One year following the fortuitous loss case Mellon v. Federal Insurance Company, which I wrote about yesterday in The First Discussion of Fortuity by an American Court, the Minnesota Supreme Court decided a case about a gemstone and fortuity. There was no steamship, no boiler explosion, and no maritime drama. Instead, there was a beautiful and delicate fire opal, which was doomed by its very nature to crack. Yet, this case, Chute v. North River Insurance Company, 1 became an important early American decision confirming that fortuity was not just a maritime curiosity, but a foundational principle of American property insurance law.
The facts in Chute were simple. The policyholder insured jewelry under an all-risk policy that expressly covered breakage. During the policy period, a fire opal cracked and lost its value. There was no accident, no drop, no mishandling, and no outside force causing the damage. It just cracked. The complaint candidly admitted that the cracking occurred solely because of the opal’s inherent nature. Fire opals, as gemologists have long known, are prone to fissures and internal failure. The insured did not try to dress the loss up as anything else. The question for the court was whether an all-risk policy covers damage that arises entirely from the thing insured destroying itself?
The Minnesota Supreme Court answered “no.” In doing so, it walked directly in the footsteps of Mellon. The court rejected a literal reading of “all risks” and focused instead on the purpose of insurance. Insurance, the court explained, is indemnity against accidents that may happen, not against events that must happen. The court reasoned that when property fails simply because of its own inherent tendencies, there is no casualty, no risk in the insurance sense, and no fortuitous event to trigger coverage.
What makes Chute especially significant is how deliberately the court anchored its reasoning in maritime insurance law. The judges openly acknowledged that there were few land-based cases on point and turned instead to the marine insurance authorities that had shaped all-risk coverage from the beginning. They quoted classic admiralty treatises and decisions explaining that insurers do not cover loss caused by inherent vice or internal decay unless some external peril activates that weakness. Fruit rots, wine sours, metal fatigues, and opals crack not because something happened to them, but because of what they are.
In that respect, Chute is not merely consistent with Mellon. It is an extension of it. Mellon taught that even the broadest all-risk policy insures only risks and requires a fortuitous event. Chute carried that principle ashore and applied it to everyday property on land. The Minnesota court even cited Mellon directly, reinforcing that fortuity was not confined to ships and seas but was part of the general law of insurance.
Chute matters because it helped solidify a line that future courts, based on fortuity denials by insurers, would draw again and again over the next century. Under this view, property insurance is not a warranty of quality, durability, or useful life. It does not promise that things will last. It promises protection against chance. Once courts accepted that premise, fortuity became the doctrinal tool used to police the boundary between insurance and guarantee.
At the same time, Chute also exposes something uncomfortable. The rule applied was not dictated by physics or logic. It was dictated by how courts understood the function of property insurance at the time. The judges were concerned about turning property insurance into a maintenance contract or a financing mechanism for inevitable consumption. Fortuity became the shorthand for saying, “this is not what insurers agreed to sell.”
That historical choice has shaped property insurance law ever since. But whether it must always do so is a different question entirely. As insurance products evolved, insurers learned how to price certainty, manage time-based risk, and insure against breakdown, defect, and inevitable failure. For example, life insurance, warranty insurance, and equipment breakdown coverage all quietly undermine the idea that inevitability is uninsurable.
Chute remains an important waypoint in the story of fortuity because it shows how and why the doctrine took hold outside of maritime law. It is the second American property insurance case discussing this issue. But it also sets the stage for a deeper conversation.
The reason fortuity became embedded in property insurance has less to do with longstanding insurance logic than with case history, function, and line-drawing derived from maritime law. And once you see that, it becomes fair to ask whether the line was ever as inevitable as the courts made it seem. I will discuss this more tomorrow.
Thought For The Day
“The cracks are where the light gets in.”
— Leonard Cohen
1 Chute v. North River Ins. Co., 172 Minn. 13, 214 N.W. 473 (Minn. 1927).
