78 N.Y. 7 (1879)
Under a marine insurance policy allowing a vessel to stop at an intermediate port ‘via’ for orders, the insured is entitled to a reasonable time to determine the best port for discharge based on market conditions, and such a delay, if incurred in good faith, does not constitute a deviation that voids the policy.
Summary
Arnold v. Pacific Mutual Insurance Co. concerns a dispute over a marine insurance policy for a shipment of coffee. The policy allowed the vessel to stop at Hampton Roads for orders. The vessel arrived at Hampton Roads, and the plaintiffs delayed ordering the vessel to its final port for 18 days while attempting to secure a favorable sale. The insurer argued this delay was an impermissible deviation from the insured voyage. The New York Court of Appeals held that the delay was reasonable under the circumstances, as the plaintiffs were entitled to a reasonable time to assess market conditions at the potential discharge ports to secure the best possible sale of their cargo. This case clarifies the scope of permissible delays under “via for orders” clauses in marine insurance policies.
Facts
The plaintiffs, B.G. Arnold & Co., insured one-sixth of their goods with the defendant, Pacific Mutual Insurance Co., under an open marine insurance policy. The policy covered goods shipped from Santos, Brazil, to New York, Baltimore, or Boston, ‘via’ Hampton Roads for orders. A shipment of coffee was made on the barque “Eliza and Maria.” The vessel’s charter-party specified a voyage to one of those three ports ‘via’ Hampton Roads for orders. The plaintiffs reported the risk to the defendant, but mistakenly omitted the “via Hampton Roads” provision. The vessel arrived safely at Hampton Roads on August 25th. The captain telegraphed the plaintiffs in New York. Plaintiffs delayed giving final port orders for eighteen days, hoping for a better market price for their coffee. The vessel was sunk by a steamer on September 13th while still at anchor in Hampton Roads, resulting in a total loss of the cargo.
Procedural History
The plaintiffs sued the defendant to recover the insurance for the lost coffee cargo. The lower court ruled in favor of the plaintiffs. The defendant appealed to the New York Court of Appeals, arguing that the plaintiffs’ mistaken reporting of the risk and the extended delay at Hampton Roads constituted breaches of the insurance policy.
Issue(s)
1. Whether the plaintiffs’ mistaken declaration of the risk, omitting the ‘via’ Hampton Roads provision, invalidated the insurance coverage, given that the insurer suffered no damage from the mistake?
2. Whether the plaintiffs’ eighteen-day delay at Hampton Roads, while awaiting favorable market conditions before ordering the vessel to its final port, constituted an unreasonable deviation from the insured voyage, thus voiding the policy?
Holding
1. No, because under an open marine insurance policy, a mistaken declaration of the risk can be corrected after the loss, absent any damage to the insurer resulting from the mistake.
2. No, because the ‘via’ Hampton Roads clause in the policy implied a reasonable time for the plaintiffs to assess market conditions and choose the most advantageous port for discharge, and the eighteen-day delay was not unreasonable under the circumstances.
Court’s Reasoning
The court reasoned that the mistaken reporting of the risk did not invalidate the policy, as the policy was an open one intended to cover all shipments made under the specified conditions. The court emphasized that “even if by mistake an erroneous declaration be made, it may be corrected even after the loss,” citing precedent (Robinson v. Touray). The court found no evidence that the insurance company was harmed by the mistake.
Regarding the delay at Hampton Roads, the court emphasized the purpose of the “via Hampton Roads for orders” clause: to allow the plaintiffs to select the port with the most favorable market conditions. The court cited cases involving similar phrases (“to call,” “to touch”) and noted that a reasonable delay for a purpose connected with the voyage is permissible. The court stated that the plaintiffs were entitled to a reasonable time, after the arrival of the vessel at Hampton Roads, to find a purchaser for the coffee at either of the ports specified.
The court acknowledged the general rule that unreasonable delay constitutes a deviation, but it clarified that only “an unreasonable or unexcused delay, that is a voluntary and unnecessary waste of time” would amount to a deviation. Because the plaintiffs were actively trying to sell the coffee in a temporarily depressed market, the delay was deemed reasonable. The court referenced Columbian Ins. Co. v. Catlett, noting that what constitutes a deviation depends on the nature of the voyage and the usage of trade.
Chief Judge Church and Judge Folger dissented, arguing that the