given to them of a fact which they themselves supposed, and which was the basis of their calculation. Nor could the circumstances relative to the Duchess of Athole, if mentioned, at all guide the underwriters in their calculation of risk. The sailing of one vessel bears no relation to the sailing of another; and all the information which could have been derived was, that a vessel might perform a voyage in less time than the Lady Stormonth had done. But still this was the very basis of the transaction between the parties, upon which risk was estimated, and the premium calculated to be equivalent to it. In Thomson against Buchanan, (20th June, 1781,) No 8. p. 7085. the underwriters were assoilzied; but this judgment was reversed in the House of Lords, as the concealment did not appear material, though the circumstances were stronger than those alleged here.
The Court laid it down as a general rule, That the case of the underwriter is, in all situations, to be viewed in a favourable light; that comparatively few of the circumstances which are known to the owner can be known to him; and, consequently, that in entering into this contract, while the insured can practice many frauds upon the underwriter, he can scarcely ever deceive the insured. The rule of law, that the concealment or disguise must be of some material circumstance, affecting the calculation of risk, they did not mean to depart from; but if the owner should himself presume to be the judge of what is material to the risk, the underwriter would probably seldom have the real circumstances for estimating the risk explained to him. In this view, all the advices on the subject of the vessel which the owner has received, should be shewn to him, whether they appear to be material or not, as the underwriter alone is the proper judge of this. In the present case, the Court, in conformity to those general ideas, thought, that the wharfinger's letter should have been communicated; and that the information which it contained was material; and, therefore,
They remitted to the Lord Ordinary to alter his interlocutor, and to pass the bill.
Lord Ordinary, Methven.Act. Hay.Agent, H. Fotheringham.Alt. Moodie.Agent, Jo. Tawse.
Fac. Coll. No. 113. p. 248.
