On 22 November 1762, Jeremiah Lee, prominent Marblehead ship owner and merchant, obtained a policy of marine insurance upon one half the cargo of the schooner Merrill for a voyage “from Marblehead to any and all the Islands in the West Indies to Windward of St. Croix, St. Thomas, Havannah and Jamaica until the cargo is sold and delivered.” The Merrill was then 79 days out of Marblehead. The eight underwriters, of whom Jonathan Bancroft was one, did not know that on October 17th, while making for Martinique, she had been taken by a Spanish privateer. When Lee subsequently presented his claim for the loss the underwriters refused payment on grounds of fraud. About a year later, the claim was submitted to arbitration in accordance with a provision of the policy. In November 1763 the arbitrators, Foster Hutchinson, John Rowe, and Melatiah Bourne, returned their unanimous report that Bancroft and six of his fellow underwriters, who had agreed to the submission, were liable in the amounts which they had subscribed.1 These seven made payment 189accordingly. The eighth underwriter, William Shillaber, was less tractable. He had not agreed to the arbitration, and Lee was forced to bring suit against him on the policy. In June 1767 Shillaber finally prevailed in an action of review in the Superior Court.2

Thereafter Bancroft and two other underwriters brought actions against Lee, claiming that the policy was void and demanding return of the payments made under it.3 Bancroft's case, in which Adams was of counsel for Lee, provides some useful insights into the conduct of maritime and mercantile affairs. It also raises an interesting problem of the effect of an arbitration proceeding upon subsequent litigation between the same parties and shows bench and bar applying English authority of most recent date to this question.4

Bancroft's declaration in an action on the case in deceit alleged that Lee had induced the underwriting by his deliberate false affirmation that the insurance was a “fair chance,” and that he had knowingly concealed two circumstances which materially altered the risk: (1) that the master's sailing orders had directed him to proceed to “the Island of Martineco (if he could get in there)”; and (2) that Lee, before the policy was written, “had received certain Intelligence that the said Schooner had not arrived at Martineco ... when she had been gone from Marblehead ... by the space of thirty three days.”5 After Lee prevailed in the Inferior Court on a sham demurrer, Bancroft appealed to the Superior Court, where at Ipswich in June 1769, upon waiver of the demurrer, the case was tried to a jury. Document 1 is Adams' memorandum of authorities on the issues presented by the fact that the vessel was actually lost at the time of the underwriting. Since Lee's policy included the words “lost or not lost,” the underwriters were liable unless Lee had sought the insurance with knowledge of the loss. This question was apparently determined adversely to Lee, because the jury found for Bancroft in the amount paid out, plus interest.6

Lee then obtained a writ of review, which was first brought on for trial in November 1770, but was continued on the withdrawal of a juror.7 In June 1771 at Ipswich the case came on again, but after Bancroft had put in at least a part of his evidence, it was continued on Lee's motion, the ground not appearing.8 Adams' minutes of this phase (Document II) are largely a summary of the testimony. John Lowell, counsel for Bancroft, after expounding authorities in his favor, produced evidence tending to show that the Merrill had in fact sailed for Martinique. He then sought to establish his allegations as to Lee's concealment of knowledge of the vessel's loss and as to his calling the risk a “fair chance.” The question of knowledge turned on the deposition of one Captain Howard, who had returned to Marblehead two weeks prior to the writing of the policy, reporting that he had heard nothing of the Merrill. Did this report amount to “certain intelligence” of her nonarrival, and was it known to Lee or to the underwriters?

The case was brought to trial a third time in November 1771. Here Adams' minutes (Document III) suggest that after Lowell had concluded his case the court on its own motion raised the problem of the effect of the 1763 arbitration report. In any event the jury was again dismissed and the action continued, this time by order of court.9 While Adams may have raised this question himself, it is interesting to note that this was the first occasion on which Foster Hutchinson, newly appointed to the court, had sat on the case, that he was one of the referees in 1763, and that he seemed to take the lead in dealing with the issue.10

After this continuance Adams and Jonathan Sewall, who with Lowell was of counsel for Bancroft, entered into a stipulation to the effect that if the court found that the report (which had not been pleaded) could be admitted in evidence under the general issue, and found that, if admissible, the report was a bar to Bancroft's action, then Bancroft would default. In June 1772 the court found the report admissible and once again ordered a continuance, doubtless for argument on the second point.11 At Salem in 191November 1772, according to William Wetmore's minutes (Document V), Hutchinson disqualified himself, and, with the other referees, gave evidence concerning the arbitration proceedings. Their testimony as minuted by Adams (Document IV) shows that the questions of the Merrill's actual destination and Lee's knowledge of her apparent non arrival had been raised at the hearing in 1763. The court had at first held that the award without more was not a bar, but on this showing they found that the action could not be maintained, applying the doctrine known today as collateral estoppel.12 A jury which had been empaneled was dismissed, and Bancroft's default was entered in accordance with the agreement.13

Bac. 3. 599.2 Tit. Merchant. “Where a Policy is a perfect Cheat as where a Person, having certain Intelligence that a Ship is lost, insures so much, this shall not bind the Insurer.”

Molloy. B. 2, c. 7, §5, bottom.3 “A Merchant having a doubtful Account of his Ship, insures her, without acquainting the Insurers of her danger; Chancery relieved against the Policy of this fraudulent Insurance.”

Ditto. “If the Party, that caused the Assurance to be made saw the ship was lost, 4 or had certain Intelligence, such subscription will not oblige, the same being accounted a mere fraud.”

But Yet,

Molloy. B. 2, c. 7, §5. “Those Assurances are most dangerous when these Words are inserted 'lost or not lost'; which is commonly done when a ship hath been long missing and no Tidings can be had, the Premio (especially in Time of War) will run very high, sometimes 19230 or 40 per Cent, and though it happens at the Time that the subscription is made, the ship is cast away, yet the Assurers must answer.”