CHAPTER XIII.

OF THE ADJUSTMENT.

AN adjustment, though usual, is not always essential. Thus the insured can recover a total loss without presenting an adjustment as for a partial loss.1 There is no particular form established by law or usage for the adjustment of a claim on insurers, but they are usually made in all the United States in a very similar way, both as to form and principle. They are instruments of much importance, although sometimes very brief and simple, for the law makes them binding upon the parties.3 There are, however, to these documents, the same exceptions as to others, and, indeed, as to all contracts. If tainted with fraud, they have no force or effect whatever against the party defrauded; but the fraudulent party cannot avail himself of his wrongdoing for his own benefit. And an adjustment made upon a misrepresentation or concealment,5 if it be of a material

1 Fuller v. Kennebec Mut. Ins. Co., 31 Maine, 325.

2 In England the custom is, on a loss taking place, for the broker to indorse on the policy: "Adjusted the loss on this policy at £— per cent." The broker then takes the policy round to the different underwriters who sign their initials to the indorsement, and the policy is then said to be adjusted. 2 Arnould, Ins. 1201. In one case, the signature of the defendant was struck out and the adjustment written in the blank space opposite his name, and his initials affixed to it. Adams v. Saundars, 4 Car. & P. 25.

3 In Hog v. Gouldney, Beawes, Lex Mercatoria, 310, Park, Ins. 162, decided in 1745, Lee, C. J., considered an adjustment signed by the underwriter as a note of hand, and that no further proof of the loss was necessary. See also, Hewit v. Flexney (1746), Beawes, Lex Mercatoria, 308; Adams v. Saundars, 4 Car. & P. 25; May v. Christie, Holt, N. P. 67, and cases infra.

4 Thus in Haigh v. De la Cour, 3 Camp. 319, an adjustment made upon the produc tion of fictitious invoices and bills of lading, was held not to be binding.

5 Faugier v. Hallett, 2 Johns. Cas. 233. The property had been captured, but a large portion was saved. The assured did not mention this fact, and the adjustment

fact, is invalid. If it is made upon any material mistake of the facts, it has no force against either party;1 and so if made upon a mistake of law. But if the money is actually paid over,

was made at ninety-eight per cent. The court held that it was not binding. In Shepherd v. Chewter, 1 Camp. 274, at the time of the adjustment, there was a notice posted up at Lloyd's, where the parties were at the time, that the vessel had chased every thing she saw, and had been at last captured through the cowardice of the master. The underwriter said when he signed the adjustment, that it was not likely that the ship was lost by cowardice, as the master had been killed. The defendant proved that the ship had been in the constant habit of cruising, which amounted to a deviation. It was contended for the plaintiffs that the only defence which could be set up was, that some fraudulent concealment had been practised, but that notice that the vessel had chased every thing, informed him of the deviation. It was held that the adjustment was primâ facie conclusive, but that it did not bind the underwriter, unless a full disclosure was made, and that if the notice drew his attention merely to the way in which the vessel was captured, the adjustment did not bind him, and that as the vessel had a letter of marque, she had a right to chase every thing on the direct line of her voyage, and consequently the notice did not necessarily draw the attention of the insured to the fact that a deviation had taken place.

But if the underwriter has all the facts before him, it is no excuse that he read the papers in a cursory manner. Voller v. Griffiths, before Lord Kenyon, C. J., Selw. N. P. 985.

1 Rogers v. Maylor, Park, Ins. 163; Christian v. Coombe, 2 Esp. 489. In De Garron v. Galbraith (1795), Park, Ins. 163, the plaintiff produced the adjustment and rested his case. The witness who produced it, testified that soon after the underwriters signed, doubts arose as to the honesty of the transaction, and they refused to pay. Lord Kenyon, C. J., held, that under these circumstances, the plaintiff must go into other evidence, and, as he was not prepared to do so, he was nonsuited. In Herbert v. Champion, 1 Camp. 134, the defence was that at the time the policy was made, the insured had concealed a material fact, and it was held that this would avoid the policy notwithstanding the adjustment. Lord Ellenborough, C. J., said: "The cases are clearly distinguishable, where upon a dispute, the money is paid, and where there is only a promise to pay. If the money has been paid, it cannot be recovered back without proof of fraud; but a promise to pay will not, in general, be binding, unless founded on a previous liability. What is an adjustment? An admission on the supposition of the truth of certain facts stated, that the insured are entitled to recover on the policy. . . . . Here it is a mere admission, and there was no consideration for the promise it is supposed to prove." In Sheriff v. Potts, 5 Esp. 96, the adjustment was admitted, but the defendant's counsel stated that his defence turned upon a fact admitted by the plaintiff himself in his answer in equity, namely, that there had been a deviation. This deviation being proved, the plaintiff was nonsuited. In Dow r. Smith, 1 Caines, 32, the court said: "It appears that, previous to the adjustment, all the facts were communicated to the underwriters. The adjustment was made by the underwriters with their eyes open. An adjustment cannot be opened, except on the ground either of fraud, or mistake from facts not known." But notwithstanding this language, it being proved that the vessel sailed with an insufficient crew, a verdict for the plaintiff was set aside and a new trial granted.

2 This is so laid down by Lord Kenyon, C. J., in Rogers v. Maylor, Park, Ins. 163,

although the insured may recover it back if it were owing to a mistake of fact, yet he cannot on the ground of a mistake of law. Indeed an action may be brought upon a written adjustment, or upon the policy without specially setting up the adjustment, in which case it may be offered in proof. But if the insurers refuse to pay a loss, the insured is not bound by an adjustment which he had presented, but he may present a new one, more favorable to himself, and sue upon it. Our policies usually make the sum insured payable in a certain number of days after "proof and adjustment of the loss," but if the insurers refuse to pay, or dispute the claim, the effect of this clause is destroyed, and no delay will be interposed against either trial, judgment, or execution, for want of the adjustment.

If an adjustment is conditional in its terms, the party setting it up must prove the performance of the conditions. And it seems that it may be shown that an adjustment which on its face is absolute, was agreed by the parties by parol to be conditional only.

and is in accordance with the well-settled principle that a mistake of law may always be set up in defence of an action founded on the promise of the party. The promise being considered as given without consideration. See 1 Parsons' Contracts, 363,

note t.

1 Reyner v. Hall, 4 Taunt. 725. In Kelly v. Solari, 9 M. & W. 54, the insured on a life policy omitted to pay the quarterly premium, and the policy became of no effect, and the word "lapsed" was written on the policy by one of the directors. The insured died, and two of the directors who had known of the fact of the policy having lapsed together with another director, on application being made, drew a check for the amount. The mistake being discovered, the insurers brought an action to recover back the amount, on the ground that it was paid under a mistake of fact, and the two directors testified that they had entirely forgotten at the time of paying the money, that the policy had lapsed. Lord Abinger, C. B., expressed his opinion that if the directors had had knowledge, or the means of knowledge of the policy having lapsed, the plaintiff could not recover, and that their afterwards forgetting it, made no differThe court granted a new trial, and it was held that "the knowledge of the facts which disentitles the party from recovering, must mean a knowledge existing in the mind at the time of payment."

ence.

2 Bilbie v. Lumley, 2 East, 469.

3 Rogers v. Maylor, Park, Ins. 163, per Lord Kenyon, C. J.

4 American Ins. Co. v. Griswold, 14 Wend. 399.

5 Gammon v. Beverley, 1 J. B. Moore, 563, 8 Taunt. 119.

6 Russell v. Dunskey, 6 J. B. Moore, 233. It was held in this case that evidence was admissible to show that the parties had agreed by parol that if other underwriters paid a less sum than the amount stated in the adjustment, the surplus should be paid back.

Not only is an adjustment binding which is made at home between the parties, but a foreign adjustment, made by competent parties, in any foreign port at which it ought to be made, if made there in good faith, with competent skill, and according to the laws of that place, is binding upon all parties interested. This rule is founded upon usage; but there are good reasons for the usage, which we have endeavored to state elsewhere.1 It is, indeed, obvious, that a delay of the adjustment until the arrival of the ship at her home port, might be very convenient to some of the parties, but very injurious to others; as to an owner, for instance, of cargo lost by jettison, who had a lien upon all the contributory interests and property for his indemnity, some of which might be delivered from the ship, and lost to him. And if it should be made and settled as to some of the parties abroad, it is obvious that it should be finally conclusive upon all.

If an insurance is effected for A on account of whom it may concern, and the insurers are informed of the parties who claim to have an interest in the vessel, and they agree with A to submit the claim to arbitration, the agreement containing the clause, "the interest of the party for whom insurance was effected being admitted," the insurers cannot afterwards set up the defence that the interest of one of the parties was not admitted by them nor passed upon by the arbitrators. And, generally, an award of arbitrators is conclusive upon the parties.

If a suit is compromised by the parties to it, this is generally conclusive, and the compromise is not subject to be opened by the discovery of further evidence on a point which constituted the chief objection to the payment of the claim in the first instance.1

1 See ante, p. 431-433.

2 Richardson v. Suffolk Ins. Co., 3 Met. 573.

8 Newburyport Mar. Ins. Co. v. Oliver, 8 Mass. 402.

4 Barlow v. Ocean Ins. Co., 4 Met. 270. In this case insurance was effected by the mortgagee of a vessel, and also by the captain who was the general owner, by separate policies on their respective interests. A loss having taken place, a suit was brought by the master on his policy, and the underwriters defended, on the ground that the master had fraudulently cast away the vessel. The plaintiff having obtained a verdict, exceptions were taken, and while the suit was pending, a compromise was effected by which the defendants agreed to pay the amount of the verdict on the captain's policy,

It has been held that if the insured settle with the underwriters for a partial loss, and give up their policy without notifying them of a claim pending in the admiralty court for salvage, if this case is decided against them, they cannot recover the additional amount from the insurers. So, if payment is made on a claim for a total loss, this is equivalent to an adjustment.2 If one of two part-owners who has authority to insure for both, effects an insurance, and on a loss taking place, receives the amount of his proportion from the underwriters, on releasing them from all further responsibility on the policy, the other partowner has a right to elect to treat the compromise as binding, and recover his proportion from his copartner.3

An adjustment, and a settlement under it, will leave the insured his claim or remedy on the policy, so far as the subjectmatter thereof is not included in the adjustment. Whatever, for example, an award may be, the question will always be open, how far the award is executed. And thus, if insurers being held to indemnify for certain injuries, take the vessel and repair and return her, and the insured accept her, they have still their action against the insurers, if the repairs are not what they ought to be. In a case where the insured refrained from abandoning, because the underwriters promised to be answerable for the repairs, it was held, that they were only liable as for a partial loss.5

The insured may sometimes recover for more than a total loss; as by expenses properly incurred by the insured under

and three fourths of the amount claimed by the mortgagee. This settlement was indorsed on the policy, and a note for the amount given. The underwriters having discovered further evidence going to show that the master had bored and scuttled the vessel, refused to pay the note. No fraud on the part of the mortgagee was suggested, and it did not appear that he had any knowledge of the way in which the vessel was destroyed. Under these circumstances, the court refused to set aside the compromise. In Kelly v. Solari, 9 M. & W. 54, where payment was made on a lapsed policy, and a suit brought to recover it back on the ground that the directors had forgotten the fact that it had lapsed, it was held that the insurers could not recover it back, if the jury should find that the directors had determined to pay the money at all events, in order not to render the office unpopular.

1 Batre v. Louisiana Ins. Co., 13 La. 577.

2 M'Lellan v. Maine F. & M. Ins. Co., 12 Mass. 246.

Briggs v. Call, 5 Met. 504.

Reynolds v. Ocean Ins. Co., 22 Pick. 191.

5 Webb v. Protection Ins. Co., 6 Ohio, 456.