^u!k.i, 1897 Second Edition 1900. Reprinted September 1900 Third Edition {Globe Zvo) 1903 Reprinted "with corrections and additions 1909 Reprinted 1910, 1913, 1914 With additiofis 1917 {Demy Zvo) 1903 O) C3 HE Ovu- fc PREFACE TO FOURTH EDITION When the Marine Insurance Act of 1906 (6 Edw. VII., Ch. 41) came into operation on the ist January 1907, it seemed to put an end to any useful existence of the present book, based as it is almost entirely upon Case law, which has been codified or superseded by that Act of Parliament. In consequence, it was arranged that there should be no further reprint of this book, as it seemed no longer adapted to the wants of the commercial community, and the writer felt that, having done its work, it might well be allowed to drop out of existence. But very soon after this decision was reached, an unexpected demand for the book arose, and as it was impossible to meet that demand by immediately supplying a similar work on the Marine Insurance Act of 1906, the only alternative that remained was to reprint the last edition, adding in a supplement the most important decisions reported since 1903. This plan is by no means satisfactory to the writer, except in so far as it gives him the opportunity of completing the record of important decisions given up to the 31st December 1906, that is, up to the close of the period during which marine insurance was regulated principally, if not entirely, by Case law. As it appeared convenient to bring the record of cases as far down as possible, the most important decisions given from ist January 1907, to the close of 4:234 r»H MARINE INSURANCE Trinity term 1909, have also been recorded. It is felt that this is a very imperfect way of dealing with the subject, but in the present circumstances, it is practically the only available plan. WILLIAM GOW 5 Castle Street, LiVERrooL, August 1909. PREFACE TO THIRD EDITION The completion of the fifth revision of this handbook leaves me with the impression that if the book had to be entirely rewritten it must assume a structure very different from that now presented. The controversies that were raging when the book was originally planned have either been settled by legal decision or have been pushed aside by other and more pressing matters. In fact, the atmosphere has changed ; and strange though it may appear, it seems to be true that even a prosaic text-book of a small section of commercial law takes its spirit and form from the surroundings of its writer, much in the same way as the great imaginative works of literature bear on them the traces of the physical, mental and moral environ- ment of their creators. But what is of perpetual value in the case of genius is only misleading and worthless in all the rest, and therefore in them, particularly in text-books, remodelling and rewriting become necessary. Besides, .there appears to be some hope that the long-discussed Marine Insurance Codification Bill may shortly become law. When this comes to pass, there will be a well- defined starting-point, whence new departures will be made in directions probably quite unsuspected by any one at this moment. Till then it is hoped that this little work may continue to be found useful to assured and underwriters alike. WILLIAM GOW. Union Marine Insurance Company, Ltd., Liverpool, ^itk June 1903. PREFACE TO SECOND EDITION At the reprintings of this volume in 1896 and 1897, oppor tunity was taken to correct such errors as had been dis- covered, and to add the decisions in the most important cases occurring since the first issue. On the present occasion additions have been made to the text, an attempt has been made to notice all recent decisions, and the appendices have been enlarged, completed, and brought down to date. At the same time the writer has done his best to keep the book from increasing in size, a task by no means easy in view of the ever- expanding material of the subject and the unceasing activity of litigants and judges. B I Liverpool and London Chambers, Liverpool, 15/A October 1899. PREFACE TO FIRST EDITION At the close of a course of lectures delivered in the Michael- mas term of 1893 at University College, Liverpool, under the auspices of the Liverpool Board of Legal Studies, I was honoured with several requests for the issue of the lectures in book form. In spite of the existence of such admirable manuals as the late Mr. Richard Lowndes's Practical Treatise on the Law of Marine hisurance, and Mr. Charles M 'Arthur's Contract of Marine Insurance, there seemed to be a want of some smaller and simpler book, adapted for the needs of beginners, and of those desirous of obtaining a general knowledge of the principles and practice of Marine Insurance, rather than a complete criticism of recent de- cisions on the subject. On consideration of the matter it became clear that if I was to make an attempt to meet this want, the subject must be worked over again by me from the beginning, the forms of expression employed in the lectures being in many cases ill -adapted or quite unsuitable for a book. I have accordingly rewritten the whole work, and have endeavoured to embody in the following pages the results of all important decisions on Marine Insurance up to ist February 1895. The authori- ties consulted are given in detail in the list on pages xi. and xii. ; unfortunately Mr. Tyser's book did not come into my hands until it was too late to use it. MARINE INSURANCE I venture to indulge in the hope that my experience of insurance in merchants' and shipowners' business may have enabled me to appreciate those wants of the Assured which underwriters are sometimes thought unduly to neglect. I desire to acknowledge with thanks the permission given to me by Mr. Reginald G. Marsden and his pub- lishers, Messrs. W. Clowes and Sons, Limited, to reproduce some of the documents given in the Appendix ; the suggestions made by Mr. T. A. Bellew, Secretaiy of the Liverpool Underwriters' Association ; and the constant assistance of my friend and deputy, Mr. Cyril A. Prescott, who has given me much help in correcting the text and checking the case-references, and has drawn up the Index of Cases. To the unfailing kindness and invaluable advice of another friend I owe if possible even more, but without his permission 1 cannot take the liberty of placing his name on this page and of so conferring on it a distinction not mine to bestow. WILLIAM GOW. F 7 Exchange Buildings, Liverpool^ 20th February 1895. CONTENTS PAGE LITERATURE xvii INDEX OF CASES xix HISTORICAL INTRODUCTION i CHAPTER I Elementary Notions — Slip, Covering Note, Policy, Stamp Act . . . lo CHAPTER II The Policy : Part I — Policy Fornxs, Common English Policy, The Heading, The Assured, Lost or Not Lost, At and From . . 27 CHAPTER III The Policy : Part I — continued^ Common English Policy continued, General Description of Subject Matter Insured, Duration of Risk on Goods and Ship, including Touch and Stay and Deviation Clauses . . . . . ... . .43 xiii xiv MARINE INSURANCE CHAPTER IV The Policy : Tar r Y—iontinued — pyfcE Common English Policy continued, Valuation , . 64 CHAPTER V Insurable Interest — Subjects of Insurance — Mul- tiple Insurance 76 CHAPTER VI The Policy: Part II— The Perils Insured against .,..,. 92 CHAPTER VII The Policy: Part \\— continued — Sue and Labour Clause, Waiver Clause, Force and Effect of Policy, Consideration, Attestation . . , .120 CHAPTER VIII Principles of Interpretation of the Policy . . 130 CHAPTER IX Total Loss of Ship and of Cargo .... 144 CHAPTER X Total Loss of Freight ..,.,.. 160 CHAPTER XI The Memorandum — F.P.A. Clause . , . .171 CONTENTS XV CHAPTER XII Particular Average PAGE 1 88 CHAPTER XIII Particular Charges — Suing and Labour Expenses 221 CHAPTER XIV Insurances on Time — Time Policies 228 CHAPTER XV Liabilities 243 CHAPTER XVI Warranties and Representations 260 CHAPTER XVII General Average . 279 APPENDICES A. Specimen Slip B. Early Policies Ca. Covering Note on Ship . . . Cb. Covering Note on Cargo and Freight D. Quotation Form . ... E. Tender of Abandonment F. Full Protection Policy . ... 317 319 324 325 326 327 328 MARINE INSURANCE PAGE G. York- Antwerp Rules 332 II. Rules of Practice adopted by the Association OF Average Adjusters up to May 191 5. . 338 Index to Rules of Practice 358 Subject Index to Rules of Practice . . 360 I. Institute Voyage Clauses, 1917 .... 365 Ka. Institute Time Clauses, 1917 .... 369 Kb. Institute Time Clauses, 1916— Hull— P.P. A. absolutely 374 Kc. Institute Time Clauses, 1916 — Steamers — Free of Damage absolutely . . . 377 Kn. Institute Time Clauses — Hulls — Excess 3 per cent P. A., 1917 . . . 380 Ke. Institute Clauses for Builders' Risks, 1916 . 385 Kf. Institute Time Clauses, 1916. Freight . . 389 Kg. Institute Voyage Clauses, 1916. Freight . 391 Km. Institute Cargo Clauses (F.P.A.) 1916 . . 393 Ki. Institute Cargo Clauses (for Policies covering Average) 394 L. I. Liverpool Slip \Yarranties : 2. Time Warran- ties usual in 1899 395 M. Clauses in Ordinary Use in Policies on Interest other than Hull 396 N. Clauses in Occasional U.se in Policies on In- terest OF ALL Kinds 403 O. Marine Insurance Act, 1906 .... 405 P. A Bill to prohibit Gambling on Loss by Maritime Perils 431 ADDENDA 433 INDEX 439 LITERATURE Allen, E. K., "Stamp Duties on Sea Insurances," 2nd edition, London, 1903. Andresen, Th., " Seeversicherung," Hamburg, 1888, Arnould, Joseph, "Treatise on the Law of Marine Insurance and Average," 2 vols., 2nd edition, London, 1857.' Baily, Laurence R., "General Average," 2nd edition, London, 1856. Do. " Perils of the Seas," London, i860. Barber, W., " Principles of the Law of Insurance adopted in the Civil Code of California," San Francisco, 1887. Benecke, W., " Principles of Indemnity in Marine Insurance, Bottomry and Respondentia," London, 1824. Do. "System des Assekuranz- und Bodmereiwesens," umgear- beitet von Vincent Nolte, 2 vols., Hamburg, 1851, 1853. Black, W. G., "Digest of Decisions in Scottish Shipping Cases, 1865-1890," Edinburgh, 1891. Chalmers, M. D., and Owen Douglas, " Digest of the Law relating to Marine Insurance," 2nd edition, London, 1903. Chalmers, Sir :\I. D., and Owen Douglas, "The Marine Insurance Act, 1906," London, 1907. Crump, F. Oclavius, " Marine Insurance and General Average in England and America," London, 1875. De Courcy, Alfred, " Commentaire des Polices fran^aises d' Assurances maritimes," 2nd edition, Paris, 1888. De Hart, E. L., and Simey, R. I., "Arnould on the Law of Marine Insurance," 8th edition, 2 vols., London, 1908. Do. " Marine Insurance Act, 1906," London, 1907. Desty, Robert, "Shipping and Admiralty," San Francisco, 1879. Douglas, R. R., " Index to Maritime Law Decisions," London, 1888. Duckworth, Lawrence, "Law Relating to General and Particular Average," 2nd edition, London, 1905. Do. " Encyclopaedia of Marine Law," London, 1907. Duer, John, "On Representations in Marine Insurance," New York, 1844. Do. "Law and Practice of Marine Insurance," 2 vols.. New York, 1845, 1846. 1 Last edition issued under author's superintendence. xvii ''' XVIU MARINE INSURANCE Eldridge, W. H. " Marine Policies," London, 1907. Emerigon, " Trait^ des Assurances et des Contrats k la Grosse," 2 vols., 2nd edition by Boulay Paty, Rennes, 1827. Gourlie, John H., "General Average," New York, 1881. Herzog, C, " Praxis der Transportversicherung," Berlin, 1909. Holland, T. E., "Manual of Naval Prize Law," London, 1888. Jacobs, Victor, "Etude sur les Assurances maritimes et les Avaries," Brussels, 1885. Lowndes, Richard, " Practical Treatise on the Law of Marine Insurance," 2nd edition, London, 1885.^ Do. " Law of General Average, English and Foreign," 4th edition, London, 188S.' M'Arthur, Charles, "Contract of Marine Insurance," 2nd edition, London, 1890. Maclachlan, D., " Arnould on the Law of Marine Insurance," 2 vols., 6th edition, London, 1887. Marsden, Reginald G., "Admiralty Cases, 1648 to i860," London, 1885. Do. " Law of Collisions at Sea," 3rd edition, London, 1891. Marshall, Samuel, "Treatise on the Law of Insurance," 2 vols., 3rd edition, London, 1823. ^ Martin, Frederick, " History of Lloyd's and Marine Insurance in Great Britain," London, 1876. Owen, Douglas, "Marine Insurance Notes and Clauses," 3rd edition, 1890. Park, J. A., "System of the Law of Marine Insurances," 7th edition, London, 1817.^ Parsons, Theophilus, " Law of Marine Insurance and General Average," 2 vols., Boston, 1868. Phillips, Willard, "Treatise on the Law of Insurance," 2 vols., 5th edition, New York, 1867. Pipia, Umberto, "Diritto Marittimo," 2 vols., Milan, 1900, 1901. Reatz, C. F., "Geschichte d. europaischen Seeversicherungs- rechts," 1870. Stevens, Robert, "Essay on Average," 5th edition, London, 1835. Templeman, F., " Marine Insurance : Its Principles and Practice," 2nd edition, London, 1909. Tyser, C. R., "Law relating to Losses under a Policy of Marine Insurance," London, 1894. Ulrich, Rudolph, " Grosse Haverei," 2nd edition, with assistance of Dr. Paul Briiders, 3 vols., Berlin, 1903, 1905, 1906. Vivante, Cesare, "II Contratto di Assicurazioni," 3 vols., Milan; vol. ii., 1890, " Le Assicurazioni Marittime." Weil, G. Denis, " Des Assurances maritimes et des Avaries," Paris, 1879. White, James D., "Marine Insurance Act, 1906," London, 1907. ' Last edition issued under author's superintendenct. INDEX OF CASES FAGB Abrota ..... 143. 243 Acaster, . , . . i66 {^Addenda 424), 300 Adam ..... 102 Aikshaw .... 13 Aitchison v. Lohre . . . . 224, 281, 287 Allison V. Bristol Marine 163, 203 AUston V. Campbell . . 83 Alps ..... 204 Alsace and Lorraine . . 178 Altair .... • 254 Andersen v. Marten . 142 {Addenda 435) Anderson v. Wallis . . . 154 Apollinaris Co. v. Norddeutsche Vers. Ges. 44 {Addenda 434) Araucania, .... 150 {Addenda 436) Amo ..... 256 Arrow Shipping Co. v. Tyne Commissioners 257 Ashley, .... 211 Astor V. Union Insurance Company . . 173 Atlantic Mutual v. Huth 123 Atwood V. Sellar . 289, 292, 294 Australasian Steam Navigation Company v. Morse . .123 Baker v. Towry .... 175 Balmoral, .... . 3" Balnacraig .... 252 Barber v. Fletcher . 268 Baring v. Claggett .... 262 Baring v. Marine Insurance Company 28 Barker v. Blakes • 154 Barker v. Janson 70 Barnstable, .... 246 {Addenda 437) Barraclough v. Brown . 258 Barrow v. Bell 177 Bartlett v. Pentland . 132 Bean v. Stupart 262, 263 Bedouin Steam Navigation Company v. Bradfc )rd 205 XX MARINE INSURANCE PAGB . . 167 . 150 . 284, 287, 301 261 278 278 . 44. 46 262 Blackwood, Bryson, and Co. v. British and Foreign Company 178 Blairmore Sailing Ship Co. v. Macredie . . 147, 159 Blankenhagen v. London Assurance . . . 103, 114, 117 Bensaude v. Thames and Mersey Marine Benson v. Chapman . Birkley v. Presgrave . Size V. Fletcher Blackburn v. Haslam . Blackburn v. Vigors . Blackett v. Royal Exchange Blackhurst v. Cockell . Boehm v. Bell Bolivia, Republic of, pany Bona, . Bond V. Nutt . Boston Fruit Co. v. Company, Ltd. Bouillon V, Lupton Bowden v. Vaughan Bo wring v. Triton Co, Boyd V. Dubois Brigella, Bristol Steam Navigation Company v. Brown v. Carstairs Brown v. Smith Brown v. Tayleur Bryant and May v. London Assurance Burger v. Indemnity Mutual Marine Burnett v. Kensington Burton v. English Busk V. Royal Exchange Butler V. Wildman Cantillon v. London Assurance Canute Carinthia, Carisbrook Steamship Co. v. London Insurance Company Carter v. Boehm Castellain v. Thompson Chandler v. Blogg Chapman v. Royal Netherlands Steam Chei\?iss& ex parte City of Cambridge and Birmah Columbian, Corcoran v. Gurney . Cornfoot v. Royal Exchange . 82 Indemnity Marine Insurance Com- 113 {Addenda 423), 277, 278 {Addenda 437) 292 264 British and Foreign Marine Insurance 246 {Addenda 437) 271 {Addenda 437) 267, 268 24 {Addenda 434) 102 Indemnity 254. 201 226 {Addenda and Provincial Marine 303 217 133 "3 40 180 , 258 179 281 lOI 117 179 315 437) 34. Navigation Company 303 277 257 182 251 270 38 241 177 54 {Addenda 434) INDEX OF CASES XXI Cory V. BiuT . Cossmann v. West Creadon Crocker v. General Insurance Compan) Crooks V. Allan Crystal Cullen V. Butler Cunard S.S. Co. v. Marten Da Costa v. Edmonds Davis V. Gildart Davison v. Burnand . De Hahn v. Hartley . Dclamhreg De Vaux v. Salvador . Dickenson v. Jardine . Dixon V. Reid Dixon V. Royal Exchange Shipping Company Dixon V. Whitworth . Dudgeon v. Pembroke Duff V. Mackenzie Earle v. Rowcroft . Earl of Eglinton v. Norman Eden v. Parkinson Eden v. Poole Ellalines Elton s Farnworth v. Hyde Fawcus V. Sarsfield Field Steamship Co. v. Burr Fletcher v. Alexander . Fletcher v. Poole French v. Backhouse . Furtado v. Rodgers Gainsborough Gallia^ Gamba v. Le Mesurier Gambles v. Ocean Marine of Bombay Gardiner v. City of London U/wg Association Gas Float Whitton No. General Mutual Insurance Company v. Sherwood Gibbs V. Lamport Gibson v. Small Gillett V. Ellis Gladstone v. Clay Glazebrooke, in re PAGB no, Il6 146 247 55 295 257 94, 116, 117 226 {Addenda 437) 44 89 117, 273 263, 266 307 213. 243 335, 316 113 107 225 139, 140 191 109 257 273 293 435 57 155. 156, 158 140 244 306 293 114, 270 141 150 114 54 13 46 244 297 272 295 52 270 XXII MARINE INSURANCE PAGB Gledstanes v. Royal Exchange 35 GUnlivet ..... 180, 181 Glover v. Black .... 44. 45- 84 Godin V. London Assurance . 82 Gordon v. Rimmingtoii lOI Gould V. Oliver .... 44 Gracie v. Marine Insurance Company . • 56 Grainger v. Martin .... 151 Grand Saint Antoine .... 102 Gratitudine ..... 122, 123 Great India Peninsula Railway Company v. Saunders 222 Gulf of Florida, . . . .271 (^Addenda 437) Hagedorn v. Whitmore . 136, 194 Haigh V. De La Cour .... . 69 Hall V. Molyneux .... 47 Hamilton v. Pandorf . . .96, 98, 100 {Addenda 434) Hamilton v. Shedden .... 41 Hamilton v. Thames and Mersey Marine . 104 , 116, 118, 134 Hammond v. Reed .... 60 Harris v. Scaramanga .... • 313 narrower v. Hutchinson 40 Hart V. Standard Marine , . .131 [^Addenda 43 c) Haughton v. Empire Maiine . 38, 39. 50. 54 Hearne 7'. Edmunds .... 177 Henderson v. Shankland 302 Heye v. N. G. Lloyd .... 295 Hibbert v. Pigon .... 261 Hickie v. Rodocanachi 153 Hill V. Secreian .... 80 Hill V. Wilson .... 306 Hobbs V. Hannara .... 82 Hodgson V. Glover .... • 85 Hoffman v. Marshall .... 177 Hogg V. Horner .... 59 Home Insurance Company v. Smith . 13 Hoskins v. Pickersgill .... 46 Hough V. Head 204 Houlder v. Merchants Marine . 56 Hunter v. Potts .... 98 Hurry v. Royal Exchange 56 Huth V. Lamport .... 297 Hydarnes Steamship Company v. Indemnity Mutua Marine Insurance Company, Limited 28 Hyde v. Bruce .... 264 iNCHCAPE Rock, . . . .54 {Addenda 434) Inman v. Bischoff .... 143 , 203, 204, 20s INDEX OF CASES xxiil PAGE Investigator, .... . 104, 117, 118 lonides v. Universal Marine , 141 Irving V. Manning II. 69, 71, 151 Irving V. Richardson . 83 Jackson v. Union Marine . 143, 166 Jamieson v. Newcastle Steam Freight Insurance Association 143, 242 Job V. Langton 286 Johnson v. Sheddon . 197, 198 Journu V. Bourdieu 173 /. M. Lennard, , . . 258 /. IV. Parker .285 Kellner v. Le Mesurier . 114 Kenyon v. Berthon 262 Kidstoii V. Empire Marine , 179, 188, 221, 223 King V. Victoria Insurance Company . 170 Kingsford v. Marshall 177 Kirkmichael .... 182, 246 Knight of St. Michael 103 Knight of the Garter ^ . 103 [Addenda 434) La Valevr .... 243 Labinovitch v. Pacific Fire and Marine 59 Labrea, . .113 ^Addenda 423), 277, 278 {Addenda 437) Laing v. Union Marine Insurance Company, Limited, 13, 59, i7j Langhorn v. Hardy . 52 Lavabre v. Wilson . . . . 58 Laveroni v. Drury . . . 98 Leitnm, .... 301 Le Mesurier v. Vaughan 47 Lewis V. Rucker . 67, 68, 196, 197, 198 Leyland v. British and Foreign Marine Insurance Company . 241 Lidgett V. Secretan • 55> 68, 69, 216, 2i8 Livie V. Janson . 2X6 Lloyd V. Guibert . . . • 305 Lodore .... . 103 Lohre v. Aitchison 218 London Assurance v. Williams 201 London Steamship Owners' Association v. Grampian Steamship Company 252 Long V. Allen 133 Lucena v. Crawfurd . 77 Luke V. Lyde .... 8 M 'Cowan v. Baine . 253 M'Dougle V. Royal Exchange • 174. 17s. 180 Mansell v. Hoade 115 [Addenda 435) XXIV MARINE INSURANCE PACE Marine Insurance Company v. China Trans-Pacific Steamship Company ...... 217 Marsden v. Reed . . . .130 Mason v. Skurray . . . . • '73 Mead v. Davison ...... 34 Mercantile Steamship Company v. 'Jyser . . . 143 Merchants Trading Company v. Universal Marine . . 95 Mersey Shipping Company v. Thames and Mersey Marine . 204 Meyer v. Ralli ...... 222 Mills V. Roebuck ...... 273 Moir V. Royal Exchange ..... 264 Montoya v. London Assurance . . 97, 105, 183 Moody V. Surridge ...... 173 Morrison v. Universal Marine .... 277 Motteux V. London Assurance . . . .41 Mount V. Larkins ...... 41 Munroe ...... 182, 246 Munro v. Vandam , ..... 273 Naylor v. Palmer . Nesbitt V. Lushington Newman v. Cazalet New Orleans, . Niohe . Nicholson v. Chapman Normandy^ "3 113. "5 311, 312 215 {^Addenda 436) • 253 225 182, 246 {Addenda 436, 437) North of England Iron Steamship Insurance Association v. Armstrong ...... 168 North of England Oil Cake Company v. Archangel Marine . 80 North of Ireland Steamship Company v. London Assurance . 211 Notara v. Henderson ...... 123 Notman v. Anchor Insurance Company . . ,136 Olaf Trygvason Osseo ..... Oxenholme .... Palmer v. Blackburn Parmeter v. Todhunter Patrick v. Eames Paul V. Insurance Co. of North America Pawson V. Barnevelt . Pawson V. Watson Pelly V. Royal Exchange Pes/iawur, .... Peters v. Warren Insurance Company Pettigrew v. Pringle . Phillips V. Barber 289, 294 182, 246 239 67 148 86 57 261 267 60, 130 289 213, 244 263 IT7 INDEX OF CASES XXV PAGB Phyllis Angel, ..... . 150 ^W Pink V. Fleming .... 107 Pipon V. Cope .... no Pine V. Middle Dock Company X03, 281, 285 Planch^ V. Fletcher .... 269 Powell V. Gudgeon . 138 Power V. Whitmore .... 293. 311. 312 Prehn v. Bailey .... • 258 Preston v. Greenwood 133 Price V. Ai Ship's Small Damage Association . 174. 315. 316 Provincial Insurance Company of Canada v. Leduc . 143 Quebec Marine Insurance Company v. Commercial Bank of Canada .... 271 Ralli v. Troop ..... . 285 Rankin v. Potter . . 147. ISO Redmond v. Smith ..... 269 Red Sea . . . ... • IS3 Reid V. Standard Marine .... 238 Reimer v. Ringrose ..... . 158 Reischer v. Borwick .... 138, 142, 185 Republic of Bolivia v. Indemnity Marine Insurance Company, Limited . • "S [Addenda 435I, 277, 278 {Addenda 437) Richardson v. Burrows .... 182, 246, 256 52 39 131. 13s Co. v. Alliance Marine and General Rickman v. Carstairs . Robertson v. Clarke . Robertson v. French . Robinson Gold Minin Insurance Company . . . iie^ (Addenda 435) Roddick v. Indemnity Mutual Marine Insurance Company, Limited ..... Rodocanachi v. Elliott Rodriguez v. Melhuish Rodney, ..... Romulus, ..... 142 Rose V. Bank of Australasia . Rossetto V. Gurney .... Routledge v. Burrell .... Roux V. Salvador .... Royal E.xchange v. Tod Ruabon, ..... Rucker v. London Assurance . Schuster v. Fletcher Scott V. Bourdillon .... Scottish Marine Insurance Company v. Turner Scripture v. Lowell Mutual Fire 239 154. 155 38 292 [Addenda 435) 288 15S 262 147 154 39 217 57 , 287 173 153 162 104 XXVI MARINE INSURANCE Sea Insurance Company v. Blogg Seagrave v. Union Marine Shaw V. Felton Silva V. Livingston .... i66 Simon Israel and Company v. Sedgwick Simond v. Boydell Simpson v. Thompson Sir Walter Raleigh . Smith V. St. Lawrence Towboat Company Sparrow v. Carruthers Spitta V. Woodman , . Steam Hopper No. 66 . . . . 246 Steinmann v. Angier Line Stewart v. Merchants Marme . Stockdale v. Dunlop . Stoomvart Maatschappy Nederland v. Peninsular and Steam Navigation Company Strang v. Scott Sullivan Sawin . . Svendsen v. Wallace . . Tala^bra . , Taylor v. Dunbar Temperley v. Mackinnon Thames and Mersey v. Pitts, Sons, and King, Thellusson v. Staples . Thompson v. Hopper . Thompson v. Rowcroft Thrunscoes . , Todd V. Ritchie Trinder v. Thames and Mersey Marine Insurance Company Uhde v. Walters . Union Marine Insurance Company v. Berwick Uzielli V. Boston Marine Vallejo v. Wheeler Vancouver Victoria Voorwarts v. Khedive Walpole v. Ewer Walthew v. Mavrojani Warkicorth Wavertree Webster v. De Tastet Wellman v. Morse Wells V. Hopwood PACK 38 80 SI {Addenda 436) 61 28 169 288 254 57 52 {Addenda 437) 114 235. 236 85 Oriental 251 281 289, 294 289, 291, 294 139. tSa 55 107 303 38 140 153 98 no 141 39 246 225 no 217 244 251 3" 29c 257 296, 305 87 297 q6 INDEX OF CASES XX VII PACK West India and Panama Telegraph Company v. Home and Colonial Marine ..... 104, 117, 118 Wkiiton Gas Float No. 2 Wild Rose, . Wilkinson v. Hyde Williams v. North China Company Williams v. Shee Wilson V. Bank of Victoria Wilson V. Smith . . Xantho Xantho v. Valuta Yestor, Zbalandia, . 46 191 71 60 294 174 212 95 . 304 119 {Addenda 435) HISTORICAL INTRODUCTION In oversea commerce there are four primary or cardinal documents — (i) The invoice embodying the terms of the contract of sale, (2) The bill of exchange, (3) The bill of lading, (4) The policy of marine insurance. All four may be and usually are existent in one form or another in every transaction of oversea trade. But all, except perhaps the invoice, involve a third party in addition to the seller (shipper) and buyer (consignee) ; the bill of exchange involves a banker, the bill of lading a shipowner, the policy of marine insurance an assurer, or, as he is more usually called, an underwriter. Each of these documents becomes in respect of that third party, a separate and dis- tinct contract. Thus _the docimient o f marine insurance evidence s primarily the contract _ between the assured "" (merchant or shipowner) and his underwriter, but it is ^ capable of extension for the protgctix)!! of any one to whom the assured properly transfers his interest in the contract of^ insurance, and in the goods or matters to which it refers. r Marine insurance, according to an Act of Parliament of ( i6oi (43 Elizabeth, c. 12), has existed time out of mind, ) " by means whereof it cometh to pass that upon the loss or v ] perishing of any ship there foUoweth not the undoing of / / any man, but the loss lighteth rather easily upon many \ \ than heavy upon few, and rather upon them that adventure S B MARINE INSURANCE ( not than upon those who do adventure ; whereby all mer-^ 1 chants, especially those of the younger sort, are allured toy ( venture more willingly and more freely." It originally ) occupied in oversea commerce a merely subsidiary position f it came in only as the last of the arrangements to be made in connection with any venture at sea. But as the method of conducting oversea trade has altered, so has the contract of marine insurance become increasingly important. When large transactions are worked, as is now extremely common, with credits and margins, the amount of the premium of insurance is often the item that decides whether some ven- ture will be attempted or not. The protection which marine insurance affords is now usually regarded as an absolute necessity to the oversea merchant ; and thus by degrees marine insurance has become in one shape or another an integral, almost an essential, factor in oversea commercial transactions. The origin of marine insurance is lost in obscurity. In the eighteenth century, when it was felt that nothing could be counted respectable unless its descent were traceable from Rome or Athens, great efforts were made to find in Roman literature some evidence of the existence of marine insur- ance in Republican and in Imperial times. No direct reference has been found either in juridical or in general Roman literature, and the few passages that have been gathered out of historians and orators do not go much beyond saying that in some marine ventures the venturer was in some way secured against loss. The commerce that grew up between Italy and ports of the other Mediter- ranean lands must have been immense, and there is no doubt that certain provisions of the character of marine law were generally respected in the Levant, being known as the Rhodian Laws. From this name it is gathered that they must have been in vogue between 900 and 700 B.C., in the period of Rhodian prosperity. A provision of Rhodian law is mentioned in Justinian's Digest (Book XIV. Tit. 2, § i), but no reference is made to insurance. In any case, if insurance was practised in the ancient world, we have no direct evidence of it. Indeed no evidence exists HISTORICAL INTRODUCTION that marine insurance prevailed in any commercial com- munity at or before looo A.D. The only Celtic reference of which I am aware is in the Tale of the Two Young Ge7itle}nen^ and as it deals with a merchant owning three ships trading between Britain and the Indies, it is clear that either the tale dates from about the end of the six- teenth century or that this passage in it has been inter- polated after that period. There is also a striking absence of mention of insurance in each and all of the compilations of sea law with which modern European maritime legisla- tion began, whether the compilations be of Romance or of Teutonic origin. This is true of the Consolato del Mare, a code originating in Italy or Spain some time in the eleventh or twelfth century ; the Laws of Oleron, said to be issued by Richard I. of England in 1194, the earliest manuscript dating from 1266 ; the Laws of Wisby, compiled about the close of the thirteenth century ; and the much more recent Hanseatic Laws, published at Liibeck in 1593 or 1597, and again in revised and enlarged form in 16 14. But the silence of these codes on the subject of insurance has been ably explained by Judge Duer. All these laws are " laws of navigation, as distinguished from regulations purely commercial." The Consolato is very full in relation to freight and to the duties of master and mariners ; the Laws of Oleron deal expressly with French ships and French navigation ; the Wisby and the Hanseatic Laws are the work of communities engaged principally in the carrying trade. Consequently it would be unsafe to conclude from their silence about insurance that insurance did not exist at the time of their publication. Although ev idence. of the exact time a nd place of the origin of insurance in modem. Europe does not remain, there can be no reasonable doubt tHatits invention or rediscovery occurred in Italy at the close of the twelfth or the beginning of the thirteenth ^entury. The Florentine historian, Villani, who died at an advanced age in 1348, says that when the Jews were ex- pelled _ by Philip Augustus from France in "1182 they. ^ In Maclnnes and Nutt's Folk and Hero Tales from Argyleshire, London, 1890. MARINE INSURANCE adopted s ome, system of insurance of their property, What au thority he had for^jhjs statement does not appear, but the st atement itself proves that when Vlllani wrote insur- ance^ was an established practice in North Italy. The Jews either invented it for the occasion or took advantage of an institution already established in North Italy. The Lombard merchants of these days had in their hands all the banking and oversea trade of Europe as far as the Crimea on the east and London and Bruges on the north, and in the early part of the thirteenth century their adoption of the business of remitting money by bills of ex- change and of making profit upon loans resulted in the transference to their hands of the trade formerly in pos- session of the Jews. The Lombard merchants, especially the Genoese, spread all over middle Europe ; Lombard bankers, then known as " usurers," established themselves in every country ; as Hallam puts it, " the general progress of commerce wore off the bigotry that had obstructed their reception." If we may draw any conclusion from the recorded failures of English traders to exclude Italians from the carrying trade into England, and from the constant mention in early policies of insurance of " the surest writing or policy of insurance heretofore made in Lombard Street," it must be that marine insurance was brought into our country by the Lombards. From Malyne, an English writer of 1622, we learn that the Antwerp policy in his day contained a similar clause referring to Lombard Street in London, from which it may fairly be concluded that whether it was by Lombards, Englishmen or Flemings that the practice of marine insur- ance was established in Antwerp, it was established on the model adopted in London.^ London and Bruges have already been named as places where the Lombards were in force ; it is worth noting that they were also two of the principal factories of the great Hansa league, and at these two points of contact the ships and merchants of Italy and ^ But the earliest known policy in English {vide p. 323) refers to Antwerp conditions as recognised in England in 1555. HISTORICAL INTRODUCTION Spain transferred to the ships and merchants of the Hansa towns such part of their cargoes as were destined for a more northern market ; through them oriental produce was transmitted to the furthest parts of the north. Introduced by these pioneers of commerce, marine insur- ance took firm root in the different commercial communities of Europe. The firmness of its hold and the reality of its growth can be best seen on consideration of the various ordinances and codes which were compilations in n\ore or less systematic form of the insurance usages that had developed in different commercial centres. The most notable of these are : — The Ordinances of Barcelona, 1434, 1458, 1461, 1484. „ „ Florence, 1523. „ „ Burgos, 1538. „ „ Bilbao, 1560. Le Guidon de la Mer, Rouen, between 1556 and 1584, published in 1671 by Cleirac. The Ordinance of Middelburg, 1600. The Ordinances of Rotterdam, 1604, 1635, 1655. Us et Coutumes de la Mer, by Cleirac of Rouen, 1656. These were followed by what is generally allowed to be one of the most perfect achievements in codification ever accomplished, the production of a genius whose name has been utterly forgotten, the great Ordonnance de la Marine, 1681. This work, one of the grand achievements of Louis XIV.'s reign, was undertaken and completed under the direction of his famous minister, Colbert. For English students it has a peculiar interest, for it has been largely instrumental in moulding the English law of marine insur- ance.^ In France its authority remained so great that when Napoleon I, issued his codification of French law, great part of Colbert's Ordonnance was assumed into it with but ^ In this connection one should notice The Undet-writing and Average Regulations of the City of Hamburg, 1731. Translation published in Lloyd's List of 12, 17, 19 Feb. 1903. MARINE INSURANCE slight alteration, so that in many respects we have a re- vision and perpetuation of the Ordonnance in the Code de Commerce of 1 807. On the model of this last have been formed all the modern codes of commercial law (including sea insurance) adopted by the different countries of Continental Europe, e.g. the Spanish Commercial Code of 1886, translated into English in 1896 by F. W. Raikes, Q.C. These codes have in their turn been elucidated and more closely defined by judges who have decided cases in accordance with their provisions. The convenience and advantage of a code are not that it makes reference to cases unnecessary, but that it definitely states the law on all points discussed in the code in their proper relation one to another.^ As Judge Duer observes : " Nearly every written law on a complex subject requires a commentary — a commentary that study, reflection, and experience can alone supply." Of subsequent local or municipal regulations regarding insurance the most important are the Hamburg conditions of marine insurance, 1847, revised 1867; Bremen conditions of marine insurance, which have been translated into English, the former by the late Dr. E. E. Wendt of London, the latter by Mr. F. Reck of Bremen. To the list of codes must be added that which was in 1867 described by the late Mr. Justice Willes (in a paper printed in the Report of Unseaworthy Ships Commission, 1874 ; vol- !••) Appendix, No. Ivii.) as "the latest and per- haps best considered one, being the joint production of the lawyers and merchants of North Germany," namely the North German General Mercantile Code of 1861, adopted by Prussia in 1862, accepted by the law of i6th April 1 87 1 constituting the German Empire as imperial German law, and now known as the German General Mercantile Code {Deu/sc/ies Allgemeinei Handelsgesetztnich), * Cf. Maine's Ancient Law, p. 14, HISTORICAL INTRODUCTION of which Dr. Wendt issued a translation in his work on Maritime Legislation (3rd ed., 1888 — Appendix). This code has recently been revised, and we now possess the new German Maritime Code, part of the new German General Maritime Law, passed May 1897 to take effect from ist January 1900. Translated into English by W. Arnold, 1900. Meanwhile matters in England proceeded in a different direction. At present the English-speaking peoples are unique in their failure to compile codes or adapt their legal acquirements and results to that form of expression. There is neither ordinance nor code to refer to, and up to the middle of the eighteenth century there is great dearth of that specially English product, reported judicial decision. In the introduction to his book on Marine Instira7ice^ Park says : *' I am sure I rather go beyond bounds if I assert that in all our reporters from the reign of Queen Elizabeth to the year 1756, when Lord Mansfield became Chief Justice of the King's Bench, there are sixty cases upon matters of insurance. Even those cases which are reported are such loose notes, mostly of trials at Nisi Prius, contain- ing a short opinion of a single judge, and very often no opinion at all, but merely a general verdict, that little in- formation can be collected upon the subject. From hence it must necessarily follow that as there have been few positive regulations upon insurances, the principles on which they were founded could never have been widely diffused, nor very generally known." The purpose of the Act of Parliament of 1 60 1 (see p. i ) was the institution of a Court of Policies of Insurance, to consist of an Admiralty Judge, the Recorder of London, two doctors of civil law, two common lawyers and eight merchants, any five of whom were empowered to hear and decide all causes arising in London. But there are no traces of much activity on the part of this court : the restriction of its jurisdiction may partly explain this, but a more serious cause is to be found in the fact that it was decided that an 6 MARINE INSURANCE adverse decision in the court did not prevent the reopening of the whole dispute in a court of common law. By 1720 the Court of Policies of Insurance had fallen entirely into disuse ; the place of regular law proceedings being largely taken by arbitration in which the practice of continental countiies was cited as authoritative or at least deserving attention, and their ordinances and codes were admitted as evidence of custom and practice. This went on till the days of William Murray, Lord Mansfield, who presided in the Court of King's Bench from 1756 to 1788, Park, in the introduction to his Mariiie Insurance already quoted, gives a most interesting account of the changes in procedure introduced by Lord Mansfield These changes were so radical that they almost amounted to a reconstitution of the court. Before his time the whole case "was left generally to the jury without any minute statement from the bench of the principles of law on which insurances were established. . . . Lord Mansfield in his statement of the case to the jury enlarged upon the rules and principles of law, as applicable to that case ; and left it to them to make the application of those principles to the facts in evidence before them." Being hampered by few precedents he had a. clear field, and his master mind practically created the commercial law of modern England. His decisions and dicta are the foundations of our insurance lav.', and through the acceptance of them by eminent American judges they lie at the base of the American decisions. He took full advantage of all he could gather from all the continental ordinances and codes existent in his day accepting his legal principles largely from these sources. The practices and customs of trade he learnt from mercantile special jurors, out of whom he gradually trained a body of experts in insurance matters. To them he most carefully expounded the law, and in his judgments he cited foreign authorities freely, For instance, in the case of Luke v. Lyde (1759, 2 Burr. 883) which dealt with the question of liability for freight due for goods lost at sea, " he cited the Roman Pandects, the Consolato del Mare, laws of Wisby and Oleron, two English and two HISTORICAL INTRODUCTION foreign mercantile writers, and the French ordinance ; and deduced from them the principle which has since been part of the law of England" (Scrutton, Mercantile Law^ p. 15). As respects the present position of the law of insurance in England, it may be said that the contract of insurance falls under the general rule of English Contract Law, namely, that the determining element of the intent of the contract is the common intention of the contracting parties. As years have gone on the possibility of diversity of in- tention and the difficulty of discovering the actual common intention have both been much reduced by the fact that the decided cases have almost all related to one set insurance formula. \xi fact the ordinary form of policy prevailing in England since about 16 13 is veiy like the Lloyd's policy IpriiioF to-clay. Consequently we have nearly three hundred years of decision and tradition bearing on one set of words, with the resultant certainty of the range and effect in English law of the words used in the customary form of the contract of marine insurance. A fixed form of policy offers the almost invaluable advantage of securing to both parties a certainty of signification in the terms employed, with the consequent stability desirable in all transactions intowhich it is introduced as a factor. On the other hand there may be some reason for doubting whether a form that may have been adequate to the commercial wants of the seventeenth century, can fairly be expected to be flexible enough to adapt itself to the wants of the nineteenth or twentieth. Every day instances occur in which merchants, shipowners, and underwriters are driven to most curious expedients in their endeavours to adapt an ancient, not to say antiquated, document to modern needs. In 1894 Lord Herschell (then Lord Chancellor) intro- duced into Parliament a codifying bill dealing with Marine Insurance. The bill was submitted to the various com- mercial bodies whose interests it affects, with the result that a general agreement has in the end been reached on almost every point. The bill has been reintroduced session after session, but so far has not become law. There appears, however, to be a fair prospect that it may be passed by both Houses by the autumn of 1903. CHAPTER I ELEMENTARY NOTIONS Slip^ Covering Note, Policy, Stamp Act Intent of Contract of Marine Insurance. — As the detemiining element of the intent of a contract is the common intention of the contracting parties, the simplest and surest method of arriving at the true character of the contract of sea insurance is to consider what is the intention common to a merchant or shipowner (or broker acting on his behalf) offering a risk and to an insurer (underwriter) accepting it. It is that the merchant or shipowner (or broker) desires the underwriter to assume in respect of the article which the merchant or shipowner (or broker) desires to insure, the liability for a certain named proportion of such loss or damage as may chance to accrue to it from certain named perils or dangers, and that the underwriter is content to assume this liability in return for a certain agreed sum of money. Grood Faith — Actual Interest. — It is almost self- evident that the transaction is assumed to be undertaken in good faith, and that consequently the merchant or ship- owner actually has something which can sustain loss or damage by the dangers arising in the course of navigation. The transaction described may also be expressed in the following form : — (1) A Contract of Indemnity, (2) Made in good faith {in uberrima fide\ (3) Referring to a defined proportion, (4) Of a genuine interest in a named object, (5) Being against contingencies definitely expressed, to which that object is actually exposed, CHAP. I GOOD FAITH — ASSURED AND ASSURER ii (6) And in return for a fixed and determined con- sideration.i The salient points of the transaction may be briefly put thus : Insurance is a Hmited aleatory or contingent contract of indemnity.^ Assured and Assurer. — The parties to the contract are known as the assured and the assurer, the former of whom is protected by the latter from losses and damage suffered by the property insured in consequence of the perils insured against. The assurer is usually in England named the underwriter, because he subscribes his name to the document of insurance. When a request is made to an underwriter to cover property by insurance, the act is usually expressed by saying that " a risk " has been offered to the underwriter. " Risk " thus comes to mean the liability of an underwriter under his contract. But the word " risk " is also used in a more limited sense to mean a peril or danger insured against, for instance the risk of fire, the risk of jettison, etc. The assured is usually a merchant or a shipowner, and is perhaps best described as a person who has an insurable interest in the property insured. The nature of insurable interest and the various kinds of property, etc., which can be insured will be ^ Cf. Duer i, 58. "It is a contract of indemnity in which the insurer, in consideration of the payment of a certain premium, agrees to make good to the assured all losses, not exceeding a certain amount, that may happen to the subject insured, from the risks enumerated or implied in the policy, during a certain voyage or period of time." E-xception might perhaps be taken to the phrase "not exceeding a certain amount." Cf. also the Belgian Insurance law of 1874, " L'assurance est un contrat par lequel I'assureur s' oblige, nioyennant une prime, k indemniser I'assur^ des pertes ou dommages qu'6prouverait celui-ci par suite de certains ^v^nements fortuits ou de force majeure. ' ' The second last European code, the Spanish Commercial Code of 1886, avoids the dangers and difficulties of definition by silence, in this respect conforming more to the habit and style of English commercial law than to that which has prevailed in continental commercial legal practice, especially in Latin countries. ^ Cf. Mr. Justice Patterson in Irving v. Manning, 1847, "A policy of insurance is not a perfect contract of indemnity." Vide p. 70. 12 MARINE INSURANCE discussed hereafter. But the merchant or shipowner need not himself effect the insurance, he may employ some one to do it for him. An agent for this class of business is called an insurance broker, his remuneration consists of a brokerage, being a percentage (usually 5 per cent or 2| per cent) of the cash paid to the underwriter for covering Addenda, the risk, which is termed the premium. Offer and Acceptance of Risk. — A risk may be offered for insurance either orally or in writing ; acceptance by the underwriter may also be signified either orally or in writing ; if in writing it is usually by the underwriter signing or agree- ing to sign a memorandum of the transaction. The insurance regulations of most European countries compel the under- writer to prepare or issue a signed document expressing the contract : this document is known as a policy. But some of these regulations do not make the absence of a policy deprive the assured of the advantage of any arrange- ment made between him and the underwriter^this holds specially of Belgium. In France the majority of the decisions is said to tend to the view that a policy is essential for the purpose of proving the contract (that is, presumably, its extent and intent), but that it is not essential for the pur- pose of giving the contract validity. It is hard to see wherein can lie the value of a legally valid contract of whose contents evidence is not forthcoming, unless, indeed, there are elements so essential to certain insurances that the mere existence of the contract of insurance involves the existence of certain terms or conditions in that contract. English Practice. — The English procedure in the offer and acceptance of a risk is unique. It is usual for the broker to offer risks by means of a shorthand description of the venture in question, called a slip (see Appendix A). The underwriter signifies his acceptance of the whole or of a part of the value exposed to peril, by signing or initialling this slip, putting down the amount for which he accepts liability, or by signing and issuing to the assured (whether principal or broker) a similar document made out in his own office called a covering note or insurance note (see Appendix C), But neither slip nor covering note constitutes 1 SLIP 13 the contract. These documents are merely first sketches of the contract ; memoranda intended to serve as the groundwork of the contract in its finally completed form ; they are simply m^nioires pour servir, so incomplete that they can only be explained when taken in conjunction with the contract in its definitively elaborated form. Slip. — Slips or insurance notes of this kind are in England of no legal value : in the form described they are not admitted in any English court as evidence for anything beyond the date of acceptance of a risk ; ^ this being the result of fiscal arrangements which are enforced partly by invalidating all contracts not fulfilling the requirements of the Revenue Department. Still slips and insurance notes are regarded by the insuring public with the most jealous care. They are taken by the parties concerned as fixing the terms of the contract so far as they are expressed in these documents, and any failure to fulfil what was under- stood to be the agreement would most seriously damage the good name and commercial reputation of the ofifending party. Slips and covering notes are merely provisional agreements, binding in honour only, to issue a stamped policy on certain terms and conditions on receipt of the necessary information. They cannot be stamped and sued upon as policies.2 It is expressly provided by 54 & 55 Vict. c. 39, that no contract or agreement for a sea insurance shall be valid unless the same is expressed in what is termed a policy. There is thus a complete discrepancy between positive statute law and the traditional and actual practice of daily business. This is carried to such an extent that in marine insurance circles the honourable obligation to fulfil to the utmost any contract for which slip or cover has been initialled or signed by an underwriter, is regarded as so binding that ■* But given in evidence and referred to in judgment of Laing v. Union Marine, Q. B. D. 10 Apl. 1895, 11 Times L.R. 359; and in Gai-diner V. City of London Ujwg Assn., and The Aikshaw, 9 Times Addenda. L.R. 605. 2 Home Insurance Company v. Smith (1898), Mathew, J. , in Q. B. D. 14 Times L.R. 366, see p. 24. 14 MARINE INSURANCE chap. it is not expected that any information respecting the risk, arriving subsequent to the acceptance of the risk, need be communicated to him, even though it bear on the nature and character of the risk. The ground of that abstention is that it is not fair to tempt any man to swerve from a course to which he is in honour bound. On the side of the assured a much greater laxity has prevailed. Where the venture contemplated cannot be entered upon, there is evidently reasonable cause for the assured to ask the under- writer to consent to cancel the agreement. But if the venture is entered upon in conditions anything like those contemplated when the agreement in question was made, there should not be a request for cancellation without some extremely strong ground, one which ought not to be in any way dependent on the rate of premium paid as compared with that at which the risk might, or could, be insured else- where. There seems, in fact, to be no good ground for holding that the assured on a slip or covering note is not bound in honour equally with the underwriter to complete his contract on the terms arranged, provided the risk in question reaches the commencement specified for it by the parties. Quotation. — The rate at which an underwriter expresses his willingness to assume liability for a venture is termed a " quotation." Obviously a mere quotation of itself imposes no legal obligation until it has been accepted by, or on behalf of, the assured. Apart from the provisions of the statute to which reference has been made, it is clear that until acceptance there has never been any agreement between underwriter and assured, and consequently that it is open to the underwriter at any time before acceptance to withdraw his quotation. This is in law the case even when the underwriter has given to the assured what in the language of commerce is known as a " firm " offer. It is popularly supposed that such an offer imposes a legal obligation on the part of the person making the offer to keep it open until the person to whom it is made either rejects or accepts it. But in law there is no foundation for such a view unless some "consideration" be given to the underwriter for the undertaking on his part to keep his offer open. Considera- QUOTATION IS tion is one of the essentials of a contract according to English law, and may be described generally as " some matter agreed upon as a return or equivalent for the promise made, showing that the promise is not made gratuitously." Effect of Quotation. — But it does not follow that because a quotation or a firm offer or the initialling of a slip imposes no legal obhgation, it does not give rise to an obligation in honour on the part of the underwriter. Different questions arise as to the duties of an underwriter under the code of honour by which he is bound, most of which are by this time settled by usage. It is evident that the com- plexion of any proposed insurance may be completely altered by the receipt of news. Besides, further information and reflection may cause the underwriter to change his opinion of the conditions and the premium required for the risk proposed. As the offerer has taken away the quotation to consider and remains entirely free of any obligation to accept unless at his own pleasure, it is evidently, on the grounds of ordinary fair dealing, unreasonable to expect that the other party to the proposed agreement, the underwriter, should be placed in a worse position. Besides, it frequently happens that the same business is offered through various hands, without any one knowing definitely through whom it will actually be done. There is no obliga- tion on the underwriter to reserve himself for the first offerer of the risk, although, as a matter of practice, later offerers are often informed that the risk has been shown already. But that is entirely a matter of friendly courtesy. When a broker has reason to expect that the risk will be offered through various hands, or that the rate, if not at once accepted, is likely to be increased, he is accustomed — in case he is on such terms with his principal that his action is sure not to be misunderstood — to accept the rate "subject to approval" (s.a.) and to get the underwriter to sign a sHp s.a. This is really changing the quotation into a signed slip for a risk containing the special clause subject to approval. Such a slip can be no more valid than any other slip ; it is of no legal validity, it is only better than a quotation in so far as it is a written document evidencing 16 MARINE INSURANCE chap. the intentions of the parties at the time it was signed. But as a matter of honour^ it is expected that if an underwriter agrees to the submission of his quotation in this form, he will-^for such a time as will permit the broker to receive from his principal a message indicating acceptance or refusal — hold himself ready to go on with the insurance on the terms he named. Practice in Quotation. — Generally in practice an under- writer may be expected to confirm within reasonable time quotations made to principals or agents (brokers), unless meanwhile exceptional circumstances have arisen, unex- pected news has come in, or the underwriter has already undertaken a risk on the venture from another offerer. But that is a matter entirely of honourable and not of legal obligation. The following instance of the course adopted by a Marine Insurance Company in connection with a quotation may be of interest and value ; — On 2 1st August 1888, Messrs. H. of B., Lancashire, wrote to the X. Marine Insurance Company, Liverpool, asking their rate on cotton valued ^650 per ship T. D. from P. to Liverpool, due to leave P. about the end of June. In reply the X. Company wrote on 22nd August on a memorandum form, bearing the full name of the company and the clause " Quotations available for three days only," the following : — " In reply to your enquiry of yesterday we beg to quote as follows : T. D., P. to Liverpool, 65 bales cotton, value ^650, 40s. per cent." On 24th August the X. Company received a letter from Messrs. H. of B. dated from 23rd August, accepting their quotation. On 23rd August a report appeared in the papers that the T. D. had been lost some time before ; and when on 24th August the X. Company received Messrs. H.'s accept- ance of the quotation, they replied that the ship was lost and quite uninsurable. Messrs. H. answered that they must hold them to their quotation. The X. Company submitted the matter to eminent QUOTATION 17 counsel, who advised that the company, having received no consideration to keep the ofiter open for three days, was at liberty to withdraw the offer any time before acceptance : that not having so withdrawn, the company could not refuse to ratify acceptance if made within three days, even if it ■reached the company after news of the loss : that in the absence of the three days' clause or other similar clause, the proposed assured would have a reasonable time within which to exercise his option of acceptance or refusal of the quotation, but that such reasonable time would probably not extend beyond the last post of the day on which the offer was received. On receipt of this opinion the X. Company issued its policy for ^650 per T. D. from P. to Liverpool at 40s. per cent and paid the loss. Warned by this instance of the dangers that may be contained in a clause apparently rendering a quotation unavailable after a named time, but actually making it available for all that time, unless specially retracted, another Liverpool company has adopted the form of quotation note printed in Appendix D, containing the clause " Subject to acceptance by ... . and no risk until confirmed by us." Under this clause even the payment of a consideration for keeping the quotation open for accept- ance till a named time would not legally oblige the underwriter in case of acceptance to issue his policy on the terms named, as there is the special reserve in the clause providing that no risk attaches until the quotation after acceptance by the assured is confirmed by the underwriter. Without any clause naming a period for which a quotation is available, there appears to be no reason to doubt that — provided no withdrawal of the underwriter's quotation comes in meanwhile — an acceptance posted by the last mail of the day on which the offer is Teceived, is acceptance within a reasonable time. Policy. — The broker's slip, the underwriter's cover note, or his signed quotation accepted by the intending assured, can be regarded only as a temporary memorandum of the intention of the parties to an insurance : neither of them is c i8 MARINE INSURANCE chap. the definitive expression of the contract to insure. That expression is usually found in the shape of what is termed a policy. The name is common to all commercial countries, all having adopted it from the Italian polizza d^assiciiraziont (literally, promise of insurance). As the insurer signifies his acceptance of the liabilities detailed in the policy aflfect- ing the objects mentioned therein as insured, by subscribing his name to the policy, he is called in English the under- writer. Classes of Policies. — Policies are divided into various classes in accordance with the different kinds of insurances eflfected by means of them. The most important of these are voyage policies and time policies, in which property is insured for transit from one point to another, or for a certain period of time. Interest policies are those in which it is clear from their form and wording thai they are intended to cover some real interest in ship, goods, freight, or other matter capable of insurance ; while wager policies show from their form and wording that they do not require from the assured any proof of reality of interest in what is stated as the subject of insurance. In valued policies, the amount at which the insured object is valued is definitely stated ; while in ope?! policies there is no such statement, and in case of the value being needed for completing the transaction of insurance, it has to be fixed presumably in accordance with the law or usage of the country in which the insurance is effected, unless there be some stipulation to the contrary in the policy. Finally, in named policies the vessel on which the risk is taken is definitely stated ; in floating policies there is usually no such limitation, the wording being made wide enough to cover the insured interest by whatever steamer or steamers, ship or ships it may come. The old designa- tion of this kind of insurance was in quovis. But it is not rare nowadays to have floating policies limited to certain named fleets or classes of vessels, or to vessels to be approved by the underwriter before being " declared on the policy" as it is termed. I STAMP— STAMP ACT 19 The ordinary form of English policy will be discussed at length hereafter (pp. 27-129). Stamp. — The Revenue authorities of most European countries have laid marine insurances under special taxes. In England the regulations for this purpose have been until lately of exceptionally complicated character, but matters have been considerably simplified by the latest Act of Parhament dealing with the subject, the Stamp Act, 1891 [54 & 55 Vict. c. 39]. The importance of these regulations lies in the fact that unless they are complied with, no document, however clear the intention of the parties to it, can be considered valid or of use for the purposes of evidence in any court of the United Kingdom except as regards the date of acceptance of a risk. The provisions of the Act and of the schedule are so short that it is worth while giving them in full, as under : — [54 & 55 Vict.] STAMP ACT 1891 [Ch. 39.] Policies of Insurance 91. For the purposes of this Act the expression "policy of insurance " includes every writing whereby any contract of insurance is made or agreed to be made, or is evidenced, and the expression " insurance " includes assurance. Policies 0/ Sea Instiraiice 92. (i) For the purposes of this Act the expression " poHcy of sea insurance " means any insurance (including reinsurance) made upon any ship or vessel, or upon the machinery, tackle, or furniture of any ship or vessel, or upon any goods, merchandise, or property of any descrip- tion whatever on board of any ship or vessel, or upon the freight of, or any other interest which may be lawfully insured in or relating to, any ship or vessel, and includes any insurance of goods, merchandise, or property for any transit which includes not only a sea risk, but also any other risk incidental to the transit insured from the com- MARINE INSURANCE mencement of the transit to the ultimate destination covered by the insurance. (2) Where any person, in consideration of any sum of money paid or to be paid for additional freight or otherwise, agrees to take upon himself any risk attending goods, merciiauuise, or property of any description whatever while on board of any ship or vessel, or engages to indemnify the owner of any such goods, merchandise, or property from any risk, loss, or damage, such agreement or engagementshall.be deemed to be a contract for sea insurance. 93. (1) A contract for sea insurance (other than such insurance as is referred to in the fifty-fifth section of the Merchant Shipping Act Amendment Act, 1862) shall not be valid unless the same is expressed in a policy of sea insurance. (2) No policy of sea insurance made for time shall be made for any time exceeding twelve months. ^ (3) A policy of sea insurance shall not be valid unless it speci- fies the particular risk or adventure^ the names of the subscribers or underwriters, and the sum or sums insured, and is made for a period not exceeding twelve months. 94. Where any sea insurance is made for a voyage and also for time, or to extend to or cover any time beyond thirty days after the ship shall have arrived at her destina- tion and been there moored at anchor, the policy is to be charged with duty as a policy for a voyage, and also with duty as a policy for time. 95. (i) A policy of sea insurance may not be stamped at any time after it is signed or underwritten by any person, except in the two cases following ; that is to say, (a) Any policy of mutual insurance having a stamp impressed thereon may, if required, be stamped with an additional stamp, provided that at the time the additional stamp is required the policy has not been signed or underwritten to an amount exceeding the sum or sums which the duty impressed thereon extends to cover : (^) Any policy made or executed out of, but bemg in any manner enforceable within, the United Kingdom, may be stamped at any time within ten days after it has been ^ But see pp. 236, 237, for provisions re Continuation Clause in Finance Act of 1901 (i Edw. VII. ch. 7). STAMP ACT first received in the United Kingdom on payment of the duty only. (2) Provided that a policy of sea insurance shall for the purpose of production in evidence be an instrument which may legally be stamped after the execution thereof, and the penalty payable by law on stamping the same shall be the sum of ;^IOO. 96. Nothing in this Act shall prohibit the making of any alteration which may lawfully be made in the terms and conditions of any policy of sea insurance after the poHcy has been underwritten ; provided that the alteration be made before notice of the determination of the risk originally insured, and that it do not prolong the time covered by the insurance thereby made beyond the period of six months in the case of a policy made for a less period than six months, or beyond the period of twelve months in the case of a policy made for a greater period than six months, and that the articles insured remain the property of the same person or persons, and that no additional or further sum be insured by reason or means of the alteration. 97. (i) If any person — (a) Becomes an assurer upon any sea insurance, or enters into any contract for sea insurance, or directly or indirectly receives or contracts or takes credit in account for any premium or consideration for any sea insurance, or know- ingly takes upon himself any risk, or renders himself liable to pay, or pays, any sum of money upon any loss, peril, or contingency relative to any sea insurance, unless the in- surance is expressed in a policy of sea insurance duly stamped, or (d) Makes or effects, or knowingly procures to be made or effected, any sea insurance, or directly or indirectly gives or pays, or renders himself liable to pay, any premium or consideration for any sea insurance, or enters into any contract for sea insurance, unless the insurance is expressed in a policy of sea insurance duly stamped, or (c) Is concerned in any fraudulent contrivance or device, or is guilty of any wilful act, neglect, or omission, with intent to evade the duties payable on policies of sea insur- 22 MARINE INSURANCE CHAP. ance, or whereby the duties may be evaded, he shall for every such ofifence incur a fine of i^ioo. (2) Every broker, agent, or other person negotiating or transacting any sea insurance contrary to the true intent and meaning of this Act, or writing any policy of sea insur- ance upon material not duly stamped, shall for every such offence incur a fine of one hundred pounds, and shall not have any legal claim to any charge for brokerage, com- mission, or agency, or for any money expended or paid by him with reference to the insurance, and any money paid to him in respect of any such charge shall be deemed to be paid without consideration, and shall remain the property of his employer. (3). If any person makes or issues, or causes to be made or issued, any document purporting to be a copy of a policy of sea insurance, and there is not at the time of the making or issue in existence a policy duly stamped whereof the said document is a copy, he shall for such offence, in addition to any other fine or penalty to which he may be liable, incur a fine of .;^ioo. [54 & 55 Vict.] SCHEDULE [Ch. 39.] STAMP ACT 1 89 I Stamp duties on policies of sea insurance — (1) Where the premium or consideration does not exceed the rate of 2s, 6d. per cent of the sum insured ...... ^o o I (2) In any other case — (a) For or upon any voyage — In respect of every full sum of ;^ 100, and also any fractional part of ;^ 1 00 thereby insured . . . .003 {d) For time — In respect of every full sum of ^100, and also any fractional part of ^100 thereby insured — » CONSIDERATION— SEA RISK 23 Where the insurance shall be made for any time not exceeding six months ..... ;^o o 3 Where the insurance shall be made for any time exceeding six months and not exceeding twelve months . . . .006 Particulars of Adventure. — It is clear that the par- ticulars of the adventure, the underwriters and the amounts underwritten, which are by § 93, 3 essential to the validity of a policy of sea insurance, are only what one would expect to find in such a document. They are, in fact, the particulars given in an abbreviated conventional form on the slip already described. Limit of Time Policy. — The special limitation of policies for time to a period not exceeding twelve months is one which most underwriters have come to regard as a salutary protection against themselves, though it is simply a matter of revenue regulation. Consideration. — The requirements of English Statute Law for the expression of certain particulars in a policy of sea insurance seem, without doubt, to be based on the requirements of Louis XIV.'s Ordonnance de la Marine. The earlier document differed from the later in making no restriction of time policies to a period of twelve months, and in requiring a great number of additional particulars, among them the amount of premium. The absence of this requirement in the English statute is all the more striking because no policy is issued in England or America without some mention of consideration. Still that occurs, not in consequence of any special legislation, but in con- formity with the general contract law of England, by which, without consideration, a promise or agreement cannot be construed into a contract valid at law. If such genuine consideration can be proved, no question will be raised regarding its adequacy or reasonableness, it being always provided that the promise or agreement has been made in good faith and between competent parties. 24 MARINE INSURANCE chap. Meaning of "Sea Risk." — In the interpretation of the Stamp Acts dealing with marine insurance the question has arisen, what constitutes a sea risk? From examination of the Customs Regulations, and of correspondence with the Board of Inland Revenue, it appears that the Board do not regard as sea risks the following : — risks by canal or risks on navigable rivers or inland lakes not extending to tidal waters. No doubt this decision was come to after consideration of the topography of the United Kingdom and the parts of the Continent of Europe nearest to it ; within these limits there is little to say against it. But it is worth remarking that this interpretation leaves all insurances effected in the United Kingdom on the hulls, freights, cargoes, disbursements, etc., of vessels engaged in trade on the vast inland lakes of North America subject to no duty beyond id. per policy. Slip Stamped. — As a slip or an insurance note almost invariably contains the three essentials of a policy prescribed by the Stamp Act (particulars of the venture, names of the underwriters, and the amounts insured), it seems not im- possible that a slip or an insurance note, if properly stamped, may become legal evidence of a contract of sea insurance. This question suggested itself to Lowndes (Law of M. I., 2nd ed., p. 73), but only as affecting the case in which it becomes necessary to submit to the penalty for stamping a document after execution ; such a case as would arise if, for instance, an underwriter refused to issue a policy cover- ing a risk for which he had signed a slip or insurance note. It has on several occasions been suggested that when no evidence of an agreement to enter into a contract of sea insurance exists except a slip, that evidence maybe rendered valid at law by having the slip properly stamped. This suggestion has been disposed of by the decision of Mathew, J., in Home Mari7ie Insurance Company v. Sjnith (1898),^ that the " cover note was not a policy . . . neither was it a contract to issue a policy. It was a contract of insurance Addenda, binding in honour only." Practical Difficulties. — The difficulties which occur in ' 14 Times L. R. 366. I SPOILED STAMPS— SUGGESTIONS 25 daily business in connection with the appHcation of the Stamp Act to marine insurance arise not so much from any obscurity in the Act as from the immense variety of cir- cumstances to which it has to be applied. There is also to be considered the diversity of the interests of the assured to whom the stamp is charged ; he wishes to have a legally valid document, and yet he has no desire to waste money in unnecessary stamps. Spoiled or Unused Stamps. — In the Stamp Management Act of 1 89 1 liberal regulations are announced for the recoveiy of spoiled or unused stamps. Of these, however, it is frequently impossible to avail oneself, owing to the delay probably inseparable from the proper accurate pro- cedure of a public department, and sometimes from the difficulty of tendering absolute proof of the identity of goods insured by error on more than one policy, or perhaps mis- described in a policy for which another is later substituted. Correspondence with Board of Inland Revenue. — A useful collection of correspondence between the Board of Inland Revenue and underwriters on matters connected with the interpretation of the Stamp Acts may be found in E. K. Allen's Shiinp Duties on Sea Insw'ances. That book appeared before the Act of 1891, which consequently is only dealt with in an addendum issued with the copies published after the Act passed. Suggestions. — It seems a pity that there should be such difficulty in the correct carrying out of the Stamp Act as regards marine insurances. The amount of revenue brought into the Exchequer is comparatively insignificant,^ and the period of time within which documents arriving from abroad must be stamped is so restricted that un- doubtedly some portion of the tax is irretrievably lost. Neither assured nor assurer desires to evade the duty on any policy to which effect may need to be given in this country ; but it often happens that in the ordinary course of business the policy does not come into the hands of the beneficiary in this country till after the period within which the document can be stamped. ' Under _;^20o,ooo per annum ; in 1901-2, ;^i98,si7. 26 MARINE INSURANCE chap, l All this delay in paying stamp, and consequent occasional loss to the Exchequer, could be avoided if it were made incumbent on the holder of the policy to get it impressed on receipt with a stamp of small value, say id. or even 3d. There would be no temptation to evade or delay payment of such a small amount. Even after the reduction of the stamp on insurances at a premium of 2s. 6d. per cent and under, to id., there is a possibility that some insurances are placed abroad, even with the foreign agencies of English companies, to avoid the duty of 3d. per cent. On a premium of 3s. per cent the stamp is one-twelfth of the gross premium. As matters stand now the very finest risks are most severely weighted with the impositions of revenue. Is any other business oppressed with an equally heavy tax ? Could not the duties on marine insurances be made the same as those on fire insurances, namely id. per policy, irrespective of duration Addenda, and amount ? CHAPTER II THE POLICY : PART I Policy Forms y Common English Policy, The Heading, The Assured, Lost or Not Lost, At and From As already stated, the usual expression of a contract ol sea insurance is a policy. But before proceeding to the consideration of the usual English form of policy it is desirable to premise that even in its fullest form the policy does not expressly detail the whole of the contract between assured and underwriter. (Cf. Amould, M. I. pp. 40, 41, and see below, pp. 132-134, 144.) Early Italian Forms. — Citing Malyne, an English writer of about 1620, Marshall writing in the period be- tween 1802 and 1823 states that it is most probable that a policy form very similar to what was in use in his day was introduced by the Lombards into England. There is a striking resemblance between the phraseology of the policy form prescribed in the ordinance of Florence of 1523 (printed in Lowndes, Law of M. L, Appendix A, pp. 233, 234) and that of the English policies of the present day. Earliest English Form. — The earliest English policy known dates from 1555, discovered in the records of the Admiralty Court by Mr. R. G. Marsden {vide Appendix B, p. 323). Next in antiquity comes the policy of 1557 on the Ele {vide p. 322, note). We have also the policy on the Tiger of 161 3 {vide p. 319), of which the original has not been preserved, but a copy, apparently made for some legal purpose, has been found in the Bodleian Library at Oxford, and is reproduced in Appendix B ; it is eminently worth comparing, clause for clause, v/ith the form now in use. 28 MARINE INSURANCE chap. English Practice till about 1865. — Up till within the last twenty-five years it appears to have been customary in England to employ only one form of policy, the old com- mon foiTTi adopted by Lloyd's on 12th January 1779, as their standard printed policy. This is the form which appears in the schedule to the Sea Insurance Stamp Act of 1795 (35 Geo. III. c. 63). The practice was to use that policy for all interests covered or desired to be covered by a policy of marine insurance. At Lloyd's this still prevails, underwriters inserting whatever further words or clauses may be necessary to adapt the document to the insurance intended. This procedure has called forth expressions of astonishment and disapproval from eminent persons, among them Lord Mansfield in St?nofid w. Boydell, ^779,^ and Lord Esher, M.R., in Bating v. Marine Ifisurance Company on appeal, 1894,2 and in Hy dames Steams Jnf> Company v. hidemnity Ma7-i7ie Insurance Company^ Limited^ when the Court proceeded " to construe the policy in a busi- nesslike way so as to give it a sensible meaning " (v. p. 130). Modern English Practice. — But in the last twenty-five years many marine insurance companies have adopted the plan of keeping in stock skeleton forms of policy, adapted from the common form to suit the requirements of different subjects of insurance, such as ship for voyage, ship for time, freight ; and for goods several forms varying according to the conditions on which the goods are meant to be in- sured. This system offers two practical advantages : it removes from the policy on any interest all clauses that do not affect that interest, and it reduces to a minimum the risk of error in the somewhat mechanical work of writing out policies and affixing the proper marginal clauses. Lloyd's Form. — The common form of Lloyd's policy being the stem form of all British marine policies, the discussion of its contents will enable us to deal with what are practically the conditions of the great majority of British insurances. The text is as follows : — ^ I Douglas 268. ^10 Times Law Reports 276. ' Court Appeal 16 Jan. 1895, 11 Times L. R. 173. LLOYD'S FORM OF POLICY 29 Be it known that A. B. '^'"'/^^ as Agent, S.G. as well in his own name, as for and £, ' in the name and names of all and every other person or persons to whom the same doth, may, or shall appertain, in part or in all, doth make assurance and cause himself and them and every of them, to be insured, lost or not lost, at and from upon any kind of goods and merchandises, and also upon the body, tackle, apparel, ordnance, munition, artillery, boat and other furni- ture, of and in the good ship or vessel called the whereof is master, under God, for this present voyage, or whosoever else shall go for master in the said ship, or by whatso- ever other name or names the same ship, or the master thereof, is or shall be named or called, beginning the adventure upon the said goods and merchandises from the loading thereof aboard the said ship, as above. upon the said ship, etc., as above, and shall so continue and endure, during her abode there, upon the said ship, etc. ; and further, until the said ship, with all her ordnance, tackle, apparel, etc., and goods and merchandises whatsoever, shall be arrived at, as above, upon the said ship, etc., until she hath moored at anchor in good safety, and upon the goods and merchandises until the same be there discharged and safely landed ; and it shall be lawful for the said ship, etc., in this voyage to proceed and sail to and touch and stay at any ports or places whatsoever without prejudice to this insurance. The said ship, etc., goods and merchandises, etc., for so much as concerns the assured, by agree- ment between the assured and assurers in this policy, are and shall be valued at as at foot, Touching the adventures and perils which we the assurers are con- tented to bear and do take upon us in this voyage, they are, of the seas, men-of-war, fire, enemies, pirates, rovers, thieves, jettisons, letters of mart and countermart, surprisals, takings at sea, arrests, restraints and detainments of all kings, princes, and people, of what nation, condition, or quality soever, barratry of the master and mariners, and of all other perils, losses, and misfortunes that have 30 MARINE INSURANCE chap. or shall come to the hurt, detriment, or damage of the said goods and merchandises and ship, etc., or any part thereof; and in case of any loss or misfortune it shall be lawful to the assured, their factors, servants, and assigns, to sue, labour, and travel for, in, and about the defence, safeguard, and recovery of the said goods and merchandises and ship, etc., or any part thereof, without prejudice to this insurance ; to the charges wliereof we, the assurers, will con- tribute each one according to the rate and quantity of his sum herein assured. And it is expressly declared and agreed that no acts of insurer or insured in recovering, saving, or preserving the property insured, shall be considered as a waiver or acceptance of abandon- ment. And it is agreed by us, the insurers, that this writing or policy of assurance shall be of as much force and effect as the surest writing or policy of assurance heretofore made in Lombard Street, or in the Royal Exchange, or elsewhere in London. And so we the assurers are contented, and do hereby promise and bind our- selves, each one for his own part, our heirs, executors, and goods, to the assured, their executors, administrators, and assigns, for the true performance of the premises, confessing ourselves paid the considera- tion due unto us for this assurance by the assured at and after the rate of IN WITNESS whereof, we the assurers have subscribed our names and sums assured in London. N.B. — Corn, fish, salt, fruit, flour, and seed are warranted free from average, unless general, or the ship be stranded ; sugar, tobacco, hemp, flax, hides, and skins are warranted free from average under five pounds per cent ; and all other goods, also the ship and freight, are warranted free from average under three pounds per cent, unless general; or the ship be stranded, stmk, or burnt. Detailed Explanation of Lloyd's Form. — As all current English policy forms have been developed from this one, which has been the subject of manifold discussions and innumerable decisions of the law-courts of the country, it seems advisable to discuss it section by section, so as to obtain, if possible, firm ground from which to consider on what principles it and similar documents are interpreted by the courts, and on what theoretical basis the contract of marine insurance is deemed to be founded. A policy in the above form is technically known as a clean policy. The Headi7ig The meaning of the letters S.G. is uncertain ; probably they stand, as has been suggested, for Ship Goods. If II THE HEADING— THE ASSURED 31 that is so, it is hardly clear why the third great maritime interest, Freight, is not also represented. But it will be discovered later that until 1749 no printed policy form contained the word freight, so that if these letters occur on earlier policies, the explanation suggested may be correct. Another view is that S.G. stands for Sahitis Gratia, i.e. for the sake of safety ; or Somma Grande, i.e. total amount (insured), as suggested by Dr. James Gow of Westminster. The pious heading, " In the Name of God, Amen," which prevailed in all the early French and English policies and in most of the early Italian, is still retained by some English companies. Lloyd's about 1870 adopted instead the formula, " Be it known that," which, however, is merely a recurrence, conscious or unconscious, to the Florentine wording of 1523, Sia noto e manifesto. The Assured A. B. """^/or as agents, as well in his own name, as for and in the name and names of all and every other person or persons to whom the same doth, may, or shall appertain in part or in all, doth make assurance and cause himself and them and every of them to be insured. By 28 Geo. III. c. 56, it is enacted that It shall not be lawful for any person or persons to make or effect or cause to be made or effected, any policy or policies of assur- ance upon any ship or ships, vessel or vessels, or upon any goods, merchandises, effects, or other property whatsoever, without first inserting or causing to be inserted, in such policy or policies of assur- ance the name or names, or the usual stile and firm of dealing of one or more of the persons interested in such assurance ; or without, instead thereof first inserting or causing to be inserted in such policy or policies of assurance the name or names or the usual stile and firm of dealing of the consignor or consignors, consignee or con- signees of the goods, merchandises, effects, or property so to be insured ; or the name or names, or the usual stile and firm of deal- ing of the person or persons residing in Great Britain who shall receive the order for and effect such policy or policies of assurance, or of the person or persons who shall give the order or direction to the agent or agents immediately employed to negotiate or effect such policy or policies of assurance. 32 MARINE INSURANCE chap. The penalty for not complying with the requirements of this Act is the nullity and avoidance of the policy. It is to be observed that the words """'/o, as agents" are a recent addition to the text of the policy ; they are evidently intended to mean "as principals ^^jox as agents." Sometimes in their place is found the phrase "on behalf of whom it may concern." These two phrases appear merely to be brief modern forms of expression, covering, if anything, more than the content of the long phrase following. The words of that phrase are so wide that they admit to the benefit of any insurance, which has been from the beginning legally and properly effected, all parties who have in whole or in part, at the time of the insurance or thereafter, such an interest iri the subject in- sured as the original assured had. They even admit to the benefit of an insurance such persons as may be willing to ratify ex post facto {i.e. after the effecting thereof) an insurance done as it were speculatively, in the hope that when these persons are advised of the insurance they will avail themselves of it. The words of the policy taken literally demand that the subject insured " doth, may, or shall appertain " to the person assured ; in other words, property in the subject insured is regarded as the only interest entitling a person to insure it. But there is one class of persons whose interest of this character does not entitle them to the in- demnity afforded by a policy of marine insurance, namely alien enemies. This is simply a matter of public policy. The result fs that in time of war no property belonging to a foreigner of a nation carrying on hostilities against Eng- land can be legally protected by an English policy. As there are other persons besides those defined in 28 Geo. III. c. 56, quoted above, who may be and often are interested in an insurance, so there are other interests besides property, in goods, etc., which it is found desirable to cover by insurance. Consequently it has become the recognised practice to comply with the statute quoted, by naming in the policy some real person actually benefited by the insurance, or acting as agent for some beneficiary, II THE ASSURED— LOST OR NOT LOST 33 and to extend the protection to cover real interests, though of a less complete and manifest natm^e than actual owner- ship of a material object. Such are rights to obtain pos- session of objects at the close of a marine venture, or to obtain certain payments in respect of their delivery at destination, or to have the disposal of objects arrived at destination, in such a way that some profit or commission accrues to the disposer. Similarly, an insurance may be arranged to take effect regarding even more distant deriva- tives of property, such as liabilities arising out of owner- ship, e.g. to afford protection against these, or protection against loss by marine peril of lien arising out of liabilities of ownership. All persons exposed to loss in respect of any such interest, excepting alien enemies, are entitled to be assured and to have the benefit of marine insurance. The nature and character of such possession, rights, and liabilities as will entitle their proprietor to effect an insur- ance will form the subject of a later section entitled " In- surable Interest" (pp. 76-86). Lost or not Lost It has been suggested that this clause was first introduced into the policy to meet the case of what are known as missing ships, that is ships acknowledged at the time they are insured, to be so long at sea unheard of, that then safety is doubtful. It does not appear in the Florentine form of 1523. But as it is found in the English policy of 1613,^ it is rather more hkely that it was devised for the protection of merchants against such losses as might occur to their ships or cargoes after starting on cross or home- ward voyages from foreign ports. It is evident that in the conditions of trade in the sixteenth century, insurances of such voyages must frequently have been effected when there was no means of knowing whether the vessel had sailed or not, and almost certainly none of knowing whether at the moment of effecting the insurance the ship was in safety or not. But by 161 3 the clause was used ^ See Appendix B. D 34 MARINE INSURANCE chap. also in London policies on outward voyages commencing in London. The clause must be understood to be part of a contract of indemnity made in absolute good faith. If the merchant or shipowner knows that when he offers the risk his cargo or vessel is lost, tie knows that he is not at that moment in possession of anything connected with the risk whose loss will further damnify him, and that nothing then exists against loss of which the underwriter can indemnify him. Similarly, if the underwriter knows that the venture proposed for insurance has safely arrived at the time of the proposal, he knows that there are no perils to be run against which he can give insurance. Consequently, in spite of the absolute wording lost or not lost, the under- writer does not propose to pay a loss known to the assured but not to himself, nor the assured to pay premium for the insurance of a risk known by the underwriter, but not by himself, to have run off safely. The effect of the clause is therefore to secure to the assured the insurance, and to the underwriter the premium on all lawful risks, in whatever position of safety or peril they may be at the time the insurance is made, so long as both parties are in a state of equal knowledge or equal ignorance. There is nothing to prevent an underwriter from accepting an insurance on some matter or object that both he and the assured know, when the risk is submitted, has met with some disaster or even total loss. This occasionally occurs in practice, underwriters accepting insurances after news of a disaster. The courts have upheld such insurances {Mead v. Davison, 1835).^ As regards the position of the assured in case the underwriter concealed his knowledge of the safe arrival of a risk offered to him for insurance. Lord Mansfield said {Carter v. Boehm, 1766): 2 "The policy would be void against the underwriter if he concealed as having insured a ship which he privately knew to be arrived, and an action would lie to recover the premium." In the case of floating policies underwriters frequently receive together notice of interest declared and of disastei ^ 3 A. & E. 303. ^ 3 Burr. 1906. n LOST OR NOT LOST 35 occurred: and the validity of declarations made in such circumstances has also been upheld by the courts {Gled- stanes V. Royal Exchange, 1864).! Marshall (p. 339) considers that though this clause may not be inserted in the policy yet it must in many cases be necessarily implied in the contract, and Arnould (p. 21) reports that if both assured and underwriter were equally ignorant of a loss at the time an insurance was effected, the policy would be, in Mr. Justice Story's opinion, binding without the words lost or not lost. As all English forms now contain the clause, and many if not all of the American contain it, this point is not now likely to arise, but it is worth notice that Mr. Justice Story's view is different from that expressed by Mr. Justice Park. Park says (p. 33) : " It is the general practice to insure lost or not lost., which is certainly very hazardous, because if the ship or goods be. lost at the time of the insurance, still the underwriter, provided there be no fraud, is liable. The premium," he continues, " is however in proportion depend- ing upon the circumstances stated to show the probability or improbability of the ship's safety. These words lost or not lost are peculiar to English policies, not being inserted in the policies of foreign nations." The statements contained in the two last sentences may have been exact in 1817 ; nowadays the peril in question is accepted without any consideration of its being an extraordinary risk. But it is true that the form lost or not lost is peculiar to English and American policies. Still in the French Code de Com- merce (§ 367) provision is made that in case of insurances effected sur bonnes ou mauvaises nouvelles (on good or bad news) the contract is not void unless it is proved that before the signature of the contract either the assured knew of the loss or the underwriter of the arrival. The penalty for such fraud is the payment to the offended by the offending party of double premium and thereafter the criminal (correctional) prosecution of the offender. The German form is similar, auf gute oder schlechte Nachricht (on good or bad news). The German General 1 34 L. J. Q.B. 30. 35. 36 MARINE INSURANCE chap. ^ Maritime Code provides in § 785 that "the validity ol the insurance contract is not affected by the question whether at the time of its conclusion there is no longer any possibility of a claim occurring for damage, or whethei claimable damage has already occurred. The contract, however, is invalid as an insurance contract if both con- tracting parties were aware of the position of affairs. If the underwriter alone was aware that the possibility of a claimable damage no longer existed, or if the assured alone was aware that claimable damage had already occurred, the contract is not binding upon the party to whom the position of affairs was not known. In the second case, the underwriter is entitled to the full premium, even when he establishes the invalidity of the contract." The important point of difference between English and German law is in the treatment of cases in which both parties are aware that the risk has either run off or resulted in some disaster ; English law upholds the contract, German law annuls it. Insurances lost or not lost are expressly permitted by the Commercial Codes of Holland, Spain, and Portugal. At and From In the blank following these words is inserted the descrip- tion of the voyage intended to be insured. The formula ai and from is one of considerable antiquity in England, and was adopted in the statutory form of policy for private underwriters appended to the Act of Parliament of 1795 (35 Geo. III. c. 63): its very existence implies that it is intended to include more than would be covered by the word from. Phillips (§ 927) distinguishes as follows: "Under a policy on a vessel against sea perils ' at ' a place as distinct from a voyage, the risk commences when the vessel is at the place in reasonable safety : and on the goods from the time of their being exposed to sea perils within the conditions of the policy in respect of the vehicle and custody in which they are." Amould (p. 23) completes the distinction thus: "An AT AND FROM 37 insurance expressed in the policy to be from A to B only protects the subject insured from the moment of the ship's sailing from A : an insurance at a?id frotn protects the subject insured from the first moment of the ship's arrival at A, and during her whole stay there." This seems too wide an extension, unless it is understood that the subject insured is the ship herself or something on board her when she arrives at A. The formula at and from was likely first devised to meet the case of goods laden abroad on a homeward voyage, but being perfectly adaptable to any kind of risk or voyage became part of the general form of policy. The voyage for which any subject is insured is described by the mention of its starting and finishing points, known technically as the terminus a quo and the fermiftus ad quern. It is notorious that the course of the passage between two named points may not be and ordinarily is not exactly the same in any two cases. But there is in every case a customary manner in which the passage is made ; e.g. the customary passage which a steamer makes from the United Kingdom to Calcutta, or vice versd, is through the Suez Canal, the customary passage of a sailer between the same points being round the Cape of Good Hope. The course at sea of a vessel, especially of a sailing vessel, necessarily varies in accordance with season, weather, political circumstances, disposition of hostile forces, etc., so that the description of the voyage insured must be regarded as compatible with such necessary variation. Consequently the law considers the voyage insured {viaggium, from the more classical viaticuni) named in the policy to be a course at sea from the starting point {terminus a quo) to the finishing point {terminus ad quern) in a course of navigation prescribed by custom {iter viaggii) with which the passage of the ship {iter navis) must correspond. Speaking generally, the course at sea between any two ports is ordinarily the sea-path over which the one can be reached from the other in the shortest time consistent with the safety and ordinary convenience of the things and persons involved in the venture, the special -45^34 (>« 38 MARINE INSURANCE chap, circumstances of each case being fairly considered. Lord Mansfield speaks {Thelhisson v. Staples^ 1780^) of pro- ceeding "to her port of delivery in a mathematical line, if it were possible." In case of insurances from a port, and of such as have their commencement determined by the time of sailing from a port, it becomes important to determine exactly what constitutes such sailing. In giving the Privy Council's decision of a case arising out of the collision of the City of Cambridge^ and the Bir/nah, 1874,2 the bench cited with approval the following from Chief Baron Pollock's judgment in Rodriguez v. Melhuish, 1854:^ "If the vessel had all her cargo on board, and the master ready to get on board, and she had everything ready to commence her voyage forthwith, and left her berth with that intention, it might no doubt be said she was proceed- ing to sea from the time she first left her berth." In Sea Insurance Cotnpany v. Blogg, Mr. Justice Mathew remarked that there Was " no authority for the proposition that there could be a sailing, as required by the policy, without a clear intention on the part of the master to pro- ceed directly on his voyage."^ The Court of Appeal in affirming this judgment held that the date of a ship " sailing " within the meaning of a marine policy is not the day she moves from the wharf to an anchorage in the river with the object of keeping the crew on board, but the day on which she actually proceeds on her voyage.^ The moment of the commencement of an at and from risk under a homeward policy on ship from a foreign port has been determined by the decision in Haughton v. Empire Marine Insurance Company, 1866.*^ The insurance ran "at and from Havana to Greenock." The vessel arrived on her outward voyage within the headlands of the port of Havana, and was towed under the direction of a pilot by a steam tug up the harbour to an anchorage. Before she had cast anchor, she settled down on the anchor of another 1 I Dougl. 366. 2 L.R. J PC. 451. 3 Lj_ Ex. 26. * Commercial Court, 5 Nov. 1897, 14 Times L. R. 20. 6 C.A. (1898) 2 Q.B. 398. 6 i^ R. J Ex. 206. II GEOGRAPHICAL TERMS 39 ship and sustained serious damage. Next day she was towed off, taken to another part of the harbour, and dis- charged. The underwriters on the homeward voyage con- tended that their poHcy had not attached when the accident occurred. The court held that it had attached, on the ground that the vessel was plainly at the place ordinarily known as Havana when the casualty befell her, and that the risk under the homeward policy attached the moment she entered within the limits of the port in a state of suffi- cient seaworthiness. At the same time it was agreed that the outward policies had not expired, but they and the homeward policies were regarded as contracts entirely separate and independent, without influence on one another, without reference to one another. To prevent such an overlapping of policies, underwriters usually employ a clause making mention of the expiry of previous policies as a precedent in some way essential to the attaching of those meant to succeed. There are various forms of this clause ; the one which best expresses the intention is, "The risk not to attach before the expiry of previous policies." In Haughton v. Empire Marine Insurance Company, 1866,^ the wide geographical range given to "Havana" shows that a considerable freedom is allowed in the interpretation of geographical terms. In documents of marine insurance geographical terms are taken to be intended in their ordinary mercantile sense, that in which business men trading in or with the places named use their namej. This mercantile sense must in case of doubt be ascertained from mercantile evidence. As the result of such evidence it has been held {Uhde v. Walters, about 1 8 1 1 2) that the Gulf of Finland is in the mercantile world considered to be part of the Baltic Sea, and {Robertson V. Clarke, 1824^) that in commercial language Mauritius is included among the Indian Islands. In a more recent case {Royal Exchatige v. Tod and others, 1892*) it was decided by Mr. Justice Romer that goods loaded on 1 L. R. I Ex. 206. ^ 3 Camp. 16. * I Bing. 445. * 8 Times Law Reports 669. 40 MARINE INSURANCE chap. board a steamer at a port on the Pacific Coast of Central America are not covered by a policy on goods " from the Pacific " by steamers, which so far as was known by under- writers at the place of insurance had not loaded at any port outside the limits of South America before the voyage on which the loss occurred. The judge was satisfied that when the slip was signed neither party contemplated any risk except on vessels sailing from South American west coast ports. Similar difticulty may arise in the use of the apparently unambiguous words Europe^ Continent {e.g. in the phrase "U.K. Cont."), United States (frequently in the language of some trades restricted to the Atlantic seaboard) ; in the inclusion of Aden under East Indian ports, of Algiers under French Mediterranean ports. The difficulty in these is to reconcile mercantile custom and geographical description. As the geographical description of a port may be found, when tested by commercial usage, to be inadequate or too comprehensive, similarly the official description may fail. The port of Runcorn is for custom-house purposes within the limits of the port or custom-house district of Liverpool. Consequently, as far as revenue is concerned, a ship loading both at Runcorn and at Liverpool is loaded entirely in the port of Liverpool. But as regards marine insurance it has been decided {Brown v. Tayleur, 1835 ;i Harrower v. Hutchinson^ 1869-) that a policy covering a vessel from "a port of loading in the U.K." does not cover a ship partly loaded at Liverpool and partly at Runcorn. Each of these places is regarded as one port, separate and distinct from the other. It is only in a matter of oflicial arrangement and convenience that they are regarded as one ; by com- mercial usage they are not one place. An insurance at and from a. named port will not cover a vessel or cargo during a period of undue and unreasonable delay at that port. The transit between the termini is, for the ship, regarded as the aim and object of its existence, and the stay at one of the termini is only justifiable in so far as it is necessary for the undertaking of the passage. 1 4 A. & E. 241, 2 L.R. 4 Q.B. 523 & 5 Q.B. 584. II DELAY, DILIGENCE ON VOYAGE, ETC. 4I Consequently idle delay at the port of commencement of the voyage will discharge the underwriter (Tindal, C. J., in Mount v. Larkins, 1831).^ But if the delay is caused by genuine preparations for the voyage, such as necessary or desirable repairs, etc., the risk continues covered {Motteux V. Lo7tdon Assurance^ 1739)-^ Similarly, for goods, the object of loading them on the vessel being their con- veyance to the other terminus of the voyage, the vessel must not be regarded as nothing more than a mere floating warehouse ; she is not that, but a vehicle or transport whose essential function is to carry from one port to another. In Hamilton v. Sheddeti, 1 83 7, ^ where a vessel engaged in the palm oil trade, with permission to act as a tender to other vessels in the same employ, was detained over twelve months in the Benin River, the delay was held to be unreasonable. .Thus, whenever delay is un- reasonable in length, or is due to causes not connected with the completion of the voyage, it is held to alter the voyage in a way not in the contemplation of the underwriter ; just as much as if after starting on the voyage the vessel turned aside, intending all the time to complete the voyage after doing something else ; the delay and the turning aside are both classed as deviations. Similarly, in the course of the whole voyage due diligence to complete the venture must be observed. Undue delay on the voyage, and more particularly at port of call and before discharge at port of discharge, will alter the character of the voyage as respects both ship and cargo. A closer definition of the beginning and end of the venture as respects ship as well as goods occurs later in the policy and will be discussed in its proper place. Mean- while there is no doubt that the policy was originally in- tended to cover only marine risks ; all additions and adaptations intended to extend its operation to cover land risks are essentially modem, and do some sort of violence to the general sense of the document. But the reasonable wants of business have had to be met. An inland manu- facturer's goods practically pass from his control when ' 8 Bing. 108. 2 I Atk. 545. 3 3 M. & w. 49. 42 MARINE INSURANCE chap. li once they are loaded on the railway trucks at his siding ; a merchant's, when they are passed over to the railway or other carrier. On the Continent of Europe where railway, canal, lake, and river transit form by far the most important part of the carrying done, the wants of the merchant have been met by the institution of companies for the insurance of such risks as their goods are exposed to, or by the special authorisation of marine insurance companies to extend their operations to cover such risks. As a natural consequence special forms of policy have been devised for such business. In England, on the other hand, the smallness of the country and the nearness of the great producing districts to the seaports, reduce the inland risk to such comparative insig- nificance that it has hardly ever been thought worth while to define its extent and content with any exactness. Such uncertainty has sometimes been^ound awkward. CHAPTER III THE POLICY : PART I — continued Common English Policy continued, General Description oj Subject Matter Insured, Duration of Risk on Goods and Ship, including Touch and Stay and Deviation Clauses. Upon any kind of goods and merchandises, and also upon the body, tackle, apparel, ordnance, munition, artillery, boat and other furniture, of and in the good ship or vessel called the . . . The earliest form of marine policy seems to have been devised for the insurance of goods only, but the extension of protection to shipoAvners had become usual long before the date when the text of the ordinary English policy was fixed. That text was therefore so drawn as to be applicable both to goods and ship. The way in which this has been done is to make the standing printed text cover both, and to designate in writing at the foot the particular object intended to be covered by the policy. {a) Goods and Merchandises. — If the written designa- tion of cargo is not more explicit than these general words, or if either of these words is merely repeated at the foot, the underwriter is held to have willingly acquiesced in the loose description, and to have taken his chance of the nature of the cargo. There are only two points which he can open in such a case ; he can demand satisfactory proof that the assured has an actual property in the interest in- sured, and he can insist that the goods or merchandises be carried in the place properly belonging to them, namely 44 MARINE INSURANCE chap. under deck. As regards the former point, Lord Mansfield in Glover v. Black, 1763,^ decided that when a ship and cargo were lost by fire, the plaintiff having lent the captain cash, for which a respondentia bond ^ in common form was given, could not recover the amount of the loan upon a policy on goods. Lord Mansfield based his decision solely on practice ; his words were : " In practice bottomry and respondentia have always been considered as a particular species of insurance, and have taken a particular denomina- tion. . . . The ground of our determination is that by the custom of merchants, respondentia is insured under a special denomination. But we by no means say that under an insurance on goods at large a man may not be permitted to give in evidence a mortgage or other special lien." On the second point, as long as maritime custom has determined that the proper place to carry goods and mer- chandises is under deck, it results that wares insured in these general terms are taken to be so laden. Consequently, even in cases where the custom of trade permits the carriage of deck loads, articles insured merely as goods or mer- chandise, or in such terms that their nature is not disclosed, are taken to be laden under deck, unless special mention is made to the contrary. The effect of such special mention is that the underwriter is warned of the special perils of the venture in question'' (see Gould y. Oliver, 1840;* Lord Addenda. Lyndhurst in Blackeit V. Royal Exchange, 1832).^ Further, the words "goods and merchandises" plainly denote such material objects as are bought and sold in trade and are conveyed from one port to another for the ^ 3 Burr. 1394. 2 A bond pledging cargo for the repayment on arrival at destina- tion of money borrowed at an intermediate port in emergency, the money not being repayable in case of loss of the venture ; the rate of interest charged is always high. 2 On the other hand the mere description of the wares insured has been held to be sufficient notice to the underwriter that they are carried on deck ; for instance, in an insurance on carboys of vitriol it was held to be si^cient that they were carefully stowed on deck ; this being the usual place for this article there was no need to inform the underwriter [Da Costa v. Edmonds, 18 15). * 4 Bing. N.C. 134 ; 2 M. & G. 208. * 2 C. & J. 250. Ill GOODS AND MERCHANDISES— SHIP 45 purposes of trade. They do not therefore include effects of the master or spare outfit of the ship. These interests should be defined by name ; so also should live stock and their feed. There seems to be now no reason to doubt that even valuables such as gold and silver specie may be insured under the general words "goods or merchandises." But such valuable documents as bonds and titles appear to be of an essentially different character ; there is in the material of which they consist no intrinsic value corresponding to that present in gold and silver. In Glover v. Black, 1763,1 Lord Mansfield had in view, when he spoke of mortgage or other special lien, some security of that character affecting objects exposed to marine perils in the venture named. Cargo on board a vessel is not covered by a policy on the vessel, even though the cargo may be of the same nature as part of the apparel or other furniture of the ship. For instance, if a ship carries as part of its cargo a shipment of ropes and cables belonging to the ship- owner, and intended to be used eventually as rigging, a loss of these could not be claimed on the ground that they were part of the ship's tackle ; and this even though in case of uncontrollable circumstances {vis major^ force majeure, hbhere Cewalt) they might have been used to supplement or replace the ship's stores. (b) The ship is described in terms more appropriate to the fleets of last century than to the trading transports of to-day. Nothing is to be made of a consideration of what each separate word of the description was intended to cover. Phillips (§ 463) interprets the purport of the clause thus : — " It is well settled that a poHcy for a com- mercial voyage on a vessel generally, without any further specification, covers not only the body, but also the rigging, sails, tackle, boat, armament, and provisions, and all the appurtenances necessary, suitable, or usual, and that may be presumed to belong to a vessel of such description, for the purposes of navigation on a voyage such as that 1 3 Burr. 1394. 46 MARINE INSURANCE chap. described." This exposition is more immediately applic- able to sailing vessels than to steamers, and even in the case of sailers, special exception must be made of fishing vessels. But if for " rigging, sails," we read " engines, boilers, shafting, fuel," the rest of the description will answer all wants. It is to be understood that of the " appurtenances necessary, suitable, or usual," only those which are permanent are to be considered part of the ship, temporary fittings being classed with such articles as sand ballast and dunnage wood and not regarded as being part of the structure of the vessel. In the case of fishing craft, the decision in Hoskins v. Pickersgill, 1783,^ was that "by the usage of trade the meaning of the word furniture did not include fishing stores, in the construction applied to a policy of insurance." On the wording of this clause in the policy the most important decision is that in Blackett v. Royal Exckajtge, 1832.2 In this case Lord Lyndhurst refused to admit evidence of a usage or custom that underwriters never paid for boats slung on the quarter outside the ship. He held that as the boat was included nominatim in the policy he ought not to admit evidence at direct variance with the terms of the policy and in plain opposition to the language it used. The phrase " ship or vessel " is employed to get over a somewhat technical difficulty. The English language possesses no word equivalent to the French navire, German Fahrzeug, Scandinavian Fartyg, meaning any seagoing carrying craft : the English vessel has a wider sense, being applicable to any moveable hollow structure capable of containing solids, fluids, or gases. ^ The word ship had therefore to be brought in ; but it is much too definite, being the technical name of a square-rigged three-master. If transport were not exclusively used in a specially limited sense it would be suitable for this place ; craft would be better still, if it were not generally used to designate smaller boats. 1 3 DougL 222. ^ 2 C. & J. 250. • Cf. Whitton Gas Float, No. 2, 1895, 12 Times L.R. 109. Ill MASTER 47 The phrase " good ship or vessel " is common to charter- parties, bills of lading, and policies of marine insurance. The charter-party after thus describing the vessel proceeds to speak of her being " tight, staunch, strong, and in every way fitted for the voyage." Without reading every detail of this into the word good as used in the policy, one may still say that good is more than merely ornamental : it is the mark of the underwriter's exemption from liability for risks on notoriously unfit vessels, the index of what is known technically as the warranty of seaworthiness. Whereof is master, under God, for this present voyage ... or whosoever else shall go for master in the said ship, or by whatso- ever other name or names the same ship, or the master thereof, is or shall be named or called. As there are many craft of one and the same name, the policy provides for more minute definition by stating, or giving the chance of stating, the master's name. This is a rough expedient, probably the only one possible at a time before the existence of official signals and registry numbers. The two leading cases connected with the misnaming of a ship are Le Mesurier v. Vaughan, 1805,1 in which a broker instructed to insure goods on board " The President'''' and to describe her as an American ship, actually did insure goods on board "the American ship President" the variation was held to be of no moment, the identity of the ship being proved ; and Hall v. Molyneux, 1744,^ in which the Leopard was insured in error instead of the Leonard and the variation again was held to be of no moment, the identity of the vessel being proved by the master's name. The provision for naming the master is common to most European policies, but except the English policy none states so fully the apparently contradictory clause " or whosoever else shall go for master." Marshall, in 1823, writes (p. 322) : "The name of the master also should be specified, because his character and ability are material sub- jects of consideration in estimating the risk." But if the 1 6 East 38a. ' Jbid. 385. 48 MARINE INSURANCE chap. fact of the master being one particular man — say one specially acquainted with the trade or voyage in which the vessel is engaged — influences an underwriter's estimate of a risk, it is hardly reasonable to follow the clause naming this master by one dispensing with him. It seems more reasonable to view the clause as merely one of further definition of the ship, be her name and her master's name what they may. As a matter of modern practice, not one policy in ten thousand contains the master's name, consequently special mention of a master nowadays has a much greater significance than it had say sixty years ago. It is therefore likely that the mention of a particular master having charge of a vessel on a named voyage would be binding on the assured in spite of the second part of the clause, unless the substitution of a new master after the completion of an insurance arises from such unavoidable causes as incapacity of the original master through sickness or his resignation after commence- ment of the venture. As Marshall says the shipowner must not change the master " wantonly or unnecessarily ; much less ought he to name one when he means to employ another" (p. 323). Beginning the adventure upon the said goods and merchandises from the loading thereof aboard the said ship, as above . . . upon the said ship, etc. , as above . . . and shall so continue and endure during her abode there, upon the said ship, etc. ; and further, until the said ship, with all her ordnance, tackle, apparel, etc., and goods and merchandises whatsoever, shall be arrived at, as above . . . upon the said ship, etc., until she hath moored at anchor in good safety, and upon the goods and merchandises until the same be there discharged and safely landed. This section of the policy is by no means clear in its construction ; it is unsatisfactory in its arrangement what- ever way it be read. It contains a description of the commencement of the risk mentioning first goods and then ship ; it proceeds with an account of the continuation of the risk at the point of its commencement without making any separate mention of ship or goods ; it ends with a definition of the close of the risk, dealing first with ship and then with goods. Ill COMMENCEMENT OF ADVENTURE 49 The wording of the section given above is that of the Act of 1795, and is actually in daily use at Lloyd's and in companies' policies. But a very slight variation given by Amould (p. 17) in what he gives as the common printed form of policy on ship and goods, helps materially to clear away the difficulty of the section. Where the form in the Act of Parliament of 1795 gives "and so shall continue and endure during her abode there, upon the said ship, etc.," Amould reads "and so shall continue and endure during her abode there on the said ship, etc." The variation as given by Arnould points to the application of the clause in question to goods on board a vessel, while the 1795 form seems to indicate that the subject of insurance intended is "the said ship, etc.," which is the phrase regularly employed in that form to designate what we now term the hull and materials of a vessel insured. If Amould's version be adopted and the section be rearranged by taking ship before goods in the description of the in- ception of the risk, the whole becomes clear, working out thus : — I. Beginning the adventure — (a) Upon the said ship, etc., as above {i.e. at and from the terminus a quo). {p) Upon the said goods and merchandises from the loading thereof aboard the said ship as above {i.e. at the ie?'inini/s a quo), and shall so continue and endure during her abode there on the said ship, etc. II. And further, until the said ship with all her ordnance, tackle, apparel, etc., and goods and merchandises whatsoever, shall be arrived at, as above (the terminus ad qucvi). {a) Upon the said ship, etc., until she hath moored at anchor in good safety. {b) And upon the said goods and merchandises until the same be there discharged and safely landed. The sole objection to this arrangement is that it makes so MARINE. INSURANCE chap the "etc." after ship at the end of I.(^) superfluous. The only alternative is to take the " continuing and enduring " clause to apply both to ship and goods, and to do that a sense must be given to "ship, etc.," in that position which it certainly has not in any of the other places where it occurs. The discussion of the effect of this clause naturally falls thus — Commencement of the risk on ship. „ „ ^on goods. Continuation of the risk. Close of the risk on ship „ „ on goods. I. Cojnmencement of the Risk on Ship In the discussion of at and from it was mentioned that in the case of a policy on ship at and from any port the risk attaches the moment the ship enters within the limits of the named port in a state of sufficient seaworthiness {Hatighton v. Empire Marine Insura?ice Compafiy, 1866).^ In the case cited it was held that the homeward policies attached although the outward policies had not expired. It has consequently been found necessary that there shall not be two sets of policies in force at the same time, and also that the insured vessel shall not be left uncovered for any time between the lapse of the earlier policies and the attachment of the later. To ensure this, clauses have been added to the policy either of positive or negative form : e.g. " risk to commence on expiry of previous policies," or " risk not to commence before expiry of previous policies." The former clause makes any policy in which it is inserted depend absolutely and entirely on the terms of other policies for the determination of its commencement ; the latter provides that the other policies shall run out their full existence before the new policy attaches ; the former clause adopts the terms of preceding policies by inclusion ; the lattei does it by exclusion. » L.R. r Ex. 206. Ill COMMENCEMENT OF RISK ON CARGO 51 2 . Commencement of the Risk on Cargo When the carrying vessel is loaded alongside a quay, pier or jetty, the words in the policy are sufficiently definite, and it may be taken that as soon as the goods are in the ship and free of the loading tackle, the risk on the Addenda goods commences. But if vessels are loaded in the stream or in the roads, there is a substantial risk between shore and ship for covering which no provision exists in the text of the policy. It does not matter whether loading in the stream or roads is customary and usual at the port of loading or is only occasional, resulting from some special circumstances or necessities of the case, the printed text of the policy does not cover the stretch between shore and ship. For the proper protection of the cargo owner a clause is put in the margin " including all risk of craft while loading," which alters the point of commencement of the risk from loading on board the ship to loading on board the barge or craft destined to carry the goods from shore to ship. But it is to be observed that this clause is inopera- tive in the case of goods bought f.o.b. (free on board). Any risk or accident occurring to such goods prior to delivery on board the vessel is at the risk of the seller and of his underwriters, the goods not being in any sense the property of the buyer until actually on board the sea- going ship, and consequently not making the intermediate transit at the risk of the buyer or of his underwriters. ^ In the case of goods, which are the assured's property when they leave the shore, being conveyed by a common lighter- man (who is answerable for all losses not arising from the act of God or of the Queen's enemies) to the ship, the assured may take recourse either against his underwriter or his lighterman. If he chooses the former then he is bound to give him the benefit of his rights against the latter. There is usually no hardship to the lighterman in this, as he is accustomed as an ordinary matter of business to in- ^ In the case of goods bought free alongside, the property passes when the goods are laid alongside the ship at quay or brought along- side the ship in craft where the loading is effected in stream or roads. 52 MARINE INSURANCE chap. sure his liability with iindenvriters. Such cases constantly happen in connection with cargoes lightered in the Thames. The policy form is not adapted to cover an interest in goods commencing at a point other than the point of original loading. For instance, in Spitta\. Woodman^ i8io,^ goods insured on this form of policy from Gothenburg to port or ports of discharge in the Baltic were held never to have been covered, because the goods in question were not loaded in Gothenburg, but in London. In La?tghorn v. Hardy, 1812," the decision was the same, although it appeared that the underwriter knew that the goods had been loaded at Addenda. London, Lord Mansfield observing that " the Court could not make the construction of a written instrument depend upon the knowledge which the defendant might possess of facts." In Gladsto7te v. Clay, 1813,^ the Court dealt with a policy on a cargo for a homeward voyage " at and from Pemambuco to Maranham, and at and from thence to Liverpool, beginning the adventure on the said goods from the loading thereof on board the said ship wheresoever^'' and held that this wording protected goods loaded at Liverpool, and still on board after the ship left Pernambuco, not having found a market there. Trading voyages of the kind con- templated in this decision are by no means usual in modern business. In the African trade difficulties of a similar kind arise, as the vessels engaged in it after discharging their outward cargo load homeward cargo at each port as they go along in their voyage. In Rickman v. Carstairs, 1833,'* the Court decided an action on a policy on ship and goods for a homeward voyage from the coast of Africa to a port in the United Kingdom, beginning the risk on the goods "from the loading thereof on board the said ship twenty- four hours after her arrival on the coast of Africa," Lord Denman holding that without distinct words to the contrary inserted in the policy it could not attach to oiihuard cargo, remaining on board the vessel twenty-four hours after hei arrival on the coast of Africa. In his judgment Lord Denman admitted that probably the assured had intended ^ 2 Taunt. 416. ' 4 Taunt. 628. » I M. & Sel. 418. * 5 B. & Ad. 651. Ill CONTINUATION OF RISK 53 both outward and homeward cargo to be insured by this pohcy, but he added a most important remark : " Unfor- tunately they have used words which will not, we think, effectuate that intention. The question in this and other cases of the construction of written instruments is not iuJ:ai rvas the intention of the parties^ but what is the mea7iing oj the words they have used?" To meet the requirements of this dictum it has become usual to insert in African trading policies a clause such as " outward cargo to be deemed homeward interest twenty-four hours after the vessel's arrival at her first port of discharge," or " the outward cargo to be deemed homeward interest in this policy until bartered, sold, or exchanged." 3. Continuation of the Risk As has already been pointed out under "at and from," the risk on ship and goods once commenced at the starting- point of the voyage remains in force while the venture remains there, but only so long as the intention of complet- ing the intended voyage lasts, and the delay at the starting- point arises from causes connected with the voyage and its object. Consequently a ship and goods insured on voyage policies at and from A. to B. containing this clause respecting the continuance and endurance of the risk at A., cease to be covered at it by these policies as soon as the intention of proceeding to B. is abandoned. They similarly cease to be covered should the vessel perfonn an intermediate voyage, or engage in any service not essentially connected with the voyage for which she has been insured, or be delayed by wilful and unnecessary waste of time. 4. Close of the Risk on Ship There does not at first sight appear to be any reason why the risk shall continue until the said ship with all het ordnatice, tackle, ap>parel, etc., and goods and merchandises whatsoever, shall be arrived at destination. But the idea underlying this formula is probably that the only 54 MARINE INSURANCE chap. arrival which involves an immediate and complete discharge of the underwriters is one in which the whole venture arrives at the intended destination without either diminution or de- terioration ; and that consequently any arrival in less perfect condition does not release the underwriter. The mention of ship and goods, as if they were insured together, is merely the accidental result of drawing one policy form to cover all kinds of interest. The moment of arrival at a port being, as has been seen in Haug/itoft v. Empire Marine, 1866,1 possibly reached a long time and space before the vessel reaches the place where she is intended to lie or discharge, the policy defines the moment of the close of the risk on ship by a reference to the moment of the vessel's " mooring at anchor in good safety." The policy of 1795 extends the ship underwriter's liabihty to twenty-four hours after arrival of the vessel in good safety. But it was found in practice awkward for shipowners to have outward policies expire so soon as twenty-four hours after an arrival of which they might have no advice. Consequently, when the Stamp Act of 1884 permitted the extension of voyage policies for thirty days after arrival without extra stamp duty, shipowners began to ask for the inclusion of the thirty days in their Addenda, voyage policies. Cases arose in which vessels insured for thirty days after arrival began, before the expiry of the thirty days, new voyages, for which they were separately insured. It became difficult to determine the proper incidence of loss and damage : underwriters finding themselves sometimes held liable under the absolute thirty days clause for ventures which they did not wittingly assume (cf. Gambles v. Ocean Marine of Bombay, 1876,2 on a policy with a fifteen days clause, held to be a time policy added to a voyage policy). In 1885 Liverpool underwriters niade a move for the adoption of a uniform clause, which would prevent the overlapping of policies and the consequent difficulties of adjustment. The form of clause proposed by the writer was adopted : " Moored at anchor in good safety at her above-named place of destination, and while there until expiry of thirty days after arrival, or until sailing on next voyage, which- ' L.R. T Ex ao6 ' i Ex. Div. 141, Ill CLOSE OF RISK ON SHIP SS ever may first occur.'"' Sometimes the words " however employed" are added after "while there." In the case of a vessel destined to only one port, Mr. Justice Mathew decided that " it was idle to insert the words however employed, which seemed to imply other employment than mere discharge."^ The only point that requires further examination in this clause is the effect of the words " good safety." They cannot mean " absolute security," for there would be no object in extending a contract of indemnity against perils to include a period of absolute security. They do mean the safety necessary to a vessel for the discharge of her inward cargo and the carrying out of the ordinary business of a ship at the port of destination. The arrival of a vessel in the Mersey in tow as a wreck, and her mooring in the Sloyne, did not constitute an arrival in good safety {Shaw v. Felion, iSoi).^ The leading modern case on the words is that of the Charlemagne {Lidgeit v. Sec7'etan, 1870).^ In this case the vessel insured from London to Calcutta and thirty days with the clause " until she hath moored twenty-four hours in good safety," struck a bank at the mouth of the Hooghly, and was only kept afloat by constant pumping. She arrived thus at Calcutta on 28th October, and was moored. After discharge of her cargo she was on 12th November moved to dry dock, where on 5th December she was destroyed by fire. The destruction by fire occurred on the thirty-eighth day after mooring at Calcutta. The Court held that the policy had terminated before the loss, the vessel having been kept afloat for over twenty-four hours after arrival, and was moored at the usual place for discharge of cargo, remaining all the while in the possession and control of her owners : and she had remained a ship, and in her owner's possession for over thirty days thereafter. It is to be observed that in the case of the Charlemagne the policy ran for twenty-four hours and thirty days after arrival. The Stamp Act of 1884 cited above does not 1 The Talavera, 1897 (Crocker v. General Ins. Co. Ld.), 13 Times L. R. 96 ; confirmed by Court of Appeal, 14 Times L. R. 113. 2 2 East 109. 3 L.R. s C.P. 190 ; 6 C.P. 616. S6 MARINE INSURANCE CIIAK provide for covering more than thirty days without payment of extra stamp duty, so that in most modern poHcies there is no twenty-four hours clause. 5. Close of the Risk on Goods By the terms of the pohcy goods and merchandises are covered until the same be " discharged and safely landed " at the terminus ad qiiem. When discharge is effected at a quay, wharf, pier, or jetty, alongside which the carrying vessel lies, the risk thus defined does not extend beyond the time when the goods are free of the unloading tackles and rest on the ground or in the place or vehicle in which they are meant to be put immediately on discharge. 1/ goods are not discharged from the ship on to a quay, pier, etc., but into a barge or lighter, then the moment of dis- charge from the ship is not simultaneous with that of safe landing, as safe landing implies deliveiy at the customary place for bringing goods ashore (Phillips, § 971, quoting the American case Grade v. Marine Insurance Company). The question of liability for the lighterage risk came before the courts in Hurry y. Royal Exchange., 1801,1 on a policy on hemp from St. Petersburg to London, which was landed, according to the constant practice of merchants in the Russian trade, in public lighters. It was decided that if it is the custom of the trade to land goods by lighters 01 launches, the goods are during such supplemental transport covered by a policy of insurance containing the words "until safely landed." But there are limits to this general proposition. If, for example, cargo be discharged from a vessel into craft, that cargo is not covered under the policy during delays not necessarily connected with the voyage which is insured, such as would be, for instance, incurred by awaiting transhipment to a vessel bound on an outward voyage {Moulder x. Merchants Marine., i886).2 In the case oi Hurry V. Royal Exxhange^ 1801,1 tj^g lighters employed were common public lighters. Similarly in the earlier case, 1 2 B. & P. 430. 2 jj, Q.B.D. 354. m CLOSE OF RISK ON GOODS 57 Riicker\. London Assurance, 1784.^ In both cases goods were insured to London till discharged and safely landed \ in both the goods were discharged into public lighters, and were damaged between ship and shore ; in both cases the loss was held to be recoverable under the policies. In his decision of the latter case, Mr. Justice Buller said : " If a merchant will not send public lighters, it shall be a delivery to him when the goods are put on board his own lighter," This is a statement of the decision of judge and jury in Sparrow wCai-ruthers, 1 745,^ Lord Chief Justice Lee holding the underwriter discharged. In modern commerce these decisions are of value at such ports as Malta, Port Said, Busrch, and perhaps at some ports in Asia Minor and Syria. The ground of the decision is that the consignee goes out of his way to anticipate the customary course of trade at his port by his own act, voluntarily assuming charge of his property earlier than he need do. Any damage or loss between ship and shore is thus done to goods under the consignee's control ; and it is a principle of law that no one shall profit by his own misdeed or misfortune.^ Again, if the assured's property in goods ceases before their safe landing (if, for instance, they are sold on such terms that they become the buyer's property as soon as the ship carrying them reaches her destination), then unless the terms of sale include the transfer of the insurance, the assured cannot transfer to a third party any insurance between ship and shore which he may have effected ; he cannot, for the advantage of a third party, claim from his underwriter indemnity for any loss or damage occurring after the expiry of his interest in the goods. To meet cases in which goods are for convenience dis- charged into lighter or other craft, although such discharge is not the ordinary custom of the port, an expansion of the craft clause already given in section 2 (p. 51) has been devised. In some cargo policy forms there- is nov/ found the clause, " Including all risk of craft to and from the vessel." And in /'a/// v. Insurance Co. 0/ North America^ ' 2 B. & P. 432, notes. 2 2 Str. 1236. » The Elton,: Q.B.D. 9 Aug. 1899. 58 MARINE INSURANCE chap. this clause has been held by Mr. Justice Mathew to cover risk of craft in a lighter of the owner of the goods. It is worth noting that in many cases {e.g. West Coast of South America) freight on goods is due as soon as the goods are delivered to the lighter into which they are dis- charged. As will be seen in the discussion of particular average, this fact has an important bearing on the indemnity payable in case of goods damaged in lighter between ship and shore. And it shall be lawful for the said ship, etc., in this voyage to proceed and sail to and touch and stay at any port or places whatso- ever . . . without prejudice to this insurance. This paragraph of the policy is based on the provision of the Florentine policy of 1523, which permits "the ship to touch at any other place, and to navigate forwards or backwards, to the right or the left at the captain's pleasure, and to do all his requirements." Where this kind of liberty is given in the earliest English policies it is usually hmited, e.g. "to touch and stay at any ports and places on this side Zante, as well on the Barbary as the Christian shore " ; from which it may be concluded that the vessel was not expected to touch and stay anywhere in her voyage from London before reaching the Mediterranean. But the modern English form introduces the words " in this voyage," which control the whole of the rest of the clause ; the word " voyage " being used here not as equivalent to the passage of the ship, whatever that may happen to be, but in its close technical sense of the course of navigation prescribed by custom between the termini named. This view was most unmistakably expressed by Lord Mansfield in Lavabre V. IVi/sofz, 1779;^ Park (p. 86) and Marshall (p. 187) agree in their statement of his clearly intimated opinion "that these general words were, by the expressions outward and homeward bound voyages, and in this voyage, qualified and restrained so as to mean only places ifi the usual course oj the voyage to and from the places mentioned in the policy." This view has been maintained strictly by succeeding judges; ' I Dougl. 284. Ill TOUCH AND STAY 59 In Hogg V, Horner^ 1797,^ a ship was insured at and from Lisbon to a port in England, with liberty to call at any one port in Portugal for any purpose whatsoever. The ship sailed from Lisbon to Faro to complete her loading, Faro being a port in Portugal, to the southward of Lisbon, and therefore quite out of the course of the voyage to England. Lord Kenyon held that the liberty given by the policy to call at any one port of Portugal must be restrained to a permission to call at some port to the north of Lisbon, in the course of the voyage to England, and that going to the southward was a deviation.^ Similarly in Labinovitch v. Pacific Fire and Marine, 1887,^ Mr. Justice Smith held that a policy covering iron on the voyage Antwerp to Odessa, did not cover iron from Antwerp to Constantinople, and thence wa Batoum and Nicolaieff to Odessa. This case is somewhat complicated by the words in the poHcy "all liberties as per bills of lading," which it was decided must be taken as referring to the bills of lading for the particular goods insured by the policy.* Further, the liberty to touch and stay is limited by its close application to the main object of the voyage ; it cannot be availed of except for matters essentially connected with the voyage ; in other words, the option cannot be exercised outside the limits of the venture described in the policy. The master is free to turn off this prescribed course of his voyage in case of extraordmary emergency, or to avoid threatened disaster or capture or other peril insured against, all without prejudice to the insurance. To use the language 1 Park 444, 475 ; Marshall 184. "^ It would be difficult to know how to apply Lord Kenyon's test in the following case of a steamer's actual voyage : "At and from Kotka (Finland) ^"''/or Snarven (Xiania) to Bushire ^"''/or Bussorah ; with leave to call at Barrow-in-Furness, ='"''/or Manchester ^"'^/or any other ports or places en route (including Jeddah) for any purpose whatsoever." 3 Queen's Bench, 28 Feb. 1887. ■* See Laingv. Union Marine, Q.B.D. 1895, 11 Times L.R. 359, in which a policy " from Haiphong to any ports or places in any order in Japan, with leave to call at any ports or places in or out of the customary route in any order and for all purposes," was held NOT to cover a vessel from Haiphong to Hongay, and thence with coal to Hongkong, and thence to Japan. 6o MARINE INSURANCE chap. of Lord Mansfield in Pelly v. Royal Exchange, 1787 :^ "Is this like a deviation ? No : 'tis ex jusia causa which always excuses." In the same judgment the following exposition of the liberty to touch and stay, granted by the custom of certain trades, occurs : " The insurer . . . must have under his consideration the nature of the voyage to be performed, and the usual course and manner of doing it. Everything done in the usual course must have been foreseen, and in contemplation at the time he engaged, he took the risk upon a supposition that what was usual or necessary should be done. In general, what is usually done by such a ship, with such a cargo, in such a voyage, is understood to be referred to by every policy, and to make a part of it, as much as if it were expressed. The usage being foreseen, is rather allowed to be done, than what is left to the master's discretion, upon unforeseen events, yet if the master ex jusia causa go out of the way, the insurance continues." No doubt the saving of life would be held to justify touching and staying out of the customary course, and certainly putting in in consequence of, or for the repair of, damage arising from peril insured against. On the other hand, a ship insured from London to Berbice was held to have deviated when she put in to Madeira to unload goods and take in wine {Williams v. Shee, 1813, before Lord Ellen- borough). ^ Also a vessel insured from Par^ to New York, with leave not only to call but to discharge, exchange, and embark cargo at all or any of the Windward or Leeward Islands, was held to deviate when after sailing from Parh on her passage to New York she put in to St. Thomas and St. Bartholomew's in order to obtain information for the owner of the state of the markets there, in order to enable him to decide about another proposed venture in another vessel of his and that one sailing /r<9w New York {Hainmotidw Reed, 1820).^ In neither of these cases was the touching and staying accomplished for an object connected with the venture on which the insurance was effected. Still less is the assured covered by this clause if, instead of going on the voyage named in the policy, the vessel ' I Burr. 341. 2 3 Camp. 460. * 4 B. & Aid. 72. Ill DEVIATION OR CHANGE OF VOYAGE 61 undertakes an absolutely different voyage. For instance, goods insured from Liverpool to Melbourne loaded on board a vessel sailing from Liverpool to Sydney are never at any moment of the passage covered ; and a loss even on this side of the Cape at a point within that part of the passage common to both voyages cannot be recovered under the policy. In the eye of the law the voyages are absolutely and entirely different. To prevent hardship to cargo-owners who may have their policies invalidated through deviation or change of voyage over which they have no control, there has been added to the policy on goods a clause to the following effect: — In the event of the vessel making any- deviation or change of voyage, it is mutually agreed that such deviation or change shall be held covered at a premium to be arranged, provided due notice be given by the assured on receipt of advice of such deviation or change of voyage. The clause has in some cases been added to ship policies also, with less necessity, but not unfairly perhaps as regards insurances from a foreign port. Even on outward voyages the shipowner may have some claim for protection against his policies being rendered valueless by a whim of the captain or by a piece of ignorance on his part which does not take effect until after he has passed from the immediate control of the owner. But here again the whole contract is con- trolled by the primary condition of perfect good faith between assured and underwriter. The effect of the " change of voyage " clause on floating policies on cargo has lately been determined in the case of Simon Israel and Company v. Sedgwick and otJiers (before Mr. Justice Wright in Q.B.D., 23rd July 1892 ; confirmed in Court of Appeal by Lords Justices Lindley, Bowen, and A. L. Smith, on 9th November 1 892). ^ The action was brought on a policy of insurance on merchandise, " as interest may appear or be hereinafter declared : at and from the Mersey or London to any port in Portugal or Spain this side of Gibraltar, and thence by any inland conveyances to any ' 8 Times Law Reports 726. 62 MARINE INSURANCE chap. place in the interior of Spain or Portugal, including all risks whatever from the time of leaving the warehouse in the United Kingdom, and all risks of every kind until safely delivered at the warehouses of the consignee, with liberty to touch and stay at any ports or places whatsoever for any purpose necessary or otherwise." There was a marginal note in these terms. " Deviation *"''/or change of voyage ""^jo^ transhipment not included in the policy to be held covered at a premium to be arranged." The goods in question were on or before 2nd March 1892 despatched from Leeds to Madrid. On former occasions goods of the same shipper for Madrid were shipped at Liverpool foi Seville and carried thence by land to Madrid. On 3rd March the shipper declared these goods on his policy : on 7th March he learnt that the goods would go by the Lope de Vega^\ on loth March he caused that vessel's name to be inserted in the declaration, and intending the same course to be observed with those goods as with former shipments to Madrid, he instructed the insurance broker that the voyage was to Seville. The vessel had left Liverpool on 6th March and was lost on that part of the voyage, common to vessels bound for the Atlantic ports of Spain and those for the Mediterranean ports. It was then discovered that the Lope de Vcga^ was not going to Seville at all, but only to Carril and Huelva on the west coast of Spain, and to Carthagena and other ports on the east coast ; and that the bill of lading for these goods had been made out for Carthagena. The shipper informed the underwriter of his mistake, tendered the customary extra premium for Carthagena, which was re- fused, solely on the ground that the voyage to Carthagena was not covered by the policy. Without the deviation or change of voyage clause there could have been no question on this point ; but the assured, relying on that clause in their policy, contended that when the goods left the ware- house, being intended by the shippers to proceed by a route covered by the policy, the declaration was rightly made and the policy attached ; and further, that the assured were entitled to change the voyage in terms of Ill CHANGE OF VOYAGE 63 the clause, and on paying a proper extra premium for Carthagena, the amount of which was not in dispute. The underwriters contended that the words " change of voyage " in the clause apply only to a change after the policy has once attached by the commencement of a voyage of such a kind that, if not changed, it would have been within the policy, that a shipment of goods and an initial declara- tion of insurance on any other voyage is outside the policy, and that therefore the " change of voyage " never takes effect at all in such a case. Mr. Justice Wright's decision in favour of the underwriters was confirmed by the Court of Appeal. The law therefore now stands (in absence of reverse of the Court of Appeal's judgment by the House of Lords, to which as far as is known this case is not in- tended to proceed) that the deviation or change of voyage clause in a floating policy on merchandise is restricted to apply only when the policy has attached by the commence- ment of a voyage which, if not changed, would be within the policy. There does not appear to be anything in the decision limiting the application of the principle to open policies only ; it seems to bear the wider general application that the words " a changed voyage " are not equivalent to the words a " different voyage " ; the former did at one period attach to the policy, while the latter did not at any period attach. CHAPTER IV THE POLICY : PART I — continued Common English Policy coniiftued, Valuation The said ship, etc., goods and merchandises, etc., for as much as concerns the assured, by agreement between the assured and the assurers in this policy, are and shall be valued at ;^ . . . . English law does not impose any obligation on assured or underwriter to fill up the blank at the end of this clause with any suin. Policies consequently fall into two classes — (l) open, in which no value is given; and (2) valued, in which a value is given. The earliest Italian and English policies make no state- ment of the value of the goods or vessel insured ; at the most they provide that a certain proportion, usually 10 per cent of the value, shall remain uninsured, stated to be "at the assured's adventure." This provision was embodied in the Guidon de la Mer, and it was stipulated in the Ordinance of Louis XIV. (Tit. vi. Art. 18) that the assured should always bear the risk of the tenth of the goods which they shipped, unless there was an express declaration on the policy that they meant the whole value to be insured. The French Code de Commerce of 1807 did not reproduce this restriction, which had fallen into disuse, express declaration of complete insurance having become usual. In consideration of the subject of valuations it soon becomes apparent that some regard must be had to the intention of the contract of insurance. The aim of the CHAP. IV VALUATION 65 contract being to secure indemnity to the assured, indemnity should be the Hmitation of the obligations of the under- writer. As Lord Mansfield put it in Godin v. London Assurance, 1758: "Before the introduction of wagering policies it was upon principles of convenience, very wisely established, that a man should not recover more than he had lost. Insurance was considered as an indemnity only in case of a loss, and therefore the insurance ought not to exceed the loss. This rule was calculated to prevent fraud, lest the temptation of gain should occasion unfair and wilful losses." But the application of this principle is not easy. What constitutes indemnity in case of loss to a merchant engaged in oversea trade ? He conducts certain commercial operations, acting on his knowledge of foreign markets and his skill in estimating the course of trade. If he ships goods and loses them by marine perils, whether is he indemnified by recovery from his marine underwriters of the sum he paid for these goods plus all the shipping ex- penses or of the sum which, but for the perils of the sea, he would have obtained for them at destination ? It is evident that all the impetus would be removed from trade if the merchant had at the commencement of a venture no expectation of obtaining more at the end than he expended at the beginning. Therefore there is considerable reason for asserting that any repayment for lost goods which leaves the assured in a worse plight than he would be if the venture had been completed is an imperfect indemnity. The first person who drew public attention to the ambiguity of the word "indemnity" was Wilhelm Benecke of Hamburg, who published between 1805 and 1821 his great System of Marine Insurance and Bottomry. ^ Removing to Lon- don about 1 8 14 or 1815, he published in 1824 his Treatise on the Priticiples of Indemnity in Marine hisurance, Bottomry, and Respondentia. Benecke concluded that to secure perfect indemnity the merchant must word his valuation thus : " Valued at so much as the gross proceeds of the goods specified will be at the port of discharge," ^ 2nd edition, edited and rearranged by Vincent Nolle. 2 vols. Hamburg, 1851 and 1852. P 66 MARINE INSURANCE chap. stipulating specially whether the duty-paid price or the price in bond is intended. As a merchant would hardly ever be able to detennine exactly what price his goods would fetch at destination, he would need for his own protection to insure an amount in excess of his expectation, and to reduce this at the close of the venture by declaring a short interest and getting a return of premium. Then, from the nature of this method of valuation, it is plain that it will not act fairly between assured and underwriter, unless the goods insured are such that the market to which they are shipped is neither raised by their loss nor depressed by their arrival ; in other words, it is hardly applicable except " in the con- veyance of current merchandise to and from important commercial places" (Benecke, p. 12). A middle course between the somewhat elaborate and inconvenient system proposed by Benecke, and the stricter ancient system of permitting the merchant to insure nothing beyond the cost of his shipment, is often adopted, namely, the valuing of the goods at invoice cost and an agreed percentage, which may be taken to represent out-of-pocket expenses and anticipated profit. The adoption of such a system simpli- fies the matter immensely, but it involves the abandonment of the idea of indemnity in either sense, and if the assured covers the whole sum of his valuation he is left either under-insured or over-insured as the market at destination goes up or down. It has, however, become the almost universal practice in England to use valued policies for goods and ships, while of freight policies a considerable proportion is open. I. Open policies. Between 1760 and 1825 various cases went to the courts ; we are consequently in possession of a series of decisions by Lord Mansfield and his suc- cessors on the valuations attached by English law to different interests. As might be expected, from the date of the earliest of this series of decisions, they are based on practices founded on the theory and jurisprudence of the French system of maritime and commercial law. As French legislators before that period based their work on such maxims of Roman law as Nemo debet aliena jactura IV VALUATION IN OPEN POLICIES 67 locupletari (no one ought to be profited by another's loss), it is only to be expected that these decisions will leave the merchant indemnified only to the extent of this actual cost and shipping expenses of his goods. The decisions are that in an open policy the valuations attached to different interests are : (a) Goods or merchandise : the prime cost (say invoice cost) plus shipping expenses and cost of insurance {Lewis v. Rucker, 1761).^ {b) Ship: the value at the commencement of the voyage, including the outfit, stores and provisions for crew, advances made against crew's wages and cost of insurance (Marshall, p. 633 i^ Stevens on Average, 5th ed. p. 190). {c) Freight : the gross freight due to the ship on her arrival abroad plus cost of insurance {Palmer v. Blackburn, 1822).^ {d) Other objects of insurance : the value to the assured at the commencement of the voyage plus cost of insurance. On examination of these four classes of interests, it is evident that owners of cargo {a) and parties interested in whatever may fall under class {d) get under these decisions the very barest provision that can be termed indemnity. On the other hand, by the provisions of {b) and {c), a ship- owner using open policies would be permitted by law to be in a better position through losing his ship at sea than by having her complete her voyage in safety, the difference being the cost of the outfit, stores, provisions, advances, in fact nearly all the expenses of earning the freight, and, in addition, the cost of insurance of ship and freight. The state of the law is thus an inducement both to assured on ^ 2 Burr. 1 167. ^ "A ship is valued at the sum she is worth at the time she sails on the voyage insured, including the expenses of repairs, the value of the furniture, provisions and stores, the money advanced to the sailors, and, in general, every expense of the outfit, to which is added thfl premium of insurance." ^ I Bing. 61. 68 . MARINE INSURANCE chap. goods and to underwriters on ship and freight not to use open policies, and indeed they are now but rarely used. 2. Valued policies. The advantages and limitations of the system of valued policies were well set forth by Mr. Justice Willes in Lidgett v. Secretan, 1871 :^ "Nobody has been able to improve on the practice as to valued policies, wTiich has been recognised and adopted by shipowners and underwriters, and has, at least among honest men, the advantage of giving the assured the full value of the thing insured and of enabling the underwriter to obtain a larger amount of profit." The most authoritative document on the English law of valuations is the memorandum on Over-Insurance, Valued Policy, and Constructive Total Loss, written by Mr. Justice Willes in 1867, and printed as Appendix Ivii. in volume 2 of Report of the Unseaworthy Ships Commission of 1874. In § 2 of this memorandum we find : In tlie absence of proof that the value fixed by the contract is so exaggerated as to be a mere cloak for gambling, in representing more than any possible interest which the assured could have in the ship and outfit, or that the exaggeration was fraudulent with a view to cheat the underwriter, the latter is oound in case of total loss to pay the agreed sum. It is only when the over-valuation is so ex- aggerated as to show to the satisfaction of a jury that it must have been designed in order to obtain more than a just and complete indemnity that the insurance is void. That Lord Mansfield would have acted on this principle IS clear from his words in Lewis v. Rucker : 2 "If it should come out in proof that a man had insured ;^20oo and had mterest on board to the value of a cable only, there never has been, and I believe there never will be, a determination that by such an evasion the Act of Parliament may be defeated." (The Act referred to is 19 Geo. II. c. 37, pro- hibiting wager policies.) " There are many conveniences from allowing valued policies, but where they are used merely as a cover to a wager they would be considered as an evasion." It must be confessed to be impossible to define h priori • L.R. 6 C.P. 616. "^ 2 Burr. 1167. IV VALUED POLICIES 69 the exact point at which excessive valuation becomes fraudulent. Indeed it is questionable whether it is ever from figures alone that one arrives at conclusions respecting fraud ; ^ but figures read in the light of the facts preceding, accompanying and succeeding the insurance, may help to establish conclusively a charge of fraud. In the case of Haigh V. De La Cour, 1812,^ it was found that goods on board the Maria were insured for ^^5000, invoices for that amount being shown to the underwriters. Claim was made against the underwriters. It was discovered that the goods were worth only ^^1400, and it was contended that up to that amount at least the underwriters were liable. But the invoices proved to be fictitious, and the bills of lading interpolated, and when something like barratrous handling of the ship was proved, the insured value became evidently fraudulent. Chief Justice Sir J. Mansfield said, " If the plaintiffs intended from the beginning to cheat the under- writers, the assignees can recover nothing. The fraud entirely vitiates the contract." Cases have occurred in the history of commerce in which the insurance of four times the amount of invoice would be quite justifiable ; for in- stance, that of shipments of silver to Japan, made for the purpose of obtaining in exchange gold at the Japanese ratio of 4 to I , when the prevailing ratio in the rest of the world was about 15^^ to i (H. Cemuschi, Monetary Diplomacy in 1878, p. 16). Similarly, in such insurances as those of contraband cargoes, or cargoes destined to run a blockade, one can imagine a very high valuation put on goods whose value would be enormously enhanced by their mere arrival at their intended destination. The case of Irving v. Manning (House of Lords, 1847^') referred to the policy value of the Genera/ /Cicid, ^17,500. The vessel was so damaged that after an expenditure of ^^10,500 in repairs she would be worth only ^9000. This was held to constitute a total loss, and to justify a claim for 1 Mr. Justice Willes in Lidgett v. Secretan, 1870 (L.R. 6C.P.), speaks of a value ' ' so outrageously large as to make it plain that the assured intended a fraud on their underwriters." ^ 3 Camp. 3ic>. ^ i H. of L. Cas. 287, 70 MARINE INSURANCE chap, the full valuation insured, ;^ 17, 500. In the course of the case it was brought out that the words of the policy merely stating the value do not amount to an agreement " that for all purposes connected with the voyage, at least for the purpose of ascertaining whether the ship is a total loss or not, the ship should be taken to be of that value " ; ^ but they '* mean only that, for the purpose of ascertaining the amount of compensation to be paid to the assured when the loss has happened, the value shall be taken to be the sum fixed, in order to avoid disputes as to the quantum of the assured's interest." Dealing with the point raised that by this means the assured would under a contract of mere indemnity obtain more than a compensation for his loss, the judges replied that it was so, that " a policy of insurance is not a perfect contract of indemnity. It must be taken with this qualification, that the parties may agree before- hand in estimating the value of the subject assured by way of liquidated damages." In Barker v. Janson, 1868,^ another important judg- ment was given. The ship Sir William Eyre was much damaged on her outward voyage from Glasgow to New Zealand, and was sent for repairs to Calcutta. She was insured for ;i^8ooo at and from Calcutta for three months, commencing thirty days after her arrival there. On reach- ing Calcutta she was dry-docked, and found to be not worth repair, the underwriters on the outward policy paying ;^7000. While the vessel was still in dry dock, and before expiry of the three months, for which the second policies covered her, she was totally destroyed by a cyclone. Claim was made for the full amount insured, ^8000 ; against this it was contended that the policy value being enormously above the tnie worth of the vessel should be reopened. Chief Justice Bovill held that the transaction was made in good faith ; he said " an exorbitant valuation may be evidence of fraud, but when the transaction is bond fide the ^ " So that when a question arises whether it would be worth while to repair, it must be assumed that the vessel would be worth that sura when repaired." * L. R. 3 C. P. 300. IV MISTAKE AS AFFECTING VALUATION 71 valuation agreed upon is binding." Mr, Justice Willes remarked in his judgment, " Here there was no wager, the insurance having been bond fide ; and it having been settled by Irvmg v. Manning that valued poHcies are vahd if there be no fraud or wagering, I think it would be wrong to make any doubt in this case." Earlier he remarked, " It is said that there was a mistake as to the state of the ship ; but a mistake, to entitle the parties to reopen a contract of valuation, must be such as would entitle the parties to proceed in equity for relief. It must have been a mistake of both parties in respect of something which was material to the contract." The consideration of mistake as affecting valuation came before the courts in Williams v. North China Company, 1 876.1 The ship Queen of the Colonies was chartered from Batavia to the United Kingdom. The assignees in Java of the charter-party insured the estimated amount of the freight, valued ;!^S94i ; and on the same day with the same office their advance against freight valued £^\Z- Taking the terms of the charter-party into consideration, the Court of Appeal decided that the former insurance was intended for the protection of the shipowners, the charterers having pro- tected themselves by the second insurance for the amount of the advances they had made in accordance with the charter-party. The shipowners were therefore interested in the freight less advances, not in the advances at all. In his judgment Chief Justice Cockbum said, " You cannot open the policy to inquire into the question whether or not there has been over-valuation, but you can do so to see if the claim of the assured is coextensive with the subject matter of the insurance. Here it is not." The Master of the Rolls (Jessel) added, " In a valued poHcy you cannot open the policy ; but that does not touch the question of what it was that was valued." It is consequently only in a very limited sense that it can be said that mistake is a ground for opening the valuation of a valued policy. In the United States of America the law respecting 1 35 L.T. N.S. 884 ; 3 Asp. Mar. L. Cases 342. 72 MARINE INSURANCE chav. valuation is substantially the same as in England. Phillips (§ 1 1 83) gives the following: " If the valuation is neither intended as a co\ er for a wager by botli parties^ nor fraudu- lently made, it is binding on the parties, in case it can be carried into effect, and will as between them determine the value of the property. And the circumstance of the pro- perty being valued very high has not in itself been held to be a sufficient proof of a wager, or of a fraudulent intention on the part of the assured." Mr. Justice Willes, in the memorandum already quoted, says : " Upon the general subject of valued policies the laws of the United States thus appear to be identical with those of England." The French Code de Commerce is very meagre on the subject of valuation ; § 339 provides that, " If the value of the goods is not fixed by the contract, it may be established by the invoices or by the books, in default (of these) the valuation of them is made in accordance with the price current at the time and place of loading, inclusive of all duties paid and expenses incurred until on board." The French policy on merchandise contains a special clause providing that in case of goods insured with a certain valuation, underwriters in case of loss or average demand proof of the real values, and in case the valuation is found to be exces- sive they may reduce it to cost price plus 10 per cent, unless they have expressly agreed to a higher increase and fixed its amount. This in effect forces merchants who desire to insure more than invoice and 10 per cent to declare the percentage they want added to invoiced prices. The General German Commercial Code is very full in its provisions on the subject. For open policies the provisions of § 786 hold: § 786. Tlie full value of the insured object is the insurable value. The sum insured shall not exceed the insurable value. The sum insured has no validity so far as it exceeds the insurable value. ^ In §§ 795, 797, and 799 provision is made for the ' Arnold's translation. IV FOREIGN LAW RESPECTING VALUATION 73 valuation of ship, freight, and cargo when no special contract exists respecting the values : Ship. Its actual value when the underwriter's risk began. Freight. The amount of freight as per the vessel's freight con- tracts, or if none exist or the cargo is on shipowner's account then the customary freight. Goods. Their value at time and place of shipment, plus all costs till on board and including insurance. By § 793 it is provided that in case of valued policies when the parties have agreed on a value for insurance, that value is taken as binding between the parties. But the underwriter is entitled to demand a reduction of the valua- tion if he can prove that it is seriously excessive, and the words in §§ 795 and 799, "This rule applies also when the insurable value of the vessel (goods) has been inserted," ^ seem to indicate that anything much exceeding the values named in these sections would be considered excessive. As regards freight, § 798 provides that when an insurance is done on freight without specifying whether gross or net freight is intended, it is taken to be done on gross freight. The Dutch and Portuguese codes and the Belgian law are said by Victor Jacobs {Etude sur les assurances niari- times et les avaries, Brussels, 18S5) to permit the under- writer in every case to reopen the valuation in the policy, unless it be fixed by arbitrators appointed by the two parties. The Italian code (§ 612) regards a valuation as exclusively the work of the assured, unless it has been preceded by a survey accepted by the underwriter. In that case the underwriters cannot impugn the valuation, unless for fraud, dissimulation, or falsification (§ 435, pt. ii.). The new Spanish code of 1885 limits (§ 747) insurances on freight to the amount appearing in the contract of aftreightment ; and on ship (§ 751) to four-fifths of the vessel's value. In cases of evident over-valuation a distinction is drawn between over-valuation in error and by fraud ; in the former the insurance is reduced to the genuine worth of the article insured, as fixed by common accord of the parties or by ^ Arnold's Uanslalion. 74 MARINE INSURANCE CHAP. appointed experts ; in the latter the policy is rendered null and void, the underwriter retaining the premium, " without prejudice to the suitable criminal proceedings " (§ 75 2, Baikes's translation). Closely connected with these questions of valuations is the theory of the true value of a ship put forward by Lowndes (Law of M. L p. 13), namely that a ship being merely a freight-earning machine, her true worth is the present value of all her freights plus what she will fetch for breaking up, that is as old metal and timber. If this is taken to be the proper basis for the valuation of ships, then, when a vessel is fully insured up to this valuation, there evidently ought to be no separate insurance of freight. No doubt the market values of ships tend more and more, as they approach the end of their career, to fix themselves on this basis ; but in the early years of a vessel's life it is much moie the rule to value a ship at what she cost less what she has earned net for her owners, and to correct that value up or down in accordance with the variation in the cost of building vessels of similar size and equipment. It may even be doubted whether a policy valuation based on such a calculation as that suggested by Lowndes (supposing it to be possible) would be unimpeachable from a legal point of view. For in the discussion of insurable interest it will be found that a mere expectation of possession of property or profit is not substantial enough to justify an insurance ; there must be actual pecuniary interest in the insured object or some firm engagement providing for such interest. Consequently the only freight engagements that could be reduced to a present value for the purpose of valuing a ship in a policy would be firm freight contracts that could be enforced by the courts. As a matter of fact it is clear that the firm freight engagements of any named ship are in amount far inferior to what is usually called her selling or commercial value. Valuation Clause. — The validity of the valuation given for a ship in a policy is sometimes made of greater strength and effect by the addition of such a clause as the following : — ■ IV VALUATION CLAUSE 75 The valuation stated herein shall by mutual consent in all ques- tions under this policy be taken to be the value of the vessel. This form of the clause has now been almost universally abandoned, but clauses of a similar character are in frequent use, and will be discussed below under the heading of Con- structive Total Loss (p. 152), CHAPTER V iKSURABLE INTEREST — SUBJECTS OF INSURANCE — MULTIPLE INSURANCE Before proceeding further in the discussion of the policj it seems better to consider at this point two subjects closely connected with Valuation, namely Insurable Interest, and Subjects of Insurance. (i) Insurable Interest. — As the contract of insurance is essentially a contract of indemnity, it follows that before this" contract can take any effect there must first have been exposure to loss ; in other words, without a previously exist- ing chance of loss or exposure to loss, no merchant would think of becoming party to a contract the object of which is to indemnify him for loss and so protect him from loss. It is this element in insurance that differentiates it from all quasi-contracts' such as wagering or betting. The assured and the underwriter do not say about a venture in which neither is concerned " we make an agreement that if this vessel or cargo (or whatever it may be) arrives you pay me so much, and if it is lost I pay you so much." That would be a simple wager. They do not even agree that in the case of loss of a vessel or cargo in which the assured is actually interested, the underwriter shall pay an arbitrarily fixed sum, having previously received as the consideration for the agreement a certain proportion of this sum, to be retained by him whether the venture is lost or arrives in safety. That would merely be a more limited and defined wager. An appreciation of the fundamental difference between such wagers and insurance joined to considerations of public policy and a desire to repress the wild speculation that accompanied and survived the South Sea Company, CH. V INSURANCE A CONTRACT OF INDEMNITY 77 resulted in the passing of an Act of Parliament on the subject in 1746 (19 Geo. II. c. 37). The preamble of the Act points out that the intention was to put an end to the clandestine export of prohibited articles, such as wool, and to engaging in prohibited or suspected trades, parties con- cerned in these securing themselves " under pretence of insuring against the risk on shipping and fair trade against loss and producing a diminution of the public revenue." The Act enacted " That no insurance shall be made on any ship or ships belonging to His Majesty or any of his subjects, or any goods or effects laden on board such ships, interest or no interest ^ or without further proof of interest than the policy^ or by way of ganmig or wagering, or with- out benefit of salvage to the insurer, and that every such insurance shall be void." In spite of this illegality such policies continue to be executed ; they are in themselves valueless in a court of law, being without any legally obliging effect on the underwriter, and perhaps on that account are respected with the most studious care. They are simply deliberately drawn memoranda of an obligation of honour between the two parties.^ .\ddenda The difference between such " pretended " insurances and the genuine insurances which Parliament meant to encourage is most clearly explained in the word? of Mr. Justice Lawrence in Lucenav. Crawfurd, 1802.2 Amould (p. 282) reports them as follows : " A man is interested in a thing to whom advantage may arise or prejudice happen from the circumstances which may attend it, and whom it importeth that its condition as to safety or other quality should con- tinue. Interest does not necessarily imply a right to the whole or part of the thing, nor necessarily and exclusively 1 In The Oxenholme {Roddick v. Indemnity Marine Insurance Company, Appeal Court, 1895) Smith, L.J., was "very strongly of the opinion that the honour policy, which was altogether null and void, could not be put forward by the insurance company as a defence, and that in that respect he differed from Mr. Justice Kennedy " (in lower court). Cf. Kay, L.J., in same case, " p.p.i. policies, that is to say, policies upon which no action could be maintained, but the terms of which were certain of being observed." 2 a B. & P.N.R. 269 ; i Taunt. 324. 78 MARINE INSURANCE chap. that which may be the subject of privation, but the having some relation to, or concern in, the subject of the insurance, which relation or concern by the happening of the perils insured against may be so affected as to produce the damage, detriment, or prejudice to the person insuring. . . . To be interested in the preservation of a thing is to be so circumstanced with respect to it as to have benefit from its existence, prejudice from its destruction. The property of the thing and the interest derived from it .may be very different. Of the first, the price is generally the measure ; but by interest in a thing every benefit and advantage aris- ing out of or depending on such thing may be considered as being comprehended." The words " benefit from its exist- ence, prejudice from its destruction," taken in connection with a marine venture may be paraphrased "benefit from the safe arrival of the venture in question, prejudice from loss or damage suffered by it." But that benefit or pre- judice must not consist solely of the good or bad result of the insurance itself; it must pre-exist and be the precedent cause of the effecting of the insurance. The ideal of insurable interest is absolute ownership, and the nearer one comes to that the clearer is the right to effect an insurance. But short of property there are many relations in which people may stand to goods, vessels, advances, profits, and freights that fairly and equitably entitle one to the protection of an insurance policy. These may be divided into relations of responsibility and relations of risk of profit and of loss as in the following cases : — A. Goods. (a) Relations of responsibility. If goods are put in charge of a lighterman for conveyance from shore to ship, or vice versd, or for transit across a river, the lighterman, being a common carrier, is liable for all and eveiy loss and damage to these goods iinless proceeding from the Act of God (vis major, force majeure) or of the King's enemies. The goods may or may not be insured by their owners, but that is a matter in which the lighterman has no concern, he cannot claim the pro taction of their policy even if such a policy exists. V INSURABLE INTEREST IN GOODS 79 He is therefore "so circumstanced in respect of these goods as to have benefit from their existence, prejudice from their destruction " (to use Mr. Justice Lawrence's words), and if he is not willing to bear this risk on his own shoulders he is entitled to pass it on to another person by insurance, namely to an underwriter.! Similarly, in the case of a wharfinger or any other bailee of goods. If a salvor working under contract with a shipowner or shipmaster, act- ing on behalf of all concerned in a wrecked venture, is asked to remove salved goods to some market for sale, it is usual and proper that these goods should be insured, unless the owners or underwriters of certain parcels or shipments declare that they do not want them insured against this risk of removal. Similarly, if a salvor has incurred certain expenses for which he is responsible to third parties, in saving goods and forwarding them to a proper place for sale or reshipment, he is entitled to insure at least his out-of-pocket disbursements incurred in the operation of salving. If a shipmaster, acting as agent for all concerned in any venture, finds it necessary to tranship cargo from his own vessel to another for conveyance to destination, he is entitled to insure the cargo for the part of the voyage to be performed in the other vessel if the original bill of lading does not give permission for such tran- shipment. {b) Relations of risk. Ownership of goods when they are exposed to sea perils evidently constitutes an insurable interest of the most unmistakable kind. But as soon and in so far as the property passes from seller to buyer so does the insurable interest of - But, however this underwriter may word his policy, he can aever be called to make good any loss or damage proceeding from the Act of God or of the King's enemies, because the lighterman being never damnified by either of these causes can never be in need of indemnity against their effects, and is not entitled to claim indemnity from his underwriter on behalf of a third party. 8o MARINE INSURANCE chap. the seller cease, and he cannot transfer to the buyer the interest in any insurance he has effected unless such transfer is specially contained in the contract of sale {North of England Oil Cake Company v. Arch- angel Marine Insurance Conpany, 1875).! Similarly a seller who contracts, for example, to deliver goods free on board ship, cannot obtain protection from a buyer's policy even should it cover the risk of tran- sit from shore to ship ; the buy^r having no pecuni- ary interest in the goods at that time has no claim for indemnity which he can transfer to the seller, as it was not possible that he should be damnified at the period when the goods were at the seller's risk. Similarly, if a consignee of goods has made an advance against their value he is entitled to protect himself by insurance against the risk of the loss of his advance which might result from the loss of the goods {Hilly. Secreian, iJc^Z).^ Lowndes (Law of M. L p. 9, note) quotes the rule given by Mr. Justice Willes in Seagrave v. Union Marine^ 1 866.3 " The general rule is clear, that to constitute interest insurable against a peril it must be an interest such that the peril would by its proximate effect cause damage to the assured." If, therefore, the consignee has no other concern in the goods than merely getting possession on behalf of the owners, whether shippers or consignees, then he is not damnified by the loss of the goods at sea, and consequently can never have the need of indemnity against that loss (except perhaps the amount of the commissions which he would certainly secure for the handling of the goods if they did arrive at destination). Further, in the case of a wrecked venture, if a salvor has contracted for payment in a lump sum or in a stated percentage of the value of salved goods payable when they reach a place selected for sale or reship- ment, he is evidently pecuniarily concerned in the » L.R. 10 Q.B. 249. 2 I 3^ p_ 2j^ 3 3 L.R. I C.P. 320. INSURABLE INTEREST IN SHIP 8i safe arrival of the goods at that place, and is conse- quently entitled to insure his interest in theni. It is to be noted that in the case of goods transferred in whole or in part of their value from one party to another, the total amount insured by all the parties should not exceed the full value of the goods. But this limitation evidently does not extend to the case of any subsequent interest arising, like that of the salvor just mentioned, out of the consequences of a sea peril. The original relations of buyer, seller, and their underwriters are not mixed up with those of the salvor and his underwriter. Ship. The owner of the whole of a ship is obviously entitled under Mr, Justice Lawrence's dictum to insure his property ; and it was decided by Lord Ellenborough in Frettch v. Backhouse^ I77i, that the owner of a share or shares in a ship is entitled to insure his share or shares. " Each separate share in the ship is the distinct property of each individual part owner, whose business it is to protect it by insurance, so that the insurance of another cannot be binding on such pioprietors without some evidence importing an authority by them." Consequently without precedent authority or subsequent ratification, no insurance effected by a part owner or managing owner on the shares belonging to other part owners is binding on them. In the case of ship companies or single-ship companies there is usually a clause in the Articles of Association ^'"'/or the resolution appointing the managers, conferring on them the authority to effect insurances, and in some cases stipulating that the amount insured shall not fall below a named amount. Where it is not very inconvenient and unworkable it is most desirable that the insurances on a ship should all be effected by one person, or at least all on the same conditions, especially of ^ 5 Burr. 2727. 82 MARINE INSURANCE chap. valuation. The confusion, annoyance, and disap- pointment arising from variation of valuation in the policies of part owners are incredible. {a) Relations of responsibility. The plainest case is that of a charterer who hires a vessel from her owner, agreeing to return her to her owner at the end of the time for which she is hired ; the charterer having the use of the vessel at his own risk. He is entitled to insure the vessel as he is pro tempore in the position of owner, being absolutely responsible to the owner for the property hired. In such an arrangement a value will prob- ably be mentioned in the charter, and it would be expected to be only for the excess of the vessel's whole worth to the owner beyond the amount stated in the charter that the real owner has an insurable interest: but this is not so.^ Captors of a vessel incur certain responsibilities to pay costs and charges in case the vessel turns out to have been improperly taken as a prize : they have therefore a proper insurable interest {Boehm v. Bell, 1799)-^ Similarly, a shipmaster moving his ship for repairs to a port other than the nearest convenient port becomes i-esponsible for the safety of the ship, and is therefore entitled to insure her value. If a ship's agent at destination is instructed to sell the vessel and can only do so on condition of delivering her at another port before obtaining the purchase money, he is evidently entitled to insure the vessel for at least the price agreed ; so that if the vessel is lost her owners are placed in as good a position as if the vessel had been sold and delivered at original destination. ' The ground given is tiiat the owner is not bound to trust exclusively to the credit of the charterer, but may likewise protect himself by a policy of insurance {Hobbs v. Hannam, 3 Camp. 93). But if in case of a loss both owner and charterer recovered and the latter remained solvent and paid the owner the value of the ship, surely the matter would be treated as a case of double insurance ; see Godin v. London Assurance, 1758 (i Burr. 489). * 8 T. R. 154. INSURABLE INTEREST IN ADVANCES 83 (J?) Relations of risk. An insurable interest exists in any case in which the ship herself is the security upon which money has been lent : such is the interest of a mortgagee. The mortgagee need not specify the nature of his interest, he can recover on an ordinary policy on the ship {Irving v. Richardson, 1831).^ A mortgagee is not entitled to insure more than the sum he has advanced, un- less the excess of this amount is insured on account of the mortgagor. The position of the mortgagor is different : he is entitled to insure his ship for her full value ; for although in case of her loss the security of the mortgagee is gone, the mortgagor is still liable for the debt. (Amould, p. 307, citing Alhton v. Campbell, 1779-)^ But what if the mortgagor is a single ship company with liability limited and capital fully paid up ? The assets of the company may consist of the ship her- self and nothing more. If the vessel in such a case be lost, can the mortgagee claim the benefit of the company's insurances, and by instituting legal pro- ceedings (say in bankruptcy), get the policies included among the assets of the company ? C. Advances. The most general form in which this interest nowadays presents itself is that of general average expenses. A vessel meets with some accident in her voyage which compels her to return to her sailing port or put into an intermediate port of refuge : while she is there certain expenses are incurred which are paid by the ship's agent on behalf of all interests. But these expenses are payable by ship cargo and freight in certain pro- portions, to be determined at the close of the venture and at the destination. There is therefore an insurable interest for the payer of these expenses from the port of refuge to the destination. In former times the most ordinary form of > r Mood. & Rob. 153 ; 2 B. & Ad. 193. 2 4 Brown's P.C. 476. 84 MARINE INSURANCE chaf. advance was the bottomry bond. When a captain found himself unable to defray his expenses in a foreign port and could raise no money on his own credit or the shipowner's, he was "in his instant unprovided necessity " (in fact, in direst neeii) em- powered ipso facto to raise money by pledging his ship for repayment. The cash thus obtained was repayable within a fixed number of days after arriVal at destination ; if the vessel did not arrive the bottomry bond remained unpaid. The lender of money on bottomry had thus an insurable interest : but in accordance with Lord Mansfield's decision in Glover V. Black in 1763,^ "respondentia and bottomry must be mentioned and specified in the policy of msurance." ^ The respondentia bond was a similar document in which the cargo was pledged. It sometimes happened that both ship and cargo were pledged, in which case the document embodying the contract was called a bottomry and respondentia bond. By the Ordinance of Louis XIV. (Book III. Tit. 6, Art. 16) borrowers on bottomry were for- bidden to insure the amount lent to them, under penalty of nullity of the policy and corporal punish- ment. Lenders on bottomry were restrained by the same penalties from insuring their expected profits on their ventures. The Code de Commerce forbids the borrower on bottomry to insure the amount he borrowed. The German code permits the lender on bottomry to insure his loan and the maritime interest. The Italian and new Spanish codes provide that on shijj and goods only the excess of * 3 Burr. 1394. ^ The question whether the borrower or lender on bottomry has an insurable interest is easily solved by applying the ordinary principles which govern insurable interest in general, and taking into consideration the nature and effect of the particular instrument of hypothecation, and that no rules other than the ordinary rules of insurance law are re- quired for its solution. — Arthur Cohen in Law Quarterly Review, April 1895. V INSURABLE INTEREST IN PROFITS — FREIGHT 85 what is covered by bottomry ^"''/„ respondentia may be insured. D. Profits being derivatives of the material subjects concerned in a marine venture are with them exposed to perils, and consequently those concerned in them have an insurable interest. The amount of such interest is not usually shown separately in policies, it is generally added to the valuation of the article on which the profit is expected. When the insurance on profit is done in this form it benefits only parties who have an interest in the goods. To make sure that insurances on profit alone represent a genuine interest in goods, it was decided in Sfockdale v. Dtui/op, 1840,1 that the assured to secure payment must be legally interested in the goods when they were lost. In the case of Hodgson v. Glover^ 1805,2 Mr. Justice Lawrence decided that the assured on profit must show that if there had been no shipwreck there would have been some profit (Arnould, p. 291, note f). E. Freight. It is impossible to avoid introducing here the great maritime interest freight, which was nowhere mentioned in the printed matter of the English policy prior to 1749. There is no interest concerning which more diverse views have been entertained or regulations devised. Bearing in mind Lowndes' view of the true value of a ship (p. 74), it is apparent that if the valuation of a ship is fixed at such an amount as will include her net earnings on the voyages for which she has firm freight contracts, the freight ought not to be insured separately. But as has been pointed out already, the valuation of ships is fixed in a very rough and ready way, cost of building, amount of shipping in the market, etc. etc., all influencing the price fixed, and as a named freight is a definite sum it has been found convenient to deal with it separately from ship. The one rule upon which English law insists » 6 M. & W, 224. » 6 East 316, 86 MARINE INSURANCE chap. is that to constitute an insurable interest in freight there must exist some legally enforceable bargain or contract. In Patrick v. £ames, 1813^ (the orchella- weed case), Lord Ellenborough stated that, " If such contract had been proved, the assured would have been deprived by the loss of a profit which they otherwise must certainly have received, and for which they would have been entitled to an indemnity." Consequently, whatever be the state of the freight market when a vessel leaves in the hope of getting a freight elsewhere, there is no insurable interest on freight until she has been fixed for her next voyage for some particular employment. In France there have been many difficulties on this subject, a very sharp distinction being drawn between /ret a faire and fret acquis, the insurance of the former being forbidden. But by the law of 14th August 1885, permission was given to insure (inter alia) net freight. (2) Subjects of fjisurance. — The discussion of the meaning to be attached to the general words in the policy intended to describe briefly the various subjects insurable by the policy and of the nature of insurable interest has resulted in the enumeration of many subjects which may be insured. But there is not in any docu- ment or enactment of English law, an enumeration seriatitn of the various classes of things that may be insured such as is found in the commercial codes of France, Germany, Italy, Spain, and other continental countries. In the absence of such an enumeration, the best plan that can be adopted is to take Mr. Justice Lawrence's definition of insurable interest, and to say that every object or relation to which this definition can be applied is one on which insurance may legally be asked and eflfected, unless there is some statutory prohibition or some valid decision against the legality of the assurance. In the examination of the wor.ds of the policy "any kinds of goods and merchandises," it was stated that ^ 3 Camp. 441. ▼ SUBJECTS OF INSURANCE 87 limitations have been placed on the use of these words as describing subjects of insurance : but that must be taken in the sense that certain subjects must be de- scribed by their specific name when it is intended that they shall be covered by policy of marine insurance. For instance, the absence of the word " freight " or " hire " from the printed words of the policy does not mean that this interest cannot be covered by the policy. It is evident that the interest meant to be protected by an insurance of freight would be misdescribed by the words "goods or merchandises." The interest "freight" must therefore be specially designated in writing in the policy. Similarly, live stock has been decided not to be properly included under the words "goods and merchandises," and it seems likely that the same holds true of fresh or frozen beef or mutton, which is now so largely imported from North and South America and New Zealand. These interests must therefore be fully specified. But of the objects in which the would-be assured has an interest properly describable as an insurable interest in terms of Mr. Justice Lawrence's definition, some even if specifically described are not admitted to be legally insur- able. Such are slaves, the insurance of whom as articles of trade was prohibited in this country by the same Act of Parliament of 1806 (47 Geo. III. c. 36) which abolished the African slave trade. This prohibition can now only be regarded as due to the same spirit as succeeded in abolishing the slave trade : it would evidently have been futile to forbid the carrying on of a trade in British vessels, which might be carried on in foreign ships protected by British insurance policies. The other subject on which insurance is forbidden in almost all maritime states is seamen's wages. As Marshall puts it, " It seems to be the policy of all maritime states to use every precaution to prevent the desertion of the seamen, to interest them in the preservation of the ship, and to invite them to the most vigorous exertions in times of danger." The English case cited by Marshall is Webster v. De Tastei, decided in 1797.' I7T.R. 157. 88 MARINE INSURANCE chap. This prohibition extends to every member of the crew under the master. But the master being considered ol too good a position to be influenced solely by his own immediate interest in the venture is permitted to insure his pay or commission as well as any share he may have in the vessel. 1 With these two exceptions it may be taken that there is no illegality in insuring any object in which an insurable interest fulfilling Mr. Justice Lawrence's dictum can be proved to exist. The prohibition of the insurance of seamen's wages recalls the somewhat similar prohibition in France, until 14th August 1885, of insurance on freight at risk {fret a faire). The shipper or charterer was permitted to include in his insurance the amount of freight prepaid or guaranteed {fret acquis) ; but the shipowner was not allowed to insure the balance of the freight. One reason given in the French books for this regulation is that it was hoped by means of it to secure the care and diligence of shipowner, master and crew. But what the great Emerigon gives as the real reason is that the freight at risk {fret cl faire) being an uncertain profit, the result of good fortune on the voyage, does not exist until the voyage is closed, and therefore cannot become a subject of insurance for the voyage. This is subtle ; but the strict application of this principle would prohibit the insurance of any profit or increase of value on ship or goods, which would be entirely alien to the spirit of English insurance law.^ Multiple Insurance. — In close connection with the questions of insurable interest and subjects of insurance 1 Cf. Shakespeare, Measure, ii. 2, 130. ^ Prior to 1885 M. Alfred de Courcy of Paris, the most eminent French underwriter of his day, used to hold that it was an error to say that French law prohibited the insurance of freight : he said that all it did was to refuse to such insurances legal sanction and recourse to the courts. It is true there was no penalty beyond the nullity and voidance of the policy, or rather the absence of legal sanction ; but is not that in itseif to some extent a deterrent provided by the law? Sea also case in Marseilles Tribunal of Commerce, 1897, Companies repre- sented by Raymond de Campou and Ytier & Rocoffort against Bank of Antwerp. V MULTIPLE INSURANCE 89 lie the problems arising from the insurance of the same interest twice or several times over with different under- writers. The principle adopted in England is that the assured has the right to make his choice of the policy against which he will make his claim for any loss that may occur ; but the underwriters on that policy are entiiled to claim from the other underwriters on the same interest a rateable contribution to their loss. In Davis V. Gildart, 1776,^ a merchant insured his interest, whose value was ^2200, first m Liverpool for £iyoo and then in London for ^{^2200, the evidence showing that there was no fraudulent intention in efiecting the second policy. It was held by Lord Mansfield that the merchant could recover from his London underwriters the full ;{j2 2o.o in- sured by them, subrogating them in his rights against the Liverpool underwriters. In cases where the same amount is without fraudulent intention insured with two set^ of underwriters, the solution is extremely simple, the assured claims his loss in full from whichever set he pleases, and they in turn claim one half from the other set. Cases in which the amount is not the same are treated aj cases of double insurance of the amount insured on the smaller of the two policies. It is extremely unusual to find any interest more than doubly insured ; but in cases of triple, quadruple, or other multiple insurance the principles now prevailing regarding double insurance would apply. The cases of multiple insurance that most generally occur are those in which buyer and seller, shipper and consignee, or others in similar relationship, have each insured the same goods or interest without knowing that the other has done the same. If the fact of double insur- ance becomes known before the lapse of the risk insured, the best course to adopt is to advise both sets of under- writers of the fact, to ask each of them to reduce his amount insured by one half and to return one half of the premium. If, on the other hand, both insurances are effected by the same person, and that without fraudulent intention and not ^ Park 424. 90 MARINE INSURANCE chap. in sheer forgetfulness, it is only fair to assume that he had some reason for effecting the additional insurance (such as dissatisfaction with the security of his first policy), and there does not appear to be any fair ground for claiming return of premium, although the final incidence of the claim is the same. French Law. — The law of France differs entirely from that of England. In France the incidence of the loss is determined by the date of the policy, the earlier policy alone is liable if its amount is equivalent to the value of the interest insured, the later pohcies do not come in except for the difference between the value and the amount insured with the earlier underwriters. For any further amount the later underwriters incur no liability, and they return the premium less ^ per cent on the amounts then treated as nulL American Law. — In the United States the practice is to adopt the French rule ; it is said that clauses to this effect are very generally introduced into the policies : the question arises whether the practice has now become a custom of American insurance so strong as to need no specification in the policy. German Law. — In Germany the general rule laid down in the Maritime Code, Art. 788, is that the earlier insur- ance alone is valid up to its full amount, the later taking up the balance of the value, if any. But in the following exceptional cases the later policy is legally valid : — Section 789. — The later insurance is, however, legally valid not- withstanding the previous insurance — ( 1 ) When at the conclusion of the later insurance it is agreed with the underwriter that rights arising out of the previous insurance shall be ceded to him. (2) When the later insurance is concluded with the condition that the underwriter shall only be answerable so far as the assured may be unable to enforce payment against the former underwriter on account of insolvency, or so far as the former insurance is legally invalid. (3) When the former underwriter is by formal notice released from liability so far as is necessary to avoid a double insurance, the later underwriter being informed thereof at the conclusion of the later insurance. In this case the former underwriter is entitled to the full premium although he is freed from his obligation. V MULTIPLE INSURANCE FOREIGN LAW 91 Section 790. — In case of double insurance the later insurance, not the previous one, is legally valid, when the previous insurance has been taken as agent without authorisation ; the later insurance, on the other hand, being effected by the assured himself, provided the assured at the time of effecting the later insurance was not informed of the previous one, or gives notice to the underwriter at the time of its conclusion that he repudiates the previous insurance.^ In all other cases of genuine double insurance, the code provides that the return for short interest shall be ^ per cent of the sum insured, or when the premium is under i per cent then one half of the premium, unless some other proportion is named in the contract or is customary in the place where the insurance is effected (§§ 894, 895). Italian Law. — Art. 608 of the Italian Code of Com- merce reads : — If several insurances on the same thing are without fraud effected by different parties interested, or by several representatives of the same interested party who have acted without special instructions, all the insurances are valid, but only to the amount of the value of the thing. The parties interested have action against any one of the underwriters at their choice with recourse of the underwriter who has paid against the others in proportion to their interest. Spanish Law. — The Code of 1885 provides: — Section 782. — If several insurances have been made without fraud on the same thing, the first only will be effective, if it covers the whole value. The subsequent insurers are free from liability and will receive ^ per cent of the sum insured. If the first policy does not cover the whole value of the thing insured, the liability for the residue will fall on subsequent insurers according to the date of the execution of the policies. Section 783. — The assured is not absolved from payment of the premiums in full to the several insurers if he has not given the later ones information of the rescission of their contracts prior to the arrival of the article insured at its port of destination (Raikes's translation). * Arnold's translation. CHAPTER VI THE POLICY : PART 11 The Perils Insured against So far the policy has merely detailed the person and objects insured, the valuation, the amount of it covered by the underwriters concerned, the commencement, duration, and end of the adventure for which the insurance is made. The second part of the policy describes the kind of risk against which the underwriter grants the assurance, the perils insured against. The formula in which the risks are detailed is very striking : the underwriters or assurers are represented as being content to bear and as actually taking upon themselves certain risks here specified as adventures or perils. It is as if they were replying to definite questions put to them asking whether they agreed to accept the risk of each of the perils named one by one, and were answering to each question, " Content, we take that upon ourselves." The result is that while the underwriters assent categorically to cover all the named perils, they are just as plainly exempt from liability to indemnify the assured against loss arising from any peril not specified. Care has therefore been taken to make the formula as comprehensive as possible. Arnould says (p. 31) of the words as we now know them : " The clause in its present state may fairly be regarded as afford- ing a protection against almost every casualty which can possibly happen in the course of any voyage " ; but when he adds the remark, " and for which it is meant that the CHAP. VI THE PERILS INSURED AGAINST 93 underwriter shall be answerable," he suggests the Inquiry whose meaning or intention is to be taken as determining the perils that ought to be covered. That the formula contained in the policy has been found fairly adequate to the requirements of the commercial community is proved not only by its almost universal acceptance in English insurance, but even more from the fact that in all its essentials it is the form adopted in the United States. This paragraph of the policy falls into two parts : the first enumerates certain definitely named adventures or perils ; the second contains what are termed " the general words." Touching the adventures and perils which we the assurers are contented to bear and do take upon us in this voyage, they are . . . In this introduction to the description of the risks assumed by the underwriters there are two points to be specially noticed. First, the designation of these risks as " adventures and perils " indicates that contingencies con- templated are not the ordinary inevitable occurrences com- mon to all navigation, but are such extraordinary fortuitous events as may be reckoned accidental. This principle will be found of great importance in the consideration of the amounts recoverable from underwriters, excluding as it does loss or damage arising from wear and tear and from in- herent defect {vice propre). Next, the introduction of the seemingly unnecessary words " in this voyage " deserves attention ; the words are not found in the Florentine form of 1523, but as they occur in a London form of 161 3, the introduction of them may be entirely the work of English underwriters. Their effect is obvious : they give additional definiteness to the limitations of space and time within which the underwriter's liability is in force ; they imply that not merely are the underwriters liable for the accidents occurring between certain termini in the course of naviga- tion in the usual way between them, but that it is only for such accidents as do so occur, not for the consequences of earlier or the causes of later disasters. This sharp and insistent definition of what may be called the sphere of the 94 MARINE INSURANCE chap. policy coming into view so early as the beginning of the seventeenth century, sufficiently indicates the frame of mind that is ready to accept f^nd carry out in its entirety the maxim, " Regard the immediate cause and not the remote one " {causa proxinia non re7nota spectetur). . . . (perils) of the seas. . . . It is natural that the first class of perils enumerated in a marine policy should be perils of the seas ; so natural, that it is more than probable that ninety-nine out of every hundred readers of a marine policy never pause to consider the exact intention of the words. The first impression of the meaning is usually that they cover everything that happens at sea. But clearly everything that happens at sea is not a peril, nor is it a peril " of" the seas. Evidently the framers of the policy (who in this section have most closely followed the Florentine model of 1523) were of this opinion, for they proceed to name other adventures, some of which could not happen except at sea — such as perils of men-of-war, pirates, jettisons, takings at sea — with others which could happen either on land or at sea, such as fire, restraints and detainments of kings, etc. In Culleti v. Butler^ 18 1 5, Lord EUenborough distinguished strongly between "peril on the seas" and "perils - owners contended that the damage was occasioned by a danger or accident of the seas ; and in the House of Lords it was finally decided that they were right in their contention. Lord Herschell declared his concurrence with the view expressed in Laveroni v. Dmry, 1852,* that damage done 1 It is worth special mention that the ordinary American form of policy expressly excludes in the case of certain delicate goods such a liability as this. ^ 4 Camp. 203. » I..R. 12 App. Cas. 518. * 8 Exch. 166. VI PERILS OF THE SEAS 99 by rats to a vessel or its cargo is not damage by perils of the sea. But he remarked that in that very case Chief Baron Pollock had said : " If indeed the rats made a hole in the ship, through which the water came and damaged he cargo, that might very likely be a case of sea damage." Thereafter Lord Herschell proceeded to say with regard to the IncJirhona^ case, " I entertain no doubt that the loss was one which would in this country be recoverable under a marine policy as due to a peril of the sea. It arose directly from the action of the sea. It was not due to wear and tear, nor to the operation of any cause ordinarily incidental to the voyage, and therefore to be anticipated." Lord Macnaghten added, " It was an accidental and unforeseen incursion of the sea that could not have been guarded against by the exercise of reasonable care." From the principles enounced in the cases cited above, it is evident that among the perils of the sea are included foundering, stranding, loss by collision with another ship or vessel, or through stress of weather. Phillips (§ 1099) gives a long catalogue of casualties which have been held to be perils of the seas, most of them based upon reported decisions, some, however, referring more exactly to the words of the general clause to be discussed hereafter, on which many important decisions have been given. His definition is : " Perils of the seas . . . comprehend those of the winds, waves, lightning, rocks, shoals, collision, and, in general, all causes of loss and damage to the property insured arising from the elements, and inevitable accidents,^ though sometimes considered not to include capture and detention." He does not mention such perils as upheaval of reefs by earthquake, or rise of sea-bottom from the same cause resulting in ships being left high and diy on a hillside, as on the Chilian coast. The mention of perils of the seas is followed in the policy by long enumeration of other perils strung together without very obvious connection, occurring much in the same order as in the Florentine policy of 1523. The only explanation of this order that offers itself as at all likely, is ' As to " inevitable." see above, p. 96. MARINE INSURANCE that the perils were added one by one simply as they were found in the history of insurance to become necessary for the proper protection of the assured. The policy runs : — Men-of-war, fire, enemies, pirates, rovers, thieves, jettisons, letters of mart and countermart, surprisals, takings at sea, arrests, restraints and detainments of all kings, princes, and people, of what nation, condition, or quality soever, barratry of the master and mariners. In the discussion of these, this arbitrary arrangement will be discarded, and the perils named will be classed under three heads — I. Perils of nature or of the elements — seas, fire. II. Perils arising from the actions of persons on board the insured vessel — jettison, barratry. III. Perils arising from the actions of persons not on board the insured vessel — men-of-war, enemies, pirates, rovers, thieves, letters of mart and counter- mart, surprisals, takings at sea, arrests, restraints and detainments of all kings, princes, and people, of what nation, condition, or quality soever. I, Perils of Nature or of the Elements Fire. — The perils of the seas having been already dis- cussed, fire remains to be dealt with. Phillips (§ 1099), after giving the definition of perils of the seas quoted above, goes on to remark that a policy against these perils covers damage by fire. For this state- ment he quotes no authority and cites no decision ; but he adds in a footnote, "This would be the construction, no doubt, though the peril were not specifically insured Addenda, against." Be that as it may, it is still somewhat striking that the only elemental peril named in the policy besides those of the seas is fire. To explain this it is necessaiy to recall the conditions of navigation under which commerce was conducted at the time the policy was devised. Marine ventures were made by sailing ships of what is now regarded as very moderate size. All the extraordinary dangers of winds, waves, rocks, fogs, tempests, calms, being already VI FIRE lOi included in the class perils of the seas, there remained for die merchants and shipowners of the sixteenth, seventeenth, and eighteenth centuries, no other danger from the forces of nature with which they were acquainted except fire, either in the shape of flame or ignition, or of lightning or other form of electrical incandescence. But fire once admitted as a peril insured against, received the most extensive application. In his decision in Gordon V. Rimmingion, 1807,1 Lord Ellenborough says: "Fire is expressly mentioned in the policy as one of the perils against which the undenvriters undertake to indemnify the assured, and if the ship be destroyed by fire it is of no consequence whether this is occasioned by a common accident, or by lightning, or by an act done in duty to the state." The case on which the judgment containing this statement was delivered was one in which an insurance had been effected on the commissions of a captain on a voyage " from Bristol to the African coast and thence to the West Indies. The vessel was chased by a French privateer of much greater strength, and when escape was seen to be impossible the captain and crew burnt their ship to prevent her falling into the hands of the enemy. The policy was held to cover this loss. Similarly in Busk v. Royal Exchange, 18 18,- an action on a policy in which the loss arose from the negligence of the mate in lighting a fire in the cabin and not seeing it properly extinguished, Mr. Justice Bayley said (as reported by Marshall, 496) : " It had been argued that they (the underwriters) were only liable where the ship had been wilfully set on fire, because barratry was one of the risks expressly mentioned in the policy, and negligence of the master was not ; but there was no authority, in our law at least, which said that they were not liable for a loss, ihe. prortmafe cause of which was one of the enumerated risks, though the remote cause might be traced to the negligence of the master and mariners." The Court held the underwriters liable. Both Arnould (p. 831) and Phillips (§ 1094) state that the assured is entitled to indemnity in case of a vessel being burnt by the municipal authorities from fear of its being ' I Camp. 123. » 2 B. & Aid. 73. 102 MARINE INSURANCE chap infected and causing a pestilence. This statement, how- ever, is not based on any EngUsh or American legislation or decision, but is taken from Emerigon (i. 429), who mentions the case of the Dutch vessel Adam, with rice from Damietta to Marseilles, about the year 1748. The vessel experienced a storm off Majorca, and the captain tried to run into port for safety. But the Spanish authori- ties learning that the vessel came from the Levant declined to permit their entry, and after sending craft to take the captain, crew, and cargo on to Marseilles, set fire to the ship. The underwriters paid the loss without demur, be- cause, as Emerigon says, " neither captain nor crew were in fault." He proceeds to report another case, that of the Grand Saint A nioine in 17 19, in which the captain's fault released the underwriters. After declaring at Leghorn that some of his crew had died of " pestilential fever," he pro- ceeded to Marseilles, did not stop at the quarantine ground, but going to the health office declared on 25th May 1720 that the deaths had been caused by bad provisions. How- ever, the watchmen and stevedores died ; in consequence the ship was removed to the quarantine groi nd and burnt by ministerial order on 20th September. In December 1723 the Admiralty Court of Marseilles condemned the underwriters to pay the loss, but this sentence was reversed by decree of February 1725. It thus appears that the only decided case reported is against the opinion stated absolutely by Arnould and Phillips. In the present state of sanitary science such a case is not likely to occur again ; but even if it did, it is not certain that an underwriter would be held liable for the loss. It is evident from what precedes that intentional as well as accidental burnings may be covered by the word "fire" in the policy. But certain non-intentional burnings cannot properly be called accidental. Such are those occasioned by the damaged state of the cargo. In Byd v. Dubois, 1811,^ Lord Ellenborough said ; " If the hemp was put on board in a state liable to eftervesce, and it did effervesce and generate the fire which consumed it, upon the common prin- * 3 Camp. 133. VI FIRE, SPONTANEOUS COMBUSTION, ETC. 103 ciple of insurance law the assured cannot recover for a loss which he has himself occasioned " (M'Arthur, p. 1 16). Some- what akin to this decision is that of Pi'rt'e v. Middle Dock Cofnpany, 1881,^ which referred to a cargo of coal in which fire broke out spontaneously ; it was held that the owner of cargo cannot take advantage of his own wrongdoing. Spon- taneous combustion is the most serious form of vice propre or inherent defect. As M. de Courcy {Commentaire, p. 218) most admirably remarks, " Spontaneous combustion is a form of words employed to indicate a production of internal facts without known external agents. It is never certain that the combustion has been spontaneous." As a matter of fact " spontaneous " combustion is the cause which is assumed to have occasioned a fire when no other real cause is proved to have in fact existed. Speaking generally, it would appear that underwriters on goods are not responsible for damage done to these goods by a fire resulting from the condition in which they were shipped. Arnould (p. 831) gives it as his opinion that the underwriters on a ship would be liable for loss by fire occasioned to the ship by this cause. Apparently it would be fair to assume that the underwriters on other cargo in the ship would likewise be liable for a loss occasioned to these goods by this cause. By the decision in the case of The Knight of St Michael^ (Barnes, J., in Admiralty Division, 2 5th January 1 898) under- writers on freight were held liable for loss of freight conse- quent on discharge of cargo to prevent probable damage by fire, although the fire had not actually occurred. The case is peculiar and not exactly analogous to that of any other peril. In the Lodore'^ case, Bigham, J., held that loss of freight arising from condemnation of cargo so heated as to be unfit to carry on to destination is claimable on freight policies without set off of contribution in General Average. There is much similarity between fire and explosion. This point was elaborated by Lord Esher (Brett, L.J.) in 1 4 Asp. Mar. L.C. 388. - 14 Times L. R. 191. But compare and contrast this with Lord EUenborough's judgment in Blankenhagen v. London Assurance, 1808 (i Camp. 453) that " fear of capture " is not a risk contemplated under the policy [vide pp. 114, 117). 8 Iredakx. China Trc^/^frj, Q. B. D. 4 July 1899 (15 Times L. R. 460) Addenda 104 MARINE INSURANCE ' chap. his judgment in the case JVes/ htdia and Panama Telegraph Company \. Home and Colonial Marine Inswance Coy., 1 880.^ In that case " the steam in the boilers burst the boilers, and the steam escaped, and the steam escaping into the ship destroyed the ship ; it blew up the deck of the ship and wrecked the ship so that she was a complete wreck." These are Lord Esher's own words as given in his judgment in the Court of Appeal in Hatniltoft v. Thames and Mersey Marine Insurance Company, Limited, 1887.2 He pro- ceeded : " There, with considerable difficulty, I as a matter of fact came to the conclusion that an explosion of steam getting into the ship and destroying the ship was sufficiently like the effects of fire upon a ship — and fire was one of the terms of the policy — to allow it to come under the general words. . . . Now I am perfectly willing to say — indeed I have it strongly in my mind — that in coming to that con- clusion of fact, I went to the verge of imagination ; I should not be surprised, on the contrary I think my mind would most obediently and willingly acquiesce, if that view of the case were overruled." In Hajnilton v. Thames and Mersey'^ in the House of Lords, Lord Herschell expressed his decided preference for the later view of Lord Esher. In America it has been decided that underwriters are not liable for damage done by the explosion of a steam boiler. Parsons (vol. i. p. 560, note) discusses ignition and explosion at considerable length, citing, inter alia, the decision in Scripture v. Lowell Mutual Fire. It is worth notice that the common explosives like gunpowder actually re- quire a spark or flame (that is, something of the nature oi fire) to release their imprisoned forces and bring about a sudden violent burst. But it is quite different with the explosives that act only when affected by impact or per- cussion, for instance djmamite. The action in this ex- plosive is entirely different from that of fire , so that a wreck caused by an explosion of dynamite could certainly not be successfully claimed as a loss by fire.* ' L.R. 6 Q. RD. 51. 2 L.R. 17 Q.B.D. 198. s L.R. 12 App. Gas. 484. * Cf. Parsons, i. p. 561, note, where in rexnewing the case of Scriptvie v. Lowell Afutual (to Cushing 356) the following occurs: VI FIRE, EXPLOSION, JETTISON 105 So fiir, the fire has been taken to be on board the ship carrying out the assured venture. But the case has arisen in which an explosion arising from fire has done serious damage to a steamer lying some distance from the point where the explosion occurred. In the great petroleum fire and explosion at Antwerp in 1889 one of the Red Star Compan/s steamers was damaged, altliough she was lying some distance from the petroleum tanks, and on the side of the dock farthest from the tanks. Underwriters settled the claim " without prejudice," considering the explosion suffi- ciently akin to a result of fire to justify their payment of the damage. But it is not certain that they would have admitted liability had the substance whose explosion undoubtedly caused the damage been one which a severe stroke or a mere fall could set off. In connection with the peril of fire it may be remarked that underwriters have lately had some examples of claims for damage done to delicate articles like flour, by smoke arising from accidental fires occurring on board Atlantic steamers, or resulting from the measures taken to extinguish such fires. Without for the moment taking into account the final incidence of the loss in such cases, and without admitting that the alleged damage is in all cases actual or serious, it may still be suggested that if real damage of any serious extent were found, the principle on which liability would be determined would be akin to that adopted in the decision of Montoya v. London Assurance, 1851.^ II. Perils arising from the Actions of Persons ON Board the Insured Vessel (a) Jettison. — It is remarkable that the most ancient scrap of marine law that has come down to modem times deals with jettison and with the method in which loss by jettison was to be made good and apportioned. Justinian's Tlie court said their opinion excluded " all damage by mere explosions not involving ignition and combustion of the agent of explosion, such as the case of steam, or any other substance acting by expansion without combustion." ' 6 lixch. 451. Io6 MARINE INSURANCE chap. Digest, Book XIV., Tit. 3, Sect. 1, reads as follows : " It is decreed by Rhodian law that if to lighten a ship a jettison of goods has occurred, that which has been given for all shall be replaced by the contribution of all." ^ Rhodes early became an important place in Levantine trade, and was a crossing point of all the commercial interests of the Mediterranean east of Carthage. So " Rhodian law " is probably simply an expression of early Mediterranean practice or tradition. Apart from any question of final incidence and apportionment the thing itself is simple ; it is merely the throwing overboard of part of a vessel's tackle or cargo to lighten or relieve her when she is in emergency. If there is real emergency, and a merchant's goods are sacrificed to prevent threatened loss becoming real loss, that merchant is in no worse a position than if the loss had actually occurred, nor is his underwriter. The question of the profit derived by the other parties of the venture from his loss is another matter that demands separate treatment. But to justify a merchant in making claim for such loss by jettison, the Lombard underwriters held that the sacrifice must have been made in circumstances of absolute necessity. It is evident that unnecessary jettison might easily become a source of gain to unscrupulous assured. On the other hand, if a merchant was not fully protected by insurance he might be unwilling to have his goods sacrificed. The result of this was the creation of an elaborate etiquette of "regular" jettison,^ so elaborate that Emerigon reports (i. 591) that Targa during sixteen years' magistracy at Genoa saw only four or five cases of it, and these were suspected of fraud simply because the formalities had been too well observed. It is evident that in cases of imminent peril any spending of time on formalities would be senseless trifling. Consequently, irregular jettison was recognised as having legal and commercial validity. M. de Courcy re- marks (Weil, § 293) on the puerility of the distinction, ^ Lege Rhodia cavettir iit si levandce ?tavis gratia jactus mercium factus est omnium contributione sarctatiir quad pro omnibus datum est. * See Rolls of Olcron, Art. 8 ; quoted by Lowndes, General Average, p. 6. VI JETTISON 107 from which it would result that the more legitimate and necessary a jettison is the more "irregular" must it be. But assuming that jettison has been made in good faith and honesty, it does not follow that the value of the goods is claimable from the underwriter on a policy of the ordinary form. For the only goods covered by a policy, unless express stipulation to the contrary is made, or it is the notorious custom of the trade to carry cargo on deck, are goods stowed under the vessel's deck. Consequently, on an ordinary policy an underwriter is not responsible for jettison of deck cargo. In the recent case of Dixon v. Royal Exchange Shipping Company, House of Lords, December 1886,1 arising out of the jettison of cotton from a deck house of the Egyptian Monarch.^ it was held that cargo in deck houses is, as far as jettison is concerned, equivalent to deck cargo. Consequently, in case such cargo has been thrown overboard its value can neither be recovered from the underwriter on the ordinary form of policy, nor by way of contribution from the other parties in the adventure.^ Again, goods thrown overboard in consequence of inherent defect, or of the undue development of their inherent qualities {^nce propre\ cannot be recovered from imder- writers using the ordinary form of policy, e.g. meat that has become putrid and dangerous {Taylor v. Dunbar., 1 869). 3 The test question is, "Is there a loss from perils insured against?" See Pink v. Fleming, 1890.^ With regard to cargo carried on deck in accordance with the universal custom of a trade, there appears to be no doubt that if the whole cargo belongs to one person, or if it belongs to several persons all engaged in the same trade, cargo thrown overboard may be claimed for as jettisoned ; it is only because it has been admitted to be jettisoned that it can become the subject of general average or general contribution. But some classes of goods (vitriol, ether, carbolic acid, and other chemicals of hiflammable, » 12 A.C. II. * It remains at the risk of the party Ijy whom or witli whose consent it was loaded in an improper place. 3 L.R. 4 C.P. 206. * 25 Q.B.D. 396. io8 MARINE INSURANCE chap. volatile, or corrosive character) are in all trades properly carried on deck and nowhere else. The existence of such goods on board a ship is not necessarily known to any one except the loading broker, the shipper of the goods, and the shipper's underwriter. The latter in taking the risk on the goods is aware of the exceptional perils to which they are by their position exposed. In case of an ordinary jettison, where such articles as carboys of vitriol are jetti- soned from deck simply to lighten the ship, the underwriter of the vitriol is no doubt responsible for the loss. But if the jettison occurred, not to lighten the ship, but to remove from the ship and the rest of the cargo the danger that would arise from the carboys or other vessels being broken, the loss would seem to be more truly due to the vice propre of the fluids, and therefore the custom has now arisen to state specially that they are insured against all risks ol jettison and washing overboard. Under all other circumstances, unless these be brought about by the negligence or default of the owner of the property sacrificed, jettison is recoverable from the under- writer on the common policy. A dishonest jettison performed with the shipowner's con- sent or under his instructions renders him liable for the value of the goods so disposed of; he cannot plead the exception in his bill of lading. But if performed by the master or crew on their own motion, and without the approval or con- nivance of the shipowner, it becomes what is known as barratry. (Ji) Barratry of the Master afid Mariners. — On this subject the old text-books go into great detail, and with reason. The world in those days was not mapped, buoyed, and lighted as it is now ; there was no regular postal system, no network of telegraphs existed ; agents in foreign ports knew no one connected with a maritime venture except the master of the ship ; in short, ship and cargo were infinitely more at the mercy of the captain and crew than they are to-day. That is one reason why most of the reported decisions on this subject are old. Another is that during the long period that England has been at peace BARRATRY 109 with the maritime nations of Europe, there have not been for badly-indined shipmasters the same convenient oppor- tunities of committing barratry'. Prize ^ court business, blockade running, illegal traffic, smuggling wholesale are accomplishments for the present forgotten, or at least dormant ; they need war to shock them into activity. Barratry is excessively difficult to define ; the definition must exclude everything of the nature of mere mistake, misjudgment, even to a certain point, negligence ; it must be wide enough to embrace actions of the master against owners ^^j^, co-owners, of the crew against the master ^*^/or owners, and to include an element of criminality or gross malversation. An early definition, that of Lord Hardwicke, that barratry is " an act of wrong done by the master against the ship and goods," is described by Arnould as "the tersest and (perhaps) best"; but in view of later decisions one has to read so much into it that it seems incomplete and inadequate. Arnould (p. 844) gives his view as follows : " Barratry in English law may be said to comprehend not only every species of fraud and knavery consciously committed by the master with the intention of benefiting himself at the expense of his owners, but every wilful act on his part of known illegality, gross malversation, or criminal negligence, by whatever motive induced, whereby the owners or the charterers of the ship (in cases where the latter are considered owners /Jr S M. & Sel. 431. VIII PROXIMATE CAUSE 139 of Appeal, 2nd and 3rd July 1894),! Lord Justice Lindley in his judgment made the following statement : " There is no doubt that, in considering the liabilities of underwriters of marine insurance policies, it is a cardinal rule to regard 'proximate' and not 'remote' causes of loss. This rule is based on the intentions of the parties as expressed in the contract into which they have entered, but the rule must be applied with good sense, so as to give effect to, and not to defeat those intentions." The existence of personal fault of the assured among the remote causes of loss or damage has been held to exempt the underwriter from claims for loss or damage even if immediately caused by perils insured against. In the case of Thoftipson v. Hopper, 1856,2 a vessel was with the deliberate knowledge, on^ might say by the wilful act, of her owner sentout of port into a roadstead without proper preparation for sea. As she lay anchored in an exposed position a gale came on, she was driven ashore and became a total wreck. It was acknowledged that the gale, a sea peril, was the immediate cause of the loss, but as the ship was know- ingly left unprepared, it was held that the assured could not recover, as otherwise he would really be deriving advantage from his personal misconduct. This case should be con- trasted with Dudgeon v. Pembroke, 1877,^ on a policy of insurance for time on a vessel bought after being out of work for a while, and fitted up by the new owner for his special trade without sparing expense or trouble. She sailed from London to Gothenburg in Sweden, and arrived there, although on the passage she made more water than was expected. On the return voyage in a gale she began to leak, and becoming full of water did not answer her helm. In consequence of this and of fog and of the gale she went ashore on the Yorkshire coast and went to pieces. The jury found that had the vessel been seaworthy she would not have gone ashore or been wrecked : that unsea- worthy though she was, she would not have been lost had Jt not been for the gale : that her unseaworthiness was a latent defect arising from no fault of the owner. It was held in ' 10 Times Law Rep. 568. ^ 6 E. & B. 172, 937. ' L. R. 2 App. Cas. 284. I40 MARINE INSURANCE chap. the Court of Queen's Bench and the House of Lords that the underwriters were Uable. The words of Lord (then Mr. Justice) Blackburn are eminently worthy of attention : " The ship perished because she went ashore on the coast of Yorkshire. The cause of her going ashore was partly that it was thick weather and she was making for Hull in distress, and partly that she was unmanageable because full of water. The cause of that cause, namely, her being in distress and full of water, was that when she laboured in the rolling sea she made water ; and the cause of her making water was, that when she left London she was not in so strong and staunch a state as she ought to have been ; and this last is said to be the proximate cause of the loss, though since she left London she had crossed the North Sea twice. We think it would have been a misdirection to tell the jury that this was not a loss by perils of the seas, even if so connected with the state of unseaworthiness as that it would prevent any one who knowingly sent her out in that state from recovering indemnity for this loss." In both of these cases the immediateness of the results from perils of the sea is evident. What prevented the recovery of the amount insured in Tkotnpson v. Hopper^ was not the remoteness of the cause, but the personal fault of the assured. Further remarks in the judgment of Dudgeon v. Pembroke ^ lead to the conclusion that if a similar loss had occurred through tear and wear aggravated by the original bad state of the vessel, ^ Mr. Justice Black- bum would have held the underwriters exempt from the loss. These decisions lead to the conclusion that in cases of ships insured on the ordinary form of policy, what has to be done is to determine the immediate, the very last cause of the loss or damage, in the way Mr. Justice Blackburn did in the extract cited above : if this very last cause is one of the perils insured against, then the loss or damage is due to be 1 6 E. & B. 172, 937. 2 L R 2 App. Cas. 284. ^ This is practically what the arbitrator found to be true in the case of Fawcus V. Sarsfield. 1856, 6 E. & B. iga. VIII PROXIMATE CAUSE 141 paid by the underwriter, unless there is among the more remote causes personal fault of the assured, simple tear and wear, or unseaworthiness. But the negligent navigation as distinguished from the wilful act of an assured does not diminish the liabiHty of underwriters for a loss of which the proximate cause is a peril of the sea.^ In the more complicated cases where a vessel is msured against only some of the perils named in the policy, and the loss occurs jointly from a peril specifically insured against and one or more of those not insured against, the same difficulty arises in a more pointed form. As an illustration one may take the imaginary case put by Chief Justice Erie in Io7iides v. Universal Marine^ 1863 :- " Suppose the ship, insured free from all consequences of hostilities, is going to a port where there are two channels, in one of which a torpedo has been laid by the enemy. If the master not knowing this goes into the channel where the torpedo is, and is blown up, this is within the exception : '^ not so, if knowing of the torpedo he takes the other channel to avoid it, and by unskilful navigation runs aground there. " In the case then under C. J. Erie's consideration, a coffee-laden ship struck a reef of rocks and became a wreck, in consequence of the captain losing his reckoning owing to Cape Hatteras light being extinguished for strategic reasons by the Confederates in the American Civil War. There were 6050 bags of coffee on board, of these 1020 would have been salved but for the intervention of the Confederate troops, who, however, saved 170 for their own use. It was decided that the underwriters who insured the coffee "free from all consequences of hostilities " were not liable for the loss of the 1020, but were liable for that of the remainder 5030. The 1020 were certainly lost in consequence of hostilities, but the 5030 from perils of the sea, namely from ^ The Gainsborough [Trinder v. Thames b" Mersey, Ct. Appeal, 4 May 1898), 14 Times L.R. 386. •'■ 14 C.B. N.S. 259. * That is, the underwriter would in consequence of the clause " free from all consequences of hostilities" be held free from all liability for the loss. 142 MARINE INSURANCE chap striking the reef, which was not by any means an inevitable Addenda. Or cvcn a usual conscqucnce of the extinction of the light. In the case of the tug Rosa already referred to {Reischer V. Borwick, Court of Appeal, 2nd and 3rd July 1894),! the risks insured against in the policy were " the risk of collision (as per clause attached) and damage received in collision with any object, including ice." The collision clause attached refers to collision with other ships ; the accident that did occur was collision with a snag in the Danube. The damage was serious ; the captain endeavoured as speedily as he could to plug up the vessel from the outside, and took the assistance of a tug to tow his vessel to a place where she could be repaired. During the tow one of the plugs fell out, and in order to prevent the vessel from sinking in deep water, the tug towed her on to the southern bank of the river. The underwriters paid cash into court for the damage sustained up to the time when the Rosa was taken into tow, but denied liability ; with respect to the subse- quent damage, they strenuously contended that they were under no liability on the ground that the proximate cause was not the collision, but the towing to a port of repair. Mr. Justice Kennedy overruled this contention, and the Court of Appeal (Lords Justices Lindley, Lopes, and Davey) confirmed his view. Lord Justice Lindley said : " The sink- ing of the ship was proximately caused by the internal injuries produced by the collision, and by the water reaching and getting through the injured parts whilst she was being towed to a place of repair. The sinking was due as much to the one of these causes as to the other ; each was as much a ' proximate ' cause of her sinking as the other, and it would in my opinion be contrary to good sense to hold that the damage by the sinking was not covered by this policy. ... I feel the difficulty of expressing in precise language the distinction between causes which co-operate in producing a given result. When they succeed each other at intervals which can be observed, it is comparatively easy to distinguish them and to have their respective effects, but under other circumstances it may be impossible to do sa ^ lo Times Law Rep. 568. vill PROXIMATE CAUSE 143 It appears to me, however, that an injury to a ship may fairly be said to cause its loss if, before that injury is or can be repaired, the ship is lost by reason of the existence of that injury, i.e. under circumstances which, but for the existence of that injury, would not have affected her safety. It follows that if, as in this case, a policy is effected covering such an injury, it will in the circumstances supposed extend to the loss of the ship, for in the case supposed the injury will really be the cause of the loss — the causa causans and not the causa sine qua no?t." From consideration of all the cases mentioned above, it appears that there is some difference between the treatment of excepted perils and that of default of owner, wear and tear, and unseaworthiness. The difference seems to be that the excepted and the covered perils are regarded as of equal importance until it is discovered which is the more imme- diate cause of the casualty ; while in the case of default, wear and tear, and unseaworthiness, any one of these once found existing absolutely wipes out the other coexisting perils and is burdened with all the liability. There is another important group of cases, Jackson v. Uniofi Marine., 1873,^ htvian v. Bischoff., 1 88 1 ,2 and Mercan- tile Steamship Company v. Tyser, 1881,^ in which the subject insured was an expectation of gain, say freight, which was lost through some circumstance like the exercise of a charterer's option to cancel a charter if the vessel does not arrive at loading port by a named date. In all these cases a casualty caused by a peril of the sea occurred, and in consequence of the resulting delay the charterers did not permit the vessels to load the cargo or earn the freight they went to get. The circumstances of the three cases differed widely, but the net result was that where the loss of the opportunity to earn freight was caused solely by the exercise of the charterer's option to cancel, the underwriters on the ordinary policy against perils of the seas were held not to be liable for the loss."* 1 L.R. 8 C.P. 572; 10 C.P. 125. * 7 App. Cas. 670. 3 7 Q. B.D. 73. * See also The Abrota, 1895 {/amieson v. Newcastle Sim. Frt. Im. Ass.), II Times L. R. 176 and 416, see also p. 242 below. CHAPTER IX TOTAL LOSS OF SHIP AND OF CARGO The policy speaks of the underwriter taking upon himself the " burden of this insurance," and binding himself " foi the true performance and fulfilment of the contract " therein contained. But the form which the underwriter's liability may assume, and the extent which it may reach, are left without special definition. All that can be gathered from the wording of the policy alone is that the assured is pro- tected by the underwriter from certain named adventures, perils, losses, and misfortunes, and from all others (of the same kind) occurring to the hurt, detriment, or damage of the property insured or any part thereof. There is nothing to be gained by attempting a theoretical deduction of the forms which this liability must take. The policy has been so modified by additions made to it from time to time that any such deduction would probably be most misleading. It will therefore be more suitable to take up the different forms of liability that have been found in practice. There is one form which must from the first have presented itself as indubitable, namely, total loss arising from any of the perils named in the policy. Total Loss, Actual and Absolute. — Suppose a vessel leaves port on a voyage to San Francisco ; some weeks after, the crew of this vessel are landed from another ship, and make a declaration that their vessel took fire in a particular position on a named day, that after being com- pelled to leave her in their boats they saw her explode and go down, that they were picked up by the rescuing ship so CHAP. IX ACTUAL TOTAL LOSS OF SHIP 145 many days after. If this declaration agrees with what else is known of the picking up of the crew, and is otherwise credible and trustworthy, there can be no doubt that " the burden "of an insurance covering fire will properly include losses of this class. Similarly, suppose that a vessel leaves port properly equipped for a voyage, which on the average lasts three months ; at the end of six months there is no news of her arrival at destination, nor any report of her passing islands or other stations on the track she was intended to take, nor any "speaking" with other vessels following or crossing that track or any in its neighbourhood. Time goes on, inquiry is made for news respecting the vessel ; in absence of news of her safety she is formally " posted " as a missing ship. From the circumstances there can be no actual proof of the cause of loss ; but as she left port a stout, strong, and staunch vessel fit for her intended voyage, the presumption is that she has perished by some of the perils named in the policy (whether they be of the elements or of man). This, therefore, also constitutes a loss, " the burden " of which should fall on the underwriter issuing his policy against perils of the sea. Next, a vessel runs against a rocky headland, knocks in her bow, smashes her keel, and breaks up into pieces of iron and timber. What is left of her is no longer a ship, it is not a vessel that can be employed in the trans- port of goods from one place to another ; should the fact of her materials remaining in a kind of existence in mass prevent the disaster from being considered a total loss ? Akin to these " losses and misfortunes " are those that occur when the action of earthquake raising dry ground under ships, or of tidal waves sweeping ships inland, results in their being left high and dry up a mountain side or hundreds of yards from sea-board. They are in these positions quite unavailable for the performance of the work they were intended for ; as far as the owner's intended employment is concerned they are as much taken out of his possession and control as if they had been seized by pirates or run off with by a barratrous captain or mutinous crew. L 146 MARINE INSURANCE The few instances given above will illustrate the very full definition given by Phillips. ^ "§1485. A total loss of a subject is when by the perils insured against it is destroyed or so injured as to be of trifling or no value to the assured for the purposes and uses for which it was intended, or is taken out of the possession and control of the assured, whereby he is deprived of it ; or where the voyage or adventure for which the insurance is made is otherwise broken up by the perils insured against." The last paragraph of this definition will be the subject of closer consideration when losses of cargo and of hire foi carrying cargo are discussed. The instances of total loss given above are so evident and uncompromising that they are properly described as actual total losses, or actual and absolute total losses. There is either nothing left of the ship at all, or nothing left in the possession and control of her owners, or only something that is of no value to the assured for the pur- poses and uses for which it was intended. Constructive Total Loss. — But although a ship is not totally lost in any of these evidently uncompromising ways, she may still be a total loss. It has often occurred that a ship having run on rocks has sustained damage to her bottom, but sits upright in the water so that at a little distance she seems to a landsman's eye uninjured, or not seriously damaged. But the owner sees that in all prob- ability she will never come off as a ship ; that she may pound and grind herself over the rocks, but likely only to sink in deep water a mass of iron and timber ; and that even if she is taken off as she is, the cost of repair will be so great as to render the taking of the vessel off a failure in a commercial sense. In such a case the owner usually proceeds to give notice of abandonment (or to tender abandonment) to his under- writers. He in effect says : " My vessel is totally lost ; pay me the amount for which you have insured her for me and I will transfer to you what remains of the property you have ' See Cossmann v. West, 1887, Privy Council, 6 Asp. Mar. L. C. 233. IX CONSTRUCTIVE TOTAL LOSS— ABANDONMENT 147 insured." If the underwriters accept the view propounded by the shipowner, or if after further progress and examination the owner turns out to be coirect in his view, the total loss thus occurring is termed a " technical or constructive total loss," that is, a loss not materially and actually, but only so regarded technically and by construction of law. There is no compulsion upon the owner to take the step of tender- ing abandonment ; if he prefers he may await the result of efforts made to save the vessel, or even wait to see what the vessel's condition is when she comes to be examined for repairs. But by so doing he may completely alter his legal position ; he may deprive himself of the possibility of claiming as a matter of legal right from his underwriters the payment of a total loss. If he awaits an examination of the ship with a view to repairs, he has to abide by its result, and take his indemnity in accordance therewith {Rouxv. Salvador^ 1836, per Lord Abinger).! Ahandonment and Notice of Abandonment. — In the consideration of constructive total loss it thus becomes necessary to discuss abandonment and notice of abandon- ment. These are two wholly distinct things ^ ; abandonment is a positive transfer of property, notice of abandonment is a declaration of intention to make such a transfer. It is not by English law put into the power of the assured to say, " Here, take my property, give me the amount for which you have assured it for rhe." All he can say is, " I give you notice that in consequence of such and such cir- cumstances I now make my election and declare my in- tention to transfer my interest in what I have insured with you, demanding in return the sum insured, and here and now I make you the offer of this transfer." The implied meaning of the tender of abandonment is that the venture is in effect totally lost. Consequently the owner ought to tender abandonment as soon as he has such definite intelligence as will enable him to make up his mind that it is reasonably certain that the venture will in effect be totally lost. If he ^ 3 Bing. N.C. 266. See below, p. 159, * Blackburn, J., in Rankin v. Potter, L. R. 6 H.L. 83 at 118 quoted by Lowndes, M.I. 153, note q. 148 MARINE INSURANCE chap. delays past that time, then all that he does may be reckoned up against him as testimony of his unwillingness to tender abandonment at the proper time, and he may in consequence have to be satisfied with some form of indemnity that does not confer on him the payment of a total loss against the transfer of the property, but leaves him with that property repaired, so as only to be as good as it was before the accident causing the damage. If the underwriter on receiving the notice or tender of abandonment accepts it, the abandonment takes effect and the property passes to him from the moment of tender, the consideration for the transfer being the payment of the sum insured. If the underwriter desires to accept abandonment he should notify this at once on receipt of the tender. If he returns no answer he must be taken to have declined to accept ; this was settled in the case of Provincial hisurance Company of Canada v. Leduc, 1874.^ If the notice of abandonment to the underwriter has not been accepted, there is a possibility of neither assured nor underwriter taking steps to save the imperilled property ; neither may be inclined to act in such a way as may be held to indicate an assumption of ownership which each wishes to disclaim. This is the reason of the existence of the "waiver clause" already mentioned (p. 120), by which it is " expressly declared and agreed that the acts of the assured or assurer in recovering, saving, and preserving the property assured shall not be considered as a waiver or acceptance of abandonment." That is, the commence- ment or continuation by the assured of operations intended to preser\'e the insured property shall not be deemed to indicate a withdrawal of any notice of abandonment which he may have tendered ; nor shall the commencement or continuation of operations by the underwriter be deemed to indicate that he regards the insured object as his pro- perty, and that therefore he must have accepted the abandonment. If, on the other hand, the assured's tender of abandon- ment has been accepted, the abandonment is definitely 1 L.R. 6 P.C. 224. IX CONSTRUCTIVE TOTAL LOSS — ABANDONMENT 149 operative as regards both assured and underwriter ; each of them has exercised his option and must abide by the consequences. No particular form has been prescribed for tender (or notice) of abandonment ; it is not even necessary that it should be given in writing, although it is usually so given. The reason for this evidently is that it is convenient to have documentary evidence of the tender of abandonment. But in whatever form it is given, one essential is that it be given unequivocally ; no condition may be attached ; it is an absolute offer then and there. As Lord Ellenborough put it in Painieter v. Todhunter^ 1 806,1 << f jjg abandonment must be direct and express, and I think the word abafidon should be used to make it effectual." It is advisable that the tender of abandonment, whether oral or written, should contain or have attached to it some statement of the grounds on which the tender is made, or some reference to the intelligence which has prompted the action of the assured. As the tender of abandonment must be unconditional and unequivocal, so must the reply in which the underwriter accepts be unconditional and absolute. If he means to decline, there is, as has already been explained, no need to send any reply ; but in case of an oral tender, it would be difficult to keep that silence in reply which would of itself constitute refusal. But if the underwriter does commit himself to writing a refusal of abandonment, he would do well to be sure that the form he employs is unconditional and unequivocal. The word " abandonment " is one of great force. To appreciate this fully, suppose that a ship belonging to an owner who insured absolutely nothing on hull or freight, got into such bad weather that she was seriously damaged and was driven ashore and severely strained. Suppose that she came off next tide without needing any assistance and that she was beached by her own crew in a place of safety,^ in what circumstances would an uninsured shipowner, exer- ' Camp. 542. ^ To give as simple a case as possible, it is assumed that absolutely no outside help is used ; this keeps the matter free from such considera- tions as those of salvage and "sue and labour" expenses. I50 MARINE INSURANCE chap, cising the ordinary prudence of a business man, leave the ship as she lay to whoever cared to take possession, in fact, literally abandon her? It is evident that it will not pay him to repair the vessel unless her value after she is repaired, plus her future earnings on the voyage, exceeds the cost of the repairs. Unless this is the result of his action, then the vessel is to him, the owner uninsured on hull and freight, commercially or technically a total loss ; he cannot restore her to her work as a carrying machine for less than her full value when restored.^ As regards abandonment by an insured owner, the law has been expressed in several forms. In Rankin v. Potter, 1873.2 Lord Blackburn said: "The question between the assured and the underwriters on ship is whether the damage sustained may be so far repaired as to keep it a ship, though not perhaps so good a ship as it was before, without expending on it more than it would be worth." Similarly, Chief Justice Tindal in Benson v. Chapman, 1843.3 speaks of the "repair necessary for pursuing the voyage insured " constituting " an expense greater than the value of the ship " before the assured is at liberty to ^ Theoretically it is better put thus : The absolutely uninsured owner will find it more profitable to abandon the wreck rather than repair it, unless Value of vessel when repaired + freight receivable at end of voyage — cost of repairs exceeds Value of wreck as she lies ; i.e. unless Repaired value + freight exceeds Cost of repairs + value of wreck as she lies. The value of the wreck is generally neglected, probably as being a vanishing quantity, or as being largely reduced by cost of removal to a place of repair ; in fact, it is (in the words of Phillips, § 1485) " of trifling or no value to the assured for the purposes and uses for which it was intended." The formula thus becomes Repaired value + freight exceeds Cost of repairs. See Phillimore, J., in Gallia, 1899, 5 Com. Cas. 269; Walton, J., in Wild Hose, 1903, 19 Times, L. R. 289, admitting the value of the wreck. Per contra Bigham, J., in Phyllis Angel, 1902, Skip- ping Gazette, Weekly Summary, 30th May 1902, rejecting the value of the wreck ; confirmed by Appeal Court (Mathew, Williams, Addenda. Stirling, L.JJ. ) 1903, 19 Times L.R. 395. " L.R. 6 H.L. 117. » 6 M. & Gr. 792 at 810. IX CONSTRUCTIVE TOTAL LOSS ABANDONMENT 151 abandon. On the other hand, Mr. Justice Patterson in Irving V. Manning'^ puts it thus, " Would a prudent owner uninsured repair?" Mr. Baron Wilde in Grainger v. Martin, 1 863,- added, "Or rather would he sell unrepaired ?" If by "prudent uninsured owner" is meant " prudent owner uninsured on hull," then these tests are all the same ; if, on the other hand, by these words is meant " prudent owner absolutely uninsured," then freight must come into the calculation. It may possibly be urged that considerations of freight ought to have no place in a matter between a ship- owner and his underwriters on hull. The main point to observe is that at this stage no regard is paid to the insured value. The validity of a claim for constructive total loss is determined simply with reference to actual values for sale {Irving V. Manning, 1847, House of Lords).^ But if the correctness of the claim is once established on this ground then the insured value comes into play as being the state- ment of the amount of indemnity for the loss in question, to be furnished by the underwriter. Constructive Total Loss : Foreign Law and Practice. — The matter of constructive total loss is one which has greatly exercised shipowners, underwriters, jurists, and legislators in all European countries and in the United States. There are points of difference between the law of these countries and the English law on the subject. One of the most striking of these is that in the United States "a damage over 50 per cent of the value of the vessel when repaired is a constructive total loss of the vessel in case of the policy containing no express provision to the contraiy" (Phillips, § 1539). By the law of France and Italy loss or deterioration of the objects insured to the extent of three-fourths constitutes a claim for constructive total loss ; the law of the German Empire as to ships is the same as French law in this matter. There is one remarkable point of agreement of the American, English, and German systems, namely, that in all three no account whatever is taken of insured value in determining whether a loss is a constructive total loss, or 1 H. of L Gas. 817. 2 ^ B. & S. 9. 3 i h. of L. Gas. 817 152 MARINE INSURANCE until after the loss has been found to be constructively total, but that as soon as that conclusion has been reached, the insured value is applied as deciding the indemnity to be paid by the underwriter. Valuation Clause. — The result of excluding insured value from consideration in determining whether there is a constructive total loss on an ordinary policy on ship is frequently found to be that in consequence of the lowness of the price which would be obtained for a ship after repair she is condemned as commercially irreparable, when, in fact, the damage done to her is actually small. In consequence of cases of this nature, valuation clauses of the kind described on p. 75 have been devised. The form there given, The valuation stated herein shall by mutual consent in all questions under this policy be taken to be the value of the vessel, is not only awkwardly arranged, but also fails to touch the point desired. Whether any loss is a constructive total loss is not a question under the policy, as its solution is reached quite independently of any reference to the policy, whose provisions and valuation come into effect only after that question has been answered. The next step was to frame a clause really meeting the case, and the following was recommended by Lloyd's and adopted by many underwriters and companies : It is hereby agreed that the vessel shall not be deemed a con- structive total loss unless the estimated cost of repairs would exceed the insured value. The defect of this form is that it creates a criterion of constructive total loss different from that laid down by the law of England ; the results of this contract and of that enforced by the law in absence of such an agreement may be the same, and, no doubt, in many cases are the same, but that is only the result of accident. As English law introduces only three factors in the determination of con- structive total loss, namely, value after repairs, freight and cost of repairs, any clause intended to bring insured value into practical effect in such determination ought to contract for its introduction in one of these factors. This is attained IX CONSTRUCTIVE TOTAL LOSS OF CARGO 153 by the use of a valuation clause of the following wording, which is now generally adopted throughout the country : — The insured value shall be taken as the repaired value of the vessel in ascertaining whether there is a constructive total loss under this policy. Freight of Ship which has become a Constructive Total Loss. — In determining whether a loss is a con- structive total loss, the freight of the current voyage is intro- duced as a factor. When abandonment is accepted it results in an absolute transfer of the ship and all the engagements she has. This includes the transfer of any freight to be received for work in which she was engaged when the transfer occurred.^ Consequently, if underwriters after accepting abandonment manage to complete the venture in which the vessel was engaged they are entitled to the freight earned by carriage on the abandoned ship. There are difficulties connected with such cases. One of these arises when a shipowner in this way surrenders pending freight to an underwriter of ship, and the freight is there- after actually earned by the abandoned ship ; the shipowner does not acquire any right of recovery against his under- writer on freight, the ground being that there was no loss of freight by the perils insured against {Scottish Marine Insurance Company v. Turner, 1853, House of Lords).^ In Hickie v. Rodocatmchi, 1859,^ it was decided that when a ship is condemned at a port of refuge, and the freight is earned by a substituted ship, the underwriter on the first ship is not entitled to any part of that freight. Constructive Total Loss of Cargo. — With respect to goods, there is no need to repeat the obvious cases of absolute total loss either by manifest peril insured against or by the carrying vessel becoming a missing ship. But one form of total loss is more striking in the case of goods than of ship. Among the instances of total loss of ship ' As to what freight is to be received, see Mr. Justice Bruce in Red Seas (Adm. 5tb July 1895), P. 293, confirmed by Ct. Appeal (14th November 1895), 12 Times L. R. 40. ^ Macqueen's H. L. App. 342. See also Thompson v. Kowcro/t, 4 East 34 [Mac\a.c\Aa.n's Arnou Id, 6th ed. , pp. 1074, 1084). ^ 28 t,. J. Ex. 273 154 MARINE INSURANCE chap. one was given of a ship being so battered by winds, waves, and rocks that in the end it was no ship at all, but only a heap of iron and timber. To use technical language the property insured had changed its species, it no longer remained the kind of thing it was at the commencement of the venture. Such losses are of great importance in the case of insurances on cargo. In the case of Roux v. Salvador, 1836,^ a parcel of hides was insured from Val- paraiso to Bordeaux. The ship sprang a leak and put into Rio, where it was found that the hides were rotting so quickly that they would certainly not reach Bordeaux as hides at all, but simply as a mass of putrefied matter. The master of the ship sold the hides at Rio, and the loss was held to be a total loss less the net proceeds accounted for by the master. Similar cases might occur in which by perils of the sea, grain, sugar, or fruit received such damage that they no longer remained grain, sugar, or fruit, but became utterly changed in their character. It appears that the principle of Roiix v. Salvador might equally apply to such cases. Yet in some such cases such a proceeding might come dangerously near paying for vice pj-opre or inherent quality of the goods. For supposing that some chemical was insured, say some powder which solidified when combined with sea-water, it is quite clear that with imperfect packages a large amount of irreparable damage might be done which would not have occurred in an article of different constitution like flour. The last words of Phillips' definition of a total loss are " or where the voyage or adventure for which the insurance is made is otherwise broken up by the perils insured against." It is hard to see how these words can be applied to ships, but in the case of goods or of the hire paid for the carriage of goods it is manifest that where perils insured against effect a " destruction of the contemplated adventure " (Lord Ellenborough's words in Atiderson v. Wallis, 18 13, and Barker V. B lakes, 1808 ; quoted by Baron Bramwell in Rodo- canachi v. Elliott, i873),2 there may be reasonable ground 1 3 Bing. N.C. 266. ' 2 Asp. Mar. L. Cas. 399 ; L. R. 8 C. P. 64Q. IX CONSTRUCTIVE TOTAL LOSS OF CARGO 155 for the assured asking for indemnity from his underwriter. Such destruction of a contemplated venture might occur in many ways : goods might be detained in a port for a long period without any hope of early release so as completely to frustrate all the commercial ventures connected with their purchase and contemplated sale. This was the case in the matter of Rodocanachi v. Elliott ^ regarding" goods detained in Paris during the siege of 187 1. Or it might happen that the vessel carrying the goods in question stranded at a point far from any possible assistance : the crew might be able to save some cargo, putting it ashore in a place of safety, but be unable to remove it to a port from which it could be sent on to destination. The goods would thus lie perfectly safe but unattainable. This appears to be a fair case of loss of venture and consequently of constructive total loss of cargo. Again, if a voyage has been in some way interrupted by perils insured against, it may happen that damaged cargo is discharged at some point en route. If the original ship is unable to prosecute her voyage it becomes a question whether the goods can be forwarded without a loss being incurred on them. If there would be a loss, in case the goods were reconditioned, reshipped and forwarded, that "is, if on arrival at destination the goods were not worth the amount of these various expenses, it is plain that there is something like a constructive total loss on the goods. On this point there are several important decisions ; one of them {Farnworth v. Hyde, 1866)^ has given rise to a good deal of discussion, owing to the discovery of what seems a mistake in an elementary sum in addition and subtraction. What would a prudent uninsured owner of goods do in such a case ? If he has goods lying damaged at an inter- mediate port or place, what will he do ? will he arrange to bring them on, or will he literally abandon them as they lie ? His choice will certainly depend on the cost of bringing them on to destination. The first item to consider ' 3 Asp. Mar. Law Gas. 399, L. R. 8 C.P. 649. !« L. R. 2 C. P. 204. 156 MARINE INSURANCE chap. is the cost of reconditioning, then follow the expenses ol reshipping and the freight. If the expected value of the goods at destination does not amount to the sum of these items, it is evidently commercially unreasonable to expect the. merchant to bring on the goods, it is evidently bettei to sell them as they lie for any price they will fetch. Suppose that the same merchant were insured, under what circumstances should he be entitled to claim a con- structive total loss from his underwriter ? There would seem to be no doubt that such a claim can be justified in case the value of the goods taken as arrived at destination with all charges paid is nothing, or, in other words, when the price obtained for goods if sold at destination after payment of all charges does not exceed the amount of the charges. The question arises whether the freight per bill of lading is one of the charges that should be taken into the calculation. The case oi Farjiworih v. Hyde, 1866,^ was one against the underwriters of a policy on a cargo of timber from Quebec to Liverpool. It was proved that the ship was frozen up in the St. Lawrence at the beginning of winter, and in the spring she was, under the advice of competent surveyors, sold, as it was considered that the expense of repairing and forwarding would be greater than the value when repaired. No notice of abandonment was given : the news of the disaster and of the sale arrived at the same time. The jury in the Court of first instance found the sale justifiable, and a verdict was entered for the assured as for a total loss. The Court of Common Pleas, on a rule to enter non-suit, held (Mr. Justice Byles dissenting) that there was evidence to show that the probable loss during the operation of saving and forwarding would have absorbed the surplus profit, and that the verdict for a total loss ought to stand even without abandonment. In estimating what would have been the value of the cargo had it arrived at Liverpool, the original bill of lading freight .^^1556 was deducted; had not this been done, there would have been a margin of profit of ^^1700 * L.R. 2 C.P. ao4. IX CONSTRUCTIVE TOTAL LOSS OF CARGO 157 This point was brought to the notice of the Exchequer Chamber by Mr. Justice Blackburn, and in consequence it was held that this freight ought not to have been deducted to get at the value of the cargo as arrived at destination. In the words of Baron Channell's judgment : " They ought not to take into account the fact that if the goods are carried on in the original bottom, or by the original ship- owners in a substituted bottom, they will have to pay the freight originally contracted to be paid, that being a charge to which the goods are liable when delivered, whether the perils of the seas affect them or not." On this principle the judgment proceeds to state that in case the original shipowner determines not to carry on the goods either in the original or in a substituted bottom, the cargo-owner, if he brings them on, is not entitled to take into account the whole of the amount he pays for forivarding, but only the amount by which that exceeds the original freight. The effect of this, put briefly, is that unless the extraordinary expenses incurred in consequence of perils of the sea or other perils insured against exceed the arrived gross value of the cargo delivered at destination {i.e. of course with freight paid) the assured is not entitled to abandon. This result is quite different from that at which we arrived when we considered the action of the prudent tini?isured owner. He would abandon the goods if their expected gross price did not exceed the freight plus the extraordinary expenses ; while the law does not give the insured owner any right to tender abandonment to his underwriter unless the expected gross value does not exceed the extraordinary expenses alone, Lowndes (Law M L p. 137) and M'Arthur (Contract M. L p. 151, note) both regard this difference as the result of a mistake or fallacy into which the judges fell. So it certainly is, if it is correct to assume that the result in any question of policy or practice in the relations of assured and underwriter must accord exactly with the result of the course which would be adopted by a prudent uninsured owner. But is this assumption justifiable ? If A, while retaining certain of his own obligations with their corresponding 158 MARINE INSURANCE chap privileges and rights, delegates some to B and others to C, the result of the operation of each separate set of delegated obligations and rights does not of necessity coincide with that of the whole sum of A's original obligations and rights. This is really the principle underlying Baron Channell's judgment : he examined separately the relations of the cargo-owner to the shipowner and then to the cargo under- writer. As to the shipowner, as long as the cargo is delivered in specie at destination the freight is due to him by the consignee in whatever state of damage the cargo is delivered, provided the damage has arisen from perils excepted in the bill of lading. As to the cargo underwriter, it is possible that before the cargo can be offered for sale at destination for any sum worth mentioning, expenses have to be incurred in recon- ditioning the goods. This class of expenses was dealt with in Rossettov. Gurney, 1851,^ and Reimerv. Ringrose, 1 85 1.2 The judges intimated to the assured: "The obligation or risk transferred by you to your under- writers includes nothing but the consequences of the perils enumerated in the policy ; liability to pay freight at destination is not one of these, so no consequence of that obligation can be transferred to your underwriter." It appears to have been on this ground that Mr. Justice Blackburn raised the question of freight in the Exchequer Court in Farnworthv. Hyde, 1866.^ The reasoning seems to be (at least) as little fallacious as the opposite doctrine that the position of an underwriter towards his assured is always to be determined commercially by the course which would have been adopted by a prudent uninsured merchant or shipowner. To put it in few words : the underwriter never guarantees that cargo will be worth its freight whether it arrives damaged or sound, why should a freight obligation be imported into his contract in certain cases of damage and loss when it is really a part of the merchant's obligations which the merchant retains at his own risk in case of arrival 1 ij C.B. 176. 2 5 Exch. 263. 3 L. R. a C.P. 204. IX CONSTRUCTIVE TOTAL LOSS OF CARGO 159 of his goods at destination ? Considerations of a similar kind arise again and again in the treatment of cargo claims ; but this instance seems to make it clear that the prudent- uninsured- ow7ier theory is not adequate to the solution of several important problems in marine insurance. Constructive Total Loss : when determinable ? — It was said above (p. 147) that if the assured instead of tendering abandonment awaits an examination of his pro- perty with a view to repairs, he has to abide by the result of such examination and take his indemnity in accordance therewith. But what constitutes indemnity in such a case ? Is the liability of the underwriters determined by the state of matters as they existed at the time when 'abandonment was tendered by the assured, or when action was instituted against the underwriter ? In the case of The Sailing Ship Blairmore Company v. Macredie^ it has been decided that to determine whether a loss is constructively total or merely partial, account must be taken of such expenses as the underwriters may incur between the dates of proper tender of abandonment and of action brought, in rescuing the pro- perty and taking it to a place of safety. Lord Herschell stated the general rule of English law to be that if, in the interval between the notice of abandonment and the time when legal proceedings are commenced, there has been a change of circumstances reducing the loss from a total to a partial one, the assured can only recover for a partial loss. But he added that this rule had never been applied to a change brought about by the underwriter. He considered that to extend it to such a case would be un- reasonable and would not give due effect to the contract between the parties. Lord Watson in his judgment remarked, " I have been unable to arrive at the conclusion that, in the circumstances which occur in this case, the consideration of what would be the action of a prudent owner uninsured affords the true test of the liability of the underwriters as for a total constructive loss. In my opinion that test is excluded by the contractual relations which exist between the insured and his insurers." * House of Lords, 1898, A. C. 593. CHAPTER X TOTAL LOSS OF FREIGHT The third great maritime interest, freight, remams to be dealt with. The word " freight " does not appear in the text of the poHcy as it existed before May 1749. ^^ '^ not easy to see how it came to have its present signification, namely, hire for carrying goods. Etymologically it should mean simply load or cargo, and it is still used in the United States in this sense (e.g. freight train, fast freight train, the equivalent of the Enghsh goods train and express goods train). But it has lo5t that meaning altogether in England, and now stands simply for hire for carrying goods, and on the United States' sea-board the word is used in nautical affairs in that sense.^ In regard to this interest there is a most important and, in fact, an essential difference between the law of England and that of most other ocean-carrying nations ; and this difference has important consequences on the relations of assured and underwriter on freight. English law takes the contract under bill of lading between ship- owner and merchant to be that if the freight is payable at destination, then no part of it is earned by a partial per- formance of the contract, that is, by delivery of the cargo at any port short of destination. If an English ship takes ^ In German there is a somewhat similar confusion between Frachi and Frachtgeld, in Dutch between Vracht and Vrachtpenning ; in Italian the words nolo and noleggio are those ordinarily used to mean freight, while in French the word fret is pushing out nolii, and in Spanishyf*"/-? is the only form now in common use. CHAP. X TOTAL LOSS OF FREIGHT i6l in cargo at Liverpool for delivery at Calcutta in return for so much freight, delivery of the cargo at Colombo or Madras will not entitle the shipowner to any freight. Almost all the maritime countries except England have adopted a custom entirely contrary to this : they regard the freight as a liability from the cargo accruing as it were mile by mile as the vessel proceeds and culminating at its full bill of lading amount at port of destination on safe delivery. If a German vessel undertook the voyage from Hamburg,^ and tendered the cargo at Colombo, being herself unable to proceed farther on the voyage, the owner would be entitled, under the law of his flag, to claim the same proportion of the full freight as the distance from Hamburg to Colombo bears to that from Hamburg to Calcutta. This is called distance freight or freight pro rata itineris peracH. In this country it has been considered contrary to public policy to permit any such partial and pro- portionate discharge of a freight contract : it has been thought that such permission might tend to encourage masters and crews to look for reasons to close the freight contract elsewhere than at the intended destination of the adventure. There is certainly good reason for thinking that many condemnations of foreign vessels at inter- mediate ports of their voyages would never occur were it not for the distance freight. In consequence of the view of freight adopted in English law, payments made towards freight hold a curious position in English maritime commerce. If the full freight as per bill of lading is, in consequence of some cause or other preventing the ship's arrival at destination, never earned, what becomes of amounts which the cargo-owner may have prepaid ? are they re- coverable by the cargo-owner or do they remain the property of the shipowner? That depends entirely on the intention of the parties ; if the intention is to provide an amount on account of freight as it may ultimately be found to be due, then the prepayment is simply a loan ; if, on the other hand, it is meant to be a payment of part of the * See Industrie, Shipping Gazette, 30th Nov. 1893. M i62 MARINE INSURANCE chap freight, due when the cargo was loaded, on signing bills of lading or immediately on sailing, then it is a payment to the shipowner absolute and irrevocable, but to be deducted from the bill of lading freight if and when earned. The latter kind of payment is termed "advance freight." If a payment on account is meant to be merely a loan against freight as ultimately due, it should be described in such words as will make its character clear and prevent its being considered advance freight. To turn to the insurance side of freight, it is plain that when the carrying ship is completely destroyed by any of what may be called the eminent perils (foundering, burning, etc. etc.) there is an end of the carrying power of the ship, and equally an end of what she was carrying, so that in such cases there is what may be termed a " double qualification" of claim for total loss of freight. In his judgment in Scottish Marine v. Turner, 1853,^ Lord Truro said : " The expression ' loss of freight ' has two meanings, and the distinction between them is material : **(i) Freights may be lost in the sense that, by the perils insured against, the ship has been prevented earning freight. " (2) Freight may be lost in the sense that, after it has been earned, the owner has been deprived of it by some cir- cumstance uftconnected with the contract between the assured aftd the underwriter on freight. For a loss of freight, in the first sense, the underwriter on freight is responsible ; for a loss of freight in the second sense he is not." Short of such complete total loss, we may have two cases of total loss of freight : (i) Where owing to perils insured against the cargo is incapable of being carried to destination. (2) Where owing to perils insured against the ship is unable to carry the cargo to destination. (l) By "incapable," in the first case, is meant not only physically incapable but also commercially incapable. That is to say, the description covers not only goods ' I Macqueen's H.L. App. 342. X TOTAL LOSS OF FREIGHT 163 altered by perils insured against into something different in specie from what was shipped or deteriorated so as not to be able to bear forwarding and consequently totally lost, but also goods burdened, in consequence of perils insured against, with such charges as make their forvvarding to destination impossible except at a loss, i.e. goods which have suffered constructive total loss in the sense already explained. Suppose that an English vessel has put into a port of refuge for repairs and has discharged her cargo, and that her cargo is found to be in such a condition that it cannot be carried forward to destination with safety to the venture, or so as to be delivered in specie, or in any but a worthless state. If this cargo is sold at port of refuge, there evi- dently has gone with it the right on the part of the ship to obtain a certain amount of freight at the end of the voyage, i.e. at destination when reached. The cargo may be sold in this way {a) whole, {b) in part. {a) If the whole cargo is sold, the possibility of earning any part of the freight has vanished ; and if the damage giving rise to the sale has been caused by perils insured against, there will be a claim for total loss on the freight policies, the shipowner not being able to collect any freight from the consignee. {b) When only a portion of the cargo is sold, and the rest is forwarded, the amount of freight due by the consignee is the excess of the bill of lading freight on the portion delivered beyond the amount of advance freight. If the fiill freight of the delivered portion does not exceed the advance freight the consignee has nothing to pay. This follows from the decision in Allison v. Bristol Marine, House of L'Drds, 1876,1 in which a ship took a cargo of coal from Greenock to Bombay ; the charter-party pro- vided that half the freight was to be paid on signing bill of lading, and the remainder on right delivery of the cargo. The vessel was lost before entering * I App. Cas. 209. i64 MARINE INSURANCE chap, Bombay harbour, and one-half of the cargo was saved and delivered. It was held that the consignee was not liable to pay anything further for freight, the amount of the advance being enough to cover the full freight of the delivered portion. There was then no loss on the advance freight, but a total loss upon the shipowner's freight at risk, which was recoverable under the policies. Had the wording of the clause in the charter-party dealing with advance freight been that one -half of the freight of each ton shipped was to be paid on signing bills of lading, and the other half on right delivery of the cargo, the amount lost would have been the same, but the loss would have fallen equally on the shipowner and on the consignee (or charterer) ; the shipowner earning full freight on half the cargo delivered (one moiety advance, one moiety on delivery) and recovering from his underwriter the moiety at risk on the half cargo lost, the con- signee (or charterer) recovering from his under- writer the moiety advanced on the half cargo lost. It has frequently happened that a vessel is left wholly or partly empty in consequence of an accident at port of loading in which all or some of her cargo is destroyed by perils insured against, e.g. fire. The question arises. What would happen if she were to complete the voyage for which she had loaded the cargo, and were to present herself at destination delivering instead of the cargo, proper and adequate proof that owing to such and such perils the missing cargo had been destroyed ? There would appear to be a loss of freight by perils insured against. It is jdoubtful whether such a course would be reasonable, for nothing would be accomplished by the passage of a vessel thus wholly or partly empty except the fulfilment of the voyage for which she accepted cargo, the voyage being completed simply to sub- stantiate a claim against underwriters on freight. X TOTAL LOSS OF FREIGHT 165 But suppose the shipowner finds himself at or near the commencement of a voyage thus by genuine perils deprived of the cargo for the carriage of which he was to earn freight, and then — instead of completing the voyage empty and to no purpose — effects a new charter and fills up his ship with new cargo, what should his position be with respect to the second freight ? If he is allowed to retain the whole of it, the net result of the accident — so far as the hire of his ship goes — is to let him compress what should have been two voyages into little over the time of one, and thus earn double freight for part or whole of his ship on what is practically one voyage. This seems hardly fair to the underwriter who pays a total loss on the part of the first freight destroyed : is he not entitled to have some share of the second as a " salvage " from what he has paid a loss for ? It is said that this point has not been definitely settled by our courts, but that the feeling of the judges has been expressed, that in such a case the assured is bound to return to the underwriter on freight any- thing extra earned by the ship on the same voyage subsequent to the accident that has caused the loss.^ ATeanwhile in the American cotton-carrying trade an attempt has been made to get over the absence of legal decision by the formation of a special agree- ment applicable to such cases. Special agreements were made in the cases of the Resolute^ and Naples^ burnt at Savannah in 1887, and later in the case of the Thalia^. These agreements formed the basis of a form of contract now embodied in the Cotton Confere7ice Dociciiients. (2) Next, the impossibility of taking the cargo on to destination may arise from the state of the ship. In this * It musi DC admitted that there are often collateral losses to the shipowner which materially reduce the apparently large profit of the second freight. i66 MARINE INSURANCE chaf. case, whether the impossibility be physical or commercial, the result is the same, the shipowner is not entitled to any freight unless he delivers at destination. On the other hand, it rests entirely with him to decide whether he will forward the cargo or not. Being under no obligation to forward he will naturally adopt the solution that is most profitable to him : if he can forward at a profit he will; if not, he will not. It is therefore usually a require- ment of an underwriter on the freight of a ship alleged to be irreparable at a port of refuge, that he be perfectly satisfied that the vessel is actually irreparable, and then be quite certain that every eflTort has been made to secure forwarding vessels at such rates as will leave to the original shipowner a profit on delivery of the cargo at destination Addenda. Under Original charter-party or bill of lading. Total Loss of Freight arising from Detention There is another form of total loss on freight that deserves special attention in consequence of an important decision and of a clause which has been inserted in almost every freight policy since the date of the decision : con- structive total loss of freight arising from delay in conse- quence of sea perils destroying, in a commercial sense, the venture entered into by the shipowner and the charterer. The ship Spirit of the Dawn got ashore in Carnarvon Bay on 4th January 1872 on her voyage from Liverpool to Newport, where she was intended to load a cargo of rails for San Francisco. Such a time was consumed in efforts to get her off the rocks (which in the end succeeded) and in repairs, that the charterers threw up the charter and engaged another vessel to take the cargo of rails which were wanted at San Francisco for the constnjction of a railway. A claim was made for total loss of freight, and in the case Jackson v. Unioti Afarifte^ 1873,^ t^he jury found that the delay was such as to put an end com- mercially to the intended venture. In consequence it » L.R. 8 C.P. S72 ; 10 C.P 125. X DETEI^TION— SUMMARY OF DOCUMENTS i6? 1 Br. & B. 388. 2 8 BinsT. 458. ^ 4 B. & Cr. 736. * I E. & B. 456. * 8 Bing. 458. « 2 Bing. N.C. 383. 178 MARINE INSURANCE chap. Two recent cases arc of interest as defining the applica- tion of the memorandum more closely. In the Alsace and Lorraine {Black^vood, Brysoji, and Company v. British and Foreign Marine Insurance Company^ 1893)/ the vessel met with bad weather on her voyage from Calcutta to Demerara, had to jettison part of her cargo of rice — damaging some of the remainder in the operation- -and put into Mauritius for repairs. The cargo was discharged, and part of it found to be unfit for reshipment was sold. Before the repairs on the vessel were completed she was driven on the rocks by the great cyclone of April 1892 ; she remained hard and fast, and was so damaged that she was hopelessly lost. The unsold portion of the cargo was forwarded to destina- tion in the Brazil, which met with bad weather, in conse- quence of which the rice on board of her was damaged. Claim was made for the amount of this damage on the ground that " the vessel " had stranded. There was no dispute about the facts. The plaintiffs' contention was that if the vessel strands after the shipment of the goods, while the vessel is still under contract to carry the goods, and during the currency of the policy covering the goods, such stranding removes the exception from the memorandum, even though at the time of the stranding the goods were not on board. This view was not accepted by Mr. Justice Barnes, who found for the defendants with costs. Similarly, in Thames and Mersey Marine Insurance Company v. Pitts, Sojis, and King, 18932 (an action to recover money overpaid), a vessel loaded cargo at San Nicolas and on her way to Buenos Ayres she stranded. At Buenos Ayres she took more cargo on board, and it was claimed by the cargo -owners that the stranding was a stranding in the sense of the memorandum even as regards the goods shipped thereafter at Buenos Ayres. The judges (Justices Day and Collins) held that the stranding of the vessel did not affect any cargo except such as was on board when it occurred. 9 Times Law Rep. 484. 2 I Q.B. 476. XI APPLICATION OF THE MEMORANDUM 179 Consequently it may be taken as settled that to con- stitute a stranding in the sense of the memorandum the interest insured must be in one common adventure with the ship at the time when the ship takes the ground. Within five years after the addition of the memorandum to the policy the courts were called upon to decide whether in a case of strand the underwriter was obliged to pay his p7-o rata share for all the damage which the goods sustained during the voyage, or only for what was occasioned by the stranding. Upon a policy on com {Cantillon v. Lotidofi Assurance^ 1754)/ it was held by Sir Dudley Ryder that the stranding entitles the assured to claim the whole loss occurring on the voyage. One consequence of this decision was that the London Assurance and the Royal Exchange Assurance struck the words " or the ship be stranded " out of their policies. There was some wavering on the part of the courts in later cases, but it was finally settled by Lord Kenyon's decision in Burnett v. Kensington, 1797,^ that " if a ship be stranded and the cargo suffer no damage whatever, and afterwards the vessel meet with bad weather and the cargo sustains an average loss, say of 90 per cent, the under- writers are answerable for the whole of that average loss." On a somewhat similar principle it has been decided that to constitute a percentage claim on goods named in the second and third classes in the memorandum, it is not necessary that the damage making up the full percentage must all happen on one occasion or from one kind of casualty. It is enough if it occurs in the course of the voyage insured, and results from perils insured against. But the stipulated percentage must consist entirely of actual damage sustained by the goods insured ; it cannot be com- posed partly of such damage and partly of such other items as general average, or of particular charges, or of expenses incurred in proving the claim (cf Kidston v. Empire Marine, 1866).^ It was mentioned above (p. 172) that words have been added to the memorandum extending the liability of the 1 Cited 3 Burr. 1553. 2 7 T.R. 210. » L.R. I C.P. S3s; a C.P. 357. i8o MARINE INSURANCE underwriter. In the case of the Glenlivet (Admiralty, March 1893),^ Mr. Justice Barnes stated that for about the last thirty years the words " sunk or burnt " have generally been added to the memorandum. As stranding designates accidental resting of the ship's side or bottom on the ground in such a way as to make her innavigable and to damage her, so sinking must mean such accidental deepening of the ship's draft as will permit water to pour into her by the hatches, or other proper openings in her, and bring her down beneath water level. The only English case on sinking is Bryant ajid May v. London Assurance, 1886 (in Queen's Bench before Mr. Justice Grove and a special jury),^ in the matter of a cargo of match splints per B. C. Boyesen from Quebec to London. On the vessel's arrival at Gravcscnd the water was over the deck as far aft as the mainmast, abaft the mainmast it was dry ; the captain's cabin and hurricane deck were dry. The cargo was very much wetted, but part of it was delivered dry. The plaintiffs contended that this con- stituted a sinking within the meaning of the memorandum, saying that the vessel had sunk as far as a vessel with a timber cargo could sink. But both of their witnesses admitted that had the cargo become more saturated with water the ship would have sunk further. The case was decided in favour of the defendants. But if a sinking were to be of such a character that, to use the words of Lord Ellenborough in M^Doiigle v. Royal Exchange, 1815,^ " the ship may pro tempore be considered as wrecked," such a disaster would certainly remove the exception laid down in the memorandum. In the case of burning another difficulty arises. If the property insured is a cargo of flour, and if this interest takes fire and is burnt without the ship being damaged by the fire, the exception has not been taken out of the memo- randum, and the underwriter remains free of claim for partial loss or damage of the flour. It is the ship that ' 9 Times Law Rep. 360 ; decisions affirmed by Court of Appeal, 10 Times Law Rep. 97, but Mr. Justice Barnes's reasons disapproved. ' 2 Times I.aw Rep. 591. ^ 4 Camp. 283. XI BURNING COLLISION i8i must be burnt, say a beam scorched, a floor charred, a ceiling burnt. Consequently the destruction of a cabin byfire removes the exception, while a fire in the cargo itself does not. Such was the view acted upon almost universally until quite lately. But a recent decision of Mr. Justice Barnes (the Glenlivei, 1 893)"^ has raised a new point. Fire occurred thrice, once on each of three separate and distinct voyages, in the Glenlivefs coal bunkers but did not pass beyond them. As it was decided by Lord Ellenborough that a mere touching of the ground was not sufficient to make a strand, so it is now decided in the Glenlivet ca.s& that a mere burning is not sufficient to take the exception out of the memorandum ; it must be such a burning as to constitute a substantial burning of the ship as a whole. The judgment in the Glenlivet has excited considerable atten- tion, as it takes away on principle what was long granted without question. But indeed it is not easy to see why a fire in a ship's bunkers or cabin should be enough to establish a claim for damage to cargo arising from some other peril barred by the memorandum, when a touch-and-go graze on a rock, even if actually causing damage, is not enough. Since the issue of the decision some slips have had the words " on fire " added to "burnt," confessedlyin the hope andexpectationof thus restor- ing to the assured what has been taken from himby the decision.2 In consequence of the great increase in the number of 1 9 Times L. R. 360 ; 10 Times L.R. 97. ^ But will not exactly the same principle that was applied in the interpretation of " burnt " be applied to that of "on fire " ? For it is not a question of the extent of the effect of ignition ; if ignition result.s in the total loss of the property insured, then the loss is claimable as a total loss and not under the memorandum or any other clause referring to partial loss ; if it does not result in a total loss, then, as far as the memorandum is concerned, is it not all the same whether you say "burnt" or "on fire" so long as the principle of "substantial burning of the ship as a whole" is applicable? This is the principle stated by Lord Justice Lindley in the Glenlivet decision, Court of Appeal, 1894, I Q. B. D. 48: "I take it the context shows what is meant is that the ship as a whole must be stranded, sunk, or burnt ; and I cannot accept the suggestion of the plaintiff's counsel that any fire on board a ship doing little structural damage to the ship itself is a burning in ordinary language. ... Of course in one sense it is burnt ; anything that burns any part of a ship is a burning of the ship, but I cannot think that that is the meanmg of it here." iS2 MARINE INSURANCE chap. collisions occurring at sea since the introduction of naviga- tion by steam, it has lately become customary to add to the memorandum in policies the words, " or the damage be caused by collision," occasionally supplemented by the words, " with another ship or vessel." ^ There are various forms of the addition, but the one just given is the most equitable between assured and underwriter, and the least likely to lead to results disappointing to either party. The form "or in collision" is open to the objection that the mere fact of the carr)'ing vessel being in collision would remove the exception from the memorandum, and that the policy would then be liable for the payment of damage arising from some other peril barred by the memorandum. The form " or the damage be caused by collision " sug- gests the true middle course open to assured and under- writers in the matter of stranding and burning. As matters are at present, the assured feels the hardship of not being able to recover the amount of damage done by fire to and in his cargo unless the fabric of the ship has been burnt ; the underwriter feels the hardship of being legally obliged to pay for sea damage to cargo which has not resulted from any serious peril, but is claimed on the ground of a merely technical strand. Why not solve both difficulties by making the memorandum read, "unless caused by stranding, pinking, burning, or collision with another ship or vessel, wreck or ice " ? The preceding remarks bear more particularly on the relation of the memorandum to goods, the bearings of the memorandum on ship and freight will be examined later. It is of interest to note that the American form of policy follows the English in adopting the plan of making a memorandum deal with the particular average liabilities of the underwriter on some interests. The text of the policy provides that " no partial loss or particular average shall in ^ Lord Coleridge in Richardson v. Burrows, 1880, gave it as his opinion that in the memorandum colh'sion means "collision with another ship" (Lowndes, Law M. L p. 199). Compare Mr. Justice Barsies in the Miinroe (Prob. Div. 1893, P- 248), Mr. Justice Mathew in Kirkmichael and Osseo {Union M. I. Co. v. Borwick, Q.B. , 20th June 1895), II Times L. R. 465, and Mr. Justice Bigham in Chandler Addenda, v. Blogg (24th Nov. 1897, 14 Times L.R. 66). XI F.P.A. CLAUSE 183 any case be paid unless amounting to 5 per cent." Then follows the memorandum : — Memorandum. — It is also agreed that bar, bunrile, rod, hoop, and sheet-iron, wire of all kinds, tin plates, steel, madder, sumac, wickerware and willow (manufactured or otherwise), salt, grain of all kinds, tobacco, Indian meal, fruits (whether preserved or other- wise), cheese, dry fish, hay, vegetables and roots, rags, hempen yarn, bags, cotton bagging, and other articles used for bags and bagging ; pleasure carriages, household furniture, skins and hides, musical instruments, looking-glasses, and all other articles that are perishable in their own nature, are warranted by the assured free from average, unless general ; hemp, tobacco stems, matting, and cassia, except in boxes, free from average under 20 per cent, unless general ; and sugar, flax, flax seed, and bread are warranted by the assured free from average under 7 per cent, unless general ; and coffee in bags or bulk, pepper in bags or bulk, and rice, free from average under 10 per cent, unless general. Warranted by the insured free from damage or injury from dampness, change of flavour, or being spotted, discoloured, musty, or mouldy, except caused by actual contact of sea water with the articles damaged, occasioned by sea perils. Not liable for leakage of molasses or other liquids unless occasioned by stranding or collision with another vessel. This is very stringent, far more closely binding than anything ever introduced into the English policy for general use ; and the occurrence of even an important casualty to the vessel carrying the goods does not subject the underwriter to any liability unless the damage amounts to the stipulated percentage, or unless, in the case of leakage, it is actually occasioned by stranding or collision. The absolute exclu- sion of such damage as gave rise to the case Motitoya v. London Assurance, 1851^ (see p. 97) is stated in ex- tremely strong language ; mere contact with sea water is not enough to constitute a claim, the contact must have been occasioned by sea perils. The Free of Particular Average Clause After 1749 the course of insurance business showed that the memorandum afforded only a moderate protection to underwriters on goods. As was remarked above (p. 173) the paucity of the articles named is striking. The meagre- ^ 6 Exch. 451. i84 ^fARINE INSURANCE ness of the memorandum was soon rectified by tlie con- struction and employment of a clause known as the " Fr-ee of Particular Average" clause, the F.P.A. clause. It was found that it suited both merchants and underwriters that some of the articles named in the second group of the memorandum should be insured on the stricter and cheaper terms of the first group, namely, free from average, unless general, or the ship be stranded ; and the same held true of many articles not specified in either the first or the second group, but included under the words " all other goods," which in the memorandum are warranted free from average under 3 per cent, unless general, or the ship be stranded. It tlius becomes customary to regard most insurances on goods as being done either on the terms of the first group in the memorandum, or on special " average " terms, to the consideration of which we will turn later. The memorandum being employed in permanent addition, to the policy, it became necessary to indicate by special clause on the policy any departure from memorandum terms in the insurance of goods or other property. The adoption of the terms of the first group of memorandum articles became so common that the clause became known as the free of particular average (F.P.A.) clause absolutely. The first form of the clause was exactly as at the beginning of the memorandum : — Warranted free from average, unless general, or the ship be stranded. This clause written on or attached to a policy for sugar, flax, or hides, or any of the second group of memorandum articles, overrides the words providing for the payment of average if exceeding 5 per cent ; for manufactured goods it overrides the words ])roviding for payment of average if exceeding 3 per cent. As in the memorandum, so in the F.P.A. clause, it was found necessary to permit the occurrence of other casualties besides stranding to annul the exception ; the clause conse- quently took the form : — Warranted free from average, unless general, or the ship be stranded, sunk, or burnt. F.P.A. CLAUSE i8s Or, substituting for the words " average, unless general," the equivalent given by Mr. Justice Fry (p. 174), " particular average," the following form : — Warranted free from particular average unless the ship be stranded, sunk, or burnt. Then it became necessary to include stranding, sinking, and burning of craft, and the clause became — Warranted free from particular average unless the vessel or craft be stranded, sunk, or burnt, each craft or lighter being deemed a separate insurance. The peril of collision becoming more and more important, it became usual to add after " burnt " some words by which the underwriter assumed liability for the proximate effects of the peril. The objections to the apparently simplest form of expressing this, namely, " or in collision," have already been pointed out (p. 182); they led to the addition of such phrases as — The collision to be of such a nature as may reasonably be supposed to have caused or led to the damage. Or, The collision to be of such a nature as may reasonably be considered to have occasioned damage to cargo. Or, The collision to be of such a nature as to have been the proxi- mate cause of damage to the interest.' Or, The collision to be of such a nature as may l)e reasonably supposed to have caused or led to the damage.^ Much the best way is to avoid entirely the use of the words " or in collision," and instead to use the form — Or the damage be caused by collision with another ship or vessel. ' Seemingly an inadequate form and dangerous for the assured. Would it cover anything except the damage done by the structure of the ships colliding with one another ? would it properly cover damage done by water coming in through a hole or leak resulting from collision ? (cf. I^ord Justice Lindley in Reischer v. Berwick, July 1894). Sec pp. 139, 142. ^ Seemingly dangerous for underwriters ; might not secondary or consequential damage be claimed under the words "led to the damage." Perhaps the insertion of the word "immediately" before "led" would suffice to make the clause safe. i86 MARINE INSURANCE chap. Even this expression was not found to be enough. There are certain expenses connected with a vessel's putting into a port of refuge in distress, such as warehousing, reshipping, and forwarding charges. These when incurred by the ship- owner have always been charged by him against the cargo, and are admitted by law in certain cases as properly charge- able. Underwriters agreed to assume responsibility for their proper proportion of such charges, and this arrange- ment was embodied in what was known as the "forwarding clause " : — To pay warehousing, forwarding, and otlier special charges if incurred. But special charges if incicrred might be much too com- prehensive a phrase ; an attempt might be made to include under it such charges as distance freight payable to a foreign ship condemned at an intermediate port, and other expenses such as would not be recovered under an ordinary English "clean" policy {i.e. policy consisting simply of the common text and the memorandum). To prevent any such incid- ence on underwriters of amounts not already at their charge, the words "if incurred" were omitted, and the clause was comj^'eted with the phrase "for which under- writers would otherwise be liable," where " otherwise " means " by some provision of the policy different from the clause now under discussion." The forwarding clause thus stood : To pay any special charges for warehouse rent, reshipping, or forwarding, for which underwriters would otherwise be liable. To these provisions was added one dealing with loss in transhipment, — in itself quite a reasonable thing to be covered by underwriters on goods. But here again there has been considerable difficulty in the wording. The first form was got by adding to the words covering collision damage words like the following : — As well as partial loss arising from transhipment. The objection to this form is that partial loss includes deterioration as well as total loss of a part of an interest insured. The perception of this and of the fact that with XI F.P.A. CLAUSE 187 such a form of words underwriters might have to pay for damage suffered in transhipment of a class of goods from which under the F.P.A. clause they would be exempt in any other part of the venture, led to the disuse of the form given and to the substitution of the following : — To pay tJie insured value of any package or packages which may be totally lost in transhipment. As a quid pro quo for this extension of liability, the assured, by special agreement with the underwriter, accedes to the following restriction of the underwriter's liability : — Grounding in the Suez Canal is not to be deemed a stranding, hut underwriters to pay any damage or loss which may be proved to have directly resulted ihercfroni. Such were the stages in the history of the F.P.A. clause as it is now known. At a general meeting of the under- writing community of the United Kingdom, assembled at Lloyd's on the 17th July 1883, a form of clause was adopted which has become the customary English form, and is, in absence of any special agreement between assured and underwriter, the F.P.A. clause ; it reads — Warranted free from particular average unless the vessel or craft be stranded, sunk, or Inirnt, each craft or lighter being deemed a separate insurance. Underwriters, notwithstanding this warranty, to pay for any damage or loss caused by collision with any other ship or craft, ami any sjiecial charges for warehouse rent, reshipping, or forwarding, for whicli they would otherwise be liable. Also to pay the insured value of any package or packages which may be totally lost in transhipment.^ Grounding in the Suez Canal not to be deemed a strand, but underwriters to pay any damage or loss which may be proved to have directly resulted therefrom. 1 Transhipnienl means gencr.iUy tlic act of transferring goods from a vessel in wliicl) they have been carried to iinother vessel for the completion of their voyage. If taken strictly, its application in this clause is confined to the mere act of lifting from the earlier vessel to the later vessel employed in the carriage of the goods, or if a lighter or other ci-aft is employed to carry the goods between the vessels — from the earlier vessel to the lighter and from the lighter to the later vessel. It is reasonably extended to the conveyance between the two vessels, but does it include any stay on quay in case the lirst vessel discharges direct on to qu.ty and the second loads direct from quay? So long as the stay on quay is merely incidental to the remov.-\l from one vessel to another, the inclu- sion of the risk for a moderate time is not unreasonable, but the moment that slay becomes delay or storage the c.ise becomes doubtful. CHAPTER XII PARTICULAR AVERAGE Before proceeding to the consideration of particular aver- age and the method in which underwriters' habihty for it is determined, it may be remarked that the percentages named in the memorandum have not continued to be apphed in their original sense (see p. 195). Stevens (Average, p. 227, note) says : *' I have been informed by a gentleman of great experience, who was one of the subscribers to old Lloyd's in Lombard Street, ^ that the intention of the memorandum when first inserted was that the £'^ per cent or £'^ per cent (according to the thing insured) on the amount of the mterest should in all cases be deducted from the average, the underwriter paying the balance, and that this was then the practice." Leaving aside for the moment the discussion of the word " average " and phrase " particular average " we may examine the definitions of the text-books. Amould (p. 970) says : " Particular average is loss arising from damage accidentally and proximately caused by the perils insured against, [or from extraordinary expenditures necessarily incurred for the benefit of] some particular interest, as the ship alone or the cargo alone." Owing to the decision in Kidsfofi v. Empire Marine^ 1867,2 the words in brackets must be deleted and the word " to " substituted. ^ Martin [History of Lloyd's, p. 120) says that Old T>loyd's ceased to exist soon after October 1770. "^ L.R. I C.P. S3S ; 2 C.P. 357. See below pp. 221, 223. CHAP. XII PARTICULAR AVERAGE 189 Phillips (§ 14^2) says: "A particular average is a loss borne wholly by the party upon whose property it takes place, and is so called in distinction from a general average for which divers parties contribute." These definitions appear rather to describe a loss borne by a shipowner or merchant than the indemnity which he recovers from his underwriter, subject to the terms of the contract between them, so that perhaps the following modification of Arnould's definition may make the matter clearer : — " Particular average is the liability attaching to a marine insurance policy in respect of damage or partial loss accidentally and immediately caused by some of the perils insured against, to some particular interest (as the ship alone or the cargo alone) which has arrived at the destination of the venture." In the discussion of the method of settling a construc- tive total loss and a salvage loss, it was pointed out that the reason of the transfer of property in such a case to the underwriter was neither that the goods were damaged, nor that they were at an intermediate port in a damaged state, but that they could not (physically or commercially) be carried on to destination, and being consequently a con- structive total loss, are surrendered to the underwriter in return for the payment of the insured value. The method of claiming indemnity for damage to interest arriving at destination in specie and otherwise than as a total loss, must be based on some principle that does not place the property with the underwriter. A policy of marine insurance is not a document guaranteeing the safe and sound arrival of a venture at destination. It is a contract of indemnity against the results of certain named perils, the indemnity varying as the amount of the loss varies. As the idea of quantity is thus an essential factor in indemnity, one naturally expects the quantities involved in any particular case of indemnity to be those stated in the contract taken in conjunction with those necessary to express the loss for which indemnity is wanted. Therefore it is natural to expect that to determine the indemnity due to the assured 190 MARINE INSURANCE chap. in a contract of marine insurance, one should find it necessary to introduce and combine in some way these four factors : the sound value with the damaged value (to determine the merchant's loss), the valuation in the policy with the proportion of it insured by each separate underwriter or insurance company (to determine the insurer's liability). Damage falling on property carried by sea may show itself in three ways, by (a) Diminution of quantity, (i>) Deterioration in quality, (c) Diminution and deterioration. In goods arrived at destination all three kinds of damage are technically described as particular average or partial loss. But in the common language of business it is usual to employ the name particular average to designate (Ji) and ( 3 C.B. N.S. 16. 2 3 c.B. N.S. 30. * The cases are dealt with here because of their practical effect : in a strictly systematic work they should be reviewed under ' ' total loss." 192 MARINE INSURANCE chap. deterioration at the end of a voyage. To exclude this apparently inevitable loss, and to prevent the occurrence of vexatious petty claims, it has been arranged that all claims falling short of a certain amount or percentage should not attach to the policy covering the goods. This amount or percentage is termed Xh^ franchise. Series. — As ships increased in size, and as some par- ticular commodities began to be carried either in full cargoes or in parcels of considerable value, it was found that although the percentage was small, the amount in cash required to amount to this percentage was considerable. This being found to leave upon the assured a share of the risk greater than seemed to be reasonable, the plan was adopted of breaking up the cargo or parcel into smaller subdivisions, and of stipulating that, if in any one of these the requisite percentage of damage was attained, the underwriter should pay his proper proportion of it. Each of these subdivisions is technically termed a scries. Taking the instance of sugar from Java to Europe, the average terms are that the underwriter pays average if amounting to a franchise of 5 j^er cent on any series of twenty baskets running landing numbers. By " running landing numbers " is meant that the baskets are to be taken in sets of twenty as they come out of the hold and are landed on the quay. Similarly, in cotton the average terms are warranted free of particular average under 3 per cent on each ten bales running landing numbers. The more delicate the goods the higher the franchise is likely to be ; e.g. ginger, gambler, dye-stuffs, like myrabolams, have a franchise of 5 per cent ; and tobacco is frequently insured on such average terms that the underwriter pays only the amount of average exceeding 5 per cent. As to series, it may almost be taken as a rule that the more valuable the goods the smaller the series, the idea evi- dently being that a series should not in value exceed a certain fairly moderate sum (about ^100). Thus when underwriters insure cigars against average the series generally consists of one case ; cotton, ten bales running landing numbers ; silk, each package ; indigo, each package ; tea, ten chests, XII SERIES— AVERAGE " ON THE WHOLE " 193 twenty half-chests, or forty boxes running landing numbers ; sugar, twenty baskets (Java), ten hogsheads, twenty barrels, ten cases, or fifty bags. There is a very full collection of customary average clauses in Lowndes's Law of M. L pp. 241-244. In that list the series is given fully, but not always the franchise. It is interesting to note the difference of average terms on the same article shipped from different ports, and on the outward and inward shipments, as well as on the raw article and manufactured goods. For example, on coffee from Java to Europe the terms are 3 per cent on twenty -five bags ; from Brazil to United States 5 per cent on two hundred and fifty bags ; on sugar shipped outwards from England the series is five casks or twenty bags ; inwards ten hogsheads, twenty barrels, ten cases, fifty bags, or twenty baskets. Average "on the whole." — When provision is made for settling average on series less than the whole quantity insured on the policy, it may happen that the damage is in several series so slight that the franchise is not attained, while in others it is so severe that if it is taken together with what has been rejected as not attaining the franchise, then the franchise necessary to constitute a claim has been reached on the whole parcel or shipment. Take for instance one hundred chests of tea, i.e. ten series of ten chests each, franchise 3 per cent. If one series is damaged to the extent of 10 per cent of its value, one 7 per cent, one 15 per cent, one i\ per cent, and three 2 per cent each, the remaining three series being perfectly sound, the franchise of 3 per cent is evidently attained in only three of the series. But if the percentages of damage are calculated out and added, it will be found that they amount to 4.05 per cent on the whole one hundred chests. It is thus evident that cases can arise in which the strict application of the series would deprive the assured of some of the indemnity he would have received had his insurance been on the same terms of franchise, but without any mention of series. But as the series has been introduced into the contract with the intention of extending the indemnity O T94 MARINE INSURANCE chap. granted to the assured, the clause providing for it is not permitted to work to his detriment (see sup. Principles of Interpretation, p. 136; cf. Hagedom v. W/ntmore, 1816).^ In many average clauses this is definitely expressed by the addition of the words " or on the whole." Formation of Series, — In series which consist of more than one package, case, or bale, it was originally stipulated that the series should be made up of a certain number of packages taken as they were landed on the quay. This stipulation has been pared down to the minimum of import- ance. The damaged packages are either not landed in the order in which they would have come out of the ship if sound, or if so landed they are entered in the landing books all together at the end of the cargo. The result is, as a rule, almost all the seriously damaged packages in a cargo of produce are found entered in the last few pages of the landing books. This procedure practically secures to the assured the recovery of all damage of any moment ; but it is not what was contemplated when the wording was devised. Lowndes (Law M. I. p. 200) speaks of this as a practice prevailing in some ports ; unfortunately it has become so usual that exceptions only rarely present themselves. Tail Series. — When on the formation of the cargo into series it is found that some packages remain over, these, however few in number they be, are taken to constitute what is called a tail series, and average is payable by the underwriter on them if it reaches the stipulated proportion of their insured value (as distinguished from the insured value of a ^^// series). For instance, in shipment of fifty- three bales of cotton, in whatever way the bales are grouped, there must always be five series of ten bales and three bales over. The three odd bales form a tail series, and if damage is found in them exceeding 3 per cent on the value of the three bales, it is recoverable from the underwriter. FrancMse how Applied. — It was observed (p. 188) that ' I Stark 1 157. XII FRANCHISE— ADJUSTMENT OF P. AVERAGE 195 the underwriters in '* Old " Lloyd's understood that the percentages named in the memorandum were always to be deducted from any claim for average made in terms of the memorandum. In all probability the same held true of the franchises mentioned in average policies. But nowadays in England when the franchise is once reached, the whole amount of average including the franchise is paid by the underwriter, unless the contrary is expressed. For instance, if the franchise on any class of goods is 5 per cent, and a shipment of these goods is damaged to the extent of 7 per cent, then it is not 2 per cent (the difference between the damage and the franchise) that is paid, but the full 7 per cent. If it is intended by the underwriter that he shall be liable only for the excess of any definite percentage, that ought to be clearly expressed in the policy. In French policies this difference is expressed with the most scrupulous exactness; "claim for material particular average to be paid in full if the franchise is reached" {remboursement integral, franchise tine fois atteinfe), as distinguished from " franchise always deducted " (franchise toujours dMteife). The distinction can be perfectly well expressed in English : " to pay particular average if amounting to . . . per cent or over" as distinguished from "to pay the excess of . . . per cent particular average." Adjustment of Particular Average. — Suppose that a parcel of goods or produce insured against particular average has arrived damaged by sea water, and that particulars have been obtained of the amount of damage and the series over which it is spread. Suppose it to be a case of such serious damage that the franchise is indubitably attained, how is the amount due by the underwriter to be determined ? As was said above (p. 1 90), in a claim made under a contract of indemnity one naturally expects to find the quantities involved to be the value of the goods when sound, their value in their damaged condition (the difference being the merchant's loss), their valuation in the policy, and the share of that valuation insured by each separate underwriter or insurance company. The first great English case on this subject is Lewis v, 196 MARINE INSURANCE chap. Rucker, 1761.^ It was on a policy covering sugars, valued at ;^30 per hogshead, from the West Indies to Hamburg. When the sound value at destination vi^as compared with the damaged value it was found that the merchant's loss by sea perils amounted to about 17 per cent. Lord Mansfield and his associates on the bench decided that the under- writers must pay 17 per cent of the amount at which the sugars were valued in the policy. Lord Mansfield stated the rule thus : " The underwriter takes the proportion of the difiFerence between sound and damaged at the port of deliver}', and pays that proportion upon the value of the goods specified in the policy." To illustrate the rule he gave the following example : " Suppose sea-damaged goods valued at £'^0 in the policy to arrive at a market where, had they arrived sound, they would have sold for ;^50, but arriving damaged, they only sell for £/\o — here is a deprecia- tion of ^10, or a fifth of their sound value ; the underwriter must pay a fifth of the value in the policy, that is £6." The reason for this procedure is not difficult to understand. The underwriter contracts to give indemnity for losses arising immediately from sea perils, consequently he is to be exempt from all losses arising from fall of market, and is equally to be deprived of all gains arising from rise of market. The valuation given on valued policy and that determined by law in the case of an open policy are both independent of market fluctuation. If the amount claimed from an underwriter in case of goods arriving damaged was simply the difference between the policy valuation and the arrived damaged value, the rise or fall of the market would be an element in the latter item, and so would come into the claim against the underwriter. It would, consequently, be to the underwriter's advantage to have damaged goods arrive in a rising market, and to his disadvantage to have them arrive in a falling market. But he will be rendered independent of rise or fall of market if the measure of his loss is taken to be the proportion which the difference between the sound and damaged arrived values bears to the sound arrived ' 2 Burr. 1167. XII ADJUSTMENT OF PARTICULAR AVERAGE 197 value, and if this proportion is applied to the insured value declared in the policy or to the legally determined value in the case of an open policy.^ It turned out that in this admirable judgment Lord Mansfield assumed one point of importance, namely, that there could be no doubt about the amounts therein described by the words " sound arrived value " and " damaged arrived value." That their meaning was not free from doubt appeared in the case of Johnson v. Sheddon, 1 802,2 long known as the Brimstone case. The policy in this case covered a shipment of brimstone and shumac on board the Caroline, from Sicily to Hamburg. Upon a calculation by Mr. Oliphant, to whom the loss was referred by the parties for adjustment, the loss was found to amount to £76 : 7 : 4 per cent. The matter came before the court, and after decision in first instance, a new trial was moved for, on the ground that the adjuster had made a mistake in his method of calculation, inasmuch as in estimating the loss he had taken for his basis the difference between the net proceeds of the damaged goods and their net sound value, instead of taking the difference between the gross damaged proceeds and the gross sound arrived value. Three points v/ere agreed to by both parties : — (i) The loss to be estimated by the rule laid do\vn in Lewis V. Rucker^ that the underwriter is not to be subjected to the fluctuation of the market. (2) The loss for which the underwriter is liable is that which arises from the deterioration of the commodity by sea damage. (3) The undei-writer is not liable for any loss which may be the consequence of duties or charges to be paid after the arrival of the commodity at the place of destination. The matter came before the Court of King's Bench, and Mr. Justice Lawrence (in what Amould, p. 985, describes as " one of the ablest judgments ever delivered in West- * As a matter of fact damaged goods never have a market value in the same sense that sound goods have, so that the underwriter can never be quite independent of considerations of market. * 2 East 581. ^ 2 Burr. 1167. 198 MARINE INSURANCE chap. minster Hall ") held the true rule of adjustment to be " that the percentage or aliquot part, which the underwriter has to pay of the prime cost or value in the policy, must be ascertained by comparing the gross produce of the sound with the gross produce of the damaged sales." By "gross produce" Mr. Justice Lawrence meant the price including freight, duty, and landing charges. His reason for adopting this price was that he desired to get at the intrinsic value of the goods in their sound and damaged conditions at destination ; for it must be borne in mind that the essence of particular average is that it is a settlement on goods which have reached destination. He said : " When a com- modity has been offered for sale to one who has nothing further to pay than the sum the seller is to receive, it is the quality of the goods which, in forming" a fair and rational judgment, can alone influence him in determining what he shall pay. He has nothing to do with what it may have cost the seller, and the goodness of the thing is the criterion which must regulate the price ; for, being liable to no other charges, he has only to consider its intrinsic value ; and therefore if a sound commodity will go as far again as a damaged commodity by having twice its strength, or by being in any other respect twice as useful, he will give twice the money for the sound that he will for the damaged ; and so in proportion." ^ Freight involved in Particular Average on Goods. — It is evident that in all cases in which the insured value is not below the gross sound arrived value, the assured is, by the principle established in Lewis v. Rucker"^ and Johftson v. Sheddon,^ secured in the payment in full by the underwriter of any particular average sustained by his goods. On the other hand, for any amount by which the gross sound arrived value exceeds the insured value the assured has to bear the loss himself As has been already explained, the gross sound arrived value includes freight, landing charges, ^ By custom of Lloyd's particular average is adjusted on a com- parison of bonded instead of duty-paid prices in claims for damage to lea, tobacco, coffee, wine, and spirits imported into this country. 2 2 Rurr. 1 167. ^ 2 East 581. XII EXPENSES CONNECTED WITH P.A. CLAIMS 199 and duties. But these expenses not being payable by the merchant until after the voyage is closed, are never incurred in case the vessel is totally lost before arrival. The shipper of goods has, therefore, no reason to insure these amounts against total loss of the ship or cargo. It is consequently only against the risk of the vessel's arrival with cargo so damaged as to give rise to a particular average claim that the shipper need insure the freight, landing charges, and duties. This is not a customary insurance in England, so that cases sometimes arise in which the application of Mr. Justice Lawrence's decision is felt by the merchant to involve him in some hardship. But in French policies on goods it is quite usual to find special provision for the insurance of freight payable abroad, warranted free of claim in case of the total loss of the ship ; in return for this warranty the premium is generally made one -half of the rate on the goods. In the case «f goods manufactured for the consumption of one firm and adopted only for their trade, it may be impossible to arrive either by sale or by assessment at a true idea of the damage sustained by them. In such cases the damage is measured by the cost of reconditioning the goods at destination, the claim on the policy being in other respects treated in the same way as if the goods had been sold or the damage assessed. Expenses of proving and adjusting Claim for Particu- lar Average. — In determining whether a claim for particular average attains the franchise or not, no account is taken of an>1:hing but the actual physical damage. The clearness with which this is brought out in the French phrase, avarie particuliere mat^rielle (material particular average), renders that designation superior to our shorter name " particular average." So far, expenses of survey, etc. etc., remain at the charge of the merchant himself. But if it is found that the actual material damage (diminution and deterioration) exceeds the stipulated franchise, there being evidently by that time a liability on the part of the underwriter, then the underwriter allows to the assured the sums spent in survey fees, etc., as being expenses incurred in the claim, which ioo MARINE INSURANCE chap, were essential to the existence of the claim and therefore became part of it. On the same ground the cost of making-up or, as it is teiTned, adjusting the claim, is admitted when the assured employs an adjuster to make it up ; but it is not (as a rule) admitted when the statement is prepared by the assured himself or by a member of his regular office staff. On examination of adjustments of particular average on goods it will be found that these statements are simply applications of the principles explained above. The adjuster first determines from invoices and policy the insured value of the goods whose damage he is dealing with ; then from account-sales or surveys he arrives at the proportion of loss sustained by the damaged goods : if this proportion exceeds the stipulated franchise he applies this proportion to the insured value he has calculated, and to the result he adds the various costs incurred in ascertaining the amount of damage and his own fee for adjustment. It follows from what has already been said respecting costs of surveys, etc., that if there is found to be a claim on only some series of the damaged goods, the proportion of the costs attaching to the goods whose damage does not attain the franchise, falls to the assured's burden not being recoverable by him from his underwriter. Particular Average on Freight. — The most frequent occasion of claim for particular average on freight is the loss of some portion of a cargo by one of the perils insured against in the policy. For instance, take a cargo of sugar carried from Java to New York in return for freight of so much per ton payable when the cargo is delivered at New York. If the vessel meets with some disaster at sea or with bad weather it may happen that a portion, say one- half, of the cargo is lost. In such a case there is evidently a good ground for claiming from the underwriter on freight the half of the amount he has insured. A claim may arise on a policy covering the freight of certain goods without the occurrence of a claim on the policy covering the goods themselves. For it might happen that the goods were insured f.p.a. unless the ship XII PARTICULAR AVERAGE ON FREIGHT 201 be stranded, and the freight on ordinary memorandum terms. In such case, if the vessel did not strand no loss on cargo except total loss could be claimed from the under- writer, while any loss on freight exceeding 3 per cent pro- ceeding from sea perils of ahy kind could be recovered from the underwriter on freight. The ordinary terms on which freight is insured are those laid down in the memorandum, but occasionally freight is insured f.p.a. unless the ship be stranded. This holds specially of freight of salt, and it is easily understood ; if it is not possible to insure the salt except f p.a. (and this holds true of insurance on salt effected on the ordinary form of policy), it is only to be expected that the freight which can be earned only when the salt is delivered in specie cannot be more favourably insured. In the discussion of total loss of freight, it was remarked that mere delay on a voyage will not constitute a claim on an ordinary policy on freight. This holds equally true as regards particular average. The loss must arise from some peri' insured against. It was also noticed that as English law takes no notice of a partial performance of a freight contract, a freight must either be earned in full by the shipowner or not earned at all. There cannot, consequently, be any claim on a freight policy for particular average arising from clos- ing a marine venture short of destination. The nearest approach that can be got to that is a salvage loss ; and such a settlement can only occur when an underwriter on the freight of cargo carried in a foreign ship ^ pays a total loss, the ship failing through perils of the sea to deliver her cargo at destination, and is in consequence substituted in the rights of the foreign shipowner to receive distance freight pro rata itineris peracti. Such a case was decided by the Court of Queen's Bench in the sense indicated, and was confimied by the Court of Appeal (The Canute^ London Assurance w. Williams^ 1893). 2 ' Or on a British ship which has conferred on \\.pro tempore the rights of a foreign vessel as to distance freight. ' 9 Times Law Reports, 96, 257. In this case the vessel was 202 MARINE INSURANCE chap. It is to be observed that when a vessel fails to deliver portion of her cargo, what the shipowner fails to collect is the corresponding proportion of gross freight, i.e. of bill of lading freight. Consequently, if the system applied to cargo is applied to freight, the proper plan of adjusting a claim on freight is to find what proportion of the total gross freight at risk is lost, and to take that proportion of the insured value as the amount payable by the underwriter. The adoption of gross value is as correct for freight as it has been found to be for cargo. For the value of the net freight on a voyage {i.e. the bill of lading freight less expenses of earning) depends on the length of the vessel's passage. Consequently, there would be in adjustments on net values an introduction of the very elements of time 'and detention which have been in other respects excluded from the contract. Besides, it is easy to conceive a case in which by the loss of a comparatively small portion of the cargo the net freight would be reduced to nothing, or even to a minus quantity. It would certainly seem absurd that a total loss could be claimable on any real interest when by far the greater part of the goods on which that interest was based completed the venture in safety. In treating cases of loss of freight and claims on policies covering that interest, there ought to be constant reference to the contract of affreightment. In case of lump sum charters, it may be that freight is payable in full only when the whole cargo is delivered at destination, or that it is payable in full when part is delivered, provided the failure to deliver the rest has arisen from perils excepted in the charter-party. It is therefore possible that, in con- sequence of the terms of the charter, what would under a charter of another form constitute a claim against under- writers on freight on the ordinary policy, would not in the particular case in hand give rise to such a claim. Similar complications may arise in connection with British, but received distance freight in consequence of an agreement that the adjustment of liabiHties between ship and cargo should be made according to the law and usage of Havannah, where the venture was broken up. XII PART. AVERAGE ON CHARTERED FREIGHT 203 freight partially prepaid, resulting in cases such as that of Allisouw Bristol Marine^ 1875-6,^ discussed above (p. 163). Passing from freight at risk to chartered freight, we enter on the consideration of one of the most difficult subjects in marine insurance. This will be better appreciated after examination of two important cases of recent occurrence. In Inman v. Bischoff^ House of Lords, 1882,2 the policy on which action was taken was a policy on chartered freight. The facts of the case were as follows : " On 20th February 1879 the Inman Steamship Company chartered the City of Paris^ to the Admiralty to convey troops to the Cape ; t"he arrangement was to hold for three months certain, commencing i8th February 1879, and was at the Admiralty's option prolongable after the expiry of that period. One month's freight was payable on signature of the charter, and at the end of the second and of every sub- sequent month's service one-half of that month's freight was payable. On 22nd February the Inman Company effected an insurance on freight outstanding, risk commencing 20th February 1879 and expiring 19th May 1879, both days included. On 21st March the vessel struck a rock near the Cape of Good Hope and sustained serious injuries, resulting in her being put out of pay in terms of her charter. On 17th April the vessel was discharged from Her Majesty's service, and it was not till 14th May that she was granted a certificate of efficiency. The Inman Company made a claim on their freight poHcies for the freight between 21st March and 19th May, alleging that perils insured against in the policy prevented them from earning the freight that would have been earned between these dates had the vessel not been put out of pay and dis- charged from Her Majesty's service. The Government time charter stipulated that if the vessel became inefficient the Admiralty could make ' abatement by way of mulct out of the hire or freight.' At the first trial Lord Justice Brett decided in favour of the plaintiffs ; on appeal this decision was reversed, the court being of opinion that none of the perils insured against was the proximate cause of the * I App. Cas. 309. * 6 Q. B. D. 648 ; 7 App. Cas. 670. 204 MARINE INSURANCE chap. loss, although one of them was a cause sine qua non. In the House of Lords both Lord Selbome and Lord Black- burn insisted on the difTerence between a fine or mulct, of the class for which the charter provides, and a loss of freight. As Lord Blackburn put it, ' The question here is not what was the proximate cause of a loss of freight, but whether there was any loss of freight.' The House of Lords decided that there was no loss of freight, con- sequently, that the underwriters on the ordinary policy were exempt from liability. Respecting the risk of fine or mulct Lord Blackburn said, '■ Such a risk might very well be in- sured against, but it would require some special clause.' " It appears that to entitle the assured on a time policy on chartered freight to claim for loss of time resulting from an accident caused by perils of the sea, the loss of time must have been such as to cause a loss of hire during the currency of the policy. In other words, if the vessel can perform the charter without having to stop her work for repairs, consequently without loss of hire, that performance discharges the underwriter, and he is not liable for any subsequent loss of hire which the shipowners suffer while the repairs are being effected. This is the effect of the decision in Hough v. Head, Court of Appeal, 1885.^ The case of the Alps {Mersey Shipping Company v. Thames and Mersey Marine Insurance Company^ Limited, Admiralty, 1893)2 is an interesting pendant to Inman v. Bischoff. The Alps was hired to charterers who paid for her use ^425 per month, payment monthly in advance; the charter-party providing that " in the event of loss of time from collision, stranding, want of repairs, breakdown of machinery, or any cause appertaining to the duties of the owner preventing the working of the vessel for more than twenty-four working hours, the payment of hire shall cease from the hour of the beginning of the detention until the ship be again in an efficient state to resume her service." On 1 8th August 1 891 the ship took fire, and was so damaged that repairs became necessary, which occupied thirteen daya ' 54 LJ. Q.B. 294 ; affirmed 55 L.J. Q.B. 43, C.A. 2 L.R. 1893, f-D. 109. XII PART. AVERAGE ON CHARTERED FREIGHT 205 The hire of the vessel for these thirteen days was repaid to the charterers by the shipowners. The question that came before the court was whether the shipowner was entitled under an ordinary policy on chartered freight to recover from underwriters their proper proportion of the hire. Both sides cited Imnan v. Bischoff, each interpreting that case his own way. Mr. Justice Barnes, after examining the judgments in that case, concluded that "the true view to take of an insurance such as this applied to a very ordinary form of charter-party containing a very ordinary and usual clause, is to cast upon underwriters the risk of loss on freight when that clause is put into operation through the immediate action of the perils insured against." In a more recent case (^Bedouin Steam Navigation Compa7iy v. Bradfoi'd, Court of Appeal, 1893)^ the charter- party contained a clause stipulating that " in the event of a breakdown of engines or machinery " (amongst other things), " and the progress of the steamer is thereby delayed for more than twenty-four running hours, payment of hire shall cease until such time as she is again in an efficient state to resume her voyage." The steamer's thrustshaft parted, and she was towed into St. Vincent, where a new shaft was fitted. The defendant, an underwriter on " freight chartered ^"'/o, as if chartered, on board or not on board," alleged that he was not informed of the existence of such a clause in the charter or of the tenor of this particular clause. In his judgment the Master of the Rolls (Lord Esher), supported by Lords Justices Lopes and Kay, confirmed Mr. Justice Barnes' decision in favour of the assured. The Master of the Rolls said that when the plaintiffs told the defendant that it was to be an assurance on freight payable per month, they told him in effect that it was to be a charter with the twenty-four hours' clause in it, and it could not be held that there was any concealment of material fact.^ * 10 Times L. R. 70. 2 It is striking that the Master ol the Rolls in the Bedouin,, and Mr. Justice Barnes in the Alps, should both have felt themselves forced to adopt trade custom as their guide in their efforts to find a proper connection between charterer, shipowner, and underwriter. 2o6 MARINE INSURANCE chap. Particular Average on Ship. — The consideration of particular average on the third great maritime interest, the ship, is beset with certain difficulties which are peculiar to that interest. It is much more easily grasped than is particular average on freight ; in fact, it is quite as tangible as particular average on goods, but it is far from being so simple. Indeed the examination of the principles and practice of adjustment of particular average on ship shows, perhaps, more clearly than anything else how strongly English law is imbued with respect for custom, or, put the other way, how fully custom has taken up in England the position elsewhere usually granted only to statute. FrancMse : Valuations.^ — -In one respect freight and ship are alike, the conditions of average for both being decided by the memorandum : on both interests there is a franchise of 3 per cent unless the ship be stranded. As has already been explained, it has become usual to add words to the memorandum which render the sinking or burning of the vessel, or her suffering damage from collision with another ship or vessel, equivalent to stranding in ex- tending underwriter's liability for particular average to damage under 3 per cent. In the case of steamships this provision was not found to be sufficiently favourable to the assured. The value of the vessels that now do the most important part of the world's carrying trade far exceeds the value generally prevailing when the memo- randum was originally drawn ; the price of what would then have been considered an enormously costly ship is no more than that of an ordinary " tramp" steamer of to-day. It has consequently become customary to give in the policy separate valuations for the hull of a steamer and for the machinery usually expressed thus : — Hull and materials, masts, spars, sails, boats, etc., and cabin furniture ..... valued at £, Machinery, boilers, and everything connected there- with valued at I and to add to the policy a clause of the following tenor : — XII P.A. ON SHIP : FRANCHISE : VALUATIONS 207 Average recoverable on each valuation as if separately insured, or on the whole, whether the average be particular or general. Leaving aside general average for the present, it is evident that this clause extends considerably the indemnity recoverable by the assured under the name of particular average. It is to be remarked that the addition of the words " or on the whole " expressly grants to the assured indemnity for claims in which the franchise on the whole value is reached, although it may not be attained on one of the valuations. This is exactly parallel to the procedure in cargo claims under average clauses, and is in perfect agree- ment with the principles universally adopted in the inter- pretation of the policy (pp. 136, 194). In the case of the great passenger line steamers the introduction of a second valuation has not been found sufficient, and the number has been increased to three or four. When the great cost of the cabin outfit and furniture of these vessels is borne in mind, it seems not unreasonable that this item should be treated as a separate valuation in their policies. In indemnifying the assured for particular average on ship, the damage suffered is estimated by a method which from its nature is usually inapplicable to other interests. The fixing of the loss which falls on a policy of insurance covering freight is simply a matter of arithmetic : the amount of damage to goods is usually determined either by assess- ment or by sale ; while in the case of ships, the measure of liability for particular average is the cost of such repairs as will put the vessel in the same state of efficiency as she was in before the accident which rendered these repairs necessary. The only parallel to this method is the charging of the cost of reconditioning goods at destination as par- ticular average. There is some reason for this exceptional treatment of ship as contrasted with goods. For goods are exposed to the perils of the sea for only a brief period of their existence, and when the underwriter's connection with them is terminated by their arrival at destination, the indemnity he has to pay is fixed by sale or assessment of the damage : ships, although insured voyage by voyage, 2o8 MARINE INSURANCE chap. or year by year, are intended to remain permanently at work at sea, and constantly exposed to sea perils, and are almost universally insured without interruption from the beginning to the end of their existence, so that it is reason- able that the payment of the cost of repairs should be taken as complete indemnity for the damage suffered by the assured. The repairs of damage of the nature of particular average are confined to what will put the vessel in the same state of efficiency as she was in before the accident which rendered these repairs necessary. There is no reference to any other standard, whether it be the re- quirements of Lloyd's registry or any other classification body. Consequently, when underwriters have a claim put before them in which the repairs are said to be based on the requirements of any registry, they are entitled to go behind the recommendations of the surveyors, and to discover the actual state of the ship prior to the accident. It might happen, it actually has happened, that a casualty necessitating the repair of a ship occurred on the voyage, at the end of which the vessel was due for Lloyd's No. 2 survey. In the ordinary course of that survey she would have to be dry-docked and opened out for examination : it would obviously be unfair that all the expenses of these operations should be charged to the underwriter, a great part if not all of them being incumbent on the shipowner himself, even if his vessel went quite free of accident. This point will be treated more fully below. Putting a vessel in the same state of efficiency as before the occurrence of an accident, does not necessarily mean the exact replacement of everything in and about her in its former position and condition ; it does not mean what is called in fire insurance " reinstatement." The repair will have fiilfiUed all that the assured is entitled to exact if it results in making the ship, to use the words of Lowndes (Law M. I. p. 191), "as strong and durable and as good a carrier ... a ship which shall be as fit either to keep or to sell as she was before." Wear and Tear. — In examining the nature of the losses XII WEAR AND TEAR 209 for which underwriters should be liable under the common form of policy, the conclusion was reached that everything in the way of damage resulting from the essential character, natural quality, or inherent defect of the subject insured should be excluded from the operation of the policy. Now the most inevitable form of inherent defect is the one that is least perceptible in its progress, namely, wear and tear. It is clear that in every structure with which we are acquainted, detriment must be going on steadily without ceasing ; these structures, though intended to last for years, are yet admittedly of only limited durability. This is particularly true of ships, especially of wooden ships ; and if true of the hull and spars, it is evidently much more so of hawsers, cordage, and sails. It is extremely difficult to determine where " wear and tear" ends. The perusal of hundreds of statements of particular average on ships will probably result in making the matter not clearer but rather more difficult. It is probable that in reality a very great proportion of the cases of damage suffered at sea arise neither from sea perils nor other extraordinary casualties alone, nor from wear and tear alone, but from a combination of these ; or from a state of insufficiency resulting not so much from active wear and tear as from the mere effect of time on materials which were originally fully sufficient for their intended purposes. The institution of periodical surveys by the classification registries may be quoted in support of this view ; these surveys are held irrespective of the history of the vessel as regards accidents, and are held at times fixed when the original class certificate is given. As an example the case of chain cables, windlasses, and hawsers may be taken. In olden days every damage or loss of these was put down to simple wear and tear, unless some strain out of the ordinary course had befallen these appliances in consequence of some peril of navigation. When a chain cable is run out with an anchor it is fulfilling the very purpose for which it was furnished. If it does not hold the ship in ordinary weather it has either been in- sufficient from the first, or having once been sufficient, F MARINE INSURANCE has through actual wear and tear, or the mere lapse of time, become insufficient. But the real difficulty is to say how much such a cable should be able to stand in the way of bad weather or unusual strain ; anything below that Standard should be called ordinary, anything above it extraordinary. In the case of cables and anchors a standard approximately of this character has been imposed on English shipowners by the Board of Trade. All vessels have to carry anchors and chain cables tested up to a strain ranging with the size of the ship. It is natural that the shipowner should consider that his fulfilment of the re- quirements of the Board of Trade should pass his cable as manifestly sufficient for all the strain to which it is exposed in ordinary weather. The next conclusion is that whatever weather is followed by the breaking of this cable must be extraordinary, as all usual wear and tear is covered by the Board of Trade's certificate. This is one of the results of positive enactments ; on the whole, they have raised the percentage of safety, but the literal fulfilment of them does not prevent the occasional occurrence of disaster which might perhaps have been avoided had it not been for their existence. With respect to the settlements made by underwriters in cases of this character there can be no doubt that, in the words of Lowndes (Law M. I. p. 183), " this leniency may perhaps ... be carried too far." The same difficulty presents itself in connection with a breakdown of machinery in steamers, especially of screw shafts. A few years ago there was an epidemic of broken shafts. It seemed as if the first flight of compound- engined cargo steamers had about worn out their shafts, or rather had reduced them to such a state of tenuity that weather far short of serious storm found the weakest spot in the shaft and snapped it. No doubt some of the breaks were due to the propellers hitting floating wrecks, while others were immediately attributed to pitching of the ship and consequent racing of the engines. But the question arises, What amount of pitching and racing is to be con- sidered ordinary pitching and racing which a seaworthy shaft ought to be able to withstand? It has often struck XII WEAR AND TEAR 211 those whose duty it is to examine claims for such damage, that the final break often comes on most moderate pro- vocation. It looks in many cases as if some congenital flaw, or some slight rent originating in previous passages, has resulted either in a crack or in such a molecular condition of the metal that what seems only a slight alteration of the stresses applied to the metal is sufficient to complete the break, which is in reality the result of an accumulation of trifling shocks. The absence of what appeared sufficient reason for such breaks of screw shafts, led to the suggestion that the constant revolution of the shafts produces crystalli- sation in the metal, rendering it so brittle that it may snap without any additional strain from without. If this were correct, the cases it would explain would unmistakably be cases of damage due to inherent defect which, equally with wear and tear, is excluded from the liabilities of the under- writer on the ordinary policy, (Cf Lowndes, Law M. I. p. 185, on decay or dry rot in wooden masts, and A. E. Seaton on Mysterious Fractures in Steel at Institute of Naval Architects, March 1896, with Prof Arnold's remarks in discussion ; also Mr. Justice Mathew in The Ashley^ (N. of Ireland S.S. Co. v. London Assurance^ Q.B.D. 8, 9, nth May 1896). Wooden Ships, Caulking and Metalling Clauses. — In repairs of wooden ships there was formerly much difficulty in settling whether damage was due to defective caulking or rot ; and in consequence of this a clause known as the 7netalling clause was drawn to limit the responsibilities of underwriters. The clause ran : — Warranted free of particular average below the load water line, unless caused by grounding or by contact with some substance other than water. This was an attempt to meet a certain class of wear and tear claims, but it is questionable if the clause could in fairness be inserted in a policy on a vessel newly caulked and metalled. Since the introduction of iron and steel for the con- struction of ships this clause has naturally fallen into disuse. In addition to the limitation put to underwriters' liability in cases of wear and tear, there are others which test upon 212 MARINE INSURANCE chap. custom, and are universally respected, although there is no definite mention of them in the policy or in any other expression of the contract of insurance, e.g. — (i) Sails Lost. — Sails split by the wind, or blown away while set, are not charged to underwriters unless the loss be occasioned by the ship's grounding or coming into collision, or in consequence of damage to the spars to which the sails are bent. (2) Rigging Chafed. — Rigging injured by straining or chafing is not charged to underwriters, unless such injury be caused by blows of the sea, grounding, or contact, or by displacement through sea peril of the spars, channels, bulwarks, or rails. These customs analysed will be found to rest on the recognition of two principles : — {a) The underwriter is not to pay for wear and tear. {li) The underwriter is not to pay for loss occurring in the proper and ordinary use of anything in the work for which it was intended. In the case of the first custom it is presumed that any weather damaging the sails without the spars is ordinary weather, and the damage arising from it does not proceed from any extraordinary occurrence. In the second the rigging is presumed to be fulfilling its proper function in bearing the straining and chafing inseparable from any sea voyage, and any injury resulting from that is such as must occur, while " the purpose of the policy is to secure an indemnity against accidents which may happen, not against events which jnust happen (Lord Herschell in the Xaniho, 1887).^ Somewhat similar is — (3) Gear, etc., on Deck. — Damage or loss of water casks or tanks carried on a ship's deck is not paid for by under- writers, nor is that of warps or other articles when improperly carried on deck. This custom is simply an extension to the insurance of ship of the principle recognised in dealing with cargo claims, that to justify a claim on the policy the property • 12 App. Cas. 503. XII PARTICULAR AVERAGE ON SHIP 213 damaged must be in the position on the ship intended for it. When a vessel is in the act of sailing, or of arriving, or preparing for either, it is quite proper to have warps, etc., on deck ready for use : at other times only extraordinary circumstances can justify their being there. The three customs dealt with above form part of the old *' customs of Lloyd's." ^ Among the many points of detail that have to be con- sidered in the settlement of almost every case of particular average on ship, the following are so important as to require special attention : — (i) Collision Liabilities. — The expenses borne by under- writers as particular average on ship being the proper proportion of the cost of the repairs of material damage, and of such outlays as may be incurred to effect these or to restore the ship to her owner's possession, no claim can be made against underwriters on the ship for damage done by her to persons or property. In the case of De Vaux v. Salvador, 1836,2 the owner of a vessel brought an action against his underwriter to recover the amount he had to pay to another vessel in consequence of a collision in the Hooghly. In the Court of King's Bench it was held that he could not recover, for, as Lord Denman expressed it, the "obligation to pay was neither a necessary nor a proximate effect of perils of the sea, but growing out of an arbitrary provision of the law of nations." ^ The result of this ^ Preamble to the ' ' custom of Lloyd's " as issued by Average Adjusters' Association : " Nothing can be called a 'custom of Lloyd's' which is determined by a decision of the superior courts ; for whatever is thus sanctioned rests on a ground surer than custom. A ' custom of Lloyd's, then, must relate to a point on which the law is doubtful, or not yet defined, but as to which for practical convenience it is necessary that there should be some uniform rule. By the term is here understood the customs of English adjusting, whether as affecting general or particular average." 2 4 Ad. and Ell. 124. * In the United States Mr. Justice Story gave a decision to the very opposite effect in Peters v. Warren htsurance Company, but in a later case Mr. Justice Curtis, in the Supreme Court of the United States, took Lord Denman's view of the matter, and Phillips (§§ 1137, 1437) states his opinion that that view seems to be " the better doctrine." 214 MARINE INSURANCE chap. decision was that to cover collision liabilities a separate contract was framed, incorporated in the policy, and known as the collision clause, which will be dealt with subsequently. On the same principle payments forother damage to property done by the ship, and loss of life caused by her, do not form part of the liabilities of the underwriter of an ordinary policy. (2) Wages of Crew and Demurrage during Repairs. — The underwriters of a ship are not charged with the wages or provisions of a crew during the time that she is detained for repair, nor with anything of the nature of demurrage. This holds equally whether the repairs are effected at the close of the voyage or at an intermediate port in the course of the voyage. But in case any members of the crew are after arrival at destination employed to do work which, unless done by them, would require the labour of workmen from outside, the amount of their wages for the time so occupied is allowed. The exclusion of demurrage from par- ticular average on ship, and its inclusion in all claims made against other vessels for damage suffered in collision, form a striking contrast. But the contrast marks strongly the difference between liability under a contract of indemnity against the immediate results of certain named perils and liability under a relation of injury arising from the fault of another person and resulting in his payment of damages. (3) Temporary Repairs. — If it is found to be for the interest of all concerned to effect only temporary repairs of damage, the shipowner is entitled to recover the cost of these repairs from his underwriters as well as the cost of the permanent repairs afterwards. In the same way he is entitled to recover the cost of repairs which have to be done over again in consequence of the work being done badly, or the repairs being effected in a manner which does not leave the ship as fit to sail or to sell as she was before the accident. (4) Cost of Removal for Repairs.— With regard to the cost of removal of a vessel for lepairs there are two possi- bilities to note : — (a) If the place of repair is in the port where the damaged vessel lies, it is customary to allow the expenses XII PARTICULAR AVERAGE ON SHIP 215 of removal to the repairing place, and from that place after repair to what would then have been the vessel's position had the necessity for repair not arisen, namely, her place of loading. {b) If it is desired to remove the vessel from an out- port or a distant or foreign place to her home port or other place to be repaired there, it should be shown that the removal has been done in the interest of underwriters before they are charged with any of the expense ; for it is only where expenses are incurred of necessity to enable the ship to be properly repaired that the underwriters are liable for them. The desire of the shipowner to superintend in person the repairs of his vessel at her home port will not justify his removing her at underwriters' expense, nor will the whole of the expense of removal be properly chargeable to underwriters if it results in the vessel, after repair, being in a better position for future engagements than if the vessel had been repaired at her destination. (5) Dispatch : Overtime. — It frequently occurs that in order to save time, the repair of damage is accomplished with unusual expedition, overtime, nightwork, holiday and Sunday work being resorted to in order to get the repair finished quickly. It may happen that the extra cost thus incurred is less than the charge that would otherwise have been made for longer use of the graving dock or slip, and in that case it is but reasonable that the underwriter should bear the extra cost, as it results in a saving to him. But usually such dispatch is required to enable the vessel to take up some engagement, such as a charter or her turn on the berth in a regular line. As the underwriter is not con- cerned in such engagements, should he be held liable to make good costs incurred solely to enable a vessel to fulfil them ? If he were liable in any sense for loss of time arising from a sea peril there would be some ground for making him pay for dispatch in repairs, but as he is not (without special agreement) liable for loss of time, it seems anomalous to charge him with expenses incurred to avoid such loss. The view adopted by the most recent writers (Lowndes, Law M. I. p. 194 ; M 'Arthur, Contract, p. 233) 2i6 MARINE INSURANCE chai>. is that the shipowner is entitled to recover the extra pay- ment for dispatch, if it is no more than he would reasonably incur if he were not insured. The solution hardly appears satisfactory, for it makes an insurance liability out of an expense in the incurring of which all question of insurance has confessedly been ignored. In addition, its adoption increases or diminishes underwriter's liability for one and the same casualty, according as the ship has engagements for favourable prompt employment or unfavourable distant employment. That is to say, the dispatch is obtained for a reason which has no relation, either proximate or remote, to the material damage chargeable on the policy. It appears that the question has not yet come before the courts. (6) Unrepaired Damage. — If a vessel is damaged and is not repaired, but is later on the same voyage lost, the only claim that can be made on the policy is for total loss. Similarly, if she is only partially repaired and lost later on the same voyage, no claim can be made for the repairs not effected {Livie v. Janson, 1 8 lo).^ But if the loss occurs on a subsequent voyage, the underwriters on the policy for the earlier voyage are liable for the repairs of damage arising on that voyage, those on the policy for the later voyage being liable for the total loss {Lidgeit v. Secretan, i87i).2 (7) Should a shipowner be content to accept some method of repair which will render the vessel as fit for her trade as if she were more completely repaired, but not as valuable for sale, he is entitled to claim from his under- writer an allowance for the depreciation his ship has suffered. For instance, it often happens that a frame or beam is injured in such a way that it must be renewed in its whole length, unless the shipowner agrees to have it " scarphed," a much cheaper operation, but one that leaves the ship of less value in the market. In such a case the shipowner is entitled to claim in addition to the cost of repairs an allowance for the diminution of his ship's value, provided that the sum of these two items does not exceed » 12 East 648. •■' 5 C.P. iQO ; 6 C.P. 616. X!l PARTICULAR AVERAGE ON SHIP 217 the cost of the more complete method of repair. But it has been decided that if the ship is, after the substituted repairs, as valuable for work or sale as she was before the accident, then the indemnity received by the assured is complete, as he cannot recover more than he has lost (^Bristol Steam Navigation Compafiy v. Indemnity Marine Tnstirafice, 1887).! (8) Concurrent Repairs. — When repairs for which underwriters are liable are carried out at the same time as repairs on shipowner's account, certain expenses, such as dock hire, are incurred only once which, unless the repairs were carried on concurrently, would be incurred twice. In the case of the Vancouver^ (^Marine Insurance Company v. China Tratts-Pacijic Steamship Company, 1 886 2) two sets of repairs, shipowners' and underwriters', quite distinct, but both necessary, were going on in graving-dock at the same time. Three days' dock dues were saved by the joint- execution of the repairs, as the shipowners' work alone would have occupied three days, and the underwriters' alone eight days. The Court of Appeal decided that the first three days' hire should be halved, and the next five should fall entirely on the underwriters, and this decision was affirmed in the House of Lords. In the case of the Rtiabon^, 1899,^ the House of Lords decided that when a vessel, docked solely for the repair of damage caused by perils insured against, is at the same time surveyed on the owner's behalf with a view to reclassification, the principle of the Vancouver^ judgment does not apply. The survey was not then necessary, it added nothing to the time spent in dock or the cost of the repairs. Tllirds Deducted. — After determining whether any liability attaches to underwriters in the ordinary form of policy for the repair of certain damage, it becomes necessary to inquire to what extent that liability goes. Up till the time when iron ships were introduced, the invariable practice in England was that unless the vessel was new a deduction of one-third was made from the cost of the repairs, this 1 6 Asp. Mar. L.C. 173. ^ 11 App. Cas. 573. 3 9 Asp. Mar. L.C. 2. 2i8 MARINE INSURANCE CHAP. deduction being called an "allowance of one-third new for old." See the remarks of Mr. Justice Brett in Lohre v. Aitc/nsoft, 1877, 1879.^ If this is examined it will turn out to be merely another application of the principle already discussed above, namely, that the underwriter is not to be liable for wear and tear. The meaning of excepting from this deduction all repairs to new vessels (or, as the clause was sometimes worded, vessels on their first voyage, or vessels within eighteen months after launching) was that it was not supposed that ordinary use of the hull and materials of a new ship for the first voyage, or for less than eighteen months, would deteriorate them to any appreciable extent. The only cases in which the clause is now customary are those of iron ships getting on in years, in which it is usual for underwriters to stipulate that thirds shall be deducted from the repairs of the parts of the ship that are not iron. The clause runs : — In event of claim, no one-third new for old to be deducted from the cost of ironwork repairs of hull, masts, or spars. In cases in which it is agreed that absolutely no thirds shall be deducted this is expressed in a clause like the following : — Average payable on each valuation or on the whole without deduction of thirds, new for old, whether the average be particular or general. Since iron and steel have displaced wood as the material for shipbuilding, the importance of the deduction of thirds is much curtailed by the almost universal adoption in policies of clauses rendering underwriters liable for these thirds,^ but as regards the ship underwriter's liability in respect of general average it is still of effect. In the clause last quoted reference is made to this, so that frequently in statements of average an item occurs, " ship's proportion of thirds deducted in general average." But in the absence of any such clause the practice is based on the custom of I 2Q.B.D. 501; 3Q.B.D. 558. ^ But see Mr. Justice Willes in l.idgett v. Secretan. 1871. XII ADJUSTMENT OF P.A. ON SHIP 219 Lloyd's as amended by the Association of Average Adjusters 1890, 1 89 1, viz. : — The deduction for new work in place of old is fixed by custom at one-third, with the following exceptions : — Anchors are allowed in full. Chain cables are subject to one- sixth only. The rule applies to iron as well as to wooden ships, and to labour as well as material. It does not apply to the expense of straightening bent ironwork, and to the labour of taking out and replacing it. It does not apply to graving-dock expenses and removals, cartages," use of shears, stages, and graving-dock materials. It does not apply to a ship's fijrst voyage.^ Old Materials. — Where damage is repaired by replacing old materials by new the value of the old is credited to the underwriter. This credit is in England entered after the deduction of the third from the cost of the new ; in America before the deduction ; the difference to the underwriter is one-third of the value of the old materials. Incidental Expenses. — As the repairing of a vessel at a port other than her home port involves the shipowner in certain expenses for the superintendence of repairs, these are allowed by underwriters when the cost of repairs is such as to constitute a claim on the policy. If a vessel is repaired at her home port no charge is admitted for the services of a superintendent in the permanent employment of the shipowner. Wherever the repairs are executed no amount is allowed to the shipowner as commission, but bank commission on the amount of the disbursement is paid ; nothing is allowed to him for payments made or services rendered at the port where he resides. The costs of surveys and adjustment are apportioned between owner and underwriter over the interests concerned. Adjustment. — It is evident from the preceding that the task of separating the items of account that should be charged to the merchant and shipowner from those that should fall in whole or in part on the underwriter is one that demands great care and skill. The result of the diffi- culty of drawing up such an account is that it has become necessary to found a profession of specialists who devote ^ But the word voyage is very aiiibiguous ; vide p. 236. MARINE INSURANCE themselves entirely to the adjustment of marine losses. They dissect the accounts item by item, apportioning the amounts (in the case of a particular average on ship) between ship, ship less one-third, and owner. In the end all that is chargeable to the two former heads is apportioned over the insured value of the ship, each underwriter pay- ing the same proportion of the amount that his subscription bears to the insured value of the ship. No account is taken of the actual value of the ship as distinguished from the insured value, ship being treated differently from goods in that respect. Summary of Documents. — For the substantiation of a claim for particular average the following documents are required : — ( 1 ) Protest of master or log-book. (2) Set of bills of lading (cargo claims). (3) Policy or certificate of insurance (endorsed if necessary). (4) Certified statements in detail of actual cash value at destination of goods in damaged state, all charges paid. Certified statements in detail of sound value at des- tination of goods on same day, all charges paid. Or original vouchers of costs of repair of ship, all discounts, rebates, allowances, and returns deducted. (5) In United States, subrogation to underwriters of damaged goods. CHAPTER Xm PARTICULAR CHARGES : SUING AND LABOURING EXPENSES Paxticular Charges. — Expenses incurred in recondition- ing cargo at destination have already been discussed as a form of particular average. Such expenses are sometimes incurred at an intermediate point of the voyage. In the absence of any special contract regarding costs of recon- ditioning, it seems to be equitable that they should be borne by the person who would have been liable for the damage which was prevented or diminished by the reconditioning. Other expenses may be incurred at an intermediate port for the preservation or recovery of the property insured, besides reconditioning expenses ; such are warehouse rent, cost of reshipping, cost of forwarding. In the case of Kidstoti v. Empire Mat hie, 1 866 and 1 867 ^ (see below, p. 223), the jury found that expenses of this character are known as " particular charges," and that they are in their nature entirely distinct from particular average, the latter denoting merely actual damage (diminution ^"'^/o, deterioration), but not expenses incurred in recovering or saving the property.^ As these expenses are not particular average they are not excluded by the memorandum or any other equivalent clause from the liabilities of the under- writer, and for the same reason their incidence is not 1 L.R. I C.P. 535; L.R. 2 C.P. 357. 2 This distinction in English law coiTesponds to the distinction drawn in France between ' ' avarie particuliere maUrielle ' ' and ' ' avaric particuliere enfrais. " 222 MARINE INSURANCE chap. limited by any consideration of franchise. These expenses are also known as " special charges." It has already been noticed (p. 187) that the latest form of the F.P.A. clause contains the words : — Undervrriters, notwithstanding this warranty, to pay for any damage or loss caused by collision with any other ship or craft, and any special charges for warehouse rent, reshipping, or forwarding, for which they would otherwise be liable. The effect of stating nominatim warehouse rent, re- shipping, and forwarding as special charges for which liability is assumed is to exclude from the operation of the clause all other special or particular charges, such as recon- ditioning. Other forms of the clause occur which give a much wider extent to the underwriter's liability, for instance, one which runs — To pay warehousing, forwarding, and other special charges if incurred. Under this a policy warranted F.P.A. would be subject to claim for even such special charges as are incurred to avert damage of the nature of particular average. This form of the clause, therefore, seems to go beyond what was originally the intention of assured and underwriter in the arrangement of the insurance on F.P.A. terms. ^ If particular charges are the direct outcome of a peril insured against they are recoverable from the underwriter. Sue and Labour Clause. — Particular charges are also recoverable on the policy in case they are incurred under the circumstances detailed in the sue and labour c'-iuse (see p. 120), viz. — 1 In Meyers. Ralli, 1876, i C.P.D. 358, in an action on a policy covering a cargo of rye, F. P. A. , it was held that underwriters were liable for the amount of expenses necessarily incurred to avert a total loss on that part of the cargo which, after reconditioning, was capable of being forwarded to destination. In Great India Peninsula Railway Company v. Saunders, i86i, 30 L.J. Q.B. 218, forwarding charges on railway iron, insured F.P.A. , were held not to be recoverable from underwriters as they were not incurred to avert a total loss on the iron. XIII SUE AND LABOUR EXPENSES 223 And in case of any loss or misfortune it shall be lawful to the assured, their factors, servants, and assigns, to sue, labour, and travel for, in, and about the defence, safeguard, and recovery of the said goods and merchandises and ship, etc., or any part thereof, without prejudice to this insurance ; to the charges whereof the said company will contribute in proportion to the sum herein assured. Probably the best way to arrive at a knowledge of the import of the clause is to examine the three leading cases connected Avith it. (i) In Kidstotiv. Empire Marine Insurance Company, 1866 and 1867,^ the action was brought on a policy insuring chartered freight free of particular average, but with the sue and labour clause. The vessel was condemned at an intermediate port, but a ship was found to take the cargo on to destination at an expense less than the original freight. The assured claimed from the underwriters their proportion of the costs incurred in so forwarding the cargo, on the ground that by this forwarding they averted the danger of a total loss on the policy ; they based their claim on the words of the sue and labour clause, and were held to be in the right. The expenses in question were incurred on behalf of one particular interest, freight, to avert what would otherwise have been a loss on the policy insuring that interest, and the steps taken, resulting in the incurring of these expenses, were taken by the assured, their factors, servants, or assigns. It may be remarked that in the wording of this clause in the policy there is an almost unavoidable ambiguity. The words run — For, in, and about the defence, safeguard, and recovery of the said goods and merchandises atid ship, or any part thereo£ This would almost make it appear (and were it not for the words " or any part thereof" it certainly would appear) that the clause was intended to cover only cases in which efforts were made to recover both ship and cargo. But this is not correct, it is not in consonance with the decisions. It must be remembered that the policy was originally 1 L.R. iCP. 535 : L.R. aC.P. 357. 224 MARINE INSURANCE chap. drawn to cover both ship and cargo, the only interests then known to insurance ; the and was originally used in this clause to make the policy include all the interests (goods and merchandise and ship) that may be insured ; it extends the sphere within which the possible obligations of the underwriter may operate, but it is held that in any actual case only one interest need be concerned. It would there- fore be more correct to word the clause — Goods or merchandises or ship or freight or etc., or any part thereof. (2) In Aitchison v. Lohre^ House of Lords, 1879,^ the action was brought on a policy insuring the vessel Crimea. She sustained much damage from sea perils, so that she became leaky, water-logged, helpless, innavigable, and in danger of being totally lost. In this state those on board signalled to the steamer Texas for assistance, and by her the ship was towed into Queenstown without agreement as to re- muneration. The repair or estimate for repair of the material damage to the vessel amounted to over 100 percent. The Court of Queen's Bench held that the payment of 100 per cent absolved the underwriters as far as material damage was concerned, and dismissed a further claim amounting to ^500 (for general average), and one for salvage. The Court of Appeal confirmed the sufficiency of the 100 per cent payment for material damage, and allowed the claims for general average and salvage. The House of Lords affirmed the sufficiency of the 100 per cent payment for material damage, and disallowed the claim made under the sue and labour clause for salvage. The principal judg- ment in the House of Lords was pronounced by Lord Blackburn. He gave as his reason for disagreeing from the Court of Appeal his view that, as regards the insurance of a ship, the sue and labour clause was intended to encourage the personal eflforts of the assured, his servants, etc., for the preservation of the vessel, by providing that underwriters should bear the expense incurred in those 1 4 App. Cas. 755- XIII SUE AND LABOUR — AGENCY, SALVAGE 225 persons' efforts ; that it was not intended to operate, and did not, in fact, operate to provide for the expenses or reward of such other persons as might, for the sake of what recompense the Admiralty Court might eventually give them, perform services to the vessel on their own account and for their own profit. " The owners of the Texas did the labour here, not as agents of the assured, and to be paid by them wages for their labour, but as salvors acting on the maritime law, which, as explained by Eyre, C. J., in Nicholson v. Chapmaii^ I793,^ gives them a claim against the property saved by their exertions, and a lien on it, and that quite irrespective of whether there is an insurance or not, or whether if there be a policy of insurance it contains the suing and labouring clause or not." The length to which this limitation of the effect of the clause has been pushed may be learnt from the decision of Uzielli v. Boston Marine, 1884.2 In this case the plaintiffs were underwriters who had reinsured a risk with the defendants on a policy covering the risk of total loss only, and containing the sue and labour clause. The plaintiffs claimed under the sue and labour clause expenses incurred by their original assured in trying to save a venture, which, however, became a total loss. It was held that on the reinsurance policy there was liability for the total loss, but not for the suing and labouring expenses, because these were incurred by the original assured, who were not the factors, servants, or assigns of the assured in the reinsur- ance policy, i.e. the original underwriters. (3) In Dixon V. IVhiiworth, 1879 and i88o,3 the amount that can be recovered under the sue and labour clause is dealt with. The plaintiff contracted to transport Cleopatra's Needle from Alexandria to London for ^10,000. He insured the obelisk and the vessel in which it was stowed against total loss and the risks covered by the sue and labour clause : he valued vessel and obelisk at ^^4000 in his policies, the sum insured on which amounted to ;!^3ooo. The vessel i 3 H.B. 254. 2 L.R. isQ.B.D. ix. » L.R. 4C.P.D. 371. 226 MARINE INSURANCE CHAP. and obelisk were towed by a steamer which had to cast them off in the Bay of Biscay in consequence of a severe storm. Later they were picked up by another steamer, taken into Ferrol, and ultimately towed to London. The Admiralty Court awarded /2000 for salvage, valuing the Needle and the vessel at ^25,000. Mr. Dixon claimed from his policies under the sue and labour clause ;^i5oo, being the same proportion of ^^2000 that the sum insured, ^^3000, bears to the value named on the policy ^{^4000. In this contention he was supported by Mr. Justice Lindley. The defendant appealed, when it was decided that he was not liable to repay to the assured any part of the ^2000 awarded as salvage ; the ground being that as the salvors were not in the service of the assured there was no Addenda, liability under the sue and labour clause of the policy.^ Summary. — The sue and labour clause is therefore an additional contract, supplernenlary to the total loss and particular average contract between assured and under- writer, referring solely to the separate interest specified in the policy, and dealing with no expenses but those incurred by the factors, servants, or assigns of the person protected by the policy. Of course it is always understood that the expenses are not excessive in amount, and not for work undertaken in a foolhardy or imprudent way. It is evident that the expenses embraced under the sue and labour clause are after all but a very limited class of those that may be incurred to safeguard property. For it might be that the property insured could not be saved except by taking steps to save other property not insured on the same policy. Similarly, it might be impossible to save cargo without ship or ship without cargo. It might be that the only person capable of taking the steps necessary to save all interests (or any) is not the agent of any one assured anywhere, but is a man who is ready to do the work on conditions of hire or share of values saved, or a lump sum paid down. If the assistance thus proffered is accepted, or if the operations are for the common benefit 0/ ' See p. 224 re Aitchison v. Lohre. 1 XIII SUE AND LABOUR CLAUSE — SUMMARY 227 the whole venture, the expenses are no longer recoverable from underwriters under the sue and labour clause, for the expenses are not special, but common to several if not to all interests in the venture ; they are not particular, but general ; they are not the payments of servants or factors, but the recompense of salvors ; they are not suing and labouring expenses, but they are General Average expendi- tures. They will be discussed later under the heading of " General Average." CHAPTER XIV INSURANCES ON TIME : TIME POLICIES Insurances on Time. — The discussions contained in the preceding pages have referred to the nature and obhgations of the contract of marine insurance as embodied in the ordinary form of voyage poHcy on goods and on ship. The only other usual form of policy is the time policy. The system of insuring for a period of time has, on the evidence of the Ordinance of Louis XIV. (Tit. vi., Art. 7), prevailed for at least two centuries. It is worth noting that the ordinance provides for the insurance on time of both ships and cargoes, together or separately {conjointement ou siparemefif). Insurance of Goods on Time. — The insurance of goods on time is of a somewhat different character from the insurances so far discussed. Goods have so far been con- sidered as in transit from one port to another, so that the specification of any particular time during which they are at risk is unnecessary. But it was specially stated above (p. 41) that a voyage insurance on goods at and from one port to another, with leave to call at intermediate ports, does not cover the goods if the ship is used either at loading, calling, or discharging port as a mere storehouse. Take, for instance, vessels kept lying at port of call waiting for orders to proceed to destination. The cause of delay in getting orders is usually the state of the market, and the delay is consequently far more than is required for merely getting the orders for which the ship originally put in. Consequently, unless the cargo-owner desires himself to run CHAP. XIV TIME INSURANCES 229 the risk of loss during this extraordinary delay at port of call, he should specially insure the cargo for the period during which the vessel is thus extraordinarily delayed. The same principle regulates the period for which the cargo is covered at the ports of loading and discharge ; for any period exceeding what is the reasonable time for loading or discharging, according to the custom of the port where the loading or discharge occurs, the assured cannot claim the protection of his voyage policy, and if he does not wish himself to bear the burden of the risk for this period he must effect a special insurance. Open Covers. — There are other forms of time insurance on goods. The one that first occurs is the ordinary open cover. It is a kind of floating contract covering so much per vessel irrespective of the amount which has already been declared by other vessels. Such a document usually runs a year ; or, to use the technical form, the sailings of the vessels declared on the policy are warranted to occur not later than 30th June or 31st December of a named year. In every case with which the writer is acquainted the open cover is a mere document of honour; it is an unstamped undertaking given by the underwriter without receipt of anything of the nature of consideration. In it the underwriter undertakes to issue stamped policies for an amount not exceeding a named sum by every vessel, sailing before a fixed date, of specified class, size, or character in which the assured has interest to insure, the rate of premium being either stated definitely or as " to be agreed." The open cover also usually contains a clause providing for its cancellation by either of the parties on giving notice, ordinarily of one month's duration. This kind of document is nothing but a perpetual cover-note running without break between certain dates. Like a cover-note it is an honour document not enforceable in any court of law, but equally with the cover-note it is an undertaking to issue a stamped enforceable document for a consideration in some way specified. But the stamped enforceable documents are in every respect ordinary voyage policies without any special 230 MARINE INSURANCE chap. significance arising out of their origin in what is really a time contract. Time Policy on Goods.^ — But there are cases in which the contract of insurance on goods is actually embodied in a time policy, such are the insurances on effects of captains and officers of steamers running in regular employments. From the nature of the interest insured it is almost certain that some of the articles (clothing, etc.) insured at the beginning of the period are during the currency of the policy replaced by others of the same kind. So far as the writer is aware no question of the attachment of the policy to these later acquired effects has ever arisen, and it seems hardly likely that the question will ever arise in any case of ^ that a warranty to sail by a named date is fulfilled by the vessel merely starting on her voyage by that date, even though she proceeds only within the limits of her port of loading, provided she is and remains in every point ready and able to proceed further without delay. But if the warranty runs, " to sail from " a named port by a named day, the meaning is (according to Lord Ellenborough in Moirv. Royal Exchafjge Assurance, 1814)3 that she should be out of the named port by that day. Modern Warranties. — The warranties which are most in use nowadays are, in the case of certain voyages, e.g. to or from the Baltic, warranties of date of sailing {e.g. warranted sailing on or before 30th September) ; to San Francisco or the Far East, warranties as to the cargo of the vessel ^ 3 DougL 213. 2 2 Cowp. 601. ' 4 Camp. 84. WARRANTIES 265 [e.g. no coal, scrap iron or steel, or combustible or injurious chemicals ; or, warranted laden under the inspection of the grain or petroleum stowage inspector at port of loading). Again, the warranty may be one of some course not to be taken by the vessel (e.g. warranted not to attempt the pass- age of Torres Straits, briefly " no Torres "). These are the customary sailing ship warranties of the day. For steamers insured on time, provision has to be made by underwriters dealing in one form with all the undesirable voyages that a vessel of the kind may undertake within a year. The following standard of warranty -requirement for ordinary steamers has been adopted by Liverpool underwriters, and formally declared to be the condition on which all their quotations are made in the absence of express understanding to the contrary : — Liverpool Slip Warranties (i) Warranted not to enter or sail from any port in British North America. (2) Warranted not to be in the Baltic or White Sea between 1st October ami 31st March, both days inclusive. (3) Warranted not to sail with over-net register tonnage of grain from any port in North America between 1st October and 31st March, both days inclusive. (4) Warranted not to sail with over-net register tonnage of ore, iron, or phosphate, to or from any port in North America between 1st September and 31st March, both days inclusive. (5) Warranted no east of Singapore (Java, Bangkok, and Saigon excepted). (6) Warranted no Bilbao. (7) Warranted no Straits of Magellan. All these conditions must be literally complied with, and in case of breach the policy becomes void from the moment of breach. To avert what might be the serious conse- quences to an owner of the unauthorised breach of warranty by a master, many shipowners word their devia- tion clause to cover also breach of warranty, t.e. of express warranty. The following form is that adopted in the Institute clauses : — Held covered in case of any breach of warranty as to cargo, trade, locality, or date of sailing, provided notice be given, and any 266 MARINE INSURANCE chap. additional premium required be agreed immediately after receipt of advices. Representations. — In consequence of the strictness with which warranties are interpreted and the severity with which non-compliance is punished, the assured and his representatives are most careful not to give a warranty unless they are positively certain that it will not be in- fringed. This is specially the case when the provisions contained in the warranty refer to matters over which the assured has not himself absolute control. A shipowner may have chartered his ship to people who, he is confident, will not load in her such cargo as dangerous chemicals, but unless he has made provision in the charter-party to that effect it would not be safe for him to accept in his policy a warranty of no dangerous chemicals on board. He may even have arranged informally that there be no load- ing of such cargo, and yet, having made no contract with the charterer to that effect, he finds it impossible (with due regard to the validity of his insurances) to accept the warranty. All he can safely do is to inform his under- writer how the matter stands ; he makes a representation, a less formal and less binding statement, whose incorrectness brings upon him less serious penalties. Penalty for Incorrect Representation. — In the con- tract of marine insurance, as in other contracts of the fullest good faith {uberrimce fidei), the incorrectness or nonfulfil- ment of a representation renders the contract voidable at the option of the other party, even though the subject of the representation does not affect the matter of the con- tract.^ The penalty is thus only slightly less severe than that for breach of warranty. Fulfilment of Representation. — It is in what consti- tutes fulfilment that the main and distinctive difference between warranty and representation lies. For the forrrier one must have absolute and literal compliance, for the latter substantial compliance suffices. The distinction is clearly laid down by Lord Mansfield in De HaJm v. Hartley^ i T.R. 343- XVI REPRESENTATIONS 267 1786,1 "A representation may be equitably and substantially answered, but a warranty must be strictly complied v/ith." This difference in the matter of fulfilment indicates that the transition between warranty and representation is a drop from a higher to a lower level : we have no longer to deal with a condition written on the face of a policy to be carried out literally and absolutely, but with a com- munication conveyed either by word of mouth or by writing not appearing on the face of a policy, but folded, pinned, wafered, or otherwise attached to it, and demanding only substantial fulfilment. Thus, in Pawson v. Watson, 1778,^ a written paper wrapped up with and enclosed in a policy when tendered to the underwriters for signature was held not to be a warranty, but only a representation. Conse- quently the statement it contained, that the ship " mounts twelve guns and twenty men " was held to be fulfilled by her taking an equivalent number of guns and swivels and a crew of men and boys equivalent to the twenty men speci- fied in the representation. There is thus a latitude of interpretation, an admission of equitable fulfilment of the statement which is absolutely foreign to the nature of a warranty. Classes of Representations. — Representations may be of different weight : their importance differs according to the source whence they come. It would evidently not be fair to attribute to a statement made by a cargo-shipper regarding the position of a vessel, or the expected date of her sailing, the same importance as would properly attach to a similar statement made by the shipowner or charterer in whose control the ship was {e.g. Bowden v. Vai/gkan, i8o9).3 Apart from this consideration, it is evident that the mode of expressing a representation may have a great influence in determining the amount of importance due to it. A merchant or broker offering an insurance may be able to make certain statements of fact which he has derived from the best informed sources : he may be able ^ 1 T.R. 343. • 3 Cowp. 785. * 10 East 415. 268 MARINE INSURANCE chai'. to state definitely whether a vessel has sailed or not, or when she sailed or is to sail. Or he may only be able to say that the vessel is expected to sail, or reported to have sailed, or to be about to sail, or that his opinion or some one else's opinion is that she has sailed or will sail about certain named dates. Representations thus fall into three classes : — (a) Representations of fact.' Ta of the assured (principal (d) „ ,, expectation.-! or agent). {^ o( some third party. It is evident that class (d) is of decidedly less weight than class (a), and that of class (d) the subdivision ft is of much slenderer fibre than the subdivision a. It would be ridiculous to deal with a second hand report of some one else's opinion as of equal import to a contract with one's own allegation of fact. Cases have arisen in which the courts have attached no penalty to the nonfulfilment of representa- tions material to the risk, but still merely expressions ol probable expectations, and made /^ond fide {Barber v. Fletcher^ 177^,^ dind Bowden \. Vaug/mti, 1809).^ The important matter to be determined in connection with representation is whether it is material or not ; in other words, whether or not the representation has been of such a character that it can reasonably be considered to have influenced the underwriter to accept the risk, or to accept it at a reduced premium. If so the representation is material. The incorrectness of a material representation constitutes one of the causes which vitiate an insurance, and is known as misrepresentation. The failure to profTer a representation material to a risk submitted to an under- writer constitutes another of the causes which vitiate an ' Sometimes termed positive representations, and subdivided into affirmative, dealing with things as tliey are at the moment the repiesentation is made, ViwA promissory, referring to things as they will be at a later time. But a representation may be of a negative content ; so that, apparently, this class would be better described as absolute, and subdivided into actual {or present) ^wA future. ^ I Dougl. 306. ' 10 East 415. XVI IMPLIED WARRANTIES 269 insurance, and is known as concealment. These two subjects will be treated later (pp. 274-278). II. Implied Warranties. — Having discussed express warranties and representations, both of which classes of statements refer only to the particular policy in which they appear, or respecting which they are made, we now pass to the implied warranties which form the necessary substratum of every English contract of marine insurance. There are three great conditions which English law insists on finding present in every marine venture before it will enforce insurances made : — {a) That the venture insured be carried out without deviation. (b) That the traffic in which the venture is made be not illegal. (f) That the vessel in which the venture is made be sfeaworthy. (a) The subject of deviation having been already dis- cussed in the examination of the text of the policy (pp. 61 to 63) need not be considered again here. {U) Legality of trade. If the trade in which a venture is made is illegal the law does not protect the merchant or shipowner against third parties. It would be inconsistent with this principle if the law were to enforce claims made on underwriters for loss or damage occurring in the course of such trade. In Redmond w. Smith, 1844,^ Chief Justice Tindal said : " A policy on an illegal voyage cannot be enforced, for it would be singular if the original contract being invalid, and therefore incapable to be enforced, a collateral contract founded upon it could be enforced." But as a slight obliquity of vision or a temporary blindness of Justice, "as she is in England," prevents her from regarding as illegal any breach of foreign revenue laws by English subjects, foreign smuggling is not in Enghsh law illegal trading. In PlancJidy. FletcheVy 1779,^ Lord Mansfield said : " At any rate this was no fraud in this country. One nation does not take notice of the • 7 M. & Gr. 457. ' I Dougl. 251. 270 MARINE INSURANCE chap. revenue laws of another," Similarly, blockade running is not illegal in this country so long as the United Kingdom is a neutral ; and ventures engaged in such traffic in these circumstances can be insured here with perfect legality. (Ex parte Chevasse in re Glazebrooke, 1865, before Lord Westbury).! The same holds of carrying contraband of war.2 Under the Laws of War, vessels and cargoes attempt- ing to run blockade or contraband of war being conveyed to alien enemies are liable to confiscation, but insurance to cover these eventualities is quite legal. On the other hand, so soon as the United Kingdom is at war every traffic with the enemy is illegal, and consequently no insurance of any venture connected with such traffic is enforceable at law. It is clear that this provision proceeds entirely from considerations of public pohcy, as it does not refer to any particular trade or to contraband. Similar considerations have led to the regulation that insurances of enemy's property against capture by British ships are not recoverable {Furtado v. Rogers, 1802).^ {c) Seaworthiness. As was mentioned above (pp. 46, 47), this condition is slightly indicated in the customary forms of charter-party and policy of insurance by the use of the quaint phrase, " the good ship or vessel." What is meant by the warranty of seaworthiness of a vessel in connection with any marine venture in which she is engaged, is that in case of an insurance by voyage the assured guarantees that, for the voyage named in the policy — i 34 L.J. (Bkpcy) 17. '^ "At no time has opinion been unanimous as to what articles ought .to be ranked as being of this nature, and no distinct and binding usage has hitherto been formed, except with regard to a very restricted class" (Hall, International Law, 4th edition, 1895, p. 665). Parsons has been cited as giving in his work on Maritime Law the following definition of contraband trade as in his judgment settled by the practice of maritime nations, viz. , ' ' Trade with a belligerent intended to provide him with military supplies, equipments, instru- ments, or arms. Goods are contraband which are in fact munitions of war, or certainly may become so, or which are designed or capable of being used for the support or assistance of an enemy in carrying on war offensively or defensively." 8 3 B. & P. 191. XVI SEAWORTHINESS 271 (i) The vessel's fabric is fit as far as a vessel of the kind can be, (2) Her gear is sufficient in quantity and quahty, (3) She is competently commanded and officered and fully manned, (4) She is properly provisioned, (5) She is not overloaded, (6) If a steamer, she is adequately supplied with coal. Addenda. As all these requirements are stated in strict connection with a named voyage, it is evident that there is no absolute standard of seaworthiness. A steamer may be adequate to a voyage to the Far East which would not be fit to face the North Atlantic in winter; a sailer may be equal to work in the Mediterranean, but short of the standard required for the Baltic or North Sea trade. This has long been recognised by the English courts, so much so that in the case of Thompson v. Hopper^ 1856,1 it was laid down by Addenda Mr. Justice Willes, that in the case of river steamers sold from Lyons to owners on the Danube these vessels in descending the Rhone must be seaworthy for the Rhone, and from Marseilles to Galatz they must be ready for the sea. Put generally, that is to say, that where a voyage consists of various parts of different degrees of peril, the warranty of seaworthiness will have been fulfilled if at the commencement of each new degree of peril the vessel is made adequate thereto. For example, in a combined risk on dock, river, lake, and ocean, it will be sufficient if at the commencement of each successive stage of the voyage the vessel is in such condition, in all the respects above named, as renders her adequate for the stage then commencing. If the vessel at the commencement of any one stage be unseaworthy for that stage the policy is thereafter void, and no loss thereafter can be recovered, even though the defect may have been remedied before loss, and the loss may not have proceeded from it {Quebec Marifte Insurance Company V. Cotnmercial Bank 0/ Canada, 1870, quoted in M'Arthur's Contract of M. I. p. 1 7).- The implied warranty 1 26 L.J. (Q.B.) 18 ; 6 E. & B. 172. 937. 2 L.R. 3P.C. 234. 273 MARINE INSURANCE chap of seaworthiness having been broken, the insurance is void ab initio. Seaworthiness as respects Time Policies. — The only poHcies not subject to the warranty of seaworthiness are time policies {Gibson v. Small, House of Lords, 1854).^ The reason alleged for this unique exception is that there is nothing to prevent a time policy lapsing and a new one beginning^ when the vessel is at sea, beyond the know- ledge and control of her owner or manager as respects seaworthiness : that consequently insistence on the warranty in such a case might become inequitable. No doubt there is much to be said in favour of this contention, but it appears almost equally inequitable that after a vessel has returned to the control of her owner or manager, or of those who are in other respects acting as his agents in her management, the underwriter should still remain deprived of the protection which he would enjoy if the vessel were insured voyage by voyage. In view of this a clause has been drawn which seems to protect both parties to the insurance equitably : — This policy shall be subject to the same warranties of seaworthi- ness as if the vessel were insured separately for each voyage. By this the owTier of a vessel which has commenced in seaworthy condition the voyage on which his old policy lapses and the new one begins, is effectually protected to the end of that voyage, and the underwriter is assured of the proper information and control of the owner or manager at the close of that voyage. Causes vitiating Insurance. — From what precedes it is evident that as the three essentials of a valid insurance are : — ( I ) Completion of the vessel's passage {iter navis),^ in the voyage insured {viaggium^), i.e. the prescribed customary course of navigation, ^ 4 H.L. Cas. 353. 2 Not "attaching," for that implies seaworthiness, the matter in uncertainty. " See p. 37. XVI VITIATION OF INSURANCE 273 (2) Legality of the traffic in which the voyage is made for the venture concerned, (3) Seaworthiness of the carrying vessel ; then three of the causes which vitiate a policy must be : — (i) Deviation, (2) Illegality of trade. (3) Unseaworthiness of the vessel. (i) With regard to deviation (pp. 61-63) there is not usually much difficulty nowadays in making sure of the facts. It is certainly much easier to trace the movements of a vessel than it was thirty years ago. (2) Illegality of trade is also a matter more easily dealt with than in the time of the last sea wars in which England was involved. Thanks to regular postal communication and the development of submarine and overland telegraphs, the news of political complication is now so quickly diffijsed that there cannot now be that doubt of the intentions of an owner on any venture that may occasionally have arisen before these facilities existed. (3) Unseaworthiness, however, has certainly become more difficult to establish, and probably this difficulty will increase from year to year. The burden of proof lies on the underwriter ; the presumption of English law is that every vessel is held to be seaworthy until the contrary is proved. 1 The difficulty involved will become apparent if one considers the alteration in the position of the shipping trade, and consequently of the shipowner, in the last hundred years. At the commencement of that period there was no fixed minimum requirement of strength of materials or of equipment determined by Government officials, and classi- ^ But in some cases {e.£: vessel foundering shortly after sailing without any apparent cause sufficient to account for it) where the fair presumption from the facts is that the disaster arose from causes exist- ing at the time of sailing, it falls upon the assured to rebut the inference of unseaworthiness, i.e. he has to assume the burden of establishing seaworthiness. See Parsons, i. 379 ; Maclachlan's Arnould, 6th ed. , ii. 678, citing Davison v. Burnand, 1868, L. R. 4 C. P. 117. The great leading case on seaworthiness is Mills v. Roebuck, Exchequer, 1769 ; Park, p. 335 : see also Eden v. Parkinson and Munro v. Vandam (both apud Park, p. 333). 274 MARINE INSURANCE chap. fying registries were still in their infancy. Consequently seaworthiness had then to be determined by the best information obtainable as to the requirements of a vessel for the one particular voyage in view. But all that has been altered in consequence of the supervision now exercised by the Board of Trade, and of the requirements of the registries as to the vessels classed by them. In fact the standard of minimum requirements of material, workmanship, and equipment having been fixed for the shipowner by recognised authorities whom he is either absolutely or practically compelled to obey or to follow, it has become a matter of extreme difficulty in any but the most extraordinary and flagrant cases to make good any allegation or suspicion of unseaworthiness. The same holds good of the arrangements made by the Board of Trade for the command and officering of ships ; as regards sufficiency of crew the recent appointment of a Departmental Committee of the Board to investigate the question of manning, indicates a tendency to regard that matter as one that may in time fall within the Board's administration. Breach of express warranty is also a caluse which vitiates an insurance, unless, as was already remarked, provision is made in the policy to cover the vessel, in case such breach occurs, at a premium either stipulated in the policy or stated to be left for future arrangement. There still remain representations to be dealt with as affecting the validity of a policy. What if the person offering the risk makes an incorrect statement, a false representation ? What if he or the undervvriter abstains from conveying information in his possession, the absence of which makes an appreciable difference in the nature of the risk offered ? In other words, what if he makes a misrepresentation or a concealment of material facts or intentions ? To take these two subjects in their order : — (i) Misrepresentation is defined by Phillips, § 529, as "a false representation of a material fact, by one of the parties to the other, tending directly to induce the other to enter into the contract, or to do so on terms less favourable to himself, when he otherwise might not do so, or might XVI MISREPRESENTATION 275 demand terms more favourable to himself." This definition is almost the exact obverse of the words used above (p. 268) in trying to form a test to discover whether a representation is material or not. This would almost lead to the con- clusion that all misrepresentation is material. In the discussion of this subject, Lowndes (Law M. I. p. 85), after approving Arnould's view (p. 551) that misrepresenta- tion fraudulently made should vitiate a policy even though it be not material, goes on most admirably to say : " It may be doubted whether such a case ever arises in practice, for who would attempt to deceive by stating something not material to the risk ? What is intended is, perhaps, merely this, that if a fraudulent design can be proved, the materiality of the misstatement need not be discussed." In law, whether a particular representation be material or not is in each case a question of fact. The subject of misrepresentation has been discussed at great length and with great learning by many writers : by none more exhaustively and learnedly than Judge Duer in his Lecture on the Law of Represe7itatiofis (New York, 1844), afterwards incorporated in his monumental work on Marhie Insurance (2 vols.. New York, 1845-6). The difficulty felt by the lawyers has been to decide whether the effect of misrepresentation should be stated as pro- ceeding from the presence of fraud in the statement made, or from something in the nature of the contract of insurance which is subverted or violated by the mere misrepresenting of any matter connected with it. This is hardly the place to attempt any examination of this difficult point of legal theory. But it is of importance to see how the mattei looks in practice. When a merchant, shipowner, or brokei offers a risk for insurance, his object, shown by the very fact of his making the offer, is to transfer from himself to the underwriter, in return for a premium to be paid and received, the risk in question. In making the offer he gives certain details, which may be classed under three categories — the unfavourable, the customary, the favourable. The unfavourable, as will be found in the next paragraph, he is bound to disclose ; the customary he is entitled 276 MARINE INSURANCE chap to pass over, as the underwriter is considered bound to know them ; only the favourable remain. An underwriter is therefore entitled to assume that a would-be assured tells him the unfavourable facts because he dare not conceal them without imperilling his insurance, passes over the customary because he need not detail them, and expounds the favourable because he desires to do so. If that is true of the information volunteered by the intending assured, it is doubly true of the content of replies made by him to questions put by the underwriter. The mere fact that questions are put on any special point must indicate that that point is one which the underwriter, rightly or wrongly, considers of some importance in regard to the risk." The questions may appear frivolous, so might the conclusions drawn by the underwriter appear if he were confident enough or careless enough to express them. Indeed from one single representation made in identical terms to two underwriters they may form entirely different opinions regarding a risk. P>ut to each of them the representation may have been of actual weight in inducing him to arrive at his particular conclusion. It seems, therefore, enough for general practical purposes to say that (so long as it is borne in mind that a representation is fulfilled by substantial compliance) misrepresentation occurs in any information volunteered or given in reply to inquiry, whenever any statement made is not substantially correct, provided it might fairly be held to affect an underwriter's opinion of a risk or of the proper premium for it. A man is entitled to say he has no information if he really has none : it will then be open to the other side to ask him to get the information required ; but a man is not entitled to invent information if he has it not, or to colour, improve, or adorn what he has. He may, however, before conclusion of the insurance withdraw or correct any representation he has made. (2) Concealment. The intending assured is fully en- titled to say he has no information if he really has none ; but the case is altered if he has it and is not willing to communicate it voluntarily or in reply to the underwriter's XVI CONCEALMENT 277 questions. What then? He is not permitted to "disre- member," he is not entitled to remember to forget any material fact, he is under the necessity of disclosing it. But in this prohibition of suppression of material facts the obligation is mutual ; it is as binding on the underwriter as on the assured. There must be no concealment or nondisclosure of any material fact lying exclusively within the knowledge of either party.'^ The penalty for such concealment is, that the contract is thereby made voidable within reasonable time at the option of the party against whom the concealment was made {Morrison v. Universal Marine, 1872-3). 2 The mutuality of the obligation to disclose was most weightily laid down by Lord Mansfield in Carter V. Boehtn, 1776.^ Good faith is the foundation on which he built up that judgment : he stated a long list of things which the intending assured need not communicate, — " what the underwriter knows, what way soever he came by that knowledge ; or what he ought to know ; or takes upon himself the knowledge of; or waives being informed of, or what lessens the risk agreed and understood to be run. . . . The rule is adapted to facts which are privately known to one party and which the other is ignorant of, or has no reason to suspect." The same difficulty arises over the materiality or immateriality of a concealment which was found to prevail with respect to representation. In law, the question whether any one undisclosed circumstance be material or not is in each case a matter of fact. But there is this special point of difference between misrepresentation and concealment : misrepresentation, being conveyed in an actual statement, may be of various shades, tints, or grades of in- tensity as well as of various degrees of blame ; concealment being merely negative, a simple failure to infoiTn, is of only one degree of intensity, though it may be of various degrees of blame. Consequently it is much easier to conceive the misrepresentation of an immaterial fact than its concealment. 1 The parties to the insuiance must be ad idem. Mathew, J. In Laingv. Union Marine, 11 Times L. R. 359. Addenda '^ L. R. 8 Ex. 40. 3 2 Burr. 1905. 278 MARINE INSURANCE chap, xvi There is an interesting pair of cases arising out of one risk respecting concealment as it aftects insurances done through brokers, Blackburn v. Vigors^ 1887/ and Black- burn V. Haslajn, 1888.2 In the former the plaintiff instructed an insurance broker to effect on his account a reinsurance on an overdue ship. Wliilst the broker was trying to place the risk he came across information tending to show that the vessel was wrecked. He did not communicate this mformation to his principal, but merely returned the order, saying he could not complete it. The plaintiff thereupon gave the order to another broker, who succeeded in placing the risk with the defendant Vigors, neither the principal nor the second broker being aware of the information which had come within the knowledge of the first broker. Mr. Justice Day held that the plaintiff was entitled to recover, there being no concealment on the part of the plaintiff, the knowledge of the' first broker not having become the knowledge of the plaintiff, nor of the second broker. The Court of Appeal reversed this judgment, but the House of Lords restored it. In the second case {Blackoum v. Haslavi)^ where the policy was effected by the first broker after the unfavourable news had come into his possession, it was held in Queen's Bench that his concealment vitiated the policy. There was no appeal. The comparison of the i:ases is instructive ; the difference of the knowledge of the two brokers was decisive as regarded the validity of the Addenda, policies they effected. Summary. — The results of the preceding discussion may be put briefly thus : misrepresentation and concealment can never occur when a statement is made of what is substantially the truth, and the whole truth, respecting the risk under submission, an obligation which in the case of concealment is incumbent on the undenvriter as well as on the intending assured. From this it is evident that in a genuine valid insurance neither party is permitted to forget the cardinal requirement of perfect, unbroken good faith (uberrima fides.") 1 L.R. 12 App. Cas. 531. 2 21 Q.B.D. 144. 3 21 Q.B.D. 144. CHAPTER XVII GENERAL AVERAGE At the close of the discussion of the expenses dealt with under the Sue and Labour Clause (p. 126) it became necessary to distinguish and separate them from certain other classes of expenditure which were designated General Average Expenditures. The opportunity will now be taken to consider not only these expenditures, but also the nature of General Average and the forms it may assume. Early Sea Law. — It must first of all be noted that one of the earliest remnants of ancient maritime law preserved to us deals with jettison made for the sake of saving ship and cargo, and with the way in which loss arising out of such jettison was to be treated both as to its final incidence and to its apportionment. In the Sententise of Paulus, written about A.D. 200, the following passage occurs (Book ii. Tit. 7): — On the Rhodian law : (1) When jettison of goods takes place for the purpose of lightening a ship, let that which has been jettisoned on behalf of all be restored by the contribution of all. (2) If a ship or mast be lost by the force of a tempest, the shippers are not held to contribution, unless the ship was saved by their tearing out the mast for safety sake. (3) If after lightening by jettison a ship perishes and the goods of some are hauled out by divers, it is decided that account is to be taken of him who jettisoned goods while the ship was safe. (4) It is proper that goods discharged into boats for the sake of lightening the ship, and in consequence lost, be made good by the contribution of the goods saved in the ship, but if the ship is lost no account is taken of the boat saved with goods. (5) A collection of the contribution for jettison shall be made when the ship is saved. 28o MARINE INSURANCE In the Digest of Justinian, Book xiv. Tit. 2, headed " On the Rhodian Law respecting Jettison," issued about a.d. 530, the words of Paulas are found put thus (f. i) : — By the Rhodian law it is provided that when a jettison of goods takes place for the purpose of lightening a ship, that which has been jettisoned on behalf of all is restored by the contribution of all. In the same title at f. 9 an extract is given from Volucius Maecianus, who flourished about A.D. 1 50 : — The petition of Eudaimon of Nicomedia to the Eniperor Antonine : Lord l^mperor Antonine, having made shipwreck in Italy, we were pillaged by the customs- farmers inhabiting the Cyclades Islands. Antonine replied to Eudaimon, " I indeed am lord of the world, but the law [is lord] of the sea. Let this be settled by the Rhodian law (which has been devised for nautical matters) in so far as it is not opposed to our laws. Such also was the judgment of the late [Emperor] Augustus." Earlier references in Roman literature acquaint us with the commercial fame of the Rhodians, and a compilation of sea laws exists which was known as the Maritime Law of the Rhodians. The best authorities consider that this com pilation is not genuine in the sense of being the Rhodian law which is referred to in the Digest.^ It is striking that the first extract from the Digest given above is word for word what appears in Paulus prefixed by the reference to Rhodian law. It would almost appear as if Paulus had taken his wording from an actual Rhodian statute, the existence of which was known to the compilers of the Digest. Certainly the first paragraph of Paulus is of entirely different grammatical construction from the following four. Had the writer desired to convey that all five paragraphs came from the Rhodian law he could easily have done so. Besides, the phraseology of the Digest seems to indicate that (i) Paulus took his wording from what the compilers of the Digest believed or knew to be some Rhodian statute, and that (2) the Rhodians had a statutor)' or a customary law dealing with maritime affairs of all kinds. Otherwise there would be no point in giving the title its very definite ^ See Robert D. Benedict, W/iai do we know of the Rhodian Mari- time Z-aw ? (Brooklyn Institute Lecture, 25th Feb. 1897). xvii G. A. AN AFFREIGHTMENT LIABILITY 281 heading, and in relating the petition of Eudaimon which had nothing to do with jettison. It is, of course, quite possible that the name Rhodian Law was also applied to what was not so much the statu- tory law of Rhodes as the customary law of the Levant, in any case, the provision regarding jettison quoted above has been cited as " the Rhodian Law " from the days ol the Digest until the date of decisions given in the English courts within the last decade. ^ The practice sanctioned in the Digest with regard to losses by jettison has been extended to other losses. Even in Roman law it was applied to many sacrifices of somewhat similar nature, and it has later been developed into a principle according to which all extraordinary sacrifices and expenditures made or incurred voluntarily in order to avert from the whole venture some threatening peril, are divided -pro rata over the whole of the items composing the venture. It is this involution of the whole venture in the payment for the loss or damage that is indicated by the word general, or common, or gross, in the phrase general average, common average, or gross average {avarie grosse, gfosse havarei), which is the name used in modem commerce to denote loss arising from volun- tary jettison and other similar casualties. General Average not primarily an Insurance Liability. — It is clear, from the preceding, that the thing called general average is not in any way dependent on insurance for its existence : there is a liability of cargo-owner and shipowner to one another for general average quite inde- pendent of any contract of either with third parties, such as the contract of insurance is. In other words, general average properly and originally forms part of the obligations that arise out of the contract of afrreightment,^ and is only secondarily connected with insurance. The late Mr. 1 E.g. Brett, L. J., in Burton v. English, 1883 ; Watson, L., in Strang V. Scott, 1882; Blackburn, L. , in Aitchison v. Lohre, 1879. 2 But in Pirie v. Middle Dock Company, 1881, 4 Asp. 390, Watkin Williams, J., said : "This right and its correlative obligation are not founded upon any contract, nor do they arise out of any relation created by contract between the parties : they spring from a rule o( 282 MARINE INSURANCE chap. Richard Lowndes, a past-master in all matters connected with this subject, remarked in the preface to the second edition of his classical work, TJie Law of General Average^ 1874, that the subject of general average can never be as well understood as when it is studied apart from insurance, "with which it is only accidentally associated, and as an outlying branch of the law of affreightment to which it naturally belongs." If this distinction be clearly borne in mind, it will help to remove difficulties arising out of what may be described as a crossing or conflict of the various interests of the assured who may find himself involved in a disaster of the nature of general average. Different senses of words " General Average." — It is worth remarking at the outset that, as a cause, result, or accompaniment of this conflict, we have a diversity of senses in which the phrase " general average " is employed. Sometimes it is used to denote the loss to be borne in common by all the interests concerned ; sometimes to denote the contribution to be paid by each separate party concerned (each one in the proper proportion of his interest) towards making good that loss. Meaning of "Average." — The word "average" did not appear in the ordinary Lloyd's policy until the addition of the memorandum in 1749, in which the words "free of average, unless general . . . free of average under ^5 per cent . . . under ^^3 per cent unless general " occur. From this wording it appears that, by 1749, two kinds of average had been distinguished, average on \X\& particular goods insured and general average. Etymology of "Average." — The etymologists have not succeeded in throwing much light on the proper meaning of the word. It is striking that no language except English has preserved the termination occurring in the mediaeval Latin averagium^ which Ducange explains as signifying loss in transit, such as leakage ; the French, Italian, Spanish (and in fact all the Romance languages), have taken their law applicable to all persons who chance to have interests on board of a ship at sea exposed to some common danger : threatening the whole. ... It is a law founded upon justice, public policy, and convenience." xvii GENERAL AVERAGE — ETYMOLOGY 283 form from the simpler mediaeval Latin word haveria^ havaria, or averia, which, however, usually means property, especially horses or cattle. It is so difficult to find a transition from this signification to that of loss or damage, that an attempt has been made to trace the Romance forms from an Arabic original arvdr, meaning defect. The matter is further complicated by the discovery in mediaeval legal English of the word aver, equivalent to live cattle. Latinised into averium, a word used in mediaeval English law to denote the best live beast due to the feudal lord on the death of a tenant, a tax or impost. From this original was formed the word average, signifying the rendering of a service or the payment of a tax or contribution. As taxes or imposts are usually levied in some proportion to the means of the contributor, the word average came to acquire its specially Enghsh sense of "proportional" or "mean" (as in the phrases average cost, above the average, below the average, etc.). Average in Fire Insurance. — What is in fire insurance termed the principle of average is simply that, in case the value of any insured goods exceeds the amount insured, the assured shall bear that proportion of any fire loss suffered by the goods which the excess of the value above the amount insured bears to the whole value : the assured is thus in effect his own insurer for part of the value. " Avarie" in French Law. — There can be little doubt that as far as mart?ie insurance is concerned the word average was suggested by or adopted from the French avarie. The Ordonnance de la Marine of Louis XIV. treats of averages in its seventh title : — Art. I. — Every extraordinary expenditure made for ships and goods conjointly or separately, and all damage affecting them from their loading and departure until their return and discharge, shall be reputed averages. Art. 2. — The extraordinary expenses for the ship alone, or for the goods alone, and the damage affecting them in particular, are simple and particular averages ; and the extraordinary expenditures made, and the damage suffered for the benefit and common safety of the goods and of the vessel, are gross and common averages. General Average in English Law. — The idea of general average once being introduced into England, its 284 MARINE INSURANCE chap. developments here can best be traced in the reports of the cases decided by the courts, whether these cases refer to the contract of affre'ghtnient — involving shipowner and cargo-owner, or to the contract of insurance — involving assured and underwriter. BiRKLEV V. Presgkave, 1801.1 — The sh'x'^Argo, when entering Sunderland, her port of discharge, was caught by a squall of such violence that it was found necessary to let go the anchor. To secure the ship she was fastened by a warp to the south pier ; but this warp parted. More cable was paid out, and the vessel was let drift alongside the north pier, to which she was fastened with hawsers and tow-lines, such as are generally used for mooring a ship. The captain was afraid that the Argo would be fallen on by another vessel drifting down on her ; he therefore cut the cable and moored his ship to the pier with the cable. When he was doing this the other ropes broke, partly from the violence of the storm and partly from another vessel drifting down on the Argo. The shipowner claimed as general average the value of the hawsers and towing-lines as well as the value of the cable cut. The claim was disputed, and formed the subject of the leading case, Birkley V. Presgrave, 1801.^ At the trial the claim for the hawser and towing-lines was withdrawn ; it was admitted that as they had been used merely for the purposes for which they were provided, their value was not properly claimable in general average. But the value of the cable was claimed on the ground that it had been " appropriated to a different use from what it was originally intended for, and which contributed to the preservation of ship and cargo." It was in the course of this case that Mr. Justice Lawrence gave the following famous definition of general average : ♦' All loss which arises in consequence of extraordinary sacrifices made, or expenses incurred, for the preservation of the ship and cargo comes within general average, and must be borne proportionally by all who are interested " In the judgment of Lord Chief Justice Kenyon in the same case we find the following : *' All ordinary losses and ' I East 220. XVII G.A. SACRIFICES — BIRKLEY z*. PRESGRAVE 285 damages sustained by the ship happening immediately from the storm or perils of the sea must be borne by the ship- owner. But all these articles which were made use of by the master and crew upon the particular emergency, and out of the usual course^ for the benefit of the whole concern, and the other expenses incurred, must be paid proportionally by the defendant as general average." From these judg- ments we conclude that a sacrifice to be properly claimable according to English law as general average must be (i) voluntary, (2) extraordinary, (3) intended for the common safety of ship and cargo, and (4) incurred in an emergency. ^ It must not be a loss (i) inevitable, (2) of things employed in the purpose for which they were intended, or (3) employed or sacrificed for the safety of any separate interest or interests. Tested by this criterion, it will be found that the value of a mast cut away 2 after it is in a state of wreck is not claimable ; nor is that of hawsers parted when trying to hold a ship at her moorings or alongside a quay ; nor is that of materials used to repair ship or cargo after damage at sea, or of anything sacrificed unnecessarily or without pressure of circumstances. Baily (General Average, p. 1 9) adds to these another test, namely, that the act must be judicious. " No act," he says, " can be a general average act unless it is a justifiable act, and no act can be justifiable unless it is judicious ; whence we arrive at the conclusion that a general average act must ^ In Pirie v. Middle Dock Company, 1881, 4 Asp. 388, Mr. Justice Watkin Williams names five essentials — 1. There must be a common danger. 2. There must be necessity for the sacrifice. 3. The sacrifice must be voluntary. 4. There must be a real sacrifice, and not a mere destruction or casting off of that which had become already lost, and con- sequently of no value. 5. There must be a saving of the imperilled property through the sacrifice. ' Who must order the sacrifice to render it valid as general average sacrifice? In Ralli v. Tivop (Sup. Court of U.S., N. York, Mass. Register, 24th April 1895) it was held that the action of the municipal authorities of Calcutta in scuttling the /. W. Parker, jute-laden, on fire, was not a voluntary sacrifice. 286 MARINE INSURANCE chap. be a judicious act. It becomes necessary, therefore, to determine in every case whether the act performed is judicious. To arrive at a correct opinion on this point, we must take into account how matters stood at the time when the act 7vas performed. To judge of the actions of men by results alone would lead often to erroneous opinions." This test may be expressed more simply by saying that the sacrifice must be reasonable. The safety of a venture may be secured, or an attempt may be made to secure it, not only by sacrifice, but also by the in- curring of expenditure. This is seen in the following case : — Job v. Langton, i 856.^ — The bark Snowdon, on a voyage from Liverpool to St. John's, Newfoundland, ran ashore on the Irish coast. At low water the vessel was left high and dry ; before she could get off all the cargo and ballast had to be discharged ; after discharge the cargo was stored in Dublin. But to get the ship off a channel had to be cut ; she was got off with the assistance of a steam-tug, and was removed to Liverpool for repairs. It was agreed by both sides that all the expenses incurred in the misadventure, until all the cargo was discharged, were general average expenditures. But the question arose whether the expenses incurred after the whole of the cargo was taken out were chargeable to general average or fell properly upon the ship alone. This gave rise to the case Job v. Langton. 1856.^ In the Court of Queen's Bench Lord Campbell pronounced these expenses not to be claimable in general average, but to be payable by the ship alone. All that he considered to be general average were the expense of discharge, the expense incurred while both ship and cargo were exposed to the same perils, which attempts were made to avert on behalf of both interests. Claims by Salvors — Ransom from Captors. — Although the sacrifices and expenditures chargeable to general average are in the end made good by all parties interested, it does not follow that expenses incurred or payments made on behalf of both ship and cargo are general average. For such expenses or payments may in many cases fail to fulfil the criterion of general average 1 6 E. & B. 779 ; 26 L.J. Q.B. 97. XVII G. A. EXPENDITURES— SCHUSTER V. FLETCHER 287 laid down in Birkley v. Presgrave : ^ they are not incurred or made to avert a danger then imminently threatening the destruction of the venture. For instance, if salvors pick up at sea a ship laden with cargo and take it into a port of safety, they may decline to liberate what they have picked up without getting payment of what they consider an adequate salvage. If such payment is effected by the shipowner, it is no doubt one beneficial to the whole venture ; but it is not an expenditure incurred in emer- gency and to avert an imminent danger, and therefore it does not constitute general average.- On the other hand, a similar payment made to captors, whether in the course of declared war or irregular hostilities, or after seizure by pirates, may be a general average loss, as in such a case the question may be one between saving the venture by means of the payment, or suffering the venture to expire by capture or seizure of the vessel and its contents, Schuster v. Fletcher^ 1878.^ — As with sacrifices, so with expenditures ; what is incurred for the advantage of any number of separate interests, and not for that of the whole venture, is not general average. For example, in Schuster v. Fletcher^ 1878,^ a shipowner took an active part in saving and transhipping the cargo of his stranded ship. He brought the cargo to its destination, and by so doing earned his freight. There had been difficulty in identifying some of the cargo, owing to obliteration of marks, and some part of it being found unidentifiable had to be sold and the proceeds to be distributed. All this was done by the shipowner, who charged as remuneration for his work a sum debited partly to the separate interests salved and delivered and partly to general average. The case came before Chief Justice Cockbum, who in a most trenchant judgment decided that the services for which remuneration was claimed had nothing to do with general average. He said : '• Here the shipowner had an interest in getting the ship off and bringing the cargo into port, in order that he ^ I East 220. ^ In Aitchison v. Lohre, 1879, Lord Blackburn stated that salvage had always been recovered from underwriters as a loss by the peril insured against. * L. R. 3 Q.B.D. 418. 288 MARINE INSURANCE chap. might earn his freight. ... A great deal of what he has done was in the performance of his own contract. He was bound to use every effort to convey the cargo safely to destination, and could only give up the task when it was hopeless.^ As to the expense incurred in respect of the articles which were identified, it was incurred for his own benefit, for unless he had delivered the goods to the proper owner he could not have obtained his freight ; and, as to those unidentified, h^ took no further trouble, but sold them through a broker, who received his brokerage.^ In every respect, therefore, the charges cannot be supported." Port of Refuge Expenses. — The class of expenditures which come most frequently into consideration in con- nection with general averages is that included under the words " Port of Refuge Expenses." But such expenses may be occasioned by two entirely dissimilar classes of acci- dent. A vessel may put into an intermediate port either — (i) Because the vessel has suffered such damage by storm as to necessitate repairs. Or, (2) Because it is necessary to replace or repair some part of the vessel or her gear Avhich has been sacrificed or intentionally damaged for the general safety. In other words, she may put in to repair damage which is of the nature either (i) of particular average, or (2) of general average. In both cases, if the putting in has been a matter of necessity for the general safety, the inward expenses, such as towage and pilotage inwards and harbour dues, are charged to general average, as also the cost of ^ Regarding these words, see Lord Herschell in the case of the Sir Walter Raleigh {Rose \, Bank of Australasia, H.L. 20th March 1894) : " My Lords, I think that that is an overstatement of the law. He miglit elect to carry it on after the ship had been lost, but he is not bound to do so. ' It cannot be said that the task was hopeless when he was not able, at the cost of some trouble, to bring the cargo into port." That is all that was said on the point." * As to charges on unidentified cargo, see the case of the Sir Walter Raleigh (Rose w. Bank of Australasia, H.L. 20th March 1894), in which Lord Herschell gives his opinion that where the shipowner acts reasonably in incurring e.xtraordinary expenditure for the benefit of the adventure generally, there is nothing in point of law that prevents his charging that expenditure upon those who are interested. XVII PORT OF REFUGE EXPENSES 289 discharging the cargo and bringing it to warehouse. With regard to the other expenses, we are now in possession of judgments of the Court of Appeal and the House of Lords. In Atwood V. Sellar, 1879,^ the Sullivan Sawin, from Savannah to Liverpool, put in to Charleston to replace her foretopmast which had been cut away for the general safety. She discharged her cargo, which was warehoused, and afterwards reloaded it and took it on to destination. The Court of Appeal decided that in such a case of putting in to repair injury caused by a general average act, the expenses of warehousing and reloading goods necessarily discharged to permit of the carrying on of repairs, the pilotage and other necessary expenses outward, are, equally with the inward charges and cost of discharge, recoverable as general average. On the other hand, in Svendsen v. Wallace, 1885,^ the ship Olaf Trygvasofi, from Rangoon to Liverpool, sprang a leak and had for the common safety to put back to Rangoon. The House of Lords held that when a vessel puts in to repair such injury as this, narnely, injury of the nature of particular average, the cost of reloading the cargo is not recoverable in general average, but forms a particular charge on freight. This should be contrasted with the Peshawur^ (before Alverstone, L.C.J., in K.B.D., loth April 1908), where a steamer within a few minutes after leaving her loading berth at Antwerp, drifted with the tide, dropped anchor, and when trying to avoid other craft took the ground. Coming off later, with the assistance of tugs, she had to slip her anchor, and then struck the quay wall, seriously damaging her stern-post and rudder, the after peak filling with water. She was brought back to her loading berth, her cargo was discharged, and she was docked for repair. Some cargo was forwarded to destination by another vessel. The Lord Chief Justice held that the slipping of the anchor was not a general average act, that the return to loading berth was not putting back to a port of refuge, and that when the vessel got alongside the quay with the after peak full of water there was no peril common to ship and cargo. ' L.R. 4 Q.B.D. 342 ; 5 Q.B.D. 286. 2 l. r_ jq App. Cas. 404. U 290 MARINE INSURANCE The unloading of the cargo, though necessary to the repaii of the ship, was not a general average act, consequently damage done to the cargo by handling was not recoverable in general average. It will be interesting to note the effect of this judgment in reducing within smaller limits the sphere of general average. It was stated above (p. 285) that losses to be properly claimable according to English law as general average must not be losses or damage of things employed in the purpose for which they were intended. In Walthew v. Mavrojani, 1870,^ Lord (then Mr. Justice) Hannen stated this principle thus: "The proposition that general average includes all extraordinary expenses incurred for the purpose of continuing the voyage is not warranted by the principle which governs contribution to general average." There are two striking exceptions to this rule which are admitted by English average adjusters : — ( 1 ) Jury rig. (2) Damage to engines in working a steamer off the strand. (r) It has long been customary to regard as recoverable in general average the value of materials used, destroyed, or cut up for the purpose of fitting a vessel with such temporary masting and rigging as she may require. There is no legal decision on the point, but the practice seems to have grown into undisputed custom. No doubt the object of the use or destruction of such materials is the completion of the adventure ; that is to say, it is the object which the shipowner and master had in view from the beginning for the earning of an agreed freight, and not the preservation of the whole venture in an emergency. At the same time, the custom is not unreasonable in so far as the materials thus used are put to uses for which they were not originally intended. In practice the whole cost of jury rig is treated as general average ; the cost of spare spars, actually put on board for use in case of accident, equally with that of ropes, etc., intended for the ordinary service of the ship, but utilised in such cases for rigging. Lord Blackburn in i L.R. 5 Ex. n6. XVII DAMAGE DONE TO ENGINES 291 Svendsen v. Wallace, 1885,1 speaks of the practice as "one which is not in general inconvenient," and although, he continues, " it throws a considerable onus on those who impugn it to show that the particular circumstances are such as to render an adherence to the practice in that case against principle," he does not go so far as to say that it is justifiable on the principle of general average adopted by English law. (2) Damage done to engines in working a steamer oj) the strand is one stage further away from true general average according to the English principle. For in this case the machinery is used simply to move the vessel ; and although the circumstances of the work are not those originally contemplated when the adventure was com- menced, yet the mode in which the engines move is exactly the same as when the vessel is being propelled by them at sea. That the machinery is worked under excep- tional strain in such a case is almost certain, but that is, after all, only somewhat rough or unusual use of the ordinary appliances of the ship. It very seldom occurs that there is in such an operation any intentional sacrifice, although in many cases there may be in the mind of the master the knowledge that the order is a risky one and might result in damage. Lowndes (General Average, p. 119) tries to distinguish between the cases in which the engines are exposed to some extraordinary danger and those in which they are not ; but as a rule claims are made for recovery in general average of the damage sustained by engines worked when a vessel is ashore irrespective of the peculiar circumstances of each case. There has hardly yet been time to form a custom on this point, and it is worth remarking that recently American underwriters of cargo in English steamers have refused to admit liability for their proportion of the amounts charged in general average under this heading. It is not easy to convince one's self that all the damage that has been attributed to this cause did actually result from it, and in many cases the engines have been worked in this excep- * L.R. 10 App. Cas. 404. 292 MARINE INSURANCE chap, tional way not for the prevention of any imminent danger, but simply to bring back the vessel to the proper channel or fairway. In the case of the Rodney^ 1904, in K.B.D. {S.S. Trafalgar Co. v. British and Foreign M. I. Co., Ltd.), it was decided that as the vessel was not in peril there was no general average, and the damage done to the engines hy working to float the vessel was not allowed. In close connection with damage to engines occasioned by working a steamer off the strand, stand the items ol coals and other stores expended in such an operation. The inclusion of these items as general average has been strongly opposed, and it certainly seems that if the inclusion of damage to engines in working off is doubtful when regarded in the light of strict principle, the inclusion of coal and engine-room stores is more than doubtful. For these supplies are actually consumed for the very purpose and in the very mode for which they were provided. If the inclusion of them is, even in case of imminent peril, regarded as not free from doubt, it is evident that where the vessel is in no danger, but is simply trying to put herself into position to complete the adventure, the inclusion of these items as general average can hardly be correct. But in the case of the Bona, 1894 (u Times L.R. 40). Sir Francis Jeune, President of the Admiralty Division, decided that when a vessel, having been stranded, was got off by her engines, which were in consequence damaged, the cost of repairs to the engines and the cost of the coaJ consumed in getting her off was a matter of general average. He held that the service which the coal was expended to provide was extraordifiary in its nature.^ Wages and Provisions of Crew. — In the case of Atwood V. Sellar," a question arose respecting the right to claim in general average the wages and provisions of the * This judgment was confirmed by the Court of Appeal (Lord Esher, M. R., Lindley, L. J., Rigby, L. J.), ist February 1895, 11 Times L.R. 209. 2 L.R. 4 Q.B.D. 342 : 5 Q.B.D. 286. XVII WAGES AND PROVISIONS 293 master and crew during detention for repairs at a port of refuge. In his judgment in the Court of Appeal, Lord Justice Thesiger said : " As a matter of fact, it is extremely doubtful whether the expenses for wages of crew or provisions in a port of refuge have ever been disallowed by our courts as constituting a claim for general average, in a case where the ship has put into the port to repair damage itself belonging to general average. ... If, then, the question before us stood only upon principle, we should have no hesitation in deciding it according to the principle we have stated. . . . But the authorities remain to be considered." The English practice has been not to allow to the shipowner these expenses, regarding them as part of what was paid for by the cargo-owner or charterer in the freight ; and the increase of these expenses in consequence of detention at a port of refuge is viewed in exactly the same light as that arising from prolongation of the voyage by contrary winds occasioning no casualty. In Fletcher v. Poole^ 1769, Lord Mansfield held that extraordinary wages and provisions expended during a vessel's detention at Minorca, where she had put in in distress for repairs, could not be allowed as a charge against the underwriter on the ship. In Eden v. Poole^ 1785,- an action was brought to recover the expenditures for wages, provisions, and the demurrage during the detention of a ship at Ferrol, where she put in to repair. Marshall (p. 730) reports that " the underwriters contended that the freight and not the ship was liable for this loss, and that the charge of demurrage could not be allowed upon this policy " (on ship and goods). " Mr. Justice Buller was of this opinion, and nonsuited the plaintiff." Still more to the point is the decision in Power v, lV/ti/nw7-e, 1815,3 on a policy on goods from London to Lisbon. The ship having sustained damage by winds and weather was obliged to put in to Cowes, where a considerable expense was incurred in repairs, in pilotage, in paying and maintaining the master and mariners, and in raising money for those purposes. On her arrival in Lisbon the assured "was adjudged by the * Park, 89 ; Marshall, 730, 733 note. ^ Park, 9 1 ; Marshall, 730, 733 note, 8 4 M. & Sel. 141. i94 MARINE INSURANCE chap. maritime court there to pay general average in respect oi the expenses, losses, and damages so incurred. . . . The Court held . . . that, as there had been no sacrifice of part for the preservation of the rest, none of the above expenses were properly the subject of general average by the law of England" (Marshall, p. 546). Lord Ellen- borough said : " General average must lay its foundation in a sacrifice of a part for the sake of the rest ; but here there was no sacrifice of any part by the master, but only of his time and patience." Lowndes (General Average, p. 241) reports that in Wtlso?i v. Bank of Victoria^ 1867,^ Mr. Justice Blackburn, alluding to the matter, incidentally spoke of the English practice as a matter settled and well known. Demurrage. — As the English law makes no allowance in general average for such actual outlays of the shipowner as wages and provisions at a port of refuge, it also refuses to recognise the shipowner's claim for delay of the ship at such port ; in other words, for demurrage at a port of refuge. Similarly, the cargo-owner is not entitled to any recovery such as interest on the value of his property for the period of delay. Claims of this nature are^not so much claims for actual loss as for failure to realise anticipated profit. In collision cases claims of this nature are admitted. Substituted Expenses. — Suppose that in the cases of the Sullivan Sawin {Atwood v. Sellar),^ and the OlaJ Trygvason {Svendsen v. Wallace)^^ dealt with above (pp. 289 and 292), the captains of these vessels had found that storage in lighters would be cheaper than warehousing ashore, it is evident that it would have been to the interest of all concerned in these ventures not to land the cargoes, but simply to transfer them to lighters to be reloaded thence when the repairs to the vessels were completed. In such cases the costs of putting into, keeping in, and loading from the lighters form what are known as Substituted Expenses. These are incurred by adopting a method of treating the case adopted in preference to the ordinary method on account of its comparative cheapness. They are divided in 1 L.R. 2 Q.B. 203. 2 i^.K. ^ Q.R.D. 342 ; 5 Q.B.D. 286. >* L.R. 10 App. Cas. 404. xvn PROCEDURE OF RECOVERY 295 the same proportion in which the total cost of the ordinary rnethod of discharge, storage, and reloading is divided among these three headings. In the same way it has become usual to make special agreements to apportion as substituted ex- penses such charges as for extra towage, undertaken to bring a crippled ship to her destination with the minimum of risk, and so to avoid a prolonged stay for repairs at an intermediate port, which might involve discharge of the cargo in whole or in part, and considerable dismantling of the ship, with the consequent charges for warehousing and reloading. There are two points to be noted in reference to such charges : they cannot be regarded as substituted expenses unless — (i) They are incurred in connection with something done by the shipowner beyond what he has in his charter- party or bill of lading contracted to do. (2) Their amount must be less than the general average charges would have been had the case taken the ordinary course. Procedure of Recovery in General Average. — When a general average consists of sacrifices made by a ship, or of expenses incurred by a ship on behalf of the whole venture, the shipowner has a lien on the cargo for its share of these sacrifices or expenditures. The form in which this lien is usually enforced is a demand by the shipowner for the deposit of a sum sufficient to cover the liability of the consignee's cargo, or for signature by the consignee of an agreement securing payment of his proper proportion of general average when ascertained. When the sacrifice is one of cargo by jettison, the shipowner, having by the jettison lost the freight payable at destination on the goods thus sacrificed, has also an interest in recovery in general average, and can thus exercise his lien in that case also, and thus act on behalf of the cargo-owner also {Gillctt v. Ellis, 1 1 Illinois ; Heye V. A^. G. Uoyd, U.S. Courts). But where the damage done consists merely in deteriora- tion of the cargo without any diminution of it or change of species, such as would occasion a loss of freight, then 296 MARINE INSURANCE chap, the only party inieiested in recovery is the owner or consignee of the damaged cargo. In the case of the Sardt?tian^, the steamer after leaving Liverpool for the St. Lawrence took fire, and to prevent total loss of the venture her holds were flooded. The steamer put back to Liverpool. One of the shippers was not satisfied with the steps taken by the shipowners, and brought an action against \.h.&m {Crooks v. Allan, 1879),^ alleging that the shipowners " refused to give any assistance to enable " any one " to get an average statement made out, or to take any steps to enable the plaintiffs to recover contribution." In his decision Mr. Justice Lush, after saying that the shipowner is the only person who has the right to require security for general average contribution from the other parties to the adventure, proceeded thus : " The right to detain for average con- tribution is derived from the civil law, which also imposes on the master of the ship the duty of having the contribution settled, and of collecting the amount, and the usage has always been substantially in accordance with this law, and has become part of the common law of the land. I am therefore of opinion . . . that he (the shipowner) is liable in this action for not having taken the necessary steps for procuring an adjustment of the general average and secur- ing its payment." Average Bonds and Deposits. — In the judgment of the Judicial Committee of the Privy Council in the case of the Waverfree, 22nd May 1897, Lord Herschell said, with reference to the preparation of a general average statement and the actual settlement and adjustment of the general average contributions, " It is necessary to bear in mind what would happen if all parties stood on their rights. The shipowner would hold the goods until he obtained the general average contribution to which they were subject. If the owner of the goods disputed his claim, he would appeal to the tribunals of the country to obtain possession of them on payment of what was due. These tribunals would have to determine whether the owner of the goods was entitled to them, and what payment he must make 1 5 Q.B.D. 38. XVII AVERAGE BONDS AND DEPOSITS 297 to release them." The conditions under which cargo- owners may obtain possession of their goods pending the adjustment of a general average formed the subject in dispute in the case of the Thales^. On a voyage from the River Plate to Liverpool she stranded in December 1883 near B rid port ; tugs were engaged, cargo was jettisoned, and the vessel came off and proceeded to Liverpool. There the shipowners required a deposit of 10 per cent of the value of the cargo into an account in the name of the adjuster or shipowner, or both jointly, and the signature of an average bond in the foiTn then regularly employed in Liverpool. Several consignees objected to this, but agreed to sign the London form of bond and to pay the deposit into a joint account of the shipowners and themselves. This proposal the shipowners declined ; the consignees then paid under protest and raised an action against the shipowners {Huth v. Lamport, Gibbs v. Lamport^ i886).i In the Court of Appeal it was decided that in exercising his lien on cargo for general average the shipowner need not accept a bond or security ; on the other hand the consignee is not bound to sign a bond. The shipow-ner has the right to demand a deposit, giving the consignee proper information so as to enable him to judge of the reasonableness of his demand and, if he considers it excessive, to tender a sufficient sum. 2 Amounts made Good. — It is necessary to consider here what amounts are by the law of England recoverable in general average. A. When the general average items are disbursements, the amount to be made good by the whole venture is the amount of the expenditures incurred plus the cost of providing the funds. In former times, when communication was slower and more difficult and banking facilities fewer, a method very generally adopted to raise funds in a foreign port was bottomry. The general practice of maritime nations was to consider the raising of money on bottomry unjustifiable J L.R. 16Q.B.D. 442. 735. ^ For the American law in this matter see Wellman v. Morse (Cir Ct. of Appeals, 1896), 76 Fed. Rep. 573. 298 MARINE INSURANCE chap. unless the master had communicated with the shipowner provided the delay arising from that course would not practically defeat the adventure, and had failed to raise the necessary money on his own security. But even with these restrictions extraordinary expenses incurred at an intermediate port were commonly met by bottomry. B. When the items of general average are sacrifices these may be : (a) of ship's materials, etc.; (d) of cargo. (a) In general average, as in particular (p. 207), the measure almost universally adopted in estimating damage done to a ship is the cost of the repairs found necessary to make good the damage. Deductions from Cost of Repairs in General Average. — In the discussion of particular average on ship it was found (p. 219) that certain deductions are, as a matter of recog- nised custom, made from the cost of repairs. A similar provision by custom regarding costs of general average repairs has long prevailed. The deductions made in the case of wooden vessels are substantially the same as those made in particular average, nothing being taken off from the cost of repairs of damage sustained on the vessel's first voyage. As regards iron ships the Association of Average Adjusters accepted in 1887 and confirmed in 1888 the following rule : That in adjusting claims for general nverage, repairs to iron vessels shall be subject to the following deductions in respect of " new for old," viz. — From Dale of Original Register — Up to fAIl repairs to be allowed in full, except painting or £ year old \ coating of bottom, from which one-third is to be (A) \ deducted. /One-third to be deducted off repairs to and renewal of boilers and iheir mountings, woodwork of hull, masts and spars, furniture, upholstery, crockery, metal and glassware, also sails, rigging, ropes, o sheets and hawsers (other than wire and chain), I & "? years ■; . 1 ■ »■ ^•^^ j avvnmgs, covers and pamtmg. One-sixth to be deducted oft wire rigging, ropes, and hawsers, chain cables and sheets, donkey engines, steam winches, steam cranes and connec- tions : other repairs in full. Between (B) XVII AMOUNTS MADE GOOD 299 Between 3 & 6 years (C) Between 6 & 10 years (D) After 10 years (E) Generally (F) r Deductions as above under clause E, except that ] one-sixth be deducted off ironwork of masts and [ spais, and machinery other than boilers. 'Deductions as above under clause C, except that one-third be deducted off ironwork of masts and spars, repairs to and renewal of all machinery and all hawsers, ropes, sheets and rigging ; one-sixth to be deducted off chains and cables. rOne-third to be deducted off all repairs and re- ' newals, except ironwork of hull and cementing. I Anciiors to be allowed in full. One-sixth to be L deducted off chain cables. 'The deductions (except as to provisions and stores, machinery and boilers) to be regulated by the age of the vessel, and not the age of the particular part of her to which they apply. No painting bottom to be' allowed if the bottom has not been painted within six months previous to the date of accident. No deduction to be made in respect of old material which is repaired without being replaced by new, and provisions and stores which have not been in Similar provisions have been made for the now less frequent cases of repair of wooden vessels in general average. So far as the writer is aware, no case has come before the courts in which any question has been raised regarding these deductions. It will be found later (p. 316, and Appendix G) that these provisions have been practi- cally approved by the representatives of the maritime nations of Europe and North America. {b) It is evident that when the sacrifice is one that involves the total loss of some of the goods, such as jettison, any method based on cost of repairs cannot be applied. The general principle regulating the amount to be made good is thus stated by Lowndes (General Average, p. 291), "The owner of the goods jettisoned is to be so compensated that he shall be in the same position, at the time and place of adjustment, as if not his goods, but those of some other person had been sacrificed." From this principle two rules result : — (i) That the values taken for sacrifices are those al 300 MARINE INSURANCE chap. destination or at an intermediate port, according as the venture is completed or broken up before completion. (2) That the amount made good for sacrifice itself contributes to the loss involved in the sacrifice. The second point will come up again for consideration when contributing values are discussed. Dealing with the first, v/e find that in order to make the position of the owner of jettisoned goods the same as if his goods were delivered, he must receive the net market value of his goods, i.e. the price he would have received for them on delivery, less the charges which must have been defrayed before they could be sold, and would not have been payable had the goods been lost. For instance, if the goods are shipped with freight payable at destination, then as sacri- ficed goods have not reached their destination no freight is payable by the consignee ; consequently, in such cases freight must be deducted from the market value in arriving at the amount to be made good to the consignee, and the freight remains a sacrifice for which the shipowner will receive the amount made good in general average. If, on the other hand, the goods have been shipped with freight prepaid, the consignee will be entitled to the market price without deduction of freight, and the shipowner will have no claim for freight sacrificed. If the freight is half prepaid and half payable on delivery, the consignee of cargo and the shipowner will each be entitled to claim one-half of the freight of the cargo sacrificed. In the Acaster^ {Silva v. R. Livingston., 1894) Barnes, J., decided that when a \oyage is broken up short of destina- tion, the loss of freight paid in advance which by the abandonment of the voyage became a total loss, is made good in genei'al average. If the sacrifice of cargo does not involve the total loss of part, but only damage to the cargo in whole or in part {e.g. by damage to cotton done by flooding holds with water to extinguish fire), the amount to be made good is ascertained by deducting the net value which the goods have on arrival from the net value of sound goods of the same quality. As the damaged goods are actually XVII CONTRIBUTING INTERESTS AND VALUES 301 delivered, the matter of freight does not come into this comparison. Sacrifice of cargo involves sacrifice of freight at risk due by the receivers of the cargo at destination. But if a vessel is under time charter, it might appear as if any detention of the vessel occurring in consequence of general average sacrifice might by the consequent loss of time and time freight constitute a claim in General Average for the amount of such consequential loss. The usual practice of British adjusters has been to disallow all such claims. This practice has been confirmed by the decision in the Leitrim^ case {Leihifn S.S. Co. v. British and Foreign M. I. Co., Ltd., 5th Aug. 1902 ; Barnes, J.^). Contributing Interests and Values. — There still remain to be considered the interests which, according to English law, contribute to general average, and the values at which these interests are rated. In Mr. Justice Lawrence's definition of general average in Birkley v. Presgrave, 1801^ (see p. 284), the only interests expressly mentioned are ship and cargo. They are indeed the only material, tangible interests manifestly involved in the venture. But it is quite clear that the derivative or secondary interest freight, being that for which the venture was originally undertaken by the ship, is equally profited by the successful outcome of a general average sacrifice or expenditure, and ought, therefore, equitably to bear a proportionate share of the burden borne by the whole venture. The contributing mass thus consists of ship, cargo, and freight. In the consideration of the amount to be made good for cargo jettisoned, it became evident that in order to distribute fairly the burden of loss arising from a genera! average sacrifice, it is necessary to provide that any amount made good bears the same proportion of the loss as is borne by the property saved. Consequently, whatever be the value on which any interest contributes, there must be added to it the amount made good for any sacrificed portion of that interest. 1 18 Times L.R. 819. * i East 220. J02 MARINE INSURANCE chap (i) SMp. — The value of contributing purposes of a ship is her worth to her owner on her arrival at her destina- tion, or if the venture does not reach its destination, then the ship's worth at the place where the interests part company, plus value of materials made good in general average, minus cost of any repairs done after the general average act and before arrival at port of destination or place of separation of interest.' (2) Cargo. — {(i) If the ship reaches destmation, market value on arrival, plus any amount made good in general average for loss of part or for deterioration, minus all charges which would not have fallen on the consignee had the goods been lost, such as landing charges, customs duties, expenses of sale, discount to buyers, and freight paid at destination. {b) If the venture is broken up at an intermediate port, market value there with the same additions and deductions as in {a\ with the exception that in such a case cargo laden in British ships has no freight to pay, while in foreign ships the freight payable is pro rata distance freight. (3) Freights. — As has already been pointed out, it fre- quently happens that freight on goods is wholly or partly prepaid ; this is termed " freight at the charterer's risk," as in case the vessel is lost he has paid the shipowner for services never performed. The remainder of the freight, i.e. the amount payable at destination, is termed " freight at the shipownei-'s risk." (a) Whether the venture reaches destination as a whole or not, it is evident that the charterer's freight or advance freight is always implicitly contained in the market value of the goods ; if it is stated separately it is only as a matter of convenience in accounts or adjustment, and being an actual disbursement of the shipper it is not subject to any deduction. {b) On the other hand, the freight received by the shipowner at destination is reduced by the amount of the port charges and crew's wages incurred after the general ' For contributing value of a ship arriving as a constructive total loss see Henderson v. Shankland, Ct. Appeal, March 1896 : 12 Times L.R. 250, 251. xvii ULTERIOR CHARTERED FREIGHT 303 average act. Had the general average act not been successful he would have lost his freight, but saved the subsequent port charges and crew's wages. Of course, if the charterer has hired the vessel on such terms as make him liable for wages or port charges, he is virtually the shipowner p)-o tempore as regards those items, and in that case his freight is subject to the deductions ordinarily applied to shipowner's freight. Ulterior Chartered Freight. — It is the English practice not to consider as a contributing interest any freight which is to accrue to the ship for carriage of a later cargo than that actually on board when the general average act occurs. It is difficult to see how cargo on one voyage can have a common interest with the freight to be earned for carrying cargo on a later voyage. Besides, the inclusion of ulterior chartered freight as a contributing interest might give rise to a general average claim on freight for a voyage which, in consequence of some disaster, could never be completed or even commenced. Also there would not be on board the ship, when the sacrifice or expenditure occurred, any physical or material substance on which a lien could be exercised that would aflfect the ulterior chartered freight in question. It consequently appears that this interest is too remote for inclusion in the contributory mass. The only case we have on the point is that of the Brigella^ {Temperley v. Mackinnon, i893)j' decided by Mr. Justice Barnes. In that case the steamer sailed from Liverpool without cargo, on 24th August 1891, in order to take up an engagement to carry a cargo from a United States Atlantic port to a port in the United Kingdom or Continent between Bordeaux and Hamburg. Meeting with bad weather she began to leak in her ballast tanks, and on 26th August put in to Holyhead. On the 29th she left Holyhead to return to Liverpool for repairs, and after their completion she sailed again on i6th September. The vessel was afterwards loaded at Baltimore and discharged her cargo at Barrow. An average adjustment was pre- pared according to the alleged provision of American law, ^ 9 Times L. R. 399. 304 MARINE INSURANCE chap. under which the chartered homeward freight was burdened with a portion of the Liverpool expenses. The under- writers on that freight were asked to pay what was put down as their liability, but refused. The court found in their favour ; but that was expressedly not because the special interest insured with them was not liable, but because the court held that there was really no general average expenditure. Again, in the case of a steamer in ballast under charter proceeding to her loading port, it has been decided that the chartered freight shall contribute to general average sacrifices.^ Amount Payable by each Contributing Interest. — The determination of the amount of general average payable by any one interest is a matter of simple propor- tion : if the whole contributing mass pays the whole amount of general average sacrifice, the contributing value of each separate item pays in the same proportion. Foreign Theories and Practice of General Average. — The preceding pages are an attempt to give a brief account and a few illustrations of the principles adopted by the English law in deciding what constitutes general average, and applied by the English courts to cases under their jurisdiction in which the venture closes in the United Kingdom, its colonies or dependencies.' They are principles based on considerations of the attainment of Common Physical Safely. The jurisprudence of Con- tinental countries has proceeded upon quite a different principle, upon considerations of Common Be7iefit^ according to which the safe completion of the venture in question is the end contemplated. This radical difference in view results in an entire divergence in practice. Proper Place and Law of Adjustment — (i) Venture Completed. — In one point the systems agree : as the time 1 The Yestor,(Carisbrook S.S. Co. v. London and Prov. M. I. Co.), Ct. Appeal, 7th Aug. 1902 : 18 Times L.R. 783, confirming judg- ment of Mathew, J., in lower court. 2 For the practice of English adjusters, see Rules of Practice of Average Adjusters' Association, printed in Appendix H. xvu PLACE AND LAW OF ADJUSTMENT 305 of the completion or dissolution of the venture is tlie time for settling finally all matters of common interest or mutual obligation among the various parties to the venture, such as general average, these questions are regulated according to the law of the country in whose jurisdiction the venture happens to be when the interests are separated from one another. In the case of a safely-completed voyage that country is of course the country of destination ; so that maritime nations generally have adopted the rule of adjust- ing general average in accordance with the law prevailing at the port of destination, unless special agreement to the contrary has been made in the contract of affreightment. In the decision of Lloyd v. Guibcrt, Exchequer Chamber,^ it was stated : " The adjustment of a general average at the port of discharge, according to the law prevailing there, is binding upon the shipowner and the merchant, as they must be taken to have assented to adjustment being made at the usual and proper place, and as a consequence, according to the law of that place." ^ But this rule can evidently not be applied in all its simplicity to cases in which a vessel is bound to several ports with cargo for each of them, unless indeed the casualty resulting in general average occurs between the second last and the last port of discharge. There is no doubt that if the accident occurs before the vessel reaches her first port there is a great deal to be said in favour of adjusting the average there, as that is the point at which the venture, as it originally was, breaks up. On the other hand, the benefit derived by cargo destined for the second or other later ports is not acquired by the owners or consignees of these goods until they are actually delivered at destination, and in case of their being lost before arrival at destination, the owner or consignee is left in exactly the same position as if the general average act had resulted unsuccessfully and the whole venture had been 1 L.R. I Q.B.D. 115. '•^ In the Waver tree case, 1897, the House of Lords decided that when an average statement is necessary a shipowner is not bound to have it drawn up at the port of discharge. 13 Times T.. R. 419. X 3o6 MARINE INSURANCE chap. lost. As far as the writer is aware, no case of this kind has yet come before the courts. Lowndes (General Average, p. 274) mentions the course adopted in the matter of the Sarnia^ from Liverpool with cargo to Halifax, N.S., and Portland, Me. This steamer put back to Liverpool for repairs and discharged her cargo. A joint adjustment was made up by a Canadian adjuster and a United States adjuster, showing the amounts payable by the Halifax cargo as general average according to English law, and those payable by the Portland cargo as general average according to American law. (2) VeJiiure not completed. — If the voyage is justifiably broken up at an intermediate port the general average is adjusted in accordance with the law of that place and the state of facts then and there. In Fletcher v. Alexander, 1868,^ a vessel with a full cargo of salt from Liverpool to Calcutta stranded near Wexford. A large portion of the cargo was jettisoned, and all the remainder of it except 100 tons was so damaged as not to be fit for taking on to destination. The vessel put back to Liver- pool and the voyage was abandoned. It was held that the average must be settled at Liverpool and in accordance with English law. On the other hand, in ///// V. Wilson, 1879,'-^ the vessel Virago sailed from Riga to Hull. She stranded and was towed in to Copenhagen, where about eight-ninths of the cargo was sold. Of the remaining ninth about one-half was forwarded to Hull in other vessels, and the other half was taken on by the Virago herself to Hull. It was held that the original voyage was not broken up at Copenhagen ; consequently it was irregular to adjust the average at Copenhagen or in accordance with Danish law. Acceptance of Foreign Law by English Law. — It is evident from the preceding paragraph that English law in certain cases recognises the validity of adjustments of general average based on the law of foreign states. This is, in fact, one of the great difificultics of the subject of general average. It is only too easy to conceive cases in 1 L.R. 3C.P. 375. "" 4C.P.D. 329. XVII ENGLISH AND FOREIGN LAW 307 which a cargo destined to several ports in different countries is carried in a ship belonging to none of these countries, and the venture is broken up in still another country ; for example, an English vessel from the River Plate to Havre and Hamburg put in to Lisbon and there the voyage broken up. The average in such a case would, according to English law, be properly adjusted at Lisbon in accordance with Portuguese law, unless the contract of affreightment contained some stipulation to the contrary. In the case of the Delainbre^^ a British steamer, on a voyage from the River Plate to Bordeau,\ and Antwerp, an accident leading to general average sacrifice or expenditure occurred before she reached Bordeaux, and the average was adjusted according to the law prevailing at Bordeaux, the first port of delivery. This was the adjustment of the liabilities of ship and cargo to one another, which was binding on the interests concerned. With the secondary liability of the underwriters to their assured we will deal later. As the English law thus in a sense incorporates the law of the country in which a maritime venture is dissolved or completed, it follows that the English shipowner and merchant are frequently, according to their own law, liable for contribution to general average which differs in amount and in its constituent items from the amount for which they would have been liable had the venture closed in a port of the United Kingdom, its colonies, or dependencies. As has been already stated, the Continental countries have proceeded on a principle quite different from the English one, and there are important differences between the practice prevalent in the United States and that in the United Kingdom. Diversities of English and Foreign Law and Practice. — That these diversities may be of serious moment is evident when it is remembered that they may result not only from difference of contributing value, but from inclusion or rejection as general average of items which in other countries v/ould be rejected or included. The following table gives a rough sketch of the con- tributing values ^x&\2\\\n^'\Xi different maritime countries : — 3o8 MARINE INSURANCE chap. Ship. — In England : its worth to the owner at the time when it ought to contribute [i.e. at destination of the venture or at place of outlay or sacrifice). In United States : its value on arrival at place of dis- charge less repairs. In France, Italy, Portugal : half its value at destination or at point of separation of interests, as the case may be. In Germany, Holland, Belgium, Denmark, Norway, Sweden, Russia, Spain, Brazil, Argentina : its value at the end or beginning of the venture, or where the interests part company, as the case may be. Cargo. — In England and United States : net market value at port of destination or of separation of interests, as the case may be. In other European and American countries substantially the same valuation prevails. Freight. — In England : gross amount at risk less port charges and wages incurred after the general average act. In United States varies : In Massachusetts, Maryland, Pennsylvania, South Caro- lina and Louisiana, two-thirds of t)^e gross freight. In New York, Virginia, South Carolina, Georgia, Texas and California, half of the gross freight. In Germany : two-thirds of the gross freight earned. In Holland and Argentina : the freight, less wages and provisions. In Belgium : either the net freight or one-half of the gross freight. In Denmark : four-fifths of the gross freight. In France, Italy, Spain, Portugal, Sweden, Norway, Russia : one-half of the gross freight. As regards amoutits made good there is at least equally embarrassing variety, for instance in the item of crew's wages and provisions during detention in port. As has already been explained (p. 293) this item is not admitted by English practice as general average ; in France it is not general average unless the ship is chartered on time ; in every other European country (with the possible exception of Spain), it is general average, as it is in the United States and all South America. It may indeed be said that no two of the leading maritime states of the world agree completely in their provisions regarding general average. The growth of commerce and the adoption by all maritime countries of the law and practice on general average of the XVII ENGLISH AND FOREIGN LAW 309 country in which a venture is dissolved or completed, compelled shipowners and merchants to inform themselves respecting the provisions of foreign codes and decisions. To meet this need comparative tables of the general average provisions of different maritime states were drawn up and published : the first, the writer believes, were issued by Mr. Philip H. Rathbone of Liverpool. In the first edition of his Law of Gencj-al Average, 1873, Mr. Richard Lowndes of Liverpool included a similar table ; and in his Grosse Haver-ei, 1884, Mr. Rudolph Ulrich of Berlin printed a still more detailed table. International Systems of General Average. — As early as i860 the increasing frequency and irritating uncertainty of these divergences and dissimilarities led to the forma- tion of a congress of English and foreign jurists, adjusters, merchants, shipowners, and underwriters, who made it their business to tabulate and examine the general average law of different maritime nations, holding meetings at Glasgow in i860, London 1862, and York in 1864. At the last of these meetings a set of International General Average Rules was formed, known as the York Rules. But no practical effect was given to them, and it was not until the Congresses of the Association for the Reform and Codifi- cation of the Law of Nations at the Hague in 1875 and Bremen in 1876 that attention was again drawn to the matter. At the Antwerp Congress of the Association in 1877 the matter was again thoroughly discussed on the basis of the York Rules, and the result was the fonnation of a series of rules intended to be the basis of a uniform system of general average for all maritime nations, known as the " York and Antwerp Rules." ^ That these rules met some want was clear from the way in which they were ^ It is interesting to observe that the committee of Lloyd's then expressed their strong feeling that "the differences which exist in various countries upon this subject would be best met by abolishing general average altogether. Possibly this cannot now be done ; and if so, the committee consider that so far as the English practice is concerned any difference should be met by curtailing, not by enlarging the English rules." Compare Mr. Douglas Owen's Jie/orm of General Average read at Lloyd's on gth May 1894. 310 MARINE INSURANCE chap. « • adopted in contracts of affreightment and of marine insur- ance — bcmg made the subject of special contract, and so securing to the parties stipulating for them the settlement of their general average liabilities in accordance with their provisions in so far as these differed from the regulations of the country in which the venture was dissolved or completed. The York and Antwerp Rules were subjected to a revision at the Association's Liverpool Congress of 1890, and the result was an expansion of the rules as suggested by the experience of the preceding thirteen years. The revised rules were confirmed at the Genoa Congress of 1892, and this revised and expanded version is what is now meant when the York and Antwerp Rules are referred to. The text is printed in full in Appendix G. As regards deductions from repairs in general average it will be found to agree very closely with the Rules of Practice of the Association of Average Adjusters. General Average as regards Affreightment. — It is clear from what precedes that so far as the contract of affreight- ment goes, the only meaning that can be attached to the words "liability of an interest for general average," is liability to contribute to general average losses ^"''/or expenditures in the proportion which the contributing value of the named interest bears to the value of the whole contributing mass. If there were no such thing as insurance, the whole course of a general average would be as described, each interest would contribute through the purse of its owner, and that would end the matter. Application of General Average to Insurance. — But if the owner of any interest is insured on such terms that he has the right of claiming from his underwriter indemnity for his loss under this head, what amount is he entitled to claim ? If the interest is insured for as much as the amount at which it is valued for contribution, the assured obviously has the right of recovering from his underwriter the full amount of the contribution demanded of him : if it is insured for less, then, in accordance with the principles of indemnity and proportion, the assured is entitled to XVII GENERAL AVERAGE AND INSURANCE 31I • claim from the underwriter that proportion of the contribu- tion of his interests which the amount insured bears to the amount at which the interest in question is assessed for contribution. In accordance with the preceding results, we will for the present understand that in all cases in which the marine policy is concerned the words "general average" mean what has been termed with greater explicitness "general average contribution.'''' Proceeding in this sense, v/e may say that by the ordinary form of policy the English underwriter contracts with his assured to pay his proper proportion of the general average contribution demanded from the interest he insures. As long as the termination of the venture takes place in the United Kingdom, its colonies, or dependencies, the general average being determined and assessed according to English law, is to the extent of his proper proportion as binding for the underwriter as it is for the merchant or shipowner whom he insures. ^ But when the general average obliga- tions of shipowner and merchant are determined by the provisions of foreign law, a question arises as to the extent of the obligations of the English underwriter who contracts to cover against general average. Mr. Justice Park {Insur- ance^ pp. 629-631) gives details of three cases in which action arose on the liability of underwriters on Lloyd's policy form for general average contribution paid by the assured in accordance with foreign adjustment, Walpole V. Ewer., 1789,^ Nezvman v. Cazalet (n.d.),^ and Power v. IVhitittore, 1815.^ In the two former clear evidence was given that " the adjustment was correct according to the ^ When the contributing value is lower than the insured value, the total amount of contribution is apportioned over the underwriters pro rata of the amounts which the}' insure. When the contributing value exceeds the insured value, the pro rata share attaching to the difference between them falls on the shipowner, as being his own underwriter for that amount. S.S, Balmoral Co. v. Marten, H. L. sth Aug. 1902 : 18 Times L. R. 802. - Quoted in Park's Insura?ice, pp. 629, 630 ; and Beawes, Lex Mercatoria, 1789, p. 477. 3 4 M. & Sel. 141. 312 MARINE INSURANCE chap. _ « law and practice of the port where it was settled " (Arnould, P- 963), and the underwriters were held liable to pay. In his judgment in Newman v. Cazalet (n.d.),i Mr. Justice Buller remarked : " On the general law the plaintiff would fail ; but in all matters of trade, usage is a sacred thing. 1 do not like these foreign settlements of average, which make underwriters liable for more than the standard of English law. But if you are satisfied it has been the usage, upon the evidence given, it ought not to be shaken." In Power v. IVMirnore, 1815,2 the same point came before the Queen's Bench. Marshall (p. 546) reports the result of the decision (per Lord Ellenborough) that "the general average to which the underwriters are liable is that alone which is admitted by the law of England." Park (p. 631) makes the judgment much less positive, as he admits that this holds only " where the parties are not to be understood as having contracted on the foot {sic) of some known general usage among merchants." But there is no doubt that the impression did prevail, that the effect of the decision was that underwriters in this country could in no case be bound by a foreign adjustment. Arnould (p. 964) corrects this impression, and quotes from Lord EUenborough's judgment : " This contract {i.e. the policy) must be governed in construction by the law of England, where it was framed, unless the parties are understood as having contracted on the footing of some other known general usage among merchants relative to the same subject, and shown to have obtained in the country, where by the terms of the contract the adventure is made to determine, and where a general average (if such should under the events of the voyage be claimed) would, of course, be demandable." Foreign General Average (F.G.A.) Clause. — To pre- vent dispute on this matter a special clause was formed, called the " Foreign General Average Clause." Its forms vary, e.g. — * Quoted in Park's Insurance, pp. 629, 630 ; and Beawes, Lex Mercatoria, 1789, p. 477. 2 4 M. & iSel. 141. XVII FOREIGN GENERAL AVERAGE CLAUSE 313 *' General average payable according to foreign custom." " General average payable according to foreign state- ment." Or, " General average payable according to foreign statement if so made up." Or, (in the fuller form now adopted as Lloyd's clause) " General average and salvage charges payable as per official foreign statement if so made up, or per York- Antwerp rules if in accordance with the contract ol affreightment." But even a clause of this nature has not prevented dispute on the question of liability. In Harris v. Scaraina7iga, 1872,1 the question arose whether English underwriters using a clause of this kind were bound to contribute towards the deficiency in the amount needed to meet a bottomry bond — this deficiency having been in a foreign statement properly adjusted as general average and apportioned over all the interests concerned in the venture. The courts held the underwriters liable. It seems that the variations in three phrases, foreign statement, foreign custom, nr\d foreign official adjustment if so made up, indicate various states of feehng in underwriters' minds. In Harris v. Scarainanga,^ Chief Justice Bovill decided that in agreeing to settle according to foreign statement, underwriters are bound by such statement though it be wrong. This led to the adoption of foreign custom, which was intended to include all foreign legal and customary regulations properly applicable to each case as it arose. But the word " custom " is often taken in a narrower sense to indicate the established local practice of any particular port, and not the law or general commercial custom of the country in which it is situated. That this difference may be serious is well known to those who know how different are the local commercial customs of Marseilles from those of Dunkirk or Havre, or, to take an even more striking case, the customs of Odessa from those of St. Petersburg. This consideration led to the framing of the » L.R. &C.P. 48T. 314 MARINE INSURANCE • chap. third form — -foreign official adjustment if so tnade up. In most Continental couniries average adjusters hold ofificial appointments at the ports where they practise, and their statements have the effect of a judgment in a court of first instance. But recent cases seem to demonstrate that this form of clause has its dangers, and for the moment there is rather a feeling in favour of return to foreign custom. Application of York -Antwerp Rules. — Where the contract of affreightment contains a provision that general average shall be settled according to York-Antwerp rules, these rules are applied in the adjustment on every point with which they deal. But as they do not form a complete code of general average law, the points not dealt with in them are treated in accordance with the law of destination or other proper place for adjusting the claim. There is room for some interesting questions as to the effect on underwriter's liability of the application of York-Antwerp rules at a destination (or port of dissolution of the venture) where the law of the land is in some respects more favourable to one or other of the concerned than the York- Antwerp rules. It is probable that these questions will first arise in the United States. But if it is borne in mind that the liability for general average on the policy of insurance cannot be greater than that of the assured on the contract of affreightment, it is clear that the issue must be fought out on the latter documents before the question can be raised on the former. When the matter is viewed in this light, it appears that it is almost certainly wrong to import into the consideration of general average such ideas as are derived from the fact that the marine insurance policy is a document for the protection of the assured, and that supplementary clauses added to it must be read as added for his additional protection. The liability for contribution exists quite independent of any right to transfer that liability to third persons. General Average Loss as distinguished from General Average Contribution.— Up to this point we have dealt with liability for general average as being what is expressed XVII G.A. LOSS AND G.A. CONTRIBUTION 315 more fully as liability for contribution to general average. There seems to be no room for doubt that had questions of insurance never come in the matter would have remained on that basis. It was commonly so accepted up till 1868, when the case of Dickenson v. Jardine ^ was decided. The facts in that case were: A shipment of 641 packages of tea was insured per Canute, Foochow to London, including the risk of particular average, the policy in the usual form expressly naming jettison as one of the perils insured against. The vessel struck on a reef, and in the efforts made to refloat her 607 packages of tea were jettisoned. The merchant claimed the insured value of these packages from his underwriters, who refused to pay, alleging that their only liability was for general average contribution. It was held by the court (Bovill, C. J., Willes, J., and Montague Smith, J.) that the owner of the jettisoned goods having insured them against jettison inter alia, " has two remedies — one for the whole value of the goods against the under- writers, and the other for a contribution in case ihe vessel arrives safely in port ; and he may avail himself of which he pleases, though he cannot retain the proceeds of both so as to be repaid the whole of his loss twice over." That is, the underwriter paying the loss direct will have recourse against all the parties to the venture for their proper contributions to general average. It was not decided whether the direct liability of underwriters came under the head of general average or of particular average, but the majority of average adjusters treated direct claims for goods or ship's materials sacrificed as if they were claims for particular average. This practice continued until the decision of the Court of Appeal in Price v. A\ Shifis Small Damage Association, 1889.2 That decision was to the effect that general average sacrifices and particular average losses were of such entirely different character, that they could not be added together for the purpose of attaining the percentage of franchise stipulated in the memorandum. The result of this decision is best seen » L.R. 3 C.P. 639. 2 L R^ 22 Q B.D. 580. 3i6 MARINE INSURANCE chap, xvii in the rule of practice which was in consequence of it adopted by the Association of Average Adjusters in 1890 and confirmed in 1891 : — " That in case of general average sacrifice there is under ordinary policies of insurance a direct liability of an under- writer on ship for loss of or damage to ship's materials, and of an underwriter on goods or freight, for loss of or damage to goods or loss of freight so sacrificed as a general average loss ; that such loss not being particular average is not taken into account in computing the memorandum percent- ages, and that ihe direct liability of an underwriter for such loss is consequently unaffected by the memorandum or any other warranty respecting particular average." The words " ordinary policies " in this rule are not free from ambiguity, but in the discussion that preceded the acceptance of the clause, it was explained that it was desired " by these words to refer pointedly to such policies as have no special clause inserted in them limiting under- writers' liability in cases of general average sacrifice." Effect of Decisions in Dickenson v. Jardine and Price V. Al Ship's Small Damage. — The result of these two decisions is that underwriters on a policy warranted free of particular average are now responsible for a partial loss by jettison or other sacrifice, if the assured chooses to claim it direct ; the underwriters being, of course, subrogated to the rights of the assured in any recovery he may make in general average from the other interests in the venture. This result is almost enough to make one doubt whether anything has been gained in consistency or simplicity by substituting general average loss for the general average contribution, which till 1868 was universally accepted as the meaning of the liability imposed on underwriters under the name of " General Average." APPENDICES 3/93- 3000. 3000. 5000 3000. 1000. 2000 3000 2000 750 750 1000 3000 900 2000 600 j^ 750 600 APPENDIX A Specimen Slip X. Y. & CO. s... ...s s... ...s M... ...s K... ...$ 12 mos. Hull and M. RDC. No. \. av. ea. val. 3, Cont., caused by coll ae C. T. L. u/rs. to have F. C. & S. piracy excepted R. B. L. J. S. Toulmin h/r ' B & F pr. J. S. M. A H 1000 28/3 J. C. S. T. & M. L. & P. J. L. W 29/3 M. 29/3 Glover B. Marten p.r. B29/3 Tyser 29/3 Vaizey 29/3 4 V. & H. Reiss 29/3 ' P/r, pro rata. • ;^75.ooo 75,000 60,000 50,000 30 ■J^ days. Dev. Dkg. -B6-€i: In event of no claim on Freight, neg. 150 B Elliott 1050 Baddeley 300 R C H P n/e » 600 H W F H 750 C A H 29/3 800 A A &c 29/3 300 C Hy 29/3 p.r 1650 TU n/e 150/ 600 L pr 450 Rouse T 750 J. F. A 29/3 500 P. S. prorata 2000 E. H. 600 E C M 29/3 300 Chance n/e 500 Pitman & C 29/3 450 G S C 29/3 ' N/e, not entered. 3i8 MARINE INSURANCE 600 Sands 29/3 300 Godwin 29/3 300 E N E 29/3 1500 Smiths &c n/e 400 Jupe 30/3 4°0/w 30/3 200/ -^ '"^ 300 W. E. B. 30/3 1000 Canton \ 1 1000 Triton j ' 1500 B M 300 G H D 4/4 400 R.W.S. 300 Crocker & S 100 Angove 4/3 400 W A S 2 4/4 400 Anderson 44 p.r. 200 A W. Y. Y. B/e 4/4 300 Denny 4/4 100 sea Round K 4/4 600 Nixon 200 Riley C 4/4 200 A J P 300 Catelin. 600 fee^ Foster 21/8 200 E. F. S. ^ H 4/4 200 Archer C 100 A H G 4/4 200 W W n/e 5C50 T. K. i 1500 N. Zealand 1500 W. S. 100 Harris H & Co. APPENDIX B Extract from Martin's History of Lloyd^s and of Marin& Insiiranct in Great Britain, pp. 46-48. Original, Tanner MS. No. 74, fo. 32, ]5odleian Library, Oxford. " In the name of God. Amen. Be it knowne vnto all men by these presents that Morris Abbott and Devereux Wogan of London merchants, doe make assurance and cause themselues and euerye of them to be assured Lost or not Lost from London to Zante Petrasse & Saphalonia or any of them vpon woollen & Lynnen cloth Leade Kersies Iron & any other goods and merchandize heretofore Laden aboard the good Shipp called the Tiger ^ of London of the burthen of 200 touns or therabouts whereof is master vnder god in this presente voyadge Thomas Crowder, or whosoever ells shall goe for master in the said shipp or by whatsoever other name or names the said shipp or the master thereof is or shalbe named or called. And it shall & may be Lawfull for the said shipp to touch & stay at any ports & places on this side Zante as well on the Barbary as the Christian shoare, & ther discharge relade & take in any goods mer- chandize & mony at the discretion of the master & ffactors vppon the aduenture of the Assurers without preiudize to this assurance : And if in case any part of the said goods shalbe discharged out of the said ship at any port or places before mentioned the assurers shall take noe bennefitt or aduantadg therby in case of Losse or aueradge vppon the rest of y^ said goods. But the assurers shall still beare their whole adventures if ther be so much goods remayning aboard y^ said shippe as shalbe assured y^ assureds aduenture of 10 per C°. deducted in as full & ample manner, as if noe parte of y^ said goods had beene dis- charged out of y8 saide shippe before hir cominge to hir last porte of discharge any order custome or vsadge or any thing in this pollacie mentioned to the Contrary notwithstandinge. Beginning the Aduenture from the day & howre of the Lading of the said 1 Cf. Shakespeare, Macbeth i. 3, 7 (written between 1603 and 1610) : Her husband's to Aleppo gone, mastrr o' the Tiger And see Clark and Wright's note in Clarendon Press Series edition, citing Sir Kenelm Digby's mention in his journal of 1628 of " the Tyger 0/ Lon.ion going for Scanderone," i.e. Alexandretta. Hakluyt (Voyages) gives letters and journals of a voyage of the Tiger of London to Tripolis in 1583. Shakespeare again mentions a ship called the Tiger in Twelfth Night, v. 1, 65 : And this is he that did the Tigtr board. 320 MARINE INSURANCE cloth Lead Kersies Iron &c. aboard the same shipp at London aforesaid, & soe shall continewe & endure vntill such tyme as the same shipp with the same Cloth Lead Kersies Iron &c. shalbe arrived at Zante Petrasse & Saphalonia or any of them aforesaid and the same ther discharged & laide on Land in good salfety. Touching the Adventures & perills which wee the assurers here- after named are contented to beare, & doe faithfully promisse by these presents to take vppon vs in this presente voyadge are of the Seas, men of warr, fyer, enemyes pirratts rovers theeues, jettezons, Lettres of marte & countermarte arests restraints, & deteynments of Kings & princes and all other persons barrtary of the master & mariners, & of all other perills Losses & misfortunes what- soeuer they be or howsoever the same at any tyme before the date hereof hath chaunced or heereafter shall happen or come to the hurte detryment or damadge of the said clolh Lead Kersies Iron &c. or any parte or parcell thereof. AUthough newes or knowledge of any losse have already come or by the Computation of one League or three English myles to one hower might have come to London before the subscribinge hereof, any order cvstome or vsadge heretofore had or made in Lumbard street or no we within the Royall exchange in London to the contrary notwithstandinge. And that in case of any misfortune it shall & may be LawfuU to the assureds ther factors servants & assignes or any of them to sue Labor & travile for in and aboute the defence salfegard & recouerie of the said Cloth Lead Kearsies Iron &c. or any parte or parcell therof without any preiudice to this assurance. To the charges wherof we the assurers shall contribute eachone accordinge to the rate & quantety of his Some herein assured. Yt is to be vnderstood that this presente writinge & assurance beinge made and registered according to the Kings Majesties order & appoynt- ment shalbe of as much force strength and effect as the best & most suerest pollacie or writinge of assurance which hath binne euer heretofore vsed to be made lost or not lost in the aforesaid streete or Royall Exchange. And soe wee the assurers are contented & doe promise and binde ourselues & euerye cf vs our heyres executors & goods by these presents to the assureds the executors administrators & assignes for the true performance of the pre- misses, Confessing ourselues fully satisfied contented & paid of & for the consideracion due to vs for this assurance by these presents at the hands of the said Morris Abbott & Deuereux Wogan after the rate of fower pounds per C°. And in Testimonye of the trueth wee the Assurers have hereonto seuerally subscribed our names & somes of moneye assured yeoven in the office of assurance within the Royall exchange in London the ffyfteenth day offfebruaryano. 1613."' 1 The Tanner MS. No. 74 fo. 32, has been most carefully collated for this reprint. I am informed that it contains no names of insurers or amounts insured. The absence of these is a matter for regret.— G. APPENDIX 321 Extract from Marsden's "Admiralty Cases, 1648- 1840" pp. 267 and 268.1 Policy of Insttrance The following policy of insurance on the cargo of the Maria, dated 29th June 1692, is taken from the Admiralty Assignation Book labelled 337 :— In the name of God. Amen. Peter Joy of London, merchant, as well in his own name as for and in the name and names of all and every other person or persons to whom the same doth may or shall appertain in part or in all doth make assurance and causeth himself and them and every of them to be insured lost or not lost from Stockholm to London, upon any kind of goods and merchandizes whatsoever loaden or to be loaden aboard the good ship called the Maria, burden . . . tuns or thereabouts, whereof ... is master under God for this present voyage Bary master or whosoever else shall go for master in the said ship, or by what- soever other name or names the said ship or the master thereof is or shall be named or called : beginning the adventure upon the said goods and merchandizes from and immediately following the lading thereof aboard the said ship at g^ockholme, and so shall continue and endure untill the said ship with the said goods and merchandizes whatsoever shall be arrived at London and the same there safely landed. And it shall be lawfull for the said ship in this voyage to stop and stay at any ports and places between Stockholme and London, without prejudice to this insurance. The said goods and merchandizes by agreement are and shall be valued at . . . sterling without farther accompt to be given by the Assureds for the same. Touching the adventures and perils which the Assurers are contented to bear and do take upon us in this voyage they are of the seas, men-of-war, fire, enemies, pirats, rovers, thieves, jettesones, letters of mart and countermart, surprizals, takcings at sea, arrests, restraints and detainments of all kings, princes, and people of what nation, condition or quality whatsoever, barratry of the master and mariners, and of all perils, losses, and misfortunes that have or shall come to the hurt, detriment, or damage of the said goods and merchandize or any part thereof; and in case of any loss or misfortune it shall be lawfull to the assured . . . factors servants and assigns to sue labour and travel for in and about the defence safeguard and recovery of the said goods and merchandizes or any part thereof without prejudice to this insurance, to the charges 1 Reproduced with the permission of the publishers, Messrs. Wm. Clowes and Sons, Ltd., London, E.C. Y 322 MARINE INSURANCE whereof we the assurers will contribute each one according to the rate and quantity of his sum herein assured. And it is agreed by us the insurers that this writing or policy of assurance shall be of as much force and effect as the surest writing or policy of assurance heretofore made in Lombard Street or elsewhere in London. And so we the assurers are contented and do hereby promise and bind ourselves each one for his own part, our heirs, executors and goods to the assured . . . executors, administrators, and assigns for the true performance of the premises, confessing ourselves paid the consideration due unto us for this assurance by Ditto Joy after the rate of three pounds per cent. In witness whereof, we the assurers have subscribed our names and sums assured in London. Memorandum. — The assurers do hereby covenant, promise and oblidge themselves, their heirs, executors, and goods in case of loss happening (which God forbid) to satisfie and pay their severall sums of money herein assured, upon the abatement only of ten pounds per cent and no more, provided always that they pay their respective sums of money by them assured according to subscription within one month after . . . otherwise no abatement whatsoever to be made, but to pay their full sums according to each man's sub-, scriptions, any use or custom to the contrary notwithstanding. Written the day above said : {I, John Berry, am content with this assurance which God preserve for one hundred pounds this 29th June, 1692, prsemio reed. (Here follow eleven other signatures, for ;^7oo in all. )^ 1 Mr. Marsden has been so good as to inform me that in the records of the Admiralty Court he has discovered an EngUsh poHcy of 6 Deer. 1557 issued in London, covering the hull and the cargo of the Ele from Veils Maligo to Antwerp and twenty-four hours after arrival. Of the eleven names of under- writers only two are foreign and those are Italian. He has also found a policy in Italian, dated London, 20 Septr. 1547, the signatures and declarations of acceptance of risk at the end being in English. The risk in this case is on the ship Santa Maria de Venetia from the port or bay of Cadiz to London. A French policy which he has found, dated London, 8 Jan. 1565, seems to cover three French ships and cargoes from Havre to Sagres ; of these, two were destroyed by the Portuguese and the remaining one was damaged by collision on her return to Havre : to this policy there are thirty-six underwriters. As Mr. Marsden is engaged in editing the records of the Admiralty Court for the Selden Society the texts of these policies will before long be accessible to the public. Meanwhile it is worth mentioning that he considers the policy of 1557 to be the earliest policy in English contained in the Admiralty records. As far as I am able to judge, that policy and the Italian one of 1547 are both based on Italian forms of earlier date and simpler content than that prescribed in the Florentine Ordinance of 1523. — G. APPENDIX 323 Extract from " Select Pleas in the Court of Admiralty," edited for the Selden Society by R. G. Marsden, vol. ii. p. 49.^ De Salizar {or Salazar) c. Blackman A.D. 1555. File 29, No. 45. Policy of assurance ; the libel, ibidem, contains an allegation that the assurers are liable if they do not within two years, or one year, of the ship sailing certify or bring to the knowledge of the assured the goods assured. In London the fyvthe of Aug ist 1555. . . . Spanyard dwellinge in London dothe cause ... to be assured in the name of Anthony d'e (Salizar of) Andwerp from any porte of the Isles of Indea of Calicut unto Lixborne in the ship called Sancta Crux whereof was capytayn and master Fernando and Peter de Lovona (?) upon all kinde of merchaundies whiche shall be laden in the same ship by the handes of Diego de Frias or Anthony Ferrera or other for them apperteynenge to Anthony de Salizar and Ventura de Fryas or to whom soever they shall appertayn. The adventure begeynethe from the ower that the said merchaundies or parte thereof shall begin to be laded in the said shippe untill the sayd shipp shall be arryved savely in Lixborn. And we bynde us to bere the adventure of the said merchaundies and the costes of the assurances. And we will that he shall not be bounde to bringe any billesof ladinge but onely the chardge of his othe. And so we are contented to bear this adventure. And we will that this assurans shall be so stronge and good as the most ample writinge of assurans whiche is used to be maid in the strete of London or in the burse of Andwerp or in any other furme that shuide have more force. And yf godes will be that the said shippe shall not well procede we promys to remyt yt to honest merchaunts and not to go to the lawe maid as aforesaid. I Lewes de Paz am contented to bere t"he adventure in this assur- ance for the some of C" money of Englond . . . . C' (In all 22 subscriptions, for sums varying from ^100 to ;^lo. The above and most of the others are crossed out. That of Black- man, one of the defendants in De Salizar c. Blackman, is as follows : — ) We John Blackman and John Watkins ar content \.o\ assure in nianer and forme abovesaid the vjth of August J-XXV" 1555- J 1 Reproduced with the permission of the Council of the Selden Society and the approval of Mr. R. G. Marsden. This is the earliest policy in English yet discovered (1899). Ship. V ^ g CJ tf] c C s 8^ u: __, Ut V' V (A rt ^ ^ o e o «5 j: 0) vh S ♦3 1 c ■o rt 13 .9 § rt C e n a. •^" o ^ T3 ■g, '1 T) H S c rt ^^° .^ -. Ji .s u 3 ■S, i.ti d. u ^-s APPENDIX Ca THE MARINE INSURANCE COMPANY. LIMITED 19 This, company provisionally insures on your account Vessel Voyage Interest 3 osz c. Amount and premium £, £ H rt E «i t > ^ S a'o P^i" cent. •5^ - 'u'o'cj On receipt of the necessary particulars a stamped c rt g = 0"° " 0"T3 ^ tv.-'"^ policy will be issued, and this slip cancelled. rt o ^ H.*- Underwriter, Conditions — No thirds off. Collision, Deviation and Docking Clauses, F.G.A. Y/A. APPENDIX Cb THE MARINE INSURANCE COMPANY, LIMITED Cargo and Freight. S ^ o 19 ° E ^ o o S M T) « ° This company provisionally insures on your account 1 1| Vessel -a 2^ « p § Voyage .2 rt a U V O !!""■:= Interest ° " 3 Amount and Premium / (^ per cent. ^ uu. On receipt of the necessary particulars a stamped policy £u;-s . will be issued, and this slip cancelled. •2 g.'s Underwriter. Conditions. — Average as customary. Free of particular aveiage, unless stranded, sunk, or burnt. F.G.A. and Y/A Rules. Deviation Clause. APPENDIX D THE MARINE INSURANCE COMPANY, LIMITED Liverpool, 19 Quotation Subject to acceptance by and no risk until confirmed by us. Dear Sir — In reply to your inquiry of the beg to inform you that our present rate on pel at and from per cent. (Usual clauses, including F.C. & S.) I am, dear sir, yours faithfully, Uttderwriier, APPENDIX E TENDER OF ABANDONMENT* Jb the undefwriters of the ship " " (or steamship " " ). Information having reached us that the has been wrecked (or sunk, or burnt, or lost by stranding or collision, etc.), at , we hereby abandon to you our interest in the above vessel, and claim from you payment of total loss in respect of the sum of ;^ insured with you. To the underwriters of the cargo {or freight) of the ship " " {or steamship " " ). Information having reached us that the ship " " has been wrecked (or sunk, or burnt, or lost by stranding, or collision, etc. ), at , we hereby abandon to you our interest in the goods shipped in above vessel as noted below and insured with you, and we claim from you payment of total loss in respect of ;^ insured with you on these goods. t See also Owen's Notes and Clauses, pp. 196, 198, aat. 328 ^fARlNE INSURANCE Cm X l-H Q iz; Oh < O B.?. c V ti u U ^ -c (U Pi rt .a C b (U rSXi T1 M V — rt C o f ^ £ S ■£ o ^-J.S >« ^C O t/) O 4> c a. c o^ "* u) ■ - '^ u-s u .5 o E &3 o - o > Pi o til c^ ^? C !5 P, ta = c " ■D "x: -S dj — — S ^^^ C!i o ^^ cj u) « tn <« t3 ° 1) HJ ^ ■'-1 rr* (ti o ^ °J .2- (A 1) 3 -Co O TJ cue 3 rt y rt t. o . -a 3 O TJ 3 ""^ = -^ o 5 0-- S ° 2 o-r-o.y o o ■5. 213- ^ ^ ^ rt 4j u : «; " 3 ■ y tld ■S -c ^&^:8 Cl )- u ^ £ : Ml) J-St3 "SJ^j.S :-^ c n " fe^ M-C.2 c o rt o o rt-D t-T3 APPENDIX 329 ■" O s= . "o ^-s s B-j'>>-s s .-■s.s,.s ^f .-:: : 2 g'o n i^ g z J' .. - JJ "rt rt .-=: •?; ti o -^ -:3 cr •= o ^ o c u u 0.2 . "-,_ "' V ^, at V~ ^ v^ -T3 o u 4) a> (3 rt (^ n.S- ^ c ^^ "}~x>.2 U1J3 T3^ «i O- C ^ " i a i3 u 2 - c rt 2 3 2 .0 S >- o C u o >^-i^ crc S-o « c rt h o g'-ci, V o a ^ 3 u ja "" T o S P-"^ V) i/imO\»UiiO(4 330 MARINE INSURANCE ^ o^ •"■ td U) "^ rt ^ I H-'-i-l ? I|l-f I' H^ M"^ ° s| sill E5>°w"!r, 13 j5 ^5 t^ 1* iJ S "3 -S^ Mi-Si! o .£^o-SESrt^grt6^£M£jJo>. aM — ' D w rt t: APPENDIX 331 S a« SI'S -^"'■Slr'a ■3 5^§.5'S^-5 ? "" ^il rr:s|i t| 1§ |« rt o i "s-o -ssg ^yg^i"^ c^^:5 8^^i2 -^c*^"" -^c^^.liaJlSrtr^ erf .^g^Sl3g =.^=.^^« llc^Srg'^ 2 •" rn u, >. tx— c5 oo8..i; 1, 43 g >. ^ o--^ r -" ^ ^ ^ -g ° -^ .2 2 J^ « T3 -S ^ ? .S - ■" >,^ a. £ - .Si ^ S rt > '^— f^r^ T3 C D—^ o>J3./i— irtfe"*;^ '' t- APPENDIX G YORK- ANTWERP RULES Association for the Reform and Codification of tliz Law of Natio?is Liverpool Conference, 1890 Rule I. ^Jettison of Deck Cargo No jettison of deck cargo shall be made good as general average. Every structure not built in with the frame of the vessel shall be considered to be a part of the deck of the vessel. Rule II. — Damage by fetlison and Sacrifice for the Common Safety Damage done to a ship and cargo, or either of them, by or in consequence of a sacrifice made for the common safety, and by water which goes down a ship's hatches opened or other opening made for the purpose of making a jettison for the common safety, shall be made good as general average. Rule HI. — Extinguishing Fire on Shipboard Damage done to a ship and cargo, or either of them, by water or otherwise, including damage by beaching or scuttling a burning ship, in extinguishing a fire on board the ship, shall be made good as general average ; except that no compensation shall be made for damage to such portions of the ship and bulk cargo, or to such separate packages of cargo, as have been on fire. Rtde IV. — Cutting away Wreck Loss or damage caused by cutting away the wreck or remains of spars, or of other things which have previously been carried away by sea peril, shall not be made good as general average. 332 APPENDIX 333 Rule V. — Volimtary Straiiding When a ship is intentionally run on shore, and the circumstances are such that if that course were not adopted she would inevitably sink, or drive on shore or on rocks, no loss or damage caused to the ship, cargo, and freight, or any of tliem, by such intentional running on shore shall be made good as general average. But in all other cases where a ship is intentionally run on shore for the common safety, the consequent loss or damage shall be allowed as general average. Rule VI . — Carrying Press of Sail — Damage to or Loss of Sails Damage to or loss of sails and spars, or either of them, caused by forcing a ship off the ground, or by driving her higher up the ground, for the common safety, shall be made good as general average ; but where a ship is afloat, no loss or damage caused to the ship, cargo, and freight, or any of them, by carrying a press of sail shall be made good as general average. Rule VII. — Damage to Engines in Refloating a Ship Damage caused to machinery and boilers of a ship, which is ashore and in a position of peril, in endeavouring to refloat, shall be allowed in general average, when shown to have arisen from an actual intention to float the ship for the common safety at the risk of such damage. Rule VIII. — Expenses Lightening a Ship when Ashore, and Consequent Damage When a ship is ashore and, in order to float her, cargo, bunker coals, and ship's stores, or any of them are discharged, the extra cost of lightening, lighter hire, and reshipping (if incurred), and the loss or damage sustained thereby, shall be admitted as general average. Rule IX. — Cargo, Ship's Materials, and Stores burnt for Fuel Cargo, ship's materials, and. stores, or any of them, necessarily burnt for fuel for the common safety at a time of peril, shall be admitted as general average, when and only when an ample supply of fuel had been provided ; but the estimated quantity of coals that would have been consumed, calculated at the price current at the ship's last port of departure at the date of her leaving, shall be charged to the shipowner and credited to the general average. 334 MARINE INSURANCE Rule X. — Expenses at Port of Refuge, etc. (a) When a ship shall have entered a port or place of refuge, or shall have returned to her port or place of loading, in consequence of accident, sacrifice, or other extraordinary circumstances, which render that necessary for the common safety, the expenses of enter- ing such port or place shall be admitted as general average ; and when she shall have sailed thence with her original cargo, or a part of it, the corresponding expenses of leaving such port or place, consequent upon such entry or return, shall likewise be admitted as general average. (b) The cost of discharging cargo from a ship, whether at a port or place of loading, call, or refuge, shall be admitted as general average, when the discharge was necessary for the common safety, or to enable damage to the ship, caused by sacrifice or accident during the voyage, to be repaired, if the repairs were necessary for the safe prosecution of the voyage. (r) Whenever the cost of discharging cargo from a ship is admissiV'le as general average, the cost ol reloading and stowing such cargo on board the said ship, together with all storage charges on such cargo, shall likewise be so admitted. But when the ship is condemned or does not proceed on her original voyage, no storage expenses incurred after the date of the ship's condemnation or of the abandonment of the voyage shall be admitted as general average. (d) If a ship under average be in a port or place at which it is practicable to repair her, so as to enable her to carry on the whole cargo, and if, in order to save expenses, either she is towed thence to some other port or place of repair or to her destination, or the cargo or a portion of it is transhipped by another ship, or otherwise forwarded, then the extra cost of such towage, transhipment, and forwarding, or any of them (up to the amount of the extra expense saved), shall be payable by the several parties to the adventure in proportion to the extraordinary expense saved. Rule XL — M-^ages and Afaitttenance of Crew in Port of Refuge, etc. When a ship shall have entered or been detained in any port or place under the circumstances, or for the purposes of the repairs, mentioned in Rule X., the wages payable to the master, officers, and crew, together with the cost of maintenance of the same, during the extra period of detention in such port or place until the ship shall or should have been made ready to proceed upon her voyage, shall be admitted as general average. But when the ship is con- demned or does not proceed on her original voyage, the wages and maintenance of the master, officers, and crew, incurred after the date of the ship's condemnation or of the abandonment of the voyage, shall not be admitted as general average. APPENDIX 335 Rtile XII. — Damage to Cargo in Discharging, etc. Damage done to or loss of cargo necessarily caused in the act of discharging, storing, reloading, and stowing, shall be made good as general average, when and only when the cost of those measures respectively is admitted as general average. Rule XIII. — Deductions from Cost of Repairs In adjusting claims for general average, repairs to be allowed in general average shall be subject to the following deductions in respect of " new for old," viz. — In the case of iron or steel ships, from date of original register to the date of accident : Up to ( All repairs to be allowed in full, except painting I year old \ or coating of bottom, from which one-third is to be (A) I deducted. One-third to be deducted off repairs to and renewal of woodwork of hull, masts, and spars, furniture, upholstery, crockery, metal and glass ware, also Between sails, dgging, ropes, sheets, and hawsers (other than I & 3 years -j wire and chain), awnings, covers, and painting. (B) One-sixth to be deducted off wire rigging, wire ropes, and wire hawsers, chain cables and chains, donkey engines, steam winches and connections, i. steam cranes and connections ; other repairs in full. J. ( Deductions as above under clause B, except that I one-sixth be deducted off ironwork of masts and iC\ 1 spars and machinery (inclusive of boilers and their ^ ' I mountings). C Deductions as above under clause C, except that Between one-third be deducted off ironwork of masts and 6 & lo years \ spars, repairs to and renewal of all machinery (D) I (inclusive of boilers and their mountings), and all L hawsers, ropes, sheets, and rigging. Between ^ One-third to be deducted off all repairs and n , J renewals, except ironwork of hull and cementing ^^^ \ and chain cables, from which one-sixth to be I deducted. Anchors to be allowed in full. (E) Over f One- third to be deducted off all repairs and IS years { renewals. Anchors to be allowed in full. One- (F) I sixth to be deducted off chain cables. 336 MARINE INSURANCE The deductions (except as to provisions and stores, machinery, and boilers) to be regulated by the age of the ship, and not the age of the particular part of her to which they apply. No painting bottom Generally to be allowed if the bottom has not been painted (G) 1 within six months previous to the date of accident. No deduction to be made in respect of old material which is repaired without being replaced by new, and provisions and stores which have not been in use. In the case of wooden or composite ships : — When a ship is under one year old from date of original register at the time of accident no deduction new for old shall be made. After that period a deduction of one-third shall be made, with the following exceptions : — Anchors shall be allowed in full. Chain cables shall be subject to a deduction of one-sixth only. No deduction shall be made in respect of provisions and stores which had not been in use. Metal sheathing shall be dealt with by allowing in full the cost of a weight equal to the gross weight of metal sheathing stripped off, minus the proceeds of the old metal. Nails, felt, and labour metalling are subject to a deduction of one-third. In the case of ships generally : — " In the case of all ships, the expense of straightening bent iron- work, including labour of taking out and replacing it, shall be allowed in full. Graving-dock dues, including expenses of removals, cartages, use of shears,- stages, and graving-dock. materials, shall be allowed in full. Rule XIV. — Temporary Repairs No deductions " new for old " shall be made from the cost of temporary repairs of damage allowable as general average. Rule XV. — Loss of Freight Loss of freight arising from damage to or loss of cargo shall be made good as general average, either when caused by a general average act, or when the damage to or loss of cargo is so made good. Rule XVI. — Amount to be made good for Cargo lost or damaged by Sacrifice The amount to be made good as general average for damage or loss of goods sacrificed shall be the loss which the owner of the APPENDIX 337 goods has sustained thereby, based on the market values at the date of the arrival of the vessel or at the termination of the adventure. /?u/e XVII. — Contrthufarv Values The contribution to a general average shall be made upon the actual values of the property at the termination of the adventure, to which shall be added the amount made good as general average for property sacrificed ; deduction being made from the shipowner's freight and passage-money at risk, of such port charges and crew's wages as would not have been incurred had the ship and cargo been totally lost at the date of the genernl average act or sacrifice, and have not been allowed as general average ; deduction being also made from the value of the property of all charges incurred in respect thereof subsequently to the general average act, except such charges as are allowed in general average. Passengers' luggage and personal effects not shipped under bill of lading shall not contribute to general average. Rule. X VIII.— Adjustment Except as provided in the foregoing rules, the adjustment shall be drawn up in accordance with the law and practice that would have governed the adjustment had the contract of affreightment not contained a clause to pay general average according to these rules. APPENDIX H THE FOLLOWING ARE THE RULES OF PRACTICE Adopted by the Association of Average Adjusters up to May 191 5 Note. — Some of the under-mentioned rules are, as indicated, "Customs of Lloyd's," now by resolution of the Association incor- porated amongst the Rules of Practice. The history of the collection of the "Customs of Lloyd's" by a Special Committee of the As- sociation, and of their final incorporation as stated, appears in the Annual Reports of the Association. The following is an Index of the references to the " Customs" in the said Reports, viz.: — THE "CUSTOMS OF LLOYD'S" Appointment of a Committee to collect Report of Committee, considered Do. further considered 1873. p- 1874, p. IS75, p. and 2C 23 22 1876, p. 12 Resolution — "That the Report on the 'Customs of Lloyd's' as now amended be adopted, and reprinted for the use of the Associa- tion" 1876, p. 21 The preamble to the Customs was — "Nothing can be called a 'Custom of Lloyd's' which is determined by a de- cision of the superior Courts ; for what- ever is thus sanctioned rests on a ground surer than Custom. A ' Custom of Lloyd's ' then must relate to a point on which the law is doubtful, or not yet defined, but as to which, for practical convenience, it is necessary that there should be some uniform rule. By the term is here understood the Customs of 33S • APPENDIX 339 English Adjusting, whether as affecting General or Particular Average." Resolution — "That the 'Customs of Lloyd's,' after having been sanctioned by a two-thirds vote of the Association, shall be deemed to have the same force as a Rule of the Association " 1877, p. 79 and 1878, p. 18 Resolution — "That the 'Customs of Lloyd's,' as col- lected by this Association, be now con- firmed" 1879, p. 21 Proposed — "That it be left to the Committee of Management to consider the ' Customs of Lloyd's ' as adopted by the Association as Rules of Practice, and to delete such rules, or parts of rules, as have been affected by legal decisions, and to report to the next General Meeting" . . 1889, p. 49 Report of the Committee accepted . . . 1890, p. 33 Adoption of alterations recommended by Com- mittee ....... 1890, p. 35 and 1891, pp. 32-34 I. Adjiistinents " For ike Consideration of Utiderwriiers" (Proposed and Accepted 1S94, p. 32. Confirmed 1895, p. 25) That any adjustment prepared for the consideration of under- writers shall include a statement of the reasons of the average adjuster for making such adjustment, and, when submitted in con- junction with a claim for which underwriters are liable, shall be contained in an entirely separate document. To such adjustments the following note shall be appended, viz. : — "This adjustment has been prepared by request, to enable the assured to submit the case to underwriters." Vide "Rules Rescinded," p. 356 in/ra. 2. Interest and Commission for Advancing Funds (Proposed and Accepted 1906, p. 21. Confirmed 1907, p. 60) That, in practice, interest and commission for advancing funds are only allowable in average when, proper and necessary steps having been taken to make a collection on account, an out-of-pocket expense for interest and / or commission for advancing funds is reasonably incurred. Vide " Rules Rescinded," p. 356 in/>a^ 340 MARINE INSURANCE 3. Agency Commission and Agency (Proposed and Accepted 1906, p. 21. Confirmed 1907, p. 60) That, in practice, neither commission (excepting bank commission) nor any charge by way of agency or remuneration for trouble is allowed to the shipowner in average, except in respect of services rendered on behalf of cargo when such services are not involved in the contract of affreightment. Vide "Rules Rescinded, ' p. 356 in/ra, 4. Duty of Adjusters in respect of Cost of Repairs (Proposed and Accepted 1879, p. 24. Confirmed 1880, p. 21) That in adjusting particular average on ship or general average which includes repairs, it is the duty of tlie adjuster to satisfy himself that such reasonable and usual precautions have been taken to keep down the cost of repairs as a prudent shipowner would have taken if uninsured. 5. Claims for Damage to Shifs Machinery (Proposed and Accepted iSSo, p. 31. Confirmed 1881, p. 27) That no claim for damage to ship's machinery shall be admitted into an adjustment unless a survey has been held upon such machinery by competent and disinterested engineers as soon as practicable after the occurrence of the casualty giving rise to the claim ; a certificate of such survey, reporting as to the nature and cause of the damage, to be furnished to the adjuster : or unless clear proof be given to the adjuster that the holding of such survey or the obtaining of such certificate is impracticable, which proof is to be set forth on the face of the adjustment. 6. Claims on Ship's Machinery (Proposed and Accepted 1890, p. 32. Confirmed 1891, p. 32) That in all claims on ship's machinery for repairs, no claim for a new propeller or new shaft shall be admitted into an adjustment, unless the adjuster shall obtain and insert into his statement evi- dence showing what has become of the old propeller or shaft. 7. Water Casks {Czistom of Lloyd's, 1S76) Water casks or tanks carried on a ship's deck are not paid for by underwriters as general or particular average ; nor are warps or other articles when improperly carried on deck. General Average — 8. Basis of Adjustment (Proposed and Accepted i88g, p. 60. Confirmed 1890, p. 33) (Addition proposed and accepted, 1899, p. 29. Confirmed 1900, p. 20) That in any adjustment of general average not made in accord- APPENDIX 341 ance with British law, it sliall be prefaced on what principle 01 according to what law the adjustment has been made, and the reason for so adjusting the claim shall be set forth. In all cases the adjuster shall give particulars in a prominent position in the average statement of the clause or clauses contained in the charter-party and/or bills of lading with reference to the adjustment of general average. 9. Deck load Jettison {Custom of Lloyd's, Amended 1890-91) The jettison of a deckload carried according to the usage of trade, and not in violation of the contracts of affreightment, is general average. There is an exception to this rule in the case of cargoes of cotton, tallow, acids, and some other goods. In lieu of— {Custom of Lloyd's, 1876) The general rule of law now is, that the Jettison of a deckload, caj-ried by consent of the shipper, is general average, as between the parties who have assented to this mode of stowage. The exceptions are, those trades in which there is a custom that the jettison shall be at the risk of the shipper or owner of the deckload. Such customs may, perhaps, though not z-ery correctly, be called ' ' Customs of Lloyd's. " This custom exists with cargoes of cotton, tallow, acids, and some other goods. 10. Damage by Water zised to extinguish Fire (Proposed and Accepted 1873, p. 20. Confirmed 1874, p. 18) That damage done by water poured down a ship's hold to ex- tinguish a fire be treated as general average. II. Damage caused by Water thrown upon Burning Goods (Proposed and Accepted 1874, p. 23. Confirmed 1875, p. 22) That goods in a ship which is on fire, or the cargo of which is on fire, affected by water voluntarily used to extinguish such fire, shall not be the subject of general average if the packages so affected be themselves on fire at the time the water was thrown upon them. 12. Voluntary Stranding {Custom of Lloyd's, 1876) The Custom of Lloyd's excludes from general average all damage to ship or cargo resulting from a voluntary stranding. 342 MARINE INSURANCE This rule does not necessarily exclude such damage as is done by beaching or scuttling a burning vessel to extinguish the fire. 13. Expenses lightening a Ship when Ashore {Cus/oirt of Lloyd's as amended 1890-91) When a ship is ashore, and, in order to float her, cargo is put into lighters and is then at once re-shipped, the whole cost of lighter- ing, including lighter hire and re-shipping, is general average. fn lieti 0/ the following, formerly succeeding Section (/) in " Expenses at Port of Refuge " The above rules do not apply to the cost of lightening a ship when ashore, in case the cargo is put into lighters in order to float the ship, and is then at once re-shipped. In such cases, the whole cost of lightening, including that of re-shipping, is general average. 14. Sails set to force a Ship off^ the Ground {Custom of Lloyd's, 1876) Sails damaged by being set, or kept set, to force a ship off the ground, or to drive her higher up the ground for the common safety, are general average. 15. Stranded Vessels. Damage to Engines in getting off (Proposed and Accepted 1890, p. 64. Confirmed 1891, p. 35) (Amended 1906, p. 15. Confirmed 1907, p. 46) That damage caused to machinery and boilers of a stranded vessel, in endeavouring to refloat for the common safety, when the interests are in peril, be allowed in general average. 16. Claims arising out of Deficiency of Fuel (Proposed .-»nd Accepted 1899, p. 50. Confirmed 1900, p. 25) That in adjusting general average arising out of deficiency of fuel, the facts on which the general average is based shall be set forth in the adjustment, including the material dates and distances, and particulars of fuel supplies and consumption. 17. Resort to Port of Refuge for General Average Repairs: Treatinent of the Charges iftctirred (Proposed and Accepted 1888, p. 45. Confirmed 1889, p. 48) That when a ship puts into a port of refuge in consequence of APPENDIX 34J damage which is itself the subject of general average, and sails thence with her original cargo, or a part of it, the outward as well as the inward port charges shall be treated as general average ; and when cargo is discharged for the purpose of repairing such damage, the warehouse rent and reloading of the same shall, as well as the discharge, be treated as general average. (See Atlwood v. Sellar. ) 1 8. Resort to Port of Refuge on account of Particular Average Repairs: Treatment of the Charges incurred (Proposed and Accepted i883, p. 47. Confirmed 1889, p. 49) That when a ship puts into a port of refuge in consequence of damage which is itself the subject of particular average (or not of general average), and when the cargo has been discharged in conse- quence of such damage, the inward port charges and the cost of discharging the cargo shall be general average, the warehouse rent of cargo shall be a particular charge on cargo, and the cost of reloading and outward port charges shall be a particular charge on freight. (See Svendsen v. Wallace.) 19. Treatment of Costs of Storage and Reloading at Port of Refuge (Proposed and Accepted 1886, p. 37. Confirmed 1887, p. 36) That when the cargo is discharged for the purpose of repairing, re-conditioning, or diminishing damage to ship or cargo which is itself the subject of general average, the cost of storage on it and of reloading it shall be treated as general average, equally with the cost of discharging it. 20. Expenses at a Pait of Refuge ( Custom of Lloyd's, Amended 1890-91) When a ship puts into a port of refuge on account of accident, and not in consequence of damage which is itself the subject of general average, then, on the assumption that the ship was sea- worthy at the commencement of the voyage, the custom of Lloyd's is as follows : — [a] All cost of towage, pilotage, harbour dues, and other extra- 1876 ordinary expenses incurred in order to bring the ship and cargo into a place of safety, are general average. Under the term "extraordinary expenses" are not included wages or victuals of crew, coals, or engine stores, or demurrage. (b) The cost of discharging the cargo, whether for the common 1876 safety, or to repair the ship, together with the cost of convey- ing it to the warehouse, is general average. ^44 MARINE INSURANCE The cost of discharging the cargo on account of damage to it resulting from its own vice propre, is chargeable to the owners of the cargo. {c) The warehouse rent, or other expenses which take the 1876 place of warehouse rent, of the cargo when so discharged, is, except as under, a special charge on the cargo. {d) The cost of reloading the cargo, and the outward port 1876 charges incurred through leaving the port of refuge, are, when the discharge of cargo falls in general average, a special charge on freight. {e) The expenses referred to in clause {d) are charged to the party 1876 who runs the risk of freight ; that is, wholly to the charterer, if the whole freight has been prepaid ; and if part only, then in the proportion which the part prepaid bears to the whole freight. kf) When the cargo, instead of being sent ashore, is placed on board hulk or lighters during the ship's stay in port, the hulk-hire is divided between general average, cargo, and freight, in such proportions as may place the several con- tributing interests in nearly the same relative positions as if the cargo had been landed and stored. The amendment is in the preamble, which formerly read thus : — When a ship puts into a poii of refuge on account of accident or sacrifice, then, on tlie assumption that the ship was seaworthy at the commencement of the voyage, the custom of Lloyd's is as follows : — 21. Treatfnent of Costs of Extraordinary Discharge (Proposed and Accepted 1886, p. 37. Confirmed 1887, p. 36) That no distinction be drawn in practice between discharging cargo for the common safety of ship and cargo, and discharging it for the purpose of effecting at an intermediate port or ports of refuge repairs necessary for the prosecution of the voyage. 22, Towage from a Port of Refuge (Proposed and Accepted 1876, p. 26. Confirmed 1877, p. 54) That if a ship be in a port of refuge at which it is practicable to repair her, and if, in order to save expense, she be towed thence tc some other port ; then the extra cost of such towage shall be divided in proportion to the saving of expense thereby occasioned to the several parties to the adventure. APPENDIX 345 23. Cargo fo}-warded from a Port of Refuge (Proposed and Accepted 1876, p. 26. Confirmed 1877, p. 34) That if a ship be in a port of refuge at which it is practicable to repair lier so as to enable her to carry on the whole cargo, but, in order to save expense, the cargo, or a portion of it, be transhipped by another vessel, or otherwise forwarded ; then the cost of such transhipment (up to the amount of expense saved) shall be divided in proportion to the saving of expense thereby occasioned to the several parlies to the adventure. 24. Cargo sold at a Port of Refige (Proposed and Accepted 1002, p. 34. Confirmed 1903, p. 18) That if a ship be in a port of refuge at which it is practicable to repair her so as to enable her to carry on the whole cargo, or such portion of it as is fit to be carried on, but, in order to save expense, the cargo, or a portion of it, be, wiih the consent of the owners of such cargo, sold at the port of refuge, then the loss by sale, including loss of freight on cargo so sold (up to the amount of expense saved), shall be divided in proportion to the saving of expense thereby occasioned to the several parties to the adventure : provided always that the amount so divided shall in no case exceed the cost of transhipment and/or forwarding referred to in the preceding rule of the Association. 25. Interpretation of the Rule respecthjg Substituted Expenses (Proposed and Accepted 1877, p. 63. Confirmed 1878, p. i£) That for the purpose of avoiding any misinterpretation of the resolution relating to the apportionment of substituted expenses, it is declared that the saving of expense therein mentioned is limited to a saving or reduction of the actual outlay, including the crew's wages and provisions, if any, which would have been incurred at the port of refuge, if the vessel had been repaired there, and does not include supposed losses or expenses, such as interest, loss of market, demurrage, or assumed damage by discharging. 26. Damage caused to Cargo during Forced Discharge (Proposed and Accepted i8Sj, p. 58. Confirmed 1884, p. 37) That whenever the cost of discharging cargo is general average, all loss or damage necessarily arising to cargo therefrom shall be allowed in general average. ViiJe "Rules Rescinded," p. 356 in/>a. 346 MARINE INSURANCE 27. Treatment of Damage to Cargo caused by Discharge, Storings and Reloading (Proposed and Accepted 1886, p. 37. Confirmed 1887, p. 36) The damage necessarily done to cargo by discharging, storing, and reloading it, be treated as general average when, and only when, the cost of those measures respectively is so treated. 28. Deductions f 7-0 iH Cost of Repairs to Iron Vessels in adjusting General Average (Proposed and Accepted 1887, p. 36. Confirmed 1888, p. 28) (Referred to Special CoiJimiitee, 1884, p. 45 — Reports, Prov., 1885, p. 19, Final, j886, p. 16) That in adjusting claims for general average, repairs to iron vessels shall be subject to the following deductions in respect of " new for old," viz : — From Date of Original Register, Up to i All repairs to be allowed in full, except painting I year old -j or coating of bottom, from which one-third is to be (A) [deducted. ( One-third to be deducted off repairs to and re- newal of boilers and their mountings, woodwork I of hull, masts and spars, furniture, upholstery, crockery, metal and glassware, also sails, rigging, ropes, sheets, and hawsers (other than wire and chain), awnings, covers, and painting. One-sixth to be deducted off wire rigging, ropes, and hawsers, chain cables and sheets, donkey engines, steam winches, steam cranes and con- ^nections ; other repairs in full. Between f Deductions as above under Clause B, except 3 & 6 years \ that one-sixth be deducted off ironwork of masts and (C) [spars, and machinery other than boilers. Deductions as above under Clause C, except that Between one-third be deducted off ironwork of masts and 6 & 10 years -J spars, repairs to and renewal of all machinery and (D) all hawsers, ropes, sheets and rigging ; one-sixth to ^be deducted off chains and cables. After r One-third to be deducted off all repairs and vears J ""enewals, except ironwork of hull and cementing. X, j Anchors to be allowed in full. V One-sixth to be deducted off chain cables. Between I & 3 years (B) APPENDIX 347 The deductions (except as to provisions and stores, machinery and boilers) to be regulated by the age of the vessel, and not the age of the particular part of her to which they apply. No painting Generally J bottom to be allowed if the bottom has not been (F) j painted within six months previous to the date of accident. No deduction to be made in respect of old material which is repaired without being re- placed by new, and provisions and stores which ^have not been in use. 29. Freight Sacrificed: Amount to be made good in General Average (Proposed and Accepted 1894, p. 56. Confirmed 1895, p. 29) That the loss of freight to be made good in general average shall be ascertained by deducting from the amount of gross freight lost the charges which the owner thereof would have incurred to earn such freight, but has, in consequence of the sacrifice, not incurred. 30. Basis of Contribution to General Average (Original Rule of Practice, 1873) When property saved by a general average act is injured or destroyed by subsequent accident, the contributing value of that property to a general average which is less than the total con- tributing value shall, when it does not reach the port of destination, be its actual net proceeds ; when it does, it shall be its actual net value at the port of destination, on its delivery there ; and in all cases any values allowed in general average shall be added to and form part of the contributing value as above. The above rule shall not apply to adjustments made before the adventure has terminated. 31. Contributory Value of Ship (Proposed and Accepted 1899, p. 41. Confirmed 1900, p. 20) That in any adjustment of general average there shall be set forth the certificate on which the contributory value of the ship is based, or if there be no such certificate, the information adopted in lieu thereof, and any amount made good shall be specified. 32. Contributory Value of Freight (Original Rule of Practice, 1873) That freight at the risk of the shipowner shall contribute to general average upon its gross amount, deducting the whole of, and 348 MARINE INSURANCE no more than, such port charges as the shipowner shall incur after tlie date of the general average act, and such wages of the crew as the shipowner shall become liable for after that date. (Proposed and Accepted 1899, p. 48. Confirmed 1900, p. 24) That in any adjustment of general average there shall be set forth the amount of the gross freight and the freight advanced, if any ; also the port charges and wages deducted, and any amount made good. 33. Fessel in Ballast a7id wider Charter : Contrihtiling In.'eiests (Proposed and Accepted 1896, p. 63. Confirmed 1807, p. 34) That when a vessel is in ballast and under charter, the interests contributing to expenses or sacrifices incurred for the common safety are, in practice, the ship and the freight she is earning under the charter, computed as usual in the adjustment of general average, unless the expenses are salvage expenses specifically charged by a Court of Law or by arbitration to the vessel without any regard to the freight. 34. Chartered Fi-eight {ulterior') : Contribution to General Average (Proposed and Accepted 1891, p. 35. Confirmed 1892, p. 27) That when at the time of a general average act the vessel has on board cargo shipped under charter-party or bills of lading, and is also under a separate charter to load another cargo after the cargo then in course of carriage has been discharged, the ulterior chartered freight shall not contribute to the general average. 35. Deductions frovi Freight at Charterer s Risk (Original Rule of Practice, 1873) That freight at the risk of the charterer shall be subject to no deduction for wages and port charges, except in the case of charters in which the wages or port charges are payable by the charterer, in which case such freight shall be governed by the same rule as freight at the risk of the shipowner. 36. Forwarding Charges on Advanced Freight (Original Rule of Practice, 1873) That in case of wreck, the cargo being forwarded to its destina- tion, the charterer, who has paid a lump sum on account of freight, which is not to be returned in the event of the vessel being lost, shall not be liable for any portion of the forwarding freight and charges, when the same are less than the balance of freight payable APPENDIX 349 to the shipowner at the port of destination under the original charter-party. 37. Adjustment : Policies of Insurance and Names of Underwriters (Proposed and Accepted 1889, p. 60. Confirmed 1890, p. 33) That no statement shall be drawn up showing the amount of payments by or to the underwriters, excluding statements of par- ticular average on ship now dealt with by rule of the Association, unless the policies, or copies of policies of insurance, or certificates of insurance, for which the statement is required, be produced to the adjusters ; and that such statement shall give the names of the underwriting firms and companies interested, and the amounts due on the respective policies produced. 38. Sacrifice for the Common Safety: Direct Liability of Underwriters (Proposed and Accepted 1890, p. 42. Confirmed 1891, p. 34) That in case of general average sacrifice there is, under ordinary policies of insurance, a direct liability of an underwriter on ship for loss of or damage to ship's materials, and of an underwriter on goods or freight, for loss of or damage to goods or loss of freight so sacrificed as a general average loss ; that such loss, not being par- ticular average, is not taken into account in computing the memo- randum percentages, and that the direct liability of an underwriter for such loss is consequently unaffected by the memorandum or any other warranty respecting particular average. 39. Enforcement of General Average Lien by Shipowners (Proposed and Accepted 1890, p. 56. Confirmed 1891, p. 34) That in all cases where general average damage to ship is claimed direct from the underwriters on that interest, the average adjusters shall ascertain whether the shipowners have taken the necessary steps to enforce their lien for general average on the cargo, and shall insert in the average statement a note giving the result of their inquiries. 40. Unde7-wr iter's Liability [Custom of Lloyd's, 1876) If the ship or cargo be insured for more than its contributory value, the underwriter pays what is assessed on the contributory value. But where insured for less than the contributory value, the underwriter pays on the insured value ; and when there has been a particular average for damage which forms a dele from or undertaken by the Liverpool and London Steamship Protection Association, Limited, and/or North of England Protecting and Indemnity Association, but excluding loss of life and personal injury and matters expressly excluded from any of the above clauses. The undersigned will pay the assured such proportion of such MARINE INSURANCE sum or sums so paid, or, which may be required to indemnify the assured for such loss, as their respective subscriptions bear to the policy value of the ship hereby insured, and where the liability of the assured has been contested with the consent in writing of a majority (in amount) of the underwriters on the ship hereby insured, the undersigned will also pay a like proportion of the costs which the assured shall thereby incur or be compelled to pay. Notwithstanding the foregoing, this policy is : — (a) Warranted free from any claim arising directly or in- directly under Workmen's Compensation or Employers' Liability Acts, and any other Statutory or Common Law liability in respect of accidents to workmen. (d) Warranted free of capture, seizure, arrest, restraint, or detainment, and the consequences thereof, or of any attempt thereat (piracy excepted), and also from all consequences of hostilities or warlike operations whether before or after declaration of war. (c) Warranted free of loss or damage caused by strikers, locked-out workmen, or persons taking part in labour dis- turbances or riots or civil commoUons. APPENDIX Kf INSTITUTE TIME CLAUSES, 1916 1. In port and at sea, in docks and graving docks, and on ways, gridirons, and pontoons, at all times, in all places, and on all occasions, services and trades whatsoever and wheresoever, under steam or sail, with leave to sail with or without pilots, to tow and assist vessels or craft in all situations, and to be towed and to go on trial trips. 2. Including risk of craft and/or lighter to and from the ship. Each craft and/or lighter to be deemed a separate insurance if desired by the assured. 3. General average and salvage to be adjusted according to the law and practice obtaining at the place where the adventure ends, as if the contract of affreightment contained no special terms upon the subject; or, if the contract of affreightment so provides, according to York- Antwerp rules, or, in the case of wood cargoes, York-Antwerp rules omitting the first word of Rule I. (" No "), but, in all matters not specifically referred to in York-Antwerp Rules I. to XVII. inclusive, the adjustment shall be in accordance with the law and practice obtaining at the place where the adventure ends and as if the contract of affreightment contained no special terms upon the subject. 4. Warranted free from particular average under 3 per cent unless the ship be stranded, sunk, or on fire, underwriters notwithstanding this warranty to pay for any damage or loss caused by fire or collision with another ship or vessel. 5. In the event of the total loss, whether absolute or constructive, of the steamer the amount underwritten by this policy shall be paid in full, whether the steamer be fully or only partly loaded or in ballast, chartered or unchartered. 6. In ascertaining whether the vessel is a constructive total loss the insured value in the policies on ship shall be taken as the repaired value and nothing in respect of the damaged or break - up value of the vessel or wreck shall he taken into account. 3^9 39° MARINE INSURANCE 7. In calculating the amount due under this policy in respect of any claim except under Clauses 3 and 5, all insurances on freight (including honour policies on freight) shall be taken into considera- tion, and when the total of such insurances exceeds in amount the gross freight actually at risk only a rateable proportion of the gross freight lost shall be recoverable under this policy, notwithstanding any valuation therein. 8. Warranted free from any claim consequent on loss of time, whether arising from the peril of the sea or otherwise, 9. Should the vessel be sold or transferred to new management, then, unless the underwriters agree in writing to such sale or transfer, this policy shall thereupon become cancelled from date of sale or transfer, unless the vessel has cargo on board and has already sailed from her loading port or is at sea in ballast, in either of which cases such cancellation shall be suspended until arrival at final port of discharge if with cargo, or at port of destination if in ballast. Kpro rata daily return of premium shall be made. 10. It is further agreed that should the within-named vessel receive salvage services from another vessel belonging wholly or in part to the same owners, or under the same management, the assured shall have the same rights under this policy as they would have were the other vessel entirely the property of owners not interested in the within-named vessel ; but in such cases the amount payable for the services rendered shall be referred to a sole arbitrator to be agreed upon between the underwriters and the insured. 11. Held covered in case of any breach of warranty as to cargo, trade, locality, or date of sailing, provided notice be given, and any additional premium required be agreed immediately after receipt of advices. 12. Should the vessel at the expiration of this policy be at sea, or in distress, or at a port of refuge or of call, the interest hereby insured shall, provided previous notice be given to the underwriters, be held covered at a pro rata monthly premium to her port of destination. 13. Warranted free of capture, seizure, arrest, restraint, or detain- ment, and the consequences thereof, or of any attempt thereat (piracy excepted), and also from all consequences of hostilities or warlike operations whether before or after declaration of war. per cent for each uncommenced month if it be mutually agreed to cancel this policy. per cent for each consecutive 30 days the vessel may be laid up in port, l 14. To return Provided always that' in no case shall a return be allowed when the within-named vessel is lying in a roadstead or in ex- posed and unprotected waters. and arrival. APPENDIX Kg INSTITUTE VOYAGE CLAUSES 1. Including risk of craft and/or lighter to and from the ship. Each craft and/or lighter to be deemed a separate insurance if desired by the assured. 2. General average and salvage to be adjusted according to the law and practice obtaining at the place where the adventure ends, as if the contract of affreightment contained no special terms upon the subject; or, if the contract of affreightment so provides, according to York-Antwerp rules, or, in the case of wood cargoes, York- Antwerp rules omitting the first word of Rule I. ("No"), but, in all matters not specifically referred to in York-Antwerp Rules I. to XVII. inclusive, the adjustment shall be in accordance with the law and practice obtaining at the place where the adventure ends and as if the contract of affreightment contained no special terms upon the subject. 3. Warranted firee from particular average under 3 per cent unless the ship be stranded, sunk, or on fire, underwriters notwithstanding this warranty to pay for any damage or loss caused by fire or collision with another ship or vessel. 4. In the event of the total loss, whether absolute or constructive, of the vessel, the amount underwritten by this policy shall be paid in full, whether the vessel be fully or only partly loaded or in ballast, chartered or unchartered. 5. In ascertaining whether the vessel is a constructive total loss the insured value in the policies on ship shall be taken as the repaired value and nothing in respect of the damaged or break-up value of the vessel or wreck shall be taken into account. 6. In calculating the amount due under this policy in respect of any claim except under Clauses 2 and 4, all insurances on freight (including honour policies on freight) shall be taken into considera- tion, and when the total of such insurances exceeds in amount the gross freight actually at risk only a rateable proportion of the gross 392 MARINE INSURANCE freight lost shall be recoverable under this policy, notwithstanding any valuation therein. 7. Warranted free from any claim consequent on loss of time whether arising from a peril of the sea or otherwise. 8. It is further agreed that should the within-named vessel receive salvage services from another vessel belonging wholly or in part to the same owners, or under the same management, the assured shall have the same rights under this policy as they would have were the other vessel entirely the property of owners not interested in the within-named vessel ; but in such cases the amount payable for the services rendered shall be referred to a sole arbitrator to be agreed upon between the underwriters and the assured. 9. Warranted free of capture, seizure, arrest, restraint, or detain- ment, and the consequences thereof, or of any attempt thereat (piracy excepted), and also from all consequences of hostilities or warlike operations whether before or after declaration of war. 10. Held covered in case of deviation or change of voyage, pro- vided notice be given and any additional premium required be agreed immediately after receipt of advices. 11. With leave to sail with or without pilots, and to tow and assist vessels or craft in all situations, and to be towed. 12. With leave to dock and undock and go into graving dock. APPENDIX Kh INSTITUTE CARGO CLAUSES (F.P.A.) 1916 1. Warranted free of capture, seizure, arrest, restraint, or detain- ment, and the consequences thereof or any attempt thereat, piracy excepted, and also from all consequences of hostilities or warlike operations, whether before or after declaration of war. 2. Warranted free of loss or damage caused by strikers locked out workmen or persons taking part in labour disturbances or riots or civil commotions. 3. General Average and Salvage Charges payable according to Foreign Statement or per York- Antwerp Rules if in accordance with the contract of affreightment. 4. Held covered, at a premium to be arranged, in case of deviation or change of voyage or of any omission or error in the description of the interest, vessel, or voyage. 5. Including (subject to the terms of the Policy) all risks covered by this Policy from shippers' or manufacturers' warehouse until on board the vessel, during transhipment if any, and from the vessel whilst on quays wharves or in sheds during the ordinary course of transit until safely deposited in consignees' or other warehouse at destination named in Policy. 6. Including risk of craft, raft, and /or lighter to and from the vessel. Each craft, raft, and / or lighter to be deemed a separate insurance. The Assured are not to be prejudiced by any agreement exempting lightermen from liability. 7. Including all liberties as per contract of affreightment. The Assured are not to be prejudiced by the presence of the negligence clause and / or latent defect clause in the Bills of Lading and / or Charter Party. The seaworthiness of the vessel as between the Assured and the Assurers is hereby admitted. 8. Warranted free from Particular Average unless the vessel or craft be stranded sunk or burnt, but the Assurers are to pay the insured value of any package or packages which may be totally lost in loading transhipment or discharge, also any loss of or damage to the interest insured which may reasonably be attributed to fire, collision or contact of the vessel and / or craft and / or conveyance with any external substance (ice included) other than water, or to discharge of cargo at a port of distress, also to pay landing warehousing for- warding and special charges if incurred. 393 F. C. & S. clause. Strikes, riots and civil commotions clause. Deviation clause. Craft, &c., clause. F. P. A. clause. APPENDIX Kl INSTITUTE CARGO CLAUSES {Fo7- Use in Policies " With Average'''') 1. Warranted free of capture, seizure, arrest, restraint, or detain- ment, and the consequences thereof or any attempt thereat (piracy excepted), and also from all consequences of hostilities or warlike operations, whether before or after declaration of war. 2. Warranted free of loss or damage caused by strikers locked out workmen or persons taking part in labour disturbances or riots or civil commotions. 3. General Average and Salvage Charges payable according to Foreign Statement or per York-Antwerp Rules if in accordance with the contract of affreightment. 4. Held covered, at a premium to be arranged, in case of deviation or change of voyage or of any omission or error in the description of the interest, vessel, or voyage. 5. Including (subject to the terms of the Policy) all risks covered by this Policy from shippers' or manufacturers' warehouse until on board the vessel, during transhipment if any, and from the vessel whilst on quays wharves or in sheds during the ordinary course of transit until safely deposited in consignee's or other warehouse at destination named in Policy. 6. Including risk of craft, raft, and / or lighter to and from the vessel. Each craft, raft, and /or lighter to be deemed a separate insurance. The Assured are not to be prejudiced by any agreement exempting lightermen from liability. 7. Including all liberties as per contract of affreightment. The Assured are not to be prejudiced by the presence of the negligence clause and / or latent defect clause in the Bills of Lading and /or Charter Party. The seaworthiness of the vessel as between the Assured and the Assurers is herebv admitted. 394 APPENDIX L r. LIVERPOOL SLIP WARRANTIES (i) Warranted no British North America. (2) Warranted not to be in the Baltic or White Sea between isl October and 31st March, both days inclusive. (3) Warranted not to sail with over net register tonnage of grain from any port in North America between ist October and 31st March, both days inclusive. (4) Warranted not to sail with over net register tonnage of ore, iron, or phosphate, to or from any port in North America between 1st September and 31st March, both days inclusive. (5) Warranted no East of Singapore, excepting Java, Bangkok, or Saigon. (6) Warranted no Bilbao. (7) Warranted no Straits of Magellan. 2. TIME WARRANTIES IN USE IN LONDON IN 1S99 Warranted no British North America {ex Halifax for coaling). Warranted no Baltic or White Sea, 1st October to ist April. Warranted no East of Singapore ex Java, Australia, Saigon, and Bangkok. 21/ additional to cancel above warranties ex British North America, ist September to ist April [in some cases, ex British North America, absolutely). In the case of fine highly valued steamers there a?-e added after the exceptions to the East of Singapore warranty the -words ' ' and out and home voyages to China and Japan." 395 APPENDIX M A Selection of Clauses in Ordinary Use in Policies ofi Interest other than HiiU^ Arrov/root. — Each 20 barrels or 50 tins. Each 50 barrels. Block Policy : Adjustment of Premium on Amounts over 01 under declared. — The premium charged under this policy being based on an estimated value of £ of shipments during the period insured, the assured warrant that at the end of one year they will report to the company the actual value of all shipments covered hereunder, and should such shipments exceed the value of £ , the assured hereby agree to pay to the company additional premium at rate of per cent of value in excess of such sum of £ , and the company shall return premium at the same rate upon the deficiency if the aggregate amount of such shipments be less than £ Blue Cloths — {Pondicherry). — Each bale. Bottled Goods (or Label Clause). — Warranted fiee from all claim arising from loss of or damage to labels, unless the vessel be stranded, sunk, or burnt. Bottomry Bond. — To pay such proportion of the £ , as may not be recovered in consequence of the surety being destroyed or diminished in value by reason of the perils insured against, or of any subsequent bond or bonds. Camels' Wool. — Each 5 bales. Each 10 bales. Cattle. — (a) Against all risks, including mortality and jeltison arising from any cause whatsoever. Animals walking ashore, or, when slung from the vessel, walking after being taken out of the slings, to be deemed arrived, and no claim to attach to this policy on such animals. Each animal to be deemed a separate insurance. {h) Warranted free from mortality, unless caused by the ' Compiled from MS. collections, telegraph codes, ofTice cl.iuses, policies, etc., and compared with Mr. Douglas Owen's Marine Insurance Notes and Clauses, 3rd ed. , 1890 ; and Mr. Richard Lowndes's Law of Marine Insurance, 2nd ed., 1885, Appendix 'D, Customary Average Clauses. APPENDIX 397 stranding, sinking, or burning of the ship, or by collision with another ship or vessel. (c) Liable only in case of total loss of vessel and of animals, oi for payment of general average levied on all interests. Cigars. — Each case. Cochineal. — Each Package or 5 packages. Cocoa-nut Oil. — i per cent for ordinary leakage, computed on the original net weight, to be deducted in case of claim. To pay average if damage amount to 3 per cent on each series of 5 pipes, 10 puncheons, or 20 hogsheads original numbers. Coffee. — Every 10 hogsheads, tierces, or casks. Each 20 barrels and 50 bags running landing numbers. Skimming Clause. — In case of damage, to pay the cost of skimming and depreciation on skimmed portion without reference to percentage, series or insured value. Cotton — East /Wzw.— Black leaf clause. — It is agreed that damage from black leaf discoloration shall not be claimed for under this policy, except when caused by the bale so affected having been in actual contact with sea water or fire, and that no allowance shall be made for black leaf in damaged bales when the sound portion of the same mark contains black leaf. Egyptian. — Each 10 bales running landing numbers, and on pickings without reference to series or percentage. American. — Average recoverable on each 10 bales running landing numbers, or on the whole ; and on pickings without reference to series or percentage. Sea-damage pickings sub- ject to deduction from weight of one-lhird for water ; country- damage, one-siKth. With liberty to stop and stay at ports and places to tran- ship, to compress, and to lighter. It is understood and agreed that this insurance attaches as soon as the cotton becomes the property of the assured, or is at their risk, and covers said cotton in presses, yards, rail- road depots, or wherever it may be, and continues so to attach until safely landed at the port of destination. This policy also covers cotton intended for interior points in Europe until its delivery at the mills, if with customary dispatch and when so specified in the certificate of insurance. Including risk of craft to and from the vessel. Each lighter or craft to be considered as if separately insurecl. Held covered in event of deviation, provided the same be communicated to assurers as soon as known to the assured, and an additional premium paid if required. Warranted by the assured free from any liability for merchandise in the possession of any carrier or other bailee, who may be liable for any loss or damage thereto ; and for merchandise shipped under a bill of lading containing a 398 MARINE INSURANCE sripulation that the carrier may have the benefit of any insurance thereon. It is by the assured expressly stipulated in respect to land carriers, that no right of subrogation is, or is to be abrogated or impaired by or through any agreement intended to relieve a carrier from duties or obligations imposed or recognised by the common law or otherwise. The insurance on cotton hereunder shall in all cases be null and void to the extent of any insurance with any fire insurance companies, directly or imlirectly covering upon the same property, whether prior or subsequent hereto in date. In case of loss prior to issue of certificate or policy, and negotiation of exchange for purchase of cotton, the liability under this insurance is not to exceed the cost of the cotton and charges added ; except in cases where the assured is compelled by his contract to replace the cotton destroyed ; in which cases the actual cost of the new cotton, and of placing it where the old cotton was lost, shall be the limit of claim, provided it does not exceed the sum insured. Deck Cargo. — See Goods on Deck. Destination Clause. — Warranted free of all average, but to pay a total loss on such portion as does not reach its destina- tion. Warranted free of all average, but to pay a total loss on such portion as does not reach its destination in the vessel named in the policy. Detention Clause. — See Freight. Disbursements. — Warranted free of all average. No claim to attach hereto unless the vessel be at total loss constructive or absolute. Fluids Clause. — Subject to particular average, including leakage caused by sea perils if amounting to 3 % each barrel separately insured. Freight — Detention clause. — Warranted free from any claim, consequent on loss of time, whether arising from a peril of the sea or otherwise. DiminisJiing clause. — It is agreed that the amount at risk shall be reduced by one-twelfth for each expired month. Freight Contingency. — On increased value on arrival by pay- ment of freight and/or charges : being against the risk of depreciation by perils insured against only. Total loss and/or loss of part to be deemed on arrival : but to include all risks of craft and/or raft, etc., at destination, and the risk of loss of the whole or part after the freight may have become due. Fruit Clause. — Free of particular average unless vessel be stranded, sunk, burned or in collision, in any, all, or several of which events the insurers are liable for such loss by decay, injury, or damage to the fruit as is occasioned thereby or APPENDIX 399 occurs during or in consequence of delay resulting therefrom, or from the breakage of shaft, loss of blades from propeller, or delay in consequence of derangement or breakage of machinery, rudder and/or stern-post, and the loss amounts to io% after deducting the ordinary loss of 5% in all cases. Glass and China Ware. — Warranted free from any claim, general average excepted, unless caused by the vessel being stranded, sunk, or burnt, or by collision with another ship or vessel. Goods on Deck. — Warranted free from claim for jettison or washing overboard. In and over all. Deck load to be considered as if separately insured. Shipo-wner' s Risk. — To cover only shipowner's liability for total loss, risk of jettison and washing overboard in consequence of being carried on deck. Shipowner's Liability. — This insurance is only against all risks to which shipowners may become liable in consequence of the goods being carried on deck. Grain. — Including all risks of craft to and from the vessel, especially from the vessel when discharging in the river, or in any dock on the Liverpool side of the river to the grain ware- houses : each lighter or craft to be considered a separate risk. Hides. — Each 1000 hides if amounting to 10 per cent. Increased Value. — (a) In the event of any claim arising for general average, this policy to pay only its proportion of any excess that may not be recoverable under the original policies; and in event of the contributory value of the cargo being greater than the total amount insured (including the policies on increased value), this policy to pay only in proportion to the said amount insured, as the amount insured may bear to the contributory value. [b) W^ithout benefit of salvage, and to pay only such proportion of general average (if any) as shall not be recoverable under the original policy or policies. (A " wager" policy.) Increased Value by Payment of Freight. — See Freight Contingency. Indigo. — Each package. Jute — {Calcutta to Dundee). — To pay average if amounting to 5 per cent on each 250 bales. Label Clause. — See Bottled Goods. Loss of Weight Clause on Cargoes of Sugar. — See Sugar. Machinery. — In case of loss or injury to any part of a machine consisting when complete, for sale or use, of several parts, this company shall only be liable for the insured value of the part lost or damaged. Machinery, Small, F.P. A. — (Motor cars, sewing machines, etc.). In the event of breach of the F.P. A. warranty and 400 MARINE INSURANCE claim for loss or injury to machinery (body or equipment), underwriters to be liable only for the cost of repairing or replacing the parts lost or injured, including all charges incidental thereto. Myrabolams. — Each 500 bags. Each ;^ioo value if amounting to 5 per cent. Olive Oil. — Each 10 casks or 5 tuns running landing numbers. Opium. — Each package. Palm Oil. — Each 3 tuns or 5 casks running landing numbers. Passage Money. — Against all costs, charges, and liabilities, the master's penalties excepted, to which the owners or charterers of the ship may be subjected, under the 50th and 52nd sections of the i8lh and 19th Victoria, Cap. 119, entituled The Passengers Act 1S55 ; and under the 14th, 15th, and l6th sections of the 26th and 27lh Victoria, Cap. 51, entituled the Passengers Act Amendment Act 1863, in- cluding the replenishing of the provisions and stores, required by the Act on putting into a port in the United Kingdom ; also the maintenance of the passengers according to the dietary of the Act while the vessel is detained after putting into a foreign port. But it is understood that the company's liability shall not exceed a total loss from any one casualty, and that they shall not be liable for the expense of replenishing the provisions and stores or maintenance as aforesaid, except the putting into port be caused by accident or damage to the ship and not by contrary winds alone. Pepper. — Each 50 bags. Petroleum. — Not liable for leakage unless the vessel be stranded or in collision, or there be a forced discharge of cargo at any intermediate port of distress, and it amount to over 3 per cent on the whole. Profit or Commission. — (a) Warranted free from all average, but to pay a total loss on such packages as do not reach their destination by any conveyance. {d) Sugar. — Warranted free from all average, but to pay a total loss of commission on such part of the sugar as may not reach its destination ; but no claim to be made in respect of wasted or empty bags unless caused by the stranding, sink- ing, or burning of the vessel. Regisiered Post. — Including all risks till delivered to the addressees. Risk to commence from the time receipt for the package is given by the postal authorities to the assured, their bankers, or authorised agents, and to continue until delivered by the postal authorities to the addressees or their representative. Rice — {From Calcutta and Rice Ports, etc.). — On each 50 bags, 100 bags, or 200 bags, according to arrangement. (Rangoon to PV.C.S. America). — Each 2000 bags. APPENDIX 401 Silk. — Each bale. Skins. — Every 3 bales. Each bale, or each ;^loo value. Specie, Shipowner's Liability for Shipments of. — (a) Against ship- owner's liability in connection with carriage of specie herein named, no claim to attach for anything excepted in the Bill of Lading or recoverable by shippers and/or consignees under ordinary form of policy on specie without recourse against shipowners. It is understood and agreed that in case any claim is made against shipowners the same shall not be admitted by the assured until after consultation with and approval of underwriters. {d) This insurance is against all liabilities which the assured may incur as shipowners in respect of shipment, carriage, or delivery of ;^ . . . specie, shipped on board the s.s. . . . , under a bill of lading dated . . . , however such liabilities may arise, and although caused or contributed to by want of fitness or seaworthiness of the ship or her crew or equipment (as to which no warranty is to be implied), or by criminal or other misconduct of any person, though employed by the assured, and although the ship may in any way deviate from or change her voyage. This insurance also covers any loss of contributions by the said cargo to sacrifices, losses, or expenses incurred by the assured which they may be unable to recover in con- sequence of some neglect or default of the assured or their servants. Sugar. — Each 20 baskets or 50 bags. Each 25 baskets or 3CX) bags. Refiner's Clause.— To pay the whole of any claim if amount- ing to $700 on the whole interest, or to pay average if amounting to 7 per cent on each 80 baskets or 240 bags. Refiner's Clause. — Subject to particular average if amounting to $ . . ., and incase of particular average, underwriters to pay for such damage as is found to be attained to the refiner, as shown and determined by the samples of the refiners and those of the assured, provided the same amounts to $ . . .^ Loss of Weight Clause (on cargoes of sugar). — Warranted by the assured free from claim for damages, but this insurance is to pay for actual loss in weight caused by perils insured against if amounting in insured value to $500. In deter- mining the loss in weight on the portion that has been in actual contact with sea -water, 2 per cent is hereby fixed as the increased weight by absorption of moisture, and is to 1 Refiner's Clause. — Franchise subsequent to 1905. Cuba sugar $250, Java sugar $700, or, in both cases, seven per cent per lighter load. " Sugar Trust" franchises : West Indian shipments to U.S.A. $150, „ „ ,, South American „ ,, S200, I) .. ,) Java ., „ S700. For other accounts : Cuba shipments, franchises varying from S150 to $300. 2. P . 402 MARINE INSURANCE be deducted from the net weight delivered of the said sea- damaged portion. (In and after 1905 the franchise was sometimes reduced to $250.) Tallow. — Particular average payable if amounting to 3 per cent upon each package, tierce, or barrel, but claims for leakage and for underweight to be paid only if occasioned by the vessel being stranded, sunk, burnt, or in collision. Tea — China. — To pay average on each 10 chests, 20 half chests, or 40 quarter chests, following landing numbers, but no claim to attach for wet or damp in respect of any package unless the tea therein shall have been in actual contact with sea water. India. — Including risk from tea gardens. Clause as above with the addition, " or river water." Telegraph Cable. — Warranted free from all claim (general average excepted) unless the same be occasioned by the loss, burning, or stranding of the vessel, and to pay only on that portion of the interest which may remain on board at the time of the accident. Tin Plates. — Each 100 boxes. Each 50 boxes. Tobacco. — Average payable on each 10 hogsheads, 10 boxes, 50 bags, or 10 tierces. (American). — In case of particular average to pay the excess of 5 per cent on the value of each 10 hogsheads, following landing numbers. Wood Goods. — In and over all. Including risk of craft *"'*/oi raft to and from the vessel. Each craft ^^jot raft ^"''/or deck load to be deemed a separate insurance. Wool — (Mediterranean and Black Sea). — Each 5 bales. (Cape). — Each bale. (River Plate). — Each 5 bales. (East Itidian). — Each lo bales, running landing numbers. (W.C.S. America). — Each bale. (Australia and New Zealand). — Each bale. APPENDIX N A Selection of Clauses in Occasional Use in Policies on Intei-est of all Kinds Average Only. — Being only to cover the risks excepted in the clause "warranted free from particular average unless the ship or craft be stranded, sunk, or burnt, etc.," but no claim to attach hereto unless it amount to per cent on the whole interest. Bonded Prices — (adjustment). — In case of claim for particular average bonded prices are to be taken as the basis of settle- ment (especially in the case of tea, tobacco, coffee, wine, and spirits imported into this country). See Rules of Practice of Average Adjusters'' Association. Crafp Clause — In all policies on cargo. — Including risk of craft to and from the vessel. Each craft or lighter to be deemed a separate insurance. Grounding — (a) Suez Canal, — Grounding in the Suez Canal not to be deemed a strand, but underwriters to pay any loss or damage which may be proved to have directly resulted therefrom. {b) River Plate. — Grounding in the River Plate (at or above. La Plata) or its tributaries shall not be deemed a strand, (f) Manchester Ship Canal. — Grounding in the Manchester Ship Canal or its connections, or in the River Mersey above Rock Ferry Slip, if occurring on a voyage to or from a point on the Manchester Ship Canal, shall not be deemed to be a strand. {d) River Plate and Manchester Ship Canal. — Grounding in the River Plate (at or above La Plata) or its tributaries shall not be deemed a strand ; nor shall grounding in the Manchester Ship Canal or its connections, nor in the River Mersey above Rock Ferry Slip, if occurring on a voyage to or from a point on the Manchester Ship Canal, ff) Suez Canal, River Plate, and Manchester Ship Canal. — Grounding in the Suez Canal or River Plate (at or above La Plata) or its tributaries shall not be deemed a strand ; nor shall grounding in the Manchester Ship Canal or its connections or in the Iviver Mersey above Rock Ferry Slip, if occurring on a voyage to or from a point on the Manchester Ship Canal. 403 404 MARINE INSURANCE " Inchmaree Clause." — See p. 119. Inland Risk — Outward. — Including all risks of inland convey- ance to place of shipment and of fire in transit, and whilst awaiting shipment in docks, warehouses, or elsewhere. Inward. — Including risks per inland conveyances from port of discharge to destination. Manchester outward. — Including the risk from Manchester to place of shipment by railway ^'^/or other conveyance, and of fire in transit, and whilst waiting in docks, warehouses, or elsewhere. Loss BEFORE DECLARATION. — In event of loss prior to declara- tion to be valued at invoice cost, adding charges and per cent. Machinery Negligence Clause. — See Inchmaree Clause, p. 119. Negligence Clause. — It is agreed that the assured shall not be prejudiced by the insertion in the bill of lading of the following clause : — The act of God, perils of the sea, fire, barratry of the master and crew, enemies, pirates, thieves, arrest and restraint of princes, rulers, and people, collisions, stranding, and other accidents of navigation excepted, even when occasioned by the negligence, default, or error in judgment of the pilot, master, mariners, or other servants of the shipowner. Same Ownership or \ Sister Ship Clause. P^^ P- ^53- Total Loss only — (See also Disbursements). — Being only against the risk of total loss. Being only against the risk of total loss of the vessel. Warranted free of all average, but to pay a total loss on such portion of the interest as does not reach its destination. Warranted free of all average, but to pay a total loss on such portion as does not reach its destination in the vessel named in the policy. Trading Clause. — Outward cargo to be deemed homeward in- terest twenty-four hours after arrival at first port or place of trade. War Risk (American Clause). — It is agreed that this insurance covers the risk of capture, seizure, destruction, or damage by men-of-war, by letters of mart, by takings at sea, arrests, re- straints, detainments and acts of kings, princes, and people, authorised by and in prosecution of hostilities between belli- gerent nations ; also warranted not to abandon in case of seizure, capture, or detention until after condemnation of the property insured ; nor until ninety days after notice of the said condemnation is given to this company. Also warranted not to abandon in case of blockade and free of claim for loss or expense in consequence thereof or of any attempt to evade blockade, but in event of blockade to be at liberty to proceed to an open port and there end voyage. APPENDIX O MARINE INSURANCE ACT, 1906 6 Edw. VII. Chapter 41 An Act to codify the Law relating to Marine Insurance. [21st December 1906.] Be it enacted by the King's most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows : — Marine Insurance 1. Marine Insurance defitted. — A contract of marine insurance is a contract whereby the insurer undertakes to indemnify the assured, in manner and to the extent thereby agreed, against marine losses, that is to say, the losses incident to marine adventure. 2. Mixed Sea and Land Risks. — (i) A contract of marine insurance may, by its express terms, or by usage of trade, be extended so as to protect the assured against losses on inland waters or on any land risk which may be incidental to any sea voyage. {2) Where a ship in course of building, or the launch of a ship, or any adventure analogous to a marine adventure, is covered by a policy in the form of a marine policy, the provisions of this Act, in so far as applicable, shall apply ihereto ; but, except as by this section provided, nothing in this Act shall alter or affect any rule of law applicable to any contract of insurance other than a contract of marine insurance as by this Act defined. 3 Marine Adventtire and Maritime Perils defined. — (i) Subject to the provisions of this Act, every lawful marine adventure may be the subject of a contract of marine insurance. (2) In particular there is a marine adventure where — {a) Any ship goods or other moveables are exposed to maritime perils. Such property is in this Act referred to as " insurable property " ; 405 406 MARINE INSURANCE (3) The earning or acquisition of any freight, passage money, commission, profit, or other pecuniary benefit, or the security for any advances, loan, or disbursements, is endangered by the exposure of insurable property to maritime perils ; {c) Any liability to a third party may be incurred by the owner of, or other person interested in or responsible for, insurable property, by reason of maritime perils. *' Maritime perils" means the perils consequent on, or incidental to, the navigation of the sea, that is to say, perils of the seas, fire, war perils, pirates, rovers, thieves, captures, seisures, restraints, and detainments of princes and peoples, jettisons, barratry, and any other perils, either of the like kind or which may be designated by the policy. Insurable Interest 4. Avoidance of Wagering or Gaming Contracts. — (1) Every contract of marine insurance by way of gaming or wagering is void. (2) A contract of marine insurance is deemed to be a gaming or wagering contract — (