Standard Marine Insurance v. Scottish Metropolitan Assurance Co.

Background

A buyer, Dreyfus & Co., bought wheat shipped from Port Arthur to Montreal. The cargo insurer (respondent) covered the wheat at a stated value per bushel, and another insurer (petitioner) separately insured the “increased value” above the c.i.f. cost — a sum meant to cover higher market value at destination. The ship carrying the wheat collided and the cargo was a total loss. The cargo owner recovered the maritime value of the wheat at the time and place of shipment. Both insurers paid their policies and intervened in the limitation case, each claiming the right to step into the cargo owner’s right to recover from the vessels that caused the loss.

Reasoning

The key question was whether the two insurers covered the same risk or different risks. The Court explained that recoverable loss for cargo damaged at sea is measured by its value at the time and place of shipment, not by later market gains at destination. The increased-value policy, by covering value above the shipment price, effectively insured profits or gains that the cargo owner could not recover from the wrongdoer. Because an insurer can only be subrogated to the insured’s actual right of recovery, the Court held the increased-value insurer could not share in a recovery for a cargo loss that the insured itself could not recover.

Real world impact

The decision means insurers who cover post-shipment market gains or profit-like increases cannot claim from tortfeasors when the insured can recover only shipment value. Cargo insurers recover based on shipment value, not later market increases, and increased-value coverage functions like insurance against profits rather than ordinary cargo loss.