broker, his lien attaches on the policy in the broker's hands, for the broker being his agent, his possession, in contemplation of law, is that of his employer. And the assignee of the policy, who becomes so under special indorsement to him of the bill of lading by the principal, takes it subject to the correspondent's lien; and in case of loss, his claim against the money in the broker's hands is modified accordingly.1 If the policy be left in the hands of an agent merely as depositary and for safe custody, he acquires no general lien left for safe thereon, although he have afterwards advanced money to the custody. assured without other security than the policy.2 a No general lien on policy It must be clearly understood that the general lien of an General lien is only for insurance broker is only for the balance of his insurance what? account, and does not comprehend transactions between the broker and his employer on a distinct account having no relation to insurance. In cases, indeed, where bankruptcy has intervened, demands, Secus in which cannot be made the subject of lien, may frequently and mutual Bankruptcy be embraced as items of mutual credit; and, in effect, the credits. broker may there avail himself of a substantial benefit, although no lien attaches.3 Such appears to have been the principle of decision in the case of Ollive v. Smith; in the subsequent case of Rose v. Hart the doctrine of mutual credit was limited to cases where the credits given must in their nature terminate in debts; but Gibbs, C. J., as the organ of the Court was careful to state expressly that the principle so laid down would support Ollive v. Smith, on the ground that in that case "the 1 Burr. 493. This case is reluctantly cited even for the general principles laid down in the course of the judgment. It is not intended by the text or by this authority in the note, to set forth that a factor under promise of a consignment, may ensure and recover his general balance under the policy notwithstanding the goods are sent elsewhere by the shipper before the loss occurs. See this case considered 1 Man v. Shiffner, 2 East, 523. 2 Muir v. Fleming, 1 Dowl. & Ryl. N. P. C. 29. This was a case on a life policy, which had been left with defendant, he paying the premiums as they became due. 3 Ollive v. Smith, 5 Taunt. 55. What lien of insurance bankrupts were indebted to the defendants, and, being so indebted, delivered policies of insurance to them to collect losses under them, which, when so collected, would make the defendants their debtors for the amount." This defence of mutual credit, however, must be pleaded specially.2 The lien of an insurance agent, as in case of every other broker is lost. lien at common law, depends on the continuance of possession. If he voluntarily delivers up the policy to his principal, or to his order, his lien is extinguished; so it is if he parts with the policy wrongfully, as by pledging it as his own; but not so, where it is taken from him by force, or fraud, or parted with by mistake.3 When, though lost, it revives. As a general rule the lien of the broker revives where the policy comes again into his possession; but there are excepted cases. If, for instance, when the policy comes again into the broker's hands, he knows or has reasonable grounds to believe that his immediate employer was a mere agent (he having been ignorant of the fact when he before held the policy), it seems that his general lien as against his immediate employer will not revive with the re-possession of the policy to the prejudice of the claims of the party really assured.5 If during the time the policy has been out of the broker's possession, it has been assigned over by his employer in good faith, and for a valuable consideration to a third party, the broker's general lien on the insurance account with his 1 Rose v. Hart, 8 Taunt. 499; 2 Smith's L. C. 251; and see as to Ollive v. Smith, the observations of Lord Brougham in Young v. Bank of Bengal, 1 Moore's Ind. App. Cases, 87; and of Maule, J., in Dixon v. Stanfield, 10 C. B. 413. 2 Hewison v. Guthrie, 2 Bing. N. C. 755. 3 2 Duer, 289. The learned jurist, as usual, supports these positions by incontestible authorities. 4 Whitehead v. Vaughan, Cook's Bankrupt Laws, 547, 7th ed.; Levy v. Barnard, 8 Taunt. 149; 2 J. B. Moore, 34, S. C. 5 Levy v. Barnard, 8 Taunt. 149; S. C., 2 J. B. Moore, 34. This was probably the point decided in this case; but it is better with Judge Duer to speak doubtfully on the matter; 2 Duer, 290, 359, 360. employer would not, it has been held in the United States, revive as against the claim of such assignee.1 a subp. duc. If an insurance broker, having a lien on a policy, be sum- Production of moned as a witness to produce it under a subpoena duces policy under tecum, in an action by his employer against the underwriter, tec. he is compellable to produce the policy; but the Court will, if the plaintiff in such action obtain a verdict, prevent the money from being paid over to him until the broker's lien is satisfied.2 Liabilities of Underwriters, a bankrupt The general rule, as we have seen, is, that the broker, and Rights and not the assured, is the debtor of the underwriter for the the Broker premiums. "By the course of dealing," says Lord Wensley- and the dale, "the broker gives the underwriter credit for the or Trustee of premium when the policy is effected, and he, as the agent underwriter. of both the assured and the underwriter, is considered as having paid the premium to the underwriter, and the latter as having lent it to the broker again, and so becoming his creditor."3 Generally speaking, however, it is only the broker im- Which mediately concerned in effecting the policy to whom the 1 Spring v. S. Carolina Ins. Co., 8 Wheat. 289, cited 2 Duer, 290. 2 Hunter v. Leathley, 10 B. & Cr. 858; S. C. at N. P., Lloyd & Welsby, 125. It appears by the Nisi Prius report that the broker, after objection made, produced the policy, "on an assurance from Lord Tenterden, that, if the plaintiffs recovered a verdict, the Court would prevent the money from being paid over to them till the witness's lien was discharged;" Lloyd & Welsby, 125. This explains the meaning of what Lord Tenterden is reported to have said in banc. "We do not by this decision" (i.e., that the broker was compellable to produce 3 Per Parke, J., Power v. Butcher, broker. underwriter can resort for premiums, on the plain principle that it is to him alone he has given credit for them.1 Being thus in the place of the assured, the broker generally has the same ground of defence against the claim for premiums as the assured would have if he had effected the policy without the intervention of a broker.2 Hence, a broker is only liable to the underwriter for premiums due on legal insurances. Therefore, in the case of premiums for re-insurance known to all to be then illegal, where no money had passed, and the assured had enjoined the brokers not to pay the underwriters on the ground of illegality, Lord Ellenborough held that no action could be maintained by the assignees of the underwriters against the brokers for the recovery of the premiums as money paid to the use of the bankrupt.3 If the premiums had actually been paid to the brokers by their employers, in such case the action would be maintainable.1 If an underwriter have, by mistake, paid the broker a foul loss, to which the assured is not entitled, he may recover it back as money had and received to his use, in case 1 In a case of Robson v. Wilson, cited 1 Marsh. Ins. 301, the Court allowed the underwriter to recover against the first broker when the broker that effected the policies for the first had become bankrupt; but the case is far too doubtful to be of much authority. 2 Per Lord Ellenborough, 6 M. & Sel. 287. Edgar v. Fowler, 3 East, 222, 224. So, where the language of the policy was large enough to comprise an illegal adventure, and it was proved that the assured had contemplated it, the underwriter was held not entitled to sue for the premium which had not been paid by the assured to the broker; Jenkins v. Power, 6 M. & Sel. 282. In Tennant v. Elliott, 1 B. & P. 3, it was held in an action by the assured against the broker, that the defendant had no right to retain as against the plaintiff monies paid to him by the underwriter as the amount of loss on an illegal insurance. This case, as Judge Duer remarks, "proceeds on a rule of universal application, viz., that the person to whom monies have been actually paid to the use of another, has no right to inquire into the legality of the transaction out of which the payment arose." So, Beeston v. Beeston, 1 Ex. D. 13; Re Teignmouth Mutual Shipping Ass. (Martin's claim), L. R., 14 Eq. 148; Duer, vol. ii. 366371. the broker has not already paid it over to his principal. Merely passing it in account with his principal is not equivalent to paying it over, and no answer to such an action; secus retaining portion of the money in payment of an adjusted balance due to him from his principal.1 set-off. In considering the right of set-off, it is as well to remember Right of that the contract of marine insurance is still a contract sounding in unliquidated damages, even after an adjustment of a loss under the policy, and notwithstanding it be a valued policy. It consequently follows that any claim for such a loss cannot give a right of set-off under the Statutes of Set-off. We have seen that the ordinary relations between the three parties to this contract result in this, that the broker is the debtor of the underwriter for premiums, and the underwriter the debtor of the assured for losses. It is when the bankruptcy of one of these parties ensues, say the bankruptcy of the underwriter or the broker, that the question of the right of set-off arises, to be determined by the answer to this other question, whether there has been in relation to the policy such mutual credit or mutual dealings between these two parties as can be recognised as being within the Bankrupt Act.4 Set-off in bankruptcy. One of the earliest reported cases was Wilson v. Creighton, Wilson v. Creighton. decided in 1782. It was an action by assignees of a bankrupt underwriter against an insurance agent, for premiums passed in account in the usual way; plea, set-off as to losses and 1 Supposing, i. e., as Judge Duer observes, the circumstances to be such that the broker had a right to revoke the credit he had given to the assured, 2 Duer, 269, note a. Buller v. Harrison, 2 Cowp. 565; Holland v. Russell, 1 B. & S. 424; 30 L. J. (Q. B.) 308; in error, 4 B. & S. 14; 32 L. J. (Q. B.) 297. 2 Castelli v. Boddington, 1 E. & B. 66; 22 L. J. (Q. B.) 5; Luckie v. Bushby, 13 C. B. 864; Thompson v. Redman, 11 M. & W. 487. 3 King v. Walker, 2 H. & C. 884, in error, 3rd ed. 209; 33 L. J. (Ex.) 167, 325. 4 46 & 47 Vict. c. 52, s. 38. |