mode of making demand or giving notice on bills of exchange, or of producing preliminary proof under policies, the customs or habits of business in the particular town, where the parties to be affected reside, are entitled to more weight and may be admitted in evidence with less hesitation. But in respect to the construction of the substantial provisions of a contract, which go to its very essence, as does the rule and measure of indemnity under policies of insurance, it admits of a serious question, whether any one town can make a peculiar usage differing from that of other places, even by a uniform and long continued practice. If, for instance, precisely the same words in a policy of insurance, involving a substantial and essential provision of the instrument, should, as applied to precisely the same facts, have one construction in Newburyport, another in Salem, a third in Boston, and a fourth and fifth in Plymouth and New Bedford, the greatest confusion and uncertainty would be the consequence. The contract would soon be subject to the most perplexing doubts, and give rise to infinite litigation. The peculiar practice of any one town ought not, therefore, to constitute a custom of insurance' even in respect to policies made in that town, so as materially to vary and control the essential provisions of the instrument. To admit of this would soon destroy the whole beauty and harmony of the laws of insurance, and reduce it to a chaos of doubtful local practices.

If this position be just, it follows that even the uniform practice of one port for a series of years, ought not to decide the question under consideration, though arising on a policy made in such place.

It being then, according to the best information I can obtain, very doubtful, whether in Boston, where the policy was made on which the present question arises, any definite, uniform, and well-settled rule has ever been so fully established, as to constitute a usage, of which all persons making insurance in Boston are bound to take notice, and it being no less doubtful, whether a policy ought to be materially affected in so essential a point by the usage merely of the place where it was made, if any such usage were shown; and there being, as far as I can learn, no proof of any usage of other places bearing with any force on the question, I cannot but think, that, as far as usage is concerned, the question is open, and that we are at liberty to take such a

position respecting it, as we may be led to, in reasoning from the objects and general principles of construction of a policy of insurance, and the practical consequences of the rule to be adopted.

This question was, I believe, first publicly suggested in 1823, when this usage was stated, on the authority of some practical insurer, as follows. The old materials, which are replaced by new, belong to the insurers, as far as they are liable for the amount of a partial loss. The proceeds of such old materials are, therefore, to be deducted from the amounts for which the insurers are liable; that is, after a deduction of a third new for old." The right of the insurer to the proceeds of the old materials is here stated to arise from his paying for the repairs. This reason might, perhaps, upon the above statement of the usage, limit his exclusive claim to two thirds of those proceeds, in a case where he pays but two thirds of the expense of repairs. But whether this would be a proper construction of the above statement is immaterial, as this subject has been much discussed since that time, and is now better understood.

The reverse of the above proposition seems to be assumed in some of the arguments that I have heard upon this subject, it being urged, or, at least apparently implied, that the insurer's right to the proceeds of the old materials is a reason why those proceeds should be deducted wholly from the two thirds of the expense of the repairs which he is liable to pay. If it can be established that the whole of these proceeds belong to him, it will follow of course that the whole must be deducted, after the one third for new. But is there any ground for assuming, in the outset, that they belong to him? They certainly do not belong to him before the repairs are made. The assured is not obliged to repair his ship at all. The contract of the underwriter is, not that he will repair the ship, but that he will indemnify. The cost of repairs affords the means of estimating the amount of indemnity to which the assured is entitled, but still the contract is, to make, not repairs, but indemnity. Though the assured does not choose to repair his ship, he is still no less entitled to indemnity. But say he chooses to repair, and the underwriter pays two thirds of the expense; if the underwriter thereby

1 Phil. Ins. 371.

acquires any right to the proceeds of the old materials, it must be in consequence of some rule adopted, as to the respective rights and liabilities of the parties in apportioning the expense of the repairs, and disposing of the proceeds of the old materials. No argument, therefore, in respect to the apportioning those expenses or disposing of those proceeds, can be drawn from the assumed fact that those proceeds belong to the underwriter. To say that the whole proceeds belong to him in consequence of some rule of apportionment of the expenses of repairing, and that this expense is to be apportioned in a certain way in consequence of the proceeds belonging to him, would be reasoning in a circle. It amounts merely to assuming that the whole of the old materials belong to the underwriter. If the old materials belonged to him before the repairs were commenced, there would be some ground for the inference, but as the fact is otherwise, and they belonged to the assured, if any inference is to be drawn, it is the contrary one, namely, that they are to be deducted for the benefit of the assured. But I make no such inference, the only object being to show that no inference should be made from the presumption that the whole of those materials belong to the underwriter, unless it is first made to appear that such materials do belong to him.

The main reason given for allowing to the underwriter the whole proceeds of these materials, however, is drawn from what is alleged to be a generally admitted doctrine in making adjustments. It is said to be generally assumed, that the new part or new thing, when made of new materials, is worth more by one third, than the old for which it is substituted. The argument stands thus: as the underwriters only agree to indemnify the assured, and as the two thirds, which he pays for the new part or thing, is equal in value to the whole part or thing lost or laid aside, the assured is completely indemnified by the paying of such two thirds, and that, therefore, the fragments belong to the underwriter.

To determine the force of this argument, we must consider what is the extent and construction of this doctrine. It is, no doubt, a received doctrine that the new is better than the old part, and that on this account the assured shall pay one third, and the underwriters only two thirds of the expense of repairs. But in settling this usage some regard must be had to the dis

position to be made of the old materials. The true state of the case, as it appears to me, is, that as between the two parties to the policy the old materials belong to neither of them exclusively, but constitute, as between them, a remaining part of the subject itself. For neither one party nor the other begins to make disbursements for repairs until the old materials or their proceeds are exhausted. As far as these go the subject repairs itself; so far no loss has happened, and no indemnity is claimed; the part of the damage thus repaired does not constitute a part of the loss. The disbursements for repairs commence beyond this point, and it is not until the disbursements begin, that any question arises between the parties as to their proportional contributions, and it seems to me that the question ought to be confined to the disbursements.

If the proceeds of the old materials will pay for the whole repairs, there is certainly no loss. The damage, the loss, the only thing about which the parties to the policy have any question of indemnity between them, is the making good the defect or injury remaining after the old materials or their proceeds have been applied. Thus in computing a loss on a cable which was cut, 1 Magens, 193; its whole value was put down, three hundred and ninety-six dollars, from which, says the adjustment, 'deduct the net proceeds of that part thereof which was saved and sold, being thirty-five,' leaving three hundred and fifty-five as the loss, about which alone there was a question between the assured and underwriters. It is to this net damage, therefore, whatever it may be, to which all the rules of indemnity are to be applied, since this is the loss for which indemnity is stipulated. It was so considered before the usage of deducting a third was introduced, and it seems to me, therefore, that when the usage was introduced, it would most naturally and obviously be applied to that amount which the underwriter had before been called upon to pay, namely, the disbursements, or net cost.

It may be admitted that, as far as the two parties make repairs out of new materials not supplied by the subject itself, the usage settles, that one party shall pay two thirds, and the other one third. And to this extent, therefore, we may consider that the usage settles, as between the parties, that the new part is worth more by a third than the old before the injury. To carry the doctrine further, and say, that where the old materials are sold,

and the proceeds laid out in new, the assured shall, before his right of indemnity commences, add fifty per cent. to those proceeds in making the purchase, because it is supposed that the new will cost fifty per cent. more than a similar quantity of the old was worth, seems to me to be a refinement in carrying out this doctrine, the objections to which are much stronger than the reasons in its favor. It is said that, if the assured is permitted to sell the old materials, and employ their proceeds, as far as they will go, to procure new materials and labor in making the repairs, without any contribution on his part towards the repairs thus far, he will, according to the doctrine, that the new is better by one third than the old part was before the accident, be more than indemnified, since to this extent he will have a better thing or part, than that which was insured. This will be true, if the doctrine, that the new part is better by a third than the old, can, as between the parties to the policy, be carried to this portion of the repairs. But it appears to me that the doctrine cannot be applied to this part of the repairs, and if not, then the above argument fails, since it is founded wholly upon assuming that this doctrine has this application.

It is said that as far as the damage is repaired by the application of the proceeds of the old materials, the new part or thing thus supplied is as much better than the corresponding one was before the injury, as if the repairs had been made by the application of funds furnished by the underwriters. This is true, and so it is also true that the repairing of a new ship does not usually make it so good as it was before the damage, and that the repairing of an old one may make it better by more than a third of the expense. It may happen, either from the ship's being old, or (in case of a deduction of the third from the net expense of repairs) because old materials of very considerable value are saved, that the assured may be more than indemnified. And this will happen in some cases, whether the one or the other mode of adjustment shall be adopted. We may admit, then, not only that the new part is as good as if it had been made at the expense of the underwriters, but also, that it will in some cases be better, by more than one third, than the corresponding part was before the injury. But still, as the repairs are in fact thus far not made at his expense, and not a part of the loss, it does not seem to be properly competent to him to