Appeal from the District Court of the United States for the Southern District of New York.
Before L. HAND, CHASE, and PATTERSON, Circuit Judges.
PATTERSON, Circuit Judge.
The defendants in July, 1934, wrote policies insuring the plaintiff's dredge against fire.A fire broke out on the dredge in January, 1935, and it became a total loss. Prior to 1928 the dredge had been used to dig a drainage canal near the Everglades in the interior of Florida. Work having been suspended for lack of funds, the dredge was laid up in 1928 near Miles City, Florida, in a short spur off the canal, and there it remained idle until lost by fire. It had been expected that the dredge would be used to dig a connecting canal, but the plan was never realized. As the situation was, the dredge was more or less immobile; it could be moved only by dismantling or by its own digging. The policy of the National Union Fire Insurance Company contained a warranty, "Warranted confined to navigation of inland and coastwise waters of the United States", and a further warranty that the dredge was then "in good safety"; the policy also gave privilege to lay up. The policies of the other insurers contained a warranty, "Warranted confined to waters of the inland and coastwise waters of the United States of America," and a statement "Warranted same terms and conditions as and to follow the settlements National Union Fire Insurance Company." In insurers' parlance the National Union was the "leading company" and the others the "following companies".
The plaintiff brought the present action to recover on the policies, the complaint merely alleging issuance of the policies and loss of the dredge by fire. The defendants' answer set up as defenses breach of the warranty confining the dredge to inland and coastwise waters, breach of the warranty as to good safety, and concealment of facts material to the risk. The plaintiff then served an amended complaint, adding a cause of action for reformation of the policies; it alleged that the National Union knew of the dredge being laid up in the drainage canal and that if the location was a breach of the warranty, the warranty was inserted in the policies by mutual mistake and should be stricken from them.
At the trial one Benfield, who placed the insurance in the plaintiff's behalf, testified that he had told Michel, the man in charge of the matter for the National Union, about the dredge, the location, the laying up and the hope that it would resume work, and had shown him an application for insurance on the dredge in 1930, in which full details concerning it were given. Michel, called by the defendants, denied having had any such talk with Benfield and denied having been shown the 1930 application. There was no evidence as to what had occurred when the insurance was placed with the other defendants. At the close of the proof the court denied the defendants' motion for directed verdict and submitted to the jury the following questions:
1. Was the plaintiff, through its representative Benfield, guilty of concealment of facts material to the risk?
2. Was the language of the warranty "Warranted confined to navigation of inland and coastwise waters of the United States" intended by the parties to prohibit the laying up of the dredge in such a place as she was at the issuance of the policy?
3. Was the dredge in good safety when the policy was issued?
4. Did the defendants know the location and circumstances surrounding the location of the dredge when the policies were issued?
The jury's answers having been in favor of the plaintiff as to each question, the court entered judgment for the plaintiff for the full amount of the policies, some $9,500 altogether.
The plaintiff made out a prima facie case when it showed issuance of the policies and loss by fire. The defendants take the position that their affirmative defenses were proved by undisputed evidence and that the court should have dismissed the case or directed a verdict in their favor.
The defendants urge that on the uncontradicted evidence the warranty confining the dredge to inland and coastwse waters was broken. The argument is that the words "inland waters of the United States" in the policies mean the same as inland waters which are navigable and subject to federal control, and concededly neither the drainage canal nor the spur in which the dredge lay were navigable waters subject to federal control. But there is no sound reason for limiting the words to the legalistic sense in which the defendants would have them read. By their natural meaning they cover all inland waters within the geographical boundaries of the United States. The parties were dealing with a dredge, and a dredge would be quite likely to operate or be laid up on a body of water non-navigable in the admiralty sense. It will not do to lay stress on the word "navigation" in the National Union policy, for that word is not to be found in the warranty of the policies of the "following companies", and both sides agree that the warranties in all the policies were of the same dimensions. The warranty was in substance a stipulation that the insurance should not cover the dredge if it ventured on the high seas. Cogswell v. Chubb, 1 App.Div. 93, 36 N.Y.S. 1076, We are of opinion that the dredge was in inland waters of the United States and that the warranty was not broken. It is therefore unnecessary to consider whether the policies should be reformed to omit the warranty.
It is equally clear that the warranty of good safety was not broken. A warranty that the property insured is in good safety at commencement of the risk is an ancient one in marine insurance. It is a narrow warranty, a stipulation by the insured that the insurance will not attach in case the property shall have been lost or damaged at the appointed time. There is no ...