Rhinelander v. The Insurance Company of Pennsylvania.

4 Cranch’s Reports, 29 to 47.

pages 13-18

A capture of a neutral vessel as prize by a belligerent armed vessel is a total loss under a policy of insurance, and the assured is entitled thereon to abandon. [See note at the end of the case.]

A capture by one belligerent from another constitutes, in the technical sense of the word, a total loss; and gives an immediate right to the assured to abandon to the insurers, although the vessel may be afterwards recaptured or restored. [see note at the end of the case, p. 47.]

An embargo or detention by a foreign friendly power, constitutes a total loss, and warrants an immediate abandonment.

The contract of insurance is a contract of indemnity; and therefore the assured can only recover according to the damage he has sustained.

The state of the loss at the time of the offer to abandon, fixes the right of the assured and of the assurers.

To constitute a right to abandon, there must have existed a total loss, occasioned by one of the perils insured against; but this total lose may be real, or legal. When the loss is real, a controversy can only respect the fact; but the circumstances that constitute a legal or technical 1oss yet remain, in many cases, open for consideration.

There are situations in which the delay of a voyage, the deprivation of the right to conduct it, produce inconveniences to the assured, for the calculation of which the law affords and can afford no standard. In such cases there is, for the time, a total loss; and in this state of things the insured may abandon to the underwriter, who stands in his place, and to whom justice is done by enabling him to receive all that the insured might receive. A capture by an enemy, and an embargo by foreign power, are admitted to be within this rule; and a complete arrest by a belligerent and not an enemy, seems, in reason, to be equally within it.

This case came before the court, from the circuit court of Pennsylvania, on a certificate of division in the opinions of the judges of that court, upon the question of the right of the plaintiff to recover upon a case stated.

For the plaintiff it was contended:
1. That there had been a total loss of the property insured, occasioned by a peril within the terms of the policy.
2. That the abandonment was made in due time

The counsel for the defendant argued:
1. That there never was a total loss, and, consequently the plaintiff never had a right to abandon.
2. That before the action was brought, the vessel was acquitted, and therefore no right of action existed.

Hopkinson and Ingersoll for the plaintiffs. Rawle and Lewis for the defendants. 

Mr. Chief Justice Marshall delivered the opinion of the Court.

The Manhattan, a neutral ship, while prosecuting the voyage insured, was captured by a belligerent cruiser; the second mate and twenty-one of the hands were taken out, and two British officers and fifteen seamen put on board, and she was ordered into a British port. The mate soon afterwards arrived in the United States in another vessel on the 26th of February, 1805, he gave information of these facts to the owner of the Manhattan, who on the 28th of the same month communicated it to the insurers, and offered to abandon to them. On the 2d of April payment of the freight was demanded and refused. The Manhattan was carried into Bermudas, and libelled as prize of war. On the 20th of April in the same year, both vessel and cargo were acquitted. From this sentence, so far as respected the cargo only, an appeal was proved, which does not appear to have been decided. The cargo was delivered to the owners on their giving security, and on the 8th of July the vessel and cargo arrived at the port of destination. The underwriters having refused to give counter security, this action was brought on the 6th of June, after the vessel was liberated, and before her arrival at the port of destination. The policy is on the freight.

The question referred to this court is, whether the facts stated entitle the insurer to recover against the underwriters for a total loss.

In examining this question, the material points to be determined are,

1st. Had the insured a right to abandon when the offer was made?

2dly. Have any circumstances since occurred which affect this right?

These are important questions to the commercial interests of the United States, and ought to be settled with as much clearness as the case admits.

It is universally agreed, that to constitute a right to abandon, there must have existed a total loss, occasioned by one of the perils insured against; but this total loss may be real, or legal. Where the loss is real, a controversy can only respect the fact; but the circumstances which constitute a legal or technical loss, yet remain, in many cases, open for consideration.

It has been decided that a capture, by one belligerent from another constitutes, in the technical sense of the word, a total loss, and gives an immediate right to the insured to abandon to the insurers, although the vessel may afterwards be recaptured and restored.

It has also been decided, that an embargo or detention by a foreign friendly power, constitutes a total loss, and warrants an immediate abandonment. But the capture, or taking at sea of a neutral vessel by a belligerent, is a case on which the courts of England do not appear to have expressly decided, and which must depend on general principles, on analogy, and on a reasonable construction of the contract between the parties.

A capture by an enemy is a total loss, although the property be not changed, because the taking is with an intent to deprive the owner of it and because the hope of recovery is too small, and too remote to suspend the right of the insured, in expectation of that event.

If a neutral ship be captured as enemy-property, the taking is unquestionably with the design to deprive the owner of it; and the hope of recovery is in many cases remote, since it may often depend on an appellate court; and though not equally improbable as in the case of capture by an enemy, is not so certain as is stated in argument by the counsel for the defendants.

The distinction between a capture by an enemy and by a belligerent not an enemy, has not been taken in the cases adjudged in England, so far as those cases have been laid before the court, and the best general writers seem to arrange them in the same class. 2 Marshall, 422. 435.

It has been also determined, that a total loss existed in the case of an embargo, or the detention of a foreign prince.

In one case cited at the bar, (Saloucci v. Johnson,) the court of king’s bench determined that an illegal arrest at sea amounted to a detention by a foreign prince, and although that case has since been overruled in England, so far as it decided that to resist a search did not justify a seizure, yet the principle that an arrest at sea was to be resolved into a detention by a foreign power, has not been denied. Marshall, p. 435, after noticing the contrary decisions respecting the right of a neutral to resist a search, adds, "yet the above case of Saloucci v. Johnson may nevertheless, I conceive, be considered as an authority to prove, that if a neutral ship be unlawfully arrested and detained by a belligerent cruiser, for any pretended offence against the law of nations, this would be a detention of princes."

That a detention of a foreign power by embargo, or otherwise, warrants all abandonment, is well settled. 2 Marshall, 483.

The opinion given by the court of king’s bench in the case of Saloucci v. Johnson goes no further than to establish that an unlawful arrest at sea is to be considered as the detention of a foreign prince. Whether the arrest can only be considered as unlawful when the cause alleged, if true, is not in itself sufficient to justify a seizure, or when, if true, it would be sufficient, but is in reality contrary to the fact, is not stated. In point of reason, however, it would seem that when an arrest is made at sea by a person acting under the authority of a prince, the detention is as much the detention of princes in the one case as in the other.

In the case of an embargo, the detention is lawful. The right of any power to lay an embargo has not been questioned. Yet it is universally admitted, that an embargo constitutes a detention which amounts, at the time, to a total loss, and warrants an abandonment.

In what consists the difference between a detention occasioned by an embargo, and a detention occasioned by an arrest at sea of a neutral by a belligerent power?

An embargo is not laid with a view to deprive the owner of his property, but the arrest is made with that view. In the first case, therefore, the property detained is not in hazard; in the last, it always is in hazard. So far the claim to abandon on an arrest is supported by stronger reason than the claim to abandon when detained by an embargo.

But it is argued that the duration of an embargo has no definite limitation, while a neutral vessel may count on being instantly discharged. Such is the rapidity of proceeding in a court of admiralty, that its mandate of restoration is figuratively said to be "borne on the wings of the wind."

Commercial contracts have but little connection with figurative language, and are seldom rightly expounded by a course of artificial reasoning. Merchants generally regard the fact itself; and if the fact be attended to, an embargo seldom continues as long as the trial of a prize cause, where an appeal is interposed. The history of modern Europe, it is believed, does not furnish an instance of an embargo of equal duration with the question whether the cargo of the Manhattan be or be not lawful prize. The reasoning of the books in the case of a capture by an enemy, and of an embargo, applies in terms, but certainly in reason, to an arrest by a belligerent, not an enemy. 2 Marshall, 483.

The reasoning of the English judges in all the cases which have been read at bar, and their decisions on the question of abandonment, have received the attention of the court. To go through those cases would protract this opinion to a length unnecessarily tedious. With respect to them, therefore, it will only be observed, that the principles laid down appear to be applicable to an arrest, as well as to a capture or detention of foreign powers; and that a distinction between an arrest and such capture or detention, has never been taken.

The contract of insurance is said to be a contract of indemnity, and therefore (it is urged by the underwriters, and has been repeatedly urged by them) the assured can only recover according to the damage he has sustained. This is true, and has uniformly been admitted. But if full compensation could only be demanded where there was an actual total loss, an abandonment could only take place where there was nothing to abandon.

There are situations in which the delay of the voyage, the deprivation of the right to conduct it, produce inconveniences to the insured, for the calculation of which the law affords and can afford no standard. In such cases there is, for the time, a total loss: and in this state of things the insured may abandon to the underwriter, who stands in his place, and to whom justice is done, by enabling him to receive all that the insured might receive. A capture by an enemy and an embargo by a foreign power are admitted to be within this rule, and a complete arrest by a belligerent, not an enemy, seems, in reason, to be equally within it.

It is, therefore, the unanimous opinion of the court, that where, as in this case, there is a complete taking at sea by a belligerent, who has taken full possession of the vessel as prize, and continues that possession to the time of the abandonment, there exists, in point of law, a total loss, and the act of abandonment vests the right to the thing abandoned in the underwriters, and the amount of insurance in the assured.

2. Have any circumstances occurred since the abandonment, which have converted this total into a partial loss.

Without reviewing the conduct of the assured subsequent to that period, it will be sufficient to observe that he has performed no act which can be construed into a relinquishment of the right which was invested in him by the offer to abandon.

It only remains, then, to inquire whether the release and return of the Manhattan deprive the assured of the right to resort to the underwriters for a total loss, which was given by the abandonment.

This point has never been decided in the courts of England.

In the case of Hamilton v. Mendez, Lord Mansfield leaves it completely undetermined, whether the state of the loss at the time the abandonment is made, or at the time of action brought, or at the time of the verdict rendered, shall fix the right to recover for a partial or a total loss.

A majority of the judges are of opinion that the state of the loss at the time of the abandonment must fix the rights of the parties to recover on an action afterwards brought; and the judge who doubts respecting it, is of opinion that, in this case, counter security having been refused by the underwriters, the question of freight is yet suspended.

It is to be certified to the circuit court of Pennsylvania, that in the case stated for the opinion of this court, the plaintiff is entitled to recover for a total loss.


Abandonment to underwriters:
1 Peters’s Digest, 1, "Abandonment."
The following cases have been decided in the courts of the United States, on abandonment:
Where a vessel is prevented from entering any of the ports mentioned in the instructions, and compelled to terminate her voyage at place to which she had been ordered by a vessel of war, the voysge is broken up; and the assured may abandon to the underwriters. Symonds v. Union Insurance Company, 4 Dall. 417. 2 Cond. Marsh. on Ins. 564.

The obligation of abandonment in case of loss, is an inseparable incident to the right of insurance; and, upon an abandonment, the underwriters acquire all the rights of the insured. 4 Dall. 441.

When the assured receive notice of a loss, it becomes incumbent on them to elect whether they will abandon or not; and if they intend to abandon, to give notice of such an intention to the underwriters. Marine Insurance Company v. Tucker, 3 Cranch, 357, 1 Condens. Rep 561.

A case of capture and recapture, where the two events are communicated before an election to abandon has been actually communicated to the underwriters, will not of itself sanction an abandonment. Yet it is equally true, that in case of a capture, a recapture alone will not deprive the party of his right to abandon. The consequences of the capture and recapture, the effect produced upon the fate of the voyage, must govern the right of the parties. This effect is always a matter of evidence, and must rest much upon the discretion of the jury. Ibid. 386.

The right of the insured to abandon and recover for a total loss, depends on the state of the fact, at the time of the offer to abandon, and not upon the state of the information received. Marshall v. Delaware Insurance Company, 4 Cranch, 202.

An abandonment must be made in reasonable time; but what is reasonable time is a question compounded of law and fact, which must be found by a jury, under the direction of the court. Maryland Insurance Company v. Ruden’s Administrator, 6 Cranch, 338. S. P. Livingston et al. v. Maryland Insurance Company, 7 Cranch, 506.

The right to abandon may be kept in suspense by mutual consent. Where the agreement to that effect contains no limitation as to time, it is at least to continue while the property remains at its then situation, unless sooner determined by one of the parties. The assured might still abandon, and the underwriter might, at any time, require the assured to elect immediately, whether to abandon or to waive the right so to do. The Maryland Insurance Company v. Ruden’s Administrator, 6 Cranch, 338.

In a cargo of mixed character, no abandonment for mere deterioration in value during the voyage can be valid, unless the damage on the non—memorandum articles exceed a moiety of the value at the whole cargo, including the memorandum articles. Macardier v. Chesapeake Insurance Company, 8 Cranch, 29.

The right to abandon exists, whenever, from the circumstances of the case, the ship, for all the useful purposes of a ship on the voyage, is for the present, gone from the control of the owner, and the time when she will be restored to him, in a state to resume the voyage, is uncertain or unreasonably distant, or the risk and expense are disproportioned to the expected benefit and objects of the voyage. In such cases, the law deems the ship, though having a physical existence, as ceasing to exist for purposes of utility, and therefore subjects her to be treated as lost. Perle v. The Merchant's Insurance Company, 3 Mason, 96.

What is a reasonable time must depend on circumstances to be judged of by the jury. The insured may wait a reasonable time to ask for advice and information, to enable him to decide whether he may legally abandon, and there may be other circumstances which may excuse some delay. But the delay must be bona fide, not with a view to speculate on events. Hurtin v. The Phoenix Insurance Company, 1 Wash. C. C. R. 400. 53O.

A formal instrument of cession is not essential to vest the property in the underwriter. The abandonment itself amounts to a legal transfer of the right of the insured, so as to enable the underwriters to pursue the property as effectually as if a regular deed had been made to them. The refusal, therefore, to execute such a cession, will not affect a prior abandonment, which had been made and accepted. Ibid. 2 Cond. Marsh. on Ins. 601.

It is incumbent on the assured to state to the underwriter a sufficient reason for the offer to abandon, and if he does, it is no objection that he does not state other reasons. But if he states one that is insufficient, he cannot at the trial rely upon one not specified in the notice. The underwriter should have an opportunity of judging whether he is bound to accept the offer or not; if bound, that he may do so at once, and take proper measures for the preservation of the property. King v. Delaware Insurance Company, 2 Wash. C. C. R. 300. 2 Cond. Marsh. on Ins. 601.

A detention by an embargo laid by the American government, of which both parties are citizens, after the policy of insurance attached, is a peril within the description of arrest, restraint and detention of princes, &c., and a sufficient ground of abandonment. Odlin v. Pennsylvania Insurance Company, 2 Wash. C. C. R. 312. 2 Cond. Marsh. on Ins. 508. 2 Hall’s Am. L. Journal, 221, S. C.

A technical total loss must continue to the time of abandonment; not that it then should be known to exist, but that it should then actually exist. Olivera v. Union Insurance Company, 3 Wheat. 103.

Under the general principles of the law of insurance, the assured, upon an abandonment in due season, for a technical total loss, acquires an immediate right of recovery against the underwriters: he is not bound to wait until they signify their acceptance or refusal of the abandonment, if it be valid; nor, if accepted, is he bound to wait for payment, but may immediately commence an action against them. Columbian Insurance Company v. Catlett, 12 Wheat 283.

A capture as prize will authorize an abandonment as soon as notice is received, provided the loss continue to the time when the abandonment is made. Queen et al. v. The Union Insurance Campany, 2 Wash. C. C. R. 331.

If a recapture is made with a view to salvage, and this does not exceed, with the expenses, one¬half of the value of the property, and the recapture produces only a temporary interruption of the voyage, the insured cannot abandon. Ibid.

If the injury which the vessel sustained exceed one-half of her value, the assured has a right to abandon, unless the underwriters will agree at all events to pay for the repairs, though they should exceed wbat they are liable for, if only a partial loss should have taken place. Hart v. Delaware Insurance Company, 3 Wash. C. C. R. 346.

The refusal of the agent of the insurers to pay for such repairs only as the defendant, were liable for, and not for all the necessary repairs, authorizes the abandonment. See upon this point the case of Ashby and Stribling v. The Insurance Company of Alexandria, 4 Peters.

2 Peters’s Digest, 519. "Total and Partial Losses."