137 U.S.

370
11 S.Ct. 133
34 L.Ed. 708

HAMILTON
v.
HOME INS. CO.
December 15, 1890.
This was an action, brought June 26, 1886, upon a policyof insurance, numbered
3,190, by which the Home Insurance Company of New York insured Robert
Hamilton for one year from February 23, 1886, on a stock of tobacco in his
warehouse at 413 and 415 Madison street in Covington in the state of Kentucky,
against loss or damage by fire to the amount of $5,000, 'to be paid sixty days after
due notice and proofs of the same shall have been made by the assured and received
at the office of the company in New York.' The policy, after providing that it case of
loss the assured should forth with give notice, and as soon afterwards as possible
furnish proofs of loss, with a magistrate's certificate, submit to examination on oath,
and produce books and vouchers, and copies of lost books and invoices, further
provided, among other things, as follows: 'When personal property is damaged, the
assured shall forth with cause it to be put in order, assorting and arranging the
various articles, according to their kinds, separating the damaged from the
undamaged, and shall cause an inventory to be made and furnished to the company
of the whole, naming the quantity, quality, and cost of each article. The amount of
sound value and of damage shall then be ascertained by appraisal of each article by
competent persons (not interested in the loss as creditors or otherwise, nor related
to the assured or sufferers) to be mutually appointed by the assured and the
company, their report in writing to be made under oath before any magistrate, or
other properly commissioned person, one-half of the appraisers' fees to be paid by
the assured. The company reserves the right to take the whole or any part of the
articles at their appraised value; and, until such proofs, declarations, and
certificates are produced, and examinations and appraisals permitted by the
claimant, the loss shall not be payable.' 'But provided, in case differences shall arise
touching any loss or damage, after proof thereof has been received in due form, the
matter shall, at the written request of either party, by submitted to impartial
arbitrators, whose award in writing shall be binding on the parties as to the amount
of such loss or damage, but shall not decide the liability of the company under this
policy.' 'And it is hereby understood and agreed by and between this company and
the assured that this policy is made and accepted in reference to the foregoing terms
and conditions, and to the classes of hazards and memoranda printed on the back of
this policy, which are hereby declared to be a part of this contract, and are to be

used and resorted to in order to determine the rights and obligations of the parties
hereto in all cases not herein otherwise specially provided for in writing.' The
answer admitted the execution of the policy, and notice of loss; put in issue the
amount of loss; denied that the plaintiff ever delivered due proofs of loss, or had
performed the conditions of the policy on his part; and, after reciting the substance
of the provisions above quoted, alleged as follows: 'And the defendant says that
differences having arisen touching the loss and damage sustained by said plaintiff
under said policy and the amount thereof, the plaintiff claiming a loss of $40,000,
and the defendant claiming and believing that it was slight and but a very small part
of said sum, and being unable to agree upon the amount of said loss, this defendant
requested and demanded in writing that the amount of such loss and damage should
be submitted to and ascertained and determined by impartial arbitrators, whose
award in writing should be binding upon the parties as to the amount of loss or
damage, but should not decide the liability of the company under said policy. And
the said defendant further says that the plaintiff wholly disregarded the terms and
conditions of said policy in that respect, and neglected and refused to have such
arbitration, and refused to choose or submit to arbitrators chosen in accordance
with the terms and provisions of said policy the amount of the loss or damage by fire
o the property covered by said policy, and refused to be governed in the
ascertainment of said loss by any of the terms and conditions of said policy, and,
against the protest of the defendant, proceeded to and did sell all of said property at
auction. An arbitration and the ascertainment of the said loss thereby, as provided
in said policy, became impossible, and this defendant was deprived of its rights and
privileges under said policy with respect to said property and the appraisement
thereof. This defendant further says that the damage done to the property insured
was of such a nature as to require a careful and scrutinizing examination to
ascertain the injury thereto and loss thereon, and that an appraisement by
arbitrators, as required by the terms and conditions of said policy, was of the
greatest importance to the defendant, and the only means under said policy whereby
the exact amount of damage and injury sustained by said plaintiff upon said
property could be determined; and the said plaintiff, by the sale of said property,
and in disregarding the terms and conditions of said policy in that respect, wholly
deprived this defendant of the right to an arbitration, as provided in said policy, and
all other rights in respect to the property so injured or damaged by said fire. The
defendant further says that by reason of the failure and refusal of said plaintiff to
agree upon arbitrators to determine the amount of the loss and damage so sustained
as aforesaid, and his refusal to submit the amount of such loss to arbitration in
accordance with the plain terms and provisions of said policy, and the sale of said
property so injured as aforesaid against the written protest of the defendant, the said
plaintiff is not entitled to recover in this action, nor to have or maintain this action
against the said defendant.' The plaintiff filed a replication, denying these
allegations of the answer. At the trial, the plaintiff introduced evidence tending to
prove a loss or damage by fire on April 16, 1886, to the amount of the insurance,

and the delivery of proofs of loss in accordance with the policy, and put in evidence
a policy of the Liverpool, London & Globe Insurance Company on the same
property; the defendant introduced evidence tending to prove that the amount of loss
or damage was less; and there was put in evidence a correspondence in writing
between the parties or their authorized agents at Cincinnati, the material parts of
which were as follows:

April 26, 1886. Plaintiff to defendant: 'I inclose proof of loss under policy
of your company, with invoice attached, in compliance with the
requirements of the policy. If there is anything defective in the substance
or form of the above proof, please advise me thereof at once that I may
perfect the same to your satisfaction, and return the proof to me in such
case for that purpose. The property described and damaged has been
invoiced and arranged, and is ready for examination by your company.
Such examination must be made at once, for the reason that I am obliged
to occupy the premises in the prosecution of my business, and each day of
delay involves considerable loss and expense to me. As before advised, I
propose to sent the entire stock to be sold at public auction in a few days,
whereof I will give you notice. It can be readily inspected in a short time
where it now lies.'
April 27, 1886. Defendant to plaintiff: 'Received of Robert Hamilton
papers purporting to be proofs of loss under Home Insurance policy No.
3,190.'
April 28, 1886. Defendant and other insurance companies to plaintiff: 'The
undersigned, representing the several insurance companies against which
you have made claim for loss under their respective policies of insurance
upon stock in your tobacco factory, Nos. 413 and 415 Madison street,
Covington, Ky., claimed to have been damaged by fire on April 16, 1886,
beg leave jointly to take exception to the amount of claim made, and to
demand that the question of the value of and the los upon the stock be
submitted to competent and disinterested persons, chosen as provided for
in the several policies of insurance under which claim is made; and we
hereby announce our readiness to proceed at once with this appraisement,
so soon as your agreement to the demand is declared. We further desire
jointly to protest against the removal, sale, or other disposition of the
property until such an appraisement has been had, and to notify you that
the insuring companies will in no way be bound by such ex parte action.'
April 29, 1886. Plaintiff's counsel to defendant and other insurance
companies: 'Mr. Hamilton is not endeavoring to obtain any unfair

advantage or unfair adjustment of his loss against the companies. He had

believed that, in view of the fact that the traffic in tobacco is so large in
this city, the substantially all of it, at least ninety-nine per cent. of the leaf
tobacco business, is transacted by sale at public auction, a sale of this
tobacco presented the fairest mode of ascertaining its actual value as it
stands. It is in substance and effect an appraisement in detail of every
package by the entire trade in this city. But in view of the fact that the
insurers seem to demand arbitration by arbitrators, and that you propose to
select a competent person, which we understand to mean a man
acquainted with the manufacture of tobacco, to act as arbitrator in your
behalf, Mr. Hamilton will accede to your proposition upon the express
understanding that the arbitrators selected shall have a full opportunity to
examine the stock of tobacco, and that it shall then be sold at public
auction, in order that its value thus ascertained, together with such other
evidence as either party may desire to offer, may be presented to the
arbitrators before they make their award.' 'If the proposed arbitration is
satisfactory, will you at once inform me of the arbitrator selected by you
and submit to me the form of agreement for arbitration which you
propose? Mr. Hamilton will do the like in respect to the arbitrator selected
by him.'
April 30, 1886. Defendant and other insurance companies to plaintiff's
counsel: 'We must insist upon arbitration, in accordance with the terms of
our several contracts, without importing into it any conditions as to the
sale of the property. Such conditions would be incompatible with the
provisions of our several policies of insurance and the rights of the
insuring companies thereunder. As soon as Mr. Hamilton indicates his
readiness to proceed with the arbitration called for, we will submit the
name of an arbitrator, and also a form of agreement for arbitration.'
April 30, 1886. Plaintiff's counsel to insurance companies: 'Mr. Hamilton,
and I in his behalf, deny that the arbitration in the manner indicated is in
violation of the terms of any of the policies, or imports any condition into
it which the insured is not entitled to insist upon, or which is incompatible
with the provisions of the several policies of insurance, or the rights of the
insurance companies thereunder. Mr. Hamilton is ready, and has directed
me to express his readiness, to proceed at once with an arbitration which,
as he understands it, is in substantial compliance with the arbitration
provided for in all the several policies; but they are not alike in their
provisions upon this subject of arbitration, and a literal compliance with
some of them would be inconsistent with a literal compliance with others.
The only way, as it seems to me, that Mr. Hamilton, or I in his behalf, can
determine whether what you call the 'arbitration called for' is what Mr.

Hamilton understands to be the 'arbitration called for,' and is willing to

accede to, is for you to indicate what you understand the arbitration called
for to be, by submitting a form of agreement for arbitration, or in some
other mode indicating the specific terms of the arbitration which you have
demanded. I wish to say that, as I understand the expression in my letter of
the 29th, that 'it' th e tobacco) 'shall then be sold at public auction, in order
that its value thus ascertained, together with such other evidence as either
party may desire to offer, may be presented to the arbitrators before they
may make their award,' does not in any wise call upon the companies to
consent to a sale of the property. Mr. Hamilton is quite ready to take upon
himself the responsibility of selling it. It simply requires that the
arbitration shall be commenced before the sale, when the arbitrators may
have an opportunity of examining the property, and that the award shall
not be made until after the sale has taken place, and the assured has had an
opportunity to submit the result of it, with other competent evidence, to
the arbitrators before the award is made.'
May 3, 1886. Insurance companies to plaintiff's counsel: 'In compliance
with the request in your letter of April 30th, addressed to the companies
insuring Robert Hamilton, we herewith inclose a form of agreement for
'submission to appraisers,' which is in practical accordance with the
conditions of the policies of the several companies, and which all the
companies are willing to sign, and abide by the award reached thereunder.
We must again decline to entertain your proposition that the arbitrators,
after examining the stock, shall postpone their award until after the stock
shall have been sold, when the result of such sale, with other evidence,
shall be submitted to the arbitrators. We insist that the arbitration provided
for in such case by our policies is in no sense a court for the hearing of
evidence. The appraisers may, in their discretion, seek any evidence they
deem necessary for their own full information and the forming of their
own judgments as to the value and damage of the goods. But we insist
that under the conditions of the several policies there can be no
abandonment of the stock to the companies, and that after an award has
been reached the companies have the right to take the stock, in whole or in
part, at the appraised value. The companies propose to stand upon the
conditions of their policies, and decline all propositions looking to a
waiver thereof, or adding new and inconsistent conditions thereto.'
The principal part of the form of 'submission to appraisers,' inclosed in
this letter, was as follows: 'It is hereby agreed by Robert Hamilton, of the
first part, and the several insurance companies, by their representatives,
whose names are hereunto affixed, of the second part, that _____ and
_____ shall appraise and estimate the loss by fire of April 16, 1886, upon

the property of Robert Hamilton, as specified below and as hereinafter

provided. In case of disagreement, said appraisers shall select a third, who
shall act with them in matters of difference only. The award of said
appraisers, or any two of them, made in writing in accordance with this
agreement, pursuant to the terms of the policies, shall be binding upon
both parties; but it is understood that this agreement and appraisement are
only for the purpose of fixing the sound value of the property immediately
before the fire and the loss or damage thereon occasioned by said fire, and
shall not waive, invalidate, or terminate the right of the insurers to take
said property at its appraised value, or any other rights of either party
hereto, but the same are to be construed solely by reference to said
policies.'
May 4, 1886. Plaintiff's counsel to insurance companies: 'There can be no
misunderstanding as to the position taken by the companies and the
assured in this matter. 1st. I understand the companies demand that
appraisers be selected by the companies and the assured, who shall
estimate the loss by their own judgment, and without hearing the
testimony of witnesses who may be called by either party, and that the
parties shall be bound by their report or award as to the amount of the loss
thus made. This Mr. Hamilton declines to do. 2d. Mr. Hamilton is willing
that the companies jointly, or as they may arrange between themselves,
shall make their own appraisement through their own appraisers of the
value of the stock, and that they shall jointly, or either of them, with the
consent of the rest, have the right to take the stock, in whole or in part, at
their appraisal. 3d. Mr. Hamilton has made and makes no claim to
abandon the property, and he has made and makes no claim that the
companies shall consent to the sale by him of the damaged stock.'
Inclosed in this letter, and signed by the plaintiff's counsel, was the
following: 'To the Liverpool and London and Globe Insurance Company,
and the companies jointly acting with it, in respect to the loss sustained by
Robert Hamilton on the property in Nos. 413 and 415 Madison street,
Covington, Ky.: Mr. Hamilton demands of the several insurance
companies an arbitration of the amount of the loss sustained upon the
goods covered by fire on the 16th day of April, and will select an
arbitrator to represent him in pursuance of the provisions of the policy, it
being stipulated in the agreement for arbitration that the several
companies and the assured shall be duly notified of the time of the hearing
by the arbitrators, and that the arbitrators shall hear all competent legal
testimony that may be offered by either party, as well as personally
examine the damaged goods, in considering and awarding the amount of
the loss.'

May 5, 1886. Insurance companies to plaintiff's counsel: 'Your

communication of the 4th is at hand. We have nothing to add to our letter
of the 3d; and if, as we are made to understand, Mr. Hamilton declines to
consent to a form of 'submission to appraisers' that does not provide for
the introduction of 'all competent legal testimony that may be offered by
either party,' (under which provision, as you have repeatedly declared, Mr.
Hamilton would seek to present evidence based on a sale of the property,)
we must accept your communication as a refusal to comply with our
request and with the conditions of the policies of insurance, which are
clearly incompatible with your wishes in the matter.'
May 7, 886. Insurance companies to plaintiff's counsel: 'Referring to your
letter of the 4th, setting forth your understanding of the position taken by
the two parties, permit me, on behalf of the companies, to take exceptions
to your first statement, to-wit: 'I understand the companies demand that
appraisers be selected by the companies and the assured, who shall
estimate the loss by their own judgment, and without hearing the
testimony of witnesses who may be called by either party, and that the
parties shall be bound by their report or award as to the amount of the loss
thus made.' This does not correctly state our position, which remains now
as stated in our communication of the 3d, to-wit: 'The appraisers may, at
their discretion, seek any evidence they deem necessary for their own full
information.' What we do object to and protest against is the sale of the
goods, or the consideration by the appraisers of evidence founded on that
fact or result. If the form of 'submission to appraisers' we submitted
contains any provision or condition limiting or defining the duties of the
appraisers and not prescribed by the several policies, each company will
submit its own form, as we desire and demand a submission free from any
conditions imposed by either party.'
The plaintiff also gave in evidence a letter from his counsel to the
Liverpool, London & Globe Insurance Company, dated May 20, 1886,
inclosing a notice in a newspaper of the day before of a sale by auction to
be had on May 29, 1886, at the plaintiff's warehouse in Covington, of the
tobacco insured by the policy in suit. Upon this evidence, the court
instructed the jury that, on the issues joined on the special defenses in the
answer, the plaintiff could not recover, and that they should return a
verdict for the defendant. The plaintiff tendered a bill of exceptions to
these instructions, and, after verdict and judgment for the defendant, sued
out this writ of error.
>Joseph Wilby and E. W. Kittredge, for plaintiff in error.

Channing Richards and C. H. Stevens, for defendant in error.

[Argument of Counsel from pages 379-382 intentionally omitted]
Mr. Justice GRAY, after stating the facts as above, delivered the opinion
of the court.

This case resembles in some aspects that of Hamilton v. Insurance Co., 136 U.
S. 242, 10 Sup. Ct. Rep. 945, (decided at the last term,) but it is essentially
different in important and controlling elements.

In that case, the effect of the provisions of the policy by reason of which it was
held that the assured, having refused to submit to the appraisal and award
provided for, could not maintain his action, was thus stated by the court: 'The
conditions of the policy in suit clearly and unequivocally manifest the intention
and agreement of the parties to the contract of insurance that any difference
arising between them as to the amount of loss or damage of the property
insured shall be submitted, at the request in writing of either party, to the
appraisal of competent and impartial persons, to be chosen as therein provided,
whose award shall be conclusive as to the amount of such loss or damage only,
and shall not determine the question of the liability of the company; that the
company shall have the right to take the whole or any part of the property at its
appraised value so ascertained; and that until such an appraisal shall have been
permitted, and such an award obtained, the loss shall not be payable, and no
action shall lie against the company. The appraisal, when requested in writing
by either party, is distinctly made a condition precedent to the payment of any
loss, and to the maintenance of any action.' 136 U. S. 254, 255, 10 Sup. Ct.
Rep. 949. That policy looked to a single appraisal and award, to be made as one
thing, and by one board of appraisers or arbitrators, whenever any difference
should arise between the parties, and to be binding and conclusive as to the
amount of the loss, although not to determine the question of the liability of the
company; and the policy contained, not only a provision that until such an
appraisal the loss should not be payable, but an express condition that no action
upon the policy should be sustainable in any court until after such an award.

In the case now before us, on the other hand, the appraisal and the award are
distinct things, and to take place at separate times, and the effect assigned to
each is quite different from that given to the appraisal and award in the other
policy. The 'appraisal,' without which the loss is not payable, is required to be
made not merely when differences arise as to its amount, but in all cases, and
results in a mere 'report in writing,' which is not declared to be binding upon the

parties in any respect, and is in truth but a part of the proofs of loss. It is only by
a separate and independent provision, and when differences arise touching any
loss 'after proof thereof has been received in due form,' that the matter is
required, at the request of either party, to be submitted to 'arbitrators, whose
award in writing shall be binding on the parties as to the amount of such loss,
but shall not decide the liability of this company under the policy;' and there is
no provision whatever postponing the right to sue until after an award. The
special defenses set up, with some tautology and surplusage, in the answer,
reduce themselves, when scrutinized, to a singel one, the plaintiff's refusal to
submit to an award of arbitrators, as provided in the policy. This appears by the
general frame of the answer, and by its speaking of the award as 'an arbitration
and the ascertainment of the said loss thereby,' and as 'an appraisement by
arbitrators,' as well as by the distinct averments that the defendant requested
and the plaintiff declined a submission to arbitration, and by the omission of
any specific allegation that the plaintiff neglected to procure a report of
appraisers. The evidence introduced at the trial was to the same effect. Proofs
of loss ent by the plaintiff to the defendant, with a request that any defects in
substance or form might be pointed out so that he might perfect the proofs to
the defendant's satisfaction, were received by the defendant, without then or
after wards objecting to their form or sufficiency. The subsequent
correspondence between the parties was evidently influenced in form by
embracing insurances in different companies under policies with various
provisions; but, as applied to the policy in suit, it manifestly related, and was
understood by both parties to relate, not to a mere report of appraisers, but to an
award of arbitrators which should bind both parties as to the amount of the loss.
The instruction to the jury, therefore, that on the issues joined on the special
defenses in the answer, and upon the evidence in the case, the plaintiff could
not recover, was, in effect, a ruling that the plaintiff could not maintain his
action because he had refused to submit the amount of his loss to arbitration.
4

A provision in a contract for the payment of money upon a contingency that the
amount to be paid shall be submitted to arbitrators, whose award shall be final
as to that amount, but shall not determine the general question of liability, is
undoubtedly valid. If the contract further provides that no action upon it shall
be maintained until after such an award, then, as was adjudged in Hamilton v.
Insurance Co., above cited, and in many cases therein referred to, the award is a
condition precedent to the right of action. But when no such condition is
expressed in the contract, or necessarily to be implied from its terms, it is
equally well settled that the agreement for submitting the amount to arbitration
is collateral and independent; and that a breach of this agreement, while it will
support a separate action, cannot be pleaded in bar to an action on the principal
contract. Roper v. Lendon, 1 El. & El. 825; Collins v. Locke, L. R. 4 App. Cas.

674; Dawson v. Fitzgerald, 1 Exch. Div. 257; Reed v. Insurance Co., 138 Mass.
572; Seward v. City of Rochester, 109 N. Y. 164, 16 N. E. Rep. 348; Insurance
Co. v. Pulver, 126 Ill. 329, 338, 18 N. E. Rep. 804; Crossley v. Insurance Co.,
27 Fed. Rep. 30. The rule of law upon the subject was well stated in Dawson v.
Fitzgerald, by Sir GEORGE JESSEL, M. R., who said: 'There are two cases
where such a plea as the present is successful: First, where the action can only
be brought for the sum named by the arbitrator; secondly, where it is agreed
that no action shall be brought till there has been an arbitration, or that
arbitration shall be a condition precedent to the right of action. In all other cases
where there is, first, a covenant to pay, and, secondly, a covenant to refer, the
covenants are distinct and collateral, and the plaintiff may sue on the first,
leaving the defendant' 'to bring an action for not referring,' or (under a modern
English statute) 'to stay the action till there has been an arbitration.' 1 Exch.
Div. 260. Applying this test, it quite clear that the separate and independent
provision, in the policy now before us, for submitting to arbitration the amount
of the loss, is a distinct and collateral agreement, and was wrongly held by the
circuit court to bar this action. Judgment reversed, and case remanded, with
directions to set aside the verdict, and to take such further proceedings as may
be consistent with this opinion.