Washburn & Moen Manufacturing Co. v. Reliance Marine Insurance

Background

A manufacturer and consignee sued an insurance company after a shipment of wire was damaged at sea. The insurance policy included a memorandum listing many articles “warranted free from average unless general,” and a rider that allowed recovery for an absolute (actual) total loss of a part in some circumstances. Much of the wire arrived at the port of destination (Velasco) in specie, some damaged and some uninjured; salvage at Key West was paid by the underwriters, and the consignee refused to accept the cargo.

Reasoning

The Court addressed whether the memorandum clause lets an insured recover for a constructive total loss (where damage makes the cargo effectively worthless) or only for an actual physical total loss. Relying on long-standing commercial rules and prior decisions, the Court explained that memorandum articles are covered only for actual destruction in specie or loss of identity, not for constructive total loss, even if damage exceeds fifty percent. The rider, however, permitted recovery for an actual, absolute loss of a specific part and the plaintiff recovered for that portion. The Court also held that actions by the insurer to save and forward the cargo, and payment of salvage, did not amount to accepting an abandonment, especially where the insurer had explicitly refused acceptance and a sue-and-labor clause preserved such efforts from creating liability.

Real world impact

Shippers of goods specifically listed in a memorandum clause cannot claim constructive total loss; insurers remain protected from partial-loss claims for those items. Insurers may undertake rescue efforts without that conduct being treated as accepting abandonment. The ruling enforces clear expectations about when damaged cargo can generate insurer liability.