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Chalmers’ Marine Insurance Act 1906
9781780431253, 9781784513870, 9781784513863

Author / Uploaded
Mackenzie D Chalmers
the late Sir; Simon Rainey; Guy Blackwood; David Walsh

Table of contents :
Preface to Eleventh Edition
Introduction to First Edition of Digest (1901)
Contents
Table of Statutes Cited
List of Cases Cited
The Marine Insurance Act 1906
Marine Insurance
1. Marine insurance defined
2. Mixed sea and land risks
3. Marine adventure and maritime perils defined
Insurable Interest
4. Avoidance of wagering or gaming contracts
5. Insurable interest defined
6. When interest must attach
7. Defeasible or contingent interest
8. Partial interest
9. Reinsurance
10. Bottomry
11. Master's and seamen's wages
12. Advance freight
13. Charges of insurance
14. Quantum of interest
15. Assignment of interest
Insurable Value
16. Measure of insurable value
Disclosure and Representations
17. Insurance is uberrimæ fidei
18. Disclosure by assured
19. Disclosure by agent effecting insurance
20. Representations pending negotiation of contract
21. When contract is deemed to be concluded
The Policy
22. Contract must be embodied in policy
23. What policy must specify
24. Signature of insurer
25. Voyage and time policies
26. Designation of subject-matter
27. Valued policy
28. Unvalued policy
29. Floating policy by ship or ships
30. Construction of terms in policy
31. Premium to be arranged
Double Insurance
32. Double insurance
Warranties etc
33. Nature of warranty
34. When breach of warranty excused
35. Express warranties
36. Warranty of neutrality
37. No implied warranty of nationality
38. Warranty of good safety
39. Warranty of seaworthiness of ship
40. No implied warranty that goods are seaworthy
41. Warranty of legality
The Voyage
42. Implied condition as to commencement of risk
43. Alteration of port of departure
44. Sailing for different destination
45. Change of voyage
46. Deviation
47. Several ports of discharge
48. Delay in voyage
49. Excuses for deviation or delay
Assignment of Policy
50. When and how policy is assignable
51. Assured who has no interest cannot assign
The Premium
52. When premium payable
53. Policy effected through broker
54. Effect of receipt on policy
Loss and Abandonment
55. Included and excluded losses
56. Partial and total loss
57. Actual total loss
58. Missing ship
59. Effect of transhipment etc
60. Constructive total loss defined
61. Effect of constructive total loss
62. Notice of abandonment
63. Effect of abandonment
Partial Losses (including Salvage and General Average and Particular Charges)
64. Particular average loss
65. Salvage charges
66. General average loss
Measure of Indemnity
67. Extent of liability of insurer for loss
68. Total loss
69. Partial loss of ship
70. Partial loss of freight
71. Partial loss of goods, merchandise etc
72. Apportionment of valuation
73. General average contributions and salvage charges
74. Liabilities to third parties
75. General provisions as to measure of indemnity
76. Particular average warranties
77. Successive losses
78. Suing and labouring clause
Rights of Insurer on Payment
79. Right of subrogation
80. Right of contribution
81. Effect of under-insurance
Return of Premium
82. Enforcement of return
83. Return by agreement
84. Return for failure of consideration
Mutual Insurance
85. Modification of Act in case of mutual insurance
Supplemental
86. Ratification by assured
87. Implied obligations varied by agreement or usage
88. Reasonable time etc, a question of fact
89. Slip as evidence
90. Interpretation of terms
91. Savings
94. Short title
First Schedule
Form of policy
Rules for construction of policy
Appendix I – Insurance Act 2015
Appendix II – The Institute Clauses
Appendix III – York-Antwerp Rules 2016
Appendix IV – Rules of Practice
Appendix V – No. 94 – Order for Production of Documents in Marine Insurance Claim
Appendix VI – The Marine Insurance Act 1906 (1st Edition) by Sir MD Chalmers and Douglas Owen, Published 1907
Index

Citation preview

Chalmers’ Marine Insurance Act 1906

Editors of Previous Editions First Edition 1901: M D Chalmers, CSI, and Douglas Owen Second Edition 1913: Sir M D Chalmers, KCB, CSI, and Douglas Owen Third Edition 1922: Sir M D Chalmers, KCB, CSI, and J G Archibald, MA Fourth Edition 1932: J G Archibald, MA, assisted by Charles Stevenson, BA Fifth Edition 1956: J Milnes Holden, LLB, PhD, AIB, and C B Drover, ACIS, AIB Sixth Edition 1966: E R Hardy Ivamy, LLB, PhD Seventh Edition 1971: E R Hardy Ivamy, LLB, PhD, LLD Eighth Edition 1976: E R Hardy Ivamy, LLB, PhD, LLD Ninth Edition 1983: E R Hardy Ivamy, LLB, PhD, LLD Tenth Edition 1993: E R Hardy Ivamy, LLB, PhD, LLD

Chalmers’ Marine Insurance Act 1906 by the late Sir Mackenzie D Chalmers, KCB, CSI, Draftsman of the Act

Eleventh Edition

Simon Rainey MA (Cantab); Lic. Sp, Dr. Eur (Bruxelles); of Lincoln’s Inn, one

of her Majesty’s Counsel; a Recorder of the Crown Court; a deputy Judge of the High Court of Justice (Queen’s Bench Division and Commercial Court); a Visiting Fellow, Institute of International Shipping and Trade Law (University of Swansea); an Honorary Professor of Business, Law and Economics (University of Swansea); a Fellow of the Chartered Institute of Arbitrators.

Guy Blackwood LLM (UCL); of Inner Temple, one of her Majesty’s Counsel. David Walsh BA (Oxon); LLM (UCL); of Inner Temple, barrister.

BLOOMSBURY PROFESSIONAL Bloomsbury Publishing Plc 41–43 Boltro Road, Haywards Heath, RH16 1BJ, UK BLOOMSBURY and the Diana logo are trademarks of Bloomsbury Publishing Plc Copyright © Bloomsbury Professional 2019 All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or any information storage or retrieval system, without prior permission in writing from the publishers. While every care has been taken to ensure the accuracy of this work, no responsibility for loss or damage occasioned to any person acting or refraining from action as a result of any statement in it can be accepted by the authors, editors or publishers. All UK Government legislation and other public sector information used in the work is Crown Copyright ©. All House of Lords and House of Commons information used in the work is Parliamentary Copyright ©. This information is reused under the terms of the Open Government Licence v3.0 (http://www.nationalarchives.gov.uk/doc/opengovernment-licence/version/3) except where otherwise stated. All Eur-lex material used in the work is © European Union, http://eur-lex.europa.eu/, 1998–2019. British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library. ISBN: HB: ePDF: ePub:

978 1 78043 125 3 978 1 78451 386 3 978 1 78043 644 9

Typeset by Compuscript Ltd, Shannon To find out more about our authors and books visit www.bloomsburyprofessional.com. Here you will find extracts, author information, details of forthcoming events and the option to sign up for our newsletters

PREFACE TO ELEVENTH EDITION

The last edition of Chalmers on the Marine Insurance Act 1906 was the tenth, published as long ago as 1993 (and reprinted in 2007). It has a long and distinguished pedigree. The core of the text first saw light as the Marine Insurance Bill, drafted by Mackenzie Chalmers with assistance from Douglas Owen, and first presented to Parliament, by Lord Herschell, in 1894. In that form, the Bill was accompanied by the Lloyd’s SG policy (still in its 1779 form, albeit minus the opening words ‘In the name of God, Amen’, replaced with what the late Donald O’May described as ‘the less fervent phrase “Be it known that”’) and the case law based Rules for Construction of Policy. The Bill represented the third great codification of English commercial law undertaken by Chalmers, following his drafting of the Bills of Exchange Act 1882 and the Sale of Goods Act 1893. The impetus for the codification of marine insurance law appears to have sprung not only from the late Victorian desire to bring certainty and order to important areas of commercial law which had acquired a settled understanding in the reported cases (and which may have been spearheaded by Joseph Chamberlain when President of the Board of Trade from 1880 to 1885 and by Herschell himself, later Lord Chancellor in 1886 and from 1892 to 1895) but also from initiatives by the leading insurance companies of the day. Robert Owen, a barrister and the secretary of the Alliance Marine and General Insurance Company Ltd undertook a project of collection and compilation of the various policies, clauses and other wordings used by marine insurers in London and in Liverpool. He published his work in 1883 under the title Marine Insurance: Notes and Clauses. Owen’s work encouraged the formation of the Institute of London Underwriters (1884) and the adoption by it of a systematic approach to drawing up a set of clauses to be used in conjunction with (and in certain respects to amend) the Lloyd’s SG policy: the Institute Clauses. The Bill fared less well in the choppy waters of Parliament than Chalmers’ other exercises in codification. After much discussion in a special committee of interested parties set up by Herschell, it was shelved after Herschell’s unexpected death in 1899. An attempt to enact it in 1899 saw it pass the House of Lords under Lord Halsbury’s steerage only to be blocked in the House of Commons. This led Chalmers to prepare a digest using the text of the Bill together with case notes and discussion of the principles, amplified with illustrations of the principles from over 2,000 reported cases, and incorporating comments and criticisms from Lord Justice Mathew (founder of the Commercial Court) ‘and other friends’. Chalmers’ previous codification work on the Bills of Exchange and Sale of Goods Act had always been preceded by the drafting of a case law digest with statement of principles with the drafting of the bill then following. Perhaps Chalmers felt that the digest helped to

v

Preface to Eleventh Edition

demonstrate better how the codification simplified a mass of case law and was a necessary adjunct to obtaining Parliamentary support. The Ur-text of Chalmers as we know it today was published as A Digest of the Law relating to Marine Insurance in 1901. It was published as a joint work by himself and Robert Owen although the ‘main responsibility for the purely legal part’ was stated to be Chalmers’. A second edition of Chalmers and Owen’s Digest was published in 1903. In 1903 Chalmers wrote an article for the Law Quarterly Review (19 LQR 10) under the heading Codification of Mercantile Law deploring that there was difficulty in getting any measure of law reform passed in the then current state of the Commons, and with a tantalising footnote that ‘one obstinate member’ was the source of the problem. The Bill was finally enacted in 1906. A new edition of Chalmers and Owen’s Digest was promptly prepared and published as The Marine Insurance Act 1906 in 1907. Chalmers was knighted shortly afterwards. And so the current work began its long life. The 1906 Act has not perhaps received the plaudits that Chalmers’ other codifications rapidly acquired. Frank Mackinnon KC (later Mackinnon LJ) in the entry for Chalmers in the Dictionary of National Biography 1922–1930 put the matter politely: ‘the subject matter is not so amenable to successful treatment in a code as is that of the other two, and for that reason only, the Act is less valuable than its predecessors’. Anthony Diamond QC in 1986 was more trenchant: ‘far less successful’ [1986] LMCLQ 25 at 26. However, the form adopted by Chalmers in this book has certainly stood the test of time as a point of immediate reference, section by section, to the relevant case law and underlying principles behind the provision and explaining how it has been applied and interpreted. The present editors, in taking over the privilege of editing this work, have set as their goal Chalmers’ own. He described the objects of the text accompanying the provisions of the Marine Insurance Act 1906) as being: ‘to support [the sections of the 1906 Act], where possible, by reference to leading cases, or cases containing good expositions of principle by eminent commercial judges [and] Where rules of law seem difficult to apply, illustrations from decided cases are inserted after the section to show the application of the abstract propositions to concrete states of fact.’ We have tried to do likewise. The text of Chalmers, having stood still since 1993, has sadly fallen into the ever-growing oubliette of legal texts. A 2007 reprint could not arrest its slide into obscurity given that by 2007 the work had already become seriously out of date. Our task has therefore required significant revision and rewriting to make the text up-to-date and relevant once more to practitioners. But we have modelled ourselves on the terse but informative style of Chalmers himself, which was largely, but not wholly, preserved in the four modern editions under the editorship of Professor Hardy Ivamy. The title of the work remains unashamedly Chalmers’ Marine Insurance Act 1906. An in-depth study of the major changes to insurance law and to the central provisions

vi

Preface to Eleventh Edition

of the 1906 Act on disclosure and good faith made by the Insurance Act 2015 are beyond the scope of this book, whose purpose remains that of a commentary on the now reduced but still substantial body of provisions of the 1906 Act. For those seeking a detailed commentary on the new 2015 Act, reference may be made to The Insurance Act 2015: A New Regime for Commercial and Marine Insurance Law, edited by Professors Malcolm Clarke and Baris Soyer (Informa 2017) to which two of the editors (Simon Rainey and David Walsh) were contributors. We have, however, included a short section providing our observations on the 2015 Act and we have also included the explanatory notes which are to be read with it. We have made three principal changes to Chalmers. In the tenth edition, a very short commentary was included on the principal Institute Clauses. We have decided that this was not likely to be useful part of the book and was at odds with the purpose of a detailed annotated commentary on the sections of the 1906 Act. Since 1993 when the text was written, other textbooks have set out a far more valuable and compendious analysis of these Clauses (see eg, Arnould, Law of Marine Insurance and Average, 19th edn, Chapter 23, pp 1117 to 1230). We have however retained appendices setting out the text of the Institute Clauses and other useful reference sources. Secondly, the value of Chalmers’ original work is reflected in the fact that the starting point in considering the meaning and purpose of a provision of the 1906 Act is still very often the case law which Chalmers sought to distil into the particular codified proposition and his original commentary on it. We thought it would therefore be useful to practitioners to have in one volume, not only a modern annotated commentary on the 1906 Act but also Chalmers’ original text as an appendix. We considered whether we should take as the original text the 1901 Digest but on reflection have decided that the more useful original text is the third reworking of the Digest which formed the first, 1907, edition of The Marine Insurance Act 1906. The reason is simple: as Chalmers himself recognised, the text of the Bill set out in the first edition of the Digest was the subject of amendments and changes as it progressed (slowly) to the statute book. Chalmers (and Owen) revised the commentary and text in drawing up their considered views on the Act, in the light of any changes made to the original draft Bill. We think it is useful to have that version as a ready reference source and for it to be made much more widely available. If nothing else, it may relieve the kindly librarians of the Middle and Inner Temple libraries of the task of retrieving it from the dusty and dimly-lit shelves of the basement collections. Thirdly, we have included a concise summary of our observations on the Insurance Act 2015. We would like to thank the publishers for their patient forbearance and unfailing support and also for agreeing to include ‘Chalmers 1907’ in this new ‘Chalmers 2018’. We have endeavoured to state the law as at 3 December 2018. S.P.R. G.A.B. D.P.W.

vii

viii

INTRODUCTION TO FIRST EDITION OF DIGEST (1901)

The large-type propositions of this Digest are taken, with a few slight corrections, and with the necessary verbal alterations (such as the substitution of the indicative for the imperative), from the clauses of the Marine Insurance Bill, which was introduced in the House of Lords in 1894, 1895, 1896 and 1899. The object of that Bill was to reproduce as exactly as possible the existing law, without making any attempt to amend it. Lord Herschell, who originally took charge of the Bill, was strongly of opinion that a codifying Bill, in its inception, ought to be a mere reproduction of existing law. If amendments in the law are made in the initial stage, the whole Bill becomes controversial. Any amendment which seems desirable should be deliberately inserted by the Legislature when the Bill is under consideration. In some instances, of course, the Bill has to deal with questions where the law is unsettled, and the framers of the Bill must decide what they believe the law to be. In the Digest, propositions which appear to be unsettled law are included in square brackets, and the doubt is dealt with in the notes. Again, in one or two instances the Lords Select Committee, which partially examined the Bill, introduced some small amendment in the law. In those cases the Digest reverts to the original draft, and the point is mentioned in the notes. The law of marine insurance rests almost entirely upon common law. Only a few isolated points are dealt with by statute. The reported cases are very numerous, being over 2,000 in number. On some points there is a plethora of authority. On other points of apparently equal importance the decisions are meagre, and not always satisfactory. Some important questions are still untouched by authority, and the rule depends on recognised commercial usage. Again, many of the older cases turn upon commercial conditions which are now obsolete. The subject, therefore, is not an easy one to deal with in a brief Digest. It would be altogether beyond the scope of this Digest to attempt even to refer to the great bulk of decided cases, much more so to endeavour to criticise them in detail. The objects of the Digest are twofold: first, to state the main principles of marine insurance law in brief consecutive propositions; and secondly, to support those propositions, where possible, by references to leading cases, or cases containing good expositions of principle by eminent commercial judges. Each case is dated, and if a later case reviews previous cases, only a reference to the later case is given. Where rules of law seem difficult to apply, illustrations drawn from decided cases are inserted after the section to show the application of the abstract proposition to concrete states of fact. After the list of cases referred to, there is added a list of important cases, which have been overruled, doubted, and explained. This list has no pretensions to completeness, but may be useful as far as it goes. ix

Introduction to First Edition of Digest (1901)

Occasional reference is made to foreign codes by way of illustration, but no attempt has been made to compare the English rules systematically with any foreign code. The Marine Insurance Bill was first introduced by Lord Herschell in 1894. Its history up to the present time (1901) sufficiently appears from the following extract from the Memorandum attached to it, viz:— ‘The Bill is founded on the Bill which was introduced in 1894. Its provisions and suggestions received from various sources have been carefully considered by a Committee appointed by the late Lord Chancellor (Lord Herschell). The Committee met at first under the presidency of the late Attorney-General (Sir R T Reid QC), and afterwards under the presidency of Lord Herschell. It consisted of Mr John Glover and Mr Milburn, representing the shipowners, Mr Charles McArthur (Chairman of the Liverpool Chamber of Commerce), and Mr Hogg representing the average adjusters, and Mr J E Street, Deputy-Chairman of Lloyd’s, Mr Douglas Owen, of the Alliance Marine and General Assurance Company, Mr William Walton (legal adviser to Lloyd’s), representing the underwriters and insurance companies, Mr C B Vallence, Chairman of the Liverpool Underwriters’ Association, and the draftsman, Mr Chalmers.* ‘In dealing with rules of law, which may be modified by the stipulations of the parties, it is to be borne in mind that the certainty of the rule laid down is of more importance than its theoretical perfection. As Wiles J said in 1786, “In all commercial transactions the great object is certainty; it will therefore be necessary for the Court to lay down some rule, and it is of more consequence that the rule should be certain than whether it is established one way or the other.” (Lockyer v Offley 1 T R at 259. See, too, Sailing Ship Blairmore v Macredie [1898] AC at 597, per Lord Halsbury.) What mercantile men require is a clear rule to provide for cases where the parties have either formed no intention or have failed to express it clearly. Where the rule of law is certain, the parties know when to stipulate and what to stipulate for.’ The future which awaits the Bill is uncertain, Mercantile opinion is in favour of codification, but probably the balance of legal opinion is against it. As along as freedom of contract is preserved, it suits the man of business to have the law stated in black and white. The certainty of the rule laid down is of more importance than its nicety. It is cheaper to legislate than to litigate; moreover, while a moot point is being litigated and appealed, pending business is embarrassed. The lawyer, on the other hand, feels cramped by codification. Discussions on the wording of the Act in *

x

After Lord Herschell’s death, Lord Chancellor Halsbury again took up the Bill, and introduced it in the House of Lords in 1899, but did not proceed with it. Further criticisms on the Bill were obtained from Lord Justice Mathew, the Right Hon Arthur Cohen KC, and other friends, and the Bill was again introduced in 1900. Lord Halsbury then appointed another committee, on which the underwriters, shipowners and average adjusters were represented, and, presiding himself, went through the Bill with them clause by clause. After this conference the Bill was passed through the Lords, but it was always blocked in the House of Commons until, in 1906, it was taken up by Lord Chancellor Loreburn in conjunction with Lord Halsbury. In the Commons the Bill was sent to Grand Committee, and was in the charge of the Solicitor-General (Lord Robson). A good many amendments were made in committee and on the report stage, and most of them were agreed to, with occasional modification, when the Bill returned to the Lords.

Introduction to First Edition of Digest (1901)

question have to take the place of discussions of principles. No code can provide for every case that may arise, or always use language which is absolutely accurate. The cases which come before lawyers are the cases in which the code is defective. In so far as it works well it does not come before them. Every man’s view of a question is naturally coloured by his own experience, and a lawyer’s view of commerce is perhaps affected by the fact that he sees mainly the pathology of business. He does not often see its healthy physiological action. If the Bill passes, this Digest may be useful as showing the foundations on which it was built up. If it does not pass, it is hoped that the Digest may be useful as a brief and succinct exposition of the existing law. I may add that I am mainly responsible for the purely legal part of this Digest, though I have had throughout the benefit of the criticisms of my colleague, Mr Douglas Owen. MDC January 1901

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CONTENTS

Preface to Eleventh Edition Introduction to First Edition of Digest (1901) Table of Statutes Cited List of Cases Cited THE MARINE INSURANCE ACT 1906 Marine Insurance 1. Marine insurance defined 2. Mixed sea and land risks 3. Marine adventure and maritime perils defined Insurable Interest 4. Avoidance of wagering or gaming contracts 5. Insurable interest defined 6. When interest must attach 7. Defeasible or contingent interest 8. Partial interest 9. Reinsurance 10. Bottomry 11. Master’s and seamen’s wages 12. Advance freight 13. Charges of insurance 14. Quantum of interest 15. Assignment of interest Insurable Value 16. Measure of insurable value Disclosure and Representations 17. Insurance is uberrimæ fidei 18. Disclosure by assured 19. Disclosure by agent effecting insurance 20. Representations pending negotiation of contract 21. When contract is deemed to be concluded The Policy 22. Contract must be embodied in policy 23. What policy must specify 24. Signature of insurer 25. Voyage and time policies 26. Designation of subject-matter 27. Valued policy

v ix xvii xxi

1 3 4 8 10 13 15 16 16 18 18 19 20 20 21 22 24 27 34 35 38 40 41 41 42 43 45

xiii

Contents

28. Unvalued policy 29. Floating policy by ship or ships 30. Construction of terms in policy 31. Premium to be arranged Double Insurance 32. Double insurance Warranties etc 33. Nature of warranty 34. When breach of warranty excused 35. Express warranties 36. Warranty of neutrality 37. No implied warranty of nationality 38. Warranty of good safety 39. Warranty of seaworthiness of ship 40. No implied warranty that goods are seaworthy 41. Warranty of legality The Voyage 42. Implied condition as to commencement of risk 43. Alteration of port of departure 44. Sailing for different destination 45. Change of voyage 46. Deviation 47. Several ports of discharge 48. Delay in voyage 49. Excuses for deviation or delay Assignment of Policy 50. When and how policy is assignable 51. Assured who has no interest cannot assign The Premium 52. When premium payable 53. Policy effected through broker 54. Effect of receipt on policy Loss and Abandonment 55. Included and excluded losses 56. Partial and total loss 57. Actual total loss 58. Missing ship 59. Effect of transhipment etc 60. Constructive total loss defined 61. Effect of constructive total loss 62. Notice of abandonment 63. Effect of abandonment Partial Losses (including Salvage and General Average and Particular Charges) 64. Particular average loss 65. Salvage charges 66. General average loss

xiv

48 48 49 50 51 53 56 58 60 61 61 62 66 67 70 71 71 72 73 75 75 77 78 80 81 81 83 83 93 94 97 97 98 105 106 111 114 115 117

Contents

Measure of Indemnity 67. Extent of liability of insurer for loss 68. Total loss 69. Partial loss of ship 70. Partial loss of freight 71. Partial loss of goods, merchandise etc 72. Apportionment of valuation 73. General average contributions and salvage charges 74. Liabilities to third parties 75. General provisions as to measure of indemnity 76. Particular average warranties 77. Successive losses 78. Suing and labouring clause Rights of Insurer on Payment 79. Right of subrogation 80. Right of contribution 81. Effect of under-insurance Return of Premium 82. Enforcement of return 83. Return by agreement 84. Return for failure of consideration Mutual Insurance 85. Modification of Act in case of mutual insurance Supplemental 86. Ratification by assured 87. Implied obligations varied by agreement or usage 88. Reasonable time etc, a question of fact 89. Slip as evidence 90. Interpretation of terms 91. Savings 94. Short title First Schedule Form of policy Rules for construction of policy APPENDIX I – INSURANCE ACT 2015

121 123 124 126 127 129 129 130 131 132 133 135 139 143 144 145 145 146 149 150 151 152 153 153 154 158 158 159 163

APPENDIX II – THE INSTITUTE CLAUSES 219 (1) Hull Clauses Time220 Voyage230 War and Strikes (Time) 239 War and Strikes (Voyage) 241 (2) Freight Clauses Time243 Voyage250 War and Strikes (Time) 254

xv

Contents

(3) Cargo Clauses (A)257 (B)262 (C)267 War272 Strikes277 APPENDIX III — YORK-ANTWERP RULES 2016

283

APPENDIX IV — RULES OF PRACTICE

295

APPENDIX V — No. 94 – ORDER FOR PRODUCTION OF DOCUMENTS IN MARINE INSURANCE CLAIM

315

APPENDIX VI — THE MARINE INSURANCE ACT 1906 (1st EDITION) BY SIR MD CHALMERS AND DOUGLAS OWEN, PUBLISHED 1907317 Index

xvi

481

Table of Statutes References in this Table to Statutes are to Halsbury’s Statutes of England (Fourth Edition) showing the volume and page at which the annotated text of an Act may be found. page Admiralty Court Act 1840 s 6�� 12 Bills of Exchange Act 1882 (5 Statutes 334) s 91�� 42 Civil Liability (Contribution) Act 1978�� 143 Companies Act 1862�� 154 Companies Act 1985 (8 Statutes 104):�� 149 Companies Act 2006�� 157 Consumer Insurance (Disclosure and Representations) Act 2012�� 28, 34, 36 s 6�� 59 s 11(2)�� 28, 34, 36 Customs Consolidation Act 1853�� 68 Finance Act 1901 s 11�� 465 Finance Act 1959 (41 Statutes 248) Sch 8 Pt II�� 39, 41, 43 Financial Services and Markets Act 2000 s 26–28�� 147 Forgery and Counterfeiting Act 1981 (12 Statutes 753) s 1�� 2 Gambling Act 2005�� 9, 148 s 335�� 9 Insurance Act 2015�� 163 s 1�� 163 s 2, 3�� 164 s 4�� 166 s 5�� 168 s 6, 7�� 169 s 8�� 170 s 9�� 59, 171 s 10�� 172 s 10(7)(a)�� 53

page Insurance Act 2015 – contd s 10(7)(b)�� 56 s 11, 12�� 174 s 13�� 175 s 13A�� 122, 144, 176 s 14�� 177 s 14(3)�� 24 s 15, 16�� 178 s 16A�� 179 s 17, 18�� 180 s 19�� 181 s 20�� 183 s 21�� 183 s 21(2)�� 28, 34, 36 s 22, 23�� 185 Sch 1 para 1–5�� 186 para 6�� 187 para 7–11�� 188 para 12�� 189 Sch 2 para 1, 2�� 190 para 3–5�� 191 para 6�� 192 Interpretation Act 1978 (41 Statutes 899)�� 158 s 9�� 157 s 23(3)�� 157 Law of Property Act 1925 (37 Statutes 72) s 136�� 80 Law Reform (Frustrated Contracts) Act 1943 (11 Statutes 215) s 1�� 148 s 2(5)�� 148 Limitation Act 1980 (24 Statutes 648)�� 106, 118 Lloyd’s Act 1871 Schedule r 4�� 42

xvii

Table of Statutes page Marine and Aviation Insurance (War Risks) Act 1952 (22 Statutes 73) s 7�� 40 Marine Insurance Act 1745�� 8, 16 Marine Insurance Act 1788�� 41 Marine Insurance Act 1906 (22 Statutes 15)�� 16, 17, 25, 112, 152 s 1�� 1, 17, 22, 154, 347 s 2�� 3, 154, 348 s 3�� 4, 12, 68, 154, 349 s 4�� 3, 8, 9, 16, 68, 114, 149, 352 s 4(2)�� 148 s 5�� 9, 10, 353 s 6�� 9, 12, 13, 356 s 7�� 9, 12, 15, 18, 357 s 8�� 9, 12, 16, 358 s 9�� 9, 12, 15, 16, 359 s 10�� 9, 12, 18, 359 s 11�� 9, 12, 18, 360 s 12�� 9, 12, 19, 23, 154, 361 s 13�� 9, 12, 20, 23, 361 s 14�� 9, 12, 20, 21, 362 s 15�� 9, 12, 14, 21, 80, 151, 363 s 16�� 20, 22, 23, 48, 53, 122, 123, 129, 144, 363 s 16(2)�� 2, 127, 154 s 16(3)�� 2, 128, 129 s 17�� 24, 25, 26, 28, 365 s 18�� 24, 26, 27, 28, 29, 62, 366 s 18(1)�� 29 s 18(3)(b), (c)�� 25 s 18(4)�� 29 s 19�� 24, 28, 34, 35, 368 s 20�� 24, 35, 36, 369 s 20(4)�� 55 s 20(7)�� 36 s 21�� 2, 31, 38, 40, 153, 370 s 22�� 2, 39, 40, 81, 154, 371 s 23�� 39, 40, 41, 372 s 23(1)�� 151 s 24�� 40, 41, 81, 373 s 25�� 42, 373 s 25(1)�� 42 s 26�� 16, 18, 43, 51, 374 s 27�� 45, 51, 52, 123, 127, 375 s 27(2)�� 2 s 27(4)�� 103 s 28�� 2, 48, 123, 127, 378 s 29�� 47, 48, 378 s 29(4)�� 47 s 30�� 49, 379

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page Marine Insurance Act 1906 (22 Statutes 15) – contd s 31�� 50, 74, 78, 380 s 31(2)�� 56 s 32�� 20, 132, 140, 144, 148, 380 s 33�� 10, 36, 51, 53, 382 s 33(3)�� 53, 54, 61 s 34�� 10, 36, 51, 54, 55, 56, 383 s 34(3)�� 56, 58 s 35�� 10, 36, 51, 55, 58, 384 s 36�� 10, 36, 51, 55, 60, 61, 385 s 37, 38�� 10, 36, 51, 55, 61, 386 s 39�� 10, 36, 51, 55, 59, 62, 64, 386 s 40�� 10, 36, 51, 55, 66, 154, 390 s 40(2)�� 67 s 41�� 5, 6, 10, 36, 51, 55, 57, 60, 67, 68, 70, 390 s 42�� 43, 70, 76, 152, 391 s 43�� 43, 71, 72, 392 s 44�� 43, 71, 72, 393 s 45�� 43, 51, 72, 393 s 46�� 43, 51, 72, 73, 394 s 47�� 43, 75, 395 s 48�� 43, 70, 75, 76, 395 s 49�� 43, 74, 77, 396 s 49(1)(b)�� 78 s 50�� 14, 21, 78, 397 s 50(1)�� 15 s 50(2)�� 154 s 51�� 14, 21, 80, 397 s 52�� 2, 81, 145, 398 s 53�� 2, 81, 145, 399 s 53(1)�� 82 s 54�� 2, 83, 400 s 55�� 2, 83, 84, 400 s 55(2)�� 84, 135, 138 s 55(2)(a)�� 86, 90, 135, 136 s 55(2)(b)�� 7, 86 s 55(2)(c)�� 86 s 56�� 2, 93, 404 s 56(3)�� 106 s 56(4)�� 154 s 56(5)�� 94 s 57�� 2, 93, 94, 96, 405 s 57(1)�� 105 s 58�� 2, 97, 152, 406 s 59�� 2, 97, 406 s 60�� 2, 7, 23, 93, 95, 98, 112, 126, 154, 407

Table of Statutes page Marine Insurance Act 1906 (22 Statutes 15) – contd s 60(1)�� 101 s 60(2)�� 126 s 60(2)(i)�� 101 s 60(2)(ii)�� 103 s 61�� 2, 105, 107, 111, 411 s 62�� 2, 94, 106, 412 s 62(6)�� 107 s 62(7)�� 9 s 62(9)�� 16 s 63�� 2, 106, 106, 107, 111, 112, 140, 414 s 63(1)�� 112 s 64�� 2, 114, 132, 416 s 64(2)�� 116, 132 s 65�� 2, 115, 130, 132, 417 s 65(1)�� 116 s 65(2)�� 115, 137 s 66�� 2, 89, 117, 121, 130, 132, 418 s 66(1)�� 116 s 66(4)�� 120 s 67�� 23, 121, 122, 144, 421 s 68�� 23, 48, 122, 123, 144, 422 s 69�� 48, 115, 123, 124, 144, 423 s 69(1)�� 297 s 69(3)�� 124, 125, 126 s 70�� 48, 126, 144, 424 s 71�� 48, 93, 115, 127, 129, 132, 144, 424 s 71(1), (2), (4)�� 154 s 72�� 93, 129, 132, 144, 426 s 73�� 119, 129, 301, 426 s 73(2)�� 116 s 74�� 7, 122, 130, 132, 144, 427 s 75�� 128, 129, 131, 428 s 75(2)�� 46, 47 s 76�� 94, 115, 132, 428 s 76(1)�� 93 s 76(2)�� 115 s 77�� 123, 125, 126, 133, 431 s 77(2)�� 48 s 78�� 89, 115, 117, 122, 132, 134, 135, 431 s 78(2)�� 137 s 78(4)�� 4, 90, 114, 135, 136, 137 s 79�� 10, 21, 48, 53, 106, 107, 111, 113, 139, 434 s 79(1)�� 110, 139, 141

page Marine Insurance Act 1906 (22 Statutes 15) – contd s 80�� 51, 53, 143, 436 s 80(2)�� 154 s 81�� 48, 51, 107, 111, 130, 140, 142, 144, 437 s 82�� 79, 145, 437 s 83�� 79, 145, 437 s 84�� 9, 52, 79, 146, 438 s 84(3)(f)�� 143 s 85�� 2, 149, 440 s 85(2)�� 50 s 86�� 14, 21, 32, 39, 41, 150, 441 s 87�� 151, 441 s 87(1)�� 81 s 88�� 50, 70, 75, 110, 152, 443 s 89�� 2, 39, 40, 153, 443 s 90�� 7, 23, 66, 153, 443 s 91�� 43, 58, 119, 154, 444 s 91(2)�� 6, 68, 132 s 92�� 158, 446 s 93�� 158, 447 s 94�� 2, 158, 447 Sch 1�� 49, 50, 158, 449 r 1�� 15, 23, 62, 159, 452 r 2�� 70, 160, 452 r 3�� 70, 154, 160, 452 r 4�� 160, 453 r 5�� 6, 160, 453 r 6�� 74, 160, 454 r 7�� 89, 160, 454 r 8, 9�� 161, 455 r 10�� 103, 104, 161, 456 r 11, 12�� 161, 457 r 13�� 115, 161, 457 r 14�� 161, 458 r 15�� 23, 161, 458 r 16�� 23, 162, 459 r 17�� 7, 19, 44, 154, 162, 459 Sch 2�� 459 Marine Insurance (Gambling Policies) Act 1909 (22 Statutes 66)�� 8 Merchant Shipping Act 1854 s 183�� 19 Merchant Shipping Act 1894 (39 Statutes 424) s 506�� 465 s 544, 557–564�� 117

xix

Table of Statutes page Merchant Shipping Act 1995 s 38�� 19 s 224�� 78 Merchant Shipping (Salvage) Act 1916�� 117 Policies of Marine Assurance Act 1868 s 1, 2�� 79 Revenue Act 1903 s 8�� 466 Revenue (No 2) Act 1864 s 1�� 16 Sale of Goods Act 1893 s 20�� 464 s 32�� 465 Sale of Goods Act 1979 (39 Statutes 106) s 8�� 50 s 20�� 15 s 32�� 15 s 56�� 152 s 61(2)�� 154 Stamp Act 1891�� 154 s 91, 92�� 461 s 93–95�� 462

xx

page Stamp Act 1891 – contd s 96, 97�� 463 Sch 1�� 464 Summer Time Act 1972 (45 Statutes 641)�� 155 s 1(2)�� 157 Supreme Court Act 1981 (11 Statutes 966) s 35A�� 111 s 69(5)�� 157 s 151(1)�� 154 Third Parties (Rights against Insurers) Act 2010 s 1�� 131 Trading with the Enemy Act 1939 (48 Statutes 808) s 2�� 157 BRITISH COLUMBIA Marine Insurance Act (RSC c 231)�� 70 INDIA Marine Insurance Act 1963�� 142 Transfer of Property Act 1882�� 142

List of Cases A. page A-G v Ard Coasters Ltd, Liverpool & London War Risks Insurance Association Ltd v SS Richard de Larrinaga Marine Underwriters see Richard de Larrinaga, SS (Owners) v Admiralty Comrs Adam SS Co Ltd v London Assurance Corpn (1914)�� 27 Adams v Mackenzie (1863)�� 94 Adelaide SS Co v R (1922)�� 92 Admiralty Comrs v Ropner & Co Ltd (1917)�� 2 African Merchants Co v British & Foreign Marine Insurance Co (1873)�� 76 Agapitos v Agnew (The Aegeon) (No 1) [2003]�� 27 Agenoria SS Co Ltd v Merchants Marine Insurance Co Ltd (1903)�� 126 Aifanourios, The see West of Scotland Ship Owners Mutual Protection & Indemnity Association (Luxembourg) v Aifanourios Shipping SA, The Aifanourios Aitchison v Lohre see Lohre v Aitchison Ajum Goolam Hossen & Co v Union Marine Insurance Co (1901)�� 63 Aktieselskabet Grenland v Jason (1918)�� 60 Al-Jubail IV, The see Almojil (M) Establishment v Malayan Motor & General Underwriters (Private) Ltd, The Al-Jubail IV Alexion Hope, The see Schiffshypothekenbank Zu Luebeck AG v Compton, The Alexion Hope Allden v Raven, The Kylie (1983)�� 33 Allgemeine Versicherungs-Gesellschaft Helvetia v German Property Administrator (1931)�� 113 Allianz Insurance Co Egypt v Aigaion Insurance Co SA (No 2) [2008]�� 82 Allison v Bristol Marine Insurance Co (1876)�� 13, 19, 45 Allkins v Jupe (1877)�� 9, 149 Almojil (M) Establishment v Malayan Motor & General Underwriters (Private) Ltd, The Al-Jubail IV (1982)�� 43, 60, 66 Alps, The (1893)�� 91 Amalgamated General Finance Co Ltd v C E Golding & Co Ltd (1964)�� 80 American Surety Co of New York v Wrightson (1910)�� 53, 144 Andersen v Marten (1908)�� 69, 92 Anderson v Morice (1875); aff’d (1876)�� 2, 9, 14, 15, 63 Anderson v Ocean SS Co see Ocean SS Co v Anderson Anderson v Pacific Fire & Marine Insurance Co (1872)�� 37, 38 Anderson v Thornton (1853)�� 38, 149 Andreas Lemos, The see Athens Maritime Enterprises Corpn v Hellenic Mutual War Risks Association (Bermuda) Ltd, The Andreas Lemos Angel v Merchants Marine Insurance Co (1903)�� 104 Anglo-Californian Bank Ltd v London & Provincial Marine & General Insurance Co Ltd (1904)�� 42, 122, 144 Anglo-International Bank Ltd, Re (1943)�� 157 Anglo-Mexican (Part Cargo ex), The (1918)�� 158 Annen v Woodman (1810)�� 148 Anstey v Ocean Marine Insurance Co (1913)�� 19

xxi

List of Cases page Apollinaris Co v Nord Deutsche Insurance Co (1904)�� 4 Arab Bank Ltd v Barclays Bank (Dominion, Colonial & Overseas) (1954)�� 157 Arash Shipping Enterprises Co Ltd v Groupama Transport [2011]�� 69 Argonaut Marine Insurance Co Ltd, Re (1932)�� 3 Aron (J) & Co v Miall (1928)�� 79, 80 Aronsen (Oscar L) Inc v Compton, The Megara (1974)�� 18 Arrow Shipping Co v Tyne Improvement Comrs, The Crystal (1894)�� 112, 142 Asfar & Co v Blundell (1896)�� 96 Assicurazioni Generali De Trieste v Empress Assurance Corpn Ltd (1907)�� 17, 142, 143 Assicurazioni Generali SpA v Arab Insurance Group [2003]�� 32, 39 Assicurazioni Generali SpA v Ege Sigorta AS [2002]�� 39 Associated Oil Carriers Ltd v Union Insurance Society of Canton Ltd (1917)�� 32, 33, 61, 96, 110 Astrovlanis Compania Naviera SA v Linard, The Gold Sky (1972); on appeal (1972)�� 90, 91, 138 Athel Line Ltd v Liverpool & London War Risks Insurance Association Ltd (1944)�� 121 Athel Line Ltd v Liverpool & London War Risks Insurance Association Ltd (1945) 93 Atlantic Maritime Carriers SA v Hellenic Mutual War Risks Association Ltd, The Miters (1969)�� 150 Atwood v Sellar (1880)�� 98, 120, 152 Austin Friars SS Co Ltd v Spillers & Bakers Ltd (1915); aff’d (1915)�� 121 Australia & New Zealand Bank Ltd v Colonial & Eagle Wharves Ltd (1960)�� 26 Australian Coastal Shipping Commission v Green (1971)�� 117, 121, 137 Axa Versicherung AG v Arab Insurance Group (BSC) [2015]�� 32, 33, 38 B Bah Lias Tobacco & Rubber Estates Ltd v Volga Insurance Co Ltd (1920)�� 71 Bainbridge v Neilson (1808)�� 111 Baines v Holland (1855)�� 56 Baker v Adam (1910)�� 17, 80 Ballantyne v Mackinnon (1896)�� 92, 117 Balmoral SS Co v Marten (1900); on appeal (1901); aff’d (1902)�� 48, 117, 130 Bamburi, The (1982)�� 104, 111 Bank Line Ltd v Arthur Capel & Co (1919)�� 104 Bank of America National Trust & Savings Association v Chrismas, The Kyriaki (1993)�� 103, 106, 133 Bank of England v Vagliano Bros (1891)�� 158 Bank of Nova Scotia v Hellenic Mutual War Risks Association (Bermuda) Ltd, The Good Luck (1991)�� 56, 58, 71 Banque Financiere de la Cite SA (formerly Banque Keyser Ullmann SA) v Westgate Insurance Co Ltd (formerly Hodge General & Mercantile Co Ltd) (1991)�� 26, 79 Barber v Fleming (1869)�� 12, 13, 15 Baring Bros & Co v Marine Insurance Co (1894)�� 132, 154 Barker v Janson (1868)�� 47, 48 Barnard v Faber (1893)�� 54 Barraclough v Brown (1897)�� 142 Bates v Hewitt (1867)�� 32 Baxendale v Fane, The Lapwing (1940)�� 90 Bean v Stupart (1778)�� 59 Becker, Gray & Co v London Assurance Corpn (1916); aff’d (1918)�� 92, 104 Bedouin, The (1894)�� 33, 37, 38, 91

xxii

List of Cases page Behn v Burness (1863)�� 38, 59 Bell v Bromfield (1812)�� 61 Bell v Humphries (1818)�� 16 Belle of Portugal, The see Rosa v Insurance Co of the State of Pennsylvania, The Belle of Portugal Bennett SS Co v Hull Mutual SS Protecting Society (1913); aff’d (1914)�� 131 Bensaude v Thames & Mersey Marine Insurance Co (1897)�� 91 Benson v Chapman (1849)�� 94, 105, 138 Bentsen v Taylor, Sons & Co (1893)�� 59 Bergens Dampskibs Assurance Forening v Sun Insurance Office Ltd (1930)�� 17 Berger & Light Diffusers Pty Ltd v Pollock (1973)�� 23, 32, 33, 39, 48, 96 Berk (F W) & Co Ltd v Style (1955)�� 7, 90, 138 Berridge v Man on Insurance Co (1887)�� 9 Besnard (Robert S) Co Ltd, Barque v Murton (19o9)�� 105 Bhugwandass v Netherlands India Sea & Fire Insurance Co of Batavia (1888)�� 40 Biccard v Shepherd (1861)�� 65, 66 Biddle, Sawyer & Co Ltd v Peters (1957)�� 90 Birkley v Presgrave (1801)�� 121 Birrell v Dryer (1884)�� 60, 152 Blackburn Rovers Football Athletic Club Ltd v Avon Insurance plc [2005]�� 91 Black King Shipping Corpn & Wayang (Panama) SA v Massie, The Litsion Pride (1985)�� 26, 27, 79, 82, 110, 111 Blackburn, Low & Co v Haslam (1888)�� 32, 35 Blackburn, Low & Co v Vigors (1887)�� 31, 35 Blacken v Royal Exchange Assurance (1832)�� 152 Blackett, Magalhaes & Colombie v National Benefit Assurance Corpn (1921)�� 67 Blackhurst v Cockell (1789)�� 55, 62 Blairmore Co Ltd (Sailing Ship) V Macredie (1898)�� 94, 111, 123 Blane Steamships Ltd v Minister of Transport [1951]�� 114 Bluebon Ltd v Ageas (UK) Ltd [2017]�� 56 Boag v Standard Marine Insurance Co Ltd (1937)�� 142, 143 Boehm v Bell (1799)�� 7, 13, 15, 148 Bold v Rotheram (1846)�� 98 Bolivia Republic v Indemnity Mutual Marine Assurance Co Ltd (1908); aff’d (1909)�� 3, 7, 32, 35, 38 Bolton MBC v Municipal Mutual Insurance [2007]�� 144 Bonner v Cox [2006]�� 39 Boon & Cheah Steel Pipes Sdn Bhd v Asia Insurance Co Ltd (1975)�� 97, 105, 129 Booth v Gair (1863)�� 98 Boston Corpn v Fenwick & Co Ltd (1923)�� 114, 142 Boston Fruit Co v British & Foreign Marine Insurance Co (1905); aff’d (1906)�� 41, 151 Bosworth (No 3), The see Grand Union (Shipping) Ltd v London SS Owners’ Mutual Insurance Association Ltd, The Bosworth (No 3) Bottomley v Bovill (1826)�� 73 Bouillon v Lupton (1863)�� 65, 78 Boulton v Houlder Bros & Co (1904)�� 27 Bovis Construction Ltd v Commercial Union Assurance Co plc [2001]�� 144 Boyd v Dubois (iflii)�� 67 Braconbush, The see United Scottish Insurance Co Ltd v British Fishing Vessels Mutual War Risks Association Ltd, The Braconbush Bradford v Symondson (1881)�� 2, 17, 148, 149 Brandeis Goldschmidt & Co v Economic Insurance Co Ltd (1922)�� 121

xxiii

List of Cases page Brandon v Curling (1803)�� 157 Brankelow SS Co v Canton Insurance Office (1899); aff’d sub nom Williams & Co v Canton Insurance Office Ltd (1901)�� 89, 92, 96 Brawn v Tayleur (1835)�� 75 Brentwood, The see Coast Ferries Ltd v Century Insurance Co of Canada, The Brentwood Brigella, The (1893)�� 121 Briggs v Merchant Traders’ Ship Loan & Insurance Association (1849)�� 7, 13 Bristol Steam Navigation Co Ltd v Indemnity Mutual Marine Insurance Co (1887)�� 126 Britain SS Co Ltd v R (1921)�� 92 British American Tobacco Co v Poland (1921)�� 77 British & Foreign Insurance Co Ltd v Wilson Shipping Co Ltd (1921)�� 2, 122, 126, 134, 144, 157 British & Foreign Marine Insurance Co v Gaunt (1921)�� 4, 7, 32, 50, 90, 138 British & Foreign Marine Insurance Co v Sturge (1897)�� 153 British & Foreign Marine Insurance Co Ltd v Samuel Sanday & Co see Sanday & Co v British & Foreign Marine Insurance Co British Dominions General Insurance Co Ltd v Duder (1915)�� 17, 110 British Marine Mutual Insurance Co v Jenkins (1900)�� 150 Brit UW Ltd v F & B Trenchless Solutions Ltd [2015]�� 38 Brooking v Maudslay, Son & Field (1888)�� 26 Brooks v MacDonell (1835)�� 134, 143 Broomfield v Southern Insurance Co (1870)�� 18 Brotherton v Aseguradora Colseguros SA [2002]�� 39 Brough v Whitmore (1791)�� 23, 152 Brown v Neilson (1804)�� 97 Brown Bros v Fleming (1902)�� 129 Browning v Provincial Insurance Co of Canada (1873)�� 80, 106 Brownlie v Campbell (1880)�� 26 Brownsville Holdings Ltd v Adamjee Insurance Co Ltd, The Milasan [2000]�� 56, 58 Bruce v Jones (1863)�� 48, 53, 144 Buchanan & Co v Faber (1899)�� 45 Buchanan Co v London & Provincial Marine Insurance Co Ltd (1895)�� 96, 117 Burger v Indemnity Mutual Marine Assurance Co (1900)�� 131 Burges v Wickham (1863)�� 65, 66, 81 Burnand v Rodocanachi, Sons & Co (1882)�� 47, 48, 103, 142, 143 Byas v Miller (1897)�� 151 Byrne v Schiller (1871)�� 19 C CCR Fishing Ltd v Tomenson Inc, The La Pointe (1991)�� 90 CTN Cash Casrry v General Accident Fire & Life Assurance Corpn [1989]�� 59 Cahill v Dawson (1857)�� 82 Caine v Palace Steam Shipping Co (1906); aff’d sub nom Palace Shipping Co Ltd v Caine (1907)�� 69 Caledonia North Sea Ltd v British Telecommunications plc [2002]�� 144 Callaghan & Hedges v Thompson [2000]�� 33 Canada Rice Mills Ltd v Union Marine & General Insurance Co Ltd (1940)�� 89 Cantiere Meccanico Brindisino v Janson (1912)�� 26, 32, 33, 65 Cap Tarifa, The see Simons (trading as Acme Credit Services) v Gale, The Cap Tarifa

xxiv

List of Cases page Cape Borer, The see Rudolph (M J) Corpn v Lumber Mutual Fire Insurance Co (Luria International, Third Parties), The Cape Borer Capital Coastal Shipping Corpn & Bulk Towing Corpn v Hartford Fire Insurance Co (United States of America, Third Party), The Cristie (1975)�� 58, 60, 63 Captain Panagos DP, The See Continental Illinois National Bank & Trust Co of Chicago & Xenofon Maritime SA v Alliance Assurance Co Ltd, The Captain Panagos DP Caribbean Sea, The see Prudent Tankers Ltd SA v Dominion Insurance Co Ltd, The Caribbean Sea Carlton SS Co Ltd v Castle Mail Packets Co Ltd (1898)�� 152 Carras v London & Scottish Assurance Corpn Ltd (1936)�� 96, 105 Carter v Boehm (1766)�� 26, 32 Caruthers v Graham (181�� 83 Carvill v Camperdown [2005]�� 148 Castellain v Preston (1883)�� 2, 20, 21, 142, 143 Castle Insurance Co ltd v Hong Kong Islands Shipping Co Ltd, The Potoi Chau (1983)�� 121 Cates (Captain J A) Tug & Wharfage Co Ltd v Franklin Insurance Co (1927)�� 96, 110, 111 Cator v Great Western Insurance Co of New York (1873)�� 129, 133 Cepheus Shipping Corpn v Guardian Royal Exchange Assurance plc, The Capricorn [1995]�� 13, 14 Chandler v Blogg (1898)�� 131 Chandris v Argo Insurance Co Ltd (1963)�� 121 Charlesworth v Faber (1900)�� 17, 33 Charlotte, The (1908)�� 142 Cheshire (T) & Co v Thompson (1919)�� 32 China (Republic of), China Merchants Steam Navigation Co Ltd & United States of America v National Union Fire Insurance Co of Pittsburgh, Pennsylvania, The Hai Hsuan (No 2) (1958)�� 10 China Traders’ Insurance Co Ltd v Royal Exchange Assurance Corpn (1898)�� 17, 27 Chippendale v Holt (1895)�� 17 Christie v Secretan (1799)�� 65 City Equitable Fire Insurance Co Ltd (No 2), Re (1930)�� 40 Clan Line Steamers Ltd v Liverpool & London War Risks Insurance Association Ltd (1942)�� 93 Clapham v Cologan (1813)�� 61 Clapham v Langton (1864)�� 66 Clothing Management Technology Ltd v Beazley Solutions Ltd [2012] EWHC 727 (QB)�� 7, 24, 97, 138 Clyde Marine Insurance Co, Re (1924)�� 40 Cobequid Marine Insurance Co v Barteaux (1875)�� 92 Cockrane v Fisher (1835)�� 60 Cohen (G) Sons & Co v Standard Marine Insurance Co Ltd (1925)�� 32, 65, 96, 111 Coker v Bolton (1912)�� 114 Colonial Insurance Co of New Zealand v Adelaide Marine Insurance Co (1886)�� 15 Comatra Ltd V Lloyd’s Underwriters [2000]�� 115, 120 Commercial Union Assurance Co v Lister (1874)�� 142 Commonwealth, The see Welsh Girl, The Compania Colombiana de Seguros v Pacific Steam Navigation Co (1964)�� 80, 142 Compania Maritima San Basilio SA v Oceanus Mutual Underwriting Association (Bermuda) Ltd, The Eurysthenes (1976)�� 43, 66

xxv

List of Cases page Constantine (Joseph) SS Line Ltd v Imperial Smelting Corpn Ltd, The Kingswood 1941�� 104 Container Transport International Inc & Reliance Group Inc v Oceanus Mutual Underwriting Association (Bermuda) Ltd (1982); revs’d (1984)�� 26, 32, 33, 35 Continental Grain Co Inc v Twitchell (1945); aff’d (1945)�� 105 Continental Illinois National Bank & Trust Co of Chicago & Xenofon Maritime SA v Alliance Assurance Co Ltd, The Captain Panagos DP (1986); aff’d (1989)�� 24, 93 Corfield (W R) & Co v Buchanan (1913)�� 150 Cory v Patton (1872)�� 35, 153 Cory v Patton (1874)�� 38 Cory (John) & Sons v Burr (1883)�� 70, 89, 92 Cossman v West (1887)�� 96 Court Line Ltd v R, The Lavington Court (1945)�� 103, 104 Cousins v Nantes (1811)�� 9 Cousins (H) & Co Ltd v D & C Carriers Ltd (1971)�� 4, 142, 143 Coxwold, The see Yorkshire Dale SS Co Ltd v Minister of War Transport, The Coxwold Cristie, The see Capital Coastal Shipping Corpn & Bulk Towing Corpn v Hartford Fire Insurance Co (United States of America, Third Party), The Cristie Crocker v Sturge (1897)�� 17 Crooks v Allan (1879)�� 121 Crouan v Stanier (1904)�� 138 Crowley v Cohen (1832)�� 13, 23, 131 Crystal, The see Arrow Shipping Co v Tyne Improvement Comrs, The Crystal Cunard v Hyde (1859)�� 70 Cunard SS Co v Marten (1902); aff’d (1903)�� 7, 13, 131, 138 Currie & Co v Bombay Native Insurance Co (1869)�� 110, 138, 152 Czarnikow (C) Ltd v Java Sea & Fire Insurance Co Ltd (1941)�� 103, 104 D Daneau v Laurent Gendron Ltée, Union Insurance Society of Canton Ltd (Third Party) (1964)�� 57, 58, 60 Daniels v Harris (1874)�� 65, 66 Darrell v Tibbitts (1880)�� 142 Davidson v Burnand (1868)�� 92, 131 Davies v National Fire & Marine Insurance Co of New Zealand (1891)�� 4, 49 Davis v Garrett (1830)�� 74 Dean v Hornby (1854)�� 111 De Cuadra v Swann (1864)�� 66 Deepak Fertilisers & Petrochemical Corpn v Davy McKee [1999]�� 13 De Hahn v Hartley (1786); aff’d (1787)�� 55, 56, 57, 59 De Hart v Compañia Anonima de Seguros Aurora (1903)�� 121 Delany v Stoddart (1785)�� 78 Delver, Assignee of Bunn v Barnes (1807)�� 16 De Mattos v Saunders (1872)�� 104, 133 De Matzos v North (1868)�� 9 Dennistoun v Lillie (1821)�� 38 Denoon v Home & Colonial Assurance Co (1872)�� 45, 48, 127, 132, 154 Dent v Smith (1869)�� 61, 92 Deutsche Ruckbersicherung Aktiengesellschaft v Walbrook Ins Co Ltd [1994]�� 35 De Vaux v Salvador (1836)�� 89, 90 Devaux v Steele (1840)�� 12

xxvi

List of Cases page De Wolf v Archangel Insurance Co (1874)�� 71 Diamond Alkali Export Corpn v FL Bourgeois [1921]�� 154 Dias, The see Palamisto General Enterprises SA v Ocean Marine Insurance Co Ltd, The Dias Dickenson v Jardine (1868)�� 120, 121, 143, 152 Dixon v Sadler (1839); aff’d sub nom Sadler v Dixon (1841)�� 65, 66 Dixon v Sea Insurance Co (1880)�� 117 Dixon v Whitworth (1879); revs’d (1879)�� 138 Dodson v Peter H Dodson Insurance Services [2001]�� 80, 81 Dodwell & Co Ltd v British Dominions General Insurance Co Ltd (1955)�� 90 Dominion Coal Co Ltd v Mackinonge SS Co Ltd (1918)�� 146 Dora Forster, The (1900)�� 134 Dora, The see Inversiones Manria SA v Sphere Drake Insurance Co plc, Malvern Insurance Co Ltd & Niagara Fire Insurance Co Inc, The Dora Dornoch Ltd v Westminster, The WD Fairway [2009]�� 42, 106, 110, 111, 114, 142, 144 Double Eight Marine SA v RSA, The Panamax Trader (2018)�� 27 Drake Insurance plc, Re [2001]�� 146 Drake Insurance plc v Provident Insurance plc [2004]�� 144 Driefontein Consolidated Gold Mines v Janson (1901); aff’d sub nom Janson v Driefontein Consolidated Mines Ltd (1902)�� 4, 157 Dudgeon v Pembroke (1874); on appeal (1875); on appeal (1877)�� 65, 66, 69 Duff v Mackenzie (1857)�� 19, 133 Dufourcet v Bishop (1886)�� 19, 21, 143 Dunlop Bros & Co v Townend (1919)�� 45, 49 Duus, Brown & Co v Binning (1906)�� 137, 142 E ED Bassoon & Co Ltd v Yorkshire Insurance Co (1923)�� 90 ERC Frankona Reinsurance v American National Insurance Co [2006]�� 32, 39, 56 Eagle Star Insurance Co Ltd v Games Video (GVC) SA, The Game Boy [2004]�� 38, 56, 60 Eagle Star Insurance v Provincial Insurance [1994] 1 AC 130�� 53, 144 Ebsworth v Alliance Marine Insurance Co (1873); revs’d (1874)�� 16, 20 Eddystone Marine Insurance Co, Re, ex p Western Insurance Co (1892)�� 17 Eden v Parkison (1781)�� 61 Edwards v Aberayron Mutual Ship Insurance Society Ltd (1876)�� 150 Edwards v Footner (1808)�� 37 Edwards (John) & Co v Motor Union Insurance Co Ltd (1922)�� 3, 10, 142, 143 Eglinton v Norman (1877)�� 142 Eide UK Ltd v Lowndes Lambert Group Ltd, The Sun Tender [1998]�� 41, 157 El Ajou v Dollar Land Holdings plc [1994]�� 35 Elcock v Thomson (1949)�� 126 Elton v Brogden (1747)�� 78 Emanuel & Co v Andrew Weir & Co (1914)�� 17 Emperor Goldmining Co Ltd v Switzerland General Insurance Co Ltd (1964)�� 138 Empress Assurance Corpn Ltd v C T Bowring & Co Ltd (1905)�� 153 Engineer, The see Tatham, Bromage & Co v Burr, The Engineer Eridania SpA v Oetker, The Fjord Wind [1999]�� 66 Ertel Bieber & Co v Rio Tinto Co (1918)�� 157 Esposito v Bowden (1857)�� 58, 157 Eurasian Dream, The [2002]�� 65 Euro-Diam Ltd v Bathurst [1988]�� 55, 69

xxvii

List of Cases page Eurysthenes, The see Compania Maritima San Basilio SA v Oceanus Mutual Underwriting Association (Bermuda) Ltd, The Eurysthenes Evans, Sons & Co v Cunard SS Co Ltd (1902)�� 75 Evelpidis Era, The see First National Bank of Chicago v West of England Shipowners Mutual Protection & Indemnity Association (Luxembourg), The Evelpidis Era�� 150 F Fabrique de Produits Chimiques SA, La v Large (1923)�� 133 Fairfield Shipbuilding & Engineering Co Ltd v Gardner, Mountain & Co Ltd (1911)�� 82 Falcke v Scottish Imperial Insurance Co (1886)�� 117 Farnworth v Hyde (1865); on appeal (1866)�� 96, 104, 110 Fawcus v Sarsfield (1856)�� 65 Feasey v Sun Life Assurance Corpn of Canada [2003]�� 13, 17, 45 Federation Insurance Co of Canada v Coret Accessories Inc & Hirsh (trading as S A Hirsh & Co) (1968)�� 91 Field SS Co v Burr (1899)�� 92, 126 Firemen’s Fund Insurance Co v Western Australian Insurance Co Ltd & Atlantic Insurance Co Ltd (1927)�� 17 First National Bank of Chicago v West of England Shipowners Mutual Protection & Indemnity Association (Luxembourg), The Evelpidis Era (1981)�� 150 Fisher v Liverpool Marine Insurance Co (1874)�� 40 Fisher v Smith (1878)�� 83 Fisk v Masterman (1841)�� 148 Fleming v Smith (1848)�� 96, 106 Fletcher v Alexander (1868)�� 121, 128 Flint v Flemyng (1830)�� 154 Forbes v Aspinall (1811)�� 127, 132 Forwood v North Wales Mutual Marine Insurance Co (1880)�� 94 Fowler v English & Scottish Marine Insurance Co Ltd (1865)�� 103 France (William), Fenwick & Co Ltd v Merchants’ Marine Insurance Co Ltd (1914); aff’d (1915)�� 131 France (William), Fenwick & Co Ltd v North of England Protection & Indemnity Association (1917)�� 92 Francis v Boulton (1895)�� 96, 129 Fraser & Co v Burrows (1877)�� 27 Fraser Shipping Ltd v Colton, The Shakir III [1997]�� 73, 97 Frenkel v MacAndrews & Co Ltd (1929)�� 75 Fuerst Day Lawson Ltd v Orion Insurance Co Ltd (1980)�� 4, 7 Furness Withy & Co Ltd v Duder (1936)�� 131 G GE Reinsurance Corpn v New Hampshire Ins Co [2004]�� 56 Gamba v Le Mesurier (1803)�� 70 Gambles v Ocean Marine Insurance Co of Bombay (1876)�� 43 Gardner v Salvador (1831)�� 104 Garnat Trading & Shipping (Singapore) Pte Ltd v Baominh Insurance Corpn [2011]�� 65, 66 Garrels v Kensington (1799)�� 61 Garthwaite (Sir William) (Insurance) Ltd v Port of Manchester Insurance Co Ltd (1930)�� 17, 27

xxviii

List of Cases page Gedge v Royal Exchange Assurance Corpn (1900)�� 7, 9, 58 Geipel v Smith (1872)�� 73 General Insurance Co of Trieste (Assicurazioni Generali) v Cory (1897)�� 60 Genforsikrings Aktieselskabet (Skandinavia Reinsurance Co of Copenhagen) v Da Costa (1911)�� 39, 40 Gernon v Royal Exchange Assurance (1815)�� 110 Gibson v Small (1853)�� 66 Glasgow Assurance Corpn Ltd v William Symondson & Co (1911)�� 18, 20 Gledstanes v Royal Exchange Assurance (1864)�� 49 Glencore International AG v Ryan, The Beursgracht [2002]�� 49 Global Process Systems Inc v Syarikat Takaful Malaysia Bhd, The Cendor Mopu [2011)�� 65, 67, 90, 91, 92 Gold Sky, The see Astrovlanis Compania Naviera SA v Linard, The Gold Sky Gooding v White (1913)�� 33 Goodwin v Robarts (1875); aff’d (1876)�� 152 Goole & Hull Steam Towing Co Ltd v Ocean Marine Insurance Co Ltd (1928)�� 2, 47, 126, 142, 143 Gorsedd SS Co Ltd v Forbes (1900)�� 146 Goshawk Dedicated Ltd v Tyser Co Ltd [2005]�� 82 Goulart v Trans-Atlantic Marine Inc & Enos (1970)�� 150 Graham Joint Stock Shipping Co v Motor Union Insurance Co (1922)�� 27 Graham Joint Stock Shipping Co Ltd v Merchants Marine Insurance Co Ltd (No 2) (1923); aff’d (1924)�� 41 Grainger v Martin (1862); aff’d (1863)�� 104 Grand Union (Shipping) Ltd v London SS Owners’ Mutual Insurance Association Ltd, The Bosworth (No 3) (1962)�� 117 Grant v King (1802)�� 71 Grant, Smith & Co & McDonnell Ltd v Seattle Construction & Dry Dock Co (1920)�� 90 Great Indian Peninsula Rly Co v Saunders (1861); on appeal (1862)�� 98, 133 Great North Eastern Rly v Avon Insurance plc [2001]�� 39 Great Western Rly Co v Mostyn (Owners), The Mostyn (1928)�� 113 Grecoair Inc v Tilling [2005]�� 17 Green v Brown (1743)�� 97 Green Lion, The see Sipowicz v Wimble, The Green Lion Green Star Shipping Co Ltd v London Assurance (1933)�� 120 Greenhill v Federal Insurance Co (1927)�� 32 Greenock SS Co v Maritime Insurance Co (1903); aff’d (1903)�� 51, 65, 90 Greenshields, Cowie & Co v Stephens & Sons Ltd (1908)�� 90, 120 Greer v Poole (1880)�� 92, 130, 157 Group Josi Re v Walbrook Insurance Co Ltd [1996]�� 35 Grover & Grover Ltd v Mathews (1910)�� 151 Gulfstream Cargo Ltd v Reliance Insurance Co, The Papoose (1971)�� 32, 33 Gurney v Grimmer (1932)�� 17 Guthrie v North China Insurance Co Ltd (1902)�� 105 H HIH Casualty & General Insurance v Chase Manhattan Bank [2003]�� 26, 56, 148, 153, 157 Hadkinson v Robinson (1803)�� 73 Hagedorn v Whitmore (1816)�� 133 Hahn v Corbett (1824)�� 92

xxix

List of Cases page Hai Hsuan, The see China (Republic of), China Merchants Steam Navigation Co & United States of America v National Union Fire Insurance Co of Pittsburgh, Pennsylvania, The Hai Hsuan Hai Hsuan (No 2), The see China (Republic of), China Merchants Steam Navigation Co Ltd & United States of America v National Union Fire Insurance Co of Pittsburgh, Pennsylvania, The Hai Hsuan (No 2) Hall v Hayman (1912)�� 103, 104, 110, 126, 158 Hall v Janson (1855)�� 19 Hall Bros SS Co Ltd v Young, The Trident (1939)�� 131 Hamilton, Fraser & Co v Pandorf & Co (1887)�� 90, 92 Hammond v Reid (1820)�� 74 Hansen v Dunn (1906)�� 98 Harding v Bussell (1905)�� 27 Harris v Scaramanga (1872)�� 120 Harrower v Hutchinson (1870)�� 32 Hart v Standard Marine Insurance Co (1889)�� 60, 152 Hartley v Buggin 0780�� 74 Haughton v Empire Marine Insurance Co (1866)�� 65 Haywood v Rodgers (1804)�� 32 Heath Lambert Ltd v Sociedad de Corretaje de Seguros [2004]�� 60, 81, 82 Helmville Ltd v Yorkshire Insurance Co Ltd, The Medina Princess (1965)�� 47, 103, 126 Henderson Bros v Shankland & Co (1896)�� 120, 126, 130 Herring v Janson (1895)�� 47 Hewitt v London General Insurance Co Ltd (1925)�� 51, 74 Hewitt Bros v Wilson (1914); aff’d (1915)�� 2, 7, 32, 51 Hibbert v Carter (1787)�� 21, 80 Hibernia Foods plc v McAuslin, The Joint Frost (1998)�� 7 Hickie & Borman v Rodocanachi (1859)�� 114 Hine Bros v SS Insurance Syndicate Ltd, The Netherholme, Glen Holme & Rydal Holme (1895)�� 82 Hobbs v Hannam (1811)�� 21 Hogarth v Walker (1900)�� 23, 24 Holman & Sons Ltd v Merchants’ Marine Insurance Co Ltd (1919)�� 131 Home Insurance Co of New York v Victoria-Montreal Fire Insurance Co (1907)�� 17 Hong Kong Borneo Services Co Ltd v Pilcher (1992)�� 4 Hood v West End Motor Car Packing Co (1917)�� 51 Hore v Whitmore (1778)�� 58 Horlock v Beal (1916)�� 58 Hoskins v Pickersgill (1783)�� 23 Houstman v Thornton (1816)�� 97, 143 Hudson v British & Foreign Marine Insurance Co see Leitrim, The Hunter v Leathley (1830); aff’d sub nom Leathly v Hunter (1831)�� 82 Hunter v Northern Marine Insurance Co Ltd (1888)�� 75 Hunter v Potts (1815)�� 90 Hunter v Wright (1830)�� 146 Hussain v Brown [1996]�� 56 Hyderabad (Deccan) Co v Willoughby (1899)�� 4, 51, 78 I Ide & Christie v Chalmers & White (1900)�� 3, 4 Ikerigi Cia Naviera SA v Palmer, The Wondrous (1992)�� 9, 92, 138

xxx

List of Cases page Imperial Marine Insurance Co v Fire Insurance Corpn Ltd (1879)�� 49 Indian City, The see Reardon Smith Lines Ltd v Black Sea & Baltic General Insurance Co Ltd, The Indian City Inglis v Robertson & Baxter (1898)�� 158 Inglis v Stock see Stock v Inglis Inman SS Co v Bischoff (1882)�� 90, 91 Integrated Container Service Inc v British Traders Insurance Co Ltd (1981)�� 138 Inversiones Manria SA v Sphere Drake Insurance Co plc, Malvern Insurance Co Ltd & Niagara Fire Insurance Co Inc, The Dora (1989)�� 32, 38 Involnert Management Inc v April Grange Ltd, The Galatea [2015]�� 33, 38, 47, 110 Ionides v Harford (1859)�� 148 Ionides v Pender (1874)�� 31, 32, 33, 47 Ionides v Universal Marine Insurance Co (1863)�� 92 Ionides & Chapeaurouge v Pacific Fire & Marine Insurance Co (1871); aff’d (1872)�� 37, 38, 41, 153 Iredale v China Traders Insurance Co (1900)�� 120 Irvin v Hine (1949)�� 47, 103, 126, 138 Irving v Manning (1847)�� 45, 47, 48, 103, 104, 123, 128 Irving v Richardson (1831)�� 20, 47 Islamic Republic of Iran Shipping Llines v Steamship Mutual Underwriting Association [2010]�� 69 Italia Express (No 2), The see Ventouris v Mountain, The Italia Express (No 2) J JA Chapman & Co Ltd v Kadirga Denizcilik Ve Ticaret [1998]�� 81 Jackson v Mumford (1902); aff’d (1904)�� 3 Jackson v Union Marine Insurance Co Ltd (1873); aff’d (1874)�� 89, 91, 104 Jacob v Gaviller (1902)�� 4 James W Elwell, The (1921)�� 18 James Yachts Ltd v Thames & Mersey Marine Insurance Co Ltd (1977)�� 4, 33, 70 Jamieson & Newcastle SS Freight Insurance Association, Re (1895)�� 91, 104 Janson v Driefontein Consolidated Mines Ltd see Driefontein Consolidated Gold Mines v Janson Janson v Poole (1915)�� 45, 153 Janson v Property Insurance Co Ltd (1913)�� 42 Jardine v Leathley (1863)�� 110 John Edwards & Co v Motor Union Insurance Co [1922]�� 143 Johnson v Sheddon (1802)�� 128 Jomie, The see Irwin v Eagle Star Insurance Co Ltd, The Jomie Joyce v Kennard (1871)�� 4, 131 K Kacianoff v China Traders Insurance Co Ltd (1914)�� 92 Kairos Shipping Ltd v ENKA & Co LLC, The Atlantik Confidence (2016)�� 27 Kaltenbach v Mackenzie (1878)�� 96, 103, 106, 110, 111 Karberg (Arnhold) & Co v Blythe Green Jourdain & Co (1916)�� 157 Kastor Navigation Co Ltd v AGF MAT [2004]�� 106, 126, 134 Keevil & Keevil Ltd v Boag (1940)�� 27 Keighley, Maxsted & Co v Durant (1901)�� 151 Keith v Protection Marine Insurance Co (1882)�� 9 Kellner v Le Mesurier (1803)�� 70, 146, 148 Kemp v Halliday (1866)�� 103

xxxi

List of Cases page Kent v Bird (1777)�� 2 Kettlewell v Refuge Assurance Co (1908); aff’d sub nom Refuge Assurance Co Ltd v Kettlewell (1909)�� 148 Kewley v Ryan (1794)�� 49 Khedive, The see Stoomvart Maatschappy Nederland v Peninsular & Oriental Steam Navigation Co, The Khedive Kidston v Empire Marine Insurance Co (1866); on appeal (1867)�� 98, 115, 133, 137, 138 King v Victoria Insurance Co Ltd (1896)�� 4, 142, 143 King v Walker (1863); on appeal (1864)�� 94 Kingswood, The see Constantine (Joseph) SS Ltd v Imperial Smelting Corpn Ltd, The Kingswood Kiriacoulis Lines SA v Compagnie d’Assurances Maritime Ariennes et Terrestres, The Demetra K [2002]�� 91 Kirkcaldy & Sons v Walker [1999]�� 58 Knight of St Michael, The (1898)�� 92 Knill v Hooper (1857)�� 65 Koebel v Saunders (1864)�� 67, 90 Kronprins Gustaf, The [1919]�� 69 Kruger & Co Ltd v Moel Tryvan Ship Co Ltd (1907)�� 142 Kuehn & Nagel Inc v Baiden (1975); on appeal (1977)�� 13, 89 Kulen Kemp v Vigne (1786)�� 3, 9 Kulukundis v Norwich Union Fire Insurance Society (1936)�� 104, 105 Kusel v Atkin, The Catariba [1997]�� 134 Kuwait Airways Corpn v Kuqait Insurance Co SAK [1999]�� 91, 103, 137, 138 Kylie, The see Allden v Raven, The Kylie Kynance Sailing Ship Co v Young (1911)�� 45, 75 Kyriaki, The see Bank of America National Trust & Savings Association v Chrismas, The Kyriaki Kyzuna Investments Lt v Ocean Marine Mutual Association [2000]�� 39, 48 L Laga, The see Vermaas’ (J) Scheepvaartbedrijf NV v Association Technique de l’Importation Charbonniere, The Laga Laing v Union Marine Insurance Co Ltd (1895)�� 32, 51 Lamb Head Shipping Co Ltd v Jennings, The Marel (1992)�� 91, 131 Lane v Nixon (1866)�� 65 La Pointe, The see CCR Fishing Ltd v Tomenson Inc, The La Pointe Lapwing, The see Baxendale v Fane, The Lapwing Larrinaga SS Co Ltd v R (1945)�� 92 Laugher v Black (1901)�� 45 Laurie v West Hartlepool SS Thirds Indemnity Association & David (1899)�� 79 Laveroni v Drury (1852)�� 90 Lavington Court, The see Court Line Ltd v R, The Lavington Court Law v Hollingsworth (1797)�� 65 Lawrence v Aberdein (1821)�� 92 Lawther v Black (1901)�� 133 Le Cheminant v Pearson (1812)�� 134 Lee v Southern Insurance Co (1870)�� 138 Leitrim, The (1902), sub nom Hudson v British & Foreign Marine Insurance Co�� 90, 91, 121 Lemenda Trading v AMEPC (1988)�� 7

xxxii

List of Cases page Leon v Casey (1932)�� 4, 27 Levy & Co v Merchants Marine Insurance Co (1885)�� 110 Lewis v Rucker (1761)�� 13, 47, 128, 132 Leyland Shipping Co v Norwich Union Fire Insurance Society Ltd (1918)�� 90, 92 Liberian Insurance Agency Inc v Mosse (1977)�� 32, 33, 38, 51 Liberty Insurance (Pte) Ltd v Argo Systems FZE [2012]�� 58 Lidgett v Secretan (1870)�� 43 Lidgett v Secretan (1871)�� 47, 48, 134 Limit No 2 Ltd v Axa Versicherung AG [2008]�� 37 Lind v Mitchell (1928); on appeal (1928)�� 90, 103 Lindsay v Klein, The Tatjana (1911)�� 66 Linelevel Ltd v Powszechny Zaklad Ubezpieczen SA, The Nore Challenger [2005] 13 Lion Mutual Marine Insurance Association Ltd v Tucker (1883)�� 150 Lishman v Northern Maritime Insurance Co (1875)�� 153 Litsion Pride, The see Black King Shipping Corpn v Massie, The Litsion Pride Liverpool & London War Risks Association Ltd v Ocean SS Co Ltd (1947)�� 93 Livie v Janson (1810)�� 134 Lloyd v Fleming (1872)�� 2, 13, 79, 81 Lloyd (J J) Instruments Ltd v Northern Star Insurance Co Ltd, The Miss Jay Jay (1987)�� 91 Loders & Nucoline Ltd v Bank of New Zealand (1929)�� 2 Lohre v Aitchison (1878); varied sub nom Aitchison v Lohre (1879)�� 2, 96, 103, 115, 117, 122, 126, 134, 137, 138 London Assurance Corpn v Williams (1892); aff’d (1893)�� 114 London County Commercial Reinsurance Office Ltd, Re (1922)�� 149 London General Insurance Co v General Marine Underwriters’ Association (1921)�� 17, 33 Lower Rhine & Würtemberg Insurance Association v Sedgwick (1899)�� 17 Lubrafol, M/V (Owners) v SS Pamia (Owners), The Pamia (1943)�� 157 Lucena v Craufurd (1806)�� 9, 12, 13, 15, 19 Lysaght (J) Ltd v Coleman (1895)�� 129 M MA Imojil Establishment v Malayan Motor & General Underwriters (Private) Ltd, The Aljubail IV [1982]�� 77 MS Amlin Corporate Member v Flora Shipping Corpn Ltd, The Mustafa Kan (2018)�� 27 Macbeth & Co Ltd v Maritime Insurance Co Ltd (1908)�� 104 M’Carthy v Abel (1804)�� 92 M’Cowan v Baine & Johnston, The Niobe (1891)�� 131 Macdowall v Fraser (1779)�� 37 Mackenzie v Whitworth (1875)�� 7, 43, 45 Maignen & Co v National Benefit Assurance Co Ltd (1922)�� 2 Main, The (1894)�� 19, 47, 48, 127, 132 Manchester Liners Ltd v British & Foreign Marine Insurance Co Ltd (1901)�� 91 Manfield v Maitland (1821)�� 12, 13 Manifest Shipping Co Ltd v Uni-Polaris Insurance Co Ltd, The Star Sea [2001]�� 25, 27, 66, 126 Mann Macneal & Steeves Ltd v General Marine Underwriters Ltd (1921)�� 32, 33 Maori King, The (Cargo Owners) v Hughes (1895)�� 67 Marc Rich & Co AG v Portman [1997]�� 33

xxxiii

List of Cases page Marel, The see Lamb Head Shipping Co Ltd v Jennings, The Marel Margetts & Ocean Accident & Guarantee Corpn, Re (1901) Marina Offshore Pte Ltd v China Insurance Co (Singapore) Pte Ltd [2007]�� 43 Marine Insurance Co v China Transpacific SS Co (1886)�� 126 Marine Insurance Co Ltd v Grimmer (1944)�� 17 Marine Mutual Insurance Association Ltd v Young (1880)�� 150 Marine Sulphur Queen, The (1970)�� 142 Maritime Insurance Co v Stearns (1901)�� 17, 71 Maritime Insurance Co Ltd v Alianza Insurance Co of Santander (1907)�� 43 Marsden v Reid (1803)�� 75 Marstrand Fishing Co Ltd v Beer (1937)�� 96, 103, 104 Marten v Nippon Sea & Land Insurance Co Ltd (1898)�� 4 Marten v SS Owners’ Underwriting Association (1902)�� 17 Marten v Vestey Bros Ltd (1920)�� 75 Martini Investments Ltd v McGinn [2001]�� 91 Mary Thomas, The (1894)�� 120, 121, 130 Masefield AG v Amlin Corporate Member Ltd, The Bunga Melati Dua [2011]�� 94, 96, 97, 103, 138 Mata Hari, The see Pindos Shipping Corpn v Raven, The Mata Hari Matveieff & Co v Crossfield (1903)�� 82, 152 Mavro v Ocean Marine Insurance Co (1874); aff’d (1875)�� 121 Mead v Davison (1835)�� 41 Medina Princess, The see Helmville Ltd v Yorkshire Insurance Co Ltd, The Medina Princess Megara, The see Aronsen (Oscar L) Inc v Compton, The Megara Melinda Holdings SA v Hellenic Mutual War Risks Association (Bermuda) Ltd [2011]�� 138 Mentz, Decker & Co v Maritime Insurance Co (1909)�� 7, 51 Mercandian Continent, The [2001]�� 27 Mercantile SS Co Ltd v Tyser (1881)�� 33 Merrett v Capitol Indemnity Corpn [1991]�� 82 Metcalfe v Parry (1814)�� 75 Meyer v Ralli (1876)�� 137 Middlewood v Blakes (1797)�� 74 Midland Insurance Co v Smith (1881)�� 143 Midland Mainline Ltd v Eagle Star Insurance Co Ltd [2004]�� 91 Mildred, Goyeneche & Co v Maspons Y Herman (1883)�� 81, 82 Miller v Law Accident Insurance Co (1903)�� 73 Miller v Woodfall (1857)�� 113 Miss Jay Jay, The see Lloyd (J J) Instruments Ltd v Northern Star Insurance Co Ltd, The Miss Jay Jay Mitera, The see Atlantic Maritime Carriers SA v Hellenic Mutual War Risks Association Ltd, The Mitera Mitsui Marine Fire Insurance Co v Bayview Motors Ltd [2003]�� 138 Montgomery & Co v Indemnity Mutual Marine Insurance Co (1901); aff’d (1902)�� 117, 121 Montoya v London Assurance Co (1851)�� 92 Montreal Light, Heat & Power Co v Sedgwick (1910)�� 94 Moore v Evans (1917); aff’d (1918)�� 2, 23, 104 Moran, Galloway & Co v Uzielli (1905)�� 7, 13, 23 Morgan v Oswald (1812)�� 157 Morgan v Price (1849)�� 53 Morrison v Universal Marine Insurance Co (1873)�� 26, 33, 39

xxxiv

List of Cases page Morrison (James) & Co Ltd v Shaw, Savill & Albion Co Ltd (1916)�� 74 Moss v Smith (1850)�� 2, 103, 104 Mostyn, The see Great Western Rly Co v Mostyn (Owners), The Mostyn Motor Union Insurance Co Ltd v Mannheimer Versicherungs Gesellschaft (1933)�� 40 Mount v Larkins (1831)�� 71 Mountain v Whittle (1921)�� 65 Muirhead v Forth & North Sea Steamboat Mutual Insurance Association (1894)�� 48 Munro, Brice & Co v War Risks Association (1918); revs’d (1920)�� 97 Munroe, The (1893)�� 131 Murphy v Bell (1828)�� 9 N National Benefit Assurance Co Ltd, Re (1931)�� 40, 148 National Farmers Union Mutual Insurance Society Ltd v HSBC Insurance (UK) Ltd [2010]�� 53 National Justice Compania Naviera SA v Prudential Assurance Co, The Ikarian Reefer [1995]�� 91 National Oilwell (UK) Ltd v Davy Offshore Ltd (1993)�� 4, 6, 13, 41, 91, 138, 151 Naviera de Canarias SA v Nacional Hispanica Aseguradora SA (1977)�� 91 Navigators Insurance Co Ltd v Atlasnavios-Navegacao Lda, The B Atlantic [2018]�� 91, 93, 111 Navone v Haddon (1850)�� 133 Naylor v Taylor (1829)�� 78 Near East Relief v King, Chasseur & Co Ltd (1930)�� 82 Nelson v Empress Assurance Corpn Ltd (1905)�� 17 Netherholme, Glen Holme & Rydal Holme, The see Hine Bros v SS Insurance Syndicate Ltd, The Netherholme, Glen Holme & Rydal Holme New England Reinsurance Corpn v Messoghios Insurance Co [1992]�� 39 New Zealand Shipping Co Ltd v Duke (1914)�� 7 Newby v Reed (1763)�� 53, 144 Nickels & Co v London & Provincial Marine & General Insurance Co (1900)�� 71, 73, 92 Nigel Gold Mining Co Ltd v Hoade (1901)�� 157 Niger Co Ltd v Guardian Assurance Co Ltd (1922)�� 39, 77 Nima SARL v Deves Insurance plc, The Prestrioka [2003]�� 72 Niobe, The see M’Cowan v Baine & Johnston, The Niobe Norske Atlas Insurance Co Ltd v London General Insurance Co Ltd (1927)�� 40 North Atlantic SS Co Ltd v Burr (1904)�� 103 North British & Mercantile Insurance Co v London, Liverpool & Globe Insurance Co (1877)�� 20, 53, 144 North British & Mercantile Insurance Co v Moffatt (1871)�� 13 North British Rubber Co v Cheetham (1938)�� 27 North-Eastern 100A SS Insurance Association v Red SS Co Ltd (1905); aff’d (1906)�� 150 North of England Iron SS Insurance Association v Armstrong (1870)�� 48, 143 North of England Oil-Cake Co v Archangel Insurance Co (1875)�� 21, 80, 81 North Shipping Co Ltd v Union Marine Insurance Co Ltd (1918); aff’d (1919)�� 146 North Star Shipping Ltd v Sphere Drake Insurance plc [2006]�� 32, 33, 47, 91, 138 Northumbrian Shipping Co Ltd v E Timm & Son Ltd (1939)�� 65, 66 Norwich Union Fire Insurance Society v Colonial Mutual Fire Insurance Co (1922)�� 17 Norwich Union Fire Insurance Society Ltd v William H Price Ltd (1934)�� 110

xxxv

List of Cases page Notara v Henderson (1872)�� 138 Noten (T M) BV v Harding (1990)�� 92 Nourse v Liverpool Sailing Ship Owners’ Mutual Protection & Indemnity Association (1896)�� 117 Ny-Eeasteyr, The see Houghton & Mancon Ltd v Sunderland Marine Mutual Insurance Co Ltd, The Ny-Eeasteyr O Ocean Iron SS Insurance Association Ltd v Leslie (1887)�� 2, 41, 150 Ocean SS Co v Anderson (1883); revs’d sub nom Anderson v Ocean SS Co (1884)�� 117, 120 Oceanic Steam Navigation Co Ltd v Evans (1934)�� 114 Odessa, The (1916)�� 157 O’Kane v Jones, The Martin P [2005]�� 13, 21, 41, 53, 144, 151 Oppenheim v Fry (1863)�� 133 O’Reilly v Royal Exchange Assurance 1815)�� 78 Oriental Fire & General Insurance Co Ltd v American President Lines Ltd & Cotton Trading Corpn of San Francisco (1968)�� 142 Ostra Insurance Public Co Ltd v Kintex Shareholding Co [2004]�� 73 Otago Farmers’ Co-op Association of New Zealand v Thompson (1910)�� 2 Outhwaite v Commercial Bank of Greece SA, The Sea Breeze (1987)�� 56, 60 Overseas Commodities Ltd v Style (1958)�� 45, 56, 60, 90, 92, 129 Overseas Marine Insurance Co Ltd, Re (1930)�� 10 P PCW Syndicates v PCW Reinsurers [1996]�� 35 Pacific Queen Fisheries v L Symes, The Pacific Queen (1963)�� 32, 33, 66, 69 Padstow Total Loss & Collision Assurance Association, Re (1882)�� 150 Page v Fry (1800)�� 16 Palamisto General Enterprises SA v Ocean Marine Insurance Co Ltd, The Dias (1972)�� 91 Palm Branch, The (1916)�� 143, 157 Palmer v Blackburn (1822)�� 23, 152 Palmer v Fenning (1833)�� 71 Palyart v Leckie (1817)�� 148 Pamia, The see Lubrafol, M/V (Owners) v SS Pamia (Owners), The Pamia Pan Atlantic Ins Co Ltd v Pine Top Ins Co Ltd [1995]�� 26, 32, 37, 157 Panamanian Oriental SS Corpn v Wright (1970); on appeal (1971)�� 96, 104, 110, 111 Papadimitriou v Henderson (1939)�� 12, 48, 91, 122 Parchim, The (1918)�� 157 Parente (Robert A) v Bayville Marine Inc & General Insurance Co of America (1975)�� 90 Parker, Re, ex p Turquand (1885)�� 152 Parker v Budd (1896)�� 103 Parkin v Tunno (1809)�� 71 Parkinson v Collier (1797)�� 152 Patel v Mirza (2016)�� 7 Paterson v Harris (1861)�� 12 Pawson v Watson (1778)�� 37, 55 Pearson v Commercial Union Assurance Co (1876)�� 76 Pellas v Neptune Marine Insurance Co (1879)�� 79 Pesquerias y Secaderos de Bacalao de España SA v Beer (1946); revs’d (1947); on appeal (1949)�� 110

xxxvi

List of Cases page Petrofina SA of Brussels v Compagnia Italiana Trasporto Olii Minerali of Genoa (1937)�� 59 Phillips v Headlam (1831)�� 65 Philpott v Swann (1861)�� 92, 104 Phyn v Royal Exchange Assurance Co (1798)�� 74 Pickersgill (William) & Sons Ltd v London & Provincial Marine & General Insurance Co Ltd (1912)�� 33, 79, 80 Pickup v Thames & Mersey Marine Insurance Co Ltd (1878)�� 63, 66 Pickwick, The (1852)�� 138 Pillgrem v Cliff Richardson Boats Ltd & Richardson (Switzerland General Insurance Co, third party) (1977)�� 13, 131 Pindos Shipping Corpn v Raven, The Mata Hari (1983)�� 60 Pink v Fleming (1890)�� 90, 92 Piper v Royal Exchange Assurance (1932)�� 13, 15, 33 Pipon v Cope (1808)�� 70 Pitman v Universal Marine Insurance Co (1882)�� 2, 124, 126 Planche v Fletcher (1779)�� 69 Polpen Shipping Co Ltd v Commercial Union Assurance Co Ltd (1943)�� 131 Polurrian SS Co Ltd v Young (1913); aff’d (1915)�� 103, 104, 111, 126 Pomeranian, The (1895)�� 138, 154 Popham v St Petersburg Insurance Co (1904)�� 121 Popi M, The see Rhesa Shipping Co SA v Edmunds, The Popi M Porter v Freudenberg (1915)�� 157 Potoi Chau, The see Castle Insurance Co Ltd v Hong Kong Islands Shipping Co Ltd, The Potoi Chau Potts v Bell (1800)�� 157 Powell v Gudgeon (1816)�� 92 Powles v Innes (1843)�� 21, 81 Pratt v Aigaion Insurance Co SA, The Resolute [2009]�� 56 Price v Maritime Insurance Co (1900); aff’d (1901)�� 7, 18, 133 Price & Co v AI Ships’ Small Damage Insurance Association (1889)�� 115, 133 Price & Co v Union Lighterage Co (1903); aff’d (1904)�� 90 Probatina Shipping Co Ltd v Sun Insurance Office Ltd (1974)�� 27 Project Asia Line Inc v Shone, The Pride of Donegal [2002]�� 65 Promet Engineering (Singapore) v Sturge, The Nukila (1997)�� 6 Property Insurance Co Ltd v National Protector Insurance Co Ltd (1913)�� 17, 32 Proudfoot v Montefiore (1867)�� 31, 33 Provincial Insurance Co of Canada v Leduc (1874)�� 56, 57, 110 Prudent Tankers Ltd SA v Dominion Insurance Co Ltd, The Caribbean Sea (1980)�� 93 Puller v Glover (1810)�� 78 Pyman v Marten (1906)�� 79, 146 Q Quebec Marine Insurance Co v Commercial Bank of Canada (1870)�� 4, 55, 57, 58, 59, 65, 66 Quellec, Le et Fils v Thomson (1916)�� 92 Quorum AS v Schramm (No 1) [2002]�� 47, 48 R RSA Insurance plc v Assicurazoni Generali SpA [2018]�� 144 Raiffeisen Zentralbank Osterreich AG v Five Star General Trading LLC, The Mount I [2001]�� 79, 80

xxxvii

List of Cases page Ralli v Janson (1856)�� 133 Ramco (UK) Ltd v International Insurance Co of Hannover Ltd [2004]�� 21 Rankin v Potter (1873)�� 7, 47, 92, 96, 103, 106, 110, 111, 113, 114, 127, 142 Rayner v Preston (1881)�� 7, 21 Reardon Smith Lines Ltd v Black Sea & Baltic General Insurance Co Ltd, The Indian City (1939)�� 75 Red Sea, The (1896)�� 114 Redmond v Smith (1844)�� 69 Regazzoni v Sethia (1958)�� 7 Reid v Standard Mar Insurance Co (1886)�� 97 Reischer v Borwick (1894)�� 89 Reliance Marine Insurance Co v Duder (1913)�� 41, 45, 47, 132 Renton (G H) & Co Ltd v Black Sea & Baltic General Insurance Co Ltd (1941)�� 4 Rhesa Shipping Co SA v Edmunds, The Popi M (1985)�� 91 Rhind v Wilkinson (1810)�� 14 Richard de Larrinaga, SS (Owners) v Admiralty Comrs (1920); aff’d sub nom A-G v Ard Coasters Ltd, Liverpool & London War Risks Insurance Association Ltd v SS Richard de Larrinaga Marine Underwriters (1921)�� 92 Rickards v Forestal Land, Timber & Rlys Co Ltd (1942)�� 73, 78, 103, 104, 110 Rivaz v Gerussi (1880)�� 29, 32, 33, 36, 37, 148 River Wear Comrs v Adamson (1877)�� 112 Roberts v Security Co Ltd (1897)�� 42, 83 Robertson v Petros M Nomikos Ltd (1939)�� 103 Robinson v Gleadow (1835)�� 16 Roddick v Indemnity Mutual Marine Insurance Co (1895)�� 23, 60 Rodocanachi v Elliott (1873); aff’d (1874)�� 3, 4, 73, 103, 104 Rosa v Insurance Co of the State of Pennsylvania, The Belle of Portugal (1970)�� 90 Ross v Hunter (1790)�� 78 Roura & Forgas v Townend (1919)�� 104, 110, 111 Roux v Salvador (1835)�� 94, 96, 103, 104, 106 Rowland & Marwood SS Co Ltd v Maritime Insurance Co Ltd (1901)�� 103, 104 Royal Boskalis Westminster NV v Mountain [1997]�� 69, 70, 103, 110, 117 Royal Exchange Assurance Corpn v Sjoforsakrings Akt Vega (1901); aff’d (1902)�� 40 Ruabon SS Co v London Assurance (1900)�� 126 Rudolph (M J) Corpn v Lumber Mutual Fire Insurance Co (Luria International, Third Parties), The Cape Borer (1975)�� 150 Russell v Provincial Insurance Co Ltd (1959)�� 50 Russell v Thornton (1859); on appeal (1860)�� 32 Russian Bank for Foreign Trade v Excess Insurance Co (1918); aff’d (1919)�� 91, 110 Ruys v Royal Exchange Assurance Corpn (1897)�� 111 S SAIL v Farex [1995]�� 35 SS Carisbrooke Co v London & Provincial Marine Insurance Co (1901)�� 121 Sadler v Dixon see Dixon v Sadler Sadlers’ Co v Badcock (1743)�� 9 Sailing Ship Blainmore v Macredie [1898]�� 103, 104, 110 St Margaret’s Trust Ltd v Navigators & General Insurance Co Ltd (1949)�� 93, 97 St Paul Fire & Marine Insurance Co v Morice (1906)�� 92 Salacia, The (1862)�� 19

xxxviii

List of Cases page Salem, The see Shell International Petroleum Co Ltd v Gibbs, The Salem Samuel v Royal Exchange Assurance Co (1828)�� 76 Samuel (P) & Co Ltd v Dumas (1924)�� 10, 41, 91, 93 Sanday & Co v British & Foreign Marine Insurance Co (1915); aff’d sub nom British & Foreign Marine Insurance Co Ltd v Samuel Sanday & Co (1916)�� 23, 73, 94, 103, 104, 157, 158 Sassoon (E D) & Co v Western Assurance Co (1912)�� 90 Sassoon (E D) & Co Ltd v Yorkshire Insurance Co Ltd (1923); aff’d (1923)�� 90 Scaramanga v Stamp (1880)�� 78 Schloss Bros v Stevens (1906)�� 4, 7, 92 Schroder v Thompson (1817)�� 76 Scott v Globe Marine Insurance Co Ltd (1896)�� 49 Scottish Marine Insurance Co v Turner (1853)�� 105, 114 Scottish Metropolitan Assurance Co Ltd v Groom (1923); aff’d (1924)�� 17 Scottish National Insurance Co Ltd v Poole (1912)�� 17, 153 Scottish Shiref Line Ltd v London & Provincial Marineka & General Insurance Co Ltd (1912)�� 9, 12, 33 Sea Breeze, The see Outhwaite v Commercial Bank of Greece SA, The Sea Breeze Sea Glory Maritime Co v Al Sagr National Insurance Co, The Nancy (2014)�� 7, 56, 69 Sea Insurance Co v Blogg (1898); on appeal (1898)�� 60 Sea Insurance Co v Hadden (1884)�� 113, 114, 143 Seagrave v Union Marine Insurance Co (1866)�� 12, 13, 21, 132 Seashore Marine SA v Phoenix Assurance plc [2002]�� 91, 117, 121 Seaton v Heath (1899); revs’d sub nom Seaton v Burnand (1900)�� 26 Seavision Investment SA v Norman Thomas Evenett & Clarkson Puckle Ltd, The Tiburon (1990); aff’d sub nom Seavision Investment SA v Evennett & Clarkson Puckle Ltd, The Tiburon (1992)�� 56, 60, 61 Sellar v M’Vicar (1804)�� 72 Seymour v London & Provincial Marine Insurance Co (1872); aff’d (1873)�� 70 Sharp v Gladstone (1805)�� 114 Sharp & Roarer Investments Ltd v Sphere Drake Insurance plc, Minster Insurance Co Ltd & E C Parker & Co Ltd, The Moonacre (1992)�� 13, 33 Shee v Clarkson (1810)�� 145 Shelbourne & Co v Law Investment & Insurance Corpn (1898)�� 4, 90, 131 Shepherd v Henderson (1881)�� 103, 110 Shoolbred v Nutt (1782)�� 32 Sibbald v Hill (1814)�� 36, 38 Silcock (R) & Sons Ltd v Maritime Lighterage Co (J R Francis & Co) Ltd (1937)�� 66 Simner v New India Assurance Co Ltd [1995]�� 32, 35 Simon, Israel & Co v Sedgwick (1893)�� 72, 73 Simons (trading as Acme Credit Services) v Gale, The Cap Tarifa (1957); aff’d (1958)�� 56 Simpson v Thomson (1877)�� 106, 112, 142, 143 Simpson SS Co Ltd v Premier Underwriting Association Ltd (1905)�� 55, 60, 72 Slattery v Mance (1962)�� 33, 38 Sleigh v Tyser (1900)�� 59, 65 Small v United Kingdom Marine Mutual Insurance Association (1897)�� 21, 91 Smit Tax Offshore Services v Youell & General Accident Fire & Life Assurance Corpn plc (1992)�� 7

xxxix

List of Cases page Smith v Robertson (1814)�� 110 Smith Hill & Co v Pyman Bell & Co (1891)�� 19 Société Nouvelle d’Armement v Spillers & Bakers Ltd (1917)�� 121 South British Fire & Marine Insurance Co of New Zealand v Da Costa (1906)�� 17 Sovfracht (V/O) v Van Udens Scheepvaart en Agentuur Maatschapij (NV Gebr) (1943)�� 157 Soya GmbH Mainz Kommanditgesellschaft v White (1982); on appeal (1983)�� 33, 90, 92 Spalding v Crocker (1897)�� 153 Sparkes v Marshall (1836)�� 15, 79 Spence v Union Marine Insurance Co Ltd (1868)�� 94, 129 Stainbank v Fenning (1851)�� 12, 18 Standard Life Assurance Ltd v Ace European Group [2013]�� 122, 144 Standard Life Assurance Ltd v Oak Dedicated Ltd [2008]�� 153 Stanton v Richardson (1874); on appeal (1875)�� 67 State of Netherlands v Youell (1998)�� 4, 13, 91, 138 Stearns v Village Main Reef Gold Mining Co Ltd (1905)�� 143 Stephens v Australasian Insurance Co (1872)�� 49, 152 Stewart v Greenock Marine Insurance Co (1848)�� 113, 114 Stewart v Steele (1842)�� 126 Stock v Inglis (1884); aff’d sub nom Inglis v Stock (1885)�� 16, 49 Stone Vickers Ltd v Appledore Ferguson Shipbuilders Ltd (1992)�� 4 Stoomvart Maatschappij Sophie H v Merchants’ Marine Insurance Co Ltd (1919)�� 92 Stott (Baltic) Steamers Ltd v Marten (1914); aff’d (1916)�� 7, 90 Strang, Steel & Co v A Scott & Co (1889)�� 121 Stranna, The (1938)�� 90 Strass v Spillers & Bakers Ltd (1911)�� 21, 80 Street v Royal Exchange Assurance (1913); aff’d (1914)�� 17 Stringer v English & Scottish Marine Insurance Co (1869); aff’d (1870)�� 110 Strive Shipping Corpn v Hellenic Mutual War Risks Association (Bermuda) Ltd, The Grecia Express [2002]�� 138 Suez Fortune Investments Ltd v Talbot Underwirting Ltd, The Brillante Virtuoso [2015]�� 23, 47, 104, 126 Sugar Hut Group Ltd v Great Lakes Reinsurance (UK) plc [2011]�� 56 Sun Alliance & London Insurance plc v PT Asuraynsri Dayin Mitra TBK, The No 1 Dae By [2006]�� 60 Sun Life Assurance Co v CX Reinsurance Co Ltd [2004]�� 39 Sutherland v Pratt (1843)�� 14 Svendsen v Wallace Bros (1884); aff’d (1885)�� 120 Svenska Handelsbanken AB v Dandridge, The Alicia Glazial [2003]�� 91 Sveriges Angfartygs Assurans Forening (The Swedish Club) v Connexxt Shipping Inc, The Renos [2018]�� 104, 110, 152 Swan & Cleland’s Graving Dock & Slipway Co v Maritime Insurance Co & Croshaw (1907)�� 41, 79, 117 Sweeting v Pearce (1859); aff’d (1861)�� 82, 152 Swiss Reinsurance Co v United India Insurance Co Ltd [2005]�� 148 Symington & Co v Union Insurance Society of Canton (1928)�� 4, 153 Synergy Health (UK) Ltd v CGU Insurance plc [2011]�� 38 T Tait v Levi (1811)�� 74 Talbot Underwriting Ltd v Nausch, Hogan & Murray Inc, The Jascon [2006]�� 41 Tannenbaum & Co v Heath (1908)�� 27

xl

List of Cases page Tasker v Cunninghame (1819)�� 73 Tate v Hyslop (1885)�� 32, 33 Tatham v Hodgson (1796)�� 90 Tatham, Bromage & Co v Burr, The Engineer (1898)�� 7, 131 Tatjana, The see Lindsay v Klein, The Tatjana Taylor v Dunbar (1869)�� 90 Tektrol Ltd v International Insurance Co of Hanover Ltd [2005]�� 91 Tenneco Oil Co v Tug Tony Coastal Towing Corpn (1972)�� 142 Thames & Mersey Marine Insurance Co v British & Chilian SS Co (1915); aff’d (1916)�� 48, 143 Thames & Mersey Marine Insurance Co v Gunford Ship Co (1911)�� 9, 11, 23, 32, 33 Thames & Mersey Marine Insurance Co Ltd v Hamilton, Fraser & Co (1887)�� 7, 90 Thames & Mersey Marine Insurance Co Ltd v Van Laun & Co (1905), (1917)�� 51, 73 Theodorou v Chester (1951)�� 7 Thomas v Tyne & Wear SS Freight Insurance Association (1917)�� 65, 66 Thomas (M) & Son Shipping Co Ltd v London & Provincial Marine & General Insurance Co Ltd (1914)�� 66 Thompson v Hopper (1856)�� 74 Thompson v Hopper (1858)�� 90 Thompson v Reynolds (1857)�� 47 Thor Navigation Inc v Ingosstrakh Insurance [2005]�� 24, 48 Thorsa, The (1916)�� 65 Tiburon, The see Seavision Investment SA v Norman Thomas Evenett & Clarkson Puckle Ltd, The Tiburon Tobin v Harford (1863); aff’d (1864)�� 128, 132 Toomey v Banco Vitalicio de Espana [2005]�� 56, 59 Toomey v Eagle Star Insurance Co Ltd [1994]�� 131 Touche Ross v Baker [1992]�� 42 Traders & General Insurance Association Ltd, Re, ex p Continental & Overseas Trading Co (1924)�� 4 Trident, The see Hall Bros SS Co Ltd v Young, The Trident Trinder, Anderson & Co v Thames & Mersey Marine Insurance Co (1898)�� 61, 70, 89, 90, 91, 111 Tropaioforos, The see Compania Naviera Santi SA v Indemnity Marine Assurance Co Ltd, The Tropaioforos Tunno v Edwards (1810)�� 142 Turnbull v Janson (1877)�� 66 Turnbull, Martin & Co v Hull Underwriters’ Association (1900)�� 91 Tyrie v Fletcher (1777) cited in (1777)�� 148 Tyser v Shipowners Syndicate (Reassured) (1896)�� 42 U Uhde v Walters (1811)�� 152 Union Castle Mail SS Co Ltd v United Kingdom Mutual War Risks Association Ltd (1958)�� 150 Union Insurance Society of Canton Ltd v George Wills & Co (1916)�� 49, 55, 57, 58 Union Marine Insurance Co v Borwick (1895)�� 131 Union Marine Insurance Co Ltd v Martin (1866)�� 53 United Scottish Insurance Co Ltd v British Fishing Vessels Mutual War Risks Association Ltd, The Braconbush (1944)�� 97 United States Shipping Co v Empress Assurance Corpn (1907); aff’d (1908)�� 20, 23, 24 Universo Insurance Co of Milan v Merchants Marine Insurance Co (1897)�� 82, 152

xli

List of Cases page Unum Insurance Co of America v Israel Pheonix Assurance Co [2002]�� 39 Usher v Noble (1810)�� 20, 23, 129 Usparicha v Noble (1811)�� 157 Uzielli v Boston Marine Insurance Co (1884)�� 17, 110, 117, 138 V Vacuum Oil Co v Union Insurance Society of Canton Ltd (1926)�� 110 Vainqueur, The see Northwestern Mutual Life Assurance Co v Linard, The Vainqueur Vallance v Dewar (1808)�� 32, 71 Vandyck v Hewitt (1800)�� 148 Velos Group Ltd v Harbour Insurance Services Ltd [1997]�� 145 Venetico Marine SA v International General Insurance Co Ltd, The Irene EM [2014]�� 97 Ventouris v Mountain, The Italia Express (No 2) (1992)�� 122, 123 Verna Trading Pty Ltd v New India Assurance Co Ltd [1991]�� 76 Versicherungs und Transport AG Daugava v Henderson (1934)�� 17 Versloot Dredging BV v HDI Gerling Industrie Versicherung AG, The DC Merwestone [2017]�� 27, 91, 126 Vincentelli & Co v John Rowlett & Co (1910)�� 2, 7 Visscherij Maatschappij Nieuw Onderneming v Scottish Metropolitan Assurance Co Ltd (1922)�� 26, 33 Vlassopoulos v British & Foreign Marine Insurance Co Ltd (1929)�� 121 Vortigern, The (1899)�� 65 Vrondissis v Stevens (1940)�� 105 W Wadsworth Lighterage & Coaling Co Ltd v Sea Insurance Co Ltd (1929)�� 90 Watson (Joseph) & Son Ltd v Firemen’s Fund Insurance Co of San Francisco (1922)�� 92, 121 Watts Watts & Co Ltd v Mitsui & Co Ltd (1917)�� 92 Waugh v Morris (1873)�� 69 Wavertree Sailing Ship Co v Love (1897)�� 157 Way v Modigliani (1787)�� 71 Wayne Tank & Pump Co Ltd v Employers Liability Insurance Corpn Ltd [1974]�� 91 Welsh Girl, The (1906); aff’d sub nom The Commonwealth (1907)�� 143, 144 West of England Fire Insurance Co v Isaacs (1896); aff’d (1897)�� 142 West of Scotland Ship Owners Mutual Protection & Indemnity Association (Luxembourg) v Aifanourios Shipping SA, The Aifanourios (1980)�� 150 Western Assurance Co of Toronto v Poole (1903)�� 138, 138, 144 Westport Coal Co v McPhail (1898)�� 91 Westwood v Bell (1815)�� 82 Wetherall (J H) & Co Ltd v London Assurance (1931)�� 91 Wetherell v Jones (1832)�� 7 Wharton (J) (Shipping) Ltd v Mortleman (1941)�� 92 Whincup v Hughes (1871)�� 148 Whitworth v Shepherd (1884)�� 144 Wilkinson v Hyde (1858)�� 133 Williams v Atlantic Assurance Co Ltd (1933)�� 23, 26, 79, 80 Williams v North China Insurance Co (1876)�� 132, 151 Williams & Co v Canton Insurance Office Ltd see Brankelow SS Co v Canton Insurance Office Willmott v General Accident Fire & Life Assurance Corpn Ltd (1935)�� 38, 39 Wilson v Boag (1956)�� 43, 71

xlii

List of Cases page Wilson v Jones (1867)�� 6, 9, 10, 12, 13, 16, 45 Wilson v Martin (1856)�� 12 Wilson v Nelson (1864)�� 47 Wilson v Rankin (1865)�� 70 Wilson v Salamandra Assurance Co of St Petersburg (1903)�� 32 Wilson Bros Bobbin Co Ltd v Green (1917)�� 133, 138 Wilson (Thomas), Sons & Co v Xantho (Cargo Owners), The Xantho (1887)�� 90 Wingate v Foster (1878)�� 75 Wondrous, The see Ikerigi Cia Naviera SA v Palmer, The Wondrous Woodside v Globe Marine Insurance Co Ltd (1896)�� 2, 48, 123, 134 Wooldridge v Boydell (1778)�� 72 Wyllie v Povah (1907)�� 7, 96 X Xantho, The see Wilson (Thomas), Sons & Co v Xantho (Cargo Owners), The Xantho Xenos v Fox (1868); on appeal (1869)�� 47, 138 Xenos v Wickham (1866)�� 42 Y Yangtze Insurance Association v Lukmanjee (1918)�� 21 Yangtze Insurance Association v Indemnity Mutual Marine Assurance Co (1908)�� 60, 69 Yasin, The (1979)�� 13, 142 Yates v Whyte (1838)�� 21 Yorkshire Dale SS Co Ltd v Minister of War Transport, The Coxwold (1942)�� 93 Yorkshire Insurance Co Ltd v Campbell (1917)�� 55, 58 Yorkshire Insurance Co Ltd v Nisbet Shipping Co Ltd (1962)�� 48, 142, 143 Yorkshire Water v Sun Alliance & London Insurance [1997]�� 138 Youell v Bland Welch (No 1) (1992)�� 4, 153 Young v Merchants’ Marine Insurance Co Ltd (1932)�� 17 Z Zephyr, The [1985]�� 39 Zinovia, The see Michalos (N) & Sons Maritime SA v Prudential Assurance Co Ltd, The Zinovia Zurich Insurance plc v International Energy Group Ltd [2015]�� 144

xliii

xliv

The Marine Insurance Act 1906

(6 Edw 7 c 41) An Act to codify1 the Law relating to Marine Insurance. [21 December 1906]

MARINE INSURANCE 1. Marine insurance defined 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 Note The formal instrument in which the contract is embodied is called the ‘policy’.3 The informal note or memorandum which is drawn up when the contract is entered into is called the ‘slip’.4 The party who undertakes to indemnify the other, ie the promisor, is called the ‘insurer’ or ‘underwriter’ (so called because he subscribes or underwrites the policy). The party to be indemnified is called the ‘insured,’ or more usually, the ‘assured’.5 When a contract of marine insurance is entered into, the underwriters are said ‘to take a line’. The subject-matter insured is usually referred to as ‘the interest insured’.6 The consideration which the insurer receives for his undertaking is called the ‘premium’. But in the case of ‘mutual insurance’ a guarantee or other arrangement may take the place of the premium.7 The term ‘loss’ includes damage or detriment as well as the actual loss of the property.8 The term ‘risk’ is used in different senses, and must always be construed in the light of its context. Sometimes it is used to denote the perils themselves to which insurable property may be exposed, as when sea risks are contrasted with land risks, or when goods are insured against ‘all risks’.9 Sometimes it is used to denote the risk run by the person whose property is exposed to danger. But, more usually perhaps, it is used to denote the liability undertaken by the insurer in respect of his contract as, for example, when goods are lost, and it is said that ‘the risk had not attached,’ that is to say, that the goods were not at the time of loss covered by the policy.10

1

The Marine Insurance Act 1906

Marine insurance, in legal theory, is essentially a contract of indemnity.11 The legal consequences and incidents of the contract are deductions from this cardinal principle. Hence arises its distinctive characteristics, such as the rules requiring an insurable interest, the rules as to double insurance, the right of subrogation consequent upon settlement of the loss, and the right to a return of premium in certain events. But it has often been pointed out that, in practice, marine insurance is not a perfect contract of indemnity.12 For example, under an unvalued policy13 on goods, in the ordinary form, and without any special clause, the assured would probably receive an amount less than his real loss,14 while under a valued policy15 he may receive an amount which either exceeds or falls short of his real loss.16 But this departure in practice from the principle of indemnity depends rather on the form of policies in actual use than on the nature of the contract itself. The lawful contract is always, in principle, a contract of indemnity, but the extent and amount of indemnity are matters of agreement between the parties. An ‘honour’ (or wager) policy is not a contract of indemnity.17 Forgery of a marine insurance policy is an offence under the Forgery and Counterfeiting Act 1981, s 1.18 1 For the short title, and the rule of construction in respect of a codifying statute, see s 94 and notes thereto. 2 Cf the definition by Blackburn J in Lloyd v Fleming (1872) LR 7 QB 299 at 302: ‘A policy of marine insurance is a contract of indemnity against all losses accruing to the subject-matter of the policy from certain perils during the adventure.’ See also Admiralty Comrs v Ropner & Co Ltd (1917) 86 LJKB 1030, distinguishing the Admiralty charter-party with marine indemnity clauses (which was used in the First World War) from marine insurance; Moore v Evans [1918] AC 185,193, distinguishing marine from non-marine risks. 3 From Latin pollicitatio, a promise, through Italian polizza or French police. 4 See ss 21, 22, 89. Cf Maignen& Co v National Benefit Assurance Co (1922) 38 TLR 257 (as to short slip and closing slip). 5 As to what is included in the term ‘assured,’ see Ocean Iron SS Insurance Association Ltd v Leslie (1887) 22 QBD at 722n, 726n, per Mathew J. 6 Cf Hewitt Bros v Wilson (1915) 20 Corn Cas 241 at 243, CA distinguishing the ‘interest insured’ from ‘insurable interest’. 7 As to the premium, see ss 52–54, and as to mutual insurance, see s 85. 8 As to loss, see ss 55–66. For a useful discussion of the meaning of ‘loss’, see Moss v Smith (1850) 19 LJCP 225, at 228. As to the clause ‘FPA and loss,’ see Otago Farmers’ Co-op Association of New Zealand v Thompson [1910] 2 KB 145. 9 Even then the term may have a double meaning, and may refer either to the quantum of loss or the cause of the accident: Vincentelli & Co v John Rowlett & Co (1910) 16 Com Cas 310 at 317. 10 Cf Bradford v Symondson (1881) 7 QBD 456 at 464, per Bramwell LJ. 11 Per Lord Mansfield, Kent v Bird (1777) 2 Cowp 583 at 585 (wager policy); per Blackburn J, Lloyd v Fleming (1872) LR 7 QB 299 at 302 (assignment after loss); per Blackburn J, Anderson v Morice (1875) LR 10 CP 609 at 615 (insurable interest); per Jessel MR, Pitman v Universal Marine Insurance Co (1882) 9 QBD 192 at 204 (partial loss); per Brett LJ and Bowen LJ, Castellain v Preston (1883) 11 QBD 380 at 386 and 397 (subrogation). 12 Aitchison v Lohre (1879) 4 App Cas at 761; British and Foreign Insurance Co v Wilson Shipping Co Ltd [1921] 1 AC at 214, 26 Com Cas at 35, per Lord Sumner; Goole and Hull Steam Towing Co Ltd v Ocean Marine Insurance Co Ltd [1928] 1 KB at 594. 13 As to unvalued policies, see s 28. 14 See s 16(3). In practice, the valuation generally allows for freight and expected profit so that the assured receives more. In the case of freight insurance the indemnity is exceeded. See s 16(2). 15 As to valued policies, see s 27(2). 16 Cf Woodside v Globe Marine Insurance Co Ltd [1896] 1 QB 105 at 107; Loders and Nucoline Ltd v Bank of New Zealand (1929) 45 TLR 203.

2

Marine insurance 17 See note to s 4, and Kulen Kemp v Vigne (1786) 1 Term Rep 304 at 309; John Edwards & Co v Motor Union Insurance Co [1922] 2 KB 249. 18 Which states: ‘A person is guilty of forgery if he makes a false instrument with the intention that he or another shall use it to induce somebody to accept it as genuine, and by reason of so accepting it to do or not to do some act to his own or any other person’s prejudice.’

2. Mixed sea and land risks (1) 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.1 (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 thereto; 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.2 Note The normal insurance on goods now contains the ‘transit’ clause,3 which covers the goods from the time they leave the shipper’s or manufacturer’s warehouse until they reach the warehouse of the consignee.4 These mixed sea and land risks may be compared, by the way of analogy, with ‘through bills of lading,’ which are the invention of modern commerce. Thus, goods may be insured ‘from Japan to London, via Marseilles and/or Southampton’;5 wool may be insured ‘at and from Townsville to London, including risk of fire and flood, from sheep’s back until waterborne at Townsville’;6 bullion may be insured ‘at and from Boodini to London, including all risks of every description, from the mines by escort to railway station at Raichur, thence by rail to Bombay, and thence to London’;7 a fox terrier may be insured ‘against all risks from London to Bombay, and thence by rail to Lahore’;8 goods may be insured ‘against all risks by land or by water’ from Cartagena to any place in the interior of Colombia;9 timber may be insured ‘whilst on board the ocean-going vessel until discharged at port of destination and whilst in transit by land and/or water to final destination there or in the interior’;10 a consignment of clothing may be insured from ‘Hong Kong to Scotland via the Port of London’;11 and oil may be insured in steel or iron drums ‘on steamer and/or steamers and/or conveyances or any other method of transportation from anywhere to anywhere’.12 It is usual to insure a vessel under construction and also while she is being launched.13 1 Ide and Christie v Chalmers and White (1900) 5 Com Cas 212 (warehouse to warehouse); Republic of Bolivia v Indemnity Mutual Marine Assurance Co [1909] 1 KB 785 at 802 (‘riverine’ policy up the Amazon). As to trade usage, which hitherto has been of very limited scope, see Rodocanachi v Elliott (1874) LR 9 CP 518. For a non-marine policy which incidentally covered a sea transit, see Moore v Evans [1918] AC 185 (no constructive total loss); and for a policy in a marine form which was in substance one of fire insurance and ultra vires the company, see Re Argonaut Marine Insurance Co Ltd [1932] 2 Ch 34. 2 Jackson v Mumford (1904) 9 Com Cas 114, CA (ships when building insured against ‘fire in shops and on board on stocks, trials, and all marine risks to completion and acceptance by Admiralty’);

3

The Marine Insurance Act 1906

James Yachts Ltd v Thames and Mersey Marine Insurance Co Ltd [1977] 1 Lloyd’s Rep 206, British Columbia, Supreme Court (policy on ‘hull, tackle … boats and other furniture and fixtures and all material belonging to and destined for inclusion in all vessels being built at the premises of the assured as specified elsewhere herein’); Stone Vickers Ltd v Appledore Ferguson Shipbuilders Ltd [1992] 2 Lloyd’s Rep 578, where the question was whether the plaintiffs were entitled to be protected against a subrogated claim; Hong Kong Borneo Services Co Ltd v Pilcher [1992] 2 Lloyd’s Rep 593, QB (Commercial Court) (reinsurance), where the risk of delay in delivery of two vessels under construction caused by strikes was reinsured. As to the words ‘so far as applicable,’ see Quebec Marine Insurance Co v Commercial Bank of Canada (1870) LR 3 PC 234 (lake, river, and canal insurance); Joyce v Kennard (1871) LR 7 QB 78 (insurance of lighterman’s liability); Shelbourne v Law Investment and Insurance Co (1898) 8 Asp MLC 445 (river insurance); Apollinaris Co v Nord Deutsche Insurance Co [1904] 1 KB 252 (deck cargo on the Rhine canal, usage); and more recent cases of marine policies on building risks include: Youell v Bland Welch (No.1) [1992] 2 Lloyd’s Rep 127; National Oilwell (UK) Ltd v Davy Offshore Ltd [1993] 2 Lloyd’s Rep 582; Heesens Yacht Builders BV v. Cox Syndicate Management Ltd [2006] Lloyd’s Rep IR 476. It was suggested by Phillips LJ in State of Netherlands v Youell [1998] 1 Lloyd’s Rep 236, 244 that the duty to sue and labour in s 78(4) of the 1906 Act was not extended to the purchaser under a shipbuilding contract just because it was in marine form, whereas Buxton LJ assumed that once the policy was in marine form then s 78(4) applied (p 247). The Law Commission proposed the repeal of s 2(2) owing to the uncertainty of its scope. 3 See Institute Cargo Clauses (A), Clause 8; Institute Cargo Clauses (B), Clause 8; Institute Cargo Clauses (C), and Clause 8; Institute War Clauses (Cargo), Clause 5. The 2009 Cargo Clauses extend cover to the loading and unloading of the goods in the warehouses of origin and destination. 4 Ide and Christie v Chalmers and White (1900) 5 Corn Cas 212; Marten v Nippon (1898) 3 Com Cas 164; Re Traders and General Insurance Association Ltd [1924] 2 Ch 187; Symington & Co v Union Insurance Society of Canton Ltd (1928) 34 Corn Cas 23; Leon v Casey [1932] 2 KB 576, CA (transit by land and sea, loss on land, policy substantially one of marine insurance). 5 Rodocanachi v Elliott (1873) LR 8 CP 649; affd (1874) LR 9 CP 518, Ex Ch (goods detained in Paris during siege). 6 King v Victoria Insurance Co [1896] AC 250, PC; see, too, Davies v National Insurance Co of New Zealand [1891] AC 485. 7 Hyderabad (Deccan) Co v Willoughby [1899] 2 QB 530; see, too, Janson v Driefontein Consolidation Mines [1902] AC 484 (bullion insured from Transvaal mines to London). 8 Jacobs v Caviller (1902) 7 Com Cas 116. 9 Schloss Bros v Stevens [1906] 2 KB 665, approved in British and Foreign Marine Insurance Co v Gaunt [1921] 2 AC 41, HL; affg SC [1920] 1 KB 903, CA (all risks from sheep’s back by land or water to warehouse). 10 G H Renton & Co Ltd v Black Sea and Baltic General Insurance Co Ltd [1941] 1 All ER 149, KB. (Held, in this case, that the risk ended when the timber was unloaded on the quay, and not after the subsequent sorting and stacking by the port authority and therefore that cargo owners were not entitled to recover under the policy). 11 H Cousin s & Co Ltd v D and C Carriers Ltd [1971] 2 QB 230; [1971] 1 All ER 55, CA. 12 Fuerst Day Lawson Ltd v Orion Insurance Co Ltd [1980] 1 Lloyd’s Rep 656. 13 See the cases cited in footnote 2, supra.

3. Marine adventure and maritime perils defined (1) Subject to the provisions of this Act, every lawful1 marine adventure may be the subject of a contract of marine insurance.2 (2) In particular there is a marine adventure where— (a) Any ship3, goods,4 or other moveables5 are exposed to maritime perils. Such property is in this Act referred to as ‘insurable property’; (b) The earning or acquisition of any freight, passage money,6 commission, profit, or other pecuniary benefit7, or the security for any advances, loan,

4

Marine insurance

or disbursements, is endangered by the exposure of insurable property to maritime perils;8 (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.9 ‘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, seizures, 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.10 Note

Lawfulness of adventure If an insurer, with his eyes open, insures an unlawful adventure, the policy is obviously a mere ‘honour’ policy, for ex turpi causa non oritur actio.11 Speaking generally, an adventure is illegal if it is prohibited by statute, or contrary to good morals or public policy;12 and illegality in any integral part of the adventure may taint the whole of it.13 The reference here to a ‘lawful’ marine adventure is probably a reference to it being lawful under the law governing the contract of insurance. The English courts may also refuse to enforce a contract if it is illegal in the place of performance or contrary to English public policy.14 But a distinction must be drawn between the lawfulness of the adventure and the implied warranty of legality by the assured (see s 41). If the insurer and the assured like to insure an illegal adventure, the contract is an ‘honour’ contract;15 but where the assured does not disclose the illegality of the adventure, the contract is binding neither in law nor honour. Again, if there is anything in foreign law or international relations which increases the particular risk and is not a matter of common knowledge, it must be disclosed to the insurer before the contract is concluded.16

Subject of insurance Strictly speaking, it is the risk or adventure of the assured and not the property exposed to peril, which is the subject of insurance. Ex hypothesi, the ship or goods may be lost. What is really insured is the pecuniary interest of the assured in or in respect of the property exposed to peril, in other words, the risk or adventure.17 Brett LJ sought to reconcile the underlying facts with popular language, by drawing a distinction between the subject insured and the subject-matter of insurance.18 In mercantile language the subject insured is referred to as ‘the interest insured.’19 ‘The subject-matter’, said Lord Blackburn, ‘is generally described very concisely as being so much “on ship,” “on goods,” “on freight,” “on profit on goods,” “on advances on coolies,” “on emigrant money,” and so on.’20

5

The Marine Insurance Act 1906

Maritime perils The result of the operation of maritime perils is to cause ‘marine damage,’ which, said Lord Herschell, does not mean only damage which has been caused by the seas, ‘but damage of a character to which a marine adventure is subject. Such an adventure has its own perils, to which either it is exclusively subject or which possess in relation to it a special or peculiar character. To secure an indemnity against these is the purpose and object of marine insurance.’21 The terms of sub-s (2) are inclusive, not exhaustive. As the conditions of maritime commerce change, new dangers and matters require to be covered by insurance. For example, shipments of live cattle, which are insured against mortality and all other risks, and pilferage risks, have to be covered by special provisions, as such risks are not contemplated by the ordinary form of policy. The insurer, as a rule, is not liable for loss consequent on delay, even though the delay is caused by a peril insured against.22 But policies may be framed to protect the assured against the cancelling clause in charter-parties, and to protect the owner of perishable goods. Insurances are often effected against ‘all risks,’ or even against ‘all risks by land or by water.’23 As regards ‘all risks’ policies there are, as Lord Sumner pointed out, certain necessary limits. The expression ‘does not cover inherent vice, or mere wear and tear, or British capture. It covers a risk, not a certainty; it is something which happens to the subjectmatter from without, not the natural behaviour of the subject-matter, being what it is, in the circumstances under which it is carried. Nor is it a loss which the assured brings about by his own act, for then he has not merely exposed the goods to the chance of injury, he has injured them himself. Finally, the description “all risks” does not alter the general law; only risks are covered which it is lawful to cover, and the onus of proof remains where it would have been on a policy against ordinary sea perils.’24 If it is desired to cover goods against all risks, the usual course is to embody in the policy the Institute Cargo Clauses (A). In order for the subject-matter to be insured against war risks, the appropriate Institute Clauses must be inserted in the policy. Cover against loss by strikes is covered by the Institute Strike Clauses. 1 As to ‘lawfulness’, see note to this section, and s 41 (warranty of legality), and note the saving for common law in s 91(2). 2 Wilson v Jones (1867) LR 2 Ex Ch 139, Ex Ch. 3 As to ‘ship,’ see Sch 1, r 15. References in whatever terms in the Marine Insurance Act 1906 to ships, vessels or boats or activities or places connected therewith are extended to include hovercraft or activities or places connected with hovercraft: Hovercraft (Application of Enactments) Order 1972 (SI 1972/971). Marine policies are also used to insure rigs operating offshore: Promet Engineering (Singapore) v Sturge, The Nukila [1997] 2 Lloyd’s Rep 146; and National Oilwell v Davy Offshore [1993] 2 Lloyd’s Rep 582.

6

Marine insurance 4 As to ‘goods,’ see Sch 1, r 17. 5 As to ‘moveables’, see s 90. 6 Such as fares payable by passengers. 7 In Hibernia Foods Plc v McAuslin, The Joint Frost [1998] 1 Lloyd’s Rep 310 an export subsidy was insured. 8 Cf Rankin v Potter (1873) LR 6 HL 83 (chartered freight on homeward voyage insured by policy on outward voyage); Price v Maritime Insurance Co (1900) 5 Corn Cas 332; affd [1901] 2 KB 412, CA (advances); Moran, Galloway & Co v Uzielli [1905] 2 KB 555 (disbursements); Wyllie v Povah (1907) 12 Com Cas 317 (profits on cargo); Mentz Decker & Co v Maritime Insurance Co (1909) 15 Com Cas 17 (commission); New Zealand Shipping Co v Duke [1914] 2 KB 682 (passage money, disbursements consequent on transhipping passengers after an accident). 9 Boehm v Bell (1799) 8 Term Rep 154 at 161 (damages and costs for illegal capture); Tatham v Burr [1898] AC 382 at 385 (liability for running down another ship); Cunard SS Co v Marten [1902] 2 KB 624 (liability of shipowner under contract of carriage); Briggs v Merchant Traders’ Association (1849) 13 QB 167 (liability for salvage charges insured as ‘average expenses’); Smit Tax Offshore Services v Youell and General Accident Fire and Life Assurance Corpn plc [1992] 1 Lloyd’s Rep 154, CA where it was held, on the true construction of the policy, that the insurers were under no liability to remove the insured vessel which sank outside Dubai waters for the Dubai authorities had not passed a decree compelling the assured to remove her. (See the judgment of Mustill LJ, ibid, at 158). See further s 74, as to ‘collision’ clause. 10 Cf Thames and Mersey Marine Insurance Co Ltd v Hamilton, Fraser & Co (1887) 12 App Cas 484 at 498, per Lord Herschell. 11 Cf Gedge v Royal Exchange Assurance Corpn [1900] 2 QB 214 at 220 (ppi policy). 12 Wetherell v Jones (1832) 3 B & Ad 221 at 225, 226. 13 However, see Patel v Mirza [2016] 2 WLR 399, [120]. 14 See Regazzoni v Sethia [1958] AC 301 and Lemenda Trading v AMEPC [1988] 1 Lloyd’s Rep 361. 15 An honour policy may have on its face the words ‘ppi’ or ‘policy to be deemed sufficient proof of interest’. The London Market has, traditionally, been reticent about taking enforcement points where such wording is found in English law policies. 16 Republic of Bolivia v Indemnity Mutual Marine Assurance Co Ltd (1908) 14 Com Cas at 166, and see s 18, as to disclosure. 17 A good illustration of this principle is furnished by the rule that there may be a total loss of goods, freight or profits when the adventure is wholly frustrated, though the goods themselves remain in specie (see s 60). 18 Rayner v Preston (1881) 18 Ch D 1 at 9, CA. 19 Cf Hewitt Bros v Wilson (1915) 20 Com Cas 241 at 243, CA distinguishing the ‘interest insured’ from ‘insurable interest.’ 20 Mackenzie v Whitworth (1875) 1 Ex D 36 at 40, CA. Under a hull policy, the adventure insured is that the ship is exposed to maritime perils and therefore the payment of freight is not within the insured adventure: see Sea Glory Maritime Co v Al Sagr National Insurance Co, The Nancy [2014] 1 Lloyd’s Rep 14, [293] per Blair J. 21 Thames and Mersey Marine Insurance Co Ltd v Hamilton, Fraser & Co (1887) 12 App Cas 484 at 498. Cf Stott (Baltic) Steamers v Marten [1916] 1 AC 304. For the provisions of the Marine Insurance Act to apply to risks that are purely land-based, a clause of the kind found in Clothing Management Technology Ltd v Beazley Solutions Ltd [2012] EWHC 727 (QB) is probably required. 22 See s 55(2)(b). 23 Schloss Bros v Stevens [1906] 2 KB 665; Vincentelli & Co v John Rowlett & Co (1910) 16 Com Cas 310. 24 British and Foreign Marine Insurance Co v Gaunt [1921] 2 AC 41 at 57, HL; applied in Theodorou v Chester [1951] 1 Lloyd’s Rep 204, KB; F W Berk & Co Ltd v Sryle [1955] 3 All ER 625. It must be shown in a claim on an ‘all risks’ policy that any loss was fortuitous. It must also, of course, be shown that the risk attached: Fuerst Day Lawson Ltd v Orion Insurance Co Ltd [1980] 1 Lloyd’s Rep 656, where a cargo of oil drums was insured against ‘all risks’ and on arrival the drums were found to contain water with slight traces of oil, and judgment was given for the insurers because the assured had failed to discharge the burden of proof that the oil in the drums had ever started on its transit. (See the judgment of Mocatta J, ibid, at 664.)

7

The Marine Insurance Act 1906

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— (a) Where the assured has not an insurable interest as defined by this Act, and the contract is entered into with no expectation of acquiring such an interest;1 or (b) Where the policy is made ‘interest or no interest,’ or ‘without further proof of interest than the policy itself,’ or ‘without benefit of salvage to the insurer,’ or subject to any other like term:2 Provided that, where there is no possibility of salvage, a policy may be effected without benefit of salvage to the insurer.’3 Note This section substantially reproduces the effect of the Marine Insurance Act 1745, which prohibited policies that bore on the face of them the indicia of wagering, whether, in fact, they were wager policies or not. The following points may be noted:— (1) The statute of 1745 was confined in terms to British ships, and goods and effects laden on them. Therefore a ppi policy on a foreign ship was not illegal if, as a fact, the insurer had a lawful interest and could prove it. As, however, such a policy bears the mark of wagering on the face of it, the Lords Select Committee concerned with the passage of the Marine Insurance Act 1906 through Parliament thought that the provision should be generalised. (2) The statute of 1745 spoke of ships, and goods and effects laden on them. But a wide construction was put on these terms, and the scope of the statute was by judicial decision extended to policies on profits and commission effected ‘without benefit of salvage’.4 (3) The scope of the statute was not confined to the exact terms prohibited. Any similar terms avoided the policy. Thus, a policy on cash advances, ‘full interest admitted,’ was void.5 (4) The statute of 1745 further contained two more or less obsolete exceptions, viz, policies on privateers, and policies on ships in the Spanish trade. (5) The statute of 1745 did not extend to Ireland.6 The present section extends to the whole of the United Kingdom. A policy ‘without interest’ is not necessarily a wager policy. For example, when the assured bona fide expects to have an interest, but the expectation is not realised, the policy is not a wager policy.7 The assured cannot recover on the policy, but he may be entitled to a return of the premium.8 Section 4 of the Act is now supplemented by the Marine Insurance (Gambling Policies) Act 1909. That Act penalises contracts of marine insurance in cases where there is no interest or bona fide expectation of interest either in the safe arrival of

8

Insurable interest

a ship or in the safety or preservation of the subject-matter insured, or where an ‘honour’ policy in relation to a ship is effected by any person in the employment of a shipowner unless that person is a part owner. An ‘honour’ policy, eg a ppi policy,9 is one in which the parties, by express terms, disclaim, on the face of it, the intention of making a contract of indemnity. Though an ‘honour’ policy is void in the eye of the law, the issue of such a policy may constitute a breach of a warranty to keep a certain proportion of the value of a ship uninsured.10 Again, a policy on ship may be avoided for non-disclosure of over-insurance by concurrent policies on disbursements.11 A distinction must be drawn between ppi policies and policies ‘without benefit of salvage,’ that is to say, in modern language, ‘without benefit of abandonment’. The nature of an insurance may be such that, in case of loss, there could be nothing to abandon to the insurer, and therefore such a policy may lawfully be effected ‘without benefit of salvage’.12 For example, a man may have an interest, but no property, in the thing imperilled, and then he has nothing which he can abandon.13 The Gambling Act 2005 probably does not affect s 4 of the Marine Insurance Act 1906; see s 335. Illustrations (1) Policy on ship, insurer to pay a total loss if she does not arrive at Yokohama on or before 31 December. The insurance is a speculation, assured having no interest in the ship or adventure. He cannot recover.14 (2) An agent is instructed by warehousemen to effect a ppi policy on profits dependent on the arrival of a cargo from abroad. He negligently omits to disclose a material fact, and the insurer consequently refuses to pay for the loss which occurred. The principal cannot recover even nominal damages from the agent.15 1 Kulen Kemp v Vigne (1786) 1 Term Rep 304, 309; Cousins v Nantes (1811) 3 Taunt 513 Ex Ch (presumption of interest and averment in pleading); Wilson v Jones (1867) LR 2 Ex Ch at 141, per Wiles J. See ss 5–15, as to interest. And as to the purpose of this enactment, see Thames and Mersey Marine Insurance Co Ltd v Gunford Ship Co Ltd [1911] AC at 543, per Lord Shaw. 2 Cf Murphy v Bell (1828) 4 Bing 567, 569. As to an equivalent clause ‘freight at risk or not,’ see Scottish Shire Line v London and Provincial Marine Insurance Co (1912) 17 Com Cas at 261, per Hamilton J. For the history of the introduction of the term ‘interest or no interest,’ see The Sadler’s Co v Badcock (1743) 2 Atk 554, per Lord Hardwicke. 3 Cf Lucena v Craufurd (1806) 2 Bos & P NR 310. Cf s 62(7), as to notice of abandonment. 4 De Matzos v North (1868) LR 3 Ex Ch 185; AIlkins vJupe (1877) 2 CPD 375; see at 388 as to possibility of salvage in such a case. 5 Berridge v Man On Insurance Co (1887) 18 QBD 346, CA; see, also Gedge v Royal Exchange [1900] 2 QB 214. 6 Keith v Protection Marine Insurance Co (1882) 10 LR Ir 51. 7 See eg Anderson v Morice (1876) 1 App Cas 713. 8 See s 84. 9 See for example Ikerigi Compania Naviera SA v Palmer, The Wondrous [1992] 2 Lloyd’s Rep 566, 574 per Lloyd LJ: ‘Section B is void under s. 4 of the Marine Insurance Act, 1906, since it is policy proof of interest.’ Though it is not possible to contract out of the provisions of s 4, the present editors’ experience is that, in the London Market at least, ppi/fia points tend not to be taken by underwriters in litigation, there being several recent examples of this. Where an increased value policy is written on ppi terms it ought not, in any event, to render the underlying hull and machinery policy void.

9

The Marine Insurance Act 1906 10 Roddick v Indemnity Mutual Marine Insurance Co [1895] 2 QB 380, CA; Samuel (P) & Co Ltd v Dumas [1924] AC 431, 29 Corn Cas 239, HL; cf Thames and Mersey Marine Insurance Co Ltd v Gunford Ship Co Ltd [1911] AC at 538, per Lord Alverstone. As to promissory warranties generally, see ss 33–41. 11 Thames and Mersey Marine Insurance Co Ltd v Gunford Ship Co Ltd (supra). 12 Lucena v Craufurd (1806) 2 Bos & P (NR) at 310, 6 RR at 694, per nine of the Judges. 13 Cf Wilson v Jones (1867) LR 2 Ex Ch 139 (policy on successful laying of submarine cable effected by shareholder in company). 14 Gedge v Royal Exchange Assurance Corpn [1900] 2 QB 214, 217. The fact that the policy was ppi was not set up as a defence. 15 Cheshire & Co v Vaughan Bros (1919) 25 Corn Cas 51; affd [1920] 3 KB 240, 25 Com Cas 242, CA. If the policy is ppi, it is none the less void because the insured has an insurable interest in fact: ibid. But the position in the USA is different. See Aetna Insurance Co v United Fruit Co 304 US 430 at 432, [1938] AMC 707: ‘But in the United States it is held that, while a wager policy on property in which the insured has no interest is void as against public policy, the provision in the policy that that instrument shall be proof of interest does not render the policy void if the insured in fact had an insurable interest, and that such policies are to be deemed policies on interest if the contracting parties so understood and agreed.’ See further, Republic of China, China Merchants Steam Navigation Co Ltd and United States of America v National Union Fire Insurance Co of Pittsburgh, Pennsylvania, The Hai Hsuan (No 2) [1958] 2 Lloyd’s Rep 578, District Council of Maryland. See especially the cases cited in the footnote on p 580. See per Scrutton LJ, as to practice of pinning on and detaching ppi clauses from policy, and cf Re London County Commercial Reinsurance Office [1922] 2 Ch 67, 81; Re Overseas Marine Insurance Co Ltd (1930) 36 LIL Rep 183; John Edwards & Co v Motor Union Insurance Co [1922] 2 KB 249 (no subrogation on payment under a ppi policy). For subrogation, see s 79.

5. Insurable interest defined (1) Subject to the provisions of this Act,1 every person has an insurable interest who is interested in a marine adventure.2 (2) In particular a person is interested in a marine adventure where he stands in any legal or equitable relation to the adventure or to any insurable property at risk therein, in consequence of which he may benefit by the safety or due arrival of insurable property, or may be prejudiced by its loss, or by damage thereto, or by the detention thereof, or may incur liability in respect thereof.3 Note Three questions, often confused, must be kept distinct, viz: 1. Has the assured an insurable interest? 2. Is the subject-matter in respect of which his interest arises sufficiently described in the policy? 3. What is the quantum of his interest? The definition of ‘insurable interest’ has been continuously expanding, and dicta in some of the older cases, which would tend to narrow it, must be accepted with caution. The concept of insurable interest in a marine adventure is a broad one.4 The essence of ‘interest’ is (a) that there should be a physical object exposed to sea perils, and (b) that the assured should stand in some relationship, recognised by law, to that object, in consequence of which he either benefits by its preservation, or is prejudiced by its loss or mishap to it. It is clear, since Wilson v Jones (illustration 2), that ‘interest’ is not confined to rights in the nature of property or arising out of contract, for the assured had no property in the cable nor any contract respecting it.

10

Insurable interest

Suppose A is offered an appointment abroad on the condition that his acceptance of the offer is received by return of post. Why should he not insure the safe arrival of the letter, although he has no legal rights in respect of it after it is posted? Sub-s (2) is, therefore, framed as being inclusive, not exhaustive, and its language was somewhat broadened in the Commons Committee. ‘Interest’ can hardly be defined exhaustively, and probably the criterion proposed by Lawrence J, cannot be improved upon: ‘Interest,’ he said, ‘does not necessarily imply a right to the whole or part of a thing, nor necessarily or exclusively that which may be the subject of privation; but the having some relation to or concern in the subject of insurance, which relation or concern, by the happening of the perils insured against, may be so affected as to produce a 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.’5 Elsewhere, speaking of liability to third persons, he said, ‘Did they mean to game, or was there not a loss against which they might indemnify themselves by insurance?’6 ‘The general rule,’ said Willes J, ‘is clear, that to constitute interest insurable against a peril, there must be an interest such that the peril would, by its proximate effect, cause damage to the assured.’7 ‘Any interest may be insured,’ said Walton J, ‘which is dependent on the safety of the thing exposed to [the risks insured against], still it must in all cases at the time of the loss be an interest legal or equitable, and not merely an expectation, however probable.’8 The ‘interest’ must be real and not merely a colourable interest.9 It has been said that the cases establish that: (1) Ownership or possession (or the right to possession) of the property insured is not a necessary requirement of an insurable interest therein; (2) Commercial convenience can be a relevant factor in determining the existence of an insurable interest; (3) A person exposed to liability in respect of the custody or care of property may, as an alternative to taking out liability insurance to protect his exposure, insure the property itself, and in the event of loss or damage thereto by a peril insured against may recover in respect thereof up to the full sum insured, even if that exceeds the amount for which he is liable and even if the loss or damage has occurred without any actionable fault on his part. If and to the extent that he has suffered no personal loss he will be liable to account to the owner of the goods who has suffered the loss; (4) A legal right to the use of goods, the benefit of which would be lost by their damage or destruction, may be sufficient to constitute an insurable interest therein; (5) A person may also have an insurable interest in property if loss of or damage to that property would deprive him of the opportunity of carrying out work in relation to that property and being remunerated for such work – see also Thames & Mersey Marine Insurance Co Ltd v Gunford Ship Co Ltd [1911] AC 529, where at page 549 Lord Robson referred to the practice of over-valuing a vessel under a H&M policy, relying among other things ‘on the interest that

11

The Marine Insurance Act 1906

the managing owners or the managers have in preserving the ship as a source of business profit to themselves’.10 Illustrations (1) Floating policy for £1,200 ‘on goods as interest may appear’. The assured, who are canal carriers, have an insurable interest in respect of their liability for the safe carriage of the goods, and this interest is sufficiently described as ‘on goods’.11 (2) Policy effected by shareholder in submarine cable company in respect of the successful laying of the cable. The assured has an insurable interest in the adventure, although he has no property in the cable.12 (3) A lends money to B, a small shipowner, whose solvency depends on the safe arrival of his ship, but the loan is not secured on the ship or freight. The loan is not at risk, and A has no insurable interest which can be covered by a marine policy.13 (4) Policy on freight, ‘chartered or otherwise, per Cambodia from Bombay to Howlands Island, and thence to a port of discharge in the United Kingdom’. Under charter, the ship is to go to Howlands Island in ballast, and then load a cargo for England. On the way to Howlands Island she is disabled by perils of the sea, so the freight cannot be earned. The assured has an insurable interest, and the risk has attached.14 (5) The agents of a foreign ship effect a policy on disbursements against the risk of total loss only. The ship becomes a constructive total loss. The agents have an insurable interest in the advances they have made to the ship in so far as they could arrest the ship under s 6 of the Admiralty Court Act 1840, for the purpose of founding an action in rem.15 (6) A marina operator insures against legal liability for loss of or damage to craft belonging to third parties whilst in his care. He has a valid insurable interest because he will be prejudiced if the craft are lost or damaged.16 (7) The owner of a yacht conferred on S by a power of attorney a wide authority to enjoy the use of her exclusively for his own purposes and to exercise over her such control as he thought fit. Held, he had an insurable interest in her for he stood in a legal relationship to her in consequence of which he would benefit from her preservation and, if she were lost or damaged, he would suffer the loss of a valuable benefit.17 (8) Policy on a tug. Significant damage identified in dry dock. Held, the bareboat charterer, with an obligation both to repair and to insure, had a clear insurable interest and would be entitled to recover under the policy in respect of damage to the tug.18 1 See ss 6–15 for sub-rules, and s 3 as to lawfulness of adventure, and s 41, warranty of legality. 2 Wilson v Jones (1867) LR 2 Ex Ch 139, Ex Ch. 3 See s 3, defining ‘marine adventure’; as to equitable assignee of freight, see Wilson v Martin (1856) 11 Exch 684. Conversely, a prospect or possibility of loss or gain which is not founded on any right or liability in, or in respect of the subject-matter insured, is not insurable: Lucena v Craufurd (1806) 2 Bos & P NR 269, 6 RR 623, HL; Seagrave v Union Marine Insurance Co (1866) LR 1 CP 305 at 320 (cargo); Barber v Fleming (1869) LR 5 QB at 71 (freight); and see eg Manfield v Maitland (1821) 4 B & Ald 582 (loan to shipowner); Devaux v Steele (1840) 6 Bing NC 358, 54 RR 818 (expected fishing bounty from French Government); Stainbank v Fenning (1851) 11 CB 51 (invalid bottomry bond); Paterson v Harris (1861) 1 B & S at 354, 355 (shares in a cable company); Scottish Shire Line v London and Provincial Marine Insurance Co [1912] 3 KB 51, 17 Corn Cas 240 (freight ‘chartered or as if chartered’); Papadimitriou v Henderson [1939] 3 All ER 908, KB (shipowner has an insurable interest in ‘anticipated freight’).

12

Insurable interest 4 Feasey v Sun Life Assurance Corporation of Canada [2003] Lloyd’s Rep IR 637, [92] per Waller LJ. Sub-s (2) is not exhaustive. See for example: National Oilwell (UK) Ltd v Davy Offshore Ltd [1993] 2 Lloyd’s Rep 582 (assured neither owner nor possessor of the insured property but might suffer liability if it is damaged); State of Netherlands v Youell [1997] 2 Lloyd’s Rep 440 (pervasive insurable interest: the right to claim an insurable interest in the whole property, analogous to the well-known right of a bailee to insure for the total value of the property bailed and not merely to the extent of his liability interest as bailee); and Deepak Fertilisers & Petrochemical Corporation v Davy McKee [1999] 1 Lloyd’s Rep 387 (insurable interest of a sub-contractor). Furthermore, the courts have remarked on various occasions that a defence of a lack of insurable interest may be unmeritorious and that, accordingly, they will strive to find an interest where they can; see for example Cepheus Shipping Corpn v Guardian Royal Exchange Assurance Plc, The Capricorn [1995] 1 Lloyd’s Rep 622, 641 per Mance J: ‘a Court is likely to hesitate before accepting a defence of lack of insurable interest’. 5 Lucena v Craufurd (1806) 2 Bos & P NR at 302, cited and approved by Blackburn J in Lloyd v Fleming (1872) LR 7 QB at 302 and by LJ in Feasey v Sun Life Assurance Corporation of Canada [2003] Lloyd’s Rep IR 637. Cf Piper v Royal Exchange Assurance (1932) 44 LI L Rep 103 KB at 116–17. 6 Boehm v Bell (1799) 8 Term Rep 154 (prize insured by captors). 7 Seagrave v Union Marine Insurance Co (1866) LR 1 CP at 326. Cf Briggs v Merchant Traders’ Association (1849) 13 QB 167 (average expenses per ship). 8 Moran, Galloway & Co v Uzielli [1905] 2 KB at 562. 9 Lewis v Rucker (1761) 2 Burr 1167 at 1171. But in case of doubt the court should lean in favour of interest: Stock v Inglis (1884) 12 QBD 864 at 871, per Brett J. 10 O’Kane v Jones, The Martin P [2005] Lloyd’s Rep IR 174, [154] per Richard Siberry QC. In Sharp and Roarer Investments Ltd v Sphere Drake Insurance Plc, The Moonacre [1992] 2 Lloyd’s Rep. 501, the fact that the assured had power to abandon the vessel was indicative of an insurable interest; cf O’Kane v Jones, The Martin P at [155]. 11 Crowley v Cohen (1832) 3 B & Ad 478, 37 RR 472; The Yasin [1979] 2 Lloyd’s Rep 45 at 53 (per Lloyd J); see Cunard SS Co v Marten [1902] 2 KB 624, for an insurance in express terms against liability of carrier owing to the omission of the negligence clause in a charter party. For an example of a policy issued to a charterer in respect of loss of or damage to cargo owned by third parties, see Kuehne and Nagel Inc v Baiden [1977] 1 Lloyd’s Rep 90, Court of Appeals of New York, where it was held that the cargo owners’ claim had been reasonably settled by the assignees of the assured. (See the judgment of Gabrielli J, ibid, at 92.) As to insurance by a bailee (who is not responsible by virtue of his special property in the goods bailed), see North British Insurance Co v Moffatt (1871) LR 7 CP 25 at 31 (fire insurance). 12 Wilson v Jones (1867) LR 2 Ex Ch 139. 13 Cf Manfield v Maitland (1821) 4 B & Ald 582; Allison v Bristol Marine Insurance Co (1876) 1 App Cas at 220. Of course, B’s solvency can be insured by an appropriate policy, but that is not a marine policy. 14 Barber v Fleming (1869) LR 5 QB 59. 15 Moran, Galloway& Co v Uzielli [1905] 2 KB 555. 16 Pillgrem v Cliff Richardson Boats Ltd and Richardson: Switzerland General Insurance Co, Third Parry [1977] 1 Lloyd’s Rep 297, Supreme Court of Ontario, where the question was whether the loss had occurred in the ‘alteration, repair or maintenance’ of a cabin cruiser. 17 Sharp and Roarer Investments Ltd v Sphere Drake Insurance plc, The Moonacre [1992] 2 Lloyd’s Rep 501, QB (Commercial Court). See the judgment of AD Colman, QC, sitting as a Deputy Judge, ibid, at 512–513. 18 Linelevel Ltd v Powszechny Zaklad Ubezpieczen SA, The Nore Challenger [2005] 2 Lloyd’s Rep 534.

6. When interest must attach (1) The assured must be interested in the subject-matter insured at the time of the loss though he need not be interested when the insurance is effected:1 Provided that where the subject-matter is insured, ‘lost or not lost,’ the assured may recover although he may not have acquired his interest until after the loss

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The Marine Insurance Act 1906

unless at the time of effecting the contract of insurance the assured was aware of the loss, and the insurer was not.2 (2) Where the assured has no interest at the time of the loss, he cannot acquire interest by any act or election after he is aware of the loss.3 Note This section relates only to the existence of interest as a condition of effective insurance. A policy founded on interest may, of course, be assigned after loss.4 As to assignment of policy, see ss 50 and 51. As to assignment of interest, see s 15, and as to ratification by the assured of insurance effected by another, see s 86. It has been argued that the rule contained in the proviso to subs (1) only applies to the case of a partial loss, but that is not so. Suppose a man buys a cargo while at sea. It turns out that before the purchase was completed the cargo had perished. As a rule the contract is void, and therefore the buyer has no insurable interest, but there is such a thing as an emptio spei, as opposed to the purchase of a thing itself. It is often a difficult question to determine the exact moment when under a contract of sale, the risk passes from seller to buyer. Prima facie, the risk passes when the property passes, but under the terms of the contract they may pass at different times. When goods are insured by the buyer, the question is whether, on the true construction of the contract, the risk has passed to him at the time when the loss occurs.5 Illustrations (1) Policy on rice ‘as interest may appear, by ship Sunbeam from Rangoon to London’. The assured has contracted to buy a ‘cargo’ of rice to be shipped in that ship. When three-fourths of the cargo are on board, the ship and rice are lost by perils of the sea. The rice is not at the assured’s risk until a complete cargo is loaded, and he has therefore no insurable interest.6 (2) Policy on ‘wheat cargo now on board or to be shipped’ in the ship Sutherland from New Zealand to England. Under the terms of the contract between the sellers and the assured, the property (and risk) pass to him as the wheat is shipped. Before the whole cargo is loaded the ship and wheat are lost by perils of the sea. The assured has an insurable interest which has attached, and can recover for the wheat lost.7 (3) Policy on ship. In 1926 P bought a yacht in Norway ‘as she lies’. She was at the risk of the seller until she arrived in London. P effected a policy in respect of her, and claimed against the insurers in respect of damage which she had suffered by stranding in 1928.The insurers counterclaimed for £346 (which they had paid him for damage suffered by her on her voyage from Norway to London in 1926) on the ground that he had no insurable interest in her at the time of the loss. Held, the counterclaim succeeded.8 1 Rhind v Wilkinson (1810) 2 Taunt at 243; Anderson v Morice (1876) 1 App Cas 713, HL. See also Cepheus Shipping Corpn v Guardian Royal Exchange Assurance Plc, The Capricorn [1995] 1 Lloyd’s Rep 622. 2 Sutherland v Pratt (1843) 11 M & W 296, and Sch I, r 1. 3 Anderson v Morice (1876) 1 App Cas 713, HL.

14

Insurable interest 4 See s 50(1); Sparkes v Marshall (1836) 2 Bing NC 761; and see further, Sch I, r 1. 5 As to when the risk passes from seller to buyer, see s 20 of the Sale of Goods Act 1979, and as to the seller’s duty to insure, see s 32 of that Act. 6 Anderson v Morice (1875) LR 10 CP 609, Ex Ch; affd (1876) 1 App Cas 713, HL. 7 Colonial Insurance Co of New Zealand v Adelaide Marine Insurance Co (1886) 12 App Cas 128, PC. 8 Piper v Royal Exchange Assurance (1932) 44 LI L Rep 103.

7. Defeasible or contingent interest (1) A defeasible interest is insurable, as also is a contingent interest. (2) In particular, where the buyer of goods has insured them, he has an insurable interest, notwithstanding that he might, at his election, have rejected the goods, or have treated them as at the seller’s risk, by reason of the latter’s delay in making delivery or otherwise.1 Note As regards contingent interests, the main difficulty is to determine, not whether there is an interest but whether the interest has attached at the time of the loss.2 Where captors of a ship insured her, but the Prize Court afterwards restored her to her owners, it was held that the premium was not returnable, for the risk had attached. The interest in this case may be regarded either as defeasible or contingent.3 In Lucena v Craufurd (1806) 2 Bos & P NR at 294, 295, seven of the Judges, in their opinion to the House of Lords, said, ‘Inchoate rights founded on subsisting titles, unless prohibited by positive laws, are insurable. Freight, respondentia, and bottomry are of this description.’ And then, after discussing various old definitions of insurance, they said (at 295): ‘These definitions clearly embrace a contingent interest, which is subject to the perils of the sea, and for the loss of which a compensation may be made.’ Reinsurance is a good example of a contingent interest.4 In the case provided for by sub-s (2), the assured has an actual interest, defeasible only at his own option. Suppose A buys goods by sample, to be shipped from abroad, and insures them. Goods which are inferior to sample are shipped, and then partially sea damaged on the voyage. A may accept the goods and claim on the policy for he has an insurable interest since he has not rejected them. If A rejects the goods, presumably he could not claim on the policy; but could he assign the policy to the seller, and then reject the goods? Presumably not; but various complications may be suggested which still await decision. 1 Sparkes v Marshall (1836) 2 Bing NC 761, as explained in Anderson v Morice (1875) LR 10 CP at p 620; Colonial Insurance Co of New Zealand v Adelaide Marine Insurance Co (1886) 12 App Cas 128 at 140, PC. 2 Cf Barber v Fleming (1869) LR 5 QB at 73. 3 Boehm v Bell (1799) 8 Term Rep 154. 4 See also s 9.

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The Marine Insurance Act 1906

8. Partial interest A partial interest of any nature is insurable. Note An undivided interest in a parcel of goods shipped f.o.b. is insurable.1 So, too, a shareholder may insure his interest in the adventure of a company engaged in laying a submarine cable;2 and a ‘hotchpot’ interest in cargo may be insured.3 ‘I do not see,’ said Heath J, ‘why a joint tenant or tenant in common has not such an interest in the entirety as will entitle him to insure.’4 Traditionally, the ownership of British ships is divided into sixty-four shares. But a part owner, it seems, has no implied authority to insure on behalf of the other part owners.5 1 Inglis v Stock (1885) 10 App Cas 263 at 274 (390 tons of sugar sent off to satisfy two contracts, for 200 tons each, without any appropriation to either contract). 2 Wilson v Jones (1867) LR 2 Ex Ch 139, Ex Ch. 3 Ebsworth v Alliance Marine Insurance Co (1873) LR 8 CP at 613. 4 Page v Fry (1800) 2 Bos & P 240 at 243 (cargo). 5 Bell v Humphries (1818) 2 Stark 345; and see Robinson v Gleadow (1835) 2 Bing NC 156 (insurance by managing owner on behalf of all).

9. Reinsurance (1) The insurer under a contract of marine insurance has an insurable interest in his risk, and may reinsure in respect of it.1 (2) Unless the policy otherwise provides, the original assured has no right or interest in respect of such reinsurance.2 Note ‘Reinsurance’, that is to say, an insurance effected by an insurer to cover wholly or in part the risk he has undertaken (it is not defined in the Act), must be distinguished from ‘double insurance,’ ie a second insurance effected by or on behalf of an assured on a risk already covered; as to which, see s 32. At Common Law reinsurance was valid, but it was prohibited in 1745 by the Marine Insurance Act, s 4, unless the insurer was dead or insolvent. Contract of reinsurance and retrocession were treated as contracts of insurance at common law Delver, Assignee of Bunn v Barnes (1807) 1 Taunt 48. The prohibition was removed in 1864 by the Revenue (No 2) Act, s 1 (since repealed), and reinsurance is now expressly recognised by the Marine Insurance Act 1906. The usual form of a reinsurance policy runs thus—‘being a reinsurance subject to all clauses and conditions of the original policy or policies, and to pay as may be paid thereon,’ and then follow the exceptions, if any.3 A policy of reinsurance need not specify that it is a reinsurance, see s 26, and no notice of abandonment need be given to the reinsurer, see s 62(9). The modern practice in effecting reinsurance was detailed by Scrutton J, in a case where it was

16

Insurable interest

held that, in the absence of inquiry, the broker effecting a policy of reinsurance is not bound to disclose the name of the reassured (original insurer).4 The Marine Insurance Act 1906 does not deal with treaties of reinsurance. A treaty of reinsurance is a contract sui generis whereby the reinsurer agrees to reinsure the whole or a portion of a specified class or classes of risk to be underwritten by the reassured (original insurer). Schedules giving particulars of the risks underwritten are usually forwarded periodically to the reinsurers. 1 Uzielli v Boston Marine Insurance Co (1884) 15 QBD at 16; and cf Bradford v Symondson (1881) 7 QBD at 463, CA. Reinsurance is a contract of indemnity; see note to s 1. Reinsurers of P&I clubs’ liabilities to indemnify shipowners against claims by injured employees, have an insurable interest in the lives of the employees; see Feasey v Sun Life Assurance Corporation of Canada [2003] Lloyd’s Rep IR 637. 2 Cf Nelson v Empress Assurance Corpn [1905] 2 KB 281, CA (reinsurer not liable as third party in action by original assured). See also Grecoair Inc v Tilling [2005] Lloyd’s Rep IR 151. However, the sub-s must now be read subject to the qualification that the original assured may have a claim directly against reinsurers in circumstances where the Contracts (Rights of Third Parties) Act 1999 confers the right to make such a claim (by a cut-through clause, for example). 3 As to construction of this provision, see Uzielli v Boston Marine Insurance Co (1884) 15 QBD 11, CA (reinsurer not liable for expenses under sue and labour clauses), criticising British Dominions General Insurance Co v Duder [1915] 2 KB 394, CA; Re Eddystone Insurance Co, ex p Western Insurance Co [1892] 2 Ch 423 (‘pay as paid’—payment by original insurer not condition precedent); Chippendale v Holt (1895) 65 LJQB 104 (reinsurer not bound by improper payment by original insurer); Crocker v Sturge [1897] 1 QB 330 (reinsurance of portion of risk—construction of ‘final port’); China Traders’ Insurance v Royal Exchange [1898] 2 QB 187, CA; Sir William Garthwaite Insurance Ltd v Port of Manchester Insurance Co (1930) 37 LI L Rep 194 (right of reinsurer to discovery of ship’s papers); Lower Rhine Insurance Association v Sedgwick [1899] 1 QB 179, CA (lapse of original policy, and issue of new one); Charlesworth v Faber (1900) 5 Com Cas 408 (continuation clause exceeding twelve months’ limit for time policy); Maritime Insurance Co v Stearns [1901] 2 KB 912, 6 Com Cas 182 (variation of risk from summer to winter); Marten v SS Owners’ Underwriting Association Ltd (1902) 7 Corn Cas 195; Fireman’s Fund Insurance Co v Western Australian Assurance Co (1927) 33 Corn Cas 36 (‘pay as may be paid’ = pay as reassured may be compelled to pay); Western Assurance Co of Toronto v Poole [1903] 1 KB 376 (reinsurance against total loss, salvage charges excluded); South British Fire and Marine Insurance Co v Da Costa [1906] 1 KB 456, 11 Com Cas 81 (reinsurance for £1,000 in excess of £500); Assicurazioni Generali de Trieste v Empress Assurance Corporation Ltd [1907] 2 KB 814 (subrogation, costs of action in which damages are recovered); Home Insurance Co of New York v Victoria Fire Insurance Co [1907] AC 59, PC (rejection of inapplicable terms); Baker v Adam (1910) 15 Corn Cas 227 (set-off against assignee); Scottish National Insurance Co v Poole (1912) 18 Corn Cas 9 (effect of two slips); Property Insurance Co v Protector Insurance Co (1913) 18 Corn Cas 119 (subject without notice to same clauses and conditions as original policy); Street v Royal Exchange (1913) 18 Com Cas 284; affd (1914) 19 Corn Cas 339, CA (to follow hull underwriters in event of a compromise being arranged); Bergens Dampskibs Assurance v Sun Insurance (1930) 46 TLR 543 (àrranged total loss’); Emanuel v Andrew Weir & Co (1914) 30 TLR 518 (two slips, rectification of policy issued on wrong slip); British Dominions General Insurance Co Ltd v Duder [1915] 2 KB 394, CA (compromise by original insurer, extent of reinsurer’s right of indemnity); London General Insurance Co v General Marine Underwriters’ Association [1921] 1 KB 104, CA (reassured’s duty to consult casualty list); Norwich Union Insurance Co v Colonial Mutual Insurance Co [1922] 2 KB 461 (variation of head policy without reinsurer’s consent); Scottish Metropolitan Assurance Co Ltd v Groom (1924) 41 TLR 35, CA (reinsurance, costs of original insurers in resisting a claim cannot be recovered from their reinsurers); Young v Merchants’ Marine Insurance Co Ltd [1932] 2 KB 705, CA (insurance against total loss and collision liability, reinsurance of liability for total loss only, claim by reinsurer to benefit in respect of claim under running down clause); Gurney v Grimmer (1932) 44 Ll L Rep 189, CA ‘total constructive compromised and/or arranged total loss of the vessel’); Versicherungs Und Transport AG Daugava v Henderson (1934) 39 Com Cas 312, CA (reinsurance, fire policy, original insurance in foreign currency, reinsurance in London, at what date rate of exchange must be taken in calculating sum to be paid by reinsurers); Marine Insurance Co Ltd v Grimmer [1944] 2 All ER 197, CA (reinsurance, cargo on named ships ‘and/or steamers held covered at premiums to be arranged’);

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The Marine Insurance Act 1906 Oscar L Aronsen Inc v Compton, The Megara [1974] 1 Lloyd’s Rep 590, US Ct of Appeals, Second Circuit (‘compromised constructive total loss’). 4 Glasgow Assurance Corpn v Symondson (1911) 16 Com Cas 109.

10. Bottomry The lender of money on bottomry or respondentia has an insurable interest in respect of the loan.1 Note By the law of the sea the master may, in case of necessity, and under certain restrictions, raise money on the security of the ship, freight, and cargo. The condition of a loan on bottomry or respondentia is that the money is not repayable if the ship or cargo does not arrive. Consequently it is the lender who must insure. As to specifically describing the subject-matter insured in the policy, see s 26. This section is now of no practical importance, for the practice of lending money on bottomry or respondentia is obsolete. Illustrations (1) The master of a damaged British ship requires money for necessary repairs. A merchant abroad advances the money, taking a bond mortgaging the ship, and making the money repayable whether she arrives or not. The merchant has no insurable interest, for the master has no authority to give such a bond, or do more than hypothecate the ship for the advances2 (sed quo now?). (2) Policy on bottomry bond in old form. The ship becomes a constructive total loss. The assured cannot recover, for the bond stands good unless there is an actual total loss.3 1 See note to s 7. 2 Stainbank v Fenning (1851) 11 CB 51; Cf The Haabet [1899] P 295, per Bucknill J; and Price v Maritime Insurance Co [1901] 2 KB 412, CA. 3 Broomfield v Southern Insurance Co (1870) LR 5 Ex 192. Some forms provide for constructive total loss. As to the requisites of a valid bottomry bond, see The James W Elwell [1921] P 351 at 365.

11. Master’s and seamen’s wages The master or any member of the crew of a ship has an insurable interest in respect of his wages. Note The law as to the insurability of seamen’s wages was doubtful. The master of a ship could always insure his wages, but formerly at any rate a seaman under the rank of master could not. ‘Wages of seamen,’ said the Judges in an old case, ‘are in their nature insurable, though universally prohibited to be insured on principles of policy.’1 But when this was laid down, the doctrine prevailed that ‘freight was the mother of wages,’ and if freight was not earned, the seaman was not entitled to his wages.

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Insurable interest

This doctrine was abandoned in 1854, and s 183 of the Merchant Shipping Act of that year provided that the right to wages should not be dependent on the earning of freight, but that in all cases of wreck or loss of the ship, proof that the seaman had not exerted himself to the utmost to save the ship and cargo should bar his claim to wages. This provision is now reproduced in s 38 of the Merchant Shipping Act 1995. The master’s effects were always insurable.2 1 Lucena v Craufurd (1806) 2 Bos & PNR at 294, HL. 2 Duff v Mackenzie (1857) 3 CBNS 16; Anstey v Ocean Marine Insurance Co (1913) 19 Corn Cas 8 (small part of captain’s effects not on board when ship lost). Cf Sch I, r 17.

12. Advance freight In the case of advance freight, the person advancing the freight has an insurable interest, in so far as such freight is not repayable in case of loss.1 Note By English law, advance freight, as such, is not repayable in case of loss. The shipowner therefore has not an insurable interest in it, but the person advancing it has.2 But by special contract it may be repayable,3 and then the positions are reversed. Though advance freight may not be repayable in case of loss, the shipowner may be liable in damages to the cargo owner if the loss is occasioned by his negligence or fault, and in estimating the damages the amount advanced for freight must be taken into account.4 An advance to a shipowner by a shipper or charterer in respect of a voyage may fall into three categories: (a) it may be advance freight not repayable in case of loss; (b) it may be advance freight specially repayable in case of loss; or, (c) it may be a mere loan repayable in any event. In the last case it is not at risk, and therefore not insurable.5 By the law of most foreign countries, advance freight is repayable in case of loss.6 Illustration Policy by shipowner on freight. Under the charter-party, half the freight is to be paid in advance and half is to be paid on delivery of the cargo. The ship is lost, but half the cargo is saved and delivered. No further freight is payable in respect of the half so delivered, in as much as it is covered by the advance payment of half the freight. This is a total loss of half the shipowner’s freight, the advance freight being at the charterer’s and not at the shipowner’s risk.7 1 Cf Smith v Pyman [1891] 1 QB at 744, 745, CA. 2 Allison v Bristol Marine Insurance Co (1876) 1 App Cas 209 at 238, HL reviewing the cases. 3 Ibid, at 221, citing Hall v Janson (1855) 4 E & B 500. 4 Dujourcet v Bishop (1886) 18 QBD 373. 5 The Salacia (1862) Lush 578 at 582. 6 Byrne v Schiller (1871) LR 6 Ex Ch at 325, Ex Ch. 7 Allison v Bristol Marine Insurance Co (1876) 1 App Cas 209, see at 235, 238; cf The Main [1894] P 320.

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The Marine Insurance Act 1906

13. Charges of insurance The assured has an insurable interest in the charges of any insurance which he may effect.1 Note Ordinarily the charges of insurance consist of the premium and the brokerage (if paid by the assured). Cf s 16 as to insurable value. In practice, the broker’s commission is paid, or rather allowed in account, by the insurer.2 1 Usher v Noble (1810) 12 East 639. 2 United States Shipping Co v Empress Assurance Corpn [1907] 1 KB at 262; Glasgow Assurance Corpn v Symondson (1911) 16 Com Cas 109.

14. Quantum of interest (1) Where the subject-matter insured is mortgaged, the mortgagor has an insurable interest in the full value thereof, and the mortgagee has an insurable interest in respect of any sum due or to become due under the mortgage.1 (2) A mortgagee, consignee, or other person having an interest in the subject-matter insured may insure on behalf and for the benefit of other persons interested as well as for his own benefit.2 (3) The owner of insurable property has an insurable interest in respect of the full value thereof, notwithstanding that some third person may have agreed, or be liable, to indemnify him in case of loss.3 Note In a case4 where a policy was effected by ship’s husbands for the mortgagee, at the instance of the mortgagor, who was part owner and master, the mortgagee was held entitled to recover, although the loss was occasioned by the barratry of the mortgagor. ‘A person,’ said Bowen LJ, ‘with a limited interest may insure either for himself and to cover his own interest only, or he may insure so as to cover not merely his own limited interest, but the interest of all others who are interested in the property,’ and he then proceeded to discuss various instances.5 Where two or more persons insure the same subject-matter, so as to exceed the insurable value, the equities are worked out by the principle of subrogation, and contribution between insurers; see note to s 32 (double insurance). Sub-section (3) generalises a case where the charterer has agreed to indemnify the shipowner. Obviously a cargo owner may insure his cargo, though if it is lost through the negligence of the shipowner, he may have his remedy in damages.6 1 Irving v Richardson (1831) 2 B & Ad 193; North British and Mercantile Insurance Co v London, Liverpool and Globe Insurance Co (1877) 5 Ch D at 583, 584, CA. 2 Ebsworth v Alliance Marine Insurance Co (1873) LR 8 CP 596 at 608 and 641; Castellain v Preston (1883) 11 QBD at 398, CA. This sub-section was inserted in the Commons Committee. It does not

20

Insurable interest create any statutory authority of an interested person to insure on behalf of others. It simply provides that if such authority exists then the interested person may insure; see O’Kane v Jones, The Martin P [2005] Lloyd’s Rep IR 174. As to a ‘bare’ consignee, see Seagrave v Union Marine Insurance Co (1866) LR 1 CP at 319, 320. 3 Hobbs v Hannam (1811) 3 Camp 93 (guarantee by charterer). 4 Small v United Kingdom Marine Mutual Insurance Association [1897] 2 QB 311, CA. 5 Castellain v Preston (1883) 11 QBD at 398, CA. A person in possession of property can insure and recover its full value and must account to other interests for any sums in excess of his own interest; see Ramco (UK) Ltd v International Insurance Co of Hannover Ltd [2004] Lloyd’s Rep IR 606. 6 Cf Dufourcet v Bishop (1886) 18 QBD 373, and Yates v Whyte (1838) 4 Bing NC 272. As to the insurer’s right of subrogation consequent on payment, see s 79.

15. Assignment of interest Where the assured assigns or otherwise parts with his interest in the subject-matter insured, he does not thereby transfer to the assignee his rights under the contract of insurance, unless there be an express or implied agreement with the assignee to that effect.1 But the provisions of this section do not affect a transmission of interest by operation of law. Note This section is supplemented by s 51 (assured not having interest cannot assign). As to assignment of policy, see s 50. As to ratification where one person insures on behalf of another without previous authority, see s 86. In Rayner v Preston,2 Lord Esher said: ‘… where the subject-matter of the insurance is sold during the running of the policy, no interest under the policy passes unless it is made part of the contract of purchase and sale, so that it would be considered in a Court of Equity as assigned.’ Where there is such an agreement, it may be given effect to either by an assignment of the policy, or by the assignor holding the policy as trustee for the assignee. The ordinary cases of transmission of interest by act of law are death and bankruptcy, but the subrogation of the insurer to the rights of the assured on payment of the claim may perhaps be regarded as coming under this category; see s 79. Illustration Policy on a cargo of logs covering risk of craft, effected by B who sells part of the logs ‘ex ship, cash against documents’. The logs are lost in transit from ship to shore. The buyer acquires no interest under this policy.3 1 Powles v Innes (1843) 11 M & W 10 (sale of shares in a ship); North of England Pure Oil Cake Co v Archangel Maritime Insurance Co (1875) LR 10 QB 249 (sale of cargo). 2 (1881) 18 Ch D at 12, CA (fire insurance). As to the converse case of an assignee insuring for his assignor, see s 14. As to partial transfers of interest, see Hibbert v Carter (1787) 1 Term Rep 745, and as to the right of a seller under a c.i.f. contract to retain ‘increased value policies,’ see Strass v Spillers and Bakers Ltd, [1911] 2 KB 759, 16 Com Cas 166. 3 Yangtze Insurance Association v Lukmanjee [1918] AC 585, 23 Corn Cas 302, PC (ex ship and c.i.f. contracts contrasted).

21

The Marine Insurance Act 1906

INSURABLE VALUE 16. Measure of insurable value Subject to any express provision or valuation in the policy, the insurable value1 of the subject-matter insured must be ascertained as follows: (1) In insurance on ship, the insurable value is the value at the commencement of the risk,2 of the ship, including her outfit, provisions and stores for the officers and crew, money advanced for seamen’s wages, and other disbursements (if any) incurred to make the ship fit for the voyage or adventure contemplated by the policy, plus the charges of insurance upon the whole:3 The insurable value, in the case of a steamship, includes also the machinery, boilers, and coals and engine stores if owned by the assured, and, in the case of a ship engaged in a special trade, the ordinary fittings requisite for that trade:4 (2) In insurance on freight, whether paid in advance or otherwise,5 the insurable value is the gross amount of the freight at the risk of the assured, plus the charges of insurance:6 (3) In insurance on goods or merchandise, the insurable value is the prime cost of the property insured, plus the expenses of and incidental to shipping and the charges of insurance upon the whole:7 (4) In insurance on any other subject-matter, the insurable value is the amount at the risk of the assured when the policy attaches, plus the charges of insurance. Note A clear delimitation of insurable value is necessary, (a) to fix the measure of indemnity in the case of an unvalued policy; (b) to fix the measure of indemnity in the few cases in which the valuation in a valued policy can be set aside; and (c) to furnish an approximate standard for fixing the value in a valued policy. Though marine insurance is universally admitted to be a contract of indemnity (see note to s 1), there are two opposing theories as to what is the nature of the indemnity to be aimed at. According to some, the assured ought to be put in the same position as if he had not undertaken the adventure. According to others, he ought to be put in the same position as if the adventure had been carried to a successful issue.8 English law steers a halting course between these two theories, but with a strong leaning towards the former. According to modern practice, unvalued policies are very rare, being practically confined to goods and in a few instances to freight payable on arrival. Other interests are almost invariably insured by valued policies. When the amount to be insured on goods cannot be fixed until the receipt of what are known as ‘closing particulars,’ provision is usually made that, in the event of loss before declaration, the declaration shall be on the basis of invoice cost and charges, plus a certain agreed percentage for anticipated profits. The words ‘if owned by the assured,’ are inserted in the second paragraph of sub-s (1) because it may happen that the fuel oil and engine stores are the property of the charterer and not of the shipowner.

22

Insurable value

It appears that a policy on ‘hull and machinery’ covers less than a policy on ‘ship,’ eg it may not cover fuel oil and stores.9 As regards ‘goods,’ a voyage policy on goods is an insurance of the adventure, as well as an insurance on the goods themselves.10 Hence the doctrine of loss of voyage or frustration of the adventure; see s 60, and notes thereto. As to measure of indemnity, see further, ss 67–68. As to charges of insurance, see s 13. As to the scope of the terms ‘ship’ and ‘freight’, see Sch I, rr 15, 16. The usual London Market wordings oust s 16 and provide that the assured’s loss is measured by the difference in the value of the subject matter immediately before and immediately after the loss.11 Illustrations 1.

2.

Time policy on ship in usual form, the ship being generally engaged in the grain trade. This policy covers separation cloths and dunnage mats as part of the ship’s outfit, even though at the time of loss the cloths and mats were not in use.12 Policy on freight effected by charterer. In case of total loss he is entitled to the gross freight without any deduction for the time it would have taken him to discharge the cargo, but he is not entitled to recover the commission he paid in getting a sub-charter.13

1 The reference to ‘insurable value’ is not synonymous with market value; see Suez Fortune Investments Ltd v Talbot Underwriting Ltd, The Brillante Virtuoso [2015] Lloyd’s Rep 651, [267]. 2 These words give rise to a difficulty in the case of an ‘at and from’ policy. Perhaps they may be construed as applying to the successive stages, ie as the risk progressively attaches. 3 Brough v Whitmore (1791) 4 Term Rep 206 (stores and provisions for crew); Moran, Galloway & Co 7) Uzielli [1905] 2 KB at 558 (disbursements); cf Sch I, r 1. 4 As to fittings, see Hogarth v Walker [1900] 2 QB 283, CA. The final words perhaps overrule Hoskins v Pickersgill (1783) 3 Doug 222, where it was held that a policy on ship did not cover fishing tackle for the whaling trade. 5 See ‘freight’ defined by s 90, and as to ‘advance freight’ see s 12. 6 Palmer v Blackburn (1822) 1 Bing 61; United States Shipping Co v Empress Assurance Corpn [1907] 1 KB 259 and [1908] 1 KB 115, CA (gross not net freight); Report of Commission on Unseaworthy Ships, 1874, vol 2, p xvi. As to the purpose of this rule, see Thames and Mersey Marine Insurance Co Ltd v Gunford Ship Co Ltd [1911] AC at 549, per Lord Robson. 7 Usher v Noble (1810) 12 East 639. As to charges of insurance, see ibid, at 646. The invoice price is prima facie evidence of prime cost. But the insurable value must be the value at the commencement of the risk, so as to ensure that the assured shall obtain neither more nor less than an indemnity in case of loss. If, therefore, the value of the goods has altered since the assured acquired them, the prime cost to the assured (as evidenced by the invoice price) does not necessarily represent their insurable value; the court must determine what the value was at the commencement of the risk: Williams v Atlantic Assurance Co Ltd [1933] 1 KB 81 at 92, 102, CA. See further, Berger and Light Diffusers Pty Ltd v Pollock [1973] 2 Lloyd’s Rep 442, QBD (Commercial Court), where it was held that the insurable value of some steel injection moulds was their value on board at the place of loading and the insurance premium and commission, and amounted to £5,316.20 (see the judgment of Kerr J, ibid, at 456). As to floating policy effected by canal carriers, see Crowley v Cohen (1832) 3 B & Ad 478. 8 C McArthur, The Contract of Marine Insurance (2nd ed, 1890), p 67, citing W Benecke, Treatise on the Principles of Indemnity in Marine Insurance, 1824. 9 Roddick v Indemnity Mutual Marine Insurance Co [1895] 2 QB at 386, CA. 10 British and Foreign Marine Insurance v Samuel Sanday & Co [1916] 1 AC 650 at 672, 21 Com Cas 154, HL. But this rule does not extend to non-marine policies: Moore v Evans [1918] AC 185, HL, affg [1917] 1 KB 458, CA (policy on jewellery detained in enemy occupied country).

23

The Marine Insurance Act 1906 11 See The Captain Panagos DP [1985] 1 Lloyd’s Rep 625 and Thor Navigation Inc v Ingosstrakh Insurance [2005] Lloyd’s Rep IR 490. Cf. Clothing Management Technology Ltd v Beazley Solutions Ltd [2012] 1 Lloyd’s Rep 571. 12 Hogarth v Walker [1900] 2 QB 283, CA. 13 United States Shipping Co v Empress Assurance Corpn [1907] 1 KB 259, affd on another ground, [1908] 1 KB 115.

DISCLOSURE AND REPRESENTATIONS 17. Insurance is uberrimæ fidei A contract of marine insurance is a contract based upon the utmost good faith, and, if the utmost good faith be not observed by either party, the contract may be avoided by the other party.1 Note Section 17 has been modified by s 14(3) of the Insurance Act 2015: see further Appendix I at p 177. Section 17 ‘restates the long established duty of the utmost good faith in contracts of marine insurance. It is not necessary, even if it were possible to go into degrees of good faith, or the question what degree of good faith may apply to other contracts. It is enough that much more than an absence of bad faith is required of both parties to all contracts of insurance.’2 The general principle is stated in this section because the special sections which follow are not exhaustive.3 Sections 18 to 20 are ‘illustrations or consequences’ of the rule in s 17.4 ‘Sections 17 and 18,’ said Fletcher Moulton LJ, ‘apply to policies of every kind, whatever risk be insured against. They apply to every policy by reason of the nature of the contract of insurance.’5 ‘The importance of the principle enshrined in the Marine Insurance Act 1906, s 17 that a contract of marine insurance is a contract based on the utmost good faith is not in question. Nothing I say is intended to diminish in any way that fundamental principle.’6 Insurance is a contract uberrimæ fidei, and the obligation is binding on both parties alike, though necessarily the question usually arises with reference to the conduct of the assured. ‘Good faith,’ said Lord Mansfield, ‘forbids either party, by concealing what he privately knows, to draw the other into a bargain from his ignorance of that fact, and from his believing the contrary … The policy would be equally [void] against the underwriter if he concealed; as if he insured a ship on her voyage which he privately knew to be arrived, an action would lie to recover the premium.7 ‘It seems to me essential to bear in mind two things, each of which stems from the need for equality between those bargaining in the marine insurance market … The first is that the insured is the one who knows most of what the underwriter needs to know but does not know; the second that, though the underwriter must trust the insured to give it him, he in his turn must be trusted not to abuse the help and protection given him by the duty the law imposes on the insured to disclose and represent truly all that a prudent underwriter needs to know, and so turn the duty into a means of avoiding a contractual liability which he ought in fairness to honour.

24

Disclosure and representations

This the [Act of 1906] recognises by making the duty to observe the utmost good faith mutual ins 17 and by providing the exceptions of circumstances which need not be disclosed that are to be found particularly in s 18(3)(b) and (c).’8 Where underwriters allege non-disclosure, they must adduce evidence in support of their plea. In one case, Scrutton LJ said: ‘The underwriters have not taken the course, which in my view should always be pursued, of going into the box and saying what they knew and what was the material fact which they did not know. In my view an underwriter pleading concealment must come and say what he was or was not told.’9 The contract is often said to be rendered void by non-disclosure or misrepresentation, but it is clear that it is only voidable at the option of the party prejudiced, and that the ordinary rules of law as to voidable contracts apply to insurance.10 A breach of the duty of good faith does not sound in damages. The only remedy open to the insured is to avoid (rescind) the policy and recover the premium.11

The post-contractual duty of good faith Attempts to confine s 17 to the pre-contract stage ‘appears to be past praying for’.12 However, it is clear that the duty ends when litigation begins; it ‘having been exhausted or at least superceded by the rules of litigation’.13

Ship’s papers It follows from the nature of the contract that both parties must play with their cards on the table14 and this historically has been used as a justification for the full and complete discovery allowed as to ship’s papers and other material documents.15 However, the idea that orders for ship’s papers are made as a consequence of the duty in s 17 was put to bed by the House of Lords in Manifest Shipping Co Ltd v Uni-Polaris Insurance Co Ltd, The Star Sea [2001] 1 Lloyd’s Rep IR 247.16 The term ‘ship’s papers’ is a shorthand for an order by which: (i) the assured and all other persons interested in the claim and the policies must (a) give specific disclosure of certain categories of document and (b) verify by affidavit those documents or classes of documents that are in their control, have never been in their control and have been but are no longer in his control; and (ii) the assured must use its best endeavours to obtain and disclose documents or classes of documents which are not or have not been in his control. As the 16th edition of Arnould states at p 1125, ‘during the nineteenth century and the early years of this [the twentieth] century the underwriter was enabled to obtain such an order, once appearance had been entered, as a matter of course in any action on a marine insurance policy’. However, with the introduction of Order 31, r 12A of the Rules of the Supreme Court in 1936 such orders became discretionary and this remained so when Order 72, r 10 of the Rules of the Supreme Court replaced Order 31, r 12A in 1964.The power of the Court to order the production of ship’s papers is set out in CPR r 58.14.

25

The Marine Insurance Act 1906

Although an order for ship’s papers may be sought at any time (CPR r 58.14(2)), the modern approach is for it to be made after the service of a defence by underwriters.17 An order for ship’s papers may be made in CPR Form No 94 or in such other form as the Court thinks fit.18 The order is in the discretion of the Court and will not be made automatically19 but the jurisdiction remains alive and well.20 That said, the jurisdiction is now probably confined to those cases where it is alleged that a ship has been cast away with the privity of the assured.21 It is also in the discretion of the Court whether to order a stay pending compliance with an order for ship’s papers.22

Fraudulent claims It has now been settled by the Supreme Court that the fraudulent claim rule, which prevents an insured from recovering under the policy where the whole claim is fabricated or where the amount of the claim is dishonestly exaggerated, does not apply to justified claims supported by collateral lies.23 However, the fraudulent claim rule is probably not a manifestation of the duty of good faith in s 17 but rather an implied term or incident of the contract of insurance.24 1 Brownlie v Campbell (1880) 5 App Cas at 954, per Lord Blackburn; cf Seaton v Heath [1899] 1 QB at 792, CA. 2 Container Transport International Inc and Reliance Group Inc v Oceanus Mutual Underwriting Association (Bermuda) Ltd [1984] 1 Lloyd’s Rep 476, at 525, CA (per Stephenson LJ). 3 This sentence was approved by Stephenson LJ in Container Transport International Inc and Reliance Group Inc v Oceanus Mutual Underwriting Association (Bermuda) Ltd [1984] 1 Lloyd’s Rep 476, at 525, CA. 4 Pan Atlantic Ins Co Ltd v Pine Top Ins Co Ltd [1995] 1 AC 501 at 554 per Lord Lloyd. 5 Cantiere Meccanico v Janson [1912] 3 KB 452 at 467, CA (policy on floating dock, ‘seaworthiness admitted’). Further, in Australia and New Zealand Bank Ltd v Colonial and Eagle Wharves Ltd: Boag (Third Parry) ([1960] 2 Lloyd’s Rep 241, QB (Commercial Court) (all risks insurance) McNair J, said (ibid, at 251) that for the moment he was prepared to assume (though he must not be taken as finally accepting) that the law as stated in s 18 of the Marine Insurance Act 1906 did apply to non-marine insurance, though he had been referred to no case in which it has been so applied. 6 Container Transport International Inc and Reliance Group Inc v Oceanus Mutual Underwriting Association (Bermuda) Ltd [1982] 2 Lloyd’s Rep 178 at 187 (per Lloyd J). In Black King Shipping Corpn v Massie, The Litsion Pride [1985] 1 Lloyd’s Rep 437 at 508, QB (Commercial Court) both counsel adopted the view that s 17 was equally applicable to events after as well as before the conclusion of the contract of insurance. This view was approved by Hirst J, ibid, at 511. It may, however, be argued that since s 17 appears in the Act under the heading of ‘Disclosure and Representations,’ it is intended to apply only to the pre-contract situation. 7 Carter v Boehm (1766) 3 Burr 1905. 8 Container Transport International Inc and Reliance Group Inc v Oceanus Mutual Underwriting Association (Bermuda) Ltd [1984] 1 Lloyd’s Rep 476, at 529, CA (per Stephenson LJ). 9 Williams v Atlantic Assurance Co Ltd [1933] 1 KB 81 at 94, CA. See also Visscherij Maatschappij Nieuw Onderneming v Scottish Metropolitan Assurance Co (1922) 27 Com Cas 198, CA. 10 Morrison v Universal Marine Insurance Co (1873) LR 8 Ex Ch 197, Ex Ch. As to cancellation of avoided policy, see Brooking v Maudslay (1888) 36 Ch D 636 at 643. 11 Banque Financiere la Cite SA v Westgate Insurance Co Ltd [1990] 2 All ER 947 at 959, HL (per Lord Templeman). But if a tort is committed in the form of a fraudulent or negligent false statement the underwriters will have the right to claim damages for any loss they have suffered if they choose not to avoid the policy or have contracted out of their right to do so (HIH Casualty and General Insurance v Chase Manhattan Bank [2003] Lloyd’s Rep IR 230).

26

Disclosure and representations 12 Manifest Shipping Co Ltd v Uni-Polaris Insurance Co Ltd, The Star Sea [2001] Lloyd’s Rep IR 247, [6] per Lord Clyde. See also [48], [72] and [106]. 13 Manifest Shipping Co Ltd v Uni-Polaris Insurance Co Ltd, The Star Sea [2001] Lloyd’s Rep. I.R. 247 at [76] per Lord Hobhouse. 14 See also Longmore LJ in The Mercandian Continent [2001] 2 Lloyd’s Rep 563 at [22(8)]. 15 This sentence was approved by Hirst J in Black King Shipping Corpn v Massie, The Litsion Pride (supra) at 511. 16 For historic decisions see: China Traders’ Insurance Co v Royal Exchange [1898] 2 QB 187, CA; Boulton v Houlder Bros [1904] 1 KB 784, CA (ship’s papers—action by underwriters for misrepresentation); Harding v Bussell [1905] 2 KB 83, CA (ship’s papers—mixed sea and land risk); Sir William Garthwaite Insurance Ltd v Port of Manchester Insurance Co (1930) 37 LI L Rep 194 (ships’ papers—order must be made ex debito justitiæ); Leon v Casey [1932] 2 KB 576,48 LQR 464, CA (ship’s papers—order may be made even where the alleged loss took place in course of land transit provided that policy is substantially one of marine insurance); North British Rubber Co Ltd v Cheetham (1938) 61 LI L Rep 337, CA (another case where the alleged loss took place in course of land transit); Keevil and Keevil Ltd v Boag [1940] 3 All ER 346, CA (eggs found to be defective on delivery). But this special right of discovery is strictly confined to marine insurance: Tannenbaum v Heath (1908) 13 Corn Cas 264, CA (fire insurance). The whole of the ship’s papers must be disclosed in the affidavit of documents, even though not specifically asked for: Graham Joint Stock Shipping Co v Motor Union Insurance Co [1922] 2 KB 563,27 Corn Cas 130, CA; overruling Fraser v Burrows (1877) 2 QBD 624. But documents subsequent to the inception of litigation are privileged: Adam SS Co v London Assurance Corpn (1914) 20 Com Cas 37, CA (correspondence with salvage association after agreed date of writ). 17 As the decisions of Kerr J and the Court of Appeal in Probatina Shipping Co Ltd v Sun Insurance Office Ltd, The Sageorge [1974] QB 635, [1974] 2 All ER at 493, CA, make clear, in the modern era it is appropriate for counsel to plead the best particulars of fraud which they consider justified on existing materials, without seeking the prior disclosure of ship’s papers. 18 See Appendix V at p 315. The modern practice is also for the parties to negotiate the categories of document to which the order applies. 19 Probatina Shipping Co Ltd v Sun Insurance Office Ltd, The Sageorge [1974] QB 635, [1974] 2 All ER at 493, CA, where no order was made. 20 An order for ship’s papers was made, for example, by Teare J in Double Eight Marine SA v RSA & Ors, The Panamax Trader (12 January 2018, unreported), and by Males J in MS Amlin Corporate Member & ors v Flora Shipping Corporation Limited & ors, The Mustafa Kan (20 November 2018, unreported). Teare J made no order in the Kairos Shipping Ltd v ENKA & Co LLC, The Atlantik Confidence [2016] 2 Lloyd’s Rep 525 because, though it was a scuttling case, it was not an action on a marine policy. 21 See again the 16th edition of Arnould at p 1128. 22 Probatina Shipping Co Ltd v Sun Insurance Office Ltd, The Sageorge [1974] QB 635, [1974] 2 All ER at 493, CA. In light of the overriding objective in the CPR, it is doubtful that litigation would nowadays be held up pending compliance with a ship’s papers order. 23 Versloot Dredging BV v HDI Gerling Industrie Versicherung AG, The DC Merwestone [2017] AC 1 (Lord Mance dissenting). Cf. Agapitos v Agnew (The Aegeon) (No1) [2003] QB 556. 24 See Versloot Dredging BV v HDI Gerling Industrie Versicherung AG, The DC Merwestone [2017] AC 1, [8] per Lord Sumption (obiter).

18. Disclosure by assured (1) Subject to the provisions of this section, the assured must disclose to the insurer, before the contract is concluded,1 every material circumstance which is known to the assured, and the assured is deemed to know every circumstance which, in the ordinary course of business, ought to be known by him. If the assured fails to make such disclosure, the insurer may avoid the contract.2 (2) Every circumstance is material which would influence the judgment of a prudent insurer in fixing the premium, or determining whether he will take the risk.3 27

The Marine Insurance Act 1906

(3) In the absence of inquiry the following circumstances need not be disclosed, namely: (a) Any circumstance which diminishes the risk;4 (b) Any circumstance which is known or presumed to be known to the insurer. The insurer is presumed to know matters of common notoriety or knowledge, and matters which an insurer in the ordinary course of his business, as such, ought to know;5 (c) Any circumstance as to which information is waived by the insurer;6 (d) Any circumstance which it is superfluous to disclose by reason of any express or implied warranty.7 (4) Whether any particular circumstance, which is not disclosed, be material or not is, in each case, a question of fact.8 (5) The term ‘circumstance’ includes any communication made to, or information received by, the assured.9 [(6) This section does not apply in relation to a contract of marine insurance if it is a consumer insurance contract within the meaning of the Consumer Insurance (Disclosure and Representations) Act 2012]. Note The provisions in square brackets were added by the Consumer Insurance (Disclosure and Representations) Act 2012, s 11(2). The provision came into force on 6 April 2013. Section 18 has now been repealed by s 21(2) of the Insurance Act 2015: see further Appendix I at p 183. ‘The duty of disclosure, as defined or circumscribed by ss 18 and 19, is one aspect of the overriding duty of the utmost good faith mentioned in s 17.’10 Non-disclosure by the assured is sometimes referred to as ‘concealment,’ but the expression ‘non-disclosure’ is preferable. Aliud est celare, aliud tacere. The duty of the assured to disclose material facts is a positive, not a negative duty. Mere silence, and even innocent silence, as to a material fact entitles the insurer to avoid the contract.11 The duty of disclosure is confined to questions of fact; ‘a question of opinion is not a material circumstance within the Act.’12 It is important to notice that the assured is deemed to know every circumstance which in the ordinary course of business ought to be known by him. Consequently, where the assured effects an insurance policy himself, knowledge of a material fact by his agent (an ‘agent to know’ or where the agent is the alter ego of the assured) will be imputed to the assured.13 If insurance is undertaken by an agent for the insurer, the ordinary rules of agency apply, but special rules apply to the agent of the assured quoad the insurer; see s 19.14 The word ‘influence’ requires the underwriter to establish materiality and inducement.15 Materiality is objective (would the reasonable prudent underwriter have been influenced) whilst inducement relates to the actual underwriter or underwriters who agreed to insure the risk.

28

Disclosure and representations

Materiality must be judged at the time the risk was accepted.16 It only relates to the risk itself and not ancillary matters.17 Nowadays materiality is usually proved by expert evidence. Inducement is not mentioned in s 18 but it is a requirement that is separate from materiality.18 It is usually proved by the actual underwriter(s) giving evidence. It is to be emphasised that, as stated in s 18(4), whether a particular circumstance be material or not is a question of fact. Consequently the illustrations set out below are not to be regarded as precedents but relate solely to the cases in question. It does not necessarily follow that because a fact has been held immaterial in one case, a similar fact is not material in another. Rivaz v Gerussi (illustration 3) was a case of fraud, but it was laid down generally that a circumstance might be material, though it had no direct bearing on the particular risk. If the assured knows of any peculiar risk attaching to the adventure, which the insurer does not know, the assured is bound to disclose it, even though it may be covered by the terms of the policy.19 The rule which exempts the assured from disclosing circumstances covered by an implied warranty appears to be of doubtful value,20 but it is an old one. As there is no implied warranty of seaworthiness in a time policy, facts bearing on the seaworthiness of the ship must be disclosed.21 The omission to make inquiry is no waiver, if the insurers are not put on inquiry. Waiver is not to be easily presumed.22 ‘There can, in my opinion, be no waiver of material information unless it would and should have been disclosed by an inquiry by the underwriter which common prudence demanded, and no affirmation of a contract unless the underwriter enters into it or carries it out after he has full knowledge of the information.’23 Even when the insurer has full knowledge of the facts, he is still entitled to a reasonable time in which to decide whether to affirm the contract. Where the insurer has taken no action to affirm or repudiate the contract and a reasonable time for making up his mind has elapsed, he will be deemed to have affirmed the contract if either so much time has elapsed that the necessary inference is one of affirmation or the assured has been prejudiced by the delay in making an election or rights of third parties have intervened.24 The existence of an open cover between the assured’s brokers and the insurers does not relieve the assured of his duty under s 18 (1) to disclose material circumstances which are known to him.25 Illustrations (1) Insurance on ship Cambria. Lloyd’s List contains an entry that a ship of this name had stranded. The broker, after inquiry, comes to the conclusion that the entry must relate to another ship, and does not disclose the information to the insurer. The insurer, not having seen the entry, may avoid the contract.26

29

The Marine Insurance Act 1906

(2) Policy for £2,800 on goods valued at £2,800, the real value being £970. The assured does not disclose the over-valuation. The insurer may avoid the contract.27 (3) Assured effects a series of consecutive policies on shipments to be declared. The goods declared on the earlier policies are systematically undervalued, and the earlier policies are thus more exhausted than they appear to be. The insurer may avoid the later policies on the ground of non-disclosure.28 (4) Insurance on chartered freight. If the charter-party contains a cancelling clause, this must be disclosed.29 (5) Insurance on goods, including risk of craft. The assured does not disclose that he gets his lighterage done on cheaper terms in consideration of the lighterman limiting his liability as a common carrier. The insurer may avoid the contract.30 (6) Insurance on chartered freight, one-third diminishing each month. The ‘slip’ shows that this is a time charter-party, which may contain the usual ‘off-hire’ clause.31 The assured need not disclose that it does, in fact, contain such a clause. (7) Policy on goods. The plaintiff’s shipping agent at Smyrna hears that the vessel on which the goods were shipped has stranded. Instead of telegraphing, he informs plaintiff of this by letter, so that plaintiff may have time to insure. Before receipt of the letter the plaintiff insures the goods. The insurer may avoid the contract.32 (8) Policy for £18,500 on hull valued at £18,500, the real value being £9,000. At the same time freight is insured for £5,500, and ‘honour’ policies on disbursements to the amount of £11,000 are taken out. If this gross over-insurance is not disclosed, the policy on hull may be avoided.33 (9) Voyage policy on ship. The master had not been at sea for twenty years, and had then lost a ship. It is not necessary to disclose these facts.34 (10) Voyage policy on floating dock sent from England to Brindisi, ‘seaworthiness admitted’. The dock had not been specially strengthened for the voyage, but the assured did not know or think that this was necessary. In the absence of inquiry, this need not be disclosed.35 (11) Policy (against war risks) on freight from Portland to Kustendji. The ship had been chartered to a German. The insurance was effected on 31 July 1914. War breaks out on 4 August. The ship is stopped at Gibraltar, and subsequently is requisitioned by the Admiralty. It is not necessary to disclose that the charterer was a German.36 (12) Reinsurance of cargo in the afternoon of 25 September. The cargo had been damaged by fire, and the news reached Lloyd’s on the night of 24 September. The casualty was posted at Lloyd’s, and casualty slips early on the morning of the 25th were sent to the reassured and the reinsurer. Neither party noticed them before the reinsurance was effected. The reinsurer may avoid the contract.37 (13) Policy on wooden ship from America to France and back again. Part of the cargo she had contracted to carry from America consisted of petrol. This is not disclosed. The absence of inquiry by the insurer as to the nature of the cargo waives disclosure.38 (14) Time policy on wooden ship. Assured did not disclose that vessel’s gasoline carrying capacity had been increased from 3000 to 8000 gallons, and that the 30

Disclosure and representations

altered method of handling gasoline was not in common usage. These facts are material and the insurer is entitled to avoid the contract.39 (15) Policy on goods. The assured’s shipping agents knew that a bill of lading in respect of some steel injection moulds was ‘claused’ in that it stated that the moulds were ùnprotected,’ secondhand’ and ‘insufficiently packed’. This fact was held to be deemed to be known by the assured.40 (16) Policy on ship. The assured did not disclose: (i) that the master had reported to him that the vessel had unusual rhythmic vibrations and leaked excessively; (ii) that after a period in a shipyard she again leaked excessively; and (iii) that a marine surveyor had reported that she was unfit for any use off shore. These facts were held to be material. The insurers had not waived information of them and could avoid liability on the policy.41 (17) Builders’ risk policy. The assured failed to disclose: (i) the fact that a local authority had refused to give him permission to use his boatyard for any industrial purpose because it was a high hazard risk; and (ii) the fact that he was in financial difficulties and would be less able to maintain the equipment used in the yard and thereby would increase the hazard. These facts were material and the insurers were entitled to avoid liability.42 (18) Policy on goods. Cargo described as ‘enamelware (cups and plates) in wooden cases’. The assured did not disclose that (i) the cargo included 823 cartons as contrasted with wooden cases; (ii) a significant part of the enamelware had been touched up by overpainting; and (iii) the cargo was an end of stock or job lot purchase and had been bought at a cheap rate.43 The facts were material, and the insurers could avoid liability. (19) Policy on goods. Cargo of soya beans arrived in heated condition. The assured did not disclose that a similar cargo loaded on another vessel had arrived earlier also in a heated condition. The insurers could not avoid liability on the ground of non-disclosure of a material fact because they had been informed that there was damage to the other cargo but that it was insignificant and negligible.44 (20) Policy on goods. Non-disclosure of claims experience of previous insurers of containers used in ocean transport. These facts were material and the present insurers had not waived information as to that experience.45 (21) Policy on yacht. Non-disclosure by assured that he had been previously convicted of handling a stolen dinghy, and that yacht had been built from a kit. These facts were material and the insurers could avoid liability for there had been no waiver.46 (22) Policy on yacht. Non-disclosure by assured that signature on the proposal form was forged by the brokers.47 (23) Charterers’ liability policy. Non-disclosure by assured of loss records. Arguments that underwriters could be presumed to know about the assured’s losses and that a failure to ask for the records amounted to a waiver of the requirement to disclose were rejected.48 (24) Policy against war risks. Non-disclosure by assured that the two individuals who controlled the company were alleged to have committed fraud and were facing criminal charges in Greece and civil proceedings in Panama.49 1 See s 21, as to conclusion of contract. 2 Ionides v Pender (1874) LR 9 QB at 537, per Blackburn J. As to facts which the assured ought to know, see Proudfoot v Montefiore (1867) LR 2 QB 511 at 519; Blackburn v Vigors (1887)

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12 App Cas at 537, 541. As to Lloyd’s agents abroad, see Wilson v Salamandra Assurance Co (1903) 8 Com Cas 129 (knowledge of Lloyd’s agent at Gibraltar does not affect a member of Lloyd’s who reinsures). 3 Rivaz v Gerussi (1880) 6 QBD at 229, per Lord Esher; Tate v Hyslop (1885) 15 QBD at 379, per Bowen LJ. Cf Republic of Bolivia v Indemnity Mutual Marine Assurance Co (1908) 14 Corn Cas at 167 (open cover which may be used for goods of different assured); Associated Oil Carriers Ltd v Union Insurance Society of Canton Ltd [1917] 2 KB 184 at 192 (per Atkin J) (for the facts of the case, see illustration 11, p 29, ante); Berger and Light Diffusers Pry Ltd v Pollock [1973] 2 Lloyd’s Rep 442, QBD (Commercial Court) at 463 (per Kerr J). 4 Carter v Boehm (1766) 3 Burr at 1910, per Lord Mansfield. 5 Carter v Boehm (1766) 3 Burr at 1910; Valiance v Dewar (1808) 1 Camp at 108 (trade usages); Harrower v Hutchinson (1870) LR 5 QB at 590. Cf British and Foreign Marine Insurance Co v Gaunt [1921] 2 AC 41 at 59–62 (usage as to deck cargo). 6 Carter v Boehm (1766) 3 Burr at 1910, 1911; cf Laing v Union Marine Insurance Co (1895) 1 Com Cas at 15. Cf Property Insurance Co v Protector Insurance Co (1913) 18 Corn Cas 119 (reinsurance, special terms in contract); Hewitt Bros v Wilson [1915] 2 KB 739, CA (second-hand machinery described as machinery. Effect of ‘held covered’ clause); Mann, MacNeal and Steeves Ltd v General Marine Underwriters Ltd [1921] 2 KB 300, 26 Com Cas 132, CA (policy on ship, absence of inquiry as to cargo); Greenhill v Federal Insurance Co [1927] 1 KB 65, CA (previous history of goods); G Cohen, Sons & Co v Standard Marine Insurance Co Ltd (1925) 30 Com Cas 139 (absence of steam power on old battleship being towed to scrapyard); Pacific Queen Fisheries v L Symes, The Pacific Queen [1963] 2 Lloyd’s Rep 201, US Ct of Appeals, Ninth Circuit (increase of vessel’s gasoline carrying capacity); Gulfstream Cargo Ltd v Reliance Insurance Co, The Papoose [1971] 1 Lloyd’s Rep 178, US Ct of Appeals, Fifth Circuit; Container Transport International Inc and Reliance Group Inc v Oceanus Mutual Underwriting Association (Bermuda) Ltd [1984] 1 Lloyd’s Rep 476, CA (claims experience of previous insurers of containers used in ocean transport). 7 Shoolbred v Nutt (1782); Haywood v Rodgers (1804) 4 East 590; The Gunford Ship Co Ltd v Thames and Mersey Marine Insurance Co Ltd 1910 SC 1072, Ct of Session; revsd by HL on another point: [1911] AC 529. 8 lonides v Pender (1874) LR 9 QB 531. 9 Blackburn v Haslam (1888) 21 QBD 144. 10 Container Transport International Inc and Reliance Group Inc v Oceanus Mutual Underwriting Association (Bermuda) Ltd [1984] 1 Lloyd’s Rep 476, at 492, CA (per Kerr LJ). 11 See Bates v Hewitt (1867) LR 2 QB 595 at 607 (failure to disclose that a merchant ship had formerly been a Confederate cruiser). 12 Cantiere Meccanico v Janson [1912] 3 KB at 472, per Buckley LJ. 13 Berger and Light Diffusers Pry Ltd v Pollock [1973] 2 Lloyd’s Rep 442, QBD (Commercial Court), the facts of which are stated in illustration 15. See more recently Simner v New India Assurance Co Ltd [1995] LRLR 240 and ERC Frankona Reinsurance v American National Insurance Co [2006] Lloyd’s Rep IR 157. 14 Note the special rule as to ratification in s 86 of the Act. 15 Pan Atlantic Insurance Co Ltd v Pine Top Insurance Co Ltd [1994] 3 All ER 581. See more recently Males J in Axa Versicherung AG v Arab Insurance Group (BSC) [2015] EWHC 1939 (Comm), [115]. As regards the burden of proof and that which must be pleaded and proved see [2017] Lloyds Rep IR 216 (CA), [138]–[139] per Christopher Clarke LJ. 16 See for example, Inversiones Manria SA v Sphere Drake Insurance Co, The Dora [1989] 1 Lloyd’s Rep 69. 17 Creditworthiness, for example: North Star Shipping Ltd v Sphere Drake Insurance plc [2006] Lloyd’s Rep IR 519. 18 Assicurazioni Generali SpA v Arab Insurance Group [2003] Lloyd’s Rep IR 131. 19 Cheshire & Co v Thompson (1919) 24 Com Cas 198 CA. 20 See Greenhill v Federal Insurance Co [1927] 1 KB at 81. 21 Russell v Thornton (1859) 29 LJ Ex 9; affd (1860) 6 H & N 140 (ship had been aground for three hours). 22 Greenhill v Federal Insurance Co [1927] 1 KB 65, CA. 23 Container Transport International Inc and Reliance Inc v Oceanus Mutual Underwriting Association (Bermuda) Ltd [1984] 1 Lloyd’s Rep 476, at 529, CA (per Stephenson LJ). 24 Liberian Agency Inc v Mosse [1977] 2 Lloyd’s Rep 560 at 565 (per Donaldson J). In that case it was held that a reasonable time had not elapsed. (See the judgment of Donaldson J, ibid, at 565–566).

32

Disclosure and representations And see Callaghan & Hedges v Thompson & ors [2000] 1 Lloyd’s Rep IR 125, 133–134: affirmation requires the innocent party to communicate an informed choice to treat the contract as alive not merely conduct which is consistent with the contract being alive. 25 Berger and Light Diffusers Pty Ltd v Pollock (supra). (See the judgment of Kerr J, ibid, at 460.) 26 Morrison v Universal Marine Insurance Co (1873) LR 8 Ex Ch 197, Ex Ch. 27 Ionides v Pender (1874) LR 9 QB 531; cf illustration 8 as to ‘honour’ policies, and see Gooding v White (1913) 29 TLR 312 (over-valued cargo); Visscherij Maatschappij etc v Scottish Metropolitan Assurance Co (1922), 27 Com Cas 198, CA (over-valued trawler); Piper v Royal Exchange Assurance (1932) 44 LI L Rep 103, KB (over-valued yacht); Slattery v Mance [1962] 1 Lloyd’s Rep 60 (overvalued yacht). Cf Berger and Light Diffusers Pty Ltd v Pollock [1973] 2 Lloyd’s Rep 442, QBD (Commercial Court), where the assured had stated that some steel injection moulds were worth £20,000 and it was held that the insurers had failed to prove that the alleged over-valuation was material. (See the judgment of Kerr J ibid, at 465.) The most recent decision on non-disclosure of an over-valuation was Involnert Management Inc v Aprilgrange Ltd, The Galatea [2015] 2 Lloyd’s Rep 289 in which underwriters successfully avoided an H&M policy on a yacht insured for €13m for non-disclosure of a €7m valuation and non-disclosure of the fact the yacht was being marketed for sale at the time the risk was bound for €8m. 28 Rivaz v Gerussi (1880) 6 QBD 222 CA (fraud). 29 Mercantile SS Co v Tyser (1881) 7 QBD 73, cf illustration 6. 30 Tate v Hyslop (1885) 15 QBD 368, CA. A common carrier is prima facie responsible as an insurer, and not merely for negligence. 31 The Bedouin [1894] P 1, CA; cf Charlesworth v Faber (1900) 5 Corn Cas 408 (continuation clause). Distinguished in Scottish Shire Line v London and Provincial Marine Insurance Co [1912] 3 KB 51 (policy on freight ‘chartered or as if chartered’—nondisclosure of agreement that ship should be at Hobart by March 28). 32 Proudfoot v Montefiore (1867) LR 2 QB 511. 33 Thames and Mersey Marine Insurance Co v Gunford Ship Co [1911] AC 529, HL. Cf Pickersgill v London and Provincial Marine Insurance Co [1912] 3 KB 614 (action by innocent assignee of policy). But what if the ‘honour’ policies had been effected after the conclusion of the contract, instead of contemporaneously. 34 Thames and Mersey Marine Insurance Co Ltd v Gunford Ship Co Ltd (supra). 35 Cantiere Meccanico v Janson [1912] 3 KB 452, CA. 36 Associated Oil Carriers Ltd v Union Insurance Society of Canton Ltd [1917] 2 KB 184, 22 Corn Cas 346. 37 London General Insurance Co v General Marine Underwriters’ Association Ltd [1921] 1 KB 104, 26 Corn Cas 52, CA. 38 Mann, MacNeal and Steeves Ltd v General Marine Underwriters Ltd [1921] 2 KB 300, 26 Corn Cas 132, CA (ship burnt on return voyage). 39 Pacific Queen Fisheries v L Symes, The Pacific Queen [1963] 2 Lloyd’s Rep 201, US Ct of Appeals, Ninth Circuit. 40 Berger and Light Diffusers Pty Ltd v Pollock [1973] 2 Lloyd’s Rep 442, QBD (Commercial Court). (See the judgment of Kerr J, ibid, at 461.) 41 Gulfstream Cargo Ltd v Reliance Insurance Co, The Papoose, [1971] 1 Lloyd’s Rep 178, US Ct of Appeals, Fifth Ciruit. (See the judgment of Brown Ch J, ibid, at 183.) The evidence of the alleged waiver is set out ibid at 209–210. 42 James Yachts Ltd v Thames and Mersey Marine Insurance Co Ltd [1977] 1 Lloyd’s Rep 206, Supreme Court, British Columbia. (See the judgment of Ruttan J, ibid, at 212.) 43 Liberian Insurance Agency Inc v Mosse [1977] 2 Lloyd’s Rep 560. (See the judgment of Donaldson J, ibid at 565). 44 Soya GmbH Mainz Kommanditgesellschaft v White [1982] 1 Lloyd’s Rep 136, CA. 45 Container Transport International Inc and Reliance Group Inc v Oceanus Mutual Underwriting Association (Bermuda) Ltd [1984] 1 Lloyd’s Rep 476, CA. 46 Allden v Raven, The Kylie [1983] 2 Lloyd’s Rep 444. (See the judgment of Parker J, ibid, at 445–448). See also Inversions Manria SA v Sphere Drake Insurance Co plc, The Dora [1989] 1 Lloyd’s Rep 69, where the skipper of a yacht had a criminal record. 47 Sharp v Sphere Drake Insurance, The Moonacre [1992] 2 Lloyd’s Rep 501. 48 Marc Rich & Co AG v Portman [1997] 1 Lloyd’s Rep 225. Followed by Males J in Axa Versicherung AG v Arab Insurance Group (BSC) [2015] EWHC 1939 (Comm). 49 North Star Shipping Ltd v Sphere Drake Insurance plc [2006] 2 Lloyd’s Rep 183.

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The Marine Insurance Act 1906

19. Disclosure by agent effecting insurance Subject to the provisions of the preceding section as to circumstances which need not be disclosed where an insurance is effected for the assured by an agent, the agent must disclose to the insurer— [1] (a) Every material circumstance which is known to himself, and an agent to insure is deemed to know every circumstance which in the ordinary course of business ought to be known by, or to have been communicated to, him;1 and (b) Every material circumstance which the assured is bound to disclose, unless it comes to his knowledge too late to communicate it to the agent.2 [(2) This section does not apply in relation to a contract of marine insurance if it is a consumer insurance contract within the meaning of the Consumer Insurance (Disclosure and Representations) Act 2012.] Note The provisions in square brackets were added by the Consumer Insurance (Disclosure and Representations) Act 2012, s 11(2). The provisions came into force on 6 April 2013. Section 19 has now been repealed by s 21(2) of the Insurance Act 2015: see further Appendix I at p 183. The ‘agent to insure’ has a restrictive meaning and only concerns the agent that actually dealt with underwriters and contracted on the assured’s behalf.3 The knowledge of an agent who does not effect the particular insurance, is immaterial,4 but if an agent to insure employs a sub-agent, all material facts known to the agent must be communicated to the sub-agent.5 If, before the contract is made, the assured hears of a loss, but has not time to communicate with his agent, the contract would stand. The assured must use ‘due diligence’ to communicate with his agent.6 Whether the material circumstance comes to the assured’s knowledge too late to communicate it to the agent, is a question of fact.7 However, the agent to insure need only disclose those matters which the assured would be required to disclose if it had known of them.8 Illustrations (1) Time policy on ship. The broker, who effects the insurance, omits to disclose a letter in his possession from the captain saying that the ship has been ashore, and that she is being repaired. This is not done dishonestly. The insurer may avoid the contract.9 (2) A, who has insured an overdue ship, instructs his Glasgow brokers to reinsure it. The Glasgow brokers effect an insurance with B through their London agents, having received some material information about the ship which they do not disclose. Afterwards A effects another policy with B through R, his London agent, who knows nothing of the news about the ship, so that both parties act honestly. A can recover on the latter policy from B.10

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Disclosure and representations

(3) Plaintiff in Glasgow employs a broker there to reinsure an overdue ship. The Glasgow broker employs a broker in London to effect the reinsurance. The Glasgow broker does not communicate either to the plaintiff or to the London broker information which he has received tending to show that the ship was lost. The insurer may avoid the contract.11 (4) A in Bolivia, acting for the government, instructs his agent in London to effect a voyage policy on goods up the Amazon. The underwriters know that the country is disturbed, but A and the government further know that an expedition is being prepared by revolutionaries to attack the ship. If this is not disclosed, and the goods are captured, the underwriters may avoid the contract.12 1 Blackburn v Vigors (1887) 12 App Cas at 541; Blackburn v Haslam (1888) 21 QBD 144. 2 Blackburn v Vigors (1887) 12 App Cas at 537. Recent authorities have endorsed the judgment of Lord MacNaghten in terms of the rationale for s 19 (not imputed knowledge but the fact that the agent of the assured is as bound as its principal to communicate marterial facts); see SAIL v Farex [1995] LRLR 116; El Ajou v Dollar Land Holdings Plc [1994] 2 All ER 685; Simner v New India Assurance Co Ltd [1995] LRLR 240. However, it may be that Lord Halsbury’s rationale (imputed knowledge) expresses the views of the majority in the case; see Deutsche Ruckversicherung Aktiengesellschaft v Walbrook Ins Co Ltd [1994] CLC 415. 3 PCW Syndicates v PCW Reinsurers [1996] 1 Lloyd’s Rep 241, 258. See also Group Josi Re v Walbrook Insurance Co Ltd [1996] 1 Lloyd’s Rep 345, 366. 4 Blackburn v Vigors (1887) 12 App Cas 531. 5 Blackburn v Haslam (1888) 21 QBD 144. 6 Cory v Patton (1872) LR 7 QB at 308. 7 Container Transport Inc and Reliance Group Inc v Oceanus Mutual Underwriting Association (Bermuda) Ltd [1984] 1 Lloyd’s Rep 476, CA, where it was held that it was not too late for the assured to have communicated their knowledge of the figures relating to a previous claim. (See the judgment of Parker LJ, ibid, at 518). 8 Societe Anonyme d’Intermediaries Luxembourgeios v Farex Gie [1995] LRLR 116. 9 Russell v Thornton (1859) 4 H & N 788; affd (1860) 6 H & N 140, Ex Ch. 10 Blackburn v Vigors (1887) 12 App Cas 531. 11 Blackburn v Haslam (1888) 21 QBD 144. No point was taken in this case that the relevant agent with the knowledge was only an intermediary and it would not have made any difference if it had been according to Staughton LJ in PCW Syndicates v PCW Reinsurers [1996] 1 Lloyd’s Rep 241 because the information should have been passed down to the brokers that effected cover. 12 Republic of Bolivia v Indemnity Mutual Assurance Co (1908) 14 Corn Cas at 166 (second policy).

20. Representations pending negotiation of contract (1) Every material representation made by the assured or his agent to the insurer during the negotiations for the contract, and before the contract is concluded, must be true. If it be untrue the insurer may avoid the contract.1 (2) A representation is material which would influence the judgment of a prudent insurer in fixing the premium, or determining whether he will take the risk.2 (3) A representation may be either a representation as to a matter of fact, or as to a matter of expectation or belief. (4) A representation as to a matter of fact is true, if it be substantially correct,3 that is to say, if the difference between what is represented and what is actually correct would not be considered material by a prudent insurer.4 (5) A representation as to a matter of expectation or belief is true if it be made in good faith.5

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The Marine Insurance Act 1906

(6) A representation may be withdrawn or corrected before the contract is concluded.6 (7) Whether a particular representation be material or not is, in each case, a question of fact.7 [(8) This section does not apply in relation to a contract of marine insurance if it is a consumer insurance contract within the meaning of the Consumer Insurance (Disclosure and Representations) Act 2012.] Note The provisions in square brackets were added by the Consumer Insurance (Disclosure and Representations) Act 2012, s 11(2). The provisions came into force on 6 April 2013. Section 20 has now been repealed by s 21(2) of the Insurance Act 2015: see further Appendix I at p 183. In the older cases it was queried whether the right to avoid only arose in cases of fraudulent misrepresentations. Sibbald v Hill,8 where the contract was avoided, though the representation had no direct bearing on the particular risk, was a case of fraud, but according to Rivaz v Gerussi,9 the rule applies whether there was fraud or not. Lord Esher in a later case, said: ‘The assured is not bound to tell the insurer what the law is. He is bound to tell him, not every fact, but every material fact. His other obligation is this, that if he is asked a question—whether a material fact or not—by the underwriters, he must answer it truly. If he answers it falsely, with intent to deceive, though it may not be a material fact, it will vitiate the policy.’10 It is now clear that s 20 mirrors the ordinary principles underpinning law on misrepresentation.11 Misrpresentations cannot, therefore, be founded on mere puffs.12 On the question of inducement, the relevant hypothetical question is probably what the underwriter would have done had fair presentation of the risk been made.13 The cases seem generally to assume that it is sufficient if a representation as to expectation or belief is made in good faith, but there was an obiter dictum by Blackburn J, that the assured must have reasonable ground for his belief.14 Having regard to the terms of sub-ss (3), (4) and (5), it may be that promissory representations, ie representations as to future events, now fall exclusively under subs (5).15 This section deals with representations made during the negotiations for the contract. They may be either oral or in writing, as, for instance, when letters are shown to the underwriter. A representation expressed in, or implied from the terms of, the policy itself, constitutes a warranty.16 The policy is the final expression of the contract, and extrinsic evidence is inadmissible to contradict its terms. A representation differs from a warranty in this—a warranty must be exactly complied with, while it is sufficient if a representation is substantially correct. See ss 33–41 as to warranties. It is to be emphasised that, as stated in s 20(7), whether a particular representation be material or not is a question of fact. Consequently the illustrations set out below are not to be regarded as precedents, but relate solely to the cases in question. The assured, or his agent, is not bound to give his opinion to the insurer on any matter relating to the adventure.17 The assured is bound to disclose facts within his

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Disclosure and representations

knowledge, and not the opinions which he forms on those facts. For example, the assured may think that war between two States is imminent; but unless he has special information, he may leave the insurer to form his own judgment on the matter. If the assured chooses to give his opinion, he’must, of course, give it honestly.18 Illustrations (1) Insurance on ship. The assured falsely informs the insurer that he has partially insured the ship elsewhere on certain specified terms. The insurer, relying on this, issues a policy on similar terms. The insurer may avoid the contract.19 (2) Policy on goods at sea. The assured represents to the insurer that the ship sailed from Baltimore for London on 12 January. In fact, she sailed on 1 January. The insurer may avoid the contract.20 (3) Policy on goods to be shipped from abroad. The assured mistaking the old ship Socrates for a new ship called the Socrate, informs the insurer that the goods are to be shipped on the new ship. The insurer may avoid the contract.21 (4) Policy on yacht. Assured during the negotiations for the contract stated that her value was £4,500, but a month beforehand had said he would be willing to accept an offer of £2,250 for her from a prospective buyer. The insurer could avoid the contract, for such a representation was a material one.22 (5) Policy on goods. Assured made representations as to state of insured cargo of ‘enamelware (cups and plates) in wooden cases,’ whereas (i) the cargo included 823 cartons as contrasted with wooden cases; (ii) a significant proportion of the enamelware had been touched up by overpainting; and (iii) the cargo was an end of stock or job lot purchase and had been bought at a cheap rate. The representations were material, and the insurer could avoid liability.23 (6) Policy on yacht. Assured made representation that they were producing yachts at the rate of about four per annum. Representation was intended to indicate to the insurers the scale of their business. Held, the representation was untrue, and was material, and, therefore, the insurers could avoid liability.24 (7) Policy on a floating casino. Assured made a knowing and fraudulent misrepresentation as to the value of the vessel, saying it was worth US$1.8m when the true value was known to be between US$100–150,000. Held, underwriters were entitled to avoid.25 1 Anderson v Pacific Fire and Marine Insurance Co (1872) LR 7 CP at 68, per Willes J; lonides v Pacific Fire and Marine Insurance Co (1871) LR 6 QB at 683, per Blackburn J; Williams v Atlantic Assurance Co Ltd [1933] 1 KB 81, CA (see per Slesser LJ at 108, gross over-valuation, underwriter entitled to avoid contract for untrue material representation; but see per Greer LJ at 102). 2 Rivaz v Gerussi (1880) 6 QBD at 229, CA. 3 Pawson v Watson (1778) 2 Cowp 785. As to a warranty, see s 33(2). 4 Macdowall v Frazer (1779) 1 Doug 260, 261. 5 Anderson v Pacific Fire and Marine Insurance Co (1872) LR 7 CP at 69 (honest but wrong opinion given by master). 6 Edwards v Footner (1808) 1 Camp 530. 7 Rivaz v Gerussi (1880) 6 QBD at 229, CA. 8 Sibbald v Hill (1814) 2 Dow 263, HL. 9 Rivaz v Gerussi (1880) 6 QBD 222 at 229. 10 The Bedouin [1894] P at 12, CA. 11 Pan Atlantic Insurance Co Ltd v Pine Top Insurance Co Ltd [1994] 3 All ER 581. 12 Limit No.2 Ltd v Axa Versicherung AG [2008] Lloyd’s Rep IR 330.

37

The Marine Insurance Act 1906 13 Brit UW Ltd v F&B Trenchless Solutions Ltd [2015] EWHC 2237 (Comm) and Axa Versicherung AG v Arab Insurance Group [2015] EWHC 1939 (Comm). This ensures consistency between the inducement tests for non-disclosure and misrepresentation. Cf. Involnert Management Inc v Aprilgrange Ltd, The Galatea [2015] 2 Lloyd’s Rep 289. 14 Ionides v Pacific Fire and Marine Insurance Co (1871) LR 6 QB at 683, 684. 15 Note the language of Dennistoun v Lillie (1821) 3 Bligh 202 at 210, HL. In Synergy Health (UK) Ltd v CGU Insurance Plc [2011] Lloyd’s Rep IR 500, Flaux J noted that the only case supportive of the proposition that a promissory representation is actionable was Dennistoun and his Lordship considered that it had been overruled implicitly by s 20. 16 Behn v Burness (1863) 32 LJQB 204 at 205, Ex Ch and s 33. 17 Anderson v Pacific and Fire Marine Insurance Co (1872) LR 7 CP 65 at 69. 18 Cf The Bedouin [1894] P at 12, per Lord Esher. As to special information concerning hostilities, see Republic of Bolivia v Indemnity Mutual Marine Assurance Co (1908) 14 Corn Cas at 166. 19 Sibbald v Hill (1814) 2 Dow 263, HL. 20 Anderson v Thornton (1853) 8 Exch 425. 21 Ionides v Pacific Fire and Marine Insurance Co (1871) LR 6 QB 674 at 683. 22 Slattery v Mance [1962] 1 Lloyd’s Rep 60. The evidence as to the overvaluation is set out ibid, at 67–70. The jury found that the representation had not been made fraudulently. In Wilmot v General Accident Fire and Life Assurance Corpn Ltd (1935) 53 LI L Rep 156 the insurers contended that the assured had made a material misrepresentation of the value of a motor boat, and it was held that the plea failed because the incorrect answer given by him as to her value was probably due to the fact that he was incorrectly questioned by the insurers’ agent, who had himself completed the proposal form. (See the judgment of Branson J, ibid, at 159.) 23 Liberian Insurance Agency Inc v Mosse [1977] 2 Lloyd’s Rep 560. (See the judgment of Donaldson J, ibid, at 565). 24 Inversions Manria SA v Sphere Drake Insurance plc, The Dora [1989] 1 Lloyd’s Rep 69, QB (Commercial Court). (See the judgment of Phillips J, ibid, at 90). 25 Eagle Star Insurance Co Ltd v Games Video Co (GVC) SA, The Game Boy [2004] EWHC 15 (Comm).

21. When contract is deemed to be concluded1 A contract of marine insurance is deemed to be concluded when the proposal of the assured2 is accepted by the insurer, whether the policy be then issued or not; and for the purpose of showing when the proposal was accepted, reference may3 be made to the slip or covering note or other customary memorandum of the contract … Note In the London Market, the process of first scratching a slip (conditionally or unconditionally) and then issuing a policy has now been replaced by the Market Reform Contract. However, so far as it is still relevant, the following should be noted about that process. ‘In effecting marine insurance,’ said the Court of Exchequer Chamber, ‘the matter is considered merely as negotiation till the slip is initialled, but, when that is done, the contract is considered to be concluded. It was proved to be the usage of underwriters to issue a stamped policy in accordance with the slip, notwithstanding anything that might happen after the initialling of the slip.4 In Cory v Patton,5 the proposal of the agent of the assured was accepted by the insurer subject to the ratification by the assured of the payment of an increased premium,

38

Disclosure and representations

and it was held that a material fact which came to the knowledge of the assured after the acceptance, but before the ratification, need not be disclosed, for the ratification related back to the acceptance. As to ratification by the assured, see s 86, and see further, notes to ss 22, 23 (policy) and s 89 (‘slip’ as evidence). Where a contract concluded by means of a ‘cross-slip’ is only of a preliminary nature and is intended to be supplemented by a ‘signing slip’ when further information results in a greater definition of the contractual terms, there is a continuing duty of disclosure between the date of the ‘cross-slip’ and that of the ‘signing slip’.6 Illustrations (1). A policy insuring goods from the United Kingdom to Africa and from Africa to the United Kingdom was effected in January 1916. The goods were stored at Burutu because it was difficult to get shipping space, and a lot of other goods were accumulated there after the date of the policy. The insurers could not avoid liability for non-disclosure of the accumulation of the goods, for once the contract was concluded, no further disclosure was necessary.7 (2). A policy relating to a motor boat was effected at a time when the assured had no intention that she should be moored anywhere except in Knightstone Harbour. She was moved to Anchor Head near Weston-super-Mare two months later. Subsequently she was lost in a gale. The insurer was held not to be entitled to repudiate liability on the ground that the assured had not disclosed the fact that she would be habitually moored off Anchor Head, for his intention to moor her there was only formed after the conclusion of the contract.8 1 This section is printed as amended by the Finance Act 1959, 8th Sch, Pt II. See further, s 89, as to ‘slip’ as evidence. 2 In Bonner v Cox [2006] 1 CLC 126, Waller LJ cited at [11] the practies of reinsurance brokers at Lloyd’s as described by Mutill LJ in The Zephyr [1985] 2 Lloyd’s Rep 529, 532. He then noted at [15] that: ‘The words of Section 21 [of the Marine Insurance Act 1906] do not cover at least with any precision the practice at Lloyd’s described above, because under the practice there is strictly no “proposal of the insured” when the slip is scratched …’ 3 Proof of agreement on terms in the London Market could be established other than through the slip but the presumption was that the parties did not intend to be bound until a slip had been scratched (New England Reinsurance Corporation v Messoghios Insurance Co [1992] 2 Lloyd’s Rep 251; Assicurazioni Generali SpA v Arab Insurance Group [2003] Lloyd’s Rep IR 131; Sun Life Assurance Co v CX Reinsurance Co Ltd [2004] Lloyd’s Rep IR 58). The contractual status of the slip after issue of the policy will depend on the facts of the case (Assicurazioni Generali SpA v Ege Sigorta AS [2002] Lloyd’s Rep IR 480; Kyzuna Investments Ltd v Ocean Marine Mutual Association [2000] 1 Lloyd’s Rep 505; Cf. Great North Eastern Railway v Avon Insurance Plc [2001] Lloyd’s Rep IR 793 and Unum Insurance Co of America v Israel Phoenix Assurance Co [2002] Lloyd’s Rep IR 374). 4 Morrison v Universal Marine Insurance Co (1873) LR 8 Ex Ch at 199. As to unreasonable refusal to issue policy, see Genforsikrings & Co v Da Costa [1911] 1 KB 137. Marking the slip ‘TBE’ (to be entered) did not indicate that the scratch on the slip was conditional (ERC Frankona Reinsurance v American National Insurance Co [2006] Lloyd’s Rep IR 157). 5 (1874) LR 9 QB 577, Ex Ch. 6 Berger and Light Diffusers Pty Ltd v Pollock [1973] 2 Lloyd’s Rep 442, QBD (Commercial Court). (See the judgment of Kerr J, ibid, at 461.) Draft wordings of the slip are inadmissible as an aid to construction Brotherton v Aseguradora Colseguros SA [2002] Lloyd’s Rep IR 848. 7 Niger Co Ltd v Guardian Assurance Co (1922) 12 LI L Rep 75, HL. 8 Willmott v General Accident Fire and Life Assurance Cotpn (1935) 53 LI L Rep 156.

39

The Marine Insurance Act 1906

THE POLICY 22. Contract must be embodied in policy Subject to the provisions of any statute, a contract of marine insurance is inadmissible in evidence unless it is embodied in a marine policy in accordance with this Act.1 The policy may be executed and issued either at the time when the contract is concluded or afterwards. Note The purpose of the section was to prevent the avoidance of stamp duty by permitting actions on documents other than formal policies. Since the introduction of the Market Reform Contract in 2007 and the discontinuation of the slip procedure, a standard policy form is used for risks placed in the London Market in any event. As such, the significance of this provision has probably diminished. Nevertheless, in cases where ‘slips’ are still relevant, no action can be maintained in the United Kingdom on the implied promise to grant a policy when the ‘slip’ is initialled.2 If the insurers go into liquidation, the liquidator cannot issue policies on outstanding ‘slips’.3 It is otherwise in countries where revenue laws do not interpose.4 But the section will apply to policies issued abroad which are sued on in England.5 The section does not prevent a party, in an appropriate case, from seeking specific performance to obtain a policy meeting the formal requirements of ss 22–24. Moreover, the inability of the claimant to produce the policy is not necessarily fatal to his claim. It has been held that insurers had no defence to a claim by an assignee even though he could not produce the policy.6 When a policy has been duly issued, reference may be made to the ‘slip’ for the purpose of showing when the contract was concluded (s 21), or for the purpose of rectifying or avoiding the policy, see s 89. Illustration Policy on ship insured with a mutual insurance association. The ship is accepted as insured in February, and after this a loss occurs. The policy may be issued in October, taking effect from February, although, when the policy is executed, it is known to both parties that the loss has occurred.7 1 Certain contracts entered into by the Secretary of State are exempt from this provision by Marine and Aviation Insurance (War Risks) Act 1952, s 7. For a case where a ‘participation agreement’ or reinsurance treaty was invalid because no marine policy was issued, see Re National Benefit Assurance Co Ltd [1931] 1 Ch 46; also Motor Union Insurance Co Ltd v Mannheimer V ersicherungs Gesellschaft [1933] 1 KB 812, KB (another reinsurance case). 2 Fisher v Liverpool Marine Insurance Co (1874) LR 9 QB 418, Ex Ch; Genforsikrings & Co v Da Costa [1911] 1 KB 137 (open covers of reinsurance). 3 Re Clyde Marine Insurance Co 1924 SC 113, 17 LI L Rep 287; Re Ciry Equitable Fire Insurance Co [1930] 2 Ch 293. 4 Bhugwandass v Netherlands Sea Insurance Co (1888) 14 App Cas 83, PC (Rangoon foreign policy). 5 Royal Exchange Assurance Corpn v Vega [1901] 2 KB 567, [1902] 2 KB 384, CA. See, however, Norske Atlas Insurance Co v London General Insurance Co Ltd (1927) 43 TLR 541 (action on foreign award).

40

The policy 6 Swan & Cleland’s Graving Dock and Slipway Co v Maritime Insurance Co [1907] 1 KB 116; Eide UK Ltd v Lowndes Lambert Group Ltd, The Sun Tender [1998] 1 Lloyd’s Rep 389. 7 Mead v Davison (1835) 3 A & El 303, 42 RR 401.

23. What policy must specify1 A marine policy must specify— (1) The name of the assured, or of some person who effects the insurance on his behalf:2 … Note The Marine Insurance Act 1788 was construed as merely prohibiting insurances in blank or to bearer, and is, therefore, sufficiently reproduced by this section. Where different interests are concerned, it had been a common practice, as Blackburn J, pointed out, for the broker to enter into the policy in his own name ‘but on behalf of and to protect the interests of different constituents’.3 But this will only cover the interests of the persons whose interests are intended to be covered by the person who causes the insurance to be effected.4 For example, A & Co charter a ship from the owners. The owners’ broker effects a policy on the ship including a ‘running-down’ clause. A & Co have to pay damages to another ship for collision. There being no evidence of any intention by the owners to insure on A & Co’s behalf, A & Co cannot recover on the policy. In short, the ordinary principles of agency law must be satisfied.5 1 This section is printed as amended by the Finance Act 1959, Sch 8, Pt II. 2 As to ratification by assured, see s 86. 3 Ionides v Pacific Fire and Marine Insurance Co (1871) LR 6 QB at 678; cf Ocean Iron SS Association v Leslie (1887) 22 QBD 722n, as to scope of the term ‘assured’. 4 Boston Fruit Co v British and Foreign Marine Insurance Co [1905] 1 KB 637, CA; affd [1906] AC 336 HL; cf Reliance Marine Insurance Co v Duder (1912) 17 Corn Cas 227 at 237, [1913] 1 KB 265, CA; Graham Joint Stock Shipping Co v Merchants’ Marine Insurance Co (1923) 28 Corn Cas 151 at 157; Samuel (P) & Co Ltd v Dumas (1924) 29 Corn Cas 239 at 246. 5 See O’Kane v Jones, The Martin P [2005] Lloyd’s Rep IR 174. See also National Oilwell (UK) Ltd v Davy Offshore Ltd [1993] 2 Lloyd’s Rep 582 and Talbot Underwriting Ltd v Nausch, Hogan & Murray Inc, The Jascon 5 [2006] Lloyd’s Rep IR 531 on the doctrine of undisclosed principal in this context.

24. Signature of insurer (1) A marine policy must be signed by or on behalf of the insurer, provided that in the case of a corporation the corporate seal may be sufficient, but nothing in this section shall be construed as requiring the subscription of a corporation to be under seal.1 (2) Where a policy is subscribed by or on behalf of two or more insurers, each subscription, unless the contrary be expressed, constitutes a distinct contract with the assured.2

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The Marine Insurance Act 1906

Note Underwriters formed a syndicate, and a Lloyd’s policy was subscribed ‘The S Syndicate, C Manager’; afterwards followed the names of the members and the amounts of their subscriptions. Held, that the contract of the members was several, and not joint.3 The fact that a single policy document can evidence numerous contracts of insurance between each of the underwriters and each of the assureds has been reaffirmed in the modern authorities.4 When a policy is subscribed by several underwriters, one underwriter may sue for premiums for himself and for the others.5 A marine policy, like every other instrument, is incomplete and revocable until delivery to, or for the benefit of, the person entitled to hold it. In the case of an insurance company’s policy delivery is presumed on very slight evidence.6 1 Cf Bills of Exchange Act 1882, s 91. 2 Lloyd’s Act 1871, Rule 4 in Schedule; and see per Walton J, in AngloCalifornian Bank v London and Provincial Marine Insurance Co (1904) 10 Corn Cas at 8. 3 Tyser v Shipowners’ Syndicate [1896] 1 QB 135. 4 Touche Ross v Baker [1992] 2 Lloyd’s Rep 207 and Dornoch Ltd v Westminster, The WD Fairway [2009] 2 Lloyd’s Rep 191, [60]. 5 Janson v Property Insurance Co (1913) 19 Com Cas 36. Order 15 r 12, of the Rules of the Supreme Court (which is preserved by the Rules of the Supreme Court, Sch.1) provides that where there are numerous persons having the same interest in any proceedings, the proceedings may be begun and, unless the court otherwise orders, continued by or against any one or more of them as representing all or as representing all except one or more of them. 6 Xenos v Wickham (1866) LR 2 HL 296 (policy executed by two directors, and ordered to lie in the office until assured called for it); see to like effect, Roberts v Security Co Ltd [1897] 1 QB 111, CA (burglary policy).

25. Voyage and time policies1 (1) Where the contract is to insure the subject-matter ‘at and from,’ or from one place to another or others, the policy is called a ‘voyage policy,’ and where the contract is to insure the subject-matter for a definite period of time the policy is called a ‘time policy.’ A contract for both voyage and time may be included in the same policy.2 Note Thus, a ship may be insured eg (i) ‘from London to Hong Kong’; ‘for 12 months from June 15 1993’; or (iii) ‘from London to New York, and thirty days after arrival’. The word ‘definite’ in s 25(1) means that the period must be specified. It is sufficiently specified if it specifies a stated period even though that period is determinable on notice and even though the insurance will be renewed or continued automatically at the end of the period unless determined.3 Where a policy was written for a year, with the intention to cover a voyage from Kob to Singapore but also subsequent trading, it was held to be a time policy.4

42

The policy

Time policies sometimes give rise to difficult questions where the cause of loss comes into operation before the policy expires, but the actual loss occurs after it expires.5 As to calculating time when ship’s time differs from English time, see note to s 91. As to the voyage insured, change of voyage, and deviation, see ss 42–49. The voyage insured (viaggium) must be distinguished from the course actually taken by the ship (iter navis). 1 This section is printed as amended by the Finance Act 1959, Sch 8, Pt II by which sub-s (2) – which had provided that a time policy made for any time exceeding 12 months was invalid – was repealed. 2 As to these ‘mixed policies,’ see Gambles v Ocean Insurance Co (1876) 1 Ex D 141, CA; Maritime Insurance Co v Alianza Insurance Co of Santander (1907) 13 Corn Cas 46; M Almojil Establishment v Malayan Motor and General Underwriters (Private) Ltd, The AlJubail IV [1982] 2 Lloyd’s Rep 637, Singapore Court of Appeal. For a case where a motor launch was insured for 41/2 months while used within a limited radius and a loss was sustained within the limits while on a voyage to a port outside the limits, and it was held to be a ‘time’ policy and not a `mixed’ policy, see Wilson v Boag [1956] 2 Lloyd’s Rep 564 (Supreme Court of New South Wales). See especially, ibid, at 565. 3 Compania Maritime San Basilio SA v Oceanus Mutual Underwriting Association (Bermuda) Ltd, The Eurysthenes [1976] 2 Lloyd’s Rep 171 at 177, CA (per Lord Denning MR). 4 Marina Offshore Pte Ltd v China Insurance Co (Singapore) Pte Ltd [2007] 1 Lloyd’s Rep 66. 5 See the cases reviewed in Lidgett v Secretan (1870) LR 5 CP 190; and see Rule 5 of First Sch.

26. Designation of subject-matter (1) The subject-matter insured must be designated in a marine policy with reasonable certainty.1 (2) The nature and extent of the interest of the assured in the subject-matter insured need not be specified in the policy.2 (3) Where the policy designates the subject-matter insured in general terms, it shall be construed to apply to the interest intended by the assured to be covered.3 (4) In the application of this section regard shall be had to any usage regulating the designation of the subject-matter insured. Note In Mackenzie v Whitworth4 in 1875, a policy of reinsurance was effected, simply as a policy ‘on cotton’. It was held that this was sufficient, and that it was not necessary to specify that it was a reinsurance. The decision at the time was supposed to be opposed to the ordinary understanding and practice, and the Lords Select Committee in 1896 proposed to alter the rule there laid down. But having regard to the length of time during which this decision had been unquestioned law, it was thought better not to disturb it. Though a reinsurance policy need not specify that it is a reinsurance, that leaves untouched the question whether the assured must not disclose the fact that he is effecting a reinsurance. The quantum of the assured’s interest need not be specified in the policy. Thus, it is not necessary to specify whether the assured insures for himself or as trustee for another, as full owner, or as mortgagor or mortgagee. The subject-matter may be very briefly described as being ‘on ship,’ ‘on goods,’ on freight,’ and so on; but the description must not be misleading. Thus, a policy on

43

The Marine Insurance Act 1906

‘piece goods’ will not cover a loss on hats;5 so, too, a policy ‘on freight’, will not cover passage money.6 In the absence of any usage an insurance on ‘goods’ will not cover deck cargo or live animals. (See Sch I, r 17). Prospective profits may be insured apart from the goods out of which they are expected to arise, but in that case they must be specifically described as profits. ‘The subject-matter of this insurance is on “rice”,’ said Blackburn J, ‘and though that is to be construed liberally as covering any interest in the rice, it cannot be construed as covering an interest in profits that might arise collaterally from a contract relating to the rice.’7 ‘In some cases,’ said Blackburn J, ‘the nature of the interest in the thing insured is such as to vary the nature of the risk, and then it should be stated … in all cases when the peculiar nature of the interest alters the risk, it may probably be said that such interest is the subject-matter of the insurance,’ and he then went on to instance a case of profits dependent on various contingencies.8 But it is difficult to see how the nature of the interest of the assured in the subject-matter can vary the risk. The true question seems to be whether, having regard to usage, the subject-matter is sufficiently described. Loans on bottomry and respondentia must, it seems, be insured as such.9 Sub-section (3) is perhaps unfortunately worded.10 It was intended to protect the assured against technical objections to the description of the interest insured, and to give effect to the real intention of the contract where the wording was ambiguous. But an unsuccessful attempt has been made to put it to the opposite use. Where a policy of reinsurance according to its natural construction covered risks under three original policies, the reinsurer maintained that only the risk under the third policy was intended to be covered. But this claim was disallowed.11 It has recently been said as regards sub-ss (1) to (3) that: ‘When one examines the authorities therefore one sees that the court is concerned to analyse by reference to the terms of the policy what is the subject of the insurance; to analyse what insurable interest a person has in the subject of the policy; and to consider whether the subject ‘embraces that insurable interest’ in the words of Blackburn J in Anderson v Morice (1875) 10 CP 609 at 622. Where on the wording of the policy the subject is not absolutely clear cut, it sometimes assists to identify the subject to ask what insurable interest the person has, but essentially the subject is defined by the words of the policy. It follows that in some cases the subject is so clear, that even when the insured can identify some insurable interest that it might have had, it will be held that the insured has failed to cover that interest by the policy. In other cases what is ‘embraced’ within the subject of the policy is less clear-cut, and in those circumstances the court may be able to say that the insurable interest is embraced within the subject of the insurance. The different elements of subject, insurable interest, and value are separate but impact one on the other.’12 Illustration Cases of tinned pork were insured against all risks, each case having to be marked ‘L 26 MS’. Some of them were not so marked. Held, the marking ‘L 26 MS’ was a 44

The policy

term of description, and the policy attached only to such of the cases as complied with that description.13 1 Mackenzie v Whitworth (1875) 1 Ex D 36 at 40, CA. 2 Ibid, at 41. 3 Allison v Bristol Marine Insurance Co (1876) 1 App Cas at 216, 235; cf Kynance Sailing Ship Co Ltd v Young (1911) 16 Corn Cas at 131; Reliance Marine Insurance Co v Duder (1912) 17 Corn Cas 227 at 235, [1913] 1 KB 265, CA; distinguished in Janson v Poole (1915) 20 Corn Cas 232 at 239; Dunlop Bros v Townend [1919] 2 KB 127, 24 Corn Cas 201, (floating policy). 4 (1875) 1 Ex D 36. 5 Mackenzie v Whitworth (1875) 1 Ex D at 40. 6 Denoon v Home and Colonial Assurance Co (1872) LR 7 CP 341. As to what is covered by the term ‘disbursements,’ see Buchanan v Faber (1899) 4 Corn Cas 223; Laugher v Black (1901) 6 Corn Cas 5; affd by CA, ibid, p 197. 7 Anderson v Morice (1875) LR 10 CP at 621, Ex Ch, but cf Reliance Marine Insurance Co v Duder (1912) 17 Corn Cas at 236, CA. 8 Mackenzie v Whitworth (1875) 1 Ex D at 41; cf Wilson v Jones (1867) LR 2 Ex Ch at 151 (submarine cable). 9 Mackenzie v Whitworth (1875) 1 Ex D at 43, citing Glover v Black (1763) 3 Burr 1394. 10 It was described in O’Kane v Jones, The Martin P [2005] Lloyd’s Rep IR 174, [140] as a ‘difficult subsection’. In that case, it was held that the provision could not be relied upon because the subject matter was designated in specific not general terms. 11 Reliance Marine Insurance Co v Duder [1913] 1 KB 265, 17 Corn Cas 227, CA; see a useful explanation of the sub-section by Bailhache J, in Dunlop Bros v Townend [1919] 2 KB 127. 12 Feasey v Sun Life Assurance Co of Canada [2004] 1 CLC 237, [80] per Waller LJ. 13 Overseas Commodities Ltd v Style [1958] 1 Lloyd’s Rep 546.

27. Valued policy (1) A policy may be either valued or unvalued.1 (2) A valued policy is a policy which specifies the agreed value of the subjectmatter insured.2 (3) Subject to the provisions of this Act,3 and in the absence of fraud, the value fixed by the policy is, as between the insurer and assured, conclusive of the insurable value of the subject intended to be insured, whether the loss be total or partial.4 (4) Unless the policy otherwise provides, the value fixed by the policy is not conclusive for the purpose of determining whether there has been a constructive total loss.5 Note An unvalued policy is sometimes spoken of as an ‘open policy,’ but as that term is applied in business language to a floating policy,6 the Act uniformly uses the term ‘unvalued policy’. In 1761 the validity of valued policies was contested on the ground that in substance they were wagering policies. Lord Mansfield disposed of this contention, and the validity of valued policies has never since been questioned. He pointed out that the effect of the valuation was merely to fix the insurable value of the goods or other subject-matter insured, ‘just as if the parties admitted it at the trial’.7 Speaking of a total loss, the judges in Irving v Manning said ‘In an open policy the compensation must be ascertained by evidence; in a valued policy the agreed total value is conclusive.’8 45

The Marine Insurance Act 1906

It is often said that the valuation is conclusive ‘for the purposes of the policy’. It is probably more correct to say that it is conclusive for all purposes relating to the insurable value of the subject-matter insured by a given policy.9 For other purposes it is not conclusive, and in some cases not even relevant. Notwithstanding the valuation, the interest of the assured may be disproved, or short interest may be shown, or it may be shown that the whole or part of the subjectmatter insured was not at risk; see s 75(2), and illustration 7, post. Over-valuation made in good faith is not a ground for avoiding the policy or reducing the amount payable under it,10 but gross over-valuation, if not disclosed, is evidence of fraud,11 and apart from fraud, gross over-insurance, even by collateral ‘honour’ policies, unless disclosed, will enable the insurer to avoid the contract; see s 18 and notes thereto. Illustrations (1) A ship is insured with one insurance company for £1,700, and with another insurance company for £2,000. In both policies she is valued at £3,000. The assured, in case of total loss, is not entitled to recover more than £3,000 in all.12 (2) Ship and freight valued at £3,000, with running-down clause under which insurers were to pay such proportion of three-fourths of any damages paid by the assured as the sum insured bore to the value of the ship insured and freight. The assured had to pay £2,110 damages for running down another ship. His ship was sold under a decree of the Admiralty Court to satisfy these damages. Held, that an underwriter who has insured the ship and freight for £100 must pay £52 15s,13 ie 100/3000 × 2110 × 3/4. (3) Ship valued at £9,000 is insured under one policy for £2,000. By another policy the same ship is valued at £8,000 and insured for £8,000. The insurer on the second policy pays for a total loss. The insurer on the first policy is liable to pay £1,000.14 (4) A ship at sea is insured by time policy for £6,000, and valued at £8,000. When the policy is effected, the ship has been sea-damaged to the extent of £5,000, but the assured is not aware of the fact. Afterwards, during the currency of the policy, she is totally lost. The assured can recover the full £6,000.15 (5) A ship valued at £6,000 is insured for £6,000. Her real value is £9,000. She is run down by another ship and lost. The insurers pay for a total loss. Afterwards the assured recovers £5,000 damages from the owners of the ship at fault. The insurers are entitled to the whole of this sum as salvage.16 (6) Ship insured by same insurer by two successive valued policies. The first policy covers her to Calcutta and for 30 days after arrival. The second policy covers her at and from Calcutta to London. On the voyage out she is damaged by storms. While she is being repaired at Calcutta, and after the 30 days have expired, she is destroyed by fire. The insurer must pay on the first policy for the partially repaired loss,17 and on the second policy for the total loss, without deducting what was paid on the first policy.18 (7) A policy for £1,000 is effected on freight valued at £2,000. Only half the intended cargo is put on board, the rest of the ship being used for emigrants. The ship is lost. The insurer is only liable for £500.19

46

The policy

(8) Policy on freight valued at £5,500. The ship is detained by an accident, and, during this delay, there is a great fall in freight rates. When a full cargo is loaded, the freight comes to £3,250, of which £925 is paid in advance. The ship is lost. The valuation stands, and the assured is entitled to receive £5,500, less £1,611, which is the proportion of the advance freight to the gross freight.20 (9) Policy for £1,000 on ship valued at £3,750, with warranty that one-fifth shall remain uninsured. The real value of the ship is £5,000. For the purpose of determining whether the warranty has been broken by a subsequent insurance„regard must be had to the agreed value, and not to the real value.21 (10) A ship is insured against fire by a valued time policy. During the currency of the policy she is so damaged by stranding that the cost of repairing her would exceed her repaired value. After this she is destroyed by fire. The insurer must pay the full amount insured.22 (11) Policy on ship valued at £33,000. Her real value is £40,000. The ship incurs certain general average and salvage expenses, which are adjusted abroad on her real value. The assured can only recover 33/40ths of the adjustment from the insurer.23 (12) Policy on ship valued at £17,500. The ship suffers storm damage, and it is shown that it would cost £10,500 to repair her, and that her market value when repaired would be £9,000. The assured, notwithstanding the valuation, is entitled to abandon the ship and claim for a total loss.24 1 Irving v Manning (1847) 1 HL Cas 305 at 307. 2 Ibid; and as to distinctly specifying the valuation, see Wilson v Nelson (1864) 33 LJQB 220. As to rectifying a defective valuation, see Rankin v Potter (1873) LR 6 HL at 114. A reference to the ‘sum insured’ is merely to the maximum amount recoverable under the policy; see for example Quorum AS v Schramm (No. 1) [2002] Lloyd’s Rep IR 292. 3 See s 29(4) (declaration on floating policy after loss or arrival); s 75 (2) (short interest), and cf Reliance Marine Insurance Co v Duder (1912) 17 Corn Cas at 236, CA. 4 Barker v Janson (1868) LR 3 CP 303; The Main [1894] P at 325; Irvin v Hine [1949] 2 All ER 1089, KB. As to non-disclosure of over-valuation, see s 18 and notes. The reference to ‘insurable value’ is not synonymous with market value; see Suez Fortune Investments Ltd v Talbot Underwriting Ltd, The Brillante Virtuoso [2015] Lloyd’s Rep 651, [267]. Sub-s (3) does not preclude an insurer from seeking to allege misrepresentation or non-disclosure of the vessel’s true value; see Inversiones Manria SA v Sphere Drake Ins Co Plc, The Dora [1989] 1 Lloyd’s Rep 69. For a review of the principal authorities on over-valuation see Involnert Management Inc v Aprilgrange Ltd, The Galatea [2015] 2 Lloyd’s Rep 289, [140] et seq (insurers entitled to avoid for non-disclosure, inter alia, of a valuation €7m valuation where the vessel was being insured for €13m). 5 Irving v Manning (1847) 1 HL Cas at 305; but it is now usual to provide that the insured value is to be taken as the repaired value; see Clause 19 of the Institute Time Clauses (Hulls) and Clause 17 of the Institute Voyage Clauses; Helmville Ltd v Yorkshire Insurance Co Ltd, The Medina Princess [1965] 1 Lloyd’s Rep 361, QB (Commercial Court), where the assured failed to prove that the vessel was a constructive total loss, and was held to be entitled to claim for a partial loss only. 6 See s 29. 7 Lewis v Rucker (1761) 2 Burr 1167, see p 1171 (partial loss); cf Irving v Manning (1847) 1 HL Cas at 305; Lidgett v Secretan (1871) LR 6 CP at 627, per Willes J. 8 Irving v Manning (1847) 1 HL Cas at 307. The same principle applies to a partial loss (see eg Goole and Hull Steam Towing Co v Ocean Marine Insurance Co [1928] 1 KB 589), but in an insurance on goods evidence of the real value must be given in order to fix the percentage of damage suffered by the subject-matter insured. 9 Cf Burnand v Rodocanachi (1882) 7 App Cas at 335, per Lord Selborne. 10 Herring v Janson (1895) 1 Com Cas at 177, 178; cf The Main [1894] P 320 at 325. 11 Ionides v Pender (1874) LR 9 QB 531. 12 Irving v Richardson (1831) 2 B & Ad 193. 13 Thompson v Reynolds (1857) 26 LJQB 93; cf Xenos v Fox (1868) LR 3 CP at 636 to like effect.

47

The Marine Insurance Act 1906 14 Bruce v Jones (1863) 32 LJ Ex 132; and see s 32 (double insurance). 15 Barker v Janson (1868) LR 3 CP 303; cf The Main [1894] P 320 (freight). 16 North of England Iron SS Insurance Association v Armstrong (1870) LR 5 QB 244; doubted, Burnand v Rodocanachi (1882) 7 App Cas at 342, and see at 335, and also Yorkshire Insurance Co Ltd v Nisbet Shipping Co Ltd [1961] 2 All ER 487 at 494. But see Thames and Mersey Marine Insurance Co v British and Chilian SS Co [1916] 1 KB 30, 21 Corn Cas 150, CA, and cf s 81 as to under-insurance, and note to s 79 (subrogation). 17 See s 77 (2). 18 Lidgett v Secretun (1871) LR 6 CP 616. 19 Denoon v Hone and Colonial Assurance Co (1872) LR 7 CP 341. 20 The Main [1894] P 320. See also Papadimitriou v Henderson [1939] 3 All ER 908, KB (‘anticipated freight’ insured for £3,500, plaintiff entitled to recover). 21 Muirhead v Forth Mutual Insurance Association [1894] AC 72, HL. 22 Woodside v Globe Marine Insurance Co Ltd [1896] 1 QB 105. 23 SS Balmoral v Marten [1900] 2 KB 748; affd [1902] AC 511, HL. 24 Irving v Manning (1847) 1 HL Cas 287.

28. Unvalued policy An unvalued policy is a policy which does not specify the value of the subject-matter insured, but, subject to the limit of the sum insured, leaves the insurable value to be subsequently ascertained, in the manner hereinbefore specified.1 Note As to insurable value, see s 16 and as to the measure of indemnity, see ss 68–71, and as to under-insurance, see s 81. Unvalued policies are found only rarely and a marine insurance policy which does not state the agreed value of the insured vessel, referring only to the ‘sum insured’, is not a ‘valued policy’ (the words ‘sum insured’ express the limit of the insurer’s liability and not the agreed value of the vessel)2. 1 Irving v Manning (1847) 1 HL Cas at 307. 2 Thor Navigation v Ingosstrakh Insurance [2005] EWHC 19 (Comm) [2005] 1 Lloyd’s Rep 547. See also Berger and Light Diffusers Pty Ltd v Pollock [1973] 2 Lloyd’s Rep 442, Kyzuna Investments Ltd v Ocean Marine Mutual [2000] 1 Lloyd’s Rep 505 and Quorum AS v Schramm [2002] 1 Lloyd’s Rep 249.

29. Floating policy by ship or ships (1) A floating policy is a policy which describes the insurance in general terms, and leaves the name of the ship or ships and other particulars to be defined by subsequent declaration. (2) The subsequent declaration or declarations may be made by endorsement on the policy, or in other customary manner. (3) Unless the policy otherwise provides, the declarations must be made in the order of despatch or shipment. They must, in the case of goods, comprise all consignments within the terms of the policy,1 and the value of the goods or other property must be honestly stated, but an omission or erroneous declaration may be rectified even after loss or arrival, provided the omission or declaration was made in good faith.2

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The policy

(4) Unless the policy otherwise provides, where a declaration of value is not made until after notice of loss or arrival, the policy must be treated as an unvalued policy as regards the subject-matter of that declaration.3 Note The legality of the practice of effecting floating policies was affirmed in England in 1794.4 When two or more floating policies effected with different insurers are open, it was formerly held that the assured had a right to declare on any of the policies a loss on board any ship he pleased that came within the terms of that policy, but subs (3) apparently negatives this rule. Floating policies are now sometimes effected ‘to follow and succeed,’ ie, the prior policy must be exhausted before the next policy is declared on.5 Some open covers are closely analogous to floating policies.6 Illustration Floating policy on goods, declarations of interest to be made to insurers’ agents ‘as soon as possible’. The ship sailed from Liverpool on 21 August, and was destroyed by fire on 12 September. The declaration was made on 13 September. Held, that this was too late and that the assured could not recover under the policy.7 1 Dunlop Bros v Townend [1919] 2 KB 127 (omission to declare consignments covered by government insurance). 2 Stephens v Australasian Insurance Co (1872) LR 8 CP 18; Imperial Marine Insurance Co v Fire Insurance Corpn (1879) 4 CPD 166; cf Davies v National Insurance Co of New Zealand [1891] AC at 491 (form of policy requiring double declaration). See also Scott v Globe Marine Insurance Co (1896), 1 Com Cas 370 (declaration of goods not intended to be covered by policy). 3 Gledstanes v Royal Exchange Assurance Corpn (1864) 34 LJQB 30, 35. Special clauses as to valuation in event of loss or arrival before declaration are now usually inserted. 4 Kewley v Ryan (1794) 2 Hy B1 345, 3 RR 400. 5 Cf Inglis v Stock (1885) 10 App Cas at 269. 6 Glencore International AG v Ryan, The Beursgracht [2002] 1 Lloyd’s Rep 574, [34]. 7 Union Insurance Society of Canton Ltd v Wills & Co [1916] 1 AC 281 at 287, 21 Com Cas 169, PC.

30. Construction of terms in policy (1) A policy may be in the form in the First Schedule to this Act.1 (2) Subject to the provisions of this Act, and unless the context of the policy otherwise requires, the terms and expressions mentioned in the First Schedule to this Act shall be construed as having the scope and meaning in that schedule assigned by them.2 Note The policy which is set out in Sch 1 is the old SG form of Lloyd’s policy. It was not mandated even by sub-s (1) and it was, after much criticism, discontinued in 1982 after some 200 years in use. It would be beyond the scope of an Act of Parliament to attempt to reproduce the many decisions which interpret particular terms in particular policies. 49

The Marine Insurance Act 1906

But the rules in the Schedule record the interpretation which has been put on some of the more important terms and expressions in the old form of Lloyd’s policy. This may assist the parties to see the scope and effect of any policy, and to add or alter its terms to meet their special requirements. In subs (2) the words ‘Subject to the provisions of this Act’ were added in the Commons Committee, and the word ‘may’ was altered into ‘shall’. The object of the first amendment was to make the provisions of the Act prevail in case of discrepancy. 1 For a case where the policy was not in the Lloyd’s form, but was the company’s own form, see Russell v Provincial Insurance Co Ltd [1959] 2 Lloyd’s Rep 275, QB (Commercial Court). 2 See the main rules for the policy’s construction in Sch I, post. See the section discussed by Lord Sumner, British and Foreign Marine Insurance Co v Gaunt [1921] 2 AC 41 at 59, 26 Com Cas 247 at 261, HL.

31. Premium to be arranged (1) Where an insurance is effected at a premium to be arranged, and no arrangement is made, a reasonable premium is payable. (2) Where an insurance is effected on the terms that an additional premium is to be arranged in a given event, and that event happens but no arrangement is made, then a reasonable additional premium is payable. Note This section was not really covered by any express decision, but it accords with business understanding, and follows the analogy of ‘reasonable price’ in the case of contracts of sale (s 8 of the Sale of Goods Act 1979). What is a reasonable premium, or an additional premium, is a question of fact; see s 88. For the position as regards mutual insurance see s 85(2). Policies are often effected on the terms that a deviation or a change of voyage or an error in description or a breach of a warranty shall be ‘held covered at a premium to be arranged’.1 ‘Arranged’ means ‘agreed to, or in default of arrangement, fixed by an arbitrator or by the Court’.2 Notice of the deviation must be given within a reasonable time after the assured has knowledge of it.3 Notice need not be given before loss and delay may be excused if earlier notice would have been of no benefit to the insurers.4 The deviation clause will not cover a deviation altering the risk which was intended at the time the insurance was effected and was not disclosed.5 The Institute Cargo Clauses (A), Clause 10 provides for an additional premium to be payable where there is a change of voyage.6 The Institute Time Clauses (Hulls), Clause 1 concerns the payment of an additional premium in case of any breach of warranty as to cargo, trade locality, towage, salvage services or date of sailing. The Institute Time Clauses (Freight), Clause 4, and the Institute Voyage Clauses (Freight), Clause 3 are in the same terms. Under the Institute Voyage Clauses (Hulls), Clause 2 an additional premium is payable where there is a deviation, a change of voyage or any breach of warranty as to towage or salvage services. 50

Double insurance 1 Cf Hyderabad (Deccan) Co v Willoughby [1899] 2 QB at 235 (deviation); Greenock SS Co v Maritime Insurance Co [1903] 1 KB 367 at 374 (any breach of warranty or unprovided risk); Hewitt Bros v Wilson [1914] 3 KB 1131: affd (1915) 20 Com Cas 241, CA (‘any incorrect definition of the interest insured,’ second-hand machinery described as ‘machinery’); Liberian Insurance Agency Inc v Mosse [1977] 2 Lloyd’s Rep 560 (‘omission or error in description of interest vessel or voyage’: enamelware). For deviation, see s 46. For change of voyage, see s 45. For description of subject-matter, see s 26. For warranties, see ss 33–41. 2 Liberian Insurance Agency Inc v Mosse [1977] 2 Lloyd’s Rep 560 at 569 (per Donaldson J). 3 Thames and Mersey Marine Insurance Co v Van Laun& Co (1905), [1917] 2 KB 48n, 23 Corn Cas 104, HL; Hood v West End Motor Car Packing Co [1917] 2 KB 38,23 Corn Cas 112, CA. 4 Mentz, Decker & Co v Maritime Insurance Co (1909); 15 Corn Cas 17 (clause provided for due notice to be given); Hewitt v London General Insurance Co (1925) 23 LI L Rep 243. 5 Laing v Union Marine Insurance Co (1895) 1 Corn Cas 11. 6 The Institute Cargo Clauses (B), Clause 10 and the Institute Cargo Clauses (C), Clause 10 are in the same terms.

DOUBLE INSURANCE 32. Double insurance (1) Where two or more policies are effected by or on behalf of the assured on the same adventure and interest or any part thereof, and the sums insured exceed the indemnity allowed by this Act, the assured is said to be over-insured by double insurance.1 (2) Where the assured is over-insured by double insurance— (a) The assured, unless the policy otherwise provides, may claim payment from the insurers in such order as he may think fit, provided that he is not entitled to receive any sum in excess of the indemnity allowed by this Act;2 (b) Where the policy under which the assured claims is a valued policy, the assured must give credit as against the valuation, for any sum received by him under any other policy without regard to the actual value of the subject-matter insured;3 (c) Where the policy under which the assured claims is an unvalued policy he must give credit, as against the full insurable value, for any sum received by him under any other policy;4 (d) Where the assured receives any sum in excess of the indemnity allowed by this Act, he is deemed to hold such sum in trust for the insurers, according to their right of contribution among themselves.5 Note As regards valued policies, see the illustrations to s 27, and see s 80, as to contribution between insurers. As to under-insurance, see s 81. As regards unvalued policies the following case may be put in illustration. Suppose a merchant to have effected insurance for £30,000 by one policy, and £20,000 by another, on cotton, and that the insurable value of the cotton on board is £40,000, and the loss on it £4000. He can recover the whole £4000, and a return of premium on £10,000, just as if he had one policy for £50,000; but he may at his option claim under one policy three-fifths and under the other policy

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two-fifths of this total; or he may claim the whole sum under either policy as if the other did not exist. Insurance is a contract of indemnity, and the assured is entitled to indemnity, but not to a gambling profit. Correlatively, the insurer must not make a profit where he runs no risk. Hence, the rules as to return of premium detailed in s 84. The English rule that the same subject-matter may be differently valued in different policies, while the valuation in a policy is conclusive for the purposes of that policy, gives rise to curious anomalies in working out the rules of double insurance under valued policies; see s 27. There appears to be no decision as to overlapping policies. Suppose a ship is insured from A to B, and thirty days while there after arrival, and is also insured at and from B to C. If she is lost at B during the thirty days, she is doubly covered.6

Different assured The question which arises when the same subject-matter is fully insured by persons who have different interests in it, eg mortgagor and mortgagee, or bailor and bailee, was discussed by Mellish LJ, in a case on a fire policy, where both the merchant and the wharfinger insured the same goods against fire. The goods were destroyed by fire, and it was held that the loss must be wholly borne by the wharfinger’s insurers, as the wharfinger was liable to the merchant. The Lord Justice said: ‘The rule is perfectly established in the case of a marine policy that contribution only applies where it is an insurance by the same person having the same rights, and does not apply where different persons insure in respect of different rights. The reason of that is obvious enough. Where different persons insure the same property in respect of their different rights, they may be divided into two classes. It may be that the interest of the two between them makes up the whole property, as in the case of tenant for life and remainderman. Then if each insures, although they may use words apparently insuring the whole property, yet they would recover from their respective insurance companies the value of their own interests, and, of course, those values added together would make up the value of the whole property. Therefore it would not be a case either of subrogation or contribution, because the loss would be divided between the two companies in proportion to the interests which the respective persons assured had in the property. But then there may be cases where, although two different persons insured in respect of different rights, each of them can recover the whole, as in the case of a mortgagor and mortgagee. But wherever that is the case, it will necessarily follow that one of these two has a remedy over against the other, because the same property cannot in value belong at the same time to two different persons. Each of them may have an interest which entitles him to insure for the full value, because in certain events—for instance, if the other person become insolvent—it may be he would lose the full value of the property, and therefore would have in law an insurable interest; but yet it must be that if each recover the full value of the property from their respective offices with whom they insure, one office must have a remedy against the other. I think whenever that is the case, the company which has insured the person who has the remedy over succeeds to his right of remedy over, and then it is a case of subrogation.’7

52

Warranties etc 1 Cf North British and Mercantile Insurance Co v London, Liverpool and Globe Insurance Co (1877) 5 Ch D at p 583, CA. There does not need to be complete coincidence of subject matter, risk and interest in order for there to be double insurance. It is enough that there is an overlap in cover so that the assured is covered in respect of the same loss by more than one policy: see Eagle Star Ins v Provincial Insurance [1994] 1 AC 130; Bovis Construction Ltd v Commercial Union Assurance Co Plc [2001] 1 Lloyd’s Rep 416. 2 Newby v Reed (1763) 1 WM BI 416 (Lord Mansfield); Morgan v Price (1849) 4 Exch 615. Where two policies seek to impose liability on the other in the case of double insurance, they are treated as cancelling each other out: National Farmers Union Mutual Insurance Society Ltd v HSBC Insurance (UK) Ltd [2010] EWHC 773 (Comm), [28] et seq. 3 Bruce v Jones (1863) 1 H & C 769. 4 As to insurable value, see s 16. 5 This is consequential. See s 80 supplementing this provision. 6 See the point raised in argument in Union Marine Insurance Co v Martin (1866) 35 LJCP 181, where the second policy superseded the first. 7 North British and Mercantile Insurance Co v London, Liverpool and Globe Insurance Co (1877) 5 Ch D at 583. See also Godin v London Assurance Co (1758) 1 Burr 489; American Surety Co of New York v Wrightson (1910) 16 Com Cas at 45–46; O’Kane v Jones, The Martin P [2005] Lloyd’s Rep IR 174. See s 79, as to subrogation, and s 80, as to contribution.

WARRANTIES ETC 33. Nature of warranty (1) A warranty, in the following sections relating to warranties,1 means a promissory warranty, that is to say, a warranty by which the assured undertakes that some particular thing shall or shall not be done, or that some condition shall be fulfilled, or whereby he affirms or negatives the existence of a particular state of facts. (2) A warranty may be express or implied.2 (3) A warranty, as above defined, is a condition which must be exactly complied with, whether it be material to the risk or not. If it be not so complied with, then, subject to any express provision in the policy, the insurer is discharged from liability as from the date of the breach of warranty, but without prejudice to any liability incurred by him before that date.3 Note Section 33(3) has been repealed by s 10(7)(a) of the Insurance Act 2015: see further Appendix I at p 172. The use of the term ‘warranty’ as signifying a condition precedent is inveterate in marine insurance, but it is unfortunate because in other branches of the law of contract the term has a different meaning. For example, in relation to the law of sale of goods it signifies a collateral stipulation, the breach of which gives rise merely to a claim for damages and not to a right to avoid the contract. Again, in marine insurance the term is used to denote two wholly different kinds of stipulations. First, it is used to denote a condition to be fulfilled by the assured. Secondly, it is used to denote a mere limitation on, or an exception from, the general words of the policy. Thus, in the case of the warranty ‘free from capture and seizure’

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The Marine Insurance Act 1906

the assured does not undertake that the ship or cargo shall not be captured. There is merely a stipulation that the policy shall not apply to such a loss, and the provisions of ss 33(3) and 34 are inapplicable. In the case of a promissory warranty, exact compliance is necessary. Substantial compliance is insufficient.4 When seeking to ascertain whether a stipulation amounts to a promissory warranty the presence or absence of the word ‘warranty’ is not conclusive.5 Rix LJ proposed three tests: ‘One test is whether it is a term which goes to the root of the transaction: a second, whether it is descriptive of or bears materially on the risk of loss: a third, whether damages would be an unsatisfactory or inadequate remedy. As Lord Justice Bowen said in Barnard v Faber: “A term as regards the risk must be a condition.” Otherwise the insurer is merely left to a cross-claim in a matter which goes to the risk itself, which is unbusinesslike.’6 Warranties are, like any other contractual provision, to be construed having regard to their context within the contract, which must in turn be set in its surrounding circumstances or factual matrix. Furthermore: (i) if underwriters want draconian protection, it is up to them to stipulate for it in clear terms; (ii) the apparently literal meaning of the words in a warranty must be restricted if they produce a result inconsistent with a reasonable and businesslike interpretation of such a warranty; and (iii) any ambiguity in the terms of a warranty will be construed against the insurer.7 Unless clear words are used, the courts will not construe a promissory warranty as relating to the assured’s futute conduct.8 It is often said that breach of a warranty makes the policy void. But this is not so. A void contract cannot be ratified, but a breach of warranty may be waived.9 When a breach of warranty is proved, the insurer is discharged from further liability, unless the assured proved that the breach has been waived. Discharge from liability is automatic: it is not dependent on any decision by the insurer to treat the policy as at an end.10 The Institute Clauses contain provisions which hold the assured covered in the event of a breach of warranty at a premium to be arranged.11 Thus, the Institute Time Clauses (Hulls), Clause 3 states: ‘Held covered in case of any breach of warranty as to cargo, trade, locality, towage, salvage services or date of sailing, provided notice be given to the Underwriters immediately after receipt of advices and any amended terms of cover and any additional premium required by them be agreed.’ The Institute Voyage Clauses (Hulls), Clause 2 states: ‘Held covered in case of … any breach of warranty as to towage or salvage services, provided notice be given to the Underwriters immediately after receipt of advices and any amended terms of cover and any additional premium required by them be agreed.’ The onus of proving a breach of warranty lies on the insurer.12 Illustrations (1) A ship is warranted to sail from L with ‘fifty hands or upwards’. She sails from L with a crew of forty-six only, but afterwards takes on six more hands. The insurer is not liable.13

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(2) A ship is insured from New York to Quebec, whilst there, and thence to London, and is warranted to sail from Quebec on or before 1 November. The ship sails from New York too late to arrive at Quebec by 1 November, and is lost before reaching that port. The insurer is liable.14 (3) Policy on ship, with warranty not to be in Gulf of St. Lawrence after 15 November. After 15 November the ship is wrecked in the Gulf. The assured gives notice of abandonment, and the insurer with knowledge of the facts, accepts the notice. The insurer is liable, having waived the breach of warranty.15 (4) Policy on ship with warranty that ‘all arrangements for the conversion of the vessel so that she could carry cattle have been made at the inception of this insurance.’ The insurance had been effected on 13 December, but only a tentative undertaking had been given by the ship repairers for the work of conversion. The insurers were discharged from liability because the warranty had not been exactly complied with, for ‘all arrangements’ meant that the ship repairers were contractually bound to carry out the work.16 (5) Policy on tins of canned pork with warranty that all tins were marked by manufacturers with a code for verification of date of manufacture. A large number of tins were incorrectly marked. The insurer was held to be discharged from liability on the ground of breach of warranty.17 (6) Policy on ship. ‘Warranted German flag, ownership and management.’ In fact, the ship was owned by a Panamanian corporation and its beneficial owner was a French national. Vessel struck by Exocet missile in war between Iraq and Iran in 1984. Held, the insurers were not liable for the damage because there had been a breach of warranty.18 (7) Policy on ship. ‘Warranted no other insurance is or shall be expected to operate during currency of policy.’ A managing owners’ interest insurance policy was effected. The vessel was subsequently lost. Held, a breach of warranty discharging the insurers from liability.19 (8) Policy on yacht. Warranty by the assured that a yacht would be ‘fully crewed’. Held, this required a member of crew on board at all times other than in the case of emergencies making his departure necessary or where temporary departure was necessary to enable him to fulfil his crewing duties.20 (9) Policy on ship. Warranted that ‘Vessels ISM Compliant’. Held, the assured merely had to produce the documentation required by the International Safety Management Code, and it was not necessary for the assured to comply with every aspect of the Code itself.21 1 See ss 34–41 as to warranties. The warranty may be either a condition precedent or a condition subsequent: Union Insurance Society of Canton Ltd v Wills & Co [1916] 1 AC 281, 21 Corn Cas 169, PC. 2 Quebec Marine Insurance Co v Commercial Bank of Canada (1870) LR 3 PC 234. Implied warranties are unique to marine insurance; see Euro-Diam Ltd v Bathurst [1988] 2 All ER 23 and ss 39–41. 3 Pawson v Watson (1778) 2 Cowp 785; De Hahn v Hartley (1786) 1 Term Rep 343; Blackhurst v Cockell (1789) 3 Term Rep 360, Buller J. As to the final words of proviso, see Simpson SS Co v Premier Underwriting Association (1905) 10 Com Cas 198 (intention to break warranty no breach). Cf s 20 (4) as to ‘representations’ which need only be ‘substantially’ complied with (a representation is not inserted on the face of the policy). Cf Yorkshire Insurance Co v Campbell [1917] AC 218 (misdescription in policy of insured horse’s pedigree). 4 In the cases it is often said that a warranty must be ‘literally’ complied with. The Lords Committee substituted ‘exactly’ for ‘literally’ in the Bill.

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The Marine Insurance Act 1906 5 The fact that the warranty described itself as a ‘warranty’ is, however, a good starting point from which to infer that it was intended to be a true warranty rather than a suspensive condition; see Sugar Hut Group Ltd v Great Lakes Reinsurance (UK) Plc [2011] Lloyds’ Law Rep IR 198, [41] and Bluebon Ltd v Ageas (UK) Ltd [2017] EWHC 3301 (Comm), [34]. 6 HIH Casualty & General Insurance Ltd v New Hampshire Insurance Co [2001] 2 Lloyd’s Rep 161, 182 (a non-marine case but applied since in Toomey v Banco Vitalicio de Espana [2004] Lloyd’s Rep IR 354 and GE Reinsurance Corp v New Hampshire Ins Co [2004] Lloyd’s Rep IR 404, 415). 7 Pratt v Aigaion Insurance Co SA, The Resolute [2009] Lloyd’s Rep IR 149. 8 Hussain v Brown [1996] 1 Lloyd’s Rep 627. But if the warranty is aimed at giving continuing protecting to underwriters then it may be so construed; see for example Eagle Star Insurance Co Ltd v Games Video Co, The Game Boy [2004] Lloyd’s Rep IR 867; Sea Glory Maritime Co v Al Sagr National Insurance Co, The Nancy [2013] EWHC 2116 (Comm). 9 Cf s 34(3) as to waiver. 10 Bank of Nova Scotia v Hellenic Mutual War Risk Association (Bermuda) Ltd, The Good Luck [1991] 3 All ER 1, HL. As explained by Rix LJ in HIH Casualty & General Insurance Ltd v New Hampshire Insurance Co [2001] 2 Lloyd’s Rep 161: ‘by being in breach of his warranty, an assured takes himself outside the cover which he has agreed with his insurer. As Lord Justice Kerr said – “the cover ceases to be applicable.” This is because a warranty is very akin to a statement of the cover provided by the insurance, indeed it is part of that cover’s definition. That is why the insurance ceases to bind as from the time of breach. That is why the insurance ceases to bind even though any subsequent loss had nothing to do with the breach of warranty. It is because the insurer had only agreed to cover the risk provided the warranty was performed’. Cf suspensory conditions where underwriters are only off-risk for the duration of the default. 11 As to the payment of an additional premium, see s 31(2). 12 Simons v Gale, The Cap Tarifa [1957] 2 Lloyd’s Rep 485, Supreme Court of New South Wales; affd [1958] 2 All ER 504, PC. 13 De Hahn v Hartley (1786) 1 Term Rep 343, 1 RR 221. 14 Baines v Holland (1855) 10 Exch 802. 15 Provincial Insurance Co v Leduc (1874) LR 6 PC 224. See s 34 (3) as to waiver. 16 Simons (trading as Acme Credit Services) v Gale [1958] 2 All ER 504, PC. 17 Overseas Commodities Ltd v Style [1958] 1 Lloyd’s Rep 546, QB (Commercial Court). 18 Seavision Investment SA v Evennett and Clarkson Puckle Ltd, The Tiburon [1990] 2 Lloyd’s Rep 418, QB (Commercial Court). 19 Outhwaite v Commercial Bank of Greece SA, The Sea Breeze [1987] 1 Lloyd’s Rep 372, QB (Commercial Court). 20 GE Frankona Reinsurance Ltd v CMM Trust No. 1400, The Newfoundland Explorer [2006] Lloyd’s Rep IR 704. Cf. Brownsville Holdings Ltd v Adamjee Insurance Co Ltd, The Milasan [2000] 2 Lloyd’s Rep 458. See also Pratt v Aigaion Insurance Co SA, The Resolute [2009] Lloyd’s Rep IR 149 where it was warranted on a fishing vessel hull policy ‘Owner and/or Owner’s experienced skipper on board and in charge at all times and one experienced crew member.’ Held, the vessel had to be fully crewed while it was at sea, not when it was in port. Compliance while the vessel was in port would have been impossible, not the least because no member of the three-man crew could have left the vessel to sell its catches. 21 Sea Glory Maritime Co v Al Sagr National Insurance Co, The Nancy [2013] EWHC 2116 (Comm).

34. When breach of warranty excused (1) Non-compliance with a warranty is excused when, by reason of a change of circumstances, the warranty ceases to be applicable to the circumstances of the contract, or when compliance with the warranty is rendered unlawful by any subsequent law.1 (2) Where a warranty is broken, the assured cannot avail himself of the defence that the breach has been remedied, and the warranty complied with, before loss.2 (3) A breach of warranty may be waived by the insurer.3

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Note This provision has now been repealed by s 10(7)(b) of the Insurance Act 2015: see further Appendix I at p 172. The reported cases assume that there is no distinction between the effects of an express and an implied warranty. But an implied warranty may, of course, be negatived by the terms of the policy eg the implied warranty of seaworthiness in a voyage policy may be negatived by the ‘unseaworthiness and unfitness exclusion’ clause. As to a change of circumstances excusing compliance with a warranty, suppose a ship is warranted to sail on or before a particular day, but owing to the outbreak of war she has to wait for a convoy. Probably in that case the policy never attaches.4 On the other hand, a ship may be warranted to sail with convoy, but if peace is made, the warranty becomes inapplicable. Compliance with a warranty will be rendered unlawful if there is a declaration of war by England for this operates as an Act of Parliament prohibiting all trading with the enemy.5 The implied warranty set out in s 41 that the adventure insured is a lawful one and that, so far as the assured can control the matter, the adventure shall be carried out in a lawful manner, is a warranty which an insurer cannot waive.6 Illustrations 1.

2.

3.

4.

Policy on ship. Ship insured ‘at and from Montreal to Halifax’. She sailed from Montreal with a defective boiler which was only discovered when she reached salt water. She had to return to Montreal for repairs which were effected. She then sailed again from Montreal, and was lost at the mouth of the river St Lawrence. The insurers were not liable for the assured could not avail himself of the defence that the breach of warranty of seaworthiness on sailing from Montreal on the first occasion had been remedied.7 Policy on ship. Warranty that she should be laid up between 16 November and 30 April. She subsequently became a total loss, and the insurers repudiated liability on the ground of breach of warranty. Held that, on the evidence, the breach had been waived and the insurers were liable.8 Policy on ship. Warranty that ‘Captain C T Chism shall be the master except in the event of emergency.’ The ship was a total loss at a time when he was not her master. Held, there was then no emergency. The insurers successfully pleaded that the warranty had been breached. On the evidence, the breach had not been waived.9 Policy on floating casino purchased for scrap. The policy included a warranty that stated ‘warranted no release, waivers or “hold harmless” given to Tug and Towers’. Held, insurers were not to be estopped from relying on a breach of that warranty even though they did not raise that defence when they pleaded other defences some seven years earlier.10

1 See notes to s 41. 2 De Hahn v Hartley (1786) 1 Term Rep 343 (express warranty); Quebec Marine Insurance Co v Commercial Bank of Canada (1870) LR 3 PC 234 (implied warranty). 3 See Quebec Marine Insurance Co v Commercial Bank of Canada (1870) LR 3 PC at 244; Provincial Insurance Co v Leduc (1874) LR 6 PC at 243; Daneau v Laurent Gendron Ltee: Union Insurance

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The Marine Insurance Act 1906 Society of Canton Ltd (Third Party) [1964] 1 Lloyd’s Rep 220, Exchequer Ct, Quebec Admiralty District; Capital Coastal Shipping Corpn and Bulk Towing Corpn v Hartford Fire Insurance Co (United States of America, Third Parry), The Cristie [1975] 2 Lloyd’s Rep 100, Dist Ct for the Eastern Dist of Virginia, Norfolk Division. The maxim of the law is cuilibet licet renunciare juri pro se introducto. In Bank of Nova Scotia v Hellenic Mutual War Risks Association (Bermuda) Ltd, The Good Luck [1992] 1 AC 233, Lord Goff made it clear that a breach of warranty automatically discharges the underwriter from liability, and that no positive action, whether described as avoidance or acceptance of repudiation, is required in order to effect such discharge: ‘When, as section 34(3) contemplates, the insurer waives a breach of a promissory warranty, the effect is that, to the extent of the waiver, the insurer cannot rely upon the breach as having discharged him from liability. This is a very different thing from saying that discharge of the insurer from liability is dependent upon a decision of the insurer.’ Followed in: J Kirkaldy & Sons Ltd v Walker [1999] Lloyd’s Rep IR 410, 422; Brownsville Holdings Ltd v Adamjee Insurance Co Ltd, The Milasan [2000] 2 Lloyd’s Rep 458, 467; and in Agipatos Laiki Bank (Hellas) SA v Agnew (No 2) [2002] EWHC 1558 Comm, [2003] Lloyd’s Rep IR 542, [66]. Thus the principles of waiver by election are inapplicable. The waiver is a waiver by estoppel and the relevant principles are clearly explained in Motor Oil Hellas (Corinth) Refineries SA v Shipping Corporation of India, The Kanchenjunga [1990] 1 Lloyd’s Rep 391. Waiver by the underwriters leaves the risk intact, but it leaves the assured open to an action for damages for breach of contract; see Kumar v AGF Insurance [1999] Lloyd’s Rep IR 147. 4 See Hore v Whitmore (1778) 2 Cowp 784 (effect of embargo). Union Insurance Society of Canton Ltd v Wills & Co [1916] 1 AC 281, 287, 21 Corn Cas 169, PC: Yorkshire Insurance Co v Campbell [1917] AC 218, PC (policy on horse from Sydney to Fremantle—misdescription of horse’s pedigree). 5 Esposito v Bowden (1857) 7 E & B 763, 779, Ex Ch; cf Horlock v Beal (1916) 21 Corn Cas 201 at 216, HL; and notes to s 91. 6 Gedge v Royal Exchange Assurance Corpn [1900] 2 QB 214. 7 Quebec Marine Insurance Co v Commercial Bank of Canada (1870) LR 3 PC 234. 8 Daneau v Laurent Gendron Ltée: Union Insurance Society of Canton Ltd (Third Parry) [1964] 1 Lloyd’s Rep 220, Exchequer Ct, Quebec Admiralty District. (See the judgment of Arthur I Smith J, ibid, at p 223.) 9 Capital Coastal Shipping Corpn and Bulk Towing Corpn v Hartford Fire Insurance Co (United States of America, Third Parry), The Cristie [1975] 2 Lloyd’s Rep 100, Dist Ct for the Eastern Dist of Virginia, Norfolk Division. (See the judgment of Hoffman DJ, ibid, at 107). 10 Liberty Insurance (Pte) Ltd v Argo Systems FZE [2012] 1 Lloyd’s Rep 129.

35. Express warranties (1) An express warranty may be in any form of words from which the intention to warrant is to be inferred.1 (2) An express warranty must be included in, or written upon, the policy, or must be contained in some document incorporated by reference into the policy.2 (3) An express warranty does not exclude an implied warranty, unless it be inconsistent therewith.3 Note The following are examples of express warranties which have been the subject of judicial interpretation: ‘Warranted [50] per cent, uninsured.’4 ‘Warranted no other insurance which includes total loss of vessel.’5 ‘Warranted, no iron or ore in excess of registered tonnage.’6 ‘Warranted not to sail for North America after 15 August.’7 ‘Warranted no St Lawrence between 1 October and 1 April.’8 58

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‘Warranted not to proceed east of Singapore.’9 ‘Sailing on or after 1 March.’10 ‘Warranted all tins marked by manufacturers with a code for verification of date of manufacture.’11 ‘Warranted all arrangements for conversion [of vessel] made at inception of this insurance.’12 ‘Warranted German flag, ownership and management.’13 ‘Period of Lay-up—Warranted that the vessel is to be laid up and out of commission between 16 November and 30 April.’14 ‘Warranted no contraband of war.’15 ‘No mining timber carried.’16 ‘Warranted the master of the insured vessel shall be Captain C T Chism.’17 ‘Warranted subject to satisfactory survey by approved surveyors.’18 ‘Warranted class maintained.’19 ‘Class KR.’20 ‘Warranted premium payable on cash basis to London Underwriters within 90 days of attachment’.21 ‘Warranted approval of Lay-up arrangements, Fire Fighting Provisions and all movements by Salvage Association and all recommendations to be complied with prior to attachment.’22 Various express warranties are contained in the Institute Clauses. Thus, by the Institute Time Clauses (Hulls), Clause 1, the Institute Voyage Clauses (Hulls), Clause 1, and the Institute Time Clauses (Freight), Clause 1 and the Institute Voyage Clauses (Freight), Clause 1: ‘It is warranted that the Vessel shall not be towed, except as is customary or when in need of assistance or undertake towage or salvage services under a contract previously arranged by the Assured and/or Owners and/ or Managers and/or Charterers …’ The Institute Time Clauses (Hulls), Clause 21 contains a disbursements warranty. 1 De Hahn v Hartley (1786) 1 Term Rep 343; Behn v Burness (1863) 32 LJQB 204, 205; Bentsen v Taylor [1893] 2 QB at 281, CA. The use of the word ‘warranty’ is not decisive; see CTN Cash Carry v General Accident Fire and Life Assurance Corporation [1989] 1 Lloyd’s Rep 299. The question is one of construction. Relevant considerations whether the term is one which goes to the root of the transaction, whether it was descriptive of or bore materially on the risk of loss, and whether damages would be an unsatisfactory or inadequate remedy (see for example Toomey v Banco Vitalicio de España [2005] Lloyd’s Rep IR 423). The most common means by which representations were previously elevated into the status of warranties, namely basis of contract clauses, is no longer effective: see section 6 of the Consumer Insurance (Disclosure and Representations) Act 2012 (consumer insurance) and s 9 of the Insurance Act 2015 (non-consumer insurance). 2 Bean v Stupart (1778) 1 Doug KB 11, 12. 3 Quebec Marine Insurance Co v Commercial Bank of Canada (1870) LR 3 PC 234; Sleigh v Tyser [1900] 2 QB 333 (seaworthiness); approved and followed in Petrofina SA of Brussels v Compagnia Italiana Transporto Olii Minerali of Genoa (1937) 42 Corn Cas 286, CA. As to the implied warranty of seaworthiness, see s 39.

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The Marine Insurance Act 1906 4 Roddick v Indemnity Mutual Marine Insurance Co Ltd [1895] 2 QB 380 (subsequent ‘honour’ policy); General Insurance Co of Trieste v Cory [1897] 1 QB 335 (insolvency of insurer). 5 Outhwaite v Commercial Bank of Greece SA, The Sea Breeze [1987] 1 Lloyd’s Rep 372, QB (Commercial Court). 6 Hart v Standard Marine Insurance Co Ltd (1889) 22 QBD 499, CA (‘Iron’ includes steel). 7 Cochrane v Fisher (1835) 1 Cr M & R 809, Ex Ch (time policy). 8 Birrell v Dryer (1884) 9 App Cas 345, HL. 9 Simpson SS Co v Premier Underwriting Association (1905) 10 Corn Cas 198. 10 Sea Insurance Co v Blogg [1898] 1 QB 27; affd [1898] 2 QB 398, CA (what is a ‘sailing’?). 11 Overseas Commodities Ltd v Style [1958] 1 Lloyd’s Rep 546, QB (Commercial Court). 12 Simons (trading as Acme Credit Services) v Gale [1958] 2 All ER 504, PC. 13 Seavision Investment SA v Evennett and Clarkson Puckle Ltd, The Tiburon [1990] 2 Lloyd’s Rep 418, QB (Commercial Court). 14 Daneau v Laurent Gendron Ltee: Union Insurance Society of Canton Ltd (Third Party) [1964] 1 Lloyd’s Rep 220, Exchequer Court, Quebec Admiralty District. 15 Yangtze Insurance Association v Indemniry Mutual Marine Assurance Co [1908] 2 KB 504, CA (applies only to goods, not to persons such as belligerent officers). As to the ‘analogues of contraband’, ie belligerent passengers or despatches, see W E Hall, A Treatise on International Law (8th ed), 1924, by A P Higgins, Pt IV, Ch VI. 16 Aktieselskabet Grenland v Janson (1918) 35 TLR 135. 17 Capital Coastal Shipping Corpn and Bulk Towing Corpn v Hartford Fire Insurance Co (United States of America, Third Party), The Cristie [1975] 2 Lloyd’s Rep 100, Dist Ct for the Eastern Dist of Virginia, Norfolk Division. 18 M Almojil Establishment v Malayan Motor and General Underwriters (Private) Ltd, The Al-Jubail IV, [1982] 2 Lloyd’s Rep 637, Singapore Court of Appeal. 19 Pindos Shipping Corpn v Raven, The Mata Hari [1983] 2 Lloyd’s Rep 449. 20 Sun Alliance & London Insurance plc v PT Asuraynsri Dayin Mitra TBK, The No. 1 Dae Bu [2006] Lloyd’s Rep IR 860). 21 Heath Lambert Ltd v Sociedad de Corretaje de Seguros [2004] Lloyd’s Rep IR 905: whether this was solely a warranty or whether it also provided the time at which premium fell due (held the latter). 22 Eagle Star Insurance Co Ltd v Games Video Co (GVC) SA, The Game Boy [2004] 1 Lloyd’s Rep 238.

36. Warranty of neutrality (1) Where insurable property, whether ship or goods, is expressly warranted neutral, there is an implied condition that the property shall have a neutral character at the commencement of the risk, and that, so far as the assured can control the matter, its neutral character shall be preserved during the risk. (2) Where a ship is expressly warranted ‘neutral’ there is also an implied condition that, so far as the assured can control the matter, she shall be properly documented, that is to say, that she shall carry the necessary papers to establish her neutrality, and that she shall not falsify or suppress her papers, or use simulated papers. If any loss occurs through breach of this condition the insurer may avoid the contract.1 Note The implied conditions may, of course, be negatived or varied by the terms of the particular express warranty. The conditions of maritime commerce and war have altered so much that it would be misleading to attempt to deduce any rule from the numerous decisions at the beginning of the nineteenth century as to the effect of the warranty to sail with convoy. As to carrying contraband of war, see note to s 41.

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The implied condition in sub-s 2 is unusual in that the contract may only be avoided if loss occurs through breach of it; cf. s 33(3). Illustrations 1. 2.

3.

Policy on a Dutch ship warranted neutral, at and from A to B. After the ship sails war breaks out between England and Holland, and the ship is captured by the English. There is no breach of the warranty of neutrality.2 Policy on goods. Ship and goods belong to the same owner, and are both warranted Danish (ie neutral). The master commits a breach of the laws of neutrality by forcibly resisting search, and the ship and goods are captured and condemned as prize. The assured cannot recover under the policy.3 Policy on goods from America to England with leave to carry simulated papers. The ship and goods are, in fact, American, but she carries irregularly simulated British papers, and is captured by a privateer belonging to a State at war with England, and is condemned on the ground of having false papers. The insurer is liable.4

1 As to documents, see Trinder v Thames and Mersey Marine Insurance Co [1898] 2 QB at 128 per Collins LJ. 2 Eden v Parkison (1781) 2 Doug KB 732, per Lord Mansfield. 3 Garrels v Kensington (1799) 8 Term Rep 230. 4 Bell v Bromfield (1812) 15 East 364.

37. No implied warranty of nationality There is no implied warranty as to the nationality of a ship, or that her nationality shall not be changed during the risk.’1 Note But suppose the assured changes the nationality of his ship, and thereby exposes her to risk of hostile capture? Possibly in that case the loss would be attributed to the act of the assured rather than to the capture. As to express warranty of neutrality, see s 36. Where a policy warranted that the flag, ownership and management would be German, it was held that the warranty related to the nationality of the legal and not the beneficial owner of the vessel.2 1 Dent v Smith (1869) LR 4 QB 414, 449 (policy on goods, nationality of ship changed on day after insurance); cf Clapham v Cologan (1813) 3 Camp 382 (Spanish ship, Tres Hermanas described by broker as the Three Sisters). Cf Associated Oil Carriers Ltd v Union Insurance Society of Canton Ltd [1917] 2 KB 184 (policy on freight just before war, ship had been chartered to a German). 2 Seavision Investment SA v Evennett and Clarkson Puckle, The Tiburon [1990] 2 Lloyd’s Rep 418.

38. Warranty of good safety Where the subject-matter insured is warranted ‘well’ or ‘in good safety’ on a particular day, it is sufficient if it be safe at any time during that day.1

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Note This section must obviously be read subject to s 18 as to disclosure of facts known to the assured before the contract is concluded. Cf Sch I, r 1. (‘lost or not lost’). 1 Blackhurst v Cockell (1789) 3 Term Rep 360 (ship).

39. Warranty of seaworthiness of ship (1) In a voyage policy there is an implied warranty that at the commencement of the voyage the ship shall be seaworthy for the purpose of the particular adventure insured.1 (2) Where the policy attaches while the ship is in port, there is also an implied warranty that she shall, at the commencement of the risk, be reasonably fit to encounter the ordinary perils of the port.2 (3) Where the policy relates to a voyage which is performed in different stages, during which the ship requires different kinds of or further preparation or equipment, there is an implied warranty that at the commencement of each stage the ship is seaworthy in respect of such preparation or equipment for the purposes of that stage.3 (4) A ship is deemed to be seaworthy when she is reasonably fit in all respects to encounter the ordinary perils of the seas of the adventure insured.4 (5) In a time policy there is no implied warranty that the ship shall be seaworthy at any stage of the adventure, but where, with the privity of the assured, the ship is sent to sea in an unseaworthy state, the insurer is not liable for any loss attributable to unseaworthiness.5 Note The implied warranty that the ship is seaworthy, attaches to every voyage policy, whether on ship, freight, cargo, profits, commission, or any other interest.6 It may, of course, be negatived by the terms of the policy, eg by the ‘unseaworthiness and unfitness exclusion’ clause;7 and it is usual to pay ‘innocent shippers’ as a matter of honour.8 The warranty applies only to the commencement of the voyage9, or, as the case may be, of each distinct ‘stage’ of the voyage. At one time it was thought that the omission to employ a pilot, at any ‘stage’ of the voyage where pilotage was compulsory, constituted unseaworthiness, but that doctrine was subsequently disapproved.10 Lord Wensleydale, speaking of a voyage policy, said that a ship was seaworthy when she was in a fit state, ‘as to repairs, equipment, and crew, and in all other respects, to encounter the ordinary perils of the voyage insured at the time of sailing upon it’.11 The state of seaworthiness is a relative and not an absolute one. It must be determined with reference to the particular voyage and adventure in contemplation. As the Privy Council said, ‘There is seaworthiness for the port, seaworthiness in some cases for the river, and seaworthiness in some cases (as in a case which has been put forward

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of a whaling voyage) for some definite, well-recognised, and distinctly separate stage of the voyage.’12 So, too, a ship may be seaworthy in herself, but not seaworthy for the purpose of the particular adventure eg, carrying deck cargo.13 On the other hand, if the insurer knows the nature of the risk, it is sufficient if every reasonable precaution is taken.14 Sub-section (3) was redrafted in the Commons Committee. It originally provided, in accordance with the older dicta, that the ship must be seaworthy, ie,seaworthy in all respects, at the commencement of each ‘stage,’ but having regard to the implied coaling warranty in the case of round voyages, it was narrowed to its present form. There is no implied warranty that the lighters in which the goods are landed shall be seaworthy.15 Sub-section (5) is declaratory of the Common Law. ‘Where a ship is sent to sea in a state of unseaworthiness in two respects, the assured being privy to the one and not privy to the other, the insurer is only protected if the loss was attributable to the particular unseaworthiness to which the assured was privy.’16 The words ‘with the privity of the assured’ in this subsection mean ‘with his knowledge and consent’.17 Although this includes ‘blind eye’ knowledge, gross negligence is not enough.18

Evidence of unseaworthiness The burden of proving unseaworthiness ordinarily lies on the insurer,19 but cases may arise where the maxim res ipsa loquitur would apply.20 In Anderson v Morice21 the insurance was on a cargo of rice. The ship sank while loading at her moorings in the river near Rangoon in ordinary weather. Evidence was given that the ship had been recently overhauled and repaired. The jury found that she was seaworthy, and the court refused to disturb the verdict. In Pickup v Thames Insurance Co22 the insurance was on freight. The vessel left Rangoon and met with heavy weather. Eleven days after sailing she had to put back, and was then found to be strained and unseaworthy. Held, that these facts did not establish the presumption of unseaworthiness when she sailed. It was a question for the jury. In Ajum Goolam Hossen & Co v Union Marine Insurance Co23 the insurance was on cargo. The ship capsized and sank twenty-four hours after leaving Port Louis, but there was no evidence to explain why she did so. Some evidence was given tending to show that the ship was seaworthy when she started. Held, that unseaworthiness was not made out. In Capital Coastal Shipping Corpn and Bulk Towing Corpn v Hartford Fire Insurance Co (United States of America, Third Parry), The Cristie,24 where a tug was insured under a time policy and sank in port in calm water, the District Court for the Eastern District of Virginia, Norfolk Division, held that the presumption that she was unseaworthy had not been satisfactorily rebutted by the assured.

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Mixed policy The warranty of seaworthiness implied by s 39 also applies in the case of a ‘mixed policy’.25 Illustrations (1) Ship. Policy on ship from Montreal to Halifax. At the time the ship sailed there was a defect in her boiler. The defect did not appear in the river, but disabled her when she got out to sea. She put back to port, and the defect was repaired. Afterwards she proceeded on her voyage, and was lost in bad weather. She was unseaworthy at the commencement of the voyage, and the insurer is not liable.26 (2) Voyage policy on ship. Steamer, built for inland navigation in Trinidad, is insured from the Clyde to Trinidad. In a heavy sea in the Atlantic she is lost. With the exercise of reasonable care she might have been made fit for the ocean voyage. The insurer is not liable.27 (3) Policy on ship on round voyage from England to port or ports in South America, with liberty to call at any ports, and back again to England. The ship calls at Montevideo, but neglects to take on sufficient coal to bring her to St. Vincent, her next port, so that some of her fittings and cargo have to be burnt as fuel. For coaling purposes this voyage is necessarily divided into ‘stages’. When she leaves Montevideo, she is not seaworthy as to her coaling equipment, and the loss incurred by burning the fittings and cargo cannot be recovered under the policy.28 (4) Time policy on ship. As she is nearing port the master imprudently, and through bad seamanship, throws his ballast overboard, thus making her unseaworthy. Before the ship reaches port she is struck by a squall and capsizes. The insurer is liable.29 (5) Time policy on ship, ‘lost or not lost,’ is effected in London in November, but to take effect from 25 September. On 24 September the ship was in the Indian Ocean badly damaged, but the assured did not know this when he effected the policy. The insurer is liable.30 (6) Time policy on ship lying in her owner’s yard. She is sent to sea in an unseaworthy condition, and lost. The owner did not know she was unseaworthy. The insurer is liable.31 (7) Time policy on ship. Wooden-hulled vessel sent to sea in an unseaworthy state by reason of the hazardous condition by an increase in her gasoline carrying capacity from 3,000 to 8,000 gallons, and by reason of an alteration in the method of discharging the gasoline. The assured were privy to her being sent to sea in such a condition. She was subsequently lost as a result of an explosion and a fire. The insurers were held to be entitled to avoid liability.32 (8) Time policy on profits, disbursements, etc, in respect of ship. She is sent to sea with an insufficient crew, with the knowledge of the managing owner who effects the policy. She is lost at sea owing to previous damage to her hull which the assured did not know of. The assured can recover, as he was not privy to the unseaworthiness which caused the loss.33 (9) Time policy on ship. Fire in the engine room. The vessel was causatively unseaworthy in a number of respects when sent to sea but, although ‘blind eye’ 64

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knowledge is sufficient for privity of the assured, there was no such knowledge on the facts.34 (10) Goods. Voyage policy on ‘wine in casks on or under deck’. The wine is all stowed on deck. The effect of this is to endanger the safety of the ship in rough weather, unless the wine is jettisoned, but the wine is so stowed as to be easily jettisoned. The ship meets with bad weather in the Bay of Biscay, and the wine is jettisoned. The ship was not seaworthy at the time of sailing, and the insurer is not liable.35 (11) Policy on copper at and from port H and port N to S. At H 150 tons are loaded, and at N 250 tons more are loaded. The additional load is too heavy for the ship, she sinks, and the copper is lost. The insurers are liable for the first 150 tons, but not for the second load of 250 tons.36 (12) Freight. Voyage policy on freight. The ship, being badly damaged, has to put into a port of distress, and the cargo is sent on in a substituted ship which is lost. There is, it seems, no implied warranty that the substituted ship is seaworthy.37 1 Biccard v Shepherd (1861) 14 Moo PCC at 493. As to the foundation of the rule, see Christie v Secretan (1799) 8 Term Rep 192 at 198, per Lawrence J. 2 Quebec Marine Insurance Co v Commercial Bank of Canada (1870) LR 3 PC at 241; cf Haughton v Empire Marine Insurance Co (1866) LR 1 Ex Ch 206 (overlapping policies). 3 Bouillon v Lupton (1863) 33 LJCP at 43; Quebec Marine Insurance Co v Commercial Bank of Canada (1870) LR 3 PC at 241; The Vortigern [1899] P 140, CA (coals); Greenock SS Co v Maritime Insurance Co [1903] 2 KB 657, CA (insufficient coal); Northumbrian Shipping Co Ltd v E Timm & Son Ltd [1939] 2 All ER 648, 56 LQR 9, HL (same doctrine applied in an affreightment case). As to damage to cargo by bad stowage, see The Thorsa (1916) 22 Com Cas 218, 221, CA (affreightment). See more recently Garnat Trading & Shipping (Singapore) Pte Ltd v Baominh Insurance Corp [2011] 1 Lloyd’s Rep 589 on the doctrine of stages at [160]. 4 Dixon v Sadler (1839) 5 M & W at 414; Bouillon v Lupton (1864) 33 LJCP at 43. This includes manning, equipment, and stowage. As to ‘perils of the seas,’ see Sch I, r 7. For a recent exposition of what it meant by seaworthiness, see The Eurasian Dream [2002] 1 Lloyd’s Rep 719, 736–737. 5 Fawcus v Sarsfield (1856) 6 E & B 192; Dudgeon v Pembroke (1877) 2 App Cas 284, HL; Mountain v Whittle [1921] 1 AC 615, HL (house-boat dragged by too powerful tug to dock for repair). As to the proviso, see Thomas v Tyne and Wear Insurance Association [1917] 1 KB 938 at 941. Lord Mance suggested in Global Process Systems Inc v Syarikat Takaful Malaysia Bhd, The Cendor Mopu [2011] 1 Lloyd’s Rep 560, [57] that the words ‘attributable to unseaworthiness’ in sub-s (5) ‘catered for the Victorian reluctance to look behind the last cause in time to any previous cause. How far the word “attributable” now allows regard to be had to causes which would, under modern conceptions, not be regarded as proximate appears undecided …’. 6 Daniels v Harris (1874) LR 10 CP at 5; cf Knill v Hooper (1857) 26 LJ Ex 377, 379 (policy on salvage of abandoned ship); Biccard v Shepherd (1861) 14 Moo PCC at 494 (goods). As to the additional warranty in case of goods, see s 40 (2). 7 Cantiere Meccanico v Janson [1912] 3 KB 452, CA. 8 But cf Sleigh v Tyser [1900] 2 QB at 336, where the shipper was partly to blame. 9 See Project Asia Line Inc v Shone, The Pride of Donegal [2002] 1 Lloyd’s Rep 659 in which Andrew Smith J rejected a submission that the the implied warranty related to the condition of the ship at the time of the conclusion of the contract of carriage. 10 Law v Hollingworth (1797) 7 Term Rep 160; disapproved, Dixon v Sadler (1839) 5 M & W at 408; Sadler v Dixon (1841) 8 M & W at 900, Ex Ch. See also Phillips v Headlam (1831) 2 B & Ad at 383. 11 Dixon v Sadler (1839) 5 M & W at 414. 12 Quebec Marine Insurance Co 2) Commercial Bank of Canada (1870) LR 3 PC at 241. And see per Collins MR, in The Vortigern [1899] P at 160, CA. 13 Daniels v Harris (1874) LR 10 CP 1 (policy on wine stowed on deck). 14 Burges v Wickham (1863) 33 LJQB 17 (river steamer sent across the sea to her destination); Cantiere Meccanico v Janson [1912] 3 KB 452, CA (floating dock sent to Brindisi, seaworthiness admitted). 15 Lane v Nixon (1866) LR 1 CP 412. 16 Thomas v Tyne and Wear Insurance Association [1917] 1 KB 938 at 941, per Atkin J; and see George Cohen, Sons& Co v Standard Marine Insurance Co Ltd (1925) 30 Corn Cas 139 at 158.

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The Marine Insurance Act 1906 17 Compania Maritima San Basillo SA v Oceanus Mutual Underwriting Association (Bermuda) Ltd, The Eurysthenes [1976] 2 Lloyd’s Rep 171 at 179, CA (per Lord Denning). See also the judgment of Roskill LJ, ibid at 184, and that of Geoffrey Lane LJ ibid, at 188. 18 Manifest Shipping Co Ltd v Uni-Polaris Insurance Co Ltd, The Star Sea [2001] Lloyd’s Rep IR 247. 19 Pickup v Thames Insurance Co (1878) 3 QBD 594, CA. 20 Pickup v Thames Insurance Co (1878) 3 QBD at 600, per Lord Esher; Lindsay v Klein [1911] AC at 204, HL (general average). The fact that a vessel goes down may be evidence of unseaworthiness but it does not generate a presumption; see Garnat Trading & Shipping (Singapore) Pte Ltd v Baominh Insurance Corporation [2011] 1 Lloyd’s Rep 589. Cf. the position where an incident occurs shortly after sailing: Eridania SPA v Oetker, The Fjord Wind [1999] 1 Lloyd’s Rep 307, 318. 21 (1875) LR 10 CP 58, 609; affd on this point (1876) 1 App Cas at 752. 22 (1878) 3 QBD 594, CA; distinguished in R Silcock& Sons Ltd v Maritime Lighterage Co Ltd (1937) 57 LI L Rep 78, CA. 23 [1901] AC 362, PC. 24 [1975] 2 Lloyd’s Rep 100. (See the judgment of Hoffman DJ, ibid, at 105.) 25 M Almojil Establishment v Malayan Motor and General Underwriters (Private) Ltd, The Al-Jubail IV [1982] 2 Lloyds Rep 637, Singapore Court of Appeal (see the judgment of Lai J, ibid, at 640). 26 Quebec Marine Insurance Co v Commercial Bank of Canada (1870) LR 3 PC 234. 27 Turnbull v Janson (1877) 3 Asp Mar Cas 433, CA. Aliter, if all reasonable means had been used, Burges v Wickham (1863) 3 B & S 669; Clapham v Langton (1864) 5 B & S 729, Ex Ch. 28 Greenock SS Co v Maritime Insurance Co [1903] 1 KB 367; affd [1903] 2 KB 657, CA and following The Vortigern [1899] P 140 (contract of affreightment). See also Northumbrian Shipping Co Ltd v E Timm & Son Ltd [1939] 2 All ER 648 HL (the ‘stage’ of the voyage must be determined before sailing; the availability of coal at some intermediate port cannot be taken into account). But the contract of affrieghtment need not expressly identify the ‘stages’: Garnat Trading & Shipping (Singapore) Pte Ltd v Baominh Insurance Corp [2011] 1 Lloyd’s Rep 589. As to insurance of round voyage, see Kynance Sailing Ship Co Ltd v Young (1911) 16 Com Cas at 128. 29 Dixon v Sadler (1839) 5 M & W 414; affd (1841) 8 M & W 895. This would equally apply to a voyage policy: ibid. 30 Gibson v Small (1853) 41HL Cas 353. 31 Dudgeon v Pembroke (1877) 2 App Cas 284. 32 Pacific Queen Fisheries v L Symes, The Pacific Queen [1963] 2 Lloyd’s Rep 201, US Ct of Appeals, Ninth Circuit. 33 Thomas v Tyne and Wear Insurance Association [1917] 1 KB 938, 22 Corn Cas 239, 241; cf Thomas v London and Provincial Marine Insurance Co (1914) 30 TLR 595, CA as to insufficient crew. 34 Manifest Shipping Co Ltd v Uni-Polaris Insurance Co Ltd, The Star Sea [2001] Lloyd’s Rep IR 247. 35 Daniels v Harris (1874) LR 10 CP 1. 36 Biccard v Shepherd (1861) 14 Moo PCC 471. 37 De Cuadra v Swann (1864) 16 CBNS 772, 3rd plea.

40. No implied warranty that goods are seaworthy (1) In a policy on goods or other moveables there is no implied warranty that the goods or moveables are seaworthy.1 (2) In a voyage policy on goods or other moveables there is an implied warranty that at the commencement of the voyage the ship is not only seaworthy as a ship, but also that she is reasonably fit to carry the goods or other moveables to the destination contemplated by the policy.2 Note Under a voyage policy the shipper, equally with the shipowner, is responsible for the seaworthiness of the ship. See note to last section, and for definition of ‘moveables,’ see s 90.

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Questions of unseaworthiness frequently arise in cases between shipper and shipowner; but such cases must be applied with caution in insurance law. A ship may be seaworthy as between shipowner and insurer on ship, though unseaworthy as between shipowner and shipper of a particular cargo, eg frozen meat, which requires special freezing apparatus, but does not affect the safety of the ship.3 Again, the warranty as to goods may apply at a different time from the warranty as to ship, eg where goods are shipped at an intermediate port. Suppose a ship is insured from Malta to London. She calls at Gibraltar, and there takes on board a consignment of apes for the London Zoological Gardens. If the apes are insured, the ship must, for the purposes of the policy on apes, be reasonably fit (ie, in the matter of appliances) to carry the animals safely to their destination, ie she must be ‘ape-worthy’ as well as being seaworthy qua ship. This implied warranty is usually included in the warranty of seaworthiness, but that seems rather a strain upon language, and it is better to regard the warranty as an additional warranty by the assured on goods. In practice, the policy usually contains an ‘unseaworthiness and unfitness exclusion’ clause nullifying the effect of s 40(2). The clause states: ‘The underwriters waive any breach of the implied warranties of seaworthiness of the ship and fitness of the ship to carry the subject-matter insured to destination, unless the assured or their servants are privy to such unseaworthiness or unfitness.’4 Illustration Policy on goods. Cotton was insured ‘at and from Liverpool to Oporto’. Some of the cargo was lost overboard by perils insured against. The insurers repudiated liability on the ground that the vessel had sailed in an unseaworthy condition in that she was improperly stowed with all the light cargo in the hold and the heavy cargo on deck, thus tending to make her top-heavy. On the evidence, however, the vessel was not unseaworthy and the insurers were liable.5 1 Koebel v Saunders (1864) 33 LJCP 310 (coconut oil); cf Boyd v Dubois (1811) 3 Camp 133. See also Global Process Systems Inc v Syarikat Takaful Malaysia Berhad (The Cendor Mopu) [2011] UKSC 5 where the absence of an implied warranty was thought, in part at least, to justify the conclusion that cargo lost by peril of the seas was covered even though the unfitness of the cargo played a contributory role. 2 Cf The Maori King [1895] 2 QB 550, 558, CA (frozen meat); Stanton v Richardson (1874) LR 9 CP 390 (affreightment). 3 Cf The Maori King [1895] 2 QB 550, 558, CA. 4 See Institute Cargo Clauses (A), Clause 5; Institute Cargo Clauses (B), Clause 5; Institute Cargo Clauses (C), Clause 5. 5 Blackett, Magalhaes and Colombie v National Benefit Assurance Co (1921) 8 Ll L Rep 293, CA.

41. Warranty of legality There is an implied warranty that the adventure insured is a lawful one, and that, so far as the assured can control the matter, the adventure shall be carried out in a lawful manner.1 Note The better view is that the implied warranty relates to legality under English, not foreign law.2 67

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‘Where a voyage is illegal, an insurance upon such a voyage is invalid. Thus, during the [Peninsular] War policies on vessels sailing in contravention of the Convoy Acts were held void, so too when the voyage was against the East India Company Acts, or the general Navigation Act, which statutes were made with reference to the general policy of the realm.’3 A contract to do a thing which cannot be done without a violation of the law is void, whether the parties know the law or not. But if a contract is capable of being performed in a legal manner, it is necessary to show clearly the intention to perform it in an illegal manner to enable the insurer to avoid it.4 An insurance on enemies’ goods or against British capture is illegal. See notes to s 91(2), and see further, notes to s 3 (lawfulness of adventure) and s 4 (wager policies). Independent of s 41, a policy will be illegal if its enforcement would be contrary to public policy.5

Contraband of war The term ‘contraband of war’ in a marine policy applies only to goods. It does not extend to persons, eg officers of a belligerent power, though carrying them exposes the ship to capture.6 ‘It is well settled,’ said Farwell LJ, ‘that the carrying of contraband in time of war between two belligerents, both of whom are at peace with this country, is legitimate trading, although the trader runs the risk of capture, and of the condemnation of the contraband store, and in many (if not all) cases of his ship also.’7 If, in a policy on goods, there is a warranty, ‘no contraband,’ the whole policy may be avoided if any part of the goods are contraband.8 Illustrations 1.

Time policy on ship. The master, with the connivance of the owner, engages in smuggling. The ship is arrested in England. The insurer is not liable.9 2. Policy on freight, from a British port abroad to Liverpool. The master, unknown to the owner, stows a part of the cargo (timber) on deck, and sails without a certificate from the clearing office, thereby contravening the Customs Consolidation Act 1853. The timber is lost by perils of the seas. The assured can recover under the policy.10 3. Policy on a French ship, effected in England, capture and seizure being among the perils insured against. After the policy is effected war breaks out between France and England, and the ship is captured by a British cruiser. The assured cannot recover under the policy.11 4. Builders’ risk policy. The assured operates an unlawful business in carrying on boat building at his yard when forbidden to do so pursuant to the byelaws and regulations of the local authority. He cannot recover under the policy.12 5. The plaintiff Dutch companies, owned a dredging fleet which was insured against war risks by the defendants. Dredging work was being performed when Iraq invaded Kuwait on 2 August 1990 and, at the insistence of the Iraqis, the work continued. On 6 August the United Nations imposed sanctions against 68

Warranties etc

Iraq and required member states to give effect to the sanctions in their own domestic legislation. Several member states, including the Netherlands, complied. On 16 September the Iraqi government promulgated a law under which all the assets of companies of countries which had brought in sanctions legislation against Iraq were to be seized. In order to secure the demobilisation of the fleet and the repatriation of their employees, the plaintiffs negotiated and signed a ‘finalisation agreement’ with the Iraqi authorities pursuant to which the plaintiffs paid large sums into bank accounts in Switzerland and Austria and waived all further claims under the dredging contract. The plaintiffs sought to recover the loss arising from the waived claims under the sue and labour clause of the insurance contract. Held, inter alia, since the conclusion of the finalisation agreement and the payments made under it did not form part of the insured adventure, the defendants were not discharged from liability under the insurance contract by s 41.13 1 Dudgeon v Pembroke (1874) LR 9 QB at 586; Pacific Queen Fisheries v L Symes, The Pacific Queen [1963] 2 Lloyd’s Rep 201, US Ct of Appeals, Ninth Circuit, where the Court declined to express a view as to whether the violation of the Tanker Act (US. Code Sect 391a) rendered the voyage illegal. ‘Warranty’ is not an apt term in this context, in as much as a warranty can be waived, but illegality cannot. 2 Euro-Diam Ltd v Bathurst [1990] 1 QB 1, 13–14 per Staughton J; Royal Boskalis Westminster NV v Mountain [1997] Lloyd’s Reinsurance LR 523, 589–590 per Rix J and on appeal at [1999] QB 674 at 736F per Phillips LJ; Sea Glory Maritime Co v Al Sagr National Insurance Co, The Nancy [2013] 2 CLC 114, [294]–[295] per Blair J. For an historical perspective, Emerigon, in his Treatise on Insurances (1850), stated as follows at Chapter VIII, section V (in translation) at p 170: ‘We come now to the principal question, – is it permitted to cause to be insured goods, whose importation or exportation are prohibited in a friendly state? According to the principles above established, it seems an insurance of this kind should be declared void, in spite of knowledge the insurer may have had of the smuggling. Still the practice is to the contrary. The statute of George II, mentioned by Blackstone, after having forbidden the making of insurances without other proof of interest than the policy itself, adds, except on ships trading to Spain and Portugal. He observes, the reason of this exception is sufficiently obvious, that is to say, because the English, smuggling in the territories of Spain and Portugal, cannot have bills of lading to prove the shipment. The same usage is tolerated among us [in France]’. Emerigon explains the reason for the enforceability of policies which are illegal under a foreign system of law in the following terms (at p 172): ‘… smuggling is a vice common to all commercial nations. The Spaniards and the English, in time of peace, practice it with us. We are then permitted, by way of reprisal, to practice it with them.’ Emerigon’s reasoning for the disregarding of foreign illegality, which is that smuggling is a mutual vice to be tolerated in times of peace, is the antithesis of the modern concept of comity between friendly states. Nevertheless, Emerigon supports the view that in 1850, policies of insurance which were lawful by their proper law were valid, even if those policies were illegal in their place of performance. Sir James Park in his work, A System of the Law of Marine Insurances, 8th edition (1842), Chapter XII, pp 505–507 also suggests that a policy of insurance which is illegal as a matter of foreign law is valid, because ‘no country takes notice of the revenue laws of another’, citing, among other cases, the decision of Lord Mansfiled in Planche v Fletcher (1779) 1 Doug 251. 3 Redmond v Smith (1844) 7 Man & Gr at 474, per Tindal CJ. 4 Waugh v Morris (1873) LR 8 QB 202. The maxim is ‘In ambigua voce accipienda est significatio quae vitio caret.’ 5 If, for example, there a statutory embargo on trading with a particular nation (see Islamic Republic of Iran Shipping Lines v Steamship Mutual Underwriting Association [2010] EWHC 2661 (Comm) and Arash Shipping Enterprises Co Ltd v Groupama Transport [2011] EWCA Civ 620). 6 Yangtze Insurance Association v Indemnity Mutual Marine Assurance [1908] 2 KB 504, CA (warranty, no contraband). As to the ‘analogues of contraband,’ ie belligerent passengers or despatches, see W E Hall, A Treatise on International Law, 8th ed, 1924, by A P Higgins, Pt IV, ch VI; and as to contraband generally, whether absolute or conditional, ibid, ch V; and such cases as The Kronprins Gustaf [1919] P 182 (conditional contraband, coffee). 7 Caine v Palace Shipping Co (1906) 12 Corn Cas at 109, CA; cf Andersen v Marten [1908] AC 334 at 338, HL.

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The Marine Insurance Act 1906 8 Seymour v London and Provincial Marine Insurance Co (1872) 41 LJCP 193 (part of the goods consisted of artillery harness. They were shipped to a neutral port, but with a further hostile destination). As to necessity of disclosure of the risk to insurer, see the terms of s 18. 9 Pipon v Cope (1808) 1 Camp 434, as explained, Trinder v Thames and Mersey Marine Insurance Co [1898] 2 QB at 129, CA. If the master smuggles without the owners’ connivance, it is barratry: Cory v Burr (1883) 8 App Cas at 399. 10 Wilson v Rankin (1865) LR 1 QB 162, Ex Ch. Aliter, if the owner was privy to the illegality: Cunard v Hyde (1859) 29 LJQB 6 (policy on goods). 11 Kellner v Le Mesurier (1803) 4 East 396, and Gamba v Le Mesurier (1803) 4 East 407. See note to s 91(2). 12 James Yachts Ltd v Thames and Mersey Marine Insurance Co Ltd [1977] 1 Lloyd’s Rep 206, British Columbia, Supreme Court. (See the judgment of Rittan J, ibid, at 212.) The implied warranty of legality in this case was set out in the Marine Insurance Act of British Columbia (RSC c 231), s 43 (which corresponds to the (English) Marine Insurance Act 1906, s 41). 13 Royal Boskalis Westminster NV v Mountain [1999] QB 674.

THE VOYAGE 42. Implied condition as to commencement of risk (1) Where the subject-matter is insured by a voyage policy ‘at and from’ or ‘from’ a particular place, it is not necessary that the ship should be at that place when the contract is concluded, but there is an implied condition that the adventure shall be commenced within a reasonable time, and that if the adventure be not so commenced the insurer may avoid the contract.1 (2) The implied condition may be negatived by showing that the delay was caused by circumstances known to the insurer before the contract was concluded, or by showing that he waived the condition.2 Note As to the attachment of a policy in the case of ‘from’ and ‘at and from’ risks, see Rules 2 and 3 in Sch I. Reasonable time is a question of fact; see s 88. Where the assured abandons the adventure insured, the contract of marine insurance is determined.3 The requirement under s 42 that the adventure must be commenced within a reasonable time appears to be distinct from the requirement under s 48 that the voyage insured must be prosecuted throughout its course with reasonable dispatch. As to frustration of the adventure, see note to s 60 (constructive total loss). Illustrations 1.

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Floating policy on cargo by a particular ship for twelve months from 11 May. A declaration of a cargo of coal having been made under this policy, the insurers, on 2 August, effected a reinsurance of the coal by that ship from the Tyne to Lulea. The vessel did not sail on the insured voyage till 25 September, and was lost with her cargo on 2 October. The reinsurer is not liable on the reinsurance policy, for the delay alters the risk from a summer risk to a winter risk.4

The voyage

2.

Policy on goods. 1916–17 tobacco crop insured in June 1917 at and from Sumatra to London and/or ports in Holland, the risk of fire before shipment being included. On 18 July part of the crop was destroyed by fire whilst in store in Sumatra. The insurers repudiated liability on the ground that there had been unreasonable delay in the commencement of the adventure. The claim, however, succeeded for they had accepted an additional premium to cover a period during which the loss occurred, and so were precluded from raising the defence of unreasonable delay.5

1 De Wolf v Archangel Insurance Co (1874) LR 9 QB 451, 457 (summer risk turned into winter risk). For a case where a motor launch was insured for 41/2 months while used within a limited radius and a loss was sustained within the limits, and it was held to be a time policy, and not a voyage policy attaching only to voyages to begin and end within the radius and to remain wholly within it, see Wilson v Boag [1956] 2 Lloyd’s Rep 564, Supreme Court of New South Wales. 2 Before the Act this was a somewhat doubtful proposition. The waiver is of the implied condition and not the right to avoid; see Bank of Nova Scotia v Hellenic Mutual War Risks Association (Bermuda) Ltd, The Good Luck [1991] 1 AC 233. 3 Grant v King (1802) 4 Esp 175 (delay of six months, policy not avoided); Palmer v Fenning (1833) 9 Bing 460 (delay of four months in case of a yacht, policy avoided); cf Parkin v Tunno (1809) 11 East 22 (abandonment of voyage in consequence of war perils); Nickels v London and Provincial Marine Insurance Co (1900) 6 Corn Cas 15 (abandonment of voyage under apprehension of hostilities); and see illustrations to s 60. 4 Maritime Insurance Co v Stearns [1901] 2 KB 912, 6 Corn Cas 182. 5 Bah Lias Tobacco and Rubber Estates v Volga Insurance Co Ltd (1920) 3 LI L Rep 155, 202.

43. Alteration of port of departure Where the place of departure is specified by the policy, and the ship instead of sailing from that place sails from any other place, the risk does not attach.1 Note By usage, it is said, an intermediate voyage may be interposed, but the evidence of such a usage would have to be very clear.2 Suppose a ship is insured from London to New York. If she starts from Southampton or Liverpool, it is a wholly different risk. Unless the ship starts from the terminus a quo, the risk cannot attach. 1 Way v Modigliani (1787) 2 Term Rep 30. 2 Cf Valiance v Dewar (1808) 1 Camp 503, 10 RR 738; Mount v Larkins (1831) 8 Bing at 121.

44. Sailing for different destination Where the destination is specified in the policy, and the ship, instead of sailing for that destination, sails for any other destination, the risk does not attach.1 Illustrations 1.

Policy on ship from Maryland to Cadiz. She cleared from Maryland to Falmouth, and was captured in Chesapeake Bay. The insurers were not liable, for the policy never attached because the voyage which had been commenced was not the one insured.2

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2.

Policy on ship from the Mersey to any port or ports west of Gibraltar. The ship sails from Liverpool for Cartagena, which is east of Gibraltar. The policy does not attach, and a clause authorising a change of voyage does not come into operation.3

1 Sellar v McVicar (1804) 1 Bos & P NR 23, 8 RR 744; Simon, Israel & Co v Sedgwick [1893] 1 QB 303, CA. See more recently Nima SARL v Deves Insurance plc, The Prestrioka [2003] 2 Lloyd’s Rep 327 where it was held that the court should conduct an exercise to determine the actual destination of the ship by inquiring into the acts and intentions of the ship owner and master at the time of sailing. The case also discussed the interplay with transit (warehouse-to-warehouse) clause in the 1982 Institute Cargo Clauses; cf clause 10.2 of the 2009 Clauses. 2 Woolridge v Boydell (1778) 1 Doug KB 16. 3 Simon, Israel & Co v Sedgwick [1893] 1 QB 303, CA; distinguished in the case of a warranty, Simpson SS Co v Premier Underwriting Association (1905) 10 Com Cas 198. As to change of voyage, see s 45.

45. Change of voyage (1) Where, after the commencement of the risk, the destination of the ship is voluntarily changed from the destination contemplated by the policy, there is said to be a change of voyage.1 (2) Unless the policy otherwise provides, where there is a change of voyage the insurer is discharged from liability as from the time of change, that is to say, as from the time when the determination to change it is manifested; and it is immaterial that the ship may not in fact have left the course of voyage contemplated by the policy when the loss occurs.2 Note Three different states of fact must be distinguished. First, the ship may sail on a voyage not contemplated by the policy. In that case the risk does not attach (ss 43 and 44). Secondly, a ship may commence the adventure insured, but afterwards change her destination. There is then a ‘change of voyage’. In that case the risk attaches, but is afterwards avoided (s 45). Thirdly, a ship may proceed from the terminus a quo to the terminus ad quem, but sail there by an unauthorised route. In that case there is a deviation (s 46).3 A change of voyage must be voluntary, but very clear evidence of force majeure is required in order to continue the insurer’s liability when the destination is altered. For instance, ‘if the master of the ship of his own accord, or in obedience to the orders of the officers of the Queen, abstains from entering a blockaded port, the causa proxima is, not the blockade, but the voluntary act of the master.’4 But if a voyage, legal in its inception, becomes illegal by English law before its termination, the assured is justified in changing his destination.5 In relation to the insurance of a ship for a voyage the Institute Voyage Clauses (Hulls), Clause 2 states: ‘Held covered in a case of … change of voyage … provided notice be given to the underwriters immediately after receipt of advices and any amended terms of cover and any additional premium required by them be agreed.’6 In relation to the insurance of cargo the Institute Cargo Clauses (A), Clause 10 states: ‘Where after attachment of this insurance, the destination is changed by the Assured,

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held covered at a premium and conditions to be arranged subject to prompt notice being given to the Underwriters.’7 Illustrations 1.

2.

Policy on ship at and from Cadiz to Liverpool. Afterwards, without the consent of the insurer, the destination of the ship is changed to Newfoundland. The ship is stranded and burnt in the Bay of Cadiz. The insurer is discharged from liability.8 Policy on goods. Cargo insured for carriage by German vessel from South American ports to Hong Kong and Shanghai. The vessel arrived at Rio de Janeiro on 25 August, 1939. War was declared on 3 September. The master sailed from Rio on 6 September in compliance with an order from the German Government to seek refuge in neutral ports or to return to Germany or as a last resort to scuttle themselves. Subsequently she was scuttled off the Faroe Islands to avoid capture by a British warship. The shipowners repudiated liability on the ground that there had been a change of voyage. This defence, however, failed, for the destination contemplated by the policy had not been voluntarily changed.9

1 Tudor Mar Cas Ed 3 p 125; Bottomley v Bovill (1826) 5 B & C 210; Simon, Israel & Co v Sedgwick [1893] 1 QB 303, CA; Fraser Shipping Ltd v Colton, The Shakir III [1997] 1 Lloyd’s Rep 586; Ostra Insurance Public Company Ltd v Kintex Shareholding Co [2004] EWHC 357 (Comm). 2 Tasker v Cunninghame (1819) 1 Bligh 87, HL, 20 RR 33; cf. Bottomley v Bovill (1826) 5 B & C 210. 3 Thames and Mersey Marine Insurance Co v Van Laun& Co (1905), (1917) 23 Com Cas at 110, 111, HL. 4 Per Brett J, in Rodocanachi v Elliott (1873) LR 8 CP 649 at 670, cited by Stirling LJ, in Miller v Law Accident Insurance Co [1903] 1 KB at 720, 8 Corn Cas at 168, CA (restraint of princes); distinguishing cases like Hadkinson v Robinson (1803) 3 Bos & P 388; Nickels v London and Provincial Marine Insurance Co (1900) 6 Com Cas 15 (abandonment under apprehension of hostilities). But as to blockade, see Geipel v Smith (1872) LR 7 QB 404, which, however, was a contract of affreightment where the rule of causa proxima is not so strictly applied (cf Russian Bank for Foreign Trade v Excess Insurance Co Ltd (1918) 23 Com Cas at 327). 5 British and Foreign Marine Insurance Co v Samuel Sanday & Co [1916] 1 AC 650 (voyage from America to Hamburg—declaration of war with Germany); Rickards v Forestal Land, Timber and Rlys Co Ltd [1942] AC 50, [1941] 3 All ER 62, HL. 6 See Fraser Shipping Ltd v Colton, The Shakir III [1997] 1 Lloyd’s Rep 586. 7 See Ostra Insurance Public Company Ltd v Kintex Shareholding Co [2004] EWHC 357 (Comm). 8 Tasker v Cunninghame (1819) 1 Bligh 87, HL, 102. 9 Rickards v Forestal Land, Timber and Rlys Co Ltd [1942] AC, 50, [1941] 3 All ER 62, HL. (See the judgment of Lord Wright, ibid, at p 78 and that of Lord Porter, ibid, at p 96).

46. Deviation (1) Where a ship, without lawful excuse, deviates from the voyage contemplated by the policy, the insurer is discharged from liability as from the time of deviation, and it is immaterial that the ship may have regained her route before any loss occurs.1 (2) There is a deviation from the voyage contemplated by the policy— (a) Where the course of the voyage is specifically designated by the policy, and that course is departed from;2 or (b) Where the course of the voyage is not specifically designated by the policy, but the usual and customary course is departed from.3

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(3) The intention to deviate is immaterial; there must be a deviation in fact to discharge the insurer from his liability under the contract.4 Note It is immaterial that the insurer may not be prejudiced by the deviation. As to causes which justify deviation, see s 49. As to liberty to ‘touch and stay,’ see Sch I, r 6; as to clause authorising deviation at a premium to be arranged, see s 31. Apart from the authority to deviate, a deviation may be waived by the insurer. In relation to an insurance on a ship the Institute Voyage Clauses (Hulls), Clause 2 states: ‘Held covered in case of deviation … provided notice be given to the Underwriters immediately after receipt of advices and any amended terms of cover and any additional premium required by them be agreed.’ But no additional premium is required in the case of cargo insurance, for the Institute Cargo Clauses (A), Clause 8 states: ‘This insurance shall remain in force … during … any deviation.’5 Illustrations 1.

2.

3.

4.

Policy on ship from L to J. There are two routes to J, one going north and the other south of the island of D. Sometimes one route and sometimes the other is the better, and the master ought to exercise his own discretion in each case. The owners direct him to call at a port in the north of the island of D. He therefore takes the northern route, and his ship is captured. This is a deviation.6 Policy on ship from her ‘port of lading in North America to Liverpool’. She loads part of her cargo at K, proceeds to B, which is seven miles away to complete her cargo, and returns to K for provisions, and then sails for England, and is lost on the voyage. The proceeding to B and back again is a deviation, and the insurer is not liable.7 Insurance on salvage pumps from A to the SS Alexandra ashore in the neighbourhood of D, ‘and while there engaged at the wreck and until again returned to A’. The pumps are lost on the wreck while it is being towed to N, a port of safety. This is a deviation.8 A vessel bound from Poti in the Black Sea to Sparrows’ Point in the USA puts in to Constanza, which is not on her direct geographical route, to take in oil fuel. She strands at Constanza. There is evidence that about a quarter of the oil-burning vessels proceeding from Black Sea ports to the Bosphorus bunker at Constanza. This is not a deviation. Evidence is admissible to show what is the usual, or a usual, route, and if the evidence adduced is sufficient to establish a practice to follow a particular route, proceeding by that route is not a deviation.9

1 Cf Hartley v Buggin (1781) 3 Doug KB 39, 40, per Lord Mansfield. 2 Phyn v Royal Exchange Assurance Co (1798) 7 Term Rep 505; Tait v Levi (1811) 14 East 481. 3 Davis v Garrett (1830) 6 Bing 716; Thompson v Hopper (1856) 26 LJQB at 22; Morrison v Shaw, Savill and Albion Co [1916] 2 KB 783, CA. And it may be a deviation to go to a place authorised by the policy, but for a purpose unconnected with the voyage insured: Hammond v Reid (1820) 4 B & Ald 72. 4 Cf Middlewood v Blokes (1797) 7 Term Rep at 168, 4 RR 409; Hewitt v London General Insurance Co (1925) 23 LI L Rep 243. 5 The Institute Cargo Clauses (B), Clause 8 and the Institute Cargo Clauses (C), Clause 8 are in the same terms. 6 Middlewood v Blakes (1797) 7 Term Rep 162.

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The voyage 7 Brawn v Tayleur (1835) 4 Ad & El 241, 43 RR 331. 8 Wingate v Foster (1878) 3 QBD 582; followed in Difiori v Adams (1884) 53 LJQB 437. 9 Reardon Smith Lines Ltd v Black Sea and Baltic General Insurance Co Ltd, The Indian Ciry [1939] 3 All ER 444, HL. See also Evans, Sons & Co v Cunard SS Co Ltd (1902) 18 TLR 374; Frenkel v MacAndrews & Co Ltd [1929] AC 545, HL.

47. Several ports of discharge (1) Where several ports of discharge1 are specified by the policy, the ship may proceed to all or any of them, but, in the absence of any usage or sufficient cause to the contrary, she must proceed to them, or such of them as she goes to, in the order designated by the policy. If she does not, there is a deviation.2 (2) Where the policy is to ‘ports of discharge,’ within a given area, which are not named, the ship must, in the absence of any usage or sufficient cause to the contrary, proceed to them, or such of them as she goes to, in their geographical order. If she does not there is a deviation.3 Note In a case where three ports of discharge were specified in the policy, Lord Ellen-borough said, ‘I think that the voyage insured to Palermo, Messina, and Naples meant a voyage to all or any of the places named; with this reserve only, that if the ship went to more than one place, she must visit them in the order described in the policy.’4 Illustration Voyage policy on ship from River Plate ‘to any port or ports in France and/or United Kingdom (final port)’. The ship discharges her cargo at St Nazaire and Le Havre, and then sails for Barry and is lost. ‘Final port’ means the final port of discharge, and when she leaves Le Havre, she is no longer covered by the policy.5 1 As to the meaning of ‘port’ in a policy, see Hunter v Northern Marine Insurance Co (1888) 13 App Cas 717, HL; Kynance Sailing Ship Co Ltd v Young (1911) 16 Corn Cas at 130. 2 Marsden v Reid (1803) 3 East 572. 3 Cf Metcalfe v Party (1814) 4 Camp 123; distinguish Kynance Sailing Ship Co Ltd v Young (1911) 16 Com Cas 123 (variation of chartered voyage justified by wide terms of policy). 4 Marsden v Reid (1803) 3 East at 576. 5 Marten v Vestey Bros [1920] AC 307, 25 Corn Cas 175, HL (reversing court below).

48. Delay in voyage In the case of a voyage policy, the adventure insured must be prosecuted throughout its course with reasonable despatch, and, if without lawful excuse it is not so prosecuted, the insurer is discharged from liability as from the time when the delay became unreasonable.1 Note Unjustifiable delay in prosecuting the voyage is sometimes classed under the heading of deviation; but it seems clearer to draw a distinction between time and locality. Reasonable despatch is a question of fact; see s 88. 75

The Marine Insurance Act 1906

This provision is to be contrasted with the position under s 42 (delay in commencement of the voyage) where the underwriter has the right to elect to avoid the contract. The Institute Cargo Clauses (A), Clause 8 states: ‘This insurance shall remain in force … during delay beyond the control of the Assured.’2 A positive duty of reasonable dispatch is imposed by Clause 18 which states: ‘It is a condition of this insurance that the Assured shall act with reasonable dispatch in all circumstances within their control.’3 Illustrations 1.

2.

3.

4.

A ship is insured from England to the coast of West Africa, and ‘during her stay and trade there,’ and back to England. After loading her cargo for the homeward voyage, she delays sailing for a month to salve the cargo of another ship which has been wrecked. On the voyage home she is lost. The assured cannot recover under the policy.4 Policy on goods. Twine insured against a number of risks including fire for voyage from London to Kavella, Greece. Under normal conditions the goods would have been transhipped at Piraeus to a coasting steamer for carriage to Kavella. Owing to war conditions the only means of forwarding the goods was to consign them to the British Consul at Piraeus, and request him to forward them. The goods were delayed at Piraeus for 3 months whilst awaiting a permit from the British Government. On arrival off Kavella the coasting steamer on which they were loaded was refused permission to land them, so the master decided to take them back to Piraeus to await instructions. On the return voyage they were destroyed by fire. The insurers repudiated liability on the ground that there had been unreasonable delay at Piraeus. The claim, however, succeeded because, on the evidence, the delay was not unreasonable.5 Policy on goods. Goods insured from interior of Africa and whilst awaiting shipment at Burutu for overseas ports. Owing to war conditions they were stored for 8 months, and were then lost by fire. The insurers repudiated liability on the ground that the delay at Burutu was unreasonable. This defence however failed because, on the evidence, the delay was not unreasonable, in the circumstances prevailing at the time.6 Mixed policy on ship for 12 months from Singapore to Damman, Saudi Arabia. Vessel encountering heavy weather and putting into Colombo where she was delayed for 79 days to complete non-essential repairs. Held, the time spent there was reasonable and there had not been an unreasonable delay.7

1 Company of African Merchants v British Insurance Co (1873) LR 8 Ex Ch 154, Ex Ch; cf Schroder v Thompson (1817) 7 Taunt 462 (delay justified by embargo); Samuel v Royal Exchange Assurance Co (1828) 8 B & C 119 (delay in entering port of destination caused by ice held justified). The equivalent section to s 48 was construed in Verna Trading Pty Ltd v New India Assurance Co Ltd [1991] VR 129 as applying only to the sea voyage and as having no application to periods of land transit under a policy affording warehouse to warehouse cover. 2 The Institute Cargo Clauses (B), Clause 8 and the Institute Cargo Clauses (C), Clause 8 are in the same terms. 3 The Institute Cargo Clauses (B), Clause 16 and the Institute Cargo Clauses (C), Clause 16 are in the same terms. 4 Company of African Merchants v British Insurance Co (1873) LR 8 Ex Ch 154, Ex Ch; and cf Pearson v Commercial Union Assurance Co (1876) 1 App Cas 498.

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The voyage 5 British American Tobacco v Poland (1921) 7 LI L Rep 108, CA. (See the judgment of Bankes LJ, ibid, at p 109.) 6 Niger Co Ltd v Guardian Assurance Co and Yorkshire Insurance Co (1922) 13 LI L Rep 75, HL. (See the judgment of Lord Buckmaster, ibid at 76, that of Lord Atkinson, ibid, at 81, and that of Lord Sumner, ibid, at 82). 7 M A lmojil Establishment v Malayan Motor and General Underwriters (Private) Ltd, The Aljubail IV [1982] 2 Lloyd’s Rep 637, Singapore Court of Appeal. (See the judgment of Lai J, ibid, at p 641).

49. Excuses for deviation or delay (1) Deviation or delay in prosecuting the voyage contemplated by the policy is excused— (a) Where authorised by any special term in the policy;1 or (b) Where caused by circumstances beyond the control of the master and his employer;2 or (c) Where reasonably necessary in order to comply with an express or implied warranty;3 or (d) Where reasonably necessary for the safety of the ship or subject-matter insured; or (e) For the purpose of saving human life, or aiding a ship in distress where human life may be in danger;4 or (f) Where reasonably necessary for the purpose of obtaining medical or surgical aid for any person on board the ship; or (g) Where caused by the barratrous conduct of the master or crew, if barratry be one of the perils insured against.5 (2) When the cause excusing the deviation or delay ceases to operate, the ship must resume her course, and prosecute her voyage, with reasonable despatch.6 Note In the case of a policy on a ship the Institute Voyage Clauses (Hulls), Clause 2 states: ‘Held covered in case of deviation … provided notice be given to the Underwriters immediately after receipt of advices and amended terms of cover and any additional premium required by them be agreed.’7 In the case of a policy on goods no additional premium is required, for the Institute Cargo Clauses (A), Clause 8 states: ‘This insurance shall remain in force … during … any deviation …’8 Illustrations 1. 2.

3.

Ship insured from Lyons to Galatz. She starts from Lyons on 24 July, properly equipped for the river voyage. She is detained for three weeks at Marseilles to equip herself for the open sea voyage. The delay is justifiable.’9 Ship warranted ‘free from capture in port’. To avoid capture she slips her cable before she is ready for sea, and then proceeds to a port out of her direct course to load. She is afterwards wrecked. The insurer is not liable.10 Sed quo since the Act? Policy on goods. Cargo insured for carriage by German vessel from South American ports to Hong Kong and Shanghai. At the outbreak of the

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Second World War the German Government ordered her to seek refuge, and her master did so. The deviation was excused under s 49(1)(b) as being beyond the control of the master and his employer.11 1 Puller v Glover (1810) 12 East 124; Naylor v Taylor (1829) 9 B & C 718; Hyderabad (Deccan) Co v Willoughby [1899] 2 QB 530. 2 Elton v Brogden (1747) 2 Stra 1264 (master forced out of his course by crew); Delany v Stoddart (1785) 1 Term Rep 22 (stress of weather); Rickards v Forestal Land, Timber and Rlys Co Ltd [1941] 3 All ER 62, HL. 3 Generalised from Bouillon v Lupton (1863) 15 CBNS 113 (delay to make ship seaworthy for a particular ‘stage’ of the voyage). 4 Scaramanga v Stamp (1880) 5 CPD 295, CA. As to master’s statutory duty to render salvage services where life is in danger, see Article 10(1) of the International Convention on Salvage 1989, given force of law in the UK by s 224 of the Merchant Shipping Act 1995. 5 Ross v Hunter (1790) 4 Term Rep 33. As to barratry, see Sch I, r 11. 6 Delany v Stoddart (1785) 1 Term Rep 22, and see s 48. 7 As to additional premium, see s 31. 8 The Institute Cargo Clauses (B), Clause 8 and the Institute Cargo Clauses (C), Clause 8 are in the same terms. 9 Bouillon v Lupton (1863) 15 CBNS 113. 10 O’Reilly v Royal Exchange Assurance Co (1815) 4 Camp 246. Sub-paragraph (d) perhaps overrules this decision. 11 Rickards v Forestal Land, Timber and Rlys Co Ltd (1941) 70 LI L Rep 173, HL. (See the judgment of Lord Wright, ibid, at 189 and that of Lord Porter, ibid, at 201).

ASSIGNMENT OF POLICY 50. When and how policy is assignable (1) A marine policy is assignable unless it contains terms expressly prohibiting assignment.1 It may be assigned either before or after loss.2 (2) Where a marine policy has been assigned so as to pass the beneficial interest in such policy, the assignee of the policy is entitled to sue thereon in his own name; and the defendant is entitled to make any defence arising out of the contract which he would have been entitled to make if the action had been brought in the name of the person by or on behalf of whom the policy was effected.3 (3) A marine policy may be assigned by indorsement thereon or in other customary manner. Note There is a distinction between an assignment of all rights under the policy on the one hand and of an assignment of sums payable under a policy and claims under the policy on the other. Absent novation it is only rights and not liabilities which can be assigned, always subject to existing equities. As to the assignment of proceeds and claims, the nomination of a loss payee under a hull policy is an example of the former species of assignment. As to the latter species of assignment, it is only an existing claim that may be assigned under statute; an assignment of a future claim can only take effect in equity.4 In practice, policies on goods do not contain clauses prohibiting assignment, for, if they did, international trade would be hampered. 78

Assignment of policy

In the case of insurance on a ship the Institute Time Clauses (Hulls), Clause 5 states: ‘No assignment of or interest in this insurance or in any moneys which may be or become payable thereunder is to be binding on or recognised by the Underwriters unless a dated notice of such assignment or interest signed by the assured and by the assignor in case of a subsequent assignment is endorsed on the Policy and the Policy assignment is produced before payment of any claim or return of premium thereunder.’5 In the case of insurance on freight the same provision is to be found in the Institute Time Clauses (Freight)6 and the Institute Voyage Clauses (Freight).7 Sub-section (2) reproduces the effect of the Policies of Marine Insurance Act 1868, s 1, which is repealed by this Act.8 That Act in terms only applied to policies on ship, freight, or goods; but it would probably have been held to extend to all marine policies. Where a policy was effected by an agent in his own name, the person for whose benefit it was effected could always sue on it in his own name.9 The difficulty arose in the case of an assignee. Sub-section (3) reproduces the effect of s 2 of the Act of 1868, which, in addition, prescribed an optional form of indorsement. The subsection is permissive in its terms, and a marine policy may be assigned in any way by which an ordinary chose in action may be assigned.10 It seems that it is not now customary to assign a policy by mere delivery.11 Illustrations 1. 2.

Action on policy by the assignee under a deed of assignment. The defendant (insurer) cannot set-off a claim against the assignor under another policy.12 Action on policy on ship by innocent assignee. The defendant (the insurer) may plead non-disclosure of a material fact by the assured (the assignor).13

1 Laurie v West Hartlepool Indemniry Association (1899) 15 TLR 486 (mutual insurance association); cf Pyman v Marten (1906) 13 Corn Cas 64, CA (cancellation of policy if ship transferred to new management). 2 Sparkes v Marshall (1836) 2 Bing NC 761; Lloyd v Fleming (1872) LR 7 QB 299 (action by executor of assignee); Aron & Co Inc v Miall (1928) 34 Com Cas 18, CA. 3 As to the words ‘arising out of the contract,’ see Pellas v Neptune Insurance Co (1879) 5 CPD 34, CA (set-off no defence); Pickersgill v London and Provincial Marine Insurance Co [1912] 3 KB 614 at 621 (non-disclosure but cf La Banque Financiere de la Cité SA v Westgate Ins Co Ltd [1991] 2 AC 249 – Pickersgill and assignment not considered but held underwriters’ right to avoid a policy for breach of the duty of utmost good faith is not a remedy ‘arising out of contract’ but rather arises as a matter of law); Black King Shipping Corpn v Massie, The Litsion Pride [1985] 1 Lloyd’s Rep 437, QB (Commercial Court) (fraudulent claim by mortgagee). (See the judgment of Hirst J, ibid, at 519.) As to action by mortgagor in respect of his residuary interest, when mortgagee is satisfied, see Swan v Maritime Insurance Co [1907] 1 KB 116,12 Corn Cas at 79,80. It was held by Greer and Slesser LJJ in Williams v Atlantic Assurance Co Ltd [1933] 1 KB 81 at 100,105 CA, that the words ‘the beneficial interest’ mean the whole beneficial interest; contra, Scrutton LJ at 97–8. See also Raiffeisen Zentralbank Österreich AG v Five Star General Trading LLC, The Mount I [2001] Lloyd’s Rep IR 460 affirming the position as descrbied by Greer and Slesser LJJ. 4 Raiffeisen Zentralbank Österreich AG v Five Star General Trading LLC, The Mount I [2001] Lloyd’s Rep IR 460. Where the assignment is in equity, it is usually necessary for the assignor to be joined but the Court of Appeal in Raiffeisen did not insist upon this because it was clear that the assignor would not be making a claim against the underwriters. 5 The Institute Voyage Clauses, Clause 3 is in the same terms. As to return of premium, see ss 82–84.

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The Marine Insurance Act 1906 6 Clause 6. 7 Clause 4. 8 See Raiffeisen Zentralbank Österreich AG v Five Star General Trading LLC, The Mount I [2001] Lloyd’s Rep IR 460, [64]. 9 Browning v Provincial Insurance Co of Canada (1873) LR 5 PC at 272. 10 See Law of Property Act 1925,s 136. For a discussion of this section in its application to policies of marine insurance, see: Williams v Atlantic Assurance Co Ltd, supra; Compania Colombian de Seguros v Pacific Steam Navigation Co [1964] 1 All ER 216; Amalgamated General Finance Co Ltd v CE Golding & Co Ltd [1964] 2 Lloyd’s Rep 163, QB (Commercial Court); and Raiffeisen Zentralbank Österreich AG v Five Star General Trading LLC, The Mount I [2001] Lloyd’s Rep IR 460. 11 Baker v Adam (1910) 15 Com Cas 227 at 230. See further, Aron & Co Inc v Miall (1928) 34 Corn Cas 18. ‘On the policy there is an assignment in the ordinary form in which policies are assigned in England, that is to say, the brokers who effected the policy have signed their name and the agent of the first seller has signed his name; and that indorsement in blank according to the custom of marine insurance in England assigns all claims on the policy to the holder of the policy,’ per Scrutton LJ at 20. 12 Baker v Adam (1910)15 Com Cas 227. 13 Pickersgill v London and Provincial Marine Insurance Co [1912] 3 KB 614.

51. Assured who has no interest cannot assign Where the assured has parted with or lost his interest in the subject-matter insured, and has not, before or at the time of so doing, expressly or impliedly agreed to assign the policy, any subsequent assignment of the policy is inoperative:1 Provided that nothing in this section affects the assignment of a policy after loss.2 Note This section supplements s 15 (assignment of interest). After loss, the right to indemnity accrues and is fixed, and this right can be assigned. ‘It is every day’s practice, where a ship has sustained damage, to sell the injured hull for the benefit of whom it concerns, and then sue on the policy. If it can be made out that the loss is total, the sale is for the benefit of the underwriters who pay the total loss. If the loss proves partial only, it is for the benefit of the assured, but no one ever thought of saying that the sale of the damaged hull put an end to the right to recover an indemnity for the partial loss.’3 Illustrations 1.

2.

A, B, and C each own a third share of a ship. A and B jointly insure their shares under a policy for £500. Afterwards B sells his share to C, but no arrangement is made as to the policy. The ship is lost. Only A’s share (£250) can be recovered from the insurer.4 A, who is abroad, insures a cargo being carried to London, including all risk of craft. While the cargo is afloat, A’s agent sells the cargo to B, but A retains the policy, as the cargo is not to be paid for until arrival. Part of the cargo is damaged while being landed in B’s lighters. After A’s interest has ceased, he assigns the policy to B. B cannot recover under the policy.5

1 North of England Pure Oil Cake Co v Archangel Maritime Insurance Co (1875) LR 10 QB 249, and cases cited for s 15 as to assignment of interest. As to partial transfers, see Hibbert v Carter (1787) 1 Term Rep 745; and as to right of assignors to retain ‘increased value policies,’ see Strass v Spillers and Bakers Ltd [1911] 2 KB 759, 16 Com Cas 166. See by way of contrast Dodson v Peter H Dodson

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The premium Insurance Services [2001] Lloyd’s Rep IR 278 (motor insurance, assured retained an insurable interest after selling his car because the policy covered him dirving other vehicles). 2 Lloyd v Fleming (1872) LR 7 QB 299, and s 50 (1). 3 Lloyd v Fleming (1872) LR 7 QB at 302, per Blackburn J. 4 Powles v Innes (1843) 11 M & W 10. 5 North of England Pure Oil Cake Co v Archangel Maritime Insurance Co (1875) LR 10 QB 249.

THE PREMIUM 52. When premium payable Unless otherwise agreed, the duty of the assured or his agent to pay the premium, and the duty of the insurer to issue the policy to the assured or his agent, are concurrent conditions, and the insurer is not bound to issue the policy until payment or tender of the premium.1 Note The significance of the fact that the underwriter is not bound to issue a policy is that under s 22 no action may be brought in a marine case other than on the policy. The term ‘agreed’ includes a binding usage, for usage is binding as being an implied term of the agreement: see s 87(1). Payment, it is to be noted, is not a technical term. It includes a settlement in account when that is the agreed way of doing business. See also note to s 53. The date on which premium is due can be modified by the parties’ agreement.2 1 Cf Burges v Wickham (1863) 33 LJCP at 18, per Blackburn J. As to correcting error in premium by subsequent indorsement on policy, see Mildred v Maspons (1883)8 App Cas at 878. As to issue of policy, see note s 24. 2 Heath Lambert Ltd v Sociedad de Corretage de Seguros [2004] Lloyd’s Rep IR 905, where the policy contained a premium warranty stating ‘Warranted premium payable on cash basis to London Underwriters within 90 days of attachment’ and it was held that the premium was not due and payable for 90 days. Cf J A Chapman & Co Ltd v Kadirga Denizcilik Ve Ticaret [1998] Lloyd’s Rep IR 377 and the distinction between a due date and a grace period.

53. Policy effected through broker (1) Unless otherwise agreed,1 where a marine policy is effected on behalf of the assured by a broker, the broker is directly responsible to the insurer for the premium, and the insurer is directly responsible to the assured for the amount which may be payable in respect of losses, or in respect of returnable premium.2 (2) Unless otherwise agreed,3 the broker has, as against the assured, a lien upon the policy for the amount of the premium and his charges in respect of effecting the policy;4 and where he has dealt with the person who employs him as a principal, he has also a lien on the policy in respect of any balance on any insurance account which may be due to him from such person, unless when the debt was incurred he had reason to believe that such person was only an agent.5 81

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Note In a case on an insurance company’s policy which, instead of reciting payment of the premium contained a promise by the assured to pay it, it was held that the ordinary custom applied, and the broker, not the assured, was liable to the insurer for the premium.6 Collins J, there said, ‘A Lloyd’s policy contains a recital that the premium has been paid; but supposing that the recital were made in a policy not under seal, so as not to amount to an estoppel; then upon the contract of insurance there would be an obligation upon the person insured to pay the premium. But that obligation is treated as discharged, although it is not discharged in fact; it is considered to be discharged by reason of a fiction based upon a custom which has received judicial sanction. It is a well-recognised practice in marine insurance for the broker to treat himself as responsible to the underwriter for the premium; by a fiction he is deemed to have paid the underwriter, and to have borrowed from him the money with which he pays.’ The deemed paid fiction may be overridden by any provision requiring premium to be paid in cash by or on a particular date.7 Illustration A instructs B, a broker at Hartlepool, to insure his ships. B employs C, another broker at Liverpool, to effect the insurances. C has a lien on the policies for the premiums and charges, even though A may have paid B.8 1 See eg Black King Shipping Corpn v Massie, The Litsion Pride [1985] 1 Lloyd’s Rep 437, QB (Commercial Court), where it was held that, by virtue of the broker’s cancelling clause in the policy, the brokers were specifically authorised to receive ordinary premiums on behalf of the insurers, and, by implication, any additional premium. (See the judgment of Hirst J, ibid, at 512.) The rule in s 53(1) is inapplicable to non-marine policies; see Goshawk Dedicated Ltd v Tyser Co Ltd [2005] Lloyd’s Rep IR 379, [51]. However, it applies to London market placements even where the governing law of the contract of insurance is not English; see Heath Lambert Ltd v Sociedad de Corretage de Seguros [2004] 1 Lloyd’s Rep 495. 2 Universo Insurance Co of Milan v Merchants’ Marine Insurance Co [1897] 2 QB at 97, 98 (premium); cf Hine Bros v SS Insurance Syndicate (1895) 7 Asp MLC 558, CA; Sweeting v Pearce (1859) 29 LJCP 265 (losses); Matveieff v Crossfield (1903) 8 Com Cas 120. The broker is under no legal liability to the assured to pay losses and if the broker does so gratuitously, without underwriters’ authority, it is construed as a gift leaving the assured free to claim the full amount due from underwriters; see Merrett v Capitol Indemnity Corporation [1991] 1 Lloyd’s Rep 169. 3 Fairfield Shipping Co v Gardner (1911) 27 TLR 281 (lien restricted by agreement). 4 Fisher v Smith (1878) 4 App Cas 1, HL; and cf Mildred v Maspons (1883) 8 App Cas at 879; Hunter v Leathley (1830) 10 B & C 858 (broker’s duty to produce policy at trial). 5 As to lien for general balance, see Westwood v Bell (1815) 4 Camp 349; cf Cahill v Dawson (1857) 3 CBNS 106; Juarez v Williams (3 Feb, 1903), Shipping Gazette. The lien is confined to insurance business, Dixon v Stanfield (1850) 10 CB 398; and cf Elgood v Harris [1896] 2 QB 491, as to effect of bankruptcy on a set-off. As to loss and revival of lien, see Near East Relief v King, Chasseur & Co Ltd [1930] 2 KB 40, 35 Com Cas 104. 6 Universo Insurance Co of Milan v Merchants’ Marine Insurance Co; affd [1897] 2 QB 93, CA. A premium payment warranty that the premium is payable in instalments on given days does not, however, displace the rule in s 53(1) and make the assured liable for premium; see A Chapman & Co Ltd v Kadirga Denizcilik Ve Ticaret [1998] Lloyd’s Rep IR 377. 7 Heath Lambert Ltd v Sociedad de Corretaje de Seguros [2004] 1 Lloyd’s Rep 495 and also Allianz Insurance Company Egypt v Aigaion Insurance Company SA (No 2) [2008] Lloyd’s Rep 595; [2009] 1 Lloyd’s Rep IR 533 (CA).

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Loss and abandonment 8 Fisher v Smith (1878) 4 App Cas 1, HL. As to del credere brokerage, see Caruthers v Graham (1811) 14 East 578: ‘Del Credere’ by R S T Chorley (1929) 45 LQR 221.

54. Effect of receipt on policy Where a marine policy effected on behalf of the assured by a broker acknowledges the receipt of the premium, such acknowledgment is, in the absence of fraud, conclusive as between the insurer and the assured, but not as between the insurer and broker. Note The acknowledgment is not conclusive as between the insurer and the broker. Probably then it is not conclusive as between insurer and assured, where the latter effects the policy directly. But it ought to be conclusive in favour of an assignee for value without notice.1 The section is now of doubtful practical utility.2 Though the practice has now fallen into disuse, as implied by the section, in former times a policy would state that premium had been received even when it had not been. This statement was (as per the section) binding as between assured under underwriters but given the broker was liable for premium the fact that it was so binding was of little or no consequence. The fact that the statement was not binding between underwriters and the broker, however, probably reinforced that the broker could not rely on such statements as a defence to a claim for premium. 1 See further, note to last section, and cf Roberts v Security Co Ltd [1897] 1 QB 111 (burglary policy). 2 LCIP 9 (Requirements for a Formal Marine Policy) 2010 and LCWP 3, 2011, recommended that this section should be repealed. This recommendation has not yet been implemented.

LOSS AND ABANDONMENT 55. Included and excluded losses (1) Subject to the provisions of this Act,1 and unless the policy otherwise provides, the insurer is liable for any loss proximately caused by a peril insured against, but, subject as aforesaid, he is not liable for any loss which is not proximately caused by a peril insured against.2 (2) In particular,— (a) The insurer is not liable for any loss attributable to the wilful misconduct of the assured, but, unless the policy otherwise provides, he is liable for any loss proximately caused by a peril insured against, even though the loss would not have happened but for the misconduct or negligence of the master or crew;3 (b) Unless the policy otherwise provides, the insurer on ship or goods is not liable for any loss proximately caused by delay, although the delay be caused by a peril insured against;4 (c) Unless the policy otherwise provides,5 the insurer is not liable for ordinary wear and tear, ordinary leakage and breakage, inherent vice or nature of

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the subject-matter insured, or for any loss proximately caused by rats or vermin,6 or for any injury to machinery not proximately caused by maritime perils.7 Note

Proximate Cause Rule No principle of marine insurance law is better established than the rule causa Proxima, non remota, spectator. ‘It were infinite,’ said Lord Bacon, ‘for the law to judge the causes of causes, and their impulsion one of another; therefore it contenteth itself with the immediate cause.’8 But though the rule is universally admitted, lawyers have never attempted to work out any philosophical theory of cause and effect, and probably it is as well for commerce that they should not have made the attempt.9 Nor is the concept defined in s 55. The numerous decisions on the rule are rough and ready applications of it to particular facts. As might be expected, many of the decisions are difficult to reconcile. But the apparent inconsistencies may be regarded as depending rather on inferences of fact than on matters of law. When there are interacting causes of loss, the efficient or ‘dominant’ cause is deemed to be the proximate cause.10 The law is no longer focussed on the cause which is last in time before the loss. Sub-section (1) makes plain that the proximate cause rule may be ousted by agreement. There may be more than one proximate (in the sense of effective or direct) cause of a loss. If one of those causes is insured against under the policy and none of the others is expressly excluded by it, the assured is entitled to recover.11 But if the loss is caused by two perils operating at the time of the loss and one is excluded by the policy the insurer is not liable.12 If the loss of a vessel results from a peril of the seas then the assured may recover even if underwriters show it was contributed to by unseaworthiness or inherent vice.13 The assured bears the burden of proof that the loss was proximately caused by a peril insured. If he cannot discharge that burden then he will not be entitled to recover.14 Sub-section (2) embodies the more important deductions from the general rule of proximate cause laid down in sub-s (1). The Institute Cargo Clauses now contain express exclusions which essentially reproduce the provisions in s 55(2) of the Act.

Negligence As Collins LJ, pointed out, a man may lawfully stipulate against the consequences of his own negligence,15 and he may stipulate against the consequences of his employees’ negligence or misconduct. In the case of negligence by the crew or repairers which leads to a casualty, the loss is regarded as caused fortuitously and proximately by

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perils of the seas, and only remotely by the negligence or unskilfulness of the master or crew.16 But when the loss is consequent on the wilful act or default of the assured, that act or default must be regarded as proximately causing the loss: Dolus circuitu non purgatur.17 Where, however, a ship is lost through the barratry of the master, who is a part owner, the innocent co-owners are entitled to recover.18 The Institute Time Clauses Hulls modify the statutory position on negligence providing cover under clause 6.2 provided that the assured, owners and managers have themselves exercised due diligence.

Scuttling Where the insurers allege that a vessel has been scuttled, the matter must be pleaded with particularity so that the assured may know what case he has to meet.19 But this does not mean that he is entitled to know what evidence will be adduced against him, nor is he entitled to particulars of circumstantial matters from which inferences will be sought to be drawn.20 He is entitled to have the best particulars available of those circumstances which the insurers will, by direct evidence or by inference, attempt to establish as constituting scuttling.21 To establish wilful misconduct the assured must have intended to achieve a loss or have been recklessly indifferent whether such loss or damage was caused and his immediate purpose must have been to claim on his insurers, or he must have subsequently advanced such a claim.22 If the vessel is sunk deliberately but underwriters cannot prove the connivance of the assured then (unless otherwise excluded) the loss will be covered under the peril of barratry.23 If the policy is composite rather than joint then the wilful misconduct of one assured will not prejudice the claim of another.24

Delay As a rule, the insurer is not liable for damage caused by delay, though the delay results from a peril insured against. But difficult cases arise with regard to freight, especially as regards time charters. Where the adventure is frustrated by a peril insured against, and freight is thereby lost, the insurer is liable.25 Thus, where a ship was delayed by the operation of perils of the seas, and the charterer justifiably refused to load, it was held to be a loss of freight by perils of the seas.26 On the other hand, in another case, a policy was effected ‘on freight outstanding’. The ship was hired to the Admiralty, and the charter-party provided that if the ship became inefficient, the charterers might make such abatement out of the freight as they thought fit. The ship struck a rock and became inefficient for a time. The charterers made an abatement from the freight. Held, that the insurers were not liable, as the loss was not proximately caused by the perils of the seas, but by the action of the Admiralty.27

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The line between the principles laid down by these cases is difficult to draw with certainty, and, as a result, special clauses are often inserted to protect the insurer or the assured, as the case may be, from the consequences of delay.28 Loss of time freight, resulting from detention for repair of general average damage, is not allowed in general average.29

Contracting out of the Act The parties are entitled to contract out of the provisions of s 55(2)(b) and (c) by inserting appropriate words in the policy. Whether they have effectively done so is a matter of construction.30 The assured may not contract out of s 55(2)(a).

Apprehended peril A distinction must be drawn between the actual operation of a peril insured against, and the apprehension of its operation. As Willes J, said in one case, the insurer is not liable for a loss caused by the prudence of the master or owner.31

Sale by master ‘It has often been observed,’ said Blackburn J, ‘that a sale by the master is not one of the underwriter’s perils, and is only material as showing that there is no longer anything which can be done to save the thing sold for whom it may concern.’32 Illustrations

Goods— 1.

2.

3. 4.

5.

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Policy on goods, which consist of hides and tobacco. Sea-water is shipped during a storm, which wets the hides. The hides become putrid, and the fumes from them spoil the flavour of the tobacco. The damage to the tobacco is proximately caused by perils of the seas.33 Policy on cargo warranted ‘free from all consequences of hostilities’. During the American Civil War the Confederates extinguish the light on Cape Hatteras. Owing to the absence of the light, the ship runs on to the rocks and is wrecked. The proximate cause of loss is the perils of the seas, and the insurer is liable.34 Policy on living animals ‘warranted free from mortality and jettison.’ In a storm some of the animals are so injured as to cause their death. The insurer is liable notwithstanding the warranty.35 Voyage policy on goods at and from K to Y. While the ship is loading at K, the weight of the cargo brings the discharge pipe below water. In consequence of a valve being negligently left open, water from the discharge pipe gets into the hold and damages the cargo. This is a loss proximately caused by perils of the seas, or other perils of a like kind, for which the insurer is liable.36 Policy on a parcel of gold shipped by a Russian ship to Turkey. The ship is stranded in Turkey, and the gold taken charge of by the Russian Consul.

Loss and abandonment

As the ship is Russian, the Russian Consular Court has jurisdiction, and that court awards salvage charges against the gold which would not be payable by English law. The assured has to pay these charges to get his gold. This is a loss by perils of the seas, for which the insurer is liable.37 6. Policy on goods shipped in a French ship. The ship is damaged in a collision, and the master, not having the funds requisite for the necessary repairs, gives a bottomry bond on ship, freight and cargo. The ship and freight not being sufficient to satisfy the bond, the assured has to pay the balance to get his goods. The insurer is not liable. The loss is not caused by perils of the seas, but by the lack of funds on the part of the master.38 7. Policy on cargo of fruit warranted free from average ‘unless damage be consequent on collision’. The ship is involved in a collision and has to go into port for repairs. The cargo has to be landed and re-shipped, and it is damaged partly by handling and partly by the delay. The collision is not the proximate cause of the damage, and the insurer is not liable.39 8. Policy on cargo of rice. Rats gnaw a hole in a pipe which passes through the cargo, and sea-water enters through the hole and damages the rice. The sea damage is the proximate cause of the loss, not the rats.40 9. Policy on goods. Soya beans insured for voyage from Surabaja, Indonesia, to Belgium and the Netherlands ‘against the risks of heat, sweat and combustion only’. When shipped in bulk it was a natural characteristic that soya beans would deteriorate if the moisture content exceeded 14 per cent. Beans, in fact, shipped with moisture content of between 12 and 13 per cent, thus exposing them to risk of deterioration. Cargo deteriorated and insurers repudiated liability on ground of inherent vice. Held, insurers were liable because the policy ‘otherwise provided’.41 10. Policy on goods. Industrial leather gloves shipped from Calcutta to Rotterdam and on discharge found to be wet, stained, mouldy and discoloured. When they were shipped, they contained excessive moisture. Held, the insurers were not liable because the loss was due to inherent vice.42 11. Policy on cargo. Loss of the legs on an oil rig extending some 100 metres upwards whilst being transported to a new location due to fatigue cracking. The cracking was caused by the repeated bending of the legs under the influence of the motions of the barge as it was being towed through the sea. Held, the loss had one proximate case, namely perils of the seas, not inherent vice. If there is a fortuitous loss at sea, in the sense that the loss was not inevitable even though foreseeable, and the loss is caused by the wind and the waves, then even if the sea conditions were perfectly normal the loss is by perils of the seas and inherent vice has no part to play.43

Freight— 12. Policy on freight from New South Wales to Valparaiso. The cargo consists of coal. The coal heats, and is in imminent danger of catching fire. Half of it has to be landed at Sydney. The rest is carried on and delivered. This is a partial loss of freight caused by fire (or other like perils) within the meaning of the policy.44

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13. Policy on chartered freight for £3,000. The master signs bills of lading without reserving a lien on the cargo as a whole. Part of the goods are jettisoned, and, in consequence, the actual freight received is only £2,400. The assured cannot recover the difference, viz £600, from the insurer, for the proximate cause of this loss was not the perils of the seas, but the form in which the bills of lading were given.45 14. Policy on freight. Vessel loaded a cargo of molasses at Bandar Abbas and was unable to leave for over a year. Held, no total loss of freight as freight was eventally earned when the cargo was discharged at Aarhus. Loss to the assured due to delay in receipt of freight, where there is no actual loss of freight, is not within the scope of an insurance on freight.46

Ship— 15. Policy on ship, with F C & S clause. The master engages in smuggling, and in consequence she is seized by the Spanish revenue authorities. The proximate cause of the loss is the seizure, not the barratry of the master. The insurer is not liable.47 16. Time policy on ship. The ship starts on a voyage with insufficient coal, and engages the services of a trawler to tow her to her port of discharge. The owner of the trawler gets judgment for salvage services, which assured has to pay. The steamer met with no extraordinary weather, and might in time have proceeded to her port under sail. The loss is not due to the perils of the seas, but to the insufficiency of coal.48 17. Neutral ship carrying contraband of war is damaged by ice. She is captured, and while in charge of a prize crew becomes a total loss. The ship and cargo are afterwards condemned by a Japanese prize court. This is a loss by capture and not by perils of the seas, and if there is an F C & S clause, the insurer is not liable.49 18. Policy on ship, ‘warranted free from all consequences of hostilities’. She is struck by an enemy torpedo, and badly damaged. She gets into port, but in consequence of bad weather there she strands and is lost. The proximate cause of loss is the torpedo, and the insurer is not liable.50 19. Ships sailing in convoy without lights on voyages which are not themselves warlike operations. One ship, The Petersham, comes into collision with another ship in the convoy and is lost. Another ship, The Matiana, obeying the naval officer’s directions, takes a zig-zag course and strikes a hidden reef. These losses are attributable to perils of the seas. The marine, and not the war risk insurers, are liable.51 20. Ships sailing without lights under Admiralty orders. One ship comes into collision with a destroyer hunting for submarines. Another ship comes into collision with a warship going to take up escort duty for another convoy. Both losses are attributable to warlike operations, and the war risk, and not the marine, insurers are liable.52 21. The Brendonia is at anchor. A second ship, requisitioned by the Government, is ordered to go to Southampton for orders. It is the intention of the Government (not yet communicated to the owners of the second ship) to employ her after arrival at Southampton for Army transport purposes. The second ship collides

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22.

23.

24. 25.

26. 27. 28.

with The Brendonia, and the latter becomes a total loss. Held, that the second ship is not engaged in a warlike operation; thus the loss of The Brendonia falls on the marine, and not the war risk, insurers.53 The Coxwold is sailing in convoy with a cargo of petrol for H.M. forces engaged in the Norwegian campaign. An alteration is ordered in the course of the convoy for half-an-hour to avoid a submarine. No subsequent correction is made for this considerable deviation. Later, an unexpected tidal set carries the ship some miles off her course. She is then damaged by stranding. There is no improper or negligent navigation of the vessel. Held, that the loss is the consequence of warlike operations.54 The Priam is requisitioned by the Government and is sailing with a cargo consisting mainly of war material, some of it being deck cargo. She maintains a zig-zag course at high speed to avoid submarines. Heavy weather is encountered. Both ship and cargo are damaged. Some of the damage occurs owing to warstores carried on deck breaking loose, the remainder being directly caused by the force of wind and sea. Held, by the Court of Appeal that all the damage was the consequence of warlike operations. The House of Lords, however, varied this order. Such damage as was caused by the force of wind and sea was not a consequence of warlike operations, even though it would not have occurred if the vessel had not zig-zagged or kept her speed. Thus, some of the damage was, and some was not, a consequence of warlike operations.55 A ship is intentionally sunk by the master who opens a valve. The proximate cause of the loss is the act of the master, and not the inrush of the water. This is not a loss by perils of the seas.56 Ketch placed on mud berth. She slipped over and filled with water, and was later raised. No further steps were taken and she gradually deteriorated. Held, the assured was not entitled to an indemnity for her eventual deterioration resulted from delay.57 Defect in vessel consisted of fatigue cracks in a wedge-shaped nozzle joined to the vessel’s plate. Defect was one of design. Held, loss of vessel not attributable to ordinary wear and tear, and the insurers were liable.58 Policy on ship. Ship deliberately run aground and set on fire by the master. Insurers proved that the assignees of the policy were privy to these acts. Held, that the insurers were not liable for her loss.59 War risks insurance on ship. Cocaine affixed to the hull of the ship. Assuming that act constituted an insured peril, persons acting maliciously, then there were two proximate causes of the loss, persons acting maliciously and detainment by reason of infringement of customs regulation: ‘while the general aim in insurance law is to identify a single real, effective or proximate cause of any loss, the correct analysis is in some cases that there are two concurrent causes’.60

1 See s 66 as to general average and s 78 (‘sue and labour’ clause). 2 De Vaux v Salvador (1836) 4 Ad & El at 431 (collision); Jackson v Union Marine Insurance Co (1874) LR 10 CP at 148, Ex Ch (freight); Cory v Burr (1883) 8 App Cas at 398 (barratry); Reischer v Borwick [1894] 12 QB at 550, CA (collision); Trinder v Thames and Mersey Marine Insurance Co [1898] 2 QB at 124, CA (negligent navigation); Brankelaw v Canton Insurance Office [1899] 2 QB 178, 186, CA (loss of freight due to form in which bills of lading were given); Canada Rice Mills Ltd v Union Marine and General Insurance Co Ltd [1940] 4 All ER 169, PC (see illustration 2, Sch I, r 7); Kuehne and Nagel Inc v F W Baiden [1975] 1 Lloyd’s Rep 331, New York Supreme Court (Appellate Division), where a charterer’s liability policy did not cover on-deck stowage and damage to cargo. (See the judgment of Judge Steuer, ibid, at 332.)

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The Marine Insurance Act 1906 3 Thompson v Hopper (1858) E B & E at 1047, Ex Ch (act of assured himself); Dixon v Sadler (1839) 5 M & W 405 (bad seamanship of master); Lind v Mitchell (1928) 34 Com Cas 81, CA (insured vessel negligently abandoned by master and crew); Trinder v Thames and Mersey Insurance Co [1898] 2 QB 114, CA (negligent navigation by master and co-owner); cf Price v Union Lighterage Co (1903) 8 Com Cas at 157 (negligence of lighterman); The Lapwing [1940] P 112 (yacht negligently docked so as to be allowed to sit on a dangerous bottom; held, that the intervention of those responsible for the docking provided the fortuitous circumstances which entitled the assured to recover for a loss due to a peril eusdem generis with a peril of the sea, namely, stranding); Rosa v Insurance Co of the State of Pennsylvania, The Belle of Portugal [1970] 2 Lloyd’s Rep 386, US Ct of Appeals, Ninth Circuit (fire caused by electrician’s negligence). This subsection is not qualified by s 78(4) as to ‘sue and labour’ clause: British and Foreign Marine Insurance Co v Gaunt [1921] 2 AC 41 at 65, followed in Lind v Mitchell (1928) 34 Com Cas 81 at 91, CA; Astrovianis Coinpania Naviera SA v Linard, The Gold Sky [1972] 2 Lloyd’s Rep 187, QBD (Commercial Court), where the relation between s 55(2)(a) and s 78(4) was considered by Mocatta J, ibid, at 221. 4 Tatham v Hodgson (1796) 6 Term Rep 656 (mortality among slaves); Taylor v Dunbar (1869) LR 4 CP 206 (cargo of meat); Pink v Fleming (1890) 25 QBD 396 (cargo of fruit); cf Shelbourne v Law Investment Corpn [1898] 2 QB at 629 (collision, delay during repairs). See note, post, as to freight. And cf Hudson v British and Foreign Marine Insurance Co (1902) 8 Com Cas 6 at 15 (general average). 5 See E D Bassoon& Co Ltd v Yorkshire Insurance Co (1923) 16 Ll L Rep 129; Dodwell& Co Ltd v British Dominion General Insurance Co Ltd (1918), [1955] 2 Lloyd’s Rep 391n; F W Berk& Co Ltd v Style [1955] 3 All ER 625; Biddle, Sawyer & Co Ltd v Walter Peters (Trading as Burose and Peters) [1957] 2 Lloyd’s Rep 339, QB (Commercial Court); Overseas Commodities Ltd v Style [1958] 1 Lloyd’s Rep 546, QB (Commercial Court); where tins of canned pork were insured under an all risks policy including ‘inherent vice,’ but the Court held that, having regard to the peculiar nature of the subject-matter, i e a pasteurised and not wholly sterilised pig product, it was inconceivable that the underwriters should, with their eyes open, have accepted liability for loss by inherent vice developing at any time in the future, since such a product must inevitably, if not consumed within a limited period, suffer loss from inherent vice, for, being perishable, it necessarily contained the seeds of its own ultimate destruction (see the judgment of McNair J, ibid, at 560); Robert A Parente v Bayville Marine Inc and General Insurance Co of America [1975] 1 Lloyd’s Rep 333, New York Supreme Court (Appellate Division), where a boat was insured against ‘latent defect,’ which was defined by Acting President Judge Hopkins (ibid, at 333) as ‘a defect or flaw which could not be discovered by any known or customary test’; Soya GmbH Mainz Kommanditgesellschaft v White [1983] 1 Lloyd’s Rep 122, HL, where a policy against the risks of heat, sweat and spontaneous combustion only was held to cover the risk of deterioration of soya beans. 6 The Xantho (1887) 12 App Cas at 509 (wear and tear, sea damage): Sassoon v Western Assurance Co [1912] AC 561, PC (ibid); Koebel v Saunders (1864) 33 LJCP 310 (vice pro-pre); Grant Smith& Co v Seattle Dry Dock Co [1920] AC 162, PC (dry dock capsizing in port owing to faulty construction); Wadsworth Lighterage Co v Sea Insurance Co (1929) 35 Com Cas 1 (barge sinking through general debility); The Stranna [1938] 1 All ER 458, CA (loss of deck cargo owing to ship heeling over held to be due to a peril of the sea). But note Greenshields, Cowie& Co v Stephens& Sons [1908] AC at 435, HL (general average arising out of spontaneous combustion). As to rats, see Hunter v Potts (1815) 4 Camp 203; Laveroni v Drury (1852) 22 L A Ex 2; but see Hamilton v Pandorf (1887)12 App Cas 518, where the action of the rats was not the proximate cause of the loss. 7 See Thames and Mersey Marine Insurance Co v Hamilton, Fraser& Co (1887) 12 App Cas 484, HL; Stott (Baltic) Steamers v Marten [1916] 1 AC 304, HL (crane breaking and dropping boiler into hold of ship, damaging the hull). 8 Maxims of the Law, cited De Vaux v Salvador (1836) 4 Ad & E 1 at p 431, 43 RR at p 383; Thompson v Hopper (1856) 26 LAQB at 22, 23; cf Greenock SS Co v Maritime Insurance Co [1903] 1 KB at 374, distinguishing the causa causans from the causa sine qua non. 9 Inman SS Co Ltd v Bischoff (1882) 7 App Cas at 683. 10 Leyland Shipping Co v Norwich Union Insurance Co [1918] AC 350 at 363, HL. Affirmed in Global Process Systems Inc v Syarikat Takaful Malaysia Berhad, The Cendor Mopu [2011] UKSC 5 at para 19 per Lord Saville. In CCR Fishing Ltd v Toinenson, The La Pointe [1991] 1 Lloyd’s Rep 89, Supreme Court of Canada, McLachlin J suggested a different test when she said (at 94): ‘It is my view that in determining whether a loss falls within the policy, the cause of the loss should be determined by looking at all the events which gave rise to it and asking whether it is fortuitous in the sense that the accident would not have occurred “but for” or without an act or event which is fortuitous in the sense

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Loss and abandonment that it was not to be expected in the ordinary course of things. This approach is preferable, in my view, to the artificial exercise of segregating the causes of the loss with a view to labelling one as proximate and the others as remote, an exercise on which the best of minds may differ.’ 11 JJ Lloyd Instruments Ltd v Northern Star Insurance Co Ltd, The Miss Jay Jay [1987] 1 Lloyd’s Rep 32, CA, where the question was whether damage suffered by a yacht was caused by external accidental means (which were insured against) and also by a faulty design (which was not insured against), and it was held that the assured could claim under the policy. (See the judgment of Slade LJ ibid, at 41.) See also Martini Investments Ltd v McGinn [2001] Lloyd’s Rep IR 374 and Seashore Marine SA v Phoenix Assurance plc [2002] Lloyd’s Rep IR 51. 12 P Samuel & Co Ltd v Dumas [1924] AC 431 at 467, HL (per Lord Sumner); Wayne Tank and Pump Co Ltd v Employers Liability Assurance Corporation Ltd [1974] QB 57; JJ Lloyd Instruments Ltd v Northern Star Insurance Co Ltd, The Miss Jay Jay [1987] 1 Lloyd’s Rep 32, 41 (per Slade LJ); Kuwait Airways Corporation v Kuwait Insurance Co SAK [1999] 1 Lloyd’s Rep 803; Kiriacoulis Lines SA v Compagnie d’Assurances Maritime Ariennes et Terrestres, The Demetra K [2002] Lloyd’s Rep IR 795; Svenska Handelsbanken AB v Dandridge, The Alicia Glazial [2003] Lloyd’s Rep IR 10; Midland Mainline Ltd v Eagle Star Insurance Co Ltd [2004] Lloyd’s Rep IR 739; Blackburn Rovers Football Athletic Club Ltd v Avon Insurance plc [2005] Lloyd’s Rep IR 447; Tektrol Ltd v International Insurance Co of Hanover Ltd [2005] EWCA Civ 845; Global Process Systems Inc v Syarikat Takaful Malaysia Berhad, The Cendor Mopu [2011] 1 Lloyd’s Rep 560; Navigators Insurance Co Ltd v Atlasnavios-Navegacao Lda, The B Atlantic [2018] 2 WLR 1671. 13 Global Process Systems Inc v Syarikat Takaful Malaysia Berhad, The Cendor Mopu [2011] 1 Lloyd’s Rep 560. 14 Rhesa Shipping v Edmunds, The Popi M [1985] 2 All ER 712; Lamb Head Shipping Co Ltd v Jennings, The Marel [1994] 1 Lloyd’s Rep 624; North Star Shipping Ltd v Sphere Drake Insurance plc [2005] 2 Lloyd’s Rep 76. Where the policy is written on ‘all risks’ terms, the assured need only show that the loss occurred fortuitously. 15 Westport Coal Co v McPhail [1898] 2 QB at 132. 16 Versloot Dredging BV v HDI Gerling Industrie Versicherung AG, The DC Merwestone [2013] EWHC 1666 (Comm). 17 Cf Trinder v Thames and Mersey Marine Insurance Co [1898] 2 QB at 127, CA. 18 Westport Coal Co v McPhail [1898] 2 QB at 132; and see Small v United Kingdom Marine Mutal Insurance Association [1897] 2 QB 311, CA (mortgagor and mortgagee). 19 Palamisto General Enterprises SA v Ocean Marine Insurance Co Ltd, The Dias [1972] 2 Lloyd’s Rep 60 at 73, CA (per Buckley LJ). 20 Ibid, at 73 (per Buckley LJ). 21 Ibid, at 73 (per Buckley LJ). See also Astroolanis Compania Naviera SA v Linard, The Gold Sky [1972] 1 Lloyd’s Rep 331, CA, where, however, an order for particulars of scuttling was not made because the application had been made too late. (See the judgment of Lord Denning MR, ibid, at 333, that of Edmund Davies LJ, ibid, at 338, and that of Stephenson, LJ, ibid, at 339.) 22 National Oilwell (UK) Limited v Davy Offshore Limited [1993] 2 Lloyd’s Rep 582. Cf. Papadimitriou v Henderson (1939) 64 Ll L Rep 345. 23 National Justice Compañía Naviera SA v Prudential Assurance Co, The Ikarian Reefer [1995] 1 Lloyd’s Rep 455. 24 Netherlands v Youell [1997] 2 Lloyd’s Rep 440. 25 See Re Jamieson [1895] 2 QB at 95. 26 Jackson v Union Marine Insurance Co (1874) LR 10 CP 125, Ex Ch; see, too, The Alps [1893] P 109; and The Bedouin [1894] P 1, CA, also cases of chartered freight. 27 Inman SS Co v Bischoff (1882) 7 App Cas 670. See, to like effect, Manchester Liners v British and Foreign Marine Insurance Co (1901) 7 Com Cas 26. 28 See, eg Bensaude v Thames and Mersey Marine Insurance Co Ltd [1897] AC 609, HL; Turnbull, Martin& Co v Hull Underwriters’ Association [1900] 2 QB 402 (warranty, ‘free from any claim consequent on loss of time’); Russian Bank for Foreign Trade v Excess Insurance Co Ltd [1918] 2 KB 123 (‘excluding all claims due to delay’); Federation Insurance Co of Canada v Coret Accessories Inc and Hirsch (Trading as SA Hirsch& Co) [1968] 2 Lloyd’s Rep 109, Quebec Superior Court, District of Montreal (‘warranted free of claim for loss, damage or deterioration arising from delay’); Naviera de Canarias SA v Nacional Hispanica Aseguradora SA, The Playa de las Nieves [1977] 1 Lloyd’s Rep 457, HL (‘warranted free from any claim consequent on loss of time whether arising from a peril of the sea or otherwise’); and clause 14 of the Institute Time Clauses (Freight). 29 The Leitrim [1902] P 256; followed and explained in J H Wetherall& Co Ltd v London Assurance [1931] 2 KB 448.

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The Marine Insurance Act 1906 30 Overseas Commodities Ltd v Style [1958] 1 Lloyd’s Rep 546; Soya GmbH Mainz Kommanditgesellschaft v White [1983] 1 Lloyd’s Rep 122, HL. 31 Philpot v Swann (1861) 11 CBNS at 282; Nickels v London and Provincial Marine Insurance Co (1900) 6 Com Cas 15; Kacianoff& Co v China Traders’ Insurance Co [1914] 3 KB 1121, CA (war risk policy, notice by insurer to assured not to continue the contemplated voyage); Becker, Gray& Co v London Assurance Corpn [1918] AC 101, 23 Com Cas 205, HL (German captain putting into neutral port, and landing goods there to avoid chance of capture); cf Watts& Co Ltd v Mitsui& Co Ltd [1917] AC 227, 22 Com Cas 242, 253, HL (charter-party, apprehended restraint of princes); Joseph Watson & Co v Fireman’s Fund Insurance Co [1922] 2 KB 355 (imaginary peril, general average). 32 Rankin v Potter (1873) LR 6 HL at 122. But the facts justifying the sale may, of course, show a total loss by perils insured against. They must amount to ‘stringent necessity’: Cobequid Marine Insurance Co v Barteaux (1875) LR 6 PC 319, 323. Obviously if a person sells his ship because he gets a good offer for it, or wants ready money, it is no concern of the underwriters. Cf McCarthy v Abel (1804) 7 RR 711, 719 (policy on freight, abandonment of ship to insurers). As to assignment of policy after loss, see s 51. 33 Montoya v London Assurance (1851) 6 Exch 451. 34 Ionides v Universal Marine Insurance Association (1863) 32 LJCP 170. Most of the cargo was destroyed by the sea, but a small part was saved, and a further part could have been saved but for the action of the Confederates, who prevented its being landed. Held, as to this part, that the warranty exempted the insurers from liability. Cf Le Quellec v Thomson (1916) 115 LT 224 (extinguished light). 35 Lawrence v Aberdein (1821) 5 B & AId 107, 24 RR 299. Mortality is mortality from natural causes; cf St. Paul Fire and Marine Insurance Co v Morice (1906) 11 Com Cas 153. 36 Davidson v Burnand (1868) LR 4 CP 117. 37 Dent v Smith (1869) LR 4 QB 414. 38 Greer v Poole (1880) 5 QBD 272; cf Powell v Gudgeon (1816) 5 M & S 431 (loss on sale of goods to pay for repairs). 39 Pink v Fleming (1890) 25 QBD 396, CA; cf Field SS Co v Burr [1899] 1 QB 579, CA. And distinguish Schloss Bros v Stevens [1906] 2 KB 665 (insurance against all risks). 40 Hamilton v Pandorf (1887) 12 App Cas 518 (bill of lading case, but the principle applies to insurance). 41 Soya GmbH Mainz Kommanditgesellschaft v White [1983] 1 Lloyd’s Rep 122, HL. (See the judgment of Lord Diplock, ibid, at 126). 42 TM Noten BV v Harding [1990] 2 Lloyd’s Rep 283, CA. (See the judgment of Bingham LJ, ibid, at 286–287). 43 Global Process Systems Inc v Syarikat Takaful Malaysia Berhad, The Cendor Mopu [2011] UKSC 5. Inherent vice is not to be treated an excepted peril as such, but rather a description of the circumstances in which there has not been a peril of the seas. 44 The Knight of St. Michael [1898] P 30; cf Iredale v China Traders’ Insurance Co [1900] 2 QB at 518, CA. 45 Williams & Co v Canton Insurance Office Ltd [1901] AC 462. 46 Ikerigi Cia Nav SA v Palmer, The Wondrous [1992] 2 Lloyd’s Rep 556. 47 Cory v Burr (1883) 8 App Cas 393. 48 Ballantyne v Mackinnon [1896] 2 QB 455, CA; see at 461 as to ‘inherent vice’. 49 Anderson v Marten [1908] AC 334, HL (policy on disbursements, but treated as policy on ship). For converse case, ie ship driven on to sandbank by perils of the seas, and then captured, see Hahn v Corbett (1824) 2 Bing 205. 50 Leyland Shipping Co v Norwich Union Insurance Co [1918] AC 350, HL, see at 363, per Lord Dunedin, as to the ‘dominant cause’; affirming ibid, 22 Com Cas 256, CA (The Ikaria); cf StoomvartMaatschappij Sophie H v Merchants’ Marine Insurance Co (1919) 36 TLR 73, [1919] WN 307, HL (ship striking drifting mine). 51 Britain SS Co v R [1921] 1 AC 99, HL; affg [1919] 2 KB 670, CA; cf France, Fenwick& Co Ltd v North of England Protecting Association [1917] 2 KB 522 (collision with ship sunk by submarine in shallow water). 52 A-G v Ard Coasters Ltd [1921] 2 AC 141, 26 Com Cas 352, HL; affg sub nom Richard de Larrinaga SS (Owners) v Admiralty Comrs [1920] 3 KB 65, CA; cf Adelaide SS Co v R (1922) 27 Com Cas 234, 239 (scope of term ‘warlike operations’). 53 J Wharton (Shipping) Ltd v Mortleman [1941] 2 All ER 261, 58 LQR 13, CA. It was likewise held in Larrinaga SS Co Ltd v R [1945] 1 All ER 329, HL, that a requisitioned merchant ship proceeding in ballast to a port of discharge after completion of her war services was not on a warlike operation. In this latter case, Lord Porter said (at p 335) that, J Wharton (Shipping) Ltd v Mortleman, supra, was

92

Loss and abandonment not free from complications, and that he preferred not to express any opinion on it. See also Clan Line Steamers Ltd v Liverpool and London War Risks Insurance Association Ltd [1942] 2 All ER 367, KB (ship carrying raw material for armaments from England to France not engaged in a warlike operation); Athel Line Ltd v Liverpool and London War Risks Insurance Association Ltd [1945] 2 All ER 694, CA (warlike operation may continue although ship is riding at anchor and not ‘proceeding through the water’). 54 Yorkshire Dale SS Co Ltd v Minister of War Transport, The Coxwold [1942] 2 All ER 6, HL. It is not easy at first sight to distinguish The Matiana (see illustration 17) from The Coxwold. Lord Wright said that The Matiana ‘is to be distinguished … from the present case, because of the nature of the cargo of The Matiana, which was cotton, and because neither her port of departure nor her port of arrival was a “war base’”: [1942] 2 All ER at 16. It is said that the decision in The Coxwold took the market by surprise, because it was felt that stranding was pre-eminently a maritime peril. Steps were at once taken to alter the F C & S clause. 55 Liverpool and London War Risks Insurance Association Ltd v Ocean SS Co Ltd [1947] 2 All ER 586, HL. 56 Samuel (P) & Co Ltd v Dumas [1924] AC 431, 29 Coma Cas 239, HL. 57 St. Margaret’s Trust Ltd vNavigators and General Insurance Co Ltd (1949)82 Al L Rep 752. 58 Prudent Tankers Ltd SA v Dominion Insurance Co Ltd, The Caribbean Sea [1980] 1 Lloyd’s Rep 338. 59 Continental Illinois National Bank v Alliance Assurance Co Ltd, The Captain Panagos DP [1989] 1 Lloyd’s Rep 33, CA. 60 Navigators Insurance Co Ltd v Atlasnavios-Navegacao Lda, The B Atlantic [2018] 2 WLR 1671, [43]. In that case the Supreme Court decided that the affixing of cocaine to the hull did not amount to persons acting maliciously because that required an element of spite or ill-will in relation to the property insured.

56. Partial and total loss (1) A loss may be either total or partial. Any loss other than a total loss, as hereinafter defined, is a partial loss. (2) A total loss may be either an actual total loss, or a constructive total loss.1 (3) Unless a different intention appears from the terms of the policy, an insurance against total loss includes a constructive, as well as an actual, total loss.2 (4) Where the assured brings an action for a total loss and the evidence proves only a partial loss, he may, unless the policy otherwise provides, recover for a partial loss.3 (5) Where goods reach their destination in specie, but by reason of obliteration of marks, or otherwise, they are incapable of identification, the loss, if any, is partial and not total.4 Note A loss must be either total or partial. A total loss of part is a partial loss. For example, if 100 bags of seed are insured, and 10 are destroyed by perils insured against, this is a partial loss. An apparent, but not a real, exception to this rule occurs when two or more distinct interests are covered by a single valuation. This is provided for by ss 71, 72, and 76 (1). For actual total loss, see s 57; for constructive total loss, see s 60. The existence of the doctrine of constructive total loss in marine insurance ‘has meant that the test for an ATL has been applied with the utmost rigour: for an insured

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has always the option of claiming for a CTL. Outside marine insurance the doctrine of actual total loss may be found to be more flexible’.5 1 Roux v Salvador (1836) 3 Bing N C at 285, Ex Ch. These two sub-sections are exhaustive; see Sanday & Co v British and Foreign Marine Insurance Co [1915] 2 KB 781, CA. 2 Adams v Mackenzie (1863) 13 CBNS 442; Sailing Ship Blainnore v Macredie [1898] AC at 598; and see Forwood v North Wales Insurance Co (1880) 9 QBD 732, CA as to by-laws of a mutual insurance association; cf Montreal Light, Heat and Power Co v Sedgwick [1910] AC 598, PC (goods insured against total loss by total loss of vessel). 3 Benson v Chapman (1849) 2 HLC at 696; King v Walker (1864) 2 H & C 384. As to the FPA warranty, see s 76. 4 Spence v Union Marine Insurance Co (1868) LR 3 CP 427. 5 Masefield AG v Amlin Corporate Member Ltd, The Bunga Melati Dua [2011] 1 Lloyd’s Rep 630 per Rix LJ at [16].

57. Actual total loss (1) Where the subject-matter insured is destroyed, or so damaged as to cease to be a thing of the kind insured, or where the assured is irretrievably deprived thereof, there is an actual total loss.1 (2) In the case of an actual total loss no notice of abandonment need be given.2 Note The statutory test in s 57(1) has been applied with the utmost rigour.3 Where by a peril insured against the goods of different owners are damaged and become so inextricably mixed as to be incapable of identification (eg, marks obliterated), the loss is partial, not total. See s 56(5), and the note to s 60 (constructive total loss). Before the Act the rule as to goods was that they were deemed to be an actual total loss where they were so damaged as to cease to exist in specie, or so damaged that they could not be rendered capable of arriving at their destination in specie. Goods ceased to exist in specie when they no longer answered to the commercial denomination under which they were insured.4 A sub-section to this effect was cut out in Committee, and the possible result may be that goods which still exist in specie, though they could not be rendered capable of arriving at their destination in specie, must now be regarded as a constructive total loss. If so, notice of abandonment must be given. It is to be noticed that in determining whether there is an actual total loss the rule de minimis non curat lex might apply.5 For notice of abandonment, see s 62. Illustrations 1.

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Hides are insured from Valparaiso to Bordeaux. In consequence of sea damage they arrive at Rio in a state of incipient putridity, and are sold there. Their state is such that they would be wholly putrid if carried on to Bordeaux. This is an actual total loss.6 Sed quo now? (see note, infra).

Loss and abandonment

2.

Insurance on goods in barges, as interest may appear. A cargo of rice valued at £450 is declared. The barge is sunk, and the rice remains under water for two tides. The rice is so damaged that the consignee refuses to accept it. Afterwards it is kiln-dried at a cost of £60, and then sold for £110. The rice still remains in specie, so this is only a partial loss.7 3. A ship is deserted in a sinking condition. She is afterwards towed into port by salvors and sold, by order of the court, for less than the salvage costs. The sale creates an actual total loss.8 4. Insurance on ‘profit on charter’ warranted free from all average. The assured, having chartered a ship for a lump sum, employs her up as a general ship. The bill of lading freight exceeds the chartered freight, but in consequence of sea damage to cargo only a portion of it becomes payable, and the portion payable is less than the chartered freight which assured has to pay. This is a total loss of profit on charter.9 5. Policy on ship. Obsolete battleship being towed to German port for breaking up went ashore on Dutch coast. She could be got off but the operation would be expensive. The Dutch authorities would not allow her to be moved because of the danger to the sea defences, but their decision was subject to appeal to a higher tribunal. Held, not an actual loss because the assured had not been irretrievably deprived of the vessel.10 6. Policy on ship. Tug sank in shallow water after a collision but was quickly raised. Held, not an actual total loss.11 7. Policy on ship. Insured vessel was boarded by Vietnamese customs officials. Unmanifested goods were found on board, and she was escorted into port. A special military court ordered that she should be confiscated. Held, there was not actual total loss because it had not been shown that the assured was irretrievably deprived of her.12 8. Steel injection moulds were insured for a voyage from Australia to England. On arrival they were found to be damaged by rust due to being immersed in water after the fracture of a pipe in the vessel’s hold. It was held that there was an actual total loss of the goods, for they had no value in their damaged state.13 9. 668 steel pipes were insured for a voyage from Prai to Brunei. All except 12 fell into the sea. The assured claimed for an actual total loss on the ground that the rule de minimis non curat lex applied. It was held that the claim failed because the 12 pipes were far too high a proportion of the whole consignment of 668 pipes to be capable of being dismissed as a matter de minimis.14 10. Policy on ketch. Ketch submerged at low tide, and subsequently raised. No further steps taken, and she gradually detriorated. Held, not an actual total loss because evidence showed only that when she was raised she could have been put into condition in which she was before she submerged, and the deterioration resulted from delay.15 11. Policy on freight in respect of dates. Vessel carrying them sank. Dates recovered and found to be unfit as human food, and sold for distilling purposes. Held, an actual total loss of freight because the dates were no longer dates in a commercial sense.16 12. Policy on goods. Seizure of the vessel by pirates. The cargo owners sought to argue that their property became an actual total loss at the moment of seizure, despite the strong likelihood that a ransom would be paid and that it would be 95

The Marine Insurance Act 1906

released, as happened. The assured contended that piratical seizure, capture and theft are perils which operate immediately as an actual total loss. Held, there is no rule of law that seizures by pirates, capture or theft are automatically to be treated as cases of actual total loss.17 13. Policy on ship for a voyage as a dead ship under tow, for breaking up at her destination. Tug and tow parted in a typhoon, and the vessel eventually stranded. The assured’s argued, inter alia, for an actual total loss by deprivation on the basis that although capable of being salved, she would probably have had to be separated into two halves in order to resume and complete the towage operation. Held, deprivation under s 57 depends on whether the vessel could physically be salved or not, regardless of what this might cost. The claim for an actual total loss based on destruction was also rejected (it has not lost its essential identitiy or ceased to be the thing insured).18 14. Policy on ship that grounded on a laden voyage from Oman to India. The assured claimed for an actual, alternatively constructive total loss. Held, no actual total loss. It was physically and legally possible to repair the damage, even if it would have been prohibitively expensive to do so. It had not been proved that the Indian authorities would refuse permission for the vessel to be towed to and worked on in Mumbai.19 1 Fleming v Smith (1848) 1 HL Cas at 535; Lohre v Aitchison (1878) 3 QBD at 562; Cossman v West (1887) 13 App Cas 160; Rankin v Potter (1873) LR 6 HL at 127; Captain J A Cates Tug and Wharfage Co v Franklin Insurance Co [1927] AC 698; Carras v London and Scottish Assurance Gorpn Ltd [1936] 1 KB 291 at 306, CA; Marstrand Fishing Co Ltd v Beer [1937] 1 All ER 158, KB (taking of a ship by barrators not in itself sufficient evidence of irretrievable deprivation to constitute an actual total loss); Panamanian Oriental SS Corpn v Wright [1970] 2 Lloyd’s Rep 365. 2 Kaltenbach v Mackenzie (1878) 3 CPD at 471, CA; cf Rankin v Potter (1873) LR 6 HL at 106; Associated Oil Carriers Ltd v Union Insurance Society of Canton Ltd [1917] 2 KB 184, 22 Com Cas 346; cf s 4(2)(b) proviso, as to benefit of salvage. 3 Masefield AG v Amlin Corporate Member Ltd, The Bunga Melati Dua [2011] 1 WLR 2012, [16] per Rix LJ. In the following paragraph [17], the judge approved the following words from the introduction to the first edition of this work following the Act (1907): ‘In the majority of cases the distinction between actual total loss and constructive total loss corresponds with the distinction which has been drawn between physical impossibility and mercantile impossibility. A merchant trades for profit, not for pleasure, and the law will not compel him to carry on business at a loss. A commercial operation is regarded as impracticable, from the mercantile point of view, when the cost of performing it is prohibitive.’ 4 Roux v Salvador (1836) 3 Bing NC 266, 287, Ex Ch; Asfar v Blundell [1896] 1 QB at 127, CA. 5 See illustration 9, supra. 6 Roux v Salvador (1836) 3 Bing NC 266, Ex Ch; cf Farnworth v Hyde (1865) 18 CBNS 835, as dealt with (1866) LR 2 CP at 226. 7 Francis v Boulton (1895) 65 LAQB 153. 8 Cossman v West (1887) 13 App Cas 160, PC, reviewing the cases; cf Buchanan v London and Provincial Marine Insurance Co (1895) 1 Com Cas at 168. 9 Asfar v Blundell [1896] 1 QB 123, CA. Semble an actual total loss. But distinguish Williams v Canton Insurance Office Ltd [1901] AC 462, HL and Wyllie v Povah (1907) 12 Com Cas 317 (profits on cargo, to pay on non-arrival of cargo at destination). 10 George Cohen Sons& Co v Standard Marine Insurance Co Ltd (1925) 21 Ll L Rep 30. (See the judgment of Roche, J, ibid, at 33). 11 Captain .7 A Cates Tug and Wharfage Co Ltd v Franklin Insurance Co [1927] AC 698, 137 LT 709, PC. 12 Panamanian Oriental SS Gorpn v Wright [1970] 2 Lloyd’s Rep 365. (See the judgment of Mocatta J, ibid, at 383). The decision in the case was later reversed on another ground: [1971] 1 Lloyd’s Rep 487, CA. 13 Berger and Light Diffusers Pry Ltd v Pollock [1973] 2 Lloyd’s Rep 442, QBD (Commercial Court). (See the judgment of Kerr J, ibid, at 456).

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Loss and abandonment 14 Boon and Cheah Steel Pipes Sdn Bhd v Asia Insurance Co Ltd [1975] 1 Lloyd’s Rep 452, Malaysia High Court. (See the judgment of Raja Alan Shah J, ibid, at 460, where he said that it might be that in the case of a single pipe or two out of the whole consignment, the rule would apply). 15 St Margaret’s Trust Ltd v Navigators and General Insurance Co Ltd (1949) 82 Ll L Rep 752. 16 [1896] 1 QB 123, CA. 17 Masefield AG v Amlin Corporate Member Ltd, The Bunga Melati Dua [2011] 1 WLR 2012. 18 Fraser Shipping Limited v Colton, The Shakir III [1997] 1 Lloyd’s Rep 586. See also Clothing Management Technology Ltd v Beazley Solutions Ltd [2012] 1 Lloyd’s Rep 571 – no actual total loss of goods where they were very difficult to retrieve and legal action had either not been taken or abandoned for good business reasons. 19 Venetico Marine SA v International General Insurance Co Ltd, The Irene EM [2014] 1 Lloyd’s Rep 349.

58. Missing ship Where the ship concerned in the adventure is missing, and after the lapse of a reasonable time no news of her has been received, an actual total loss may be presumed.1 Note Reasonable time is a question of fact; see s 88. The assured must still, however, prove on the balance of probabilities that the loss took place within the policy period.2 If the insurer pays for a missing ship as lost, and she afterwards turns up, she belongs to the insurer.3 When a ship is missing in wartime, the court must consider the probabilities, and determine as best it can whether the loss falls on the marine or the war risk underwriters.4 1 Green v Brown (1743) 2 Stra 1199. 2 Brown v Neilson 1 Caines 525 (1804), cited 1 Parsons 311, and followed by Field J in Reid v Standard Mar Ins Co (1886) 2 TLR 807. 3 Houstman v Thornton (1816) Holt NP 242, 17 RR 632. 4 Munro, Brice & Co v War Risks Association [1920] 3 KB 94, 25 Com Cas 112, CA; rvsg [1918] 2 KB 78, and reviewing the previous cases. For a strange case where a ship was holed, but did not sink for several hours, see United Scottish Insurance Co Ltd v British Fishing Vessels Mutual War Risks Association Ltd (1944) 78 Ll L Rep 70, KB (held, on a balance of probabilities, that the ship was holed by contact with an explosive float).

59. Effect of transhipment etc Where, by a peril insured against, the voyage is interrupted at an intermediate port or place, under such circumstances as, apart from any special stipulation in the contract of affreightment,1 to justify the master in landing and re-shipping the goods or other moveables, or in transhipping them, and sending them on to their destination, the liability of the insurer continues, notwithstanding the landing or transhipment.2 Note The English rules as to transhipment are not very well settled.3

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Where the policy on goods contains a ‘transit clause,’ the risk continues during transhipment.4 When goods have to be landed and transhipped, the consequent expenses, according to the circumstances, are sometimes recoverable as general average5 and sometimes as particular charges.6 But to avoid difficulties of proof policies on goods now include a clause in which underwriters agree to pay landing, warehousing and forwarding charges.7 1 The insurer is not a party to the contract of affreightment, and is not concerned with it, unless and in so far as it is in some way expressly incorporated into the policy, eg by the clause ‘all liberties as per contract of affreightment’. 2 Cf Bold v Rotheram (1846) 8 QB at 808. 3 Hansen v Dunn (1906) 11 Com Cas 100 (general principles as to transhipment) is the most recent exposition. 4 See eg Institute Cargo Clauses (A), Clause 8. 5 Atwood v Sellar & Co (1880) 5 QBD 286, CA. 6 Kidsion v Empire Insurance Co (1866) LR 1 CP 535, and (1867) LR 2 CP 357, explaining Booth v Gair (1864) 33 LJCP 99, and Great Indian Peninsular Rly Co v Saunders (1862) 2 B & S 266. 7 See eg clause 12 of the Institute Cargo Clauses (A).

60. Constructive total loss defined (1) Subject to any express provision in the policy,1 there is a constructive total loss2 where the subject-matter3 insured is reasonably abandoned4 on account of its actual total loss appearing to be unavoidable, or because it could not be preserved from actual total loss without an expenditure which would exceed its value when the expenditure had been incurred.5 (2) In particular,6 there is a constructive total loss‑ (i) Where the assured is deprived of the possession of his ship or goods by a peril insured against, and (a) it is unlikely7 that he can recover the ship or goods as the case may be, or (b) the cost of recovering the ship or goods, as the case may be, would exceed their value when recovered;8 or (ii) In the case of damage to a ship, where she is so damaged by a peril insured against, that the cost of repairing the damage would exceed the value of the ship when repaired.9 In estimating the cost of repairs, no deduction is to be made in respect of general average contributions to those repairs payable by other interests, but account is to be taken of the expense of future salvage operations and of any future general average contributions to which the ship would be liable if repaired;10 or (iii) In the case of damage to goods, where the cost of repairing the damage and forwarding the goods to their destination would exceed their value on arrival.11 Note Sub-section (1) lays down the general rule. Sub-section (2) formulates certain of the more important deductions from it. The Bill originally contained a sub-section dealing with freight, which was agreed to by the Lord Chancellor’s Committee, but it was contended that it was too broadly

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expressed, and it was afterwards cut out. Constructive total loss of freight is, therefore, now governed by the general provision contained in subs (1) of this section.12 It is commonly said that, for the purpose of determining whether the assured is entitled to treat a loss as a constructive total loss, regard must be had to the course which would be pursued by a prudent uninsured owner in the circumstances of the case.13 But as decisions multiply ‘the prudent uninsured owner’ test becomes of diminishing importance, because the decisions tend to settle as a matter of law the course which a prudent uninsured owner would be bound to take. This, perhaps, is fortunate, because the test is not an easy one to apply. When the test is applicable, the question is, not what the particular owner, if uninsured, would do, but what a man of average prudence ought to do in similar circumstances.14 Constructive total loss lies midway between actual total loss on the one hand and partial loss on the other. It is in effect a hybrid loss, and its dual character has complicated the decisions. In some instances notice of abandonment has been given as a matter of precaution, and a case is treated as one of constructive total loss when the facts would have justified its being treated as an actual total loss. In other instances due notice of abandonment has not been given, and the case has to be treated as a partial loss, though the facts show a constructive total loss. Again, when there was a warranty free of particular average, and the loss was heavy, juries sometimes struggled to bring the case within the line of constructive total loss. The result is that the outlines of the law are somewhat blurred. In the majority of cases the distinction between actual total loss and constructive total loss corresponds with the distinction which has been drawn between physical impossibility and business impossibility.15 A merchant trades for profit, not for pleasure, and the law will not compel him to carry on business at a loss. A commercial operation is regarded as impracticable, from the business point of view, when the cost of performing it is prohibitive. As regards a ship, sub-s (2)(ii) settles a controverted point in favour of the insurer. After much doubt it had been decided by the Court of Appeal in 1903, that the value of the wreck could not be added to the cost of repairs for the purpose of determining whether there had been a constructive total loss.16 But in a subsequent case, which was commenced before, but decided after the passing of the Act, the House of Lords in 1908 overruled this decision on the ground that a prudent uninsured owner would take the value of the wreck into account in considering whether he would repair or not.17 The Act, however, re-establishes the rule which was in force when it was passed.18 In practice, a clause in the policy usually states ‘In ascertaining whether the vessel is a constructive total loss the insured value shall be taken as the repaired value and nothing in respect of the damaged or break-up value or wreck shall be taken into account …’19 It seems that when calculating the cost of repairs, in relation to matters which cannot be determined with precision, such as the extent of damage to items of machinery and equipment which were not opened up and tested, the court will apply to any repair estimate a ‘large margin’.20

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A usual clause in war risks policies in respect of a ship concerns constructive total loss due to her detention where the assured loses the free use and disposal of her for a continuous period of 12 months.21 There is a similar clause as regards freight.22 The same general principle as to loss by frustration of the adventure seems to cover goods, freight and profits. ‘It is well established,’ said Lord Bramwell, ‘that there may be a loss of the goods by a loss of the voyage in which the goods are being transported, if it amounts, to use the words of Lord Ellenborough, to a destruction of the contemplated adventure.’23 But the doctrine of ‘loss of voyage’ has no application to a ship. The rules as to constructive total loss are peculiar to marine insurance, and do not apply to non-marine policies.24 Illustrations

Ship 1.

Policy on ship. The ship gets on a rock and the master bona fide comes to the opinion that she cannot be saved. He therefore sells her for £18. The buyer gets her off the rock and repairs her at a cost of £750, when she is worth £1,200. This is not a constructive total loss.25 2. Ship of a special class and size is valued at £17,000. In consequence of sea damage she puts into Mauritius, where she is sold for £1,400. Her value four years before the insurance was effected was £20,000. The cost of repairing her would have been £10,500, and her value when repaired would have been £7,500; but a ship of that class and size, fitted for the particular trade, could not be built or bought for £10,500. The assured can only claim for a partial loss.26 3. Policy on ship with stipulation that if she is stranded for six months, during which time it is impracticable to save her, the assured may abandon her. The ship strands and remains stranded for more than six months, but it would be practicable to save her eventually. This is a constructive total loss.27 4. Policy on ship. The cost of repairing a vessel would have amounted to $30,500. Her value when repaired would have been $34,000. The assured sought to add the value of the wreck ($14,000) to the cost of the repairs in order to claim that she was a constructive total loss. Held, that he was not entitled to do so.28 5. Policy on ship on voyage from England to Constantinople. After she sails war breaks out between Greece and Turkey. The captain was not aware of this. The Greeks capture the ship, and confiscate the cargo (coal) as contraband. Notice of abandonment is given, but not accepted. Six weeks afterwards, on proof that the captain did not know of the state of war, the ship is released. This is not a constructive total loss. It was uncertain, but not ùnlikely’ that the ship would be released.29 6. The Lavington Court is requisitioned by the Government. Whilst sailing in convoy on 18 July, 1942 she is struck by a torpedo. The master and crew leave her. Later the naval authorities attempt to save her by towing, but on 1 August she founders and sinks. There is a dispute as to when hire ceases to be payable. The owners say that there was no total loss of the ship, actual or constructive, before 1 August, and they claim hire under the charter-party up to that date.

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7.

8.

Held, by a majority that the action of the master in leaving the ship was not an ‘abandonment’ within s 60(1); nor was the recovery of the ship on 18 July ‘unlikely’ within s 60(2)(i). Hence the owners succeeded.30 Ship insured from 15 January to 15 July 1966 under time policy incorporating Institute War Clauses. Vessel seized by Vietnamese Customs authorities for carrying unmanilested goods and confiscated on order of Special Court. Attempts were made to obtain her release down to 29 August, 1967 (when writ was issued by assured) and a long time afterwards. Held, that she was a constructive total loss because her recovery was ‘unlikely’.31 A vessel was detained in the Shatt-al-Arab roads by the Iraqi authorities during a war between Iraq and Iran, and was forbidden to leave. Notice of abandonment was given on 30 September and 14 October 1981. The assured was entitled to claim for a constructive total loss because it was unlikely that possession of the vessel would be recovered within 12 months of either of those dates.32

Goods 9.

10.

11.

12.

13.

Policy on goods. The ship becomes a constructive total loss, and the goods have to be landed in a damaged condition. There is a constructive total loss of the goods if the cost of landing, warehousing, reconditioning, reshipping, and forwarding them to their destination (minus the original freight) would exceed their value on arrival.33 Policy on cargo of salt. The ship meets with bad weather, and is towed into a port of refuge by salvors. The salt is landed in a damaged condition, and is sold under a decree of the court for salvage costs. This is a partial loss, not a constructive total loss.34 Policy on two lots of goods from River Plate to Hamburg, shipped in two different ships. After the ships sail war breaks out with Germany. One ship is ordered by a French cruiser into an English port, and the other ship under Admiralty instructions is diverted by the owners into an English port. The cargoes are discharged in England. There is a constructive total loss by ‘restraint of princes,’ for the adventure is frustrated.35 Policy on goods, shipped by an English merchant from Calcutta to Hamburg on a German ship. War breaks out while the ship is in the Mediterranean. The captain to avoid risk of capture puts into Messina, and then goes on to Syracuse (neutral port) where he abandons the voyage. This is not a constructive total loss. The loss is due to the voluntary act of the captain and not to the operation of any peril insured against.36 Policy on 668 steel pipes insured for voyage from Prai to Brunei. All except 12 pipes fell into the sea. Claim for constructive total loss. No proof by assured that cost of reconditioning and forwarding the pipes to Brunei would exceed their value on arrival. Held, not a constructive total loss.37

Freight 14. Policy on freight valued at £2,000. The ship strikes a rock. The master puts into Pernambuco, and instead of abandoning as he might have done, repairs the ship

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15.

16.

17.

18.

19.

20.

102

at a cost exceeding her repaired value, borrowing the money on bottomry. The ship arrives with her cargo. On arrival the ship is sold to satisfy the claim of the lender on bottomry, and the freight also is paid to him. The owner cannot repudiate the acts of the master, and, as freight has been earned, there is no loss of freight.38 Policy on freight. The ship becomes a constructive total loss at her port of destination, but freight is earned. On the abandonment of the ship by the assured, the freight passes to insurers on ship. The assured cannot claim for a loss of freight, for it has been earned.39 Policy on chartered freight from Chittagong to Dundee. The ship is wrecked fifty miles from Dundee, and notice of abandonment is properly given in respect of ship, cargo, and freight. Underwriters employ salvors, who bring the cargo into Dundee. This is a total loss of freight. No freight is earned, because the goods are brought to their destination under a salvage contract, and not under the contract of affreightment.40 Policy on chartered freight from M to N. The ship becomes a constructive total loss, and is bought by the underwriters on cargo with the right to collect freight. The underwriters receive a certain sum as freight, but the cost of towage exceeds what they receive. This (it seems) is a total loss of freight.41 Under a charter-party (which specifies a cancelling date) the plaintiffs’ ship is proceeding to Valparaiso to load cargo. The assured take out a policy on freight and/or chartered freight and/or anticipated freight, subject to the Institute Voyage Clauses (Freight). The ship, while proceeding to Valparaiso, strands and is abandoned to hull underwriters. She is refloated and brought by salvors to M. The hull underwriters compromise for a total loss, the owners retaining the ship but remaining liable to the salvors. The ship is surrendered to the salvors in discharge of their claim. Held, that as, owing to perils of the sea, the ship could not make the cancelling date or be tendered to the charterers according to the charter-party, there was an actual loss of freight, and that it was not material to consider whether the ship was a constructive total loss.42 Under a charter-party the assured’s ship proceeds to South America and loads a cargo for UK ports. Under the charter-party, the assured are to receive a lump sum freight of £8,000 payable concurrent with discharge. The assured take out a policy on ‘freight and/or chartered freight,’ subject to the Institute Voyage Clauses (Freight). The ship, after loading, strands. The assured form the opinion that to continue the voyage will be hopelessly unprofitable, so they abandon the ship and cargo to the salvors, and give notice of abandonment. The assured agree to accept a certain sum from hull underwriters who accept full liability for the ship. Cargo underwriters pay a total loss on cargo. After repairs the ship proceeds to Rotterdam with about half the original cargo. Held, for varying reasons, that there was a total loss of freight and that the assured were entitled to recover under the policy.43 The assured take out a policy, subject to the Institute Time Clauses (Freight), on the freight to be earned by their ship for twelve months. One of the clauses provides: ‘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 …’ The assured charter the ship to a company to sail to V or A or C and there load oil for European ports. Before starting on her voyage and whilst undergoing repairs, she sustains damage from an explosion followed by a fire. The cost

Loss and abandonment

of the repairs is more than the insured value of the hull, but owing to the rise in the value of shipping, the assured have the repairs effected. The charterparty is never performed, and the assured receive no part of the freight payable thereunder. Held, that as there was a constructive total loss of the ship, the freight underwriters were liable under the policy on freight.44 1 See eg Fowler v English and Scottish Marine Insurance Co (1865) 18 CBNS 818 (to pay a total loss 30 days after official news of capture or embargo); Rowland and Marwood’s SS Co Ltd v Maritime Insurance Co (1901) 6 Com Cas 160 (CTL if ship stranded for six months). 2 This section ‘circumscribes completely the conception of constructive total loss’: per Devlin J, in Irvin v Hine [1949] 2 All ER 1089 at 1091, KB. To the same effect, see Lord Porter’s dictum in Robertson v Petros M Nomikos Ltd [1939] 2 All ER 723 at 734, HL. 3 See the expression ‘subject-matter’ discussed, British and Foreign Marine Insurance Co v Samuel Sanday & Co [1916] 1 AC 650, 657 (policy on goods). 4 This is not a reference to a notice of abandonment but rather a reference to the abandonment of the hope of recovery: see Masefield AG v Amlin Corporate Member Ltd [2010] 1 Lloyd’s Rep. 509, [54]–[57] per Steel J. See also Scott LJ, and Stable J, in Court Line Ltd v R, The Lavinglon Court [1945] 2 All ER 357, CA. Contra per du Parcq LJ, ibid. In Lind v Mitchell (1928) 34 Com Cas 81, the Court was satisfied that the abandonment of a schooner was unreasonable, for she was 15 miles from her own port. She floated high in the water 7 or 8 hours after she was abandoned. 5 Kaltenbach v Mackenzie (1878) 3 CPD at 473 and 479, per Lord Esher; Shepherd v Henderson (1881) 7 App Cas at 70, per Lord Blackburn; cf Moss v Smith (1850) 19 LJCP at 228; Robertson v Petros M Nomikos Ltd [1939] 2 All ER 723, HL (notice of abandonment not an ingredient of a constructive total loss). 6 ‘Sub-s (2), as compared with subs (1), is thus additional, and not merely illustrative’: per Lord Wright in Rickards v Forestal Land, Timber and Rlys Co Ltd [1941] 3 All ER 62 at 79, HL. See also per Stable J, in Court Line Ltd v R, The Lavington Court [1945] 2 All ER 357 at 368, CA. 7 In the Bill as drafted the word used was ‘uncertain,’ but the word ‘unlikely’ was substituted at the suggestion of the Lord Chancellor’s Committee. This alters the law, somewhat to the prejudice of the assured; see Polurrian SS Co v Young [1915] 1 KB 922, 20 Com Cas 152, 163, CA; Marstrand Fishing Co Ltd v Beer [1937] 1 All ER 158, KB (a case where it was ‘uncertain,’ but not ‘unlikely,’ that the ship would be recovered; it is the true facts, and not the facts as known at the time of abandonment, which provide the criterion); C Czarnikow Ltd v Java Sea and Fire Insurance Co Ltd [1941] 3 All ER 256, KB (‘unlikely’ that a cargo-owner would recover his goods on a German ship in a norminally neutral (Italian) port); Court Line Ltd v R, The Lavington Court [1945] 2 All ER 357, CA (see illustration 6, supra); and Kuwait Airways Corporation v Kuwait Insurance Co SAK [1996] 1 Lloyd’s Rep 664. The words ‘within a reasonable time’ are to be implied and (assuming a writ clause) the court will ask whether the vessel is likely to be recovered within a reasonable time as at the date of notice of abandonment (Royal Boskalis Westminster NV v Mountain [1997] LRLR 523). 8 Roux v Salvador (1836) 3 Bing NC at 286 (goods); Rodocanachi v Elliott (1874) LR 9 CP 518, Ex Ch (goods in besieged town); Sailing Ship Blainnore v Macredie [1898] AC 593; Rickards v Forestal Land, Timber and Rlys Co Ltd [1941] 3 All ER 62, HL (for facts, see note to Sch I, r 10); and see illustrations to s 62 (notice of abandonment). 9 Moss v Smith (1850) 19 LJCP 225; Lohre v Aitchison (1878) 3 QBD at 562, 563; affd on this point, Aitchison v Lohre (1879) 4 App Cas at 762; Rankin v Potter (1873) LR 6 HL at 116. Apart from any special provision, in applying this test, the real value and not the policy valuation is to be regarded: Irving v Manning (1847) 1 HL Cas 287, and s 27 (4). As to construction of a special clause ‘the insured value to be taken as the repaired value,’ see North Atlantic SS Co v Burr (1904) 9 Com Cas 164, and Hall v Hayman [1912] 2 KB 5; Helmvilk Ltd v Yorkshire Insurance Co Ltd, The Medina Princess [1965] 1 Lloyd’s Rep 361, QB (Commercial Court) where the assured failed to prove that the vessel was a constructive total loss, and was held to be entitled to claim for a partial loss only; and see Clause 19 of the Institute Time Clauses (Hulls). For a case where the insurers contended that the vessel was a partial loss only, and the assured proved that she was a constructive loss because the cost of the repairs exceeded the insured value, see Bank of America National Trust and Savings Association v Chrismas, The Kyriaki [1993] 1 Lloyd’s Rep 137, QB (Commercial Court). (See the judgment of Hirst J, ibid, at 142). 10 Kemp v Halliday (1866) LR 1 QB 520, Ex Ch. Conversely, freight which has been earned is not to be taken into account, Parker v Budd (1896) 2 Com Cas 47. The costs of repair can, notwithstanding the reference in s 60(2)(ii) to future salvage costs, include salvage costs incurred before the date of notice

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The Marine Insurance Act 1906 of abandonment: Sveriges Angfartygs Assurans Forening (The Swedish Club) v Connect Shipping Inc, The Renos [2018] 1 Lloyd’s Rep 285. 11 Farnworth v Hyde (1866) LR 2 CP 204, Ex Ch (sea damage to goods). 12 See, as to freight, Moss v Smith (1850) 19 LJCP 225; Rankin v Potter (1873) LR 6 HL at 102, 104; Jackson v Union Marine Insurance Co (1873) LR 8 CP 572; Re Jamieson [1895] 2 QB at 95, CA; and the illustrations given below. 13 Roux v Salvador (1836) 3 Bing NC at 286 (goods); Irving v Manning (1847) 1 HL Cas at 306 (ship); Rankin v Potter (1873) LR 6 HL at 155; Sailing Ship Blainnore v Macredie [1898] AC 593, HL (ship); but perhaps the test did not apply to freight; see Philpou v Swann (1861) 11 CBNS at 282, per Willes J. 14 The prudent or reasonable man of English law corresponds with the bonus paterfamilias of Roman law. The standard is an objective one, and any personal equation must be excluded from consideration; cf Angel v Merchants’ Marine Insurance Co [1903] 1 KB at 819, CA. 15 Moss v Smith (1850) 19 LJCP at 228; cf Rankin v Potter (1873) LR 6 HL at 104. 16 Angel v Merchants’ Marine Insurance Co [1903] 1 KB 811, CA. 17 Macbeth v Maritime Insurance Co [1908] AC 144, HL. 18 Hall v Hayman [1912] 2 KB 5. (See the judgment of Bray J, ibid, at 15). 19 See Institute Time Clauses (Hulls), cl 19. 20 Suez Fortune Investments Ltd v Talbot Underwriting Ltd, The Brillante Virtuoso [2015] 1 Lloyd’s Rep 651, [92] per Flaux J. 21 See eg Institute War and Strikes Clauses (Hulls-Time), Clause 3; Institute War and Strikes Clauses (Hulls-Voyage), Clause 3; The Bambini [1982] 1 Lloyd’s 312, where the meaning of ‘free use and disposal’ is considered, ibid, at 321 (per Staughton J). The detainment clause is almost invariably amended in the London Market to a period of six months. 22 See Institute War and Strikes Clauses (Freight-Time); Institute War and Strikes Clauses (Freight-Voyage). 23 Rodocanachi v Elliott (1873) LR 9 CP at 522, Ex Ch; British and Foreign Marine Insurance Co v Samuel Sanday& Co [1916] 1 AC 650, HL (goods). As to freight, cf Re Jamieson [1895] 2 QB at 95; Kulukundis v Norwich Union Fire Insurance Society [1936] 2 All ER 242, 1488n, CA. As to frustration of adventure in relation to affreightment (where the rule of proximate cause is less strictly applied), see e g Bank Line Ltd v Arthur Carpel & Co [1919] AC 435, HL; distinguished in Court Line Ltd v R, The Lavington Court [1945] 2 All ER 357, CA. See also Joseph Constantine SS Line Ltd v Imperial Smelting Cotpn Ltd, The Kingswood [1941] 2 All ER 165, HL. 24 Moore v Evans [1918] AC 185, 194, 23 Com Cas 124, 129, HL; reviewing the cases, and discussing the origin of the marine insurance rules. 25 Gardner v Salvador (1831) 1 Mood & R 116, 42 RR 767. 26 Grainger v Martin (1862) 2 B & S 456; affd (1863) 4 B & S 9, Ex Ch. 27 Rowland and Marwood’s SS Co Ltd v Maritime Insurance Co (1901) 6 Com Cas 160. 28 Hall v Hayman [1912] 2 KB 5. See p 92, ante. 29 Polurrian SS Co v Young [1915] 1 KB 922, 20 Com Cas 152, CA (discussed Roura and Forgas v Townend (1918) 24 Com Cas 71 at 81); Marstrand Fishing Co Ltd v Beer [1937] 1 All ER 158, KB; C Caarnikow Ltd v lava Sea and Fire Insurance Co Ltd [1941] 3 All ER 256, KB. 30 Court Line Ltd v R, The Lavington Court [1945] 2 All ER 357, CA. Scott and du Parcq LJJ, Stable J, dissenting. 31 Panamanian Oriental SS Corpn v Wright [1970] 2 Lloyd’s Rep 365, QB (Commercial Court). See the judgment of Mocatta J, ibid, at 338. This decision was subsequently reversed on another ground: [1971] 1 Lloyd’s Rep 487, CA. 32 The Bamburi [1982] 1 Lloyd’s Rep 312, a case decided by Staughton J, sitting as a sole arbitrator. (As to the loss amounting to a constructive total loss, see the award ibid, at 322.) The loss of ‘free use and disposal’ of the vessel amounted to loss of possession within the meaning of the policy. (See ibid, at 321.) 33 Farnworth v Hyde (1866) LR 2 CP 204, Ex Ch. This decision has been the subject of much discussion. 34 De Mattos v Saunders (1872) LR 7 CP 570; cf Meyer v Ralli (1876) 1 CPD 358. 35 British and Foreign Marine Insurance Co v Samuel Sanday& Co [1916] 1 AC 650, 21 Com Cas 154, HL; aff’d [1915] 2 KB 781, CA; cf Rickards v Forestal Land, Timber and Rlys Co Ltd [1941] 3 All ER 62, HL (for facts, see note to Sch I, r 10). 36 Becker, Gray& Cotpn v London Assurance Cotpn [1918] AC 101, 23 Com Cas 205, HL; affg [1916] 2 KB 156, CA. As to apprehended perils, see note, p 79, ante.

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Loss and abandonment 37 Boon and Cheah Steel Pipes Sdn Bhd v Asia Insurance Co Ltd [1975] 1 Lloyd’s Rep 452, Malaysia High Court. (See the judgment of Raja Azlan Shah J, ibid, at 454). The claim for an actual total loss by reason of the rule de minimis non curat lex also failed. (See ibid, at 460). 38 Benson v Chapman (1849) 2 HLC at 696, 723. 39 Scottish Marine Insurance Co of Glasgow v Turner (1853) 1 Macq 334, HL. 40 Guthrie v North China Insurance Co (1902) 7 Com Cas 130, CA. 41 Barque Robert S Besnard v Murton (1909) 14 Com Cas 267. (The freight had not been earned at the date taken by consent as the date of the writ.) 42 Carras v London and Scottish Assurance Corpn Ltd [1936] 1 KB 291, CA. It is convenient to insert this case here because of the preceding illustrations, but, as Lord Wright MR, pointed out (ibid, at 306), ‘it may indeed be that part of the definition of actual total loss in s 57(1), that is, the words “where the assured is irretrievably deprived” of the subject-matter insured, may apply to an actual total loss of freight such as the present.’ 43 Kulukundis v Norwich Union Fire Insurance Society Ltd [1936] 2 All ER 242, 1488n, CA. Slesser and Greene LJJ, were chiefly influenced by the fact that the cost of temporary repairs to the ship would have exceeded the repaired value of the ship; Scott LJ, rejected this test, but held that the facts established a ‘commercial loss’ of the ship, judged by the charter-party criterion. See also Vrondissis v Stevens [1940] 3 All ER 74, KB (preliminary issue on a point of law as to interpretation of a policy which provided that loss of freight was not recoverable if ‘arising from’ total loss and/or constructive total loss of vessel). 44 Robertson v Petros M Nomikos Ltd [1939] 2 All ER 723, HL. See also Continental Grain Co Inc v Twitchell [1945] 1 All ER 357, KB; affd (1945) 61 TLR 291, CA (policy on ‘anticipated earnings and/or interest, warranted free of all average. Only against total and/or constructive total loss of the vessel …’ The assured failed to prove total loss of the estimated earnings).

61. Effect of constructive total loss Where there is a constructive total loss the assured may either treat the loss as a partial loss, or abandon the subject-matter insured to the insurer and treat the loss as if it were an actual total loss.1 Notes As Cotton LJ, put it, ‘A constructive total loss is when the damage is of such a character that the assured is entitled, if he thinks fit, to treat it as a total loss.’2 As Tomlinson J has said, ‘Where there is a CTL, the assured may either treat the loss as a partial loss or he may treat it as if it were an actual total loss … However the right of the assured to treat a CTL as if it were an actual total loss is dependent on his abandoning the subject-matter insured to the insurer’.3 The assured must also continue to abandon the subject-matter insured to the insurer if he is to claim for a CTL. Where, for example, the assured sells a wreck without reference to the insurer, he will be relegated to a claim for a partial loss only.4 The Act does not define ‘abandonment,’5 and the term is sometimes used in three different senses. (1) First, and strictly, in the case of a constructive total loss, it denotes the voluntary cession by the assured to the insurer of whatever remains of the subject-matter insured, together with all proprietary rights and remedies in respect thereof. This is the meaning in which it is principally used in the Act.6 (2) Secondly, but incorrectly, it is used as equivalent to notice or tender of abandonment, that is to say, the act by which the assured signifies to the insurer his election to abandon what remains and claim for a total loss.7

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(3) Thirdly, it denotes the cession or transfer, which takes place, by operation of law, of whatever remains of the subject-matter insured when the insurer pays for a total loss. In this sense, it is a corollary of the doctrine of subrogation, which is a necessary incident of every contract of indemnity.8 As to notice of abandonment, see s 62, and as to its effects, see s 63. An election to claim for a partial loss, once made, is irrevocable.9 The section, of course, would not apply to a case where, by the terms of the policy, the assured was only entitled to claim for an actual total loss; see s 56(3).

Date of cause of action In a constructive total loss case the cause of action arises at the date of the casualty, so that the notice of abandonment is not an essential ingredient of that cause of action, but rather a notification of an election between two alternative quantums of damage.10 Accordingly, where a vessel was a constructive total loss on 22 July 1985 and the notice of abandonment was given on 3 September 1985, the period of limitation under the Limitation Act 1980 began on 22 July 1985.11 Illustration A ship is damaged by sea perils and puts into a foreign port. The master, after communicating with the owners, has her repaired at a cost exceeding her value when repaired. After her arrival in London the owners give notice of abandonment. This is ineffectual. There is only a partial loss.12 1 Roux v Salvador (1836) 3 Bing NC at 286, 287, Ex Ch; Fleming v Smith (1848) 1 HL Cas 513; Rankin v Potter (1873) LR 6 HL at 118, 131, 135; and Kaltenbach v Mackenaie (1878) 3 CPD 467, 479, CA, where abandonment and notice of abandonment are distinguished. As to election, see ibid, and Browning v Provincial Insurance Co of Canada (1873) LR 5 PC 263. 2 Kaltenbach v Mackenak (1878) 3 CPD at 479. 3 Dornoch Ltd v Westminster International BV, The WD Fairway [2009] 2 Lloyd’s Rep 191, [31]. 4 Dornoch Ltd v Westminster International BV, The WD Fairway [2009] 2 Lloyd’s Rep 191, [33]. 5 From the French abandonnement, but the corresponding term in insurance law is délaissement. 6 Rankin v Potter (1873) LR 6 HL at 144; cf Kaltenbach v Mackenaie (1878) 3 CPD at 471. 7 Rankin v Potter (1873) LR 6 HL 83 at 118, 119, per Blackburn J, and at 156 (per Lord Chelmsford); cf Kaltenbach v Mackenzie (1878) 3 CPD at 479. 8 Simpson v Thomson (1877)3 App Cas at 292, 293, per Lord Blackburn; cf Rankin v Potter (1873) LR 6 HL at 118; Kaltenbach v Mackenaie (1878) 3 CPD at 471, per Lord Esher; and see s 79 as to subrogation, and note to s 63. 9 Kastor Navigation Co Ltd v AGF MAT [2004] 2 Lloyd’s Rep 119. 10 Bank of America National Trust and Savings Association v Christmas, The Kyruiki [1993] 1 Lloyd’s Rep 137, QB (Commercial Court). (See the judgment of Hirst J, ibid, at 151). 11 Ibid. 12 Fleming v Smith (1848) 1 HL Cas 513.

62. Notice of abandonment (1) Subject to the provisions of this section, where the assured elects to abandon the subject-matter insured to the insurer he must give notice of abandonment. If he fails to do so the loss can only be treated as a partial loss.1 106

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(2) Notice of abandonment may be given in writing, or by word of mouth, or partly in writing and partly by word of mouth, and may be given in any terms which indicate the intention of the assured to abandon his insured interest in the subject-matter insured unconditionally to the insurer.2 (3) Notice of abandonment must be given with reasonable diligence after the receipt of reliable information of the loss, but where the information is of a doubtful character the assured is entitled to a reasonable time to make inquiry.3 (4) Where notice of abandonment is properly given, the rights of the assured are not prejudiced by the fact that the insurer refuses to accept the abandonment. (5) The acceptance of an abandonment may be either express or implied from the conduct of the insurer. The mere silence of the insurer after notice is not an acceptance.4 (6) Where notice of abandonment is accepted the abandonment is irrevocable. The acceptance of the notice conclusively admits liability for the loss and the sufficiency of the notice.5 (7) Notice of abandonment is unnecessary where at the time when the assured receives information of the loss there would be no possibility of benefit to the insurer if notice were given to him.6 (8) Notice of abandonment may be waived by the insurer.7 (9) Where an insurer has reinsured his risk, no notice of abandonment need be given by him.8 Note As to definition of abandonment, see note to s 61; as to its effects, see s 63. As to under-insurance, see s 81 and the notes to s 79 (subrogation). Suppose notice of abandonment is given, and the insurer does not accept it. Can the assured withdraw the notice? Atkinson J, answered this question by saying that ‘by a notice of abandonment the assured merely makes an offer, which remains executory unless and until it is accepted. Until it is accepted the assured has the right to look to intervening events which may restore in whole or in part his former situation, and may limit his claim accordingly if it suits him better to claim as for a partial loss … Indeed if it were not so, s 62(6) of the Marine Insurance Act 1906 would be otherwise expressed.’9 It seems that where due notice of abandonment has not been given, the right to give notice of abandonment may revive on a change of circumstances.10 Before the Act it was an open question whether notice must be given if the subjectmatter must inevitably perish before notice could be received and acted on, though the subject-matter exists when the election to abandon is made.11 Notice of abandonment is not excused simply because the insurers, if notified, could have done nothing more than was done by the assured. If the goods are there to be dealt with, and there is something useful which can be done, notice must be given.12 ‘Information of the loss’ means information such that the assured is in a position to make up his mind that there is a constructive total loss.13 107

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Notice of abandonment can only be given by or on behalf of the owner of the subjectmatter insured, eg it cannot be given by a pledgee of the policy, but it can be given by a joint owner who manages the vessel for the rest.14 Sub-section (9) is rather ambiguously worded. It would be clearer if it ran: ‘Where an insurer has reinsured his risk, no notice of abandonment need be given by him to the reinsurer.’

Ademption of loss According to the law of Scotland and of most foreign countries, the validity of a notice of abandonment must be determined by reference to the state of facts at the time when notice is given, but in England, as Lord Herschell said, the rule is ‘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, or, in other words, if at the time of action brought the circumstances are such that a notice of abandonment would not be justifiable, the assured can only recover for a partial loss,’ but this rule does not extend to a change of circumstances when brought about by the action of the insurer.15 The theory of ademption of loss, said Roche J, ‘is that restoration precludes recovery, not because in such case there never was a constructive total loss, but because an assured cannot, under a contract of indemnity, although he may at one time have suffered a loss, recover in respect of such loss, if before action it has already been made good to him.’16 The issue of the writ is therefore all important in England. Until that is done, the notice of abandonment is liable to be defeated. A sub-section embodying the English rule was cut out in Committee on objection taken by the Scottish members. It has not yet been decided whether the possible effect of the Act, as it stands, may be to abrogate the English in favour of the Scottish rule. Be that as it may, in modern practice the conflict between the English rule and the Scottish rule is negligible, because, as Pickford J, pointed out, when notice of abandonment is sent, ‘the underwriters are asked in case they refuse to accept the abandonment to put the assured in the same position as if a writ had been issued. In nine cases out of ten, and probably a much larger proportion, the underwriters agree to do so, and, if they do not, the consequence is that the assured issues his writ immediately, and therefore the two dates in ordinary English insurance practice correspond.’17 Similarly, Staughton J, sitting as a sole arbitrator, said: ‘If abandonment is declined, it is the usual practice, so far as my knowledge goes, to agree to place the assured in the same position as if a writ had been issued.’18 Illustrations 1. 2.

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Policy on ship. On 7 February the assured is informed that the ship is a constructive total loss. On 23 February she is sold for what she will fetch. On 10 March notice of abandonment is given. This is too late.19 Policy on ship. Obsolete battleship left Chatham in December 1922 for Germany to be broken up. After 2 or 3 days she stranded on the Dutch coast and became a constructive total loss. In February 1923 the assured claimed for

Loss and abandonment

a total loss and in April 1923 gave formal notice of abandonment. Held, the claim made in February 1923 was a valid notice of abandonment and had been made within a reasonable time.20 3. A ship is captured by the enemy. The owner, hearing of the capture, gives notice of abandonment. The ship is recaptured and restored to her owner before action brought. The notice of abandonment is ineffectual. This is only a partial loss.21 4. A ship insured against war risks is captured, and the assured gives notice of abandonment. The insurer declines to accept it. The assured commences an action. After the issue of the writ, the Prize Court, on the termination of the war, decrees the restoration of the ship. This is a valid abandonment, and the assured can recover for a total loss.22 5. A ship is sunk in deep water in harbour. Notice of abandonment is given, but not accepted, and then the underwriter, on his own initiative, and at great expense, recovers the ship before action is brought. The notice is valid, and the assured can recover for a total loss.23 6. Chartered freight on homeward voyage is insured by policy covering prior outward voyage. On the outward voyage the ship becomes a constructive total loss, so freight on homeward voyage is lost. No notice of abandonment need be given.24 7. Policy on freight from New Zealand to San Francisco. The ship strands near Honolulu, and the cargo, which consists of coal, gets wetted. Ship and cargo are both sold at Honolulu. If the coal had been dried and sent on, the cost would have been more than its worth. There is a total loss of freight, and no notice of abandonment is necessary.25 8. Policy on profit on charter. The ship becomes a constructive total loss, but no notice of abandonment is given by the shipowner. The assured (charterer) can recover, although no notice of abandonment has been given.26 9. Policy on goods. Cargo insured from Novorossisk to Falmouth. After the closing of the Dardanelles the assured telegraphed to their brokers saying: ‘Agreeable release underwriters if underwriters will pay difference between present value in Novorossisk and insured value.’ This telegram was shown to the underwriters. Held, there had been no effective notice of abandonment, for the telegram had not indicated the intention of the assured to abandon their interest unconditionally.27 10. Policy on goods. Some tins of petroleum were a constructive total loss. Notice of abandonment was given to a Lloyd’s agent by a representative of the assured. The notice was invalid because a Lloyd’s agent was not authorised to receive it on behalf of the insurers.28 11. Policy on ship. Tug was sunk in a collision and notice of abandonment was given to the insurers. As a result of salvage operations which they instituted the vessel was raised and towed inshore, and the notice was not accepted. Without the knowledge of the assured the salvors made an offer to purchase the vessel but withdrew it 3 weeks later. The assured contended that the negotiations between the insurers and the salvors constituted an acceptance of the notice. Held, that no acceptance could be implied from the conduct of the insurers.29 12. Policy on ship. Ship attacked and struck by missile in war between Iraq and Iran, and subsequently sank. Salvage was completely impracticable by reason of the place and the circumstances of the sinking. Held, notice of abandonment was unnecessary.30 109

The Marine Insurance Act 1906 1 Gernon v Royal Exchange (1815) 6 Taunt 383, 387. As to the origin of notice of abandonment, see Kaltenbach v Mackenaie (1878) 3 CPD at 471, CA, where the whole subject is discussed. 2 Currie & Co v Bombay Native Insurance Co (1869) LR 3 CP at 78; Hall v Hayman (1911) 17 Coma Cas at 87; Panamanian Oriental SS Cotpn v Wright [1970] 2 Lloyd’s Rep 365, QB (Commercial Court). This decision was subsequently reversed on another ground: [1971] 1 Lloyd’s Rep 487, CA; Black King Shipping Corpn v Massie, The Litsion Pride [1985] 1 Lloyd’s Rep 475, QB (Commercial Court), where a number of telexes and the writ claiming an indemnity in respect of a total loss amounted to a notice of abandonment. (See the judgment of Hirst J, ibid, at 478.) A conditional notice of abandonment, suggesting a compromise, is insufficient: Russian Bank for Foreign Trade v Excess Insurance Co [1919] 1 KB 39, 24 Com Cas 55, 57, CA. Nor was a letter to underwriters in Involnert Management Inc v Aprilgrange Ltd, The Galatea [2015] 2 Lloyd’s Rep 289 which said the vessel was ‘almost certainly’ a CTL (see [261]). 3 Cunvie v Bombay Insurance Co (1869) LR 3 PC at 79; Rankin v Potter (1873) LR 6 HL at 105; Kaltenbach v Mackenaie (1878) 3 CPD at 472, 478. Reasonable diligence, like reasonable time, is a question of fact: see s 88 and Sveriges Angfartygs Assurans Forening (The Swedish Club) v Connect Shipping Inc, The Renos [2018] 1 Lloyd’s Rep 285. 4 Provincial Insurance Co of Canada v Leduc (1874) LR 6 PC 224; Shepherd v Henderson (1881) 7 App Cas 49, HL (underwriters acting as salvors not an acceptance); Captain J A Cates Tug and Wharfage Co Ltd v Franklin Insurance Co [1927] AC 698. The rejection of a notice of abandonment (usual practice in the London Market) does not preclude a subsequent exercise by the insurers of their right to take over the subject matter on full payment of the loss, under s 79(1): Dornoch Ltd v Westminster International BV (No. 2), The WD Fairway [2009] 2 Lloyd’s Rep 191. 5 Smith v Robertson (1814) 2 Dow 474, 14 RR 174; Provincial Insurance Co v Leduc (1874) LR 6 PC 224 (implied acceptance, waiver of breach of warranty). Semble, a notice of abandonment given and accepted under a mutual mistake of fact may be a nullity: Norwich Union Fire Insurance Society Ltd v William H Price Ltd [1934] AC 455, PC. Similarly, if the policy can be avoided for nondisclosure, the underwriter will not be bound to pay the claim simply by virture of accepting notice of abandonment: Fraser Shipping Ltd v Colton [1997] 1 Lloyd’s Rep 586. 6 Farnworth v Hyde (1865) 18 CBNS 835 (goods); Rankin v Potter (1873) LR 6 HL 83 (freight); Kaltenbach v Mackenaie (1878) 3 CPD 467, CA (ship); Associated Oil Carriers Ltd v Union Insurance Society of Canton Ltd [1917] 2 KB 184, 22 Com Cas 346, 350 (freight, chartered voyage becoming illegal by outbreak of war). Reliance on s 62(7) rejected in Involnert Management Inc v Aprilgrange Ltd, The Galatea [2015] 2 Lloyd’s Rep 289 where vessel fire damaged and lying in port with some residual value. As to constructive total loss developing into actual total loss, see Levy v Merchants’ Marine Insurance Co (1885) 5 Asp MLC 407 and Kastor Navigation Co Ltd v. AGF MAT, The Kastor Too [2004] Lloyd’s Rep IR 481. 7 Housiman v Thornton (1816) Holt NP 242; Black King Shipping Corpn v Massie, The Litsion Pride (supra), where it was held that there was no evidence of a waiver. (See the judgment of Hirst J, ibid, at 478.) Notice was waived in Rickards v Forestal Land, Timber and Rlys Co Ltd [1941] 3 All ER 62, HL. 8 Uzielli v Boston Marine Insurance Co (1884) 15 QBD 11, CA. As to rights of reinsurer when original insurer effects a compromise, see British Dominion & General Insurance Co Ltd v Duder [1915] 2 KB 394, CA, criticising the Uzielli case. 9 Pesquerias y Secaderos de Bacalao de Espana SA v Beer (1946) 79 Ll L Rep 417, KB, per Atkinson J, p 433; reversed on the facts (1947) 80 Ll L Rep 318, CA; [1949] 1 All ER 845, HL. Notice of abandonment may also be withdrawn by conduct, for example in selling the vessel without reference to underwriters or otherwise acting inconsistently with abandoning the vessel to underwriters (Royal Boskalis Westminster NV v Mountain [1997] LRLR 523; Dornoch Ltd v Westminster International BV (No. 2), The WD Fairway [2009] 2 Lloyd’s Rep 191). Cf. Suez Fortune Investments Ltd v Talbot Underwriting Ltd, The Brillante Virtuoso [2015] 1 Lloyd’s Rep 651. 10 Stringer v English and Scottish Marine Insurance Co (1869) LR 4 QB 676, and (1870) LR 5 QB 599 at 604. 11 Kaltenbach v Mackenzie (1878) CPD at 475, per Brett LJ. 12 Vacuum Oil Co v Union Insurance Society of Canton Ltd (1926) 25 Ll L Rep 546 at 554. 13 Ibid, at 553. 14 Jardine v Leathley (1863) 32 LJQB 132. 15 Sailing Ship Blaimore v Macredie [1898] AC at 610. See at 606, 609 as to Scottish rule. 16 Roura and Forgas v Townend [1919] 1 KB 189 at 196, 24 Com Cas 71 at 81.

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Loss and abandonment 17 Polurrian SS Co v Young (1913) 19 Com Cas 143 at 153. See eg Panamanian Oriental SS Corpn v Wright [1970] 2 Lloyd’s Rep 365, QB (Commercial Court), where the insurers agreed to put the assured in the same position as if they had issued a writ on 23 May 1966, when the constructive total loss of the vessel was alleged to have occurred. (See the judgment of Mocatta J, ibid, at 383.) This decision was subsequently reversed on another ground: [1971] 1 Lloyd’s Rep 487, CA. It was argued in a final trial in The WD Fairway litigation, which did not lead to a judgment but which was heard in full by Steel J, that the writ clause could be of wider significance. The assured contended that it amounted to a contractual agreement by underwriters to pay interest under section 35A of the Senior Courts Act 1981 as if a claim form had been issued on the date the writ clause was scratched. The present editors consider that this would be a surprising effect. See Atlasnavios Navegacao Lda v Navigators Insurance Co Ltd, The B Atlantic [2015] 1 Lloyd’s Rep 117 [344]. 18 The Bamburi [1982] 1 Lloyd’s Rep 312 at 321. 19 Kaltenbach v Mackenzie (1878) 3 CPD 467, CA. 20 George Cohen Sons & Co v Standard Marine Insurance Co Ltd (1925) 30 Com Cas 139. 21 Bainbridge v Neilson (1808) 10 East 329; cf Dean v Hornby (1854) 3 E & B 180, 190. See note, ante, as to ademption of loss. 22 Ruys v Royal Exchange Assurance Corpn [1897] 2 QB 135, reviewing previous cases. Aliter, it seems, in Scotland: Sailing Ship Blairmore v Macredie [1898] AC 593 at 606, 609. See, p 100 ante. 23 Sailing Ship Blairmore v Macredie [1898] AC 593. 24 Rankin v Potter (1873) LR 6 HL 83. 25 Trinder v Thames and Mersey Marine Insurance Co [1898] 2 QB at 119, CA. 26 Roura and Forgas v Townend [1919] 1 KB 189, 24 Com Cas 71 (ship captured by Germans but afterwards recovered). 27 Russian Bank for Foreign Trade v Excess Insurance Co Ltd [1919] 1 KB 39, CA. 28 Vacuum Oil Co v Union Insurance Society of Canton Ltd (1926) 25 Ll L Rep 546, CA. (See the judgment of Atkin LJ, ibid, at 554.) 29 Captain J A Cates Tug and Wharfage Co Ltd v Franklin Insurance Co (1927) 137 LT 709, PC. (See the judgment of Lord Sumner, ibid, at 711.) 30 Black King Shipping Corpn v Massie, The Litsion Pride (supra). (See the judgment of Hirst J, ibid, at 478).

63. Effect of abandonment (1) Where there is a valid abandonment, the insurer is entitled to take over the interest of the assured in whatever may remain of the subject-matter insured, and all proprietary rights incidental thereto.1 (2) Upon the abandonment of a ship the insurer thereof is entitled to any freight in course of being earned, and which is earned by her subsequent to the casualty causing the loss,2 less the expenses of earning it incurred after the casualty; and where the ship is carrying the owner’s goods the insurer is entitled to a reasonable remuneration for the carriage of them subsequent to the casualty causing the loss.3 Note As to the effect of under-insurance, see s 81, and see s 79 as to subrogation. As to the various meanings of ‘abandonment,’ see note to s 61. Scrutton LJ, explained the effect of abandonment thus:4 ‘What is the effect of abandonment under English or German law, which are assumed to be the same? When the total loss of a thing insured is not actual but constructive, that is, where the thing insured is in specie, but the cost of preserving and repairing it would be more than its value when preserved or repaired (see Marine Insurance Act 1906,

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s 60), the assured must give a notice of abandonment. This in itself does not pass any property or rights in the thing insured to the underwriter. If the underwriter then pays the assured a total loss, it used to be thought that the payment passed the property and rights incidental to it to the underwriter, as benefit of salvage. Lord Blackburn in 1877, before the Marine Insurance Act [1906], in Simpson v Thomson said:5 ‘I do not doubt at all that where the owners of an insured ship have claimed or been paid as for a total loss, the property in what remains of the ship, and all rights incident to the property, are transferred to the underwriters as from the time of the disaster in respect of which the total loss is claimed for and paid.’ He distinguishes the case from subrogation to a right to recover damages against a third party in respect of the thing insured, which he says follows on payment for a total loss, but must be exercised in the name of the assured and in respect of his right … ‘… But before the Marine Insurance Act was passed in 1906, circumstances arose which rendered it necessary to consider whether an underwriter, merely by paying, necessarily became the “owner” of the thing insured, for it might be a damnosa hereditas, whose ownership only imposed liabilities which the underwriter did not want. The owner of a ship wrecked in a harbour might be liable to the harbour authority for the costs of buoying and removing the wreck. The case of River Wear Comrs v Adamson,6 as explained in The Mostyn,7 shows the difficulties of deciding the liability of “the owner” in such a case, and in 1894, in Arrow Shipping Co v Tyne Improvement Comrs,8 the question was raised whether underwriters, who had paid a total loss, were not “owners” liable for the expense of raising the wreck, and Lord Herschel declined to decide the question. Probably in consequence of this question having arisen when the Marine Insurance Act 1906 was passed, s 63 was worded thus: “Where there is a valid abandonment, the insurer is entitled to take over the interest of the assured in whatever may remain of the subject-matter insured, and all proprietary rights incidental thereto,” thus apparently leaving it open to the underwriter not to “take over” the interest of the assured, though “entitled to take it over”.’ Each underwriter has a separate contract with the assured, so it is a decision for each underwriter severally whether or not to exercise the right to take over the subject matter under s 63(1).9 In practice, it is very rare for an underwriter to take over the assured’s interests in the subject matter insured.10 Usually, the underwriters and assured will co-operate and either the vessel/wreck will be sold or the assured permitted to keep her whilst giving credit for the net residual value.11 A decision of Bailhache J, supports the view that if notice of abandonment is given, but not accepted, the property becomes res nullius.12 But in a later case,13 Greer LJ said: ‘It does not follow that because notice of abandonment is given to an insurer, therefore, the vessel which may have some value, is abandoned to all the world, so that it has no owner at all, and becomes what lawyers prefer to describe, using the Latin language, as res nullius.’ More recently,14 Cohen LJ, said that his inclination was to prefer the opinion expressed by Greer LJ, to that of Bailhache J. Where underwriters elect to take over the proprietary interests of the assured in the subject matter, underwriters thereby obtain an equitable lien over the subject matter, and the lien crystallises into full legal ownership as soon as the loss is actually

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paid. If there is an impediment (eg, registration) to the immediate vesting of legal title, equitable title is nevertheless vested in underwriters.15 The interest of each underwriter in the subject matter insured is in proportion to its subscription. It has been suggested that, in case of abandonment, freight should be apportioned between the insurer on ship and the insurer on freight: see a curious case where this was done by consent.16 The provisions of this sub-s (2) may be modified by agreement;17 they are modified, for example, by Clause 20 of the Institute Time Clauses (Hulls), which states: ‘In the event of total or constructive total loss no claim to be made by the underwriters for freight whether notice of abandonment has been given or not.’ Clause 18 of the Institute Voyage Clauses (Hulls) is in the same terms. On abandonment, any act or thing done subsequent to the casualty causing the loss by the assured or his agents for the protection of the subject-matter insured, is at the risk of the insurer and for his benefit, provided such an act or thing is done in good faith and reasonably.18 Illustrations 1.

2.

3.

4.

5.

Ship insured from Quebec to Liverpool. She is damaged first by an iceberg, and again damaged in entering the dock at Liverpool. The cargo is delivered and freight paid. After survey the ship is found to be not repairable, and the owner abandons her to the insurer. The freight belongs to the insurer on ship.19 Policy on ship. The ship halfway on the voyage becomes a total loss and is abandoned to the insurers, but the cargo is landed, and sent on by the master in another ship to its destination. The insurer on ship is not entitled to the freight so earned.20 Policy on ship, which has been chartered. The ship is damaged by collision and cannot earn freight. Her damage is such that she is abandoned to the insurer. The insurer on ship is not entitled to the damages which the assured may recover from the ship at fault for loss of freight.21 Policy on chartered freight from Pensacola to England. The ship gets into Havannah as a constructive total loss, and is abandoned. The cargo is brought home by the insurers. The adjustment is made at Liverpool, but by agreement in accordance with the law of Havannah. Under that law pro rata freight to Havannah is payable. The insurer is entitled to this freight.22 Policy on ship from Pensacola to Hartlepool. Part of the freight is paid in advance. The ship is stranded getting into Hartlepool, but the cargo is delivered, and freight earned. Assured abandons the ship. The insurer is not entitled to the advance freight, but only to the balance payable on arrival.23

1 Stewart v Greenock Insurance Co (1848) 2 HL Cas at 183; Rankin v Potter (1873) LR 6 HL at 118, 114; and cf s 79 (subrogation). 2 Sea Insurance Co v Hadden (1884) 13 QBD 706, CA. 3 Miller v Woodfall (1857) 27 LJQB 120. 4 Allgemeine Versicherungs-Gesellschaft Helvetia v Administrator of German Property [1931] 1 KB 672 at 687–8, CA (a case where abandonment involved the assignment of a chose in action by an enemy). 5 (1877) 3 App Cas 279 at 292. 6 (1877) 2 App Cas 743. 7 Great Western Rly Co v SS Mostly (owner) [1928] AC 57. 8 [1894] AC 508.

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The Marine Insurance Act 1906 9 Dornoch Ltd v Westminster International BV (No. 2), The WD Fairway [2009] 2 Lloyd’s Rep 191. 10 Cf. Dornoch Ltd v Westminster International BV (No. 2), The WD Fairway [2009] 2 Lloyd’s Rep 191, which was an unprecedented case where cooperation proved not to be possible. The vessel was sold to a Nigerian subsidiary of the assured before all underwriters had elected to take over the vessel following a dispute about her residual value. 11 As described in Dornoch Ltd v Westminster International BV, The WD Fairway (No.3) [2009] 2 Lloyd’s Rep 420, [11]–[12]. Where the assured keeps the vessel it is sometimes referred to (inaccurately) as it ‘buying back’ the vessel from underwriters. 12 Boston Corpn v Fenwick & Co Ltd (1923) 28 Com Cas 367. 13 Oceanic Steam Navigation Co Ltd v Evans (1934) 40 Com Cas 108 at 111, CA. 14 Blane Steamships Ltd v Minister of Transport [1951] 2 KB 965 at 991, CA. 15 Scottish Marine Insurance Co v Turner (1853) 1 Macq HL Cas 334; Dornoch Ltd v Westminster International BV (No. 2), The WD Fairway [2009] 2 Lloyd’s Rep 191. 16 Sharp v Gladstone (1805) 7 East 24. 17 Coker v Bolton [1912] 3 KB 315 (agreement that in case of CTL freight shall not go to insurer on ship). But note that a policy ‘without benefit of abandonment’ is a wager policy under s 4. 18 Rankin v Potter (1873) LR 6 HL at 119; cf the ‘waiver’ clause, p 248, post, and s 78 (4). 19 Stewart v Greenock Insurance Co (1848) 2 HL Cas 159; on these facts there is no loss of freight for which assured can claim against insurer on freight: Scottish Marine Insurance Co of Glasgow v Turner (1853) 1 Macq 334, HL. 20 Hickie v Rodocanachi (1859) 28 LJ Ex 273. But the insurer is entitled to pro rata freight earned under a foreign contract of affreightment; see London Assurance v Williams (1892) 9 TLR 96; affd 9 TLR 257, CA. See illustration 4, post. 21 Sea Insurance Co v Hadden (1884) 13 QBD 706, CA. 22 London Assurance v Williams (1892) 9 TLR 96; affd 9 TLR 257, CA. 23 The Red Sea [1896] P 20, CA.

PARTIAL LOSSES (INCLUDING SALVAGE AND GENERAL AVERAGE AND PARTICULAR CHARGES) 64. Particular average loss (1) A particular average loss is a partial loss of the subject-matter insured, caused by a peril insured against, and which is not a general average loss.1 (2) Expenses incurred by or on behalf of the assured for the safety or preservation of the subject-matter insured, other than general average and salvage charges, are called particular charges. Particular charges are not included in particular average.2 Note The expression ‘particular average loss’ involves a tautology, but the use of the term among lawyers is inveterate. ‘A general average differs from a particular average in its nature and incidence. The former is a partial loss, voluntarily incurred for the common safety, and made good proportionably by all parties concerned in the adventure; the latter is a partial loss, fortuitously caused by a maritime peril, and which has to be borne by the party upon whom it falls.’3 Once it is accepted that expenditure which would be recoverable as particular average is general average expenditure, it cannot be recovered as particular average.4

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As to particular charges, see further s 65(2), s 76(2) and s 78, and Sch I, r 13; and as to particular average warranties, see s 76. See further, the illustrations to ss 69, 71 and 76. 1 Kidston v Empire Insurance Co (1866) LR 1 CP at 544; Lohre v Aitchison (1878) 3 QBD at 566, per Brett LJ; Price& Co v Al Ships’ Small Damage Insurance Association Ltd (1889) 22 QBD at 590, CA. 2 Ibid. 3 C. McArthur, The Contract of Marine Insurance (2nd ed, 1890), p 163. 4 Comatra Ltd v Lloyd’s Underwriters [2000] 2 Lloyd’s Rep 574, [41] per Clarke LJ.

65. Salvage charges (1) Subject to any express provision in the policy, salvage charges incurred in preventing a loss by perils insured against may be recovered as a loss by those perils.1 (2) ‘Salvage charges’ means the charges recoverable under maritime law by a salvor independently of contract. They do not include the expenses of services in the nature of salvage rendered by the assured or his agents, or any person employed for hire by them, for the purpose of averting a peril insured against. Such expenses, where properly incurred, may be recovered as particular charges or as a general average loss, according to the circumstances under which they were incurred.2 Note The decision of the House of Lords in 1879 in Aitchison v Lohre3 that an award paid to a salvor, who was not acting under a salvage contract, could not be recovered under the ‘sue and labour’ clause occasioned some surprise. The case proceeded on the ground that salvors, who intervene voluntarily and not under contract, are not the agents of the assured, for English law does not, as a rule, recognise the Continental doctrine of ‘agent of necessity’. The practical effect of the decision, now embodied in the Act, is this. As ‘salvage charges’ strictly so called, are recoverable under the policy, and not under the ‘sue and labour’ clause, they cannot be recovered in addition to the sum insured, but the total liability of the insurer is limited to the sum insured.4 Contractual salvage, which accounts for most modern salvage – under the Lloyd’s Open Form, for example – is recoverable under the suing and labouring clause.5 The payment of salvage charges under a foreign adjustment is usually provided for by a special clause in the policy, a usual form of which runs:6 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; but where the contract of affreightment so provides the adjustment shall be according to York-Antwerp Rules’. The expression ‘salvage’ requires definition, because it is used in various senses. In maritime law it is applied alike to the salvor’s service and the salvor’s reward. It is used to denote the services of a salvor, who intervenes voluntarily, and whose rights

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are given him by maritime law, and also the services of a salvor, who is employed by the ship, and whose rights depend on contract. In insurance law it is also used to denote the thing saved, as eg in the phrase ‘without benefit of salvage,’ or when a loss is referred to as a ‘salvage loss’. If the insurer voluntarily pays a salvage claim, without the assent of the assured, he does so at his own risk, and cannot set off the sum so paid against an assignee of the policy.7 Life salvage, apart from the salvage of property, is the creation of statute,8 and the shipowner’s liability therefore is not covered by the ordinary form of policy on ship. It must be covered by a special insurance.9 But a salvage award in so far as it reflects an element of life salvage gives rise to a charge incurred in preventing a loss by perils insured against within the meaning of s 65(1), for by the practice of the Admiralty Court an award made in these circumstances is treated as being an award for services rendered to the ship and cargo.10 In the present section, and throughout the Act, the term ‘salvage’ is used to denote salvage strictly so called, ie the salvor’s reward, under maritime law, for saving property or property and life conjointly. ‘With regard to salvage, general average, and contribution,’ said Bowen LJ, ‘the maritime law differs from the Common Law. That has been so from the time of the Roman law downwards. The maritime law, for the purposes of public policy, and for the advantage of trade, imposes in these cases a liability upon the thing saved—a liability which is a special consequence arising out of the character of mercantile enterprise, the nature of sea perils, and the fact that the thing saved was saved under great stress and exceptional circumstances.’11 As to the adjustment of salvage charges, see s 73(2). Military salvage, that is to say salvage by Her Majesty’s ships, is necessarily regulated on different lines, because of the special duty of those ships to render protection and help to ships in distress.12 As to ‘particular charges,’ see s 64(2), and as to ‘general average loss,’ see s 66(1). Illustrations 1.

2.

116

A ship valued at £2,600 is insured with D for £1,200. After encountering very bad weather, the ship is rescued by a steamer, with which no contract is made, and which afterwards obtains a salvage award of £800. The owner does not abandon the ship, but elects to repair her. D’s proportion of the expenses of repair comes to £1,200; i e the full sum insured. He is not liable for any portion of the salvage or general average expenses in excess of the £1,200.13 Time policy on ship. The ship starts on a voyage with an insufficiency of coal, and engages the services of a trawler to tow her to her port of discharge. The owner of the trawler gets judgment for salvage services, which the assured has to pay. The steamer met with no extraordinary weather, and might in time have sailed to the port. The loss is not due to the perils of the seas, but to the insufficiency of coal, which is not a peril insured against, and accordingly the insurer is not liable.14

Partial losses (including salvage and general average and particular charges) 1 Aitchison v Lohre (1879) 4 App Cas at 765; cf SS Balmoral v Marten [1901] 2 KB at 904, CA. See the discussion of Aitchison v Lohre by Phillips LJ in Royal Boskalis Westminster NV v Mountain [1999] 2 WLR 538. 2 Australian Coastal Shipping Commission v Green [1971] 1 All ER 353, CA, where expenses incurred in defending an action brought by tugowners, who had rendered services to the insured vessel, were held to be general average expenditure and recoverable under the policy. Cf Anderson v Ocean SS Co (1884) 10 App Cas 107, 114; cf s 78 (‘sue and labour’ clause). As to the meaning of salvage and the history of the subject, see Aitchison v Lohre (1879) 4 App Cas 755 at 765–6. 3 (1879) 4 App Cas at 765; and cf Uzielli v Boston Marine Insurance Co (1884) 15 QBD 11, CA. 4 Cf Montgomery v Indemnity Mutual Marine Insurance Co [1902] 1 KB at 152, per Mathew J. 5 Marine Insurance Act 1906, s 78. See also Seashore Marine SA v Phoenix Assurance plc [2002] Lloyd’s Rep IR 51 and Institute Time Clauses Hulls, cl 11.1. 6 See Institute Time Clauses (Hulls) Clause 11. The Institute Voyage Clauses (Hulls) Clause 9 is in the same terms. 7 Swan v Maritime Insurance Co [1907] 1 KB 116; cf Buchanan v London and Provincial Marine Insurance Co (1895) 1 Com Cas 165 (salvage expenses paid by insurers, who afterwards have to pay a total loss). 8 Merchant Shipping Act 1894, s 544. 9 Nourse v Liverpool Sailing Ship Association [1896] 2 QB 16, CA. The assured’s liability to pay life salvage may be insured with a mutual insurance association. 10 Grand Union (Shipping) Ltd v London SS Owners’ Mutual Insurnce Association Ltd, The Bosworth (No 3) [1962] 1 Lloyd’s Rep 483, QB (Commercial Court). See especially the judgment of McNair J, ibid, at 490–491. 11 Falcke v Scottish Insurance Co (1886) 34 Ch D at 248. 12 See Merchant Shipping Act 1894, ss 557–564 as amended by Merchant Shipping (Salvage) Act 1916, and the cases decided on these enactments. 13 Aitchison v Lohre (1879) 4 App Cas 755, discussed in Montgomery v Indemnity Mutual Marine Insurance Co [1902] 1 KB at 152; Dixon v Sea Insurance Co (1880) 4 Asp MLC 327, CA. 14 Ballantyne v Mackinnon [1896] 2 QB 455, CA.

66. General average loss (1) A general average loss is a loss caused by or directly consequential on a general average act. It includes a general average expenditure as well as a general average sacrifice.1 (2) There is a general average act where any extraordinary sacrifice or expenditure is voluntarily and reasonably made or incurred in time of peril for the purpose of preserving the property imperilled in the common adventure.2 (3) Where there is a general average loss, the party on whom it falls is entitled, subject to the conditions imposed by maritime law, to a rateable contribution from the other parties interested, and such contribution is called a general average contribution.3 (4) Subject to any express provision in the policy, where the assured has incurred a general average expenditure, he may recover from the insurer in respect of the proportion of the loss which falls upon him;4 and in the case of a general average sacrifice he may recover from the insurer in respect of the whole loss without having enforced his right of contribution from the other parties liable to contribute.5 (5) Subject to any express provision in the policy, where the assured has paid, or is liable to pay, a general average contribution in respect of the subject insured, he may recover therefor from the insurer.6

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(6) In the absence of express stipulation, the insurer is not liable for any general average loss or contribution where the loss was not incurred for the purpose of avoiding, or in connection with the avoidance of, a peril insured against.7 (7) Where ship, freight, and cargo, or any two of those interests, are owned by the same assured, the liability of the insurer in respect of general average losses or contributions is to be determined as if those subjects were owned by different persons.8 Note The definition of ‘general average’ given by Lawrence J, in 1801, still remains the standard definition. ‘All loss,’ he said, ‘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 proportionably by all who are interested.’9 Where there is a general average loss, the period of limitation under the Limitation Act 1980 runs from the date of the loss, and not from the date when the general average statement prepared by the average adjusters is published to the insurers.10 But where the parties sign a general average bond, the period of limitation runs from the time when the general average statement has been completed by the average adjusters11 Sub-sections (1) to (3) are merely explanatory, and perhaps belong more properly to the law of general average than to the law of marine insurance.12 As Gorell Barnes J, said, ‘… the obligation to contribute in general average exists between the parties to the adventure, whether they are insured or not. The circumstances of a party being insured can have no influence on the adjustment of general average, the rules of which … are entirely independent of insurance. If a contributing party is insured, he can claim an indemnity against his underwriter in respect of the contribution which he has been compelled to pay in general average, but that is all. I do not forget that in some cases an assured may have a right to recover in full for the loss of sacrificed property, but the underwriters have the right. to recover contribution from the various contributories, and, subject to certain differences of values, the result to the underwriters should be practically the same as if the assured had only claimed his contribution from them.’13 Sub-section (7) was twice altered during the passage of the Bill through Parliament, and is not very happily expressed. It was intended to affirm the recently established rule that there might be a claim on the insurer for a loss in the nature of a general average loss though there were no contributing interests, owing to single ownership. But take this case. A mast is sacrificed for the benefit of ship and cargo. If they are owned by different owners, the assured on ship gets the full value of the mast from the underwriter on ship, but the latter then becomes entitled to contribution from the cargo owner.14 But where the shipowner is the same person as the cargo owner, it seems absurd to pay him the full value of the mast and thereby become entitled to claim from him the cargo contribution. No doubt as a matter of adjustment the cargo contribution will have to be deducted. 118

Partial losses (including salvage and general average and particular charges)

It has been said that the English law of general average is in a somewhat unsatisfactory condition.15 The liability to contribute is a Common Law liability, independent of insurance, and consequently the liability of the assured under the contract of affreightment may differ from that of the insurer under the policy. For example, suppose goods are insured with a warranty ‘free of capture and seizure’. General average expenses may be incurred in avoiding capture, but the insurer would not be liable for them. The English rule of law, though not always logically carried out in details, is narrower than the consistent practice of average adjusters, and considerably narrower than the rule which prevails in nearly all foreign countries. In England, general average is only payable when the sacrifice was made, or the expenditure incurred, for the preservation of the ship and cargo. Foreign laws for the most part include in general average nearly all expenses incurred for the benefit of the common adventure. As to the place of adjustment, and the law to be followed, see note to s 91. In practice, the normal English rule only applies in exceptional cases, because nearly every policy contains a foreign adjustment clause16 which makes either some foreign laws or the York-Antwerp Rules applicable. A usual clause17 states: 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; but where the contract of affreightment so provides the adjustment shall be according to York-Antwerp Rules.’ The York-Antwerp Rules of 1890 attempted to cover only a portion of the field, but those of 1924 were intended to provide a complete code.18 There were revisions of the Rules in 1974, 1994 and 2004 and the present Rules are those of 2016. It seems a moot point whether volunteer salvage charges can ever be recovered as general average. Concerning general average as between ship, freight, and cargo, see R Lowndes and G R Rudolf, The Law of General Average and the York-Antwerp Rules (15th edn, 2018). It is the duty of the shipowner and his agents to take such steps as may be reasonable to provide that all general average contributions (whether due to himself or others) are adjusted and collected, and he has a lien on the cargo until this be done.19 As to adjustment of general average loss, see s 73. It has yet to be decided whether general average expenditure is recoverable over and above the limit of indemnity payable for a total loss as is the case with sue and labour.20 Illustrations 1.

2.

Policy on goods. Certain goods are jettisoned as a general average act. The insurer of these goods must pay the insured value of them as a loss under the policy, but he then stands in the place of the assured as regards claims for contribution from the other parties interested.21 Policy on ship from London to Liverpool and thence to Calcutta. The ship strands on a bank in Ireland. Half the cargo, consisting of salt, is jettisoned. The remainder is brought back much damaged to Liverpool. The amount to be 119

The Marine Insurance Act 1906

3.

4.

5.

6. 7.

made good in general average must be ascertained by valuing the jettisoned salt at the price it would have fetched in Liverpool, and the probability that it would have been damaged like the rest of the cargo must be taken into account.22 Policy on cargo of corn from Varna to Marseilles, general average ‘as per foreign statement’. The ship springs a leak, part of the corn is sea-damaged, and the voyage has to be abandoned at Constantinople. Average is adjusted according to the law prevailing there, and the damage to the wheat is charged to general average though, according to English law, it would be particular average but excluded by the terms of the policy. The insurer is liable to pay this sum.23 Policy on goods. Both ship and goods belong to the same owner. In stormy weather the mast has to be cut away for the safety of ship and cargo. The shipowner is entitled to a general average contribution from the insurer on goods in respect of the general average sacrifice.24 Policy on ship. Under charter-party the ship sails in ballast for Savannah, where she is to load a cargo of cotton for England. On the voyage out the ship grounds, and a general average loss is incurred in respect of the ship’s machinery. The chartered freight is liable to contribute, and the amount of the contribution can be deducted from the sum due under the policy on ship.25 Sailing ship in wartime engages a tug to tow her from Queenstown to Sheerness in order to lessen the danger from submarines. The cost of the tug is not a general average expenditure, for the vessel is not in immediate peril.26 Vessel insured under policy incorporating York-Antwerp Rules 1950 was in peril, and engaged a tug under United Kingdom Standard Towage Conditions, which stated that the shipowner must indemnify the tugowner for any damage to the tug. Tow line fouled the tug’s propeller and she was damaged. The shipowner indemnified the tugowner and claimed that the expenditure was a general average expenditure. Held, the insurer was liable to reimburse him, for the expenditure was a ‘direct consequence’ of a general average act within the meaning of Rule C27 of the York-Antwerp Rules 1950.28

1 Ocean SS Co v Anderson (1883) 13 QBD at 666, CA; Svendsen v Wallace (1884) 13 QBD at 84, CA; (1885) 10 App Cas at 419, HL. As to the words ‘directly consequential,’ see Atwood v Sellar (1880) 5 QBD 286, CA (landing and warehousing goods); cf Greenshields, Cowie & Co v Stephens & Sons Ltd [1908] AC 431, HL (damage to goods by water used to put out fire). 2 Iredale v China Traders’ Insurance Co [1900] 2 QB at 519, CA. The usual phrase is ‘ship and cargo’ instead of ‘common adventure,’ but cases occur where there is a common adventure, but no cargo, eg ship in ballast going out to earn chartered freight. 3 Svendsen v Wallace (1885) 10 App Cas at 415. 4 These words are wide enough to include the cargo’s share of a general average expenditure incurred by the shipowner but irrecoverable from the cargo by reason of the diminution or extinction of its value before the adventure terminates: Green Star Shipping Co Ltd v London Assurance [1933] 1 KB 378, KB. The word ‘proportion’ in s 66(4) is not a reference to rateable proportion; see Comatra Ltd v Various Underwriters, The Abt Rasha [2000] 2 Lloyd’s Rep 575. 5 Dickenson v Jardine (1868) LR 3 CP 639; The Mary Thomas [1894] P at 125, CA. Where the YorkAntwerp Rules apply, contributory values are to be assessed as at the termination of the adventure: Green Star Shipping Co Ltd v London Assurance (supra). 6 Cf Henderson v Shankland [1896] 1 QB 525, CA (general average sacrifice following particular average loss and ship then becoming CTL). The word ‘subject’ more correctly should be ‘subject-matter’ or Interest’. 7 Harris v Scaramanga (1872) LR 7 CP at 496. It is necessary, therefore, for the assured to prove that the expenditure was incurred by reason of avoiding loss which would otherwise have been proximately

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caused by a peril insured against under the terms of the relevant Clause; see Seashore Marine SA v Phoenix Assurance plc [2002] Lloyd’s Rep IR 51. Cf Joseph Watson & Co v Fireman’s Fund Insurance Co [1922] 2 KB 355 (imaginary peril, no general average). 8 Montgomery v Indemnity Mutual Marine Insurance Co [1901] 1 KB 147; affd [1902] 1 KB 734, CA. Cf Popham v St Petersburg Insurance Co (1904) 10 Com Cas 31 (freight and goods both owned by charterer). The word ‘subjects’ more correctly should be ‘interests’. 9 Birkley v Presgrave (1801) 1 East at 228, discussed in Hudson v British and Foreign Marine Insurance Co (1902) 8 Com Cas at 12 (loss of time freight, not general average). Cf Austin Friars SS Co v Spillers and Bakers Ltd [1915] 1 KB 833; affd [1915] 3 KB 586, CA (ship voluntarily running into dock pier, to escape stranding outside, general average). 10 Chandris v Argo Insurance Co Ltd [1963] 2 Lloyd’s Rep 65, QB (Commercial Court). 11 Castle Insurance Co Ltd v Hong Kong Islands Shipping Co Ltd, The Potoi Chau [1983] 2 Lloyd’s Rep 376, PC. (See the judgment of Lord Diplock, ibid, at 382–383). 12 For a case where these sub-sections were considered in their relation to the York-Antwerp Rules 1924, see Athel Line Ltd v Liverpool and London War Risks Insurance Association Ltd [1944] KB 87, [1944] 1 All ER 46, KB. 13 The Brigella [1893] P at 195. 14 Dickenson v Jardine (1868) LR 3 CP 369. 15 See generally K S Selmer, The Survival of General Average (2nd ed, 1985). 16 Vlassopoulos v British and Foreign Insurance Co [1929] 1 KB 187; Australian Coastal Shipping Commission v Green [1971] QB 456, [1971] 1 All ER 353, CA. 17 See Institute Time Clauses (Hulls), Clause 11. The Institute Voyage Clauses (Hulls), Clause 9 is in similar terms. 18 Cf The Mary Thomas [1894] P 108, CA (Dutch adjustment); Brandeis Goldschmidt& Co v Economic Insurance Co Ltd (1922) 38 TLR 609 (foreign adjustment clause, but no adjustment made). 19 Crooks v Allan (1879) 5 QBD 38; approved in Strang, Steel& Co v Scott (1889) 14 App Cas at 607. 20 It is submitted that the better view is that a general average loss falls to be treated as a loss subject to the limit imposed in respect of losses due to the identified perils and to the identified subject-matter of the insurance and that sue and labour expenses are unique. 21 Dickenson v Jardine (1868) LR 3 CP 639 (London usage to hold insurer only liable for the assured’s share of the loss of jettisoned goods held invalid). 22 Fletcher v Alexander (1868) LR 3 CP 375. 23 Mavro v Ocean Marine Insurance Co (1875) LR 10 CP 414, Ex Ch; cf The Mary Thomas [1894] P 108, CA; and De Hart v Compania Anonima de Seguros Aurora [1903] 2 KB 503 (general average payable as per foreign statement, special stipulation in charter-party as to general average). 24 Montgomery v Indemnity Mutual Marine Insurance Co [1901] 1 KB 147; affd [1902] 1 KB 734, CA. 25 SS Carisbrooke Co v London and Provincial Marine Insurance Co (1901) 6 Com Cas 291. 26 Société Nouvelle d’Armament v Spillers and Bakers Ltd [1917] 1 KB 865, 870 (not an insurance case, but based on the definition of general average in s 66). 27 Which stated: ‘Only such losses, damages or expenses which are the direct consequence of the general average act shall be allowed as general average.’ Rule C of the York-Antwerp Rules 1974 is in the same words. 28 Australian Coastal Shipping Commission v Green [1971] QB 456, [1971] 1 All ER 353, CA. (See the judgment of Lord Denning MR, ibid, at 360).

MEASURE OF INDEMNITY1 67. Extent of liability of insurer for loss (1) The sum which the assured can recover in respect of a loss on a policy by which he is insured, in the case of an unvalued policy, to the full extent of the insurable value, or, in the case of a valued policy, to the full extent of the value fixed by the policy, is called the measure of indemnity.2 (2) Where there is a loss recoverable under the policy, the insurer, or each insurer if there be more than one, is liable for such proportion of the measure of

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indemnity as the amount of his subscription bears to the value fixed by the policy, in the case of a valued policy, or to the insurable value, in the case of an unvalued policy.3 Note Insurance is a contract of indemnity, but in marine insurance the amount of the indemnity is a matter of agreement between the parties, and the following sections supply the standard or measure for ascertaining it. The adjustment of marine losses proceeds on the hypothesis that the subject-matter insured is fully covered by insurance. Suppose a ship valued at £1,000,000 is insured for £100,000 only. The shipowner is said to be ‘his own insurer’ for £900,000, and any loss which occurs must be adjusted on this basis; see s 81.4 The following cases may be put in illustration of this principle: (i)

A cargo valued at £100,000 is insured for £10,000 by ten underwriters who each subscribe for £1,000. It is damaged by sea perils to the extent of £10,000. Each underwriter is liable for £100 only. (ii) A ship valued at £500,000 is insured for £100,000. The ship is stranded, and the owner spends £100,000 in trying to get her off, but eventually she is a total loss. The insurer must pay £100,000 on the policy, and £20,000 (ie one-fifth) under the suing and labouring clause. It is immaterial whether the real value of the ship is £450,000 or £550,000.5 As to ‘insurable value,’ see s 16. As to the ‘sue and labour’ clause, which is a distinct engagement in the policy, see s 78; and for a quasi-exception, see s 74 (liabilities to third parties). Section 67, together with s 68 in total loss cases, is conclusively definite on the extent of the liability of the insurer for the loss of a vessel under a valued policy.6 These provisions must now be read alongside s 13A of the Insurance Act 2015, which states that it is an implied term of every insurance contract that the insurer must pay any sums due in respect of the claim within a reasonable time and that remedies, including for damages, for breach of that implied term are in addition to and distinct from any right to enforce payment of the sums due and from any right to interest. 1 The term has been criticised as unfamiliar. See this ‘fasciculus of sections’ and their construction discussed by Lord Sumner, British and Foreign Insurance Co v Wilson Shipping Co Ltd [1921] 1 AC 188, 26 Com Cas 13, 32, HL, pointing out that the words ‘a policy’ and ‘the policy’ are constantly used to denote not merely a single instrument, but also an entire insurance on the same subject-matter, though contained in two or more policies. 2 Papadimitriou v Henderson [1939] 3 All ER 908, KB (‘anticipated freight’ fixed by valuation). 3 Cf Lohre v Aitchison (1878) 3 QBD at 564, 565, CA, affd on this point, but reversed on another, (1879) 4 App Cas 755. 4 See principle explained by Walton J, in Anglo-Californian Bank v London and Provincial Marine Insurance Co (1904) 10 Com Cas at 8, 9. 5 The equivalent illustration in the first edition of this work was cited by Tomlinson LJ in Standard Life Assurance Ltd v Ace European Group [2013] Lloyd’s Rep IR 415 at [38]. 6 Ventouris v Mountain, The Italia Express (No 2) [1992] 2 Lloyd’s Rep 281, QB (Commercial Court) at 291 (per Hirst J).

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68. Total loss Subject to the provisions of this Act,1 and to any express provision in the policy, where there is a total loss of the subject-matter insured,— (1) If the policy be a valued policy, the measure of indemnity is the sum fixed by the policy:2 (2) If the policy be an unvalued policy, the measure of indemnity is the insurable value of the subject-matter insured.3 Note As to ‘valued’ and ‘unvalued’ policies, see ss 27 and 28, and as to ‘insurable value’ and the rules of determining it, see s 16. The Institute Clauses contain a special provision concerning the breaking up of the vessel. Thus, the Institute Time Clauses (Hulls), Clause 1 states: ‘In the event of the Vessel sailing (with or without cargo) with the intention of being (a) broken up, or (b) sold for breaking up, any claim for loss of or damage to the Vessel occurring subsequent to such sailing shall be limited to the market value of the Vessel as scrap at the time when the loss or damage is sustained, unless previous notice has been given to the Underwriters and any amendment to the terms of cover, insured value and premiums required by them have been agreed …’ In relation to the total loss of freight, the Institute Clauses4 state that: ‘In the event of the total loss (actual or constructive) of the vessel … the amount [of freight] insured shall be paid in full, whether the vessel be fully or partly loaded or in ballast, chartered or unchartered … Should the vessel be a constructive total loss but the claim on the insurances on hull and machinery be settled as a claim for partial loss,5 no payment [for freight] shall be due.’ Section 68 is conclusive as to the extent of the insurer’s liability in the case of a total loss.6 Illustration A vessel was a total loss. As part of his claim the plaintiff contended that he was entitled to damages for loss of income, the increase in the capital value of a replacement vessel, inconvenience and mental distress. Held, by s 68, he could claim only for the value fixed by the policy.7 1 See s 77 as to successive losses, and s 78 as to ‘sue and labour’ clause. 2 Irving v Manning (1847) 1 HL Cas at 305, 307; Sailing Ship Blairmore v Macredie [1898] AC at 610; cf Woodside v Globe Marine Insurance Co Ltd [1896] 1 QB 105. 3 Irving v Manning (1847) 1 HL Cas at 305, 307. 4 Institute Time Clauses (Freight), Clause 15; Institute Voyage Clauses (Freight), Clause 13. 5 As to partial loss of ship, see s 69. 6 Ventouris v Mountain, The Italia Express (No 2) [1992] 2 Lloyd’s Rep 281, QB (Commercial Court) at 291 (per Hirst J). 7 Ibid.

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69. Partial loss of ship Where a ship is damaged, but is not totally lost, the measure of indemnity, subject to any express provision in the policy, is as follows: (1) Where the ship has been repaired, the assured is entitled to the reasonable cost of the repairs, less the customary deductions,1 but not exceeding the sum insured in respect of any one casualty:2 (2) Where the ship has been only partially repaired, the assured is entitled to the reasonable cost of such repairs, computed as above, and also to be indemnified for the reasonable depreciation, if any, arising from the unrepaired damage, provided that the aggregate amount shall not exceed the cost of repairing the whole damage, computed as above:3 (3) Where the ship has not been repaired, and has not been sold in her damaged state during the risk, the assured is entitled to be indemnified for the reasonable depreciation arising from the unrepaired damage, but not exceeding the reasonable cost of repairing such damage computed as above.4 Note In the case of wooden ships, except on a first voyage, the custom was to make an arbitrary deduction of ‘one third new for old’ from the cost of the repairs.5 But this rule is inapplicable to modern ships, and the practice is to provide for them by special clauses. Thus, Clause 14 of the Institute Time Clauses (Hulls) provides: ‘Claims payable without deduction, new for old.’6 Clause 8 of the Institute Yacht Clauses provides: ‘Average irrespective of percentage. No deduction of things new for old shall be made except in respect of sails, protective covers and running rigging.’ The ‘customary deductions’ were originally set out as a schedule to the Bill, but the schedule was cut out afterwards as it was thought better to leave it to custom, which may alter from time to time to meet new needs. See Rules of Practice of the Association of Average Adjusters, rule D7. The Act does not provide for the case where the ship is not repaired, but is sold in her damaged state during the risk. In that case, according to the majority of the Court of Appeal in Pitman v Universal Marine Insurance Co,7 the assured is entitled to the reasonable cost of repairing such damage, computed as above, but not exceeding the actual depreciation in the value of the ship as ascertained by the sale. Brett LJ, dissented, thinking the principle it laid down a dangerous innovation, and that the estimated cost of repairs, less the usual deductions, should be the sole measure of indemnity. The decision is unsatisfactory, because the other Judges on appeal expressly refrained from deciding what was to be taken as the basis of depreciation. The sale price is one factor in the comparison, but what is the other factor? Is it the value of the ship at the commencement of the risk, or at the time of the casualty, or what other value? In the case of a time policy the time at which the measure of indemnity under s 69(3) falls to be determined is the time when the policy expires.8 ‘It is only when the risk is ended that it can be predicted for certain that neither repair nor sale will take place

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during the risk.’9 However, see the Rules of Practice of the Association of Average Adjusters, rule A4(2) as regards repairs, where the relevant question now seems to be whether the assured has made an election to repair before the risk has ended. Where the measure of indemnity is depreciation under s 69(3) but where the damaged value of a vessel is virtually nil, the indemnity is limited to the reasonable cost of the repairs.10 The term ‘reasonable cost of repairs’ is not, however, confined to the reasonable cost of permanent repairs. It is a question of fact in each case as to what the phrase includes.11 Section 69 (3) requires the measure of indemnity to be quantified on the basis of what it would have cost to repair a vessel if the repairs had been carried out. Thus, if it would have been necessary for her to be towed to a port for repairs, the cost of towing, although not incurred, is recoverable as part of the partial loss claim.12 As to total loss following a partial loss and successive repaired losses, see s 77. Successive partial losses cannot be aggregated so as to produce a recovery exceeding the insured value.13 The Institute Clauses provide that in the case of a partial loss of a ship the claim is subject to a ‘deductible,’ ie it will not be paid if the damage does not exceed a specified percentage.14 Further, as regards claims for unrepaired damage, they state: ‘The measure of indemnity in respect of claims for unrepaired damage shall be the reasonable depreciation in the market value of the Vessel at the time this insurance terminates arising from such unrepaired damage, but not exceeding the reasonable cost of repairs … The Underwriters shall not be liable in respect of unrepaired damage for more than the insured value at the time this insurance terminates.’15 Under these provisions ‘market value’ means just that and not insured value.16 Illustrations 1.

2.

3. 4.

Policy on hull and machinery. The ship is damaged in a collision, and has to put into dock for repairs. The cargo becomes putrid, and the shipowner incurs expenses in landing it. These expenses cannot be recovered under the policy on ship.17 Policy on ship. In consequence of damage the ship is put into dry dock for repairs. The owners take the opportunity to have her surveyed for Lloyd’s classification, but this does not increase the time in dock. The insurer must pay the whole expenses of docking the ship.18 Policy on ship. Ship insured for £4,000 was involved in a collision. The cost of repairing her amounted to £5,000. Any expenditure over £4,000 cannot be recovered from the insurers.19 Whilst a trawler is being towed in January 1942 to a dry dock for refitting, she strands and is severely damaged. The assured gives notice of abandonment. After the ship is salvaged by the Admiralty, he refuses to have her put in dry dock for ascertainment of damage. He does not contest salvage proceedings after which the ship is sold under an order of the court. At all material times the assured was unlikely to obtain a licence to repair her or to place her in dry dock. Held, that there was no constructive total loss, because the claim did not

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fall under any of the heads specified in s 60. With regard to partial loss, the risk ended when the ship was abandoned, and so the case fell within s 69(3).20 1 As to reasonable cost of repairs, see Agenoria SS Co v Merchants’ Marine Insurance Co (1903) 8 Com Cas 212 (costs of special surveyor from England, banker’s overdraft, and scarfing sternpost); Helmville Ltd v Yorkshire Insurance Co Ltd, The Medina Princess [1965] 1 Lloyd’s Rep 361 at 523 QB (Commercial Court) (reasonable fees for classification surveyors and other surveyors properly allowable as part of the cost of repairs); cf Hall v Hayman (1911) 17 Com Cas at pp 90–92 (scarfing, etc). As to the customary deductions, see Note supra. 2 Aitchison v Lohre (1879) 4 App Cas at 762; Pitman v Universal Marine Insurance Co (1882) 9 QBD at 208. As to successive losses, see s 77. 3 Cf Stewart v Steele (1842) 5 Scott NR 927 at 948; British and Foreign Insurance Co Ltd v Wilson Shipping Co Ltd [1921] 1 AC 188 at 194, 206. 4 Ibid. And see Manifest Shipping Co Ltd v Uni-Polaris Insurance Co Ltd, The Star Sea [1995] 1 Lloyd’s Rep 651 (Comm Ct). 5 See Pitman v Universal Marine Insurance Co (1882) 9 QBD at 215; cf Henderson v Shankland [1896] 1 QB at 530, CA. 6 The Institute Voyage Clauses (Hulls), Clause 12 is in the same terms. This removes any claim by underwriters for betterment where the assured receives new subject matter in the place of the damaged subject matter: Versloot Dredging BV v HDI Gerling Industrie Versicherung AG, The DC Merwestone [2013] EWHC 1666 (Comm). 7 (1882) 9 QBD 192 at 218, 219, CA; cf Stewart v Steele (1842) 5 Scott NR 927 at 948; British Steam Navigation Co v Indemnity Mutual Marine Assurance Co (1887) 6 Asp MLC 173. See further, Elcock v Thomson [1949] 2 KB 755, 762 (fire insurance). 8 Helmville Ltd v Yorkshire Insurance Co Ltd, The Medina Princess [1965] 1 Lloyd’s Rep 361, QBD (Commercial Court). 9 Ibid, at 516 (per Roskill J). See also The Catariba [1997] 2 Lloyd’s Rep 749. 10 Ibid, at 515 (per Roskill J). 11 Ibid, at 518–520 (per Roskill J). The term should be construed in the same way as the term ‘cost of repairing’ in s 60(2). 12 Ibid, at 521 (per Roskill J). 13 The Catariba [1997] 2 Lloyd’s Rep 749. 14 Institute Time Clauses (Hulls), Clause 12; Institute Voyage Clauses (Hulls), Clause 10. 15 Institute Time Clauses (Hulls), Clause 18; Institute Voyage Clauses (Hulls), Clause 16. These provisions are only concerned with partial losses and not constructive total losses (Kastor Navigation Co Ltd v AGF MAT, The Kastor Too [2004] Lloyd’s Rep IR 481). 16 Suez Fortune Investments Ltd v Talbot Underwriting Ltd, The Brillante Virtuoso [2015] 1 Lloyd’s Rep 651, [259]–[267] per Flaux J; see also The Catariba [1997] 2 Lloyd’s Rep 749, 758 per Colman J as regards the Institute Yacht Clauses. 17 Field SS Co v Burr [1899] 1 QB 579, CA, followed in Polurrian SS Co v Young (1913) 19 Com Cas 143 at 159. 18 Ruabon SS Co v London Assurance [1900] AC 6, HL, distinguishing Marine Insurance Co Ltd v China Transpacific SS Co Ltd (1886) 11 App Cas 573. 19 Goole and Hull Steam Towing Co Ltd v Ocean Marine Insurance Co Ltd (1929) 29 Ll L Rep 242. (See the judgment of Mackinnon J, ibid, at 244.) 20 Irvin v Hine [1949] 2 All ER 1089, KB. ‘In estimating the cost of repair for the purpose of a partial loss I think that the court has to get as near as possible to the actual figure which would have been expended had she been repaired, and, if it be proved to my satisfaction, as it is, that she could not have been repaired earlier than the early part of 1947, I think I ought to take the figures appropriate to that time.’ Per Devlin J, at 1092–3. As to ‘constructive total loss’, see s 60, ante.

70. Partial loss of freight Subject to any express provision in the policy, where there is a partial loss of freight, the measure of indemnity is such proportion of the sum fixed by the policy, in the case of a valued policy, or of the insurable value, in the case of an unvalued policy,

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as the proportion of freight lost by the assured bears to the whole freight at the risk of the assured under the policy.1 Note As to valued policy, see s 27, and as to unvalued policy, see s 28. The insurable value in the case of freight is the gross freight; see s 16(2). The rule for adjusting a partial loss on freight is very simple, i e, that where the sum insured is less than the insurable value of the interest at risk, the underwriter pays the same proportional part of the loss that the sum insured is of the insurable value of the freight; if the sum insured equals the insurable value of the interest, then he pays the whole of the loss. The Institute Time Clauses (Freight)2 and the Institute Voyage Clauses (Freight)3 set out a ‘franchise’ in respect of small losses (ie the insurer is not liable if the specified percentage of loss is not reached, but is liable for the whole of the loss once the percentage is reached) and state: The insurance does not cover partial loss other than general average loss,4 under 3 per cent unless caused by fire, sinking, stranding or collision with another vessel. Each craft and/or lighter to be deemed a separate insurance if required by the Assured.’ Further, the Clauses also state that the amount recoverable for any partial loss of freight shall not exceed the gross freight actually lost.5 1 Forbes v Aspinall (1811) 13 East 323, 12 RR 352; Denoon v Home and Colonial Assurance Co (1872) LR 7 CP at 351; The Main [1894] P 320. As to the facts which constitute a partial, as distinguished from a total loss of freight, see Rankin v Potter (1873) LR 6 HL at 98–100, per Brett J. See W Gow, Marine Insurance: A Handbook (5th ed, 1931), pp 154–155. 2 Clause 12. 3 Clause 10. 4 As to ‘general average loss,’ see s 66. 5 Institute Time Clauses (Freight), Clause 13; Institute Voyage Clauses (Freight), Clause 11.

71. Partial loss of goods, merchandise etc Where there is a partial loss of goods, merchandise, or other moveables, the measure of indemnity, subject to any express provision in the policy, is as follows: (1) Where part of the goods, merchandise, or other moveables insured by a valued policy is totally lost, the measure of indemnity is such proportion of the sum fixed by the policy as the insurable value of the part lost bears to the insurable value of the whole, ascertained as in the case of an unvalued policy:1 (2) Where part of the goods, merchandise, or other moveables insured by an unvalued policy is totally lost, the measure of indemnity is the insurable value of the part lost, ascertained as in case of total loss:2 (3) Where the whole or any part of the goods or merchandise insured has been delivered damaged at its destination, the measure of indemnity is such proportion of the sum fixed by the policy, in the case of a valued policy, or of the insurable value in the case of an unvalued policy, as the difference between the gross sound and damaged values at the place of arrival bears to the gross sound value:3

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(4) ‘Gross value’ means the wholesale price, or, if there be no such price, the estimated value, with, in either case, freight, landing charges, and duty paid beforehand; provided that in the case of goods or merchandise customarily sold in bond, the bonded price is deemed to be the gross value. ‘Gross proceeds’ means the actual price obtained at a sale where all charges on sale are paid by the sellers.4 Note The policy of the rules contained in sub-ss (3) and (4) has often been criticised, but they are only prima facie rules, applicable to ordinary goods. There are many matters to which they could not apply, eg loss of part of a machine, rendering the whole valueless.5 Such cases are usually provided for by special clauses. See further s 75, as to cases not specially provided for. As to insurable value, see s 16(3). The insurers insure against actual damage to the goods but not against prejudice or suspicion of damage. ‘However great the suspicion of damage and however strong the moral belief and conviction of the [assured], unless damage is proved on the balance of probabilities on the basis of legal evidence and material on record, there cannot be proof of damage.’6 Illustrations 1.

2.

3. 4.

Unvalued policy on coffee from Jamaica to London. The insurable value, ie, the invoice cost, plus shipping expenses and charges of insurance, is £200. Half the coffee is damaged on the voyage. The value of the damaged coffee in London is half that of the undamaged coffee. The selling price in London fixes the measure of percentage of depreciation, but not the amount the insurer has to pay. That must be determined by applying the depreciation to the insurable value, so that in this case the insurer has to pay £50.7 Policy on 40 bales of cotton, which are shipped as part of a cargo of 1,600 bales of cotton belonging to different owners. Owing to sea perils 200 bales have to be jettisoned, and the rest are damaged and the marks wholly obliterated. The 1,400 bales are sold for the benefit of whom it may concern. This is a partial loss, and the assured is entitled to recover as if five of his 40 bales had been jettisoned, and the rest damaged to the extent shown by the sale of the whole.8 Policy on 1,700 packages of tea, valued at £6,000. Part of the tea is seadamaged, and the remainder, which arrives undamaged, is sold in consequence for a smaller price. The insurer is not liable for the depreciation so caused.9 Policy on cargo of sheet iron in separate packages, average payable ‘on each package separately or on the whole’. Damage is sustained before the termination of the risk. The whole of the iron is unpacked and examined. The damaged iron is sold, and the rest is repacked and sent on. The insurer is not liable for the expenses incurred in examining and repacking the packages which were not damaged.10

1 Lewis v Rucker (1761) 2 Burr 1167; Irving v Manning (1847) 1 HL Cas at 305. 2 Lewis v Rucker (1761) 2 Burr 1167; Irving v Manning (1847) 1 HL Cas at 305; cf Tobin v Harford (1863) 32 LJCP 134, 136; see s 16(3) as to insurable value. 3 Johnson v Sheddon (1802) 2 East 581 (the ‘brimstone case’). As to estimating the value of jettisoned goods, cf Fletcher v Alexander (1868) LR 3 CP 375 (general average). The values must, of course, be reduced to the same cash basis. ‘Where the goods are sold by public auction the gross amount they

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realise is called the “damaged value,” and the value they would have been sold for if sound, ie, the current price for sound articles of the same kind in the same market, is called the “sound value”.’ 4 Rules of Practice of the Association of Average Adjusters, rule E2. Where any sale or other preliminary charges on damaged goods or merchandise are paid or payable by the buyers, such charges must be added to the gross proceeds before establishing the ratio of damage, as above provided, and in the event of a claim being established, such charges are subsequently recoverable from the insurers as ‘extra charges’: Francis v Boulton (1895) 65 LJQB 153 (conditioning charges). 5 Cf British Columbia Sawmill Co v Nettleship (1868) LR 3 CP 499 (measure of damage against shipowner); and see s 75. 6 Boon and Cheah Steel Pipes Sdn Bhd v Asia Insurance Co Ltd (supra) at 454 (per Raja Azlan, Shah J). 7 Usher v Noble (1810) 12 East 639, and s 16 (insurable value). The test adopted excludes the rise or fall of the London market. 8 Spence v Union Marine Insurance Co (1868) LR 3 CP 427. 9 Cator v Great Western Insurance Co (1873) LR 8 CP 552, 561. There was a special warranty as to seadamage, but the judgment establishes the general principle. See this case distinguished, Brown Bros v Fleming (1902) 7 Com Cas 245 (policy on cases of whisky—damage to labels and packing by sea perils). Cator v Great Western Insurance Co was applied obiter by McNair J, in Overseas Commodities Ltd v Sryle [1958] 1 Lloyd’s Rep 546 (all risks insurance) at pp 561–562, where he said that financial loss resulting from sound canned pork being suspect was not recoverable as a particular average loss. See also Boon and Cheah Steel Pipes Sdn Bhd v Asia Insurance Co Ltd [1975] 1 Lloyd’s Rep 452, Malaysia High Court, where some steel pipes were thought to be damaged. 10 Lysaght v Coleman [1895] 1 QB 49, CA.

72. Apportionment of valuation (1) Where different species of property are insured under a single valuation, the valuation must be apportioned over the different species in proportion to their respective insurable values, as in the case of an unvalued policy. The insured value of any part of a species is such proportion of the total insured value of the same as the insurable value of the part bears to the insurable value of the whole ascertained in both cases as provided by this Act. (2) Where a valuation has to be apportioned, and particulars of the prime cost of each separate species, quality, or description of goods cannot be ascertained, the division of the valuation may be made over the net arrived sound values of the different species, qualities, or descriptions of goods.1 Note As to ‘insurable value,’ see s 16(3); and for the mode of ascertaining the value referred to in sub-s (1), see s 71, as read with s 16. 1 This does not reflect current adjusting practice. See Rules of Practice of the Association of Average Adjusters as amended in 2015, rule E3, which provides for apportionment on the basis of invoice values where the invoice distinguishes the separate values of the different qualities or descriptions of cargo, and only in other cases on net arrived sound values.

73. General average contributions and salvage charges (1) Subject to any express provision in the policy, where the assured has paid, or is liable for, any general average contribution, the measure of indemnity is the full amount of such contribution if the subject-matter liable to contribution is

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insured for its full contributory value; but if such subject-matter be not insured for its full contributory value, or if only part of it be insured, the indemnity payable by the insurer must be reduced in proportion to the under-insurance, and where there has been a particular average loss which constitutes a deduction from the contributory value, and for which the insurer is liable, that amount must be deducted from the insured value in order to ascertain what the insurer is liable to contribute.1 (2) Where the insurer is liable for salvage charges the extent of his liability must be determined on the like principle. Note This section deals with adjustment. As to liability, see ss 65 and 66. Suppose goods are insured for £1,500 by a valued policy. General average is incurred, of which £80 is found to be the proportion payable by the owner of the goods, their contributory value being taken at £1,600. The insurer is liable for 15–16ths of £80, viz, £75. But if the contributory value of the goods is taken at £1,500, the insurer is liable for the whole £80. See s 81 as to under-insurance. Illustration Policy on ship valued at £33,000, for that sum. Her real value is £40,000. The ship incurs certain general average and salvage expenses which are adjusted abroad on her real value. The assured can only recover 33/40ths of the amount so adjusted from the insurer.2 1 As to the effect to be given to the foreign general average clause, see Greer v Poole (1880) 5 QBD 272; The Maly Thomas [1894] P 108, CA. As to contribution by goods where ship is a constructive total loss, see Henderson v Shankland [1896] 1 QB 525, CA. 2 SS Balmoral Co v Marten [1901] 2 KB 896, CA; affd [1902] AC 511, HL.

74. Liabilities to third parties Where the assured has effected an insurance in express terms against any liability to a third party, the measure of indemnity, subject to any express provision in the policy, is the amount paid or payable by him to such third party in respect of such liability.1 Note A carrier may insure his liability to a cargo owner if the cargo is damaged by the carrier’s negligence. So, too, may a marina operator insure against his legal liability to a third party.2 Again, a shipowner may insure against liability for damage caused to another vessel by the negligent navigation of the insured vessel. This insurance cover is provided by the ‘Collision Clause’ contained in the Institute Time Clauses (Hulls)3 and the Institute Voyage Clauses (Hulls).4 The construction of such a clause depends entirely

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on the language used by the parties in the particular clause in question, for its wording has been modernised from time to time.5 By the Third Parties (Rights against Insurers) Act 2010, s 1 if an assured incurs liability to a third party, and before making payment becomes bankrupt or goes into liquidation, the rights in the policy are transferred to the third party. Illustration A carrier insures his liability to a third party in respect of goods worth £40,000 for £20,000. If the goods are sea-damaged to the extent of £20,000, he can recover the whole £20,000.6 1 The Niobe [1891] AC 401, HL (collision); cf Joyce v Kennard (1871) LR 8 QB 78 (lighterman’s liability); Cunard SS Co v Marten [1902] 2 KB 624, 629 (carriers’ liability); Holman & Sons v Merchants’ Marine Insurance Co [1919] 1 KB 383, 24 Com Cas 102 (‘increased value’ policy on ship is insurance on the res, not against liability). The section is inapplicable to reinsurance; see Toomey v Eagle Star Insurance Co Ltd [1994] 1 Lloyd’s Rep 516, 524 per Hobhouse LJ. 2 Pillgrem v Cliff Richardson Boats Ltd and Richardson (Switzerland General Insurance Co, Third Parry) [1977] 1 Lloyd’s Rep 297, Supreme Court of Ontario, where there was a ‘deductible’ of $1,250. 3 See Clause 8. 4 See Clause 6. 5 Davidson v Burnand (1868) LR 4 CP at 121, per Willes J. As to the scope to be given to the term ‘collision,’ see Chandler v Blogg [1898] 1 QB 32 (collision with sunken barge); The Niobe [1891] AC 401 (collision with tug: tug and tow regarded as identical); The Munroe [1893] P 248 (meaning of sunken wreck); Union Marine Insurance Co v Borwick [1895] 2 QB 279 (‘piers or similar structures’ include artificial bank); Shelbourne v Law Investment Insurance Corpn [1898] 2 QB 626 (loss by detention during repairs not recoverable); Tatham v Burr [1898] AC 382 (removal of obstructions under statutory powers); Burger v Indemnity Mutual Marine Assurance Co [1900] 2 QB 348, CA (damage to ship or vessel herself); Re Margetts and Ocean Accident and Guarantee Corpn Ltd [1901] 2 KB 792 (collision with anchor of another vessel); Bennett SS Co v Hull Mutual SS Protecting Society [1913] 3 KB 372; affd [1914] 3 KB 57, CA (ship, running into fishing nets not within collision clause); France, Fenwick & Co Ltd v Merchants’ Marine Insurance Co Ltd [1915] 3 KB 290, CA; affg [1914] 3 KB 827 (ship A colliding with ship B thereby causing ship B to run into ship C); Furness Withy& Co Ltd v Duder [1936] 2 All ER 119, KB (the words ‘liable to pay … by way of damages’ in a collision clause cover only liability arising by way of tort and not by way of contract); Hall Bros SS Co Ltd v Young, The Trident [1939] 1 All ER 809, CA (a payment by way of indemnity under French legislation to a French pilot-boat irrespective of negligence is not ‘by way of damages’); Polpen Shipping Co Ltd v Commercial Union Assurance Co Ltd [1943] 1 All ER 162, KB (collision with a flying-boat, held not a ‘ship or vessel’). 6 Cunard SS Co v Marten [1902] 2 KB 624 at 629, 8 Com Cas at 22, per Walton J. Aliter if, as bailee, he insures the goods himself: Crowley v Cohen (1832) 3 B & Ad 478.

75. General provisions as to measure of indemnity (1) Where there has been a loss in respect of any subject-matter not expressly provided for in the foregoing provisions of this Act, the measure of indemnity shall be ascertained, as nearly as may be, in accordance with those provisions, in so far as applicable to the particular case.1 (2) Nothing in the provisions of this Act relating to the measure of indemnity shall affect the rules relating to double insurance, or prohibit the insurer from disproving interest wholly or in part, or from showing that at the time of the loss the whole or any part of the subject-matter insured was not at risk under the policy.2

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Note If the provisions of sub-s (1) do not meet the case, recourse may be had to the common law (including the law merchant) under the saving provided by s 91(2). 1 See notes to ss 71 and 74 and such cases as Baring Bros & Co v Marine Insurance Co (1894) 10 TLR 276 (stock certificates sent abroad by registered letter). 2 See s 32 (double insurance). As to disproving interest entirely, see Lewis v Rucker (1761) 2 Burr at 1171 (colourable interest); Seagrave v Union Marine Insurance Co (1866) LR 1 CP 305, 316–320 (bare consignee); as to short interest, see Forbes v Aspinall (1811) 13 East 323; Denoon v Home and Colonial Assurance Co (1872) LR 7 CP 341; Williams v North China Insurance Co (1876) 1 CPD 757, CA; cf Reliance Marine Insurance Co v Duder (1912) 17 Com Cas at 236, Kennedy LJ, and as to part of the subject-matter not being at risk, see Tobin v Harford (1864) 34 LJCP 37, 57, Ex Ch; The Main [1894] P 320 (freight).

76. Particular average warranties (1) Where the subject-matter insured is warranted free from particular average, the assured cannot recover for a loss of part, other than a loss incurred by a general average sacrifice, unless the contract contained in the policy be apportionable; but, if the contract be apportionable, the assured may recover for a total loss of any apportionable part.1 (2) Where the subject-matter insured is warranted free from particular average, either wholly or under a certain percentage, the insurer is nevertheless liable for salvage charges, and for particular charges and other expenses properly incurred pursuant to the provisions of the suing and labouring clause in order to avert a loss insured against.2 (3) Unless the policy otherwise provides, where the subject-matter insured is warranted free from particular average under a specified percentage, a general average loss cannot be added to a particular average loss to make up the specified percentage.3 (4) For the purpose of ascertaining whether the specified percentage has been reached, regard shall be had only to the actual loss suffered by the subject-matter insured. Particular charges and the expenses of and incidental to ascertaining and proving the loss must be excluded. Note It is unusual for modern policies use FPA terminology4 however ‘total loss only’ or ‘TLO’ policies are common. As to ‘general average sacrifice,’ see s 66; as to ‘salvage charges,’ see s 65; as to ‘particular charges’, see s 64(2); as to ‘suing and labouring clause’, see s 78; and as to ‘particular average loss’, see s 64. A policy, or rather the contract contained in it, is apportionable where the policy itself provides for apportionment, or where by usage it is treated as apportionable. Cf s 72 as to apportionment. Illustrations 1.

132

Policy on master’s effects, ‘free of all average’. The effects include articles of different species, e g feather-bed, chronometer, spy-glass, etc. Some of the

Measure of indemnity

2.

3.

4.

effects are totally lost by perils of the seas, others are saved. The assured can recover in respect of those which are totally lost.5 Policy on iron rails, warranted ‘free from particular average unless the ship be stranded’. The ship is not stranded, but becomes a constructive total loss. The rails are saved, landed, and sent on to their destination in another ship at an increased freight. The assured cannot recover the extra freight he has had to pay.6 Policy on 2,000 bags of linseed insured for (say) £2,000, ‘warranted free from average, unless general, etc’. One thousand bags are so sea-damaged as to become rotten and valueless. The insurer is not liable. This is not a separate insurance of each bag, but of the whole of the linseed, and the warranty applies accordingly.7 Policy on disbursements and advances warranted ‘free from all average’. The disbursements include outlay, before the ship sails, on provisions, stores, port dues, and insurance. The ship was chartered to take a cargo to South America, and the intention of the assured was to obtain a homeward cargo there. On the voyage out the ship catches fire, and the assured abandons the voyage and brings the ship home for repairs. This is an average and not a total loss, and the warranty applies.8

1 Ralli v Janson (1856) 6 E & B 422 (bags of seed), read with Duff v Mackenzie (1857) 3 CBNS 16 (master’s effects), and Cator v Great Western Insurance Co (1873) LR 8 CP at 559. And see Fabrique de Produits Chimiques v Large [1923] 1 KB 203, 28 Com Cas 248. In Duff v Mackenzie it was held that where the goods were different in specie, the contract was apportionable, but it is submitted that this is only one test of severability. For cases on the fpa warranty, see Hagedorn v Whitmore (1816) 1 Stark 157; Navone v Haddon (1850) 9 CB 30; Kidston v Empire Insurance Co (1866) LR 1 CP at 548 (reviewing cases); De Mattos v Saunders (1872) LR 7 CP 570. 2 Kidston v Empire Insurance Co (1866) LR 1 CP 535; and s 78 (‘sue and labour’ clause). 3 Price & Co v A1 Ships’ Small Damage Insurance Association Ltd (1889) 22 QBD 580, CA; and cf Oppenheim v Fry (1863) 3 B & S at 884. 4 An example, however, is Bank of America National Trust and Savings Corporation v Chrismas, The Kyriaki [1993] 1 Lloyd’s Rep 137 in which it was held that where the FPA warranty did not prevent the claim even though the claim was for a CTL but no notice of abandonment had been tendered as so was assessed as a partial loss. 5 Duff v Mackenzie (1857) 3 CBNS 16; cf Wilkinson v Hyde (1858) 3 CBNS 30, 34 (iron castings, sheet glass, and other species of goods). 6 Great Indian Peninsular Rly Co v Saunders (1861) 1 B & S 41; affd (1862) 2 B & S 266; discussed and explained in Kidston v Empire Insurance Co (1866) LR 1 CP at 548; distinguished in Wilson Bros Bobbin Co v Green [1917] 1 KB 860, 863, 22 Com Cas 185. 7 Ralli v Janson (1856) 6 E & B 422, Ex Ch. 8 Lawther v Black (1900) 6 Com Cas 5; affd (1901) 6 Com Cas 196, CA; cf Price v Maritime Insurance Co [1901] 2 KB 412, CA, as to distance freight payable under Italian law.

77. Successive losses (1) Unless the policy otherwise provides, and subject to the provisions of this Act, the insurer is liable for successive losses, even though the total amount of such losses may exceed the sum insured.1 (2) Where under the same policy, a partial loss, which has not been repaired or otherwise made good, is followed by a total loss, the assured can only recover in respect of the total loss: Provided that nothing in this section shall affect the liability of the insurer under the suing and labouring clause.2 133

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Note In Lidgett v Secretan,3 where the assured recovered for both a partial and total loss, the losses were covered by different and consecutive policies, and the fact that the insurer was the same person in both cases was held to be immaterial. ‘It is clear,’ said Lord Abinger, ‘that whenever the underwriter adjusts a partial loss, he still remains liable on the policy, and may go on paying partial losses exceeding in the whole cent per cent, and may ultimately have to pay a total loss of cent per cent. Such a case is possible.’4 As to the ‘sue and labour’ clause, see s 78. The Institute Clauses5 state that: ‘In no case shall the Underwriters be liable for unrepaired damage in the event of a subsequent total loss (whether or not covered under this insurance) sustained during the period covered by this insurance or any extension thereof.’ As to successive total losses, see Kastor Navigation v AGF MAT, The Kastor Too [2004] 2 Lloyd’s Rep 119. Illustrations 1. 2.

3.

A ship is insured against perils of the seas, but not against fire. She is seadamaged, but the sea-damage is not repaired. Afterwards she is destroyed by fire. The assured cannot recover anything on the policy.6 A ship is insured by her owners under a time policy. After insurance she is chartered. On the voyage out the ship is damaged, and the repairs are paid for by the charterers, and the cost specially insured by them. On the voyage home she is totally lost. The shipowner can only recover for the total loss.7 Ship insured by one insurer against marine perils, and by another insurer against war risks. She suffers marine damage, which is not repaired. She is afterwards totally lost by a war peril (torpedoed by submarine). The unrepaired partial loss is merged in the total loss, and cannot be recovered under the marine policy.8

1 Le Cheminant v Pearson (1812) 4 Taunt 367; cf Aitchison v Lohre (1879) 4 App Cas at 763. This only applies to successive repaired losses; see Kusel v Atkin, The Catariba [1997] 2 Lloyd’s Rep 749. 2 Livie v Fanson (1810) 12 East 648. As to proviso, see ibid, at 655; cf British and Foreign Insurance Co v Wilson Shipping Co Ltd [1921] 1 AC 188, HL. The words ‘under the same policy’ do not confine the rule to this case; see infra. 3 Lidgett v Secretan (1871) LR 6 CP 616; cf Woodside v Globe Marine Insurance Co [1896] 1 QB 105; Lidgett v Secretan was discussed in the Wilson Shipping Case, supra and was not disapproved, but is difficult to reconcile with the principle of the latter case; see especially Lord Sumner’s speech. 4 Brooks v MacDonnell (1835) 1 Y & C Ex 500 at 515, 41 RR at 342. 5 Institute Time Clauses (Hulls), Clause 18; Institute Voyage Clauses (Hulls), Clause 16. 6 Livie v Fanson (1810) 12 East 648 at 654, where this case is put. 7 The Dora Forster [1900] P 241. 8 British and Foreign Insurance Co v Wilson Shipping Co Ltd [1921] 1 AC 188, 26 Com Cas 13, HL. As Lord Shaw said in his judgment, at 206, ‘The assured has no vested right of action when the injury is sustained.’

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Measure of indemnity

78. Suing and labouring clause (1) Where the policy contains a suing and labouring clause, the engagement thereby entered into is deemed to be supplementary to the contract of insurance, and the assured may recover from the insurer any expenses properly incurred pursuant to the clause, notwithstanding that the insurer may have paid for a total loss, or that the subject-matter may have been warranted free from particular average, either wholly or under a certain percentage.1 (2) General average losses and contributions and salvage charges, as defined by this Act, are not recoverable under the suing and labouring clause.2 (3) Expenses incurred for the purpose of averting or diminishing any loss not covered by the policy are not recoverable under the suing and labouring clause.3 (4) It is the duty of the assured and his agents, in all cases, to take such measures as may be reasonable for the purpose of averting or minimizing a loss.4 Note The assured and his agents are bound by law to use all reasonable efforts to avert or minimise a loss.5 The ‘sue and labour’ clause enables the assured to recover the expenditure involved in these efforts from the insurer. The continental codes embody the conditions of the ‘sue and labour’ clause so that under those codes the liability of the insurer is determined by law, whereas in England it rests on contract.6 The ‘sue and labour’ clause is usually supplemented by the ‘waiver clause,’ which provides that ‘no acts of the insurer or insured in recovering, saving or preserving the property insured shall be considered as a waiver or acceptance of abandonment.’ Although the ‘sue and labour’ clause is a distinct engagement added to the policy, expenses incurred under it are apportioned according to the normal rule of marine insurance. The clause imports that ‘whilst the underwriters are to bear their share of any suing and labouring expenses, they are to bear such share only in the proportion of the amount underwritten to the whole value of the property or interest insured.’7 Where there is no ‘sue and labour’ clause in the policy, particular charges incurred by the assured in preserving the subject-matter insured may be recoverable.8 Sub-section (4) relates only to suing and labouring, and does not qualify the provisions of s 55(2) as to insurance against negligence or the misconduct of the master and crew.9 It has been suggested that the words ‘his agents’ in s 78(4) should be read as inapplicable to the master or crew unless expressly instructed by the assured in relation to what to do or not to do in respect of suing and labouring. Many persons other than the master or members of the crew may be agents of the assured with the duty to act on his behalf in relation to suing and labouring. A possible exception exists in the case of a master/owner. Negligent navigation by such an assured will not bar his claim under s 55(2)(a), whereas s 78(4) clearly seems to impose the statutory duty on him.10

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It has also been suggested that s 78(4) is applicable after the occurrence of the insured peril, whereas s 55(2)(a) applies prior to the occurrence of the peril.11 Sub-section (4) may simply state a rule of causation, with the relevant question being whether the assured has caused his own loss.12 It will be very difficult to establish that the assured has caused his own loss and there has not been a full defence based on suing and labouring successfully pleaded since the 1906 Act.13 A breach of the duty to sue and labour is not, in any event, actionable in damages. Although service of a writ clause will crystallise matters as between the assured and insurer for the purpose of ademption of loss, it has been held that sue and labour expenditure is recoverable even after service of a writ clause (The B Atlantic [2015] 1 Lloyd’s Rep 117, [335]–[345]). Illustrations 1.

2. 3.

4. 5. 6.

7.

8.

136

Insurance on chartered freight, warranted free from particular average. The ship in consequence of sea-damage becomes a constructive total loss, but the cargo is landed and sent on in another ship. The expenses of landing, warehousing, and reloading the cargo can be recovered as particular charges under the ‘sue and labour’ clause.14 Policy on ship containing a ‘collision’ clause. The assured is sued for running down another ship, and incurs costs in defending the action. These costs are not recoverable from the insurer under the ‘sue and labour’ clause.15 Policy on freight. A ship bound for L is stranded at P. The cargo is landed, and, in order to earn freight, is sent on by rail to L at a cost of £200. It might have been sent on by ship at a cost of £70. The insurer on freight is liable for £70 only, under the ‘sue and labour’ clause.16 Policy for £1,000 on ship and cargo valued at £4,000. Expenses are incurred under the ‘sue and labour’ clause to the extent of £2,000. The insurer is liable to pay £500.17 Live cattle are insured against all risks. The ship, owing to sea perils, is detained in a port of refuge for some weeks. The cost of extra fodder supplied to the cattle during the detention is recoverable under the ‘sue and labour’ clause.18 A ship valued at £2,600 is insured with D for £1,200. After encountering very heavy weather the ship is rescued by a steamer with which no contract is made, and which afterwards obtains an award of £800 for salvage. The owner, instead of abandoning, elects to repair the ship at a cost of £2,600. The insurer is only liable for £1,200. He is not liable under the ‘sue and labour’ clause for any additional sum for salvage charges, for the salving steamer is not the ‘factor, servant, or assign’ of the assured.19 A ship is insured by A (an underwriter) who reinsures with B, who again reinsures with C for £100. The ship becomes a constructive total loss. A pays the claim of the original assured, and then at great expense refloats the ship and sells her. His expenses amount to 112 per cent of the insured value. If B pays A, he can only recover £100 from C, for A (the first insurer) is not the ‘factor, servant, or assign’ of B within the meaning of the ‘sue and labour’ clause.20 Policy effected by shipowner ‘to cover shipowner’s liability of any kind to owners of mules and cargo up to £20,000 owing to the omission of the negligence clause in the contract’. The mules are worth £40,000. The ship is

Measure of indemnity

9.

10.

11.

12.

13.

14. 15.

stranded, and expenses are incurred in landing some of the mules which were saved. The ‘sue and labour’ clause does not apply to a policy in this form, and the expenses so incurred cannot be recovered under the clause.21 A ship insured against total loss is stranded, and abandoned. The insurers employ a firm of ship repairers, who succeed in getting her off and saving her, and the assured fails in his claim for a total loss. The insurers cannot counterclaim under the ‘sue and labour’ clause, or otherwise, for the expenses of salving the ship.22 Policy on goods against war risks. The ship is stopped by a German cruiser, and has to put into a Norwegian port, where storage and re-shipment expenses are incurred. These expenses are recoverable under the ‘sue and labour’ clause.23 Policy on kieselguhr24 packed in bags and insured against ‘all risks’. The bags were defective and burst whilst being transferred from the ship’s hold to a lighter. Assured incurred expenses in rebagging the goods. Held, insurer not liable under the ‘sue and labour’ clause for these expenses, as they were due to inherent vice of the goods, and not a peril insured against.25 Policy on intermodal freight containers. Containers were leased to a third party. The assured incurs costs in recovering them from the third party, who has been adjudged bankrupt. He is entitled to an indemnity under the ‘sue and labour’ clause in respect of such costs.26 Policy on ship. An accurate estimate of the damage to the vessel could not be obtained without a survey of her in dry dock, but this was never done. The insurers contended that the assured was in breach of duty under s 78 (4), and they were not liable on his claim under the policy. This argument was rejected by the Court, for a survey in dry dock would not avert or minimise the loss but would merely ascertain its extent. Consequently the assured had not committed a breach of duty under s 78(4).27 Policy on freight. The assured claimed sue and labour expenses. Held, on the evidence, no loss of freight had been proved, and therefore no sue and labour expenses were recoverable.28 War risks policy. Application to strike out a late amendment extending the claim for a CTL to one for sue and labour expenses. Held- the amendment would be struck out. The claim for sue and labour expenses gave rise to a separate cause of action; it was not to be treated as merely ancillary to the main claim.29

1 Lohre v Aitchison (1878) 3 QBD at 567, CA (reversed on another point); and Kidston v Empire Insurance Co (1866) LR 1 CP 535; affd (1867) LR 2 CP 357, Ex Ch; cf Duus Brown & Co v Binning (1906) 11 Com Cas 190. The financial limits under the policy do not apply to sue and labour claims; to this extent the sue and labour clause is deemed to be a separate contract: see Kuwait Airways Corporation v Kuwait Insurance Co SAK [1996] 1 Lloyd’s Rep 664. 2 Aitchison v Lohre (1879) 4 App Cas 755, especially at 765, 768. As to ‘salvage charges’ see s 65, and as to ‘general average,’ see s 66. See eg Australian Coastal Shipping Commission v Green [1971] 1 All ER 353, CA, where it was held that expenditure incurred in indemnifying a tugowner for damage to the tug engaged under the United Kingdom Standard Towage Conditions was general average expenditure for which the insurer was liable, and the expenditure was not ‘salvage charges’ and therefore not recoverable under s 78(2), for the services were rendered under contract and not by a ‘salvor independently of contract’ within the meaning of s 65(2). (See the judgment of Lord Denning MR, ibid, at 360). 3 Kidston v Empire Insurance Co (1866) LR 1 CP at 546, 547, per Willes J; Meyer v Ralli (1876) 1 CPD 358; Lohre v Aitchison (1878) 3 QBD at 566, per Brett LJ.

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The Marine Insurance Act 1906 4 Kidston v Empire Insurance Co (1866) LR 1 CP at 544; Currie & Co v Bombay Native Insurance Co (1869) LR 3 PC 72; cf Benson v Chapman (1849) 2 HL Cas 696; Notara v Henderson (1872) LR 7 QB 225, Ex Ch (shipper v shipowner); Irvin v Hine [1950] 1 KB 555, [1949] 2 All ER 1089, KB (by refusing to have a survey in dry dock, owner not in breach of any duty laid on him by this provision). This provision does not qualify s 55(2) as to insurance against negligence; see note 10, p 128, ante. The common law does not recognise any duty to sue and labour; see Yorkshire Water v Sun Alliance & London Insurance [1997] 2 Lloyd’s Rep 21. 5 Benson v Chapman (1849) 2 HL Cas at 696; Notara v Henderson (1872) LR 7 QB 225, Ex Ch (shipper v shipowner). 6 The clause, it seems, may be excluded by agreement, eg by the term ‘no s/c,’ Western Assurance Co of Toronto v Poole [1903] 1 KB 376, 384, 8 Com Cas at 119 (reinsurance, expert evidence admitted to show that ‘no salvage charges’ meant ‘no sue and labour charges’). 7 Cunard SS Co v Marten [1902] 2 KB at 629, 8 Com Cas at p 23. 8 But see Emperor Goldmining Co Ltd v Switzerland General Insurance Co Ltd [1964] 1 Lloyd’s Rep 348 (Supreme Ct of New South Wales), where Manning J, held that they were recoverable. This decision would not appear to be in accordance with principle, for if it is correct, no ‘sue and labour’ clause need ever be inserted in a policy. The assured could recover any expenses in any event, as long as they were reasonably incurred. 9 British and Foreign Marine Insurance Co Ltd v Gaunt [1921] 2 AC 41 at 65, 26 Com Cas at 267, HL. 10 Astrovlanis Compania Naviera SA v Linard, The Gold Sky [1972] 2 Lloyd’s Rep 187, QBD (Commercial Court) at 221 (per Mocatta J). Cf. National Oilwell (UK) Ltd v Davy Offshore Ltd [1993] 2 Lloyd’s Rep 582. 11 State of Netherlands v Youell [1998] 1 Lloyd’s Rep 236. 12 See for example National Oilwell (UK) Ltd v Davy Offshore Ltd [1993] 2 Lloyd’s Rep 582; The Vasso [1993] 2 Lloyd’s Rep 309; State of Netherlands v Youell [1998] 1 Lloyd’s Rep 236; Strive Shipping Corporation v Hellenic Mutual War Risks Association (Bermuda) Ltd, The Grecia Express [2002] Lloyd’s Rep IR 669; Mitsui Marine Fire Insurance Co v Bayview Motors Ltd [2003] Lloyd’s Rep IR 117; Melinda Holdings SA v Hellenic Mutual War Risks Association (Bermuda) Ltd [2011] EWHC 181 (Comm); and Clothing Management Technology Ltd v Beazley Solutions Ltd [2012] EWHC 727 (QB). 13 As noted in Masefield AG v Amlin Corporate Member Ltd [2011] EWCA Civ 24. 14 Kidston v Empire Insurance Co (1866) LR 1 CP 535; affd (1867) LR 2 CP 357, Ex Ch. 15 Xenos v Fox (1869) LR 4 CP 665, Ex Ch (‘sue and labour’ clause does not apply). The right to recover sue and labour expenses does not extend to legal expenses incurred in pursuing a third party who has wrongfully taken possession of the insured property (Kuwait Airways Corporation v Kuwait Insurance Co SAK [1996] 1 Lloyd’s Rep 664, [1999] 1 Lloyd’s Rep 803). 16 Lee v Southern Insurance Co (1870) LR 5 CP 397. 17 Dixon v Whitworth (1879) 4 CPD at 377, 378. The case is overruled only so far as it decided that salvage expenses were recoverable under the clause. See, too, Cunard SS Co v Marten [1902] 2 KB at 629. 18 The Pomeranian [1895] P 349. 19 Aitchison v Lohre (1879) 4 App Cas 755. 20 Uzielli v Boston Marine Insurance Co (1884) 15 QBD 11, CA; distinguished and discussed in Western Assurance Co of Toronto v Poole [1903] 1 KB 376, 384. 21 Cunard SS Co v Marten [1902] 2 KB 624; affd [1903] 2 KB 511, CA. There is no duty to sue and labour and therefore no right to recover the costs of preventing or mitigating loss under liability policies; see Yorkshire Water v Sun Alliance & London Insurance Ltd [1997] 2 Lloyd’s Rep 21 and Pilkington United Kingdom Ltd v CGU Insurance [2004] EWCA Civ 23 but cf. King v Brandywine Reinsurance Co (UK) Ltd [2004] Lloyd’s Rep IR 554. 22 Crouan v Stanier [1904] 1 KB 87, distinguishing The Pickwick (1852) 16 Jur 669. 23 Wilson Bros Bobbin Co v Green [1917] 1 KB 860, 22 Com Cas 185, 191. 24 Ie a diatomaceous earth used as an absorbent of nitro-glycerine in the manufacture of dynamite. 25 F W Berk & Co Ltd v Solle [1955] 2 Lloyd’s Rep 382, QB. See the judgment of Sellers J, ibid, at 388. 26 Integrated Container Service Inc v British Traders’ Insurance Co Ltd [1981] 2 Lloyd’s Rep 460. 27 Irvin v Hine [1949] 2 All ER 1089. (See the judgment of Devlin J, ibid, at 1092.) 28 Ikerigi Compania Naviera SA v Palmer, The Wondrous [1992] 2 Lloyd’s Rep 566, CA. (See the judgment of Lloyd LJ, ibid, at 576.) 29 North Star Shipping Ltd v Sphere Drake Insurance plc, The North Star [2005] Lloyd’s Rep IR 404.

138

Rights of insurer on payment

RIGHTS OF INSURER ON PAYMENT 79. Right of subrogation (1) Where the insurer pays for a total loss, either of the whole, or in the case of goods of any apportionable part, of the subject-matter insured,1 he thereupon becomes entitled to take over the interest of the assured in whatever may remain of the subject-matter so paid for, and he is thereby subrogated to all the rights and remedies of the assured in and in respect of that subject-matter2 as from the time of the casualty causing the loss.3 (2) Subject to the foregoing provisions, where the insurer pays for a partial loss, he acquires no title to the subject-matter insured, or such part of it as may remain, but he is thereupon subrogated to all rights and remedies of the assured in and in respect of the subject-matter insured as from the time of the casualty causing the loss, in so far as the assured has been indemnified, according to this Act, by such payment for the loss.4 Note The right of subrogation is a necessary incident of a contract of indemnity, and it operates on every right and remedy ‘by which the loss insured against can be or has been diminished’.5 The assured is ‘indemnified according to this Act’ when he has received the indemnity agreed on, even though he may remain out of pocket.6 If the assured is indemnified, the insurer cannot recover from a third party under the doctrine of subrogation more than he has paid to the assured.7 If a ship valued at £500,000 is insured for £400,000, the assured, being ‘his own insurer’ for £100,000, is entitled to a fifth of the salvage.8 It is to be noted, however, that the rights of an insurer cannot be affected by any contract made by the assured with a later insurer, unless the assured reserves the right of making such other contract and the first insurer subscribes the policy under a condition that the assured may avail himself of such right.9 The question has been raised whether an insurer, merely by paying for a total loss, necessarily becomes the ‘owner’ of the thing insured.10 It will be noticed that s 79(1) provides that the insurer becomes ‘entitled to take over’ the interest of the assured. The same words appear in s 63 (see note thereto), and the result is that it is left open to the insurer not to ‘take over’ the interest of the assured, although ‘entitled to take it over’. Where underwriters pay a CTL but decline notice of abandonment and the vessel is sold before the option under s 79(1) is exercised, the purchaser takes good title, underwriters having no equitable lien in the vessel.11 Speaking broadly, the insurer, in the absence of a special contract, must exercise all remedies arising from subrogation in the name of the assured.12 It follows that the insurer is entitled to the use of the assured’s name; but if the insurer wishes to bring an action, he must, of course, be prepared to indemnify the assured as regards costs. The right of subrogation may be waived by agreement between the assured and the insurers.13 Further, the policy may contain an implied term that the insurer will not exercise the right of subrogation.14 139

The Marine Insurance Act 1906

As to under-insurance, see s 81, and as to the distinction between abandonment and subrogation, see note to s 63. As to the effect of the rule of subrogation on the doctrine of contribution between insurers of the same property, see note to s 32. Illustrations 1.

Goods insured by a valued policy are captured and sold. The underwriters pay 50 per cent of the loss on account. Afterwards the assured receives half the proceeds of the goods from the captors. The insurers are not entitled to this or any part of it for they have not fully indemnified the assured.15 2. A ship is missing, and the insurer pays for a total loss. If the ship afterwards arrives, she belongs to the insurer.16 3. Policy on goods. The ship is captured by a Brazilian cruiser as a blockaderunner. The assured offers to abandon her. The insurer declines to accept the abandonment, but eventually compromises the claim by paying 35 per cent. Some years afterwards, the Brazilian Government, under a Convention with Great Britain, pays compensation. The insurer is not entitled to any part of the compensation so paid for the insurers have not fully indemnified the assured in respect of the loss.17 4. Insured goods are jettisoned. The insurer of these goods pays for a total loss, but he then stands in the place of the assured as regards claims for a general average contribution from the other interests involved in the adventure.18 5. A ship valued at £6,000 is insured for £6,000. Her real value is £9,000. She is run down by another ship, and the insurers pay for a total loss. Afterwards the assured recovers £5,000 damages from the owners of the ship at fault. The insurers are entitled to the whole of this sum as salvage for they have paid for a total loss.19 6. Cargo insured under a valued policy is destroyed by a Confederate cruiser in the American Civil War. The cargo is worth more than the valuation. After the war, compensation is paid to the cargo owner by the United States under an Act which expressly refuses to recognise claims made by or on behalf of insurers. The insurers, who have paid for a total loss, are not entitled to this compensation in view of the express provisions of the Act.20 7. Two ships belonging to the same owner come into collision. The insurers of the ship not at fault have no claim against the ship at fault, for they stand in the place of the assured, who cannot have a claim against himself.21 8. Goods, on which freight has been paid in advance by the shipper, are lost through the negligence of the shipowner. Subject to any special provision in the contract of affreightment, the shipper can recover as damages the advance freight for the benefit of the insurers on freight once they have paid the sum assured.22 9. A ship is run down, and the insurer pays for a total loss. The insurer on ship is not entitled to the damages recovered by the shipowner from the ship at fault for loss of freight.23 10. Wool is damaged in a collision between lighters. The insurers pay the claim, and the assured assigns to them his rights against the owner of the lighter at fault. That owner cannot set up the defence that the payment was outside the

140

Rights of insurer on payment

11.

12.

13.

14.

15.

16.

17.

terms of the policy for the settlement of the loss concerns the assured and the insurers alone, and a third party plays no part in it.24 An insurer is induced by misrepresentation to pay a loss. He recovers the amount back in an action against the assured. The reinsurer, who had paid the original insurer before the fraud was discovered, is entitled to recover the sum he paid less the reasonable (not taxed) costs of the original insurer.25 Policy for £1,000 on ship valued in the policy at £1,350. The ship is run down and the insurer pays a total loss, i e £1,000. The shipowner afterwards recovers £1,000 and interest from the owners of the vessel which was to blame for the collision. The insurer is entitled to 1,000/1,350ths of the sum recovered, and the assured to 350/1,350ths.26 Neutral ship seized as prize. The owner had insured with enemy underwriters who paid for a total loss. The neutral assured’s claim in the Prize Court is dismissed, and the ship is condemned, as the claim is made on behalf of the enemy underwriters.27 Policy for £4,000 on ship so valued. The ship is in collision and £5,000 is expended by the assured owners in repairing the damage. In an action against the colliding vessel both ships are found to blame and the assured owners recover £2,500. The amount required to indemnify the assured owners ‘according to this Act’ is £4,000 (i e the reasonable cost of repairs not exceeding the sum insured); the assured owners must give underwriters credit for £2,500 and can recover £1,500 only.28 Cargo is insured under a policy for its then value of £685. Later an ‘increased value’ policy is taken out with other insurers for £215. The cargo is jettisoned, and both insurers pay for a total loss. £532 becomes payable to cargo owners in general average. The first insurers are entitled to the whole amount because the rights of subrogation vest in them ‘as from the time of the casualty causing the loss,’ as stated in s 79(1), nothing being payable to the increased value insurers.29 Ship insured for £72,000. She became a total loss as a result of a collision with a Canadian Government vessel. The insurers paid the £72,000 to the assured, and then claimed damages from the Canadian Government. The action was successful, but meanwhile the Pound Sterling had been devalued in 1949 and the loss, when quantified and converted into English currency, came to nearly £127,000. The assured then repaid the £72,000 to the insurers, and claimed that they were entitled to keep the balance. Held, that this contention succeeded because the insurers could not recover under the doctrine of subrogation anything more than they had paid.30 Goods insured from Hong Kong to Scotland via Port of London, and lost in transit between London and Scotland on 16 December 1965 through negligence of carriers. Assured claimed against insurers who paid claim on 11 August 1966. Insurers brought action in assured’s name against carriers, who on 12 November 1969 paid into Court sum representing full value of goods lost. Held, that (i) interest would be awarded from 17 January 1966 (ie date on which assured would have expected payment from their customers in respect of the goods) until 12 November 1969; and (ii) by subrogation, insurers were entitled to proportionate part of that interest from date of settlement of claim, ie 11 August 1966.31

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The Marine Insurance Act 1906 1 The words as to total loss of part were added after some discussion by the Lord Chancellor’s Committee. Before the Act the law was very doubtful. 2 A claim in respect of interest on the value of goods lost through the negligence of a third party is a right or remedy of the assured ‘in or in respect of the subject-matter’. A judgment given in favour of the assured for their loss and a sum by way of interest is a single judgment based on a single cause of action, and the insurers are subrogated to the assured’s right to sue for the loss of the goods and also interest: H Cousins & Co Ltd v D and C Carriers Ltd [1970] 2 Lloyd’s Rep 397, CA. (See the judgment of Widgery LJ, ibid, at 400.) For the facts of the case, see illustration 17, p 133, ante. 3 Rankin v Potter (1873) LR 6 HL at 118, 119, 144; Simpson v Thomson (1877) 3 App Cas at 284, 292; Burnand v Rodocanachi (1882) 7 App Cas at 339; Darrell v Tibbitts (1880) 5 QBD at 563, CA, per Lord Esher; Assicurazioni Generali de Trieste v Empress Assurance Corpn Ltd [1907] 2 KB 814 at 820. But cf John Edwards & Co v Motor Union Insurance Co [1922] 2 KB 249 (no subrogation in case of wager policy). 4 Simpson v Thomson (1877) 3 App Cas at 292, HL; cf Commercial Union Assurance Co v Lister (1874) 9 Ch App 483 (fire policy, bona fide compromise of action by assured). 5 Castellain v Preston (1883) 11 QBD at 388, 404, CA; and cf West of England Fire Insurance Co v Isaacs [1896] 2 QB 377 (fire policy). As to ademption of loss, see note to s 62. 6 Goole and Hull Steam Towing Co v Ocean Marine Insurance Co [1928] 1 KB 589. 7 Yorkshire Insurance Co Ltd v Nisbet Shipping Co Ltd [1962] 2 QB 330, [1961] 2 All ER 487. 8 See s 81 (under-insurance) and illustration 12. 9 Boag v Standard Marine Insurance Co Ltd [1937] 1 All ER 714, CA, illustration 15. 10 Eglinton v Norman (1877) 3 Asp MLC 471, CA; and see Arrow Shipping Co v Tyne Improvement Comrs [1894] AC 508, HL; and Barraclough v Brown [1897] AC 615; Boston Corpn v Fenwick & Co Ltd (1923) 129 LT 766, 28 Com Cas 367. 11 Dornoch Ltd v Westminster International BV (No. 2), The WD Fairway [2009] 2 Lloyd’s Rep 191. The assured must continue to abandon the vessel to underwriters if he is to claim for a CTL. If the assured does something inconsistent with this continued abandonment such as selling the vessel without reference to underwriters, he will be relegated to a claim for a partial loss. If, however, underwriters expressly elect not to take over the vessel after paying out for a CTL, they relinquish all interest in the insured subject matter and cannot exercise a subrogation claim against the proceeds of sale: Dornoch Ltd v Westminster International BV, The WD Fairway (No. 3) [2009] 2 Lloyd’s Rep 420. 12 Simpson v Thomson (1877) 3 App Cas 290 at 293; The Charlotte [1908] P 206, CA; Oriental Fire and General Insurance Co Ltd v American President Lines Ltd and Cotton Trading Corpn of San Francisco [1968] 2 Lloyd’s Rep 372, High Court of Bombay, where it was held that an insurer who was subrogated to the rights of the assured under the Indian Transfer of Property Act (since repealed and re-enacted by the (Indian) Marine Insurance Act 1963) was not entitled to bring an action in his own name against the wrongdoer; and cf Kruger& Co v Moel Tryvan Ship Co (1907) 13 Com Cas at 4; but see King v Victoria Insurance Co [1896] AC 250 (special assignment of rights) and Compania Colombian de Seguros v Pacific Steam Navigation Co [1964] 1 All ER 216, where consignees assigned to the insurer all their rights against the shipowners in respect of the damaged goods, and the insurer was held entitled to sue in his own name. As to the division of costs of unsuccessful action brought by an assured partly for his own benefit and partly for that of the insurer, see Duus Brown & Co v Binning (1906) 11 Com Cas 190. 13 The Marine Sulphur Queen [1970] 2 Lloyd’s Rep 285, District Court of Southern District of New York, where the policy stated: ‘These assurers hereby agree to waive all rights against the steamer and/or the assured and/or affiliated and/or associated and/or allied companies and/or corporations in the event that the carrying steamer is owned and/or chartered and/or operated by the assured and/or affiliated and/or associated and/or allied companies and/or corporations,’ and it was held that the assured was not affiliated and/or associated with another company to which the vessel concerned had been let out under a demise charter, and that therefore the clause did not apply, and the insurers had not waived their right of subrogation (see the judgment of Cannella DJ ibid, at 299); Tenneco Oil Co v, Tug Tony and Coastal Towing Corpn [1972] 1 Lloyd’s Rep 514, Dist Ct for the Southern Dist of Texas (Houston Division), where it was held that a clause stating ‘Privilege is granted the assured hereunder to waive subrogation prior to a loss against parties with whom the assured has a working agreement’ was not void as being contrary to public policy, and that, on the evidence, the right of subrogation had been waived. (See the judgment of Carl O Bue Jr DJ, ibid, at 516–517). 14 The Yasin [1979] 2 Lloyd’s Rep 45, where, however, it was held that the policy did not contain an implied term (see the judgment of Lloyd J, ibid, at 56). 15 Tunno v Edwards (1810) 12 East 488, 11 RR 458.

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Rights of insurer on payment 16 Houstman v Thornton (1816) Holt NP 242. 17 Brooks v MacDonnell (1835) 41 RR 336. 18 Dickenson v Jardine (1868) LR 3 CP 639; and Rules of Practice of the Association of Average Adjusters rules B30/831. 19 North of England Iron SS Insurance Association v Armstrong (1870) LR 5 QB 244, doubted Burnand v Rodocanachi (1882) 7 App Cas at 342; but approved in Thames and Mersey Marine Insurance Co v British and Chilian SS Co [1915] 2 KB 214, per Scrutton J; not discussed on appeal, [1916] 1 KB 30, CA. North of England Iron SS Insurance Association v Armstrong (supra) was criticised and explained in Yorkshire Insurance Co Ltd v Nisbet Shipping Co Ltd [1961] 2 All ER at 492–493. 20 Burnand v Rodocanachi (1882) 7 App Cas 333, explained in Castellain v Preston (1883) 11 QBD at 404, per Bowen LJ; and Stearns v Village Main Reef Co (1904) 10 Com Cas 89, CA. 21 Simpson v Thomson (1877) 3 App Cas 279, HL; discussed in Midland Insurance Co v Smith (1881) 6 QBD at 565. A special clause known as the ‘Sister Ship’ clause has been framed to meet this case; see the Institute Time Clauses (Hulls), Clause 9 and the Institute Voyage Clauses (Hulls), Clause 7. 22 Dufourcet v Bishop (1886) 18 QBD 373. 23 Sea Insurance Co v Hadden (1884) 13 QBD 706, CA. 24 King v Victoria Insurance Co [1896] AC 250, PC; distinguished in John Edwards& Co v Motor Union Insurance Co [1922] 2 KB 249 at 256 (ppi policy). 25 Assicurazioni Generali de Trieste v Empress Assurance Corpn Ltd [1907] 2 KB 814. 26 The Commonwealth [1907] P 216, CA; affg The Welsh Girl (1906) 22 TLR 475. 27 The Palm Branch [1916] P 230, but orders modified on appeal because a small percentage of the underwriters were neutrals: [1919] AC 272, PC. 28 Goole and Hull Steam Towing Co Ltd v Ocean Marine Insurance Co Ltd [1928] 1 KB 589. 29 Boag v Standard Marine Insurance Co Ltd [1937] 1 All ER 714, CA. 30 Yorkshire Insurance Co Ltd v Nisbet Shipping Co Ltd [1962] 2 QB 330, [1961] 2 All ER 487. 31 H Cousins & Co Ltd v D and C Carriers Ltd [1970] 2 Lloyd’s Rep 397, CA. (See the judgment of Widgery LJ, ibid, at 401, and that of Davies LJ, ibid, at 402).

80. Right of contribution (1) Where the assured is over-insured by double insurance, each insurer is bound, as between himself and the other insurers, to contribute rateably to the loss in proportion to the amount for which he is liable under his contract.1 (2) If any insurer pays more than his proportion of the loss, he is entitled to maintain an action for contribution against the other insurers, and is entitled to the like remedies as a surety who has paid more than his proportion of the debt.2 Note Co-insurers are not co-sureties, but in many respects they have similar relations inter se. As Martin B, said, when two or more policies are effected on the same subject-matter and interest, ‘the policies are one insurance as between all the underwriters, but not one insurance for all purposes.’3 But for a qualification of this principle as regards return of premium, see s 84(3)(f) and note thereto. The relevant date for assessing whether a right of contribution exists is unclear. Certain cases have favoured the date when the loss occurs4, whilst others have favoured the date when the contribution is claimed5. It is submitted that the former view is to be preferred. The relationship between these provisions and the Civil Liability (Contribution) Act 1978 is not entirely clear but the better view, it is suggested, is that the 1978 Act is of no application.6 143

The Marine Insurance Act 1906 1 Newby v Reed (1763) 1 Wm Bl 416; North British and Mercantile Insurance Co v London, Liverpool and Globe Insurance Co (1877) 5 Ch D at 583, CA; American Surety Co of New York v Wrightson (1910) 16 Com Cas at pp 54–56. As to double-insurance generally, see s 32. Where a claim is paid by one underwriter on an ex gratia basis, it will not be entitled to seek a contribution (Legal and General Assurance Society v Drake Insurance Co [1992] 2 QB 887; cf. Drake Insurance plc v Provident Insurance plc [2004] Lloyd’s Rep IR 277). Where there is a contractual indemnifier and an indemnifying underwriter, the position is not the same as where there are two indemnifying underwriters; see Caledonia North Sea Ltd v British Telecommunications plc [2002] Lloyd’s Rep IR 261. 2 Sub-section (2) is consequential. As to the measure of contribution between underwriters, see O’Kane v Jones, The Martin P [2005] Lloyd’s Rep IR 174. 3 Bruce v Jones (1863) 32 LJ Ex at 135. Cf British and Foreign Insurance Co v Wilson Shipping Co Ltd (1920) 26 Com Cas at 35, per Lord Sumner [1921] 1 AC at 214. 4 Legal and General Assurance Society v Drake Insurance Co [1992] 2 QB 887; O’Kane v Jones, The Martin P [2005] Lloyd’s Rep IR 174. 5 Eagle Star Insurance Co Ltd v Provincial Insurance plc [1993] 2 Lloyd’s Rep 143; Bolton MBC v Municipal Mutual Insurance [2007] Lloyd’s Rep IR 173. 6 See Bovis Construction Ltd v Commercial Union Assurance Co Plc [2001] 1 Lloyd’s Rep 416 and also O’Kane v Jones, The Martin P [2005] Lloyd’s Rep IR 174 and Zurich Insurance Plc v International Energy Group Ltd [2015] 2 WLR 1471, [64] per Lord Mance. This view is reinforced by s 13A of the Insurance Act 2015, which states that it is an implied term of every insurance contract that the insurer must pay any sums due in respect of the claim within a reasonable time which may mean that underwriters are not liable ‘in respect of the same damage’. Cf. RSA Insurance Plc v Assicurazoni Generali SpA [2018] EWHC 1237 (QB).

81. Effect of under-insurance Where the assured is insured for an amount less than the insurable value, or, in the case of a valued policy, for an amount less than the policy valuation, he is deemed to be his own insurer in respect of the uninsured balance.1 Note The measure of indemnity rests on the hypothesis that the subject-matter insured is to be regarded as fully insured. The adoption of this hypothesis may date back to the early days of marine insurance to ensure that an underwriter who led on a slip did not bear a risk greater than he intended by reason of the inability to find other underwriters prepared to follow his lead. The principle of under-insurance is of no application to liability insurance.2 Suppose a ship, valued at £300,000, is insured with A for £100,000 and with B for £100,000. If she is damaged by perils of the seas to the extent of £30,000 A is liable for £10,000 and B is liable for £10,000. That being so, it is obviously immaterial to A and B whether the remaining £100,000 is uninsured or whether it is insured with C.3 For a quasi-exception, see s 74 as to insurance against liability to a third party. As to ‘insurable value’, see s 16. 1 Whitworth v Shepherd (1884) 12 R 204, Court of Session (abandonment) and discussed in Dornoch Ltd v Westminster International (The WD Fairway) [2009] 1 CLC 645, 679–680; Western Assurance Co of Toronto v Poole (1903) 8 Com Cas at 119 (‘sue and labour’); The Commonwealth [1907] P 216, CA (subrogation), and see ss 67–72 as to the measure of indemnity generally. See, further, the illustrations to s 79 (subrogation). 2 Discussed in Ace European Group & Ors v Standard Life Assurance Ltd [2013] 1 CLC 255, [68]. 3 Cf Anglo-Californian Bank v London and Provincial Marine Insurance Co (1904) 10 Com Cas at 8, 9, per Walton J.

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Return of premium

RETURN OF PREMIUM 82. Enforcement of return Where the premium, or a proportionate part thereof, is, by this Act, declared to be returnable,— (a) If already paid, it may be recovered by the assured from the insurer; and, (b) If unpaid, it may be retained by the assured or his agent.1 Note The broker is directly responsible to the insurer for the payment of the premium, but, when returnable, it is repayable to the assured; see ss 52 and 53. If the premium is returnable via the broker, he may set off against the return premium any commission that is owed to him by the assured.2 1 Shee v Clarkson (1810) 12 East 507 11 RR 473, (broker); cf C McArthur, The Contract of Marine Insurance (2nd ed, 1890), p 40. 2 Velos Group Ltd v. Harbour Insurance Services Ltd [1997] 2 Lloyd’s Rep 461.

83. Return by agreement Where the policy contains a stipulation for the return of the premium, or a proportionate part thereof, on the happening of a certain event, and that event happens, the premium, or, as the case may be, the proportionate part thereof, is thereupon returnable to the assured.1 Note Express clauses may state that a proportionate part of the premium is returnable in the case of e g, the vessel being transferred to new management, the cancellation of the policy or the vessel being laid up in port. Thus, Clause 4 of the Institute Time Clauses (Hulls) states that a pro rata daily net return of premium is to be made on ‘any change, voluntary or otherwise, in the ownership or flag, transfer to new management, or charter on a bareboat basis, or requisition …’. Further, cl 22 of the Institute Time Clauses (Hulls) states: ‘To return as follows: … per cent net for each uncommenced month if this policy be cancelled by agreement, and for each period of 30 consecutive days the vessel may be laid up in port or in a lay-up area approved by the underwriters …: (a) … per cent net not under repair, (b) … per cent net under repair …’. Where the policy gives the assured a right to cancel and to recover a proportionate part of his premium, any clause in the same policy which permits the insurers to cancel the policy but which is silent on return of premium is to be construed as containing a provision for proportionate return of premium.2

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The Marine Insurance Act 1906

Illustrations 1.

2.

Time policy on ship, providing for pro rata return of premium if she is sold, or ‘transferred to new management’. She is captured and condemned for carrying contraband. This is not a ‘transfer to new management’, and the premium is not returnable.3 Time policy on ship. Proportionate part of premium to be returned ‘for every thirty consecutive days vessel may be laid up in port.’ The ship is employed for two months in port in coaling other ships under Admiralty orders. She is not ‘laid up in port,’ so no premium is returnable.4

1 Kellner v Le Mesurier (1803) 4 East 396, 7 RR 581; Hunter v Wright (1830) 10B & C 714 (return if ship ‘laid up’); Gorsedd SS Co v Forbes (1900) 5 Com Cas 413 (return after loss); Dominion Coal Co v Maskinonge SS Co (1918) 87 LJKB 459, HL (premium returnable if ship ordered into war zone). 2 Re Drake Insurance Plc [2001] Lloyd’s Rep IR 643. 3 Pyman v Marten (1906) 13 Com Cas 64, CA. 4 North Shipping Co Ltd v Union Marine Insurance Co Ltd (1918) 24 Com Cas 83; affd (1919) 24 Com Cas 161, CA.

84. Return for failure of consideration (1) Where the consideration for the payment of the premium totally fails, and there has been no fraud or illegality on the part of the assured or his agents, the premium is thereupon returnable to the assured.1 (2) Where the consideration for the payment of the premium is apportionable and there is a total failure of any apportionable part of the consideration, a proportionate part of the premium is, under the like conditions, thereupon returnable to the assured.2 (3) In particular— (a) Where the policy is void, or is avoided by the insurer as from the commencement of the risk, the premium is returnable, provided that there has been no fraud or illegality on the part of the assured; but if the risk is not apportionable, and has once attached, the premium is not returnable;3 (b) Where the subject-matter insured, or part thereof, has never been imperilled, the premium, or, as the case may be, a proportionate part thereof, is returnable: Provided that where the subject-matter has been insured ‘lost or not lost,’ and has arrived in safety at the time when the contract is concluded, the premium is not returnable unless, at such time, the insurer knew of the safe arrival.4 (c) Where the assured has no insurable interest throughout the currency of the risk the premium is returnable, provided that this rule does not apply to a policy effected by way of gaming or wagering;5 (d) Where the assured has a defeasible interest which is terminated during the currency of the risk, the premium is not returnable;6 (e) Where the assured has over-insured under an unvalued policy, a proportionate part of the premium is returnable;

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Return of premium

(f) Subject to the foregoing provisions, where the assured has over-insured by double insurance, a proportionate part of the several premiums is returnable;7 Provided that, if the policies are effected at different times, and any earlier policy has at any time borne the entire risk, or if a claim has been paid on the policy in respect of the full sum insured thereby, no premium is returnable in respect of that policy, and when the double insurance is effected knowingly by the assured no premium is returnable.8 Note Apart from agreement, the return of the premium seems to rest on the doctrine of failure of consideration.9 The principle has been generalised in sub-ss (1) and (2), as the subordinate rules in sub-s (3) may not be exhaustive. ‘The general rule of law,’ said Bovill CJ, ‘is that where a contract has been in part performed, no part of the money paid under such contract can be recovered back. There may be some cases of partial performance which form exceptions to this rule, as, for instance, if there were a contract to deliver ten sacks of wheat and six only were delivered, the price of the remaining four might be recovered back. But there the consideration is clearly severable.’10 The case of ‘double insurance’ gives rise to complications. ‘The assured has the right to elect under which policy or set of policies he will claim for a loss, and under which policy or set of policies he will claim for a return of premium; but the underwriters, having settled with the assured, must proceed to readjust the entire claim among themselves, so that each underwriter shall ultimately bear his proportionate part both of the loss and of the return premium.’11 But as regards return of premium this rule is subject to qualification. When, as often happens, the risk under some of the policies attaches before the risk under later policies, so that under the earlier policies the entire risk is run for a time, then the premium is only returnable by the underwriter of the later policies.12 This qualification is really a deduction from sub-s (3)(a). To get rid of this complication and to discourage over-insurance, Lord Herschell proposed that in case of double insurance, the premium should not be returnable, but sub-s 3(f) stops somewhat short of this. The better view is that when premium is returnable, it is returnable gross on the basis that the general rule in marine insurance is that the the broker is paid by insurers.13 See also ss 26 to 28 of the Financial Service and Markers Act 2000, by which the assured is entitled, inter alia, to recover premium paid where a contract of insurance is entered into by an unauthorised insurer. Illustrations 1.

Goods are insured from London to a port in an enemy’s country. The ship is captured. The insurance is void as trading with the enemy is illegal, and the premium is not returnable.14

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The Marine Insurance Act 1906

2. 3.

4.

5. 6.

7.

A ship insured ‘at and from A,’ sails from A, with an insufficient crew, and is lost. The insurer is not liable, and the premium is not returnable.15 Cotton, at sea and overdue, valued at £30,000, is insured by policies effected on 12 April for £20,000, and by policies effected on 13 April for £16,000. In case of safe arrival, no premium is returnable on the policies effected on the 12th, for they bore the whole risk till the other policies were effected. But the premium on £6,000 (ie the extent of the over-insurance) is returnable on the policies effected on the 13th.16 Policy on goods at sea. The assured represents to the insurer that the ship sailed from Baltimore on 12 January. In fact, she sailed on 1 January. The insurer avoids liability on the policy. If the representation was an honest mistake, the premium is returnable. Aliter, if it was made dishonestly.17 Insurance on profits and commission ‘without benefit of salvage’. The policy is void as being a wager policy, and the premium is not returnable.18 A, who has insured the cargo on a ship believed to be overdue, reinsures his risk with B ‘lost or not lost’. At the time the reinsurance is effected the ship has safely arrived, but neither party knows this. The reinsurance policy attaches, and the premium is not returnable.19 Insurance on 500 bales of cotton to be shipped by a particular ship. Only 250 bales are shipped. Half the premium is returnable.

1 As to fraud by insurer, see Kettlewell v Refuge Assurance Co [1908] 1 KB 545, CA; affd [1909] AC 243, HL (life insurance). As to illegality, see Re National Benefit Assurance Co Ltd [1931] 1 Ch 46 (reinsurance treaty). 2 Ibid; Ionides v Harford (1859) 29 LJ Ex 36. In Swiss Reinsurance Co v United India Insurance Co Ltd [2005] Lloyd’s Rep IR 341 (non-marine) it was held that there could be no return of the premium. The premium was found to have been calculated on a global basis even though it related to risks which were in principle separable. 3 It was said by Lord Bingham, for example, in HIH Casualty & General Insurance Ltd v Chase Manhattan Bank [2003] 2 Lloyd’s Rep 61 at [22] that this provision contemplates the possibility of a fraudulent non-disclosure and that this possibility need not be rejected on conceptual grounds. See also Rivaz v Gerussi Brothers & Co (1880) 6 QBD 222 per Brett LJ at 229–230 and now, in a non-conumer context, Schedule 1, paragraph 2(b) of the Insurance Act 2015. 4 As to proviso, see Bradford v Symondson (1881) 7 QBD 456, CA. 5 See s 4(2), as to wager policies, and illustration 5. The significance of this provision since the passing of the Gambling Act 2005 is uncertain. 6 Boehm v Bell (1799) 8 Term Rep 154. 7 Ibid, and see s 32 as to ‘double insurance’. 8 Fisk v Masterman (1841) 8 M & W 165. 9 Tyrie v Fletcher (1777) 2 Cowp 666, 668, per Lord Mansfield. 10 Whincup v Hughes (1871) LR 6 CP at 81. Different rules apply, in general, where a contract has become impossible of performance or has otherwise been frustrated. The Law Reform (Frustrated Contracts) Act 1943, s 1 permits the recovery of money paid on a contract which has been frustrated even where there has been no total failure of consideration, and makes provision for compensation in the case of partial performance before frustration. But s 2(5) provides that the Act does not apply to contracts of insurance. 11 C McArthur, The Contract of Marine Insurance (2nd ed, 1890), p 44. See, too, s 32. 12 Fisk v Masterman (1841) 8 M & W 165. 13 Cf. Carvill v Camperdown [2005] Lloyd’s Rep IR 55. 14 Vandyck v Hewitt (1800) 1 East 96, 5 RR 516; see, too, Kellner v Le Mesurier (1803) 4 East 396, 7 RR 581 (foreign ship, British capture), and Palyart v Leckie (1817) 6 M & S 290, where the voyage was abandoned. 15 Annen v Woodman (1810) 3 Taunt 299. 16 Fisk v Masterman (1841) 8 M & W 165.

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Mutual insurance 17 Anderson v Thornton (1853) 8 Exch 425. 18 Allkins v Jupe (1877) 2 CPD 375, see at 388, as to possibility of salvage in such a case; cf s 4, as to wager policies. But see Re London County Commercial Reinsurance Office Ltd [1922] 2 Ch 67, 86 (ppi policy where there was bona fide interest). 19 Bradford v Symondson (1881) 7 QBD 456, CA.

MUTUAL INSURANCE 85. Modification of Act in case of mutual insurance (1) Where two or more persons mutually agree to insure each other against marine losses there is said to be a mutual insurance.1 (2) The provisions of this Act relating to the premium do not apply to mutual insurance, but a guarantee, or such other arrangement as may be agreed upon, may be substituted for the premium.2 (3) The provisions of this Act in so far as they may be modified by the agreement of the parties, may in the case of mutual insurance be modified by the terms of the policies issued by the association, or by the rules and regulations of the association.3 (4) Subject to the exceptions mentioned in this section, the provisions of this Act apply to a mutual insurance.4 Note Mutual insurance associations consisting of more than twenty members must be registered under the Companies Act 1985,5 and the insurances effected by them must be embodied in marine policies.6 Mathew J, said: ‘… mutual insurance is the simplest thing in the world, if you have not to record it in written documents. It is a system by which every one insured is at once underwriter and assured. … This very simple principle was acted upon successfully for many years, until technical difficulties began to be interposed. The first technical difficulty was this: all mutual insurance associations were ordered by statute to be incorporated as joint stock companies. The second technical difficulty was, that under statutes framed for different purposes, which were positive in their terms, every contract of insurance had to be recorded in a written document; there must be a policy of insurance. These two conditions having to be complied with, the mutual insurance associations set themselves to work, by various forms of rules, to endeavour to reconcile the rules of the law with the conduct of their business, and different regulations have been adopted to meet the decisions on the subject.’7 The policies issued by mutual insurance associations to members omit the ordinary provision as to premium. The omission is provided for by rules of the association which regulate members’ contributions to losses.8 Their policies therefore have to be construed together with the rules and regulations of the association.9 The risks covered by mutual insurance associations cover (i) risks of a general nature, eg damages for loss of life or personal injury, repatriation, crew substitute expenses, life salvage, collision liability, liability under towage contracts, removal of wrecks,10

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quarantine expenses, and liability for loss of cargo;11 (ii) war risks, eg detention of vessel and prolongation of voyage,12 and diversion of vessel;13 (iii) freight and demurrage risks; and (iv) through transit risks. 1 For the history of mutual insurance, see Marine Mutual Insurance Association Ltd v Young (1880) 4 Asp MLC at 358. The wording of this sub-section, although it represents the substance of the transaction, is technically inaccurate, because practically all mutual associations require to be incorporated, and then the assured is insured by the body corporate and not by the individual members. 2 Lion Insurance Association v Tucker (1883) 12 QBD at 187, CA. 3 Ocean Iron SS Insurance Association Ltd v Leslie (1887) 22 QBD 722n; British Marine Mutual Insurance Co v Jenkins [1900] 1 QB 299; North Eastern 100A SS Insurance Association v Red S SS Co Ltd (1905) 10 Com Cas 245. 4 British Marine Mutual Insurance Co v Jenkins [1900] 1 QB 299. 5 Re Padstow Assurance Association (1882) 20 Ch D 137, CA. 6 Edwards v Aberayron Mutual Insurance Society (1876) 1 QBD 563, Ex Ch. 7 Ocean Iron SS Insurance Association v Leslie (1889) 22 QBD at 724. 8 For a case where an association brought an action to enforce a call, see West of Scotland Shipowners’ Mutual Protection and Indemnity Association (Luxembourg) v Aifanourios Shipping SA, The Aifanourios [1980] 2 Lloyd’s Rep 403, Court of Session. For a case where the question was whether an association could set off an amount due in respect of calls against an amount due from the association, see First National Bank of Chicago v West of England Shipowners’ Mutual Protection and Indemnity Association (Luxembourg), The Evelpidis Era [1981] 1 Lloyd’s Rep 54. 9 See, further, Corfield v Buchanan (1913) 29 TLR 258, HL (issue of fixed premium policies to non-members). 10 See eg M J Rudolph Corpn v Lumber Mutual Fire Insurance Co (Luria International, Third Parties), The Cape Borer [1975] 2 Lloyd’s Rep 108, Dist Ct for the Eastern Dist of New York. 11 For a case where a fisherman was excluded from the coverage of a protection and indemnity policy and claimed that the insurers had no right to do so, see Goulart v Trans-Atlantic Marine Inc and Enos [1970] 2 Lloyd’s Rep 389, Massachusetts Superior Court. 12 See, eg Union Castle Mail SS Co Ltd v United Kingdom Mutual War Risks Association Ltd [1958] 1 Lloyd’s Rep 58, QB (Commercial Court), where the voyages of two vessels were changed due to the closure of the Suez Canal in 1956. 13 See eg Atlantic Maritime Carriers SA v Hellenic Mutual War Risks Association Ltd; Capetandiamantis Compania Maritima SA; Eastern Seas Transport Corpn and Orient Shipping Corpn v Same [1969] 1 Lloyd’s Rep 359, CA, where three vessels were diverted due to the closure of the Suez Canal in 1967.

SUPPLEMENTAL 86. Ratification by assured Where a contract of marine insurance is in good faith effected by one person on behalf of another, the person on whose behalf it is effected may ratify the contract even after he is aware of a loss.1 Note This is an old rule of marine insurance law. ‘I think,’ said Cockburn CJ, ‘that this is a legitimate exception from the general rule, because the case is not within the principle of that rule. Where an agent effects an insurance subject to ratification, the loss is very likely to happen before ratification, and it must be taken that the insurance so effected involves that possibility as the basis of the contract.’2 The rule has been as been rejected for non-marine insurance3 but this had been doubted more recently.4

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The insurance can only be ratified by the person on whose behalf it is effected.5 Thus, if A takes out a policy in his own name on behalf of B, the transaction cannot be adopted by C.6 See further, the notes to ss 15 and 23(1).7 1 Williams v North China Insurance Co (1876) 1 CPD 757 at 764, CA. 2 Ibid. As to the common law rule, to which this is an exception, see Keighley, Maxsted & Co v Durant [1901] AC 240, HL; and Grover and Grover Ltd v Mathews [1910] 2 KB 401 (fire insurance). 3 Grover and Grover Ltd v Matthews (above). 4 National Oilwell v Davy Offshore [1993] 2 Lloyd’s Rep 582. 5 Boston Fruit Co v British and Foreign Marine Insurance Co [1905] 1 KB 637, CA; affd [1906] AC 336, HL (policy effected for shipowner cannot afterwards be adopted by charterer). 6 Byas v Miller (1897) 3 Com Cas 39, and last note. 7 See also Arnould (19th ed.), 8-06–8-11 for the conditions that must be satisfied for the ratification to be effective and O’Kane v Jones (The Martin P) [2004] 1 Lloyd’s Rep 389, [129]–[133] for a recent (unsuccessful) attempt to ratify which involved invoking s 86.

87. Implied obligations varied by agreement or usage (1) Where any right, duty, or liability would arise under a contract of marine insurance by implication of law, it may be negatived or varied by express agreement, or by usage, if the usage be such as to bind both parties to the contract.1 (2) The provisions of this section extend to any right, duty, or liability declared by this Act which may be lawfully modified by agreement. Note Marine insurance is a consensual contract, and in the absence of a positive legal prohibition, the parties may make any stipulation they please.

Express Agreement As regards ‘express agreement,’ the maxims of the law are Expressum facit cessare taciturn and Modus et conventio vincunt legem. For example, it is a well-known rule of law that deviation is a ground for avoiding the insurance, but the parties may agree to a deviation clause being inserted in the policy. On the other hand, the parties cannot by agreement dispense with the provisions against gaming and wagering which are prohibited in the public interest. But, speaking generally, the main object of the Act is to declare the law, that is to say, to indicate to the parties the legal position if they do not make any express bargain, leaving them free to make any bargain they like to suit their own needs.

Usage Speaking, in 1791, of a marine policy, Buller J, said, ‘it is founded on usage and must be governed by usage.’2 This proposition must now be taken with qualifications.

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A usage may be either a general usage of trade, or a particular usage, prevailing only among particular classes or in particular localities. When a general usage has been affirmed by judicial decision, it becomes incorporated into the law merchant, and thenceforward evidence of any usages inconsistent therewith is inadmissible.3 A particular usage must be proved by evidence in each case, at any rate till it becomes so notorious that the Courts will take judicial notice of it.4 It is only binding in so far as it forms an implied term of the contract between the parties concerned. Geographical terms used in a policy, eg the term ‘Baltic,’ may have a special meaning attached to them by usage.5 As a marine policy is an instrument in writing, evidence of usage is not admissible to contradict anything which is plainly expressed.6 Such evidence is only admissible either to explain what is technical or ambiguous, or to annex incidents to the contract.7 1 Hart v Standard Marine Insurance Co Ltd (1889) 22 QBD at 501, CA; cf Matveieff v Crossfield (1903) 8 Com Cas 120 (settlement according to custom of Lloyd’s not binding on person ignorant of custom). 2 Brough v Whitmore (1791) 4 Term Rep at 210. 3 Goodwin v Robarts (1875) LR 10 Ex at 357, Ex Ch. 4 Cf Ex p Turquand (1885) 14 QBD at 645. 5 Uhde v Walters (1811) 3 Camp 16; cf Birrell v Dryer (1884) 9 App Cas at 351. 6 Parkinson v Collier (1797) 2 Park’s Marine Insurance 8th ed; Blacken v Royal Exchange Assurance Co (1832) 2 Cr & J at 250. 7 For illustrations of the part played by usage, see Universo Insurance Co of Milan v Merchants’ Marine Insurance Co [1897] 2 QB 93 (liability of broker for premium); Atwood v Sellar (1880) 5 QBD 286, CA (practice of average adjusters to charge certain general average expenses to particular average, invalid); Stephens v Australasian Insurance Co (1872) LR 8 CP at 23 (declarations on floating policies); Dickinson v Jardine (1868) LR 3 CP 639 (special usage as to jettison, invalid); Sweeting v Pearce (1861) 30 LJCP 109 (usage of Lloyd’s as to settlement of losses); Blacken v Royal Exchange Assurance Co (1832) 2 Cr & J 244 (usage not to pay for boat slung outside, invalid); Palmer v Blackburn (1822) 1 Bing 61, 64 (measure of indemnity, gross freight).

88. Reasonable time etc, a question of fact Where by this Act any reference is made to reasonable time, reasonable premium, or reasonable diligence, the question what is reasonable is a question of fact.1 Note This section is similar to the lines of the Sale of Goods Act 1979, s 56. The concept of reasonable time may be relevant, for example, to questions under s 58 (missing ship) and s 42 (commencement of voyage) of the Marine Insurance Act 1906 and to whether notice of abandonment is given timeously.2 1 As to reasonable time, see Carlton SS Co v Castle Mail Packets Co [1898] AC 486 at 491, per Lord Herschell; Currie & Co v Bombay Native Insurance Co (1869) LR 3 CP at 79; as to premium, see note to s 31. 2 Sveriges Angfartygs Assurans Forening (The Swedish Club) v Connect Shipping Inc (The Renos) CA [2018] 1 Lloyd’s Rep 285.

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89. Slip as evidence Where there is a duly stamped policy, reference may be made, as heretofore, to the slip or covering note in any legal proceeding.1 Note This section is now of limited relevance to the London Market, where slips have now fallen out of use. Lord Blackburn said, ‘As the slip is clearly a contract for marine insurance, and is equally clearly not a policy, it is, by virtue of these enactments (the stamp laws), not valid, that is, not enforceable at law or in equity; but it may be given in evidence wherever it is, though not valid, material.’ For example, the slip is evidence for the purpose of correcting an error in the name of the ship.2 So, too, if the insurer seeks to avoid the policy on the ground of non-disclosure of a material fact, the date of the ‘slip’ would be material to show whether, when the fact came to the knowledge of the assured, the contract had or had not been concluded.3 The ‘slip’ cannot be used to contradict the terms of the policy4 unless there is a clear case of common mistake. It may then be used for the purpose of rectifying the policy.5 It is not clear whether the slip can be used for the purpose of clarifying ambiguity in the policy.6 1 lonides v Pacific Fire and Marine Insurance Co (1872) LR 7 QB 517, Ex Ch. Cf Scottish National Insurance Co v Poole (1912) 18 Com Cas 9 (effect of two slips); Janson v Poole (1915) 20 Com Cas 232 at 239 (whether homeward voyage covered or not). 2 Ionides v Pacific Marine Insurance Co (1871) LR 6 QB at 685 (name of ship); cf Western Assurance Co of Toronto v Poole (1903) 8 Com Cas at 118 (‘no s/c’ to exclude ‘sue and labour’ clause in a policy of reinsurance). 3 Cory v Patton (1872) LR 7 QB 304; cf Lishman v Northern Marine Insurance Co (1875) LR 10 CP 179, Ex Ch. See s 21, as to conclusion of contract. 4 British and Foreign Marine Insurance Co Ltd v Sturge (1897) 2 Com Cas 244. 5 Empress Assurance Ccon v Bowring (1905) 11 Com Cas 107 at 114, per Kennedy J. Cf Spalding v Crocker (1897) 13 TLR 396, per Mathew J; Symington v Union Insurance Society of Canton Ltd (1928), 34 Com Cas 233. 6 Youell v Bland Welch (No 1) [1992] 2 Lloyd’s Rep 127 suggested not but contrast Standard Life Assurance Ltd v Oak Dedicated Ltd [2008] Lloyd’s Rep IR 552 and Mopani Copper Mines plc v Millennium Underwriting Ltd [2009] Lloyd’s Rep IR 158 following the decision in HIH Casualty and General Insurance Ltd v New Hampshire Insurance Co [2001] Lloyd’s Rep IR 596.

90. Interpretation of terms In this Act, unless the context or subject-matter otherwise requires,— ‘Action’ includes counter-claim and set-off:1 ‘Freight’ includes the profit derivable by a shipowner from the employment of his ship to carry his own goods or moveables, as well as freight payable by a third party, but does not include passage money:2

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‘Moveables’ means any moveable tangible property, other than the ship, and includes money, valuable securities, and other documents:3 ‘Policy’ means a marine policy. Note ‘Action’. This definition is merely inclusive. For a substantive definition of ‘action’ see the Supreme Court Act 1981, s 151(1). See s 50(2), s 56(4), and s 80(2), which require this definition. As to actions on marine policies, see note to s 22. ‘Freight’. In shipping law the term ‘freight’ is sometimes used to denote the goods or cargo laden on board ship. More usually it is used to denote the sum payable to a shipowner by a third person for the use of a ship as a vehicle for merchandise.4 In insurance law the term has a wider meaning. In a case where it was held that an insurance ‘on freight’ did not cover coolies’ passage money, Willes J, after commenting on the different meanings of the word, said that it had been ‘decided that “freight” sufficiently represents the interest of the shipowner in the carriage of his own goods, and includes the value of their carriage’.5 It is immaterial to the insurer whether the ship is regarded as hired to an actual or to a hypothetical charterer. As to ‘advance freight,’ see s 12. As to freight ‘chartered or as if chartered’ and the distinction between chartered and bill of lading freight, see Sch I, r 3. See s 16(2), s 60, and s 71(4), which require this definition. ‘Moveables’. In commercial law generally, the term ‘goods’ includes all moveable tangible property,’6 but in marine insurance law the term has a restricted meaning; see Sch I, r 17. See s 3, s 40 and s 71(1) and (2), which require this definition. ‘Policy’. See ss 1, 2, and 22, which refer to a ‘marine policy’.7 1 Cf Sale of Goods Act 1979, s 61 (2). 2 Flint v Flemyng (1830) 1 B & Ad 45; see note to this section. 3 See Baring Bros& Co v Marine Insurance Co (1894) 10 TLR 276 (postal packet containing stock certificates); The Pomeranian [1895] P 349 (live cattle); Sleigh v Tyser [1900] 2 QB 333 (live cattle). 4 By English law, apart from special contract, freight is only payable on delivery of the cargo, and freight pro rata itineris is not recognised. Cf Carver, paras 1662, 1667. 5 Denoon v Home and Colonial Assurance Co (1872) LR 7 CP 341 at 349. 6 Cf Sale of Goods Act 1979, s 61(2), where the term ‘goods,’ however, expressly excludes money. 7 This term is not broad enough (expressly or impliedly) to encompass a ‘certificate’ of insurance: see Diamond Alkali Export Corporation v FL. Bourgeois [1921] 3 KB 443, 457.

91. Savings (1) Nothing in this Act, or in any repeal effected thereby, shall affect— (a) The provisions of the Stamp Act 1891, or any enactment for the time being in force relating to the revenue; (b) The provisions of the Companies Act 1862, or any enactment amending or substituted for the same;1 (c) The provisions of any statute not expressly repealed by this Act. (2) The rules of the Common Law, including the law merchant, save in so far as they are inconsistent with the express provisions of this Act, shall continue to apply to contracts of marine insurance.2

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Note The object of subs (2) is (i) to fill up lacunae in the Act itself, and (ii) to preserve the operation of rules of law applicable to all contracts of insurance so far as consistent with the special provisions of the Act. In Continental countries marine and commercial cases are relegated to special commercial tribunals. In England, as in the United States, they are dealt with by the ordinary courts. The Law Merchant is part of the Common Law, and its special rules are enforced as part of the ordinary law of the land. Marine insurance is a contract, and in so far as the contract has not special incidents peculiar to itself, it is dealt with on the same footing as other contracts.

Conflict of Laws An underwriter is bound by an average adjustment duly made according to the law of the place of adjustment, i e when the voyage is completed in due course, by the law of the port of destination, or, when the voyage is not completed, by the law of the place where the voyage is broken up and the ship and cargo part company. An English insurer of goods shipped by an English merchant on board a foreign ship is not affected by the law of the flag.3 As Lush J, said, an insurer under an English policy may, if he chooses, stipulate ‘that such policy shall be construed and applied in whole or in part according to the law of any foreign state, as if it had been made in and by a subject of the foreign state, and the policy in question does so stipulate as regards general average; but, except when it is so stipulated, the policy must be construed according to our law, and without regard to the nationality of the vessel.’4

Foreign law In the absence of evidence to the contrary, the law of a foreign country is presumed to be the same as English law. If the foreign law differs, and the difference is relied on, it must be proved as a question of fact by expert evidence.5 But when the evidence has been given, its effect is a question for the Judge, and not for the jury, if any.6

Calculation of time Suppose a ship is insured in London with A up to midnight of 31 December without any special provision as to time, and with B from 1 January. The ship founders in the West Indies on 31 December at 10 pm according to the ship’s time. According to London time, A’s policy would have expired, and the risk would be on B’s policy. If the policy is made in Great Britain, Greenwich mean time applies,7 except for any time during which the Summer Time Act 1972 is in operation. The time for general purposes in Great Britain is, during the period of summer time, one hour in advance of Greenwich mean time.8

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Effect on policy of subsequent hostilities Subject to the provisions of any licence to trade,9 the insurer is not liable for any loss suffered by an enemy alien during the continuance of hostilities, even though the policy may have been effected before the commencement of hostilities.10 For example: 1.

2.

3.

Policy on goods from London to Bayonne, effected on behalf of a Frenchman. War afterwards breaks out between England and France, and the goods are captured by a Spanish cruiser, i e by a British ally. The insurer is not liable, even though the action is brought after peace has been concluded.11 Policy on gold bullion from Johannesburg to London, effected by a company registered and carrying on business in the (Boer) South African Republic. On 2 October the gold is seized in transit by the Government of the South African Republic. On that day war with England was anticipated, but it did not break out until 11 October. The assured is entitled to recover.12 Policy effected in May on gold bullion from a mine in the Transvaal to London. In October war breaks out between the Transvaal Government and England, and the gold is seized. The assured is a company registered in Natal, though working the mine in the Transvaal. The gold is not enemy property, and the insurer is liable under the policy.13

‘There are three rules,’ said Lord Davey, ‘which are established in our Common Law. The first is that the King’s subjects cannot trade with an alien enemy, ie a person owing allegiance to a Government at war with the King, without the King’s licence. Every contract made in violation of this principle is void, and goods which are the subject of such a contract are liable to confiscation. ‘The second principle is a corollary from the first, but it is also rested on distinct grounds of public policy. It is that no action can be maintained against an insurer of an enemy’s goods or ships against capture by the British Government. One of the most effectual instruments of war is the crippling of the enemy’s commerce, and to permit such an insurance would be to relieve enemies from the loss they incur by the action of British arms, and would, therefore, be detrimental to the interests of the insurer’s own country. The principle equally applies where the insurance is made previously to the commencement of hostilities, and was therefore legal in its inception, and whether the person claiming on the policy be a neutral or even a British subject, if the insurance be effected on behalf of an alien enemy. ‘The third rule is that, if a loss has taken place before the commencement of hostilities, the right of action on a policy of insurance by which goods lost were insured is suspended during the continuance of war and revives on the restoration of peace.’14 The Common Law doctrines as to enemies and trading with the enemy have been considerably extended by legislation. At Common Law an alien enemy is a person who voluntarily resides, or carries on business, in enemy territory.” Locality and not nationality furnishes the test. But by statute enemy status may be imposed on enemy

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nationals and other persons having hostile associations outside enemy territory;15 see eg Trading with the Enemy Act 1939, s 2. A declaration of war by this country operates as an Act of Parliament prohibiting all trading and business intercourse with the enemy.16 If a contract made before the war involves intercourse with the enemy for its due fulfilment, the contract is dissolved, and a clause purporting to suspend its operation during war is null and void.17 If a British ship sails before the war for a port which, owing to the outbreak of war, becomes an enemy port, the voyage becomes illegal, and must be abandoned;18 and if a neutral insures with an enemy underwriter who pays for a total loss, the subjectmatter insured or whatever remains of it becomes enemy property, and may be dealt with accordingly.19 1 The principal Act is now the Companies Act 2006. 2 Pan Atlantic Insurance Co Ltd v Pine Top Insurance Co Ltd [1995] 1 AC 501, 544–545; Eide UK Ltd v Lowndes Lambert Group Ltd [1999] QB 199, 206; HIH Casualty & General Insurance Ltd v Chase Manhattan Bank [2001] 2 Lloyd’s Rep 483, [169] (CA); British and Foreign Insurance Co v Wilson Shipping Co Ltd [1921] 1 AC 188 at 193, 211, HL. 3 Cf Wavertree Sailing Ship Co v Love [1897] AC 373, PC. 4 Greer v Poole (1880) 5 QBD 272 at 274. (English policy with foreign general average clause). As to choice of law clauses more generally see Dicey, Morris & Collins on the Conflict of Laws (15th ed.), Chapter 33, section 7. 5 The Parchim [1918] AC 157 at 160, 161, per Lord Parker. 6 Senior Courts Act 1981, s 69(5). 7 Interpretation Act 1978, ss 9, 23(3). 8 Summer Time Act 1972, s 1(2). The period of summer time for the purposes of this Act is the period beginning at one o’clock, Greenwich mean time, in the morning of the last Sunday in March and ending at one o’clock, Greenwich mean time, in the morning of the last Sunday in October: ibid, s 1(2). 9 Usparicha v Noble (1811) 13 East 332, 12 RR 360. Morgan v Oswald (1812) 3 Taunt 554; W E Hall, A Treatise on International Law (8th ed, 1924); by A P Higgins, pp 668–671, para 196; George J Webber, Effect of War on Contracts (2nd ed, 1946), pp 149–151; Lord McNair and A D Watts, Legal Effects of War (4th ed, 1966), pp 356–363. 10 Brandon v Curling (1803) 4 East 410. 11 Ibid; and cf Potts v Bell (1800) 8 Term Rep 548, 5 RR 452, Ex Ch (goods purchased in enemy territory, shipped to this country in a neutral vessel). 12 Driefontein Consolidated Mines v Janson [1901] 2 KB 419, CA; affd [1902] AC 484, HL. 13 Nigel Gold Mining Co v Hoade [1901] 2 KB 849, 6 Com Cas 268. 14 Janson v Driefontein Consolidated Mines [1902] AC at 499, HL. 15 Ibid, at 505, HL, per Lord Lindley; Porter v Freudenberg [1915] 1 KB 857, CA. Speaking generally, an enemy cannot be the actor in any legal proceeding except under royal licence, but, as he may be sued, he can appeal. See also V 10 Sovfracht v Gebr Van Udens Scheepvaart en Agentuur Maatschappij [1943] 1 All ER 76, HL (a company domiciled in Holland became an alien enemy during German occupation); distinguished in Lubrafol Owners v Pamia SS Owners, The Pamia [1943] 1 All ER 269, P (company transferred its business from enemy-occupied territory to neutral country); Re The AngloInternational Bank Ltd [1943] 2 All ER 88, CA (further discussion of enemy and enemy-occupied territory). 16 Esposito v Bowden (1857) 7 E & B 763, 781, Ex Ch, per Willes J. 17 Ertel Bieber & Co v Rio Tinto Co [1918] AC 260, HL; as to cif contracts, see Arnhold Karberg & Co v Blythe, Green, Jourdain & Co [1916] 1 KB 495, CA; as to contracts between banker and customer, see Arab Bank Ltd v Barclays Bank (Dominion, Colonial and Overseas) [1954] 2 All ER 226, HL. 18 British and Foreign Marine Insurance Co Ltd v Samuel Sanday & Co [1916] 1 AC 650, 673, HL. (See the judgment of Lord Wrenbury). 19 The Palm Branch [1916] P 230, modified on appeal because it turned out that a small percentage of the insurers were not enemies, [1919] AC 272, PC. As regards enemy property, the English or neutral pledgee or mortgagee has no claim cognisable by a British Prize Court, even though the security was given before war; see The Odessa [1916] 1 AC 145, PC.

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92. This section was repealed by the Statute Law Revision Act 1927 93. This section was repealed by the Statute Law Revision Act 1927 94. Short title This Act may be cited as the Marine Insurance Act 1906. Note This Act, like all Acts passed subsequent to 1889, must be read subject to the applicable provisions of the Interpretation Act 1978. A codifying Act, as Lord Herschell has pointed out, must be construed according to its natural meaning without regard to the previous state of the law. It is only in case of doubt that resort to the previous law is legitimate.1 Where an Act is divided into Parts or Headings, regard should be had to these divisions in construing the Act.2 1 Vagliano v Bank of England [1891] AC 107 at 145, HL; Hall v Hayman [1912] 2 KB at 12; The AngloMexican [1918] AC 422, PC, but later cases show an inclination to construe the Act as declaratory whenever possible; see eg British and Foreign Marine Insurance Co Ltd v Sanday & Co [1916] 1 AC 650 at 672, per Lord Wrenbury. 2 Inglis v Robertson [1898] AC 616 at 630, HL.

FIRST SCHEDULE Form of Policy Lloyd’s S.G. policy Be it known that as well in 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 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 furniture, 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 whatsoever 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 merchandises from the loading thereof aboard the said ship. upon the said ship, &c. and so shall continue and endure, during her abode there, upon the said ship, &c. And further, until the said ship, with all her ordnance, tackle, apparel, &c., and goods and merchandises whatsoever shall be arrived at 158

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upon the said ship, &c., until she hath moored at anchor twenty-four hours 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, &c., 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, &c., goods and merchandises, &c., for so much as concerns the assured by agreement between the assured and assurers in this policy, are and shall be valued at Touching the adventures and perils which we the assurers are contented 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 or shall come to the hurt, detriment, or damage of the said goods and merchandises, and ship, &c., 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, safeguards, and recovery of the said goods and merchandises, and ship, &c., or any part thereof, without prejudice to this insurance; to the charges whereof we, the assurers, will contribute each one according to the rate and quantity of his sum herein assuredAnd it is especially declared and agreed that no acts of the insurer or insured in recovering, saving, or preserving the property insured shall be considered as a waiver, or acceptance of abandonment. 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 ourselves, 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 consideration 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.

Rules for Construction of Policy The following are the rules referred to by this Act for the construction of a policy in the above or other like form, where the context does not otherwise require:—

Lost or not lost 1

Where the subject-matter is insured “lost or not lost,” and the loss has occurred before the contract is concluded, the risk attaches unless, at such time the assured was aware of the loss, and the insurer was not. 159

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From 2

Where the subject-matter is insured “from” a particular place, the risk does not attach until the ship starts on the voyage insured.

At and from 3(a) Where a ship is insured “at and from” a particular place, and she is at that place in good safety when the contract is concluded, the risk attaches immediately. (b) If she be not at that place when the contract is concluded, the risk attaches as soon as she arrives there in good safety, and, unless the policy otherwise provides, it is immaterial that she is covered by another policy for a specified time after arrival. (c) Where chartered freight is insured “at and from” a particular place, and the ship is at that place in good safety when the contract is concluded the risk attaches immediately. If she be not there when the contract is concluded, the risk attaches as soon as she arrives there in good safety. (d) Where freight, other than chartered freight, is payable without special conditions and is insured “at and from” a particular place, the risk attaches pro rata as the goods or merchandise are shipped; provided that if there be cargo in readiness which belongs to the shipowner, or which some other person has contracted with him to ship, the risk attaches as soon as the ship is ready to receive such cargo.

From the loading thereof 4

Where goods or other moveables are insured “from the loading thereof,” the risk does not attach until such goods or moveables are actually on board, and the insurer is not liable for them while in transit from the shore to the ship.

Safely landed 5

Where the risk on goods or other moveables continues until they are “safely landed,” they must be landed in the customary manner and within a reasonable time after arrival at the port of discharge, and if they are not so landed the risk ceases.

Touch and stay 6

In the absence of any further licence or usage, the liberty to touch and stay “at any port or place whatsoever” does not authorise the ship to depart from the course of her voyage from the port of departure to the port of destination.

Perils of the seas 7

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The term “perils of the seas” refers only to fortuitous accidents or casualties of the seas. It does not include the ordinary action of the winds and waves.

First schedule

Pirates 8

The term “pirates” includes passengers who mutiny and rioters who attack the ship from the shore.

Thieves 9

The term “thieves” does not cover clandestine theft or a theft committed by any one of the ship’s company, whether crew or passengers.

Restraint of princes 10 The term “arrests, &c., of kings, princes, and people” refers to political or executive acts, and does not include a loss caused by riot or by ordinary judicial process.

Barratry 11 The term “barratry” includes every wrongful act wilfully committed by the master or crew to the prejudice of the owner, or, as the case may be, the charterer.

All other perils 12 The term “all other perils” includes only perils similar in kind to the perils specifically mentioned in the policy.

Average unless general 13 The term “average unless general” means a partial loss of the subject-matter insured other than a general average loss, and does not include “particular charges.”

Stranded 14 Where the ship has stranded, the insurer is liable for the excepted losses, although the loss is not attributable to the stranding, provided that when the stranding takes place the risk has attached and, if the policy be on goods, that the damaged goods are on board.

Ship 15 The term “ship” includes the hull, materials and outfit, stores and provisions for the officers and crew, and, in the case of vessels engaged in a special trade,

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the ordinary fittings requisite for the trade, and also, in the case of a steamship, the machinery, boilers, and coals and engine stores, if owned by the assured.

Freight 16 The term “freight” includes the profit derivable by a shipowner from the employment of his ship to carry his own goods or moveables, as well as freight payable by a third party, but does not include passage money.

Goods 17 The term “goods” means goods in the nature of merchandise, and does not include personal effects or provisions and stores for use on board. In the absence of any usage to the contrary, deck cargo and living animals must be insured specifically, and not under the general denomination of goods.

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Insurance Act 2015

2015 CHAPTER 4 An Act to make new provision about insurance contracts; to amend the Third Parties (Rights against Insurers) Act 2010 in relation to the insured persons to whom that Act applies; and for connected purposes. [12th February 2015] Be it enacted by the Queen’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:—

PART 1 INSURANCE CONTRACTS: MAIN DEFINITIONS 1 Insurance contracts: main definitions In this Act (apart from Part 6)— “consumer insurance contract” has the same meaning as in the Consumer Insurance (Disclosure and Representations) Act 2012; “non-consumer insurance contract” means a contract of insurance that is not a consumer insurance contract; “insured” means the party to a contract of insurance who is the insured under the contract, or would be if the contract were entered into; “insurer” means the party to a contract of insurance who is the insurer under the contract, or would be if the contract were entered into; “the duty of fair presentation” means the duty imposed by section 3(1). NOTES The Insurance Act 2015 (the ‘2015 Act’) received Royal Assent on 12 February 2015 and came into force 18 months later, on 12 August 2016; Explanatory Notes, paragraph 172. A ‘consumer insurance contract’ as defined by the Consumer Insurance (Disclosure and Representations) Act 2012 (the ‘2012 Act’) is an insurance contract between an insurer and ‘an individual who enters into the contract wholly or mainly for purposes 163

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unrelated to the individual’s trade, business or profession’; see the Explanatory Notes, paragraphs 31–32. In practice, therefore, the majority of contracts of marine insurance will be non-consumer contracts because the insured will be a corporate entity and/or because the contract of insurance will have been entered into wholly or mainly for business purposes. The 2012 Act is not considered in detail here. Contracts of reinsurance and of retrocession are non-consumer insurance contracts for the purpose of the 2015 Act; Explanatory Notes, paragraph 36.

PART 2 THE DUTY OF FAIR PRESENTATION 2 Application and interpretation (1) This Part applies to non-consumer insurance contracts only. (2) This Part applies in relation to variations of non-consumer insurance contracts as it applies to contracts, but— (a) references to the risk are to be read as references to changes in the risk relevant to the proposed variation, and (b) references to the contract of insurance are to the variation. NOTES Part 2 of the 2015 Act, the duty of fair presentation, applies to non-consumer insurance contracts only. It also applies to variations of non-consumer contracts of insurance but the duty to make a fair presentation of the risk only applies to changes in the risk relevant to the proposed variation.

3 The duty of fair presentation (1) Before a contract of insurance is entered into, the insured must make to the insurer a fair presentation of the risk. (2) The duty imposed by subsection (1) is referred to in this Act as “the duty of fair presentation”. (3) A fair presentation of the risk is one— (a) which makes the disclosure required by subsection (4), (b) which makes that disclosure in a manner which would be reasonably clear and accessible to a prudent insurer, and (c) in which every material representation as to a matter of fact is substantially correct, and every material representation as to a matter of expectation or belief is made in good faith. (4) The disclosure required is as follows, except as provided in subsection (5)— (a) disclosure of every material circumstance which the insured knows or ought to know, or (b) failing that, disclosure which gives the insurer sufficient information to put a prudent insurer on notice that it needs to make further enquiries for the purpose of revealing those material circumstances. 164

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(5) In the absence of enquiry, subsection (4) does not require the insured to disclose a circumstance if— (a) it diminishes the risk, (b) the insurer knows it, (c) the insurer ought to know it, (d) the insurer is presumed to know it, or (e) it is something as to which the insurer waives information. (6) Sections 4 to 6 make further provision about the knowledge of the insured and of the insurer, and section 7 contains supplementary provision. NOTES Section 3(1) of the 2015 Act imposes a duty on the insured to make ‘a fair presentation of the risk’ before entering into the contract of insurance. This duty replaces the duties regarding disclosure and representations contained in ss 18 to 20 of the Marine Insurance Act 1906 (the ‘1906 Act’). There are three requirements to the duty to make a fair representation of the risk. First, the presentation must comply with sub-s (4). This subsection has two alternative threshold standards. The first standard, s 3(4)(a) requires disclosure of every material circumstance which the insured knows or ought to know. It is similar to the existing law addressed above. The alternative threshold standard is a lower one and applies in default of compliance with the first (s 3(4)(b)). This lower standard provides that a fair presentation is still made where the first threshold is not met, provided that the insurer has been furnished with enough information to put a prudent insurer on notice that it needs to make further enquires; see paragraph 45 of the Explanatory Notes. This lower threshold has the potential to reduce the amount of disclosure required of an insured but much will depend on the circumstances in which the Courts will be prepared to fix an insurer with notice. The second requirement is that the disclosure is made in a manner which ‘would be reasonably clear and accessible to a prudent insurer’; s 3(3)(b). This requirement is aimed at striking a balance between vast ‘data dumps’ of information at one end of the scale and ‘overly brief or cryptic’ presentations at the other; Explanatory Notes, paragraph 46. The third requirement is based on s 20 of the Marine Insurance Act 1906 and is the duty not to make material misrepresentations. It is addressed above. Section 3(5) provides exceptions to the insured’s duty of disclosure, but these exceptions only apply ‘in the absence of enquiry’ by the insurer. They do not apply to the requirement to make disclosure in a clear and accessible form nor to the duty not to make a material misrepresentation; Explanatory Notes, paragraph 48. Exceptions (a) and (e) closely replicate s 18(3)(a) and (c) of the 1906 Act. Exceptions (b), (c) and (d) except from disclosure information which the insurer knows, ought to know or is presumed to know. Sections 4 and 5 of the 2015 Act expand on these concepts of knowledge of the insured and the insurer respectively.

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4 Knowledge of insured (1) This section provides for what an insured knows or ought to know for the purposes of section 3(4)(a). (2) An insured who is an individual knows only— (a) what is known to the individual, and (b) what is known to one or more of the individuals who are responsible for the insured’s insurance. (3) An insured who is not an individual knows only what is known to one or more of the individuals who are— (a) part of the insured’s senior management, or (b) responsible for the insured’s insurance. (4) An insured is not by virtue of subsection (2)(b) or (3)(b) taken to know confidential information known to an individual if— (a) the individual is, or is an employee of, the insured’s agent; and (b) the information was acquired by the insured’s agent (or by an employee of that agent) through a business relationship with a person who is not connected with the contract of insurance. (5) For the purposes of subsection (4) the persons connected with a contract of insurance are— (a) the insured and any other persons for whom cover is provided by the contract, and (b) if the contract re-insures risks covered by another contract, the persons who are (by virtue of this subsection) connected with that other contract. (6) Whether an individual or not, an insured ought to know what should reasonably have been revealed by a reasonable search of information available to the insured (whether the search is conducted by making enquiries or by any other means). (7) In subsection (6) “information” includes information held within the insured’s organisation or by any other person (such as the insured’s agent or a person for whom cover is provided by the contract of insurance). (8) For the purposes of this section— (a) “employee”, in relation to the insured’s agent, includes any individual working for the agent, whatever the capacity in which the individual acts, (b) an individual is responsible for the insured’s insurance if the individual participates on behalf of the insured in the process of procuring the insured’s insurance (whether the individual does so as the insured’s employee or agent, as an employee of the insured’s agent or in any other capacity), and (c) “senior management” means those individuals who play significant roles in the making of decisions about how the insured’s activities are to be managed or organised. NOTES Section 4 of the 2015 contains a new and unique statutory definition of what the insured ‘knows’ or ‘ought to know’ for the purpose of disclosure. Section 4(2) applies to an insured who is an individual and provides that the insured ‘knows only’ that which is actually known ‘to the individual’ or to the ‘individuals 166

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who are responsible for the insured’s insurance.’ These individuals will include an insurance broker placing the risk; s 4(8)(b). Section 4(3) is a new special rule of corporate attribution where the insured is not an individual and replaces the common law on attribution of knowledge; Explanatory Notes, paragraph 52 and see Meridian Global Funds Management v Securities Commission [1995] 2 AC 500 at 507 on special rules of attribution. Section 4(3) provides that such an insured ‘knows only’ that which is known to individuals who are ‘part of the insured’s senior management’ or ‘responsible for the insured’s insurance’ (see above). These categories of persons ‘are expected to be construed relatively narrowly, but are capable of being applied flexibly’; Explanatory Notes, paragraph 55. Section 4(4) and (5) of the 2015 Act exclude from the insured’s knowledge ‘confidential information’ known to an individual if the individual is, or is an employee of the insured’s agent and the information was acquired ‘through a business relationship with a person who is not connected with the contract of insurance.’ Confidential information acquired by an insured’s broker through another client is not be attributed to the insured; paragraph 59 of the Explanatory Notes. Section 4(6) defines what an insured ‘ought to know’, constructive knowledge. This is defined by reference to ‘what should reasonably have been revealed by a reasonable search of information available to the insured.’ It appears to be an objective test. Section 4(7) defines ‘information’ as including ‘information held within the insured’s organisation or by any other person …’. This is intended to be a flexible definition; Explanatory Notes, paragraph 56. The view of the drafters of the Explanatory Notes is that ‘future interpretation of sections 4(6) and 4(7) is likely to be guided by existing case law’; Explanatory Notes, paragraph 57. The knowledge of an ‘agent to know’ ‘may well be included;’ Explanatory Notes, paragraph 57. For persons who qualify, or may qualify as ‘agents to know’, see Proudfoot v Montefiore (1867) LR 2 QB 511; Blackburn, Low & Co. v Vigors, (1886) 17 Q.B.D. 553; (1887) 12 App. Cas. 531; Regina Fur Company v Bossom [1957] 2 Lloyd’s Rep. 466 at 484rhc; Australia & New Zealand Bank, Ltd. v Colonial & Eagle Wharves, Ltd.; Boag (third party); [1960] 2 Lloyd’s Rep. 241 at 254lhc. A fuller discussion of ‘agents to know’ is to be found above. The proposition inherent in s 4(6) of the 2015 Act appears to be that a reasonable search ought, objectively, to have revealed the knowledge of an ‘agent to know’ even if in fact a search would not have revealed such knowledge. However a reasonable ‘search may not be expected to evince an admission by a servant of their own negligence’; Explanatory Notes, paragraph 57. Section 4(8)(b) provides that ‘an individual is responsible for the insured’s insurance if the individual participates on behalf of the insured in the process of procuring the insured’s insurance.’ This definition embraces the insured’s broker as the agent to insure. Whilst the matter is not free from doubt, it appears that by a combination of s4(3)(b) and (6), the knowledge which a broker ‘ought to have’ is to be attributed to the insured.

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5 Knowledge of insurer (1) For the purposes of section 3(5)(b), an insurer knows something only if it is known to one or more of the individuals who participate on behalf of the insurer in the decision whether to take the risk, and if so on what terms (whether the individual does so as the insurer’s employee or agent, as an employee of the insurer’s agent or in any other capacity). (2) For the purposes of section 3(5)(c), an insurer ought to know something only if— (a) an employee or agent of the insurer knows it, and ought reasonably to have passed on the relevant information to an individual mentioned in subsection (1), or (b) the relevant information is held by the insurer and is readily available to an individual mentioned in subsection (1). (3) For the purposes of section 3(5)(d), an insurer is presumed to know— (a) things which are common knowledge, and (b) things which an insurer offering insurance of the class in question to insureds in the field of activity in question would reasonably be expected to know in the ordinary course of business. NOTES Section 5(1) of the 2015 Act addresses the actual knowledge of the insurer (ss. 5(1)), and is another special rule of corporate attribution. ‘The intended effect of the phrase “knows … only” is that the common law of attribution of information to an insurer is replaced by the terms of the Act’; Explanatory Notes, paragraph 61. The provision is ‘intended to capture the person or people involved in the particular underwriting decision – essentially the underwriter’; Explanatory Notes, paragraph 61. The knowledge of directors and other senior officers of insurers will no longer be imputed to the insurer unless those executives participated in the particular underwriting decision. Section 5(2) identifies two circumstances in which the insurer ‘ought to know something.’ The first circumstance is that ‘an employee or agent of the insurer knows it, and ought reasonably to have passed on the relevant information.’ This test is of an ‘agent to know’ of the insurer. The examples given are of ‘information held by the claims department or reports produced by surveyors or medical experts for the purpose of assessing the risk’; Explanatory Notes, paragraph 62. It is not thought that the drafters intended that all information held by an insurer’s claims department be imputed to the insurer. The circumstances in which that information was obtained and retained ought to be a relevant factor. The second circumstance is ‘intended to require the relevant underwriter to make a reasonable effort to search such information as is available to them within the insurer’s organisation …’; Explanatory Notes, paragraph 64 (emphasis supplied). Section 5(3) identifies two circumstances in which the insurer is presumed to know something. The first, ‘things which are common knowledge’ is intended to reflect a modernisation of the language contained in s 18(3)(b) of the 1906 Act;

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Explanatory Notes, paragraph 66. The second, ‘things which an insurer offering insurance of the class in question to insureds in the field of activity in question would reasonably be expected to know in the ordinary course of business’ is an objective test and is again intended to modernise the language of s 18(3)(b) of the 1906 Act, whilst recognising that ‘many underwriters work by class of business’; Explanatory Notes, paragraph 67.

6 Knowledge: general (1) For the purposes of sections 3 to 5, references to an individual’s knowledge include not only actual knowledge, but also matters which the individual suspected, and of which the individual would have had knowledge but for deliberately refraining from confirming them or enquiring about them. (2) Nothing in this Part affects the operation of any rule of law according to which knowledge of a fraud perpetrated by an individual (“F”) either on the insured or on the insurer is not to be attributed to the insured or to the insurer (respectively), where— (a) if the fraud is on the insured, F is any of the individuals mentioned in section 4(2)(b) or (3), or (b) if the fraud is on the insurer, F is any of the individuals mentioned in section 5(1). NOTES Section 6(1) of the 2015 Act provides that the knowledge of an individual includes not only actual knowledge but also ‘blind-eye’ knowledge (‘Nelsonian blindness’ or ‘wilful blindness’); Explanatory Notes, paragraph 69. Section 6(2) preserves the ‘Hampshire Land’ principle, whereby a principal is not fixed with the knowledge of a fraud perpetrated against it by its agent; Explanatory Notes, paragraph 70.

7 Supplementary (1) A fair presentation need not be contained in only one document or oral presentation. (2) The term “circumstance” includes any communication made to, or information received by, the insured. (3) A circumstance or representation is material if it would influence the judgement of a prudent insurer in determining whether to take the risk and, if so, on what terms. (4) Examples of things which may be material circumstances are— (a) special or unusual facts relating to the risk, (b) any particular concerns which led the insured to seek insurance cover for the risk, (c) anything which those concerned with the class of insurance and field of activity in question would generally understand as being something that should be dealt with in a fair presentation of risks of the type in question. 169

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(5) A material representation is substantially correct if a prudent insurer would not consider the difference between what is represented and what is actually correct to be material. (6) A representation may be withdrawn or corrected before the contract of insurance is entered into. NOTES By s 7(1), a ‘fair presentation’ does not need to be contained in a single document or oral presentation. The 2015 Act ‘is intended to recognise that the insurer may need to ask questions about the information contained in the initial presentation …’; Explanatory Notes, paragraph 72. Section 7(2) contains a definition of the term ‘circumstance’. Section 7(3) contains the definition of materiality and is based on ss 18(2) and 20(2) of the 1906 Act, as is the phrase ‘prudent insurer’. The test of materiality is an objective one and evidence from an expert underwriter is usually obtained on whether a non-disclosure or misrepresentation is or is not material; see above for a fuller treatment of this subject. Section 7(4) contains three examples of matters which may be material circumstances. Whether these examples do in fact constitute material circumstances ‘will depend on the facts of each case’; Explanatory Notes, paragraph 75.

8 Remedies for breach (1) The insurer has a remedy against the insured for a breach of the duty of fair presentation only if the insurer shows that, but for the breach, the insurer— (a) would not have entered into the contract of insurance at all, or (b) would have done so only on different terms. (2) The remedies are set out in Schedule 1. (3) A breach for which the insurer has a remedy against the insured is referred to in this Act as a “qualifying breach”. (4) A qualifying breach is either— (a) deliberate or reckless, or (b) neither deliberate nor reckless. (5) A qualifying breach is deliberate or reckless if the insured— (a) knew that it was in breach of the duty of fair presentation, or (b) did not care whether or not it was in breach of that duty. (6) It is for the insurer to show that a qualifying breach was deliberate or reckless. NOTES Section 8 of the 2015 Act identifies the circumstances in which an insurer will be entitled to a remedy for breach of the insured’s duty to make a fair representation. Subsection (1) retains the requirement for the insurer to prove inducement (causation), viz. but for the non-disclosure or misrepresentation, the particular

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underwriter who wrote the risk would not have done so, or would only have done so on different terms; Explanatory Notes, paragraph 77. The test is subjective and the burden of proving inducement is on the insurer; AXA Versicherung AG (successor to Albingia) v Arab Insurance Group (BSC) [2016] 1 Lloyd’s Rep. Insurance & Reinsurance 1, Commercial Court, per Males J at [118]; [2017] Lloyd’s Rep. IR 216 (Court of Appeal) at [138] per Christopher Clarke LJ. Where the insured alleges that the broker would have urged on the insurer additional matters for writing the business as part of the fair presentation, an evidential burden on the insured exists to prove that the additional matters would probably have been raised on a hypothetical broke and such matters must be pleaded and proved; AXA Versicherung AG (successor to Albingia) v Arab Insurance Group (B.S.C.) [2017] Lloyd’s Rep IR 216 (Court of Appeal) at [138]–[139] per Christopher Clarke LJ. Subsection (2) states that the insurer’s remedies are listed in Sch 1 to the 2015 Act and marks a significant departure from the existing law. It is thought that Sch 1 to the 2015 Act is intended to set out a complete code of remedies for breach of the duty of fair presentation. Under the 1906 Act, the position was ‘all or nothing’ in that the insurer’s only remedy was avoidance. Schedule 1 to the 2015 Act provides for a range of different remedies depending on what an insurer would have done had a fair presentation been made (in innocent and negligent cases of non-disclosure). In consequence, it is thought that an underwriter’s evidence on inducement may to be subjected to greater scrutiny in future. AXA Versicherung AG (successor to Albingia) v Arab Insurance Group (B.S.C.) [2016] 1 Lloyd’s Rep Insurance & Reinsurance 1, was a case decided under the 1906 Act but demonstrates that in appropriate circumstances the Court will treat an underwriter’s evidence of inducement with ‘a healthy scepticism’ ([2016] 1 Lloyd’s Rep. Insurance & Reinsurance 1 at [121]). A fuller consideration of the law of inducement is addressed above. Subsection (3) defines a breach for which the insurer has a remedy as a ‘qualifying breach’. By sub-s (4), a qualifying breach can be either deliberate or reckless or innocent. Subsection (6) puts the burden of proving an intentional or a reckless breach on the insurer, which will not be a burden which it will be easy for the insurer to plead or prove.

PART 3 WARRANTIES AND OTHER TERMS 9 Warranties and representations (1) This section applies to representations made by the insured in connection with— (a) a proposed non-consumer insurance contract, or (b) a proposed variation to a non-consumer insurance contract. (2) Such a representation is not capable of being converted into a warranty by means of any provision of the non-consumer insurance contract (or of the terms of the variation), or of any other contract (and whether by declaring the representation to form the basis of the contract or otherwise).

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NOTES Section 9 of the 2015 Act prohibits an insurer from adding a statement in an insurance proposal which converts a representation into a warranty. This was achieved by including a declaration in an insurance proposal stating that the insured warrants the correctness of all answers given, or by stating that those answers form the basis of the contract (a ‘basis clause’). Such basis of contract clauses are no longer of any effect.

10 Breach of warranty (1) Any rule of law that breach of a warranty (express or implied) in a contract of insurance results in the discharge of the insurer’s liability under the contract is abolished. (2) An insurer has no liability under a contract of insurance in respect of any loss occurring, or attributable to something happening, after a warranty (express or implied) in the contract has been breached but before the breach has been remedied. (3) But subsection (2) does not apply if— (a) because of a change of circumstances, the warranty ceases to be applicable to the circumstances of the contract, (b) compliance with the warranty is rendered unlawful by any subsequent law, or (c) the insurer waives the breach of warranty. (4) Subsection (2) does not affect the liability of the insurer in respect of losses occurring, or attributable to something happening— (a) before the breach of warranty, or (b) if the breach can be remedied, after it has been remedied. (5) For the purposes of this section, a breach of warranty is to be taken as remedied— (a) in a case falling within subsection (6), if the risk to which the warranty relates later becomes essentially the same as that originally contemplated by the parties, (b) in any other case, if the insured ceases to be in breach of the warranty. (6) A case falls within this subsection if— (a) the warranty in question requires that by an ascertainable time something is to be done (or not done), or a condition is to be fulfilled, or something is (or is not) to be the case, and (b) that requirement is not complied with. (7) In the Marine Insurance Act 1906— (a) in section 33 (nature of warranty), in subsection (3), the second sentence is omitted, (b) section 34 (when breach of warranty excused) is omitted.

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NOTES The effect of s 10(1) of the 2015 Act is to abolish automatic discharge of the liability of the insurer from the date of breach of warranty provided for in ss 33(3) and 34(2) of the 1906 Act. The definition of a warranty contained in s 33(1) of the 1906 Act is retained (see above). By sub-ss (2) and (4), the effect of a breach of warranty is now suspensory. The insurer’s liability is suspended from the date of the breach until such time as the breach is remedied, but remains liable for something happening before the breach or after the breach is remedied. ‘The insurer will have no liability for anything which occurs, or which is attributable to something occurring, during the period of suspension.’ ‘The “attributable to something happening” wording is intended to cater for the situation in which loss arises as a result of an event which occurred during the period of suspension, but is not actually suffered until after the breach has been remedied’; Explanatory Notes, paragraphs 87 and 89. These subsections may give rise to difficulty in cases where there is more than one cause of the loss, one (or more) of which falls within s 10(2) and one (or more) of which falls within s 10(4). It remains to be seen how the Court will construe s 10(2) and (4) in such circumstances. Section 10(3) provides that cover will not be suspended in any of the three specified circumstances, which substantially reproduce s 34(1) and (3) of the 1906 Act (‘When breach of warranty excused’, see above). Section 10(5) and (6) define when a breach of warranty is deemed to be remedied, such that the insurer comes back on risk. By s 10(5)(a) and (6), a breach of warranty requiring that something is to be done, or not done within an ‘ascertainable time’ is deemed to be remedied when ‘the risk to which the warranty relates later becomes essentially the same as that originally contemplated’ (a time-specific warranty). Time-specific warranties are warranties which require compliance by a deadline: ‘If a deadline is missed, the insured could never cease to be in breach because the critical time for compliance has passed. Sections 10(5)(a) and 10(6) are intended to mean that this type of breach will be remedied if the warranty is ultimately complied with, albeit late’; Explanatory Notes, paragraph 90. Belated compliance with a time-specific warranty does not necessarily mean that ‘the risk to which the warranty relates later becomes essentially the same as that originally contemplated by the parties.’ The approach suggested by the Law Commission is to look at the purpose for which the warranty was inserted and to ask whether that purpose has been frustrated or is still is substance fulfilled; Law Commission Report No. 353, ‘Insurance Contract Law: Business Disclosure; Warranties; Insurers’ Remedies for Fraudulent Claims; and Late Payment.’ Other warranties, general warranties are remedied when the insured ‘ceases to be in breach of the warranty’; s 10(5)(b). Section 10 applies to all express and implied warranties; Explanatory Notes, paragraph 91.

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11 Terms not relevant to the actual loss (1) This section applies to a term (express or implied) of a contract of insurance, other than a term defining the risk as a whole, if compliance with it would tend to reduce the risk of one or more of the following— (a) loss of a particular kind, (b) loss at a particular location, (c) loss at a particular time. (2) If a loss occurs, and the term has not been complied with, the insurer may not rely on the non-compliance to exclude, limit or discharge its liability under the contract for the loss if the insured satisfies subsection (3). (3) The insured satisfies this subsection if it shows that the non-compliance with the term could not have increased the risk of the loss which actually occurred in the circumstances in which it occurred. (4) This section may apply in addition to section 10. NOTES Section 11(1) provides that the section ‘applies to a term’ which is a phrase capable of including a warranty, a condition precedent and an exclusion; Explanatory Notes, paragraphs 92 and 94. It is not easy to give a comprehensive definition of ‘a term defining the risk as a whole’ but a geographical restriction is an obvious example. Another example is ‘a requirement that a property or a vehicle is not to be used commercially’; Explanatory Notes, paragraph 94. Section 11 applies where compliance with the term would tend to reduce loss of a particular kind, at a particular location or at a particular time. This is an objective test. The effect of sub-ss (2) and (3) is that the insurer cannot rely on non-compliance to avoid liability if the insured proves that the non-compliance ‘could not’ have increased the risk of the loss which occurred, in the circumstances which it occurred. Thus, ‘the relevant test is not whether the non-compliance actually caused or contributed to the loss which has been suffered’; Explanatory Notes, paragraph 96. Section 11(4) provides that ss 10 and 11 may apply together where the term is a warranty; Explanatory Notes, paragraph 97.

PART 4 FRAUDULENT CLAIMS 12 Remedies for fraudulent claims (1) If the insured makes a fraudulent claim under a contract of insurance— (a) the insurer is not liable to pay the claim, (b) the insurer may recover from the insured any sums paid by the insurer to the insured in respect of the claim, and (c) in addition, the insurer may by notice to the insured treat the contract as having been terminated with effect from the time of the fraudulent act.

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(2) If the insurer does treat the contract as having been terminated— (a) it may refuse all liability to the insured under the contract in respect of a relevant event occurring after the time of the fraudulent act, and (b) it need not return any of the premiums paid under the contract. (3) Treating a contract as having been terminated under this section does not affect the rights and obligations of the parties to the contract with respect to a relevant event occurring before the time of the fraudulent act. (4) In subsections (2)(a) and (3), “relevant event” refers to whatever gives rise to the insurer’s liability under the contract (and includes, for example, the occurrence of a loss, the making of a claim, or the notification of a potential claim, depending on how the contract is written). NOTES Section 12(1)(a) and (b) puts the common law rule of forfeiture on a statutory footing. The Supreme Court has now held that the deployment of a fraudulent device, or ‘collateral lie’ in the pursuit of a justified claim does not bar the insured from making recovery; The DC Merwestone [2017] AC 1. For a fuller discussion of the common law rule of forfeiture see above. Section 12(1)(c) is new and gives the insurer an additional remedy, which is to treat the contract as having been terminated as from the date of the fraudulent ‘act’. A fraudulent ‘claim’ is to be distinguished from a fraudulent ‘act’. A fraudulent ‘act’ ‘is intended to be the behaviour that makes a claim fraudulent … if an insured submits a genuine claim in January and adds a fraudulent element in March (for example, adding an additional, fabricated head of loss) the ‘fraudulent act’ takes place in March. This is the point at which the contract may be treated as having been terminated …’; Explanatory Notes paragraph 102. Although the 2015 Act is silent, it is presumed that the notice of termination must be tendered within a reasonable time of the fraudulent act. Subsections (2) and (3) spell out the consequences if an insurer elects to treat the contract as having been terminated. The insurer may refuse all liability for a ‘relevant event’ occurring after the fraudulent act and need not return premiums paid but remains liable for a ‘relevant event’ occurring before the time of the fraudulent act. The ‘relevant event’ is that which gives rise to an insurer’s liability, such as the occurrence of a loss.

13 Remedies for fraudulent claims: group insurance (1) This section applies where— (a) a contract of insurance is entered into with an insurer by a person (“A”), (b) the contract provides cover for one or more other persons who are not parties to the contract (“the Cs”), whether or not it also provides cover of any kind for A or another insured party, and (c) a fraudulent claim is made under the contract by or on behalf of one of the Cs (“CF”).

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(2) Section 12 applies in relation to the claim as if the cover provided for CF were provided under an individual insurance contract between the insurer and CF as the insured; and, accordingly— (a) the insurer’s rights under section 12 are exercisable only in relation to the cover provided for CF, and (b) the exercise of any of those rights does not affect the cover provided under the contract for anyone else. (3) In its application by virtue of subsection (2), section 12 is subject to the following particular modifications— (a) the first reference to “the insured” in subsection (1)(b) of that section, in respect of any particular sum paid by the insurer, is to whichever of A and CF the insurer paid the sum to; but if a sum was paid to A and passed on by A to CF, the reference is to CF, (b) the second reference to “the insured” in subsection (1)(b) is to A or CF, (c) the reference to “the insured” in subsection (1)(c) is to both CF and A, (d) the reference in subsection (2)(b) to the premiums paid under the contract is to premiums paid in respect of the cover for CF. NOTES The purpose of s 13 of the 2015 Act is to give an insurer a remedy against a fraudulent group member where a policy provides cover for one or more persons which are not parties to the policy, and a fraudulent claim is made on behalf of one of those non-parties (‘CF’). Subsection (2) provides that s 12 of the 2015 Act applies in relation to such a claim as if cover were provided to CF under a separate contract of insurance, with the consequence that the insurer’s rights under sesction 12 can only be exercised against CF and cover provided for anybody else remains unaffected. Subsection (3)(a) entitles the insurer to ‘reclaim any sums paid in respect of the fraudulent claim from either [the policyholder] or CF, depending on which of them is (or was last) in possession of the money’; Explanatory Notes, paragraph 112.

PART 4A LATE PAYMENT OF CLAIMS 13A Implied term about payment of claims (1) It is an implied term of every contract of insurance that if the insured makes a claim under the contract, the insurer must pay any sums due in respect of the claim within a reasonable time. (2) A reasonable time includes a reasonable time to investigate and assess the claim. (3) What is reasonable will depend on all the relevant circumstances, but the following are examples of things which may need to be taken into account— (a) the type of insurance, (b) the size and complexity of the claim,

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(c) compliance with any relevant statutory or regulatory rules or guidance, (d) factors outside the insurer’s control. (4) If the insurer shows that there were reasonable grounds for disputing the claim (whether as to the amount of any sum payable, or as to whether anything at all is payable)— (a) the insurer does not breach the term implied by subsection (1) merely by failing to pay the claim (or the affected part of it) while the dispute is continuing, but (b) the conduct of the insurer in handling the claim may be a relevant factor in deciding whether that term was breached and, if so, when. (5) Remedies (for example, damages) available for breach of the term implied by subsection (1) are in addition to and distinct from— (a) any right to enforce payment of the sums due, and (b) any right to interest on those sums (whether under the contract, under another enactment, at the court’s discretion or otherwise).

NOTES By these provisions, which were inserted by s 28 of the Enterprise Act 2016, it is an implied term of every insurance contract that the insurer must pay any sums due in respect of the claim within a reasonable time and that remedies, including for damages, for breach of that implied term are in addition to and distinct from any right to enforce payment of the sums due and from any right to interest.

PART 5 GOOD FAITH AND CONTRACTING OUT Good faith 14 Good faith (1) Any rule of law permitting a party to a contract of insurance to avoid the contract on the ground that the utmost good faith has not been observed by the other party is abolished. (2) Any rule of law to the effect that a contract of insurance is a contract based on the utmost good faith is modified to the extent required by the provisions of this Act and the Consumer Insurance (Disclosure and Representations) Act 2012. (3) Accordingly— (a) in section 17 of the Marine Insurance Act 1906 (marine insurance contracts are contracts of the utmost good faith), the words from “, and” to the end are omitted, and

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(b) the application of that section (as so amended) is subject to the provisions of this Act and the Consumer Insurance (Disclosure and Representations) Act 2012. (4) In section 2 of the Consumer Insurance (Disclosure and Representations) Act 2012 (disclosure and representations before contract or variation), subsection (5) is omitted. NOTES Section 14 of the 2015 Act removes avoidance of the contract as the remedy for breach of the duty of utmost good faith, both under s 17 of the 1906 Act and at law. However, ‘the intention of section 14 is that good faith will remain an interpretative principle’; Explanatory Notes, paragraph 116.

Contracting out 15 Contracting out: consumer insurance contracts (1) A term of a consumer insurance contract, or of any other contract, which would put the consumer in a worse position as respects any of the matters provided for in Part 3 or 4 of this Act than the consumer would be in by virtue of the provisions of those Parts (so far as relating to consumer insurance contracts) is to that extent of no effect. (2) In subsection (1) references to a contract include a variation. (3) This section does not apply in relation to a contract for the settlement of a claim arising under a consumer insurance contract. NOTES Section 15(1) of the 2015 Act precludes insurers from contracting out of the provisions of the Act to the detriment of consumers. A term of a consumer insurance contract, including a variation is void to the extent that it would have that effect. The restriction does not apply to settlement agreements; s 15(3).

16 Contracting out: non-consumer insurance contracts (1) A term of a non-consumer insurance contract, or of any other contract, which would put the insured in a worse position as respects representations to which section 9 applies than the insured would be in by virtue of that section is to that extent of no effect. (2) A term of a non-consumer insurance contract, or of any other contract, which would put the insured in a worse position as respects any of the other matters provided for in Part 2, 3 or 4 of this Act than the insured would be in by

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virtue of the provisions of those Parts (so far as relating to non-consumer insurance contracts) is to that extent of no effect, unless the requirements of section 17 have been satisfied in relation to the term. (3) In this section references to a contract include a variation. (4) This section does not apply in relation to a contract for the settlement of a claim arising under a non-consumer insurance contract. NOTES Section 16(1) of the 2015 Act prevents a term in a non-consumer insurance contract from putting the insured in a worse position under s 9 of the Act, which renders basis of contract clauses of no effect. Save for this prohibition, s 16(2) and (3) provide that it is permissible for a term of a non-consumer contract or of a variation thereto to put the insured in a worse position than he would have been in had the Act applied provided that the requirements of s 17 have been complied with, the Transparency Requirements. The burden of proving compliance is on the insurer.

16A Contracting out of the implied term about payment of claims: consumer and non-consumer insurance contracts (1) A term of a consumer insurance contract, or of any other contract, which would put the consumer in a worse position as respects any of the matters provided for in section 13A than the consumer would be in by virtue of the provisions of that section (so far as relating to consumer insurance contracts) is to that extent of no effect. (2) A term of a non-consumer insurance contract, or of any other contract, which would put the insured in a worse position as respects deliberate or reckless breaches of the term implied by section 13A than the insured would be in by virtue of that section is to that extent of no effect. (3) For the purposes of subsection (2) a breach is deliberate or reckless if the insurer— (a) knew that it was in breach, or (b) did not care whether or not it was in breach. (4) A term of a non-consumer insurance contract, or of any other contract, which would put the insured in a worse position as respects any of the other matters provided for in section 13A than the insured would be in by virtue of the provisions of that section (so far as relating to non-consumer insurance contracts) is to that extent of no effect, unless the requirements of section 17 have been satisfied in relation to the term. (5) In this section references to a contract include a variation. (6) This section does not apply in relation to a contract for the settlement of a claim arising under an insurance contract.

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NOTES These provisions were added by s 29 of the Enterprise Act 2016: see notes to s 13A. See also s 5A of the Limitation Act 1980, added by s 30 of the Enterprise Act 2016 in respect of limitation period for breaches of s 13A.

17 The transparency requirements (1) In this section, “the disadvantageous term” means such a term as is mentioned in section 16(2). (2) The insurer must take sufficient steps to draw the disadvantageous term to the insured’s attention before the contract is entered into or the variation agreed. (3) The disadvantageous term must be clear and unambiguous as to its effect. (4) In determining whether the requirements of subsections (2) and (3) have been met, the characteristics of insured persons of the kind in question, and the circumstances of the transaction, are to be taken into account. (5) The insured may not rely on any failure on the part of the insurer to meet the requirements of subsection (2) if the insured (or its agent) had actual knowledge of the disadvantageous term when the contract was entered into or the variation agreed. NOTES The term which puts the insured in a worse position is known as ‘the disadvantageous term’; s 17(1). An insurer ‘must take sufficient steps to draw the disadvantageous term’ to the attention of the insured before conclusion of the contract, or variation and the term must be ‘clear and unambiguous’; s 17(2) and (3). In ascertaining whether these requirements have been satisfied, ‘the characteristics of insured persons of the kind in question’ and ‘the circumstances of the transaction’ are to be taken into account. The first criterion is objective, the second fact specific. The effect of ss 22(4) and 17(5) of the 2015 Act is that the requirement in s 17(2) can be satisfied by bringing ‘the disadvantageous term’ to the attention of the insured’s agent (such as a broker).

18 Contracting out: group insurance contracts (1) This section applies to a contract of insurance referred to in section 13(1)(a); and in this section— “A” and “the Cs” have the same meaning as in section 13, “consumer C” means an individual who is one of the Cs, where the cover provided by the contract for that individual would have been a consumer insurance contract if entered into by that person rather than by A, and “non-consumer C” means any of the Cs who is not a consumer C.

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(2) A term of the contract of insurance, or any other contract, which puts a consumer C in a worse position as respects any matter dealt with in section 13 than that individual would be in by virtue of that section is to that extent of no effect. (3) A term of the contract of insurance, or any other contract, which puts a non-consumer C in a worse position as respects any matter dealt with in section 13 than that person would be in by virtue of that section is to that extent of no effect, unless the requirements of section 17 have been met in relation to the term. (4) Section 17 applies in relation to such a term as it applies to a term mentioned in section 16(2), with references to the insured being read as references to A rather than the non-consumer C. (5) In this section references to a contract include a variation. (6) This section does not apply in relation to a contract for the settlement of a claim arising under a contract of insurance to which this section applies. NOTES Section 18 of the 2015 Act addresses contracting out of s 13 of the Act, the insurer’s remedies where a fraudulent claim is made by a non-party to the insurance contract for whose benefit cover is provided. If the term puts a consumer in a worse position than it would have been in had s 13 applied, the term is, to that extent, of no effect; s 13(2). If the term puts a non-consumer in a worse position that it would have been in had s 13 applied, the insurer must comply with the transparency requirements of s 17 if the term is to be of effect; s 18(3). The burden of proving compliance is on the insurer. Section 17 applies to policy variations but not to settlement agreements; s 17(5), (6).

PART 6 AMENDMENT OF THE THIRD PARTIES (RIGHTS AGAINST INSURERS) ACT 2010 19 Power to change meaning of “relevant person” for purposes of 2010 Act For section 19 of the Third Parties (Rights against Insurers) Act 2010 (power to amend sections 4 to 6 of the Act) substitute— “19 Power to change the meaning of “relevant person” (1) The Secretary of State may by regulations make provision adding or removing circumstances in which a person is a “relevant person” for the purposes of this Act, subject to subsection (2). (2) Regulations under this section may add circumstances only if, in the Secretary of State’s opinion, the additional circumstances— (a) involve actual or anticipated dissolution of a body corporate or an unincorporated body, 181

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(3)

(4)

(5)

(6)

(b) involve actual or anticipated insolvency or other financial difficulties for an individual, a body corporate or an unincorporated body, or (c) are similar to circumstances for the time being described in sections 4 to 7. Regulations under this section may make provision about— (a) the persons to whom, and the extent to which, rights are transferred under section 1 in the circumstances added or removed by the regulations (the “affected circumstances”), (b) the re-transfer of rights transferred under section 1 where the affected circumstances change, and (c) the effect of a transfer of rights under section 1 on the liability of the insured in the affected circumstances. Regulations under this section which add or remove circumstances involving actual or anticipated dissolution of a body corporate or unincorporated body may change the cases in which the following provisions apply so that they include or exclude cases involving that type of dissolution or any other type of dissolution of a body— (a) section 9(3) (cases in which transferred rights are not subject to a condition requiring the insured to provide information or assistance to the insurer), and (b) paragraph 3 of Schedule 1 (notices requiring disclosure). Regulations under this section which add circumstances may provide that section 1 of this Act applies in cases involving those circumstances in which either or both of the following occurred in relation to a person before the day on which the regulations come into force— (a) the circumstances arose in relation to the person; (b) a liability against which the person was insured under an insurance contract was incurred. Regulations under this section which— (a) add circumstances, and (b) provide that section 1 of this Act applies in a case involving those circumstances in which both of the events mentioned in subsection (5)(a) and (b) occurred in relation to a person before the day on which the regulations come into force,

must provide that, in such a case, the person is to be treated for the purposes of this Act as not having become a relevant person until that day or a later day specified in the regulations. (7) Regulations under this section which remove circumstances may provide that section 1 of this Act does not apply in cases involving those circumstances in which one of the events mentioned in subsection (5)(a) and (b) (but not both) occurred in relation to a person before the day on which the regulations come into force. (8) Regulations under this section may— (a) include consequential, incidental, supplementary, transitional, transitory or saving provision, (b) make different provision for different purposes, and

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(c) make provision by reference to an enactment as amended, extended or applied from time to time, (and subsections (3) to (7) are without prejudice to the generality of this subsection). (9) Regulations under this section may amend an enactment, whenever passed or made, including this Act. (10) Regulations under this section are to be made by statutory instrument. (11) Regulations under this section may not be made unless a draft of the statutory instrument containing the regulations has been laid before, and approved by a resolution of, each House of Parliament.” NOTES Section 19 of the 2015 Act adds a new s 19 into the Third Parties (Rights against Insurers) Act 2010, enabling the Secretary of State to make regulations adding or removing circumstances in which a person is a ‘relevant person’ for the purpose of the Third Parties (Rights against Insurers) Act 2010. In summary, by ss 4 to 7 of the Third Parties (Rights against Insurers) Act 2010, a ‘relevant person’ is a person subject to insolvency or other similar proceedings. By s 19(2) of the 2015 Act, Regulations may only add circumstances if the additional circumstances involve actual or anticipated dissolution, insolvency or other financial difficulties.

20 Other amendments Schedule 2 amends the Third Parties (Rights against Insurers) Act 2010 in relation to the insured persons to whom the Act applies. NOTES Section 20 of the 2015 Act gives effect to Sch 2 to the 2015 Act, which itself amends the definition of relevant insured persons to whom the Third Parties (Rights against Insurers) Act 2010 applies.

PART 7 GENERAL 21 Provision consequential on Part 2 (1) The provision made by this section is consequential on Part 2 of this Act. (2) In the Marine Insurance Act 1906, sections 18 (disclosure by assured), 19 (disclosure by agent effecting insurance) and 20 (representations pending negotiation of contract) are omitted. (3) Any rule of law to the same effect as any of those provisions is abolished.

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(4) In section 152 of the Road Traffic Act 1988 (exceptions to duty of insurers to satisfy judgment against persons insured against third-party risks)— (a) in subsection (2)— (i) in paragraph (a), for “it either under the Consumer Insurance (Disclosure and Representations) Act 2012 or, if that Act does not apply,” substitute “the policy under either of the relevant insurance enactments, or the security”, (ii) in paragraph (b), for “or security under that Act or” substitute “under either of the relevant insurance enactments, or the security”; (b) in subsection (3), after “specifying” insert “the relevant insurance enactment or, in the case of a security,”; (c) after subsection (4) add— “(5) In this section, “relevant insurance enactment” means the Consumer Insurance (Disclosure and Representations) Act 2012 or Part 2 of the Insurance Act 2015.” (5) In Article 98A of the Road Traffic (Northern Ireland) Order 1981 (S.I. 1981/154 (N.I.)) (exceptions to duty of insurers to satisfy judgement against persons insured against third party risks)— (a) in paragraph (2)— (i) in paragraph (a), for “it either under the Consumer Insurance Act (Disclosure and Representations) Act 2012 or, if that Act does not apply,” substitute “the policy under either of the relevant insurance enactments, or the security”; (ii) in paragraph (b), for “or security under that Act or” substitute “under either of the relevant insurance enactments, or the security”; (b) in paragraph (3), after “specifying” insert “the relevant insurance enactment or, in the case of a security,”; (c) after paragraph (4) add— “(5) In this Article, “relevant insurance enactment” means the Consumer Insurance (Disclosure and Representations) Act 2012 or Part 2 of the Insurance Act 2015.” (6) In section 11 of the Consumer Insurance (Disclosure and Representations) Act 2012 (consequential provision), subsections (1) and (2) are omitted. NOTES Section 21 of the 2015 Act amends or repeals ss 18, 19 and 20 of the Marine Insurance Act 1906, s 152 of the Road Traffic Act 1988, art 98A of the Road Traffic (Northern Ireland) Order 1981, SI 1981/154 (NI)and s 11 of the Consumer Insurance (Disclosure and Representations) Act 2012. Section 21(2) repeals ss 18 to 20 of the Marine Insurance Act 1906 because the content of the pre-contractual duty imposed on a non-consumer insured is now contained in Part 2 of the 2015 Act. Although the 1906 Act only applies to marine insurance, its principles have been applied to non-marine insurance. Section 19(3) of the 2015 Act abolishes the rules of common law to the same effect as ss 18 to 20 of the 1906 Act; Explanatory Notes, paragraph 143.

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22 Application etc of Parts 2 to 5 (1) Part 2 (and section 21) and section 14 apply only in relation to— (a) contracts of insurance entered into after the end of the relevant period, and (b) variations, agreed after the end of the relevant period, to contracts of insurance entered into at any time. (2) Parts 3 and 4 of this Act apply only in relation to contracts of insurance entered into after the end of the relevant period, and variations to such contracts. (3) In subsections (1) and (2) “the relevant period” means the period of 18 months beginning with the day on which this Act is passed. (4) Unless the contrary intention appears, references in Parts 2 to 5 to something being done by or in relation to the insurer or the insured include its being done by or in relation to that person’s agent. NOTES Section 22(1) of the 2015 Act provides that the sections of the Act which apply to the duty of fair presentation and to good faith apply to, 1 2

contracts of insurance entered into after 12 August 2016, and variations to contracts of insurance agreed after 12 August 2016, irrespective of whether the contract of insurance was entered into prior to 12 August 2016.

Section 22(2) of the 2015 Act provides that the sections of the Act which address warranties and remedies for fraudulent claims apply to contracts of insurance entered into after 12 August 2016 and variations to those contracts. Section 22(4) of the 2015 Act provides that unless the context otherwise requires, references in ss 2 to 5 to something being done by an insurer or an insured include it being done by the person’s agent, such as an insured’s broker.

23 Extent, commencement and short title (1) This Act extends to England and Wales, Scotland and Northern Ireland, except for— (a) section 21(4), which does not extend to Northern Ireland; and (b) section 21(5), which extends to Northern Ireland only. (2) This Act (apart from Part 6 and this section) comes into force at the end of the period of 18 months beginning with the day on which it is passed. (3) In Part 6— (a) section 19 comes into force at the end of the period of two months beginning with the day on which this Act is passed; and (b) section 20 and Schedule 2 come into force on the day appointed under section 21(2) of the Third Parties (Rights against Insurers) Act 2010 for the coming into force of that Act. (4) This section comes into force on the day on which this Act is passed. (5) This Act may be cited as the Insurance Act 2015.

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NOTES Section 23(1) and (2) of the 2015 Act provide that the Act extends to the whole of the United Kingdom. By sub-s (2), the Act, with the exception of those provisions affecting the Third Parties (Rights against Insurers) Act 2010 came into force on 12 August 2016; Explanatory Notes, paragraph 172. The effect of sub-s (3) is that s 19 of the 2010 Act came into force on 12 April 2015 and s 20 and Sch 2 to the Act will come into force on the day appointed by the Secretary of State; Explanatory Notes, paragraph 173 and fn. 34. The Third Parties (Rights against Insurers) Act 2010 (Commencement) Order 2016, SI 2016/550 provides that: ‘The Third Parties (Rights against Insurers) Act 2010, so far as not already in force, comes into force on 1st August 2016.’

SCHEDULES

SCHEDULE 1 Insurers’ remedies for qualifying breaches PART 1 CONTRACTS General 1

This Part of this Schedule applies to qualifying breaches of the duty of fair presentation in relation to non-consumer insurance contracts (for variations to them, see Part 2).

Deliberate or reckless breaches 2

If a qualifying breach was deliberate or reckless, the insurer— (a) may avoid the contract and refuse all claims, and (b) need not return any of the premiums paid.

Other breaches 3 4 5

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Paragraphs 4 to 6 apply if a qualifying breach was neither deliberate nor reckless. If, in the absence of the qualifying breach, the insurer would not have entered into the contract on any terms, the insurer may avoid the contract and refuse all claims, but must in that event return the premiums paid. If the insurer would have entered into the contract, but on different terms (other than terms relating to the premium), the contract is to be treated as if it had been entered into on those different terms if the insurer so requires.

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6 (1) In addition, if the insurer would have entered into the contract (whether the terms relating to matters other than the premium would have been the same or different), but would have charged a higher premium, the insurer may reduce proportionately the amount to be paid on a claim. (2) In sub-paragraph (1), “reduce proportionately” means that the insurer need pay on the claim only X% of what it would otherwise have been under an obligation to pay under the terms of the contract (or, if applicable, under the different terms provided for by virtue of paragraph 5), where— X=

Premium actually charged × 100 Higher premium

NOTES Schedule 1 to the 2015 marks a radical departure from the existing law, whereby the remedy to which an insurer is entitled is dependent upon the mens rea of the person making the non-disclosure or misrepresentation. If the non-disclosure was deliberate or reckless, the insurer can avoid the contract of insurance and retain all premiums paid; Part 1, para 2. The burden of proving a deliberate or a reckless breach is on the insurer; s 8(6). In practice, it is thought that this will be a difficult burden for the insurer to overcome. If the breach was either innocent or negligent, the remedy to which the insurer is entitled will depend on what the insurer would have done had a fair presentation of the risk been made. If the insurer would not have written the contract of insurance on any terms, the insurer can avoid the contract but must return the premiums paid; Part 1, para 4. If the insurer would have entered into contract of insurance but would have included different terms not relating to premium (eg a warranty relating to the risk, an excess/deductible or an exemption clause), the contract is to be treated as if it had been written on those different terms, if the insurer so requires; Part 1, para 5. Part 1, paragraph 6 addresses the circumstance in which but for the innocent or negligent non-disclosure, the insurer would have charged a higher premium. In such circumstance, the insurer is entitled to reduce the claim proportionately as provided for by the formula set out in s 2 ‘For example, if an insurer only charged £10,000 but would have charged £15,000 had the insured made a fair presentation, the insurer is entitled to reduce the amount to be paid on a claim by a third’; Explanatory Notes, paragraph 158. Paragraphs 5 and 6 are not mutually exclusive and if both apply, viz. the additional term(s) to the contract of insurance may be applied in addition to reducing the claim proportionately; Explanatory Notes, paragraph 159.

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PART 2 VARIATIONS General 7

This Part of this Schedule applies to qualifying breaches of the duty of fair presentation in relation to variations to non-consumer insurance contracts.

Deliberate or reckless breaches 8

If a qualifying breach was deliberate or reckless, the insurer— (a) may by notice to the insured treat the contract as having been terminated with effect from the time when the variation was made, and (b) need not return any of the premiums paid.

Other breaches 9 (1) This paragraph applies if— (a) a qualifying breach was neither deliberate nor reckless, and (b) the total premium was increased or not changed as a result of the variation. (2) If, in the absence of the qualifying breach, the insurer would not have agreed to the variation on any terms, the insurer may treat the contract as if the variation was never made, but must in that event return any extra premium paid. (3) If sub-paragraph (2) does not apply— (a) if the insurer would have agreed to the variation on different terms (other than terms relating to the premium), the variation is to be treated as if it had been entered into on those different terms if the insurer so requires, and (b) paragraph 11 also applies if (in the case of an increased premium) the insurer would have increased the premium by more than it did, or (in the case of an unchanged premium) the insurer would have increased the premium. 10 (1) This paragraph applies if— (a) a qualifying breach was neither deliberate nor reckless, and (b) the total premium was reduced as a result of the variation. (2) If, in the absence of the qualifying breach, the insurer would not have agreed to the variation on any terms, the insurer may treat the contract as if the variation was never made, and paragraph 11 also applies. (3) If sub-paragraph (2) does not apply— (a) if the insurer would have agreed to the variation on different terms (other than terms relating to the premium), the variation is to be treated as if it had been entered into on those different terms if the insurer so requires, and (b) paragraph 11 also applies if the insurer would have increased the premium, would not have reduced the premium, or would have reduced it by less than it did. Proportionate reduction 11 (1) If this paragraph applies, the insurer may reduce proportionately the amount to be paid on a claim arising out of events after the variation. 188

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(2) In sub-paragraph (1), “reduce proportionately” means that the insurer need pay on the claim only Y% of what it would otherwise have been under an obligation to pay under the terms of the contract (whether on the original terms, or as varied, or under the different terms provided for by virtue of paragraph 9(3)(a) or 10(3)(a), as the case may be), where— Y=

Total premium actually charged × 100 P

(3) In the formula in sub-paragraph (2), “P”— (a) in a paragraph 9(3)(b) case, is the total premium the insurer would have charged, (b) in a paragraph 10(2) case, is the original premium, (c) in a paragraph 10(3)(b) case, is the original premium if the insurer would not have changed it, and otherwise the increased or (as the case may be) reduced total premium the insurer would have charged. NOTES Part 2 of Schedule 1 contains the remedies available for breaches of the duty of fair presentation when a contract of insurance is being varied. If the breach was deliberate or reckless, the insurer is entitled to treat the contract of insurance as having been terminated with effect from the time when the variation was made, and need not return any premiums paid; para 8. If the breach was innocent or negligent, the remedy to which the insurer is entitled depends on that which would have occurred had a fair presentation been made. Paragraph 9 addresses the circumstance where the breach was innocent or negligent and the total premium was either increased or remained unaltered as a result of the variation. If the insurer would not have agreed to the variation on any terms, the insurer may treat the contract of insurance as if the variation was never made, but must return any additional premium paid; para 9(2). If the insurer would have agreed to the variation on different terms unrelated to premium, the variation is to be treated as having been entered into on those different terms if the insurer so requires; para 9(3)(a). If the insurer would have increased the premium by more than it did, or in case of unchanged premium would have increased the premium, the insurer can reduce the claim proportionately in accordance with the formula set out in para 11; para 9(3)(b). Paragraph 10 addresses the circumstance where the breach was innocent or negligent and the total premium was reduced as a result of the variation. If but for the breach, the insurer would not have agreed to the variation on any terms, the insurer may treat the contract of insurance as if the variation was never agreed and may also reduce the claim proportionately in accordance with the formula set out in para 11; para 10(2).

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If the insurer would have agreed to the variation on different terms unrelated to premium, the variation is to be treated as having been entered into on those different terms if the insurer so requires; para 10(3)(a). The insurer is also entitled to reduce the claim proportionately in accordance with the formula in para 11 if it would have increased the premium, would not have reduced the premium or would not have reduced the premium by as much as it did; para 10(3)(b). Paragraph 11 sets out the formula by which claims are to be proportionately reduced arising out of events after a variation. By para 11(2) and (3), the premium ‘P’ to be inserted into the formula depends on what the insurer would have done to the premium charged on variation viz. increased the premium, not changed the premium or reduced the premium by less than he did; Explanatory Notes, paragraph 166.

PART 3 SUPPLEMENTARY Relationship with section 84 of the Marine Insurance Act 1906 12

Section 84 of the Marine Insurance Act 1906 (return of premium for failure of consideration) is to be read subject to the provisions of this Schedule in relation to contracts of marine insurance which are non-consumer insurance contracts.

NOTES Section 84 of the Marine Insurance Act 1906 permits an insurer to retain premiums paid on avoidance where there has been fraud or illegality. This is now to be read subject to Sch 1 of the 2015 Act which entitles the insurer to retain premiums for deliberate or reckless breaches of the duty of fair presentation; Explanatory Notes, paragraph 167.

SCHEDULE 2 Rights of third parties against insurers: relevant insured persons 1

The Third Parties (Rights against Insurers) Act 2010 is amended as follows.

Individuals subject to debt relief orders in Northern Ireland 2 (1) Section 4 (relevant persons: individuals) is amended as follows. (2) In subsection (3), after paragraph (b) (deed of arrangements registered under the Insolvency (Northern Ireland) Order 1989) insert— “(ba) subject to subsection (4), a debt relief order made under Part 7A of that Order,”.

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(3) In subsection (4) (individuals who are relevant persons for the purposes of section 1(1)(b) only), after “(1)(d)” insert “or (3)(ba)”. Corporate bodies etc in administration 3 (1) Section 6 (corporate bodies etc) is amended as follows. (2) In subsection (2) (events under the Insolvency Act 1986), for paragraph (b) substitute— “(b) the body is in administration under Schedule B1 to that Act,”. (3) In subsection (4) (events under the Insolvency (Northern Ireland) Order 1989), for paragraph (b) substitute— “(b) the body is in administration under Schedule B1 to that Order,”. Transitional cases 4

In section 1(5)(b) (definition of “relevant person”), at the end insert “(and see also paragraph 1A of Schedule 3)”. 5 (1) Schedule 3 (transitory, transitional and saving provision) is amended as follows. (2) At the beginning insert— “Application of this Act”. (3) After paragraph 1 insert— “Relevant persons 1A (1) An individual, company or limited liability partnership not within sections 4 to 7 is to be treated as a relevant person for the purposes of this Act in the following cases. (2) The first case is where an individual— (a) became bankrupt before commencement day, and (b) has not been discharged from that bankruptcy. (3) The second case is where— (a) an individual made a composition or arrangement with his or her creditors before commencement day, and (b) the composition or arrangement remains in force. (4) The third case is where— (a) a winding-up order was made, or a resolution for a voluntary winding-up was passed, with respect to a company or limited liability partnership before commencement day, and (b) the company or partnership is still wound up. (5) The fourth case is where a company or limited liability partnership— (a) entered administration before commencement day, and (b) is still in administration. (6) The fifth case is where— (a) a receiver or manager of the business or undertaking of a company or limited liability partnership was appointed before commencement day, and (b) the appointment remains in force.

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(7) In those cases, the person is a relevant person only in relation to liabilities under a contract of insurance under which the person was insured at the time of the event mentioned in sub-paragraph (2)(a), (3)(a), (4)(a), (5)(a) or (6)(a) (as appropriate).” (4) Before paragraph 2 insert— “Bankruptcy and Diligence etc (Scotland) Act 2007”. (5) Before paragraph 3 insert— “Application of 1930 Acts”. (6) Before paragraph 5 insert— “Interpretation”. Interpretation 6 After section 19 insert— ‘19A Interpretation (1) The references to enactments in sections 4 to 7, 9(7) and 14(4) and paragraph 3(2)(b), (4) and (5) of Schedule 1 are to be treated as including references to those enactments as amended, extended or applied by another enactment, whenever passed or made, unless the contrary intention appears. (2) In this Act, “enactment” means an enactment contained in, or in an instrument made under, any of the following— (a) an Act; (b) an Act or Measure of the National Assembly for Wales; (c) an Act of the Scottish Parliament; (d) Northern Ireland legislation.” NOTES Schedule 2 to the 2015 Act introduces a number of amendments to the Third Parties (Rights against Insurers) Act 2010 in the definition of relevant insured persons under that Act.

EXPLANATORY NOTES INTRODUCTION 1.

2.

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These explanatory notes relate to the Insurance Act 2015 which received Royal Assent on 12 February 2015. They have been provided by HM Treasury to assist the reader in understanding the Act. They do not form part of the Act and have not been endorsed by Parliament. These notes need to be read in conjunction with the Act. They are not, and are not meant to be, a comprehensive description of the Act. So where a section or

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3.

part of a section does not seem to require any explanation or comment, none is given. In these notes, references to the current or existing law are to the law as at 3 February 2015, before the commencement of any provisions of the Insurance Act 2015.

TERRITORIAL EXTENT AND APPLICATION 4. The Act extends to the whole of the United Kingdom, apart from the consequential amendments in sections 21(4) and (5). Section 21(4) extends only to England and Wales and Scotland and section 21(5) extends only to Northern Ireland. This reflects the extent of the Acts amended by those provisions.

BACKGROUND Insurance contract law 5.

6.

7.

8.

9.

The main provisions of the Act give effect, with some modifications, to the recommendations set out in a joint Report published in July 2014 by the Law Commission and the Scottish Law Commission (“the Commissions”): Insurance Contract Law: Business Disclosure; Warranties; Insurers’ Remedies for Fraudulent Claims; and Late Payment (Law Com No 353; Scot Law Com No 238). British insurance law developed during the 18th and 19th centuries, and was partly codified by the Marine Insurance Act 1906 (“the 1906 Act”). The rules were designed to protect a fledgling insurance industry against exploitation by the insured. They therefore provide insurers with several mechanisms to refuse claims, even where this does not reflect the commercial merits of the case. Although strictly the 1906 Act applies only to marine insurance, most of its principles have been applied to non-marine insurance on the basis that the 1906 Act embodies the common law. The 1906 Act is written in clear, forthright terms which can constrain the courts’ ability to develop the law. Its provisions are now significantly out of line with best practice in the modern insurance market. The law has also failed to keep pace with developments in other areas of commercial contract and consumer law, and with insurance law in other jurisdictions. The Commissions focused first on the consumer’s duty to disclose information to the insurer. Their recommendations formed the basis for the Consumer Insurance (Disclosure and Representations) Act 2012 (“CIDRA”). CIDRA replaced the consumer’s duty to volunteer information with a duty to answer the insurer’s questions honestly and reasonably. The Commissions published further consultation papers in 2011 and 2012, covering the matters in the current Act. The Act reforms insurance contract law in the following areas: a) disclosure and misrepresentation in business and other non-consumer insurance contracts;

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b) insurance warranties and other terms; and c) insurers’ remedies for fraudulent claims. 10. The purpose of the Act is to update the statutory framework in these areas, in line with best practice in the modern UK insurance market.

Amendments to the Third Parties (Rights against Insurers) Act 2010 11. The Act also amends the Third Parties (Rights against Insurers) Act 2010 (“the 2010 Act”), which has not yet been brought into force. These amendments clear the way for the 2010 Act to come into force. 12. The 2010 Act was intended to simplify and modernise the existing procedure by which victims can obtain compensation for wrongs done to them by insured persons who, in broad terms, have become insolvent or otherwise ceased to exist. It implements, with minor modifications, the recommendations of the Commissions in their 2001 Report, Third Parties – Rights against Insurers (Law Com No 272; Scot Law Com No 184). The 2010 Act was intended to replace the Third Parties (Rights against Insurers) Act 1930 and Third Parties (Rights against Insurers) Act 1930 (Northern Ireland) (“the 1930 Acts”). 13. The 2010 Act was not commenced because as originally enacted it failed to cover the full range of insolvent or defunct wrongdoers. Part 6 of the new Act rectifies the problem in two main ways. First, it adds two specific circumstances in which the 2010 Act will apply. Secondly, it substitutes, for the existing power to amend the circumstances in which the 2010 Act may apply in Northern Ireland, a broader power that is applicable to the whole of the United Kingdom.

SUMMARY Insurance contract law The duty of fair presentation 14. The Act updates and replaces the existing duty on non-consumer policyholders to disclose risk information to insurers before entering into an insurance contract. It redefines its boundaries under the banner of the “duty of fair presentation”, effectively requiring policyholders to undertake a reasonable search of information available to them, and defining what a policyholder knows or ought to know. The Act also requires insurers to play a more active role, asking questions in some circumstances. Importantly, the Act introduces a new system of proportionate remedies where the duty has been breached. This replaces the existing single remedy of avoidance of the contract, except where the policyholder has breached the duty deliberately or recklessly.

Warranties and other terms 15. Under the current law, breach of a warranty in an insurance contract discharges the insurer from liability completely from that point onwards, even if the

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breach is remedied. An insurer may also avoid liability even if the breached term would not have increased the risk of the type of loss occurring which was actually suffered. The Act abolishes “basis of the contract” clauses, which have the effect of converting pre-contractual information supplied to insurers into warranties. It also provides that the insurer’s liability will be suspended, rather than discharged, in the event of breach of warranty, so that the insurer is liable for valid claims which arise after a breach has been remedied. Further, it provides that non-compliance with a warranty or other term relating to a particular type of loss should not allow the insurer to escape liability for a different type of loss, on which the non-compliance could have had no effect.

Insurers’ remedies for fraudulent claims 16. The Act provides the insurer with clear statutory remedies when a policyholder submits a fraudulent claim. The main remedy in the Act is the one already established by the courts: if a claim is tainted by fraud, the policyholder forfeits the whole claim. The Act also addresses a current area of uncertainty: the insurer may refuse any claim arising after the fraudulent act. However, previous valid claims are unaffected. 17. The Act makes special provision for situations in which a member of a group insurance policy makes a fraudulent claim. Where this happens, the insurer will have a remedy against the fraudulent member but it will not affect the other members or the insurance policy as a whole.

Good faith 18. The Act removes the remedy of avoidance of the contract for breach of the duty of good faith in section 17 of the 1906 Act, and any equivalent common law rule.

Contracting out 19. The Act provides that, as far as it applies to consumer insurance contracts, an insurer will not be able to use a contractual term to put a consumer in a worse position than they would be in under the terms of the Act. For non-consumer insurance, the provisions of the Act are intended to provide default rules and parties are free to agree alternative regimes, provided that the insurer satisfies two transparency requirements.

Consequential amendments 20. The Act repeals sections 18, 19 and 20 of the 1906 Act. In addition, the Act abolishes any common law rule which has the same effect as these sections. 21. Section 152 of the Road Traffic Act 1988 and Article 98A of the Road Traffic (Northern Ireland) Order 1981 (S.I. 1981/154 (N.I.)) are amended by the Act 195

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because they relate to insurance companies avoiding motor insurance contracts where the insured has breached the duty of fair presentation. 22. The Act repeals sections 11(1) and 11(2) of CIDRA, which are superseded by amendments to the 1906 Act and the Road Traffic Act 1988.

Amendments to the Third Parties (Rights against Insurers) Act 2010 23. The policy of the 2010 Act, like that of the 1930 Acts which it will repeal, is to enable payments of compensation by insurers of relevant wrongdoers to go to the victim rather than forming part of the assets available to the general creditors of the wrongdoer. This is achieved by a statutory transfer: the rights the policyholder has against the insurer are transferred to the victim. This enables the victim to recover direct from the insurer the insurance monies that would have been paid to the policyholder in respect of the victim’s claim. Unlike the 1930 Acts, however, the 2010 Act does this without the victim having first to establish the liability of the policyholder, whether by legal proceedings or otherwise. The victim is the third party referred to in the title of the 1930 Acts and the 2010 Act. 24. There is no single term that can completely describe the circumstances in which a person should be subject to the 1930 Acts or the 2010 Act but the Commissions, in their joint 2001 Report, broadly endorsed the view of Bingham LJ that: The legislative intention was, I think, that … the provisions of the 1930 Act should apply upon an insured losing the effective power to enforce its own rights and dispose of its own assets. 25. The 1930 Acts and the 2010 Act each define the insured wrongdoers to whom they are to apply. The 2010 Act does so by listing in sections 4 to 7 the circumstances in which the insured wrongdoer is a “relevant person”. These circumstances are of various types but they include all the principal forms of insolvency and some other situations, including some dissolutions, that may be, but are not always, related to insolvency. For example, a body corporate or unincorporated body which has been dissolved under specified provisions in the Companies Act 2006 is defined by the 2010 Act as a relevant person – so the 2010 Act will apply.1 Such dissolutions may or may not follow insolvency. If a circumstance is not listed in sections 4 to 7, it will not be capable of triggering a transfer of rights under the 2010 Act. 26. Where a person who is a relevant person for the purposes of the 2010 Act is already subject to a liability to another person or becomes subject to such a liability later, his or her rights under a contract insuring that liability will be transferred to the person to whom the liability is owed.2 27. The 2010 Act was, among other things, intended to address omissions from the 1930 Acts, in particular by providing for the wide variety of insolvency type procedures to which individuals, companies and other bodies may now

1 2010 Act, s 6(1)(b). 2 2010 Act, s 1.

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be subject and which may adversely affect a third party. The intention was therefore that the 2010 Act should have a wider coverage than the 1930 Acts. However, while the 1930 Acts cover all forms of administration under the Insolvency Act 1986 and its Northern Ireland equivalent, the 2010 Act only covers administration pursuant to a court order. Additionally, the 2010 Act has not kept up to date with other developments in the field of insolvency, even though some of the new procedures fall within the 1930 Acts.3 Further, whilst the 1930 Acts did not cover dissolution, the 2010 Act, while its scope is wider in this respect, still only covers a limited number of the possible forms of dissolution of bodies corporate and unincorporated bodies.4 28. The provisions in the Act address this by adding categories of administrations under the Insolvency Act 1986 and debt relief orders in Northern Ireland to the circumstances in which the 2010 Act applies; and by providing a means both of correcting other omissions and accommodating future changes in the law, where the 2010 Act is not amended by the legislation in question, without the need for primary legislation. 29. The inclusion of a power to change the circumstances in which the 2010 Act is to apply by making regulations will give effect to a recommendation made by the Commissions in their 2001 joint Report, which was not implemented in the 2010 Act (other than, in effect, in relation to Northern Ireland).5

COMMENTARY ON SECTIONS PART 1: INSURANCE CONTRACTS: MAIN DEFINITIONS Section 1: Insurance contracts: main definitions 30. Some of the insurance contract law provisions apply to both “consumer insurance contracts” and “non-consumer insurance contracts”. Others only apply to one or the other. Section 1 defines these terms. 31. Section 1 provides that a “consumer insurance contract” has the same definition as in CIDRA. Section 1 of CIDRA defines a “consumer insurance contract” as an insurance contract between an insurer6 and “an individual who enters into the contract wholly or mainly for purposes unrelated to the individual’s

3 See, for example, energy administration orders (Energy Act 2004, ss 154–171) and railway administration orders (Railways Act 1993, Sch 6, para 20). 4 Companies Act 2006, ss 1000, 1001 and 1003. 5 See cl 18 of the draft Bill annexed to the 2001 joint Report (Law Com No 272; Scot Law Com No 184) and 2010 Act, s 19. 6 Defined by s 1 of CIDRA as ‘a person who carries on the business of insurance and who becomes a party to the contract by way of that business (whether or not in accordance with permission for the purposes of the Financial Services and Markets Act 2000)’.

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32.

33.

34.

35.

36.

trade, business or profession”. A consumer must therefore be a natural person, rather than a legal person (such as a company or corporation). In “mixed use” policies, where the insurance covers some private and some business use, one must look at the main purpose of the insurance to classify it as one or the other. Section 1 of the Act defines “non-consumer insurance contract” as any contract of insurance which does not fall within the CIDRA definition of consumer insurance contract. An insurance contract may be “non-consumer” for two reasons: either the policyholder is not an individual, or they have entered into the contract wholly or in significant part for trade, business or professional reasons. Section 1 also defines “insurer” and “insured”. Each is a “party to a contract of insurance”. The definitions also capture the parties who would be the “insurer” and “insured” under a contract of insurance if the contract were entered into. This part of the definitions caters for Part 2 of the Act, which addresses pre-contractual requirements and therefore applies to persons who are not yet parties to the relevant insurance contract. The 1906 Act does not define insurance, or contract of insurance, relying instead on common law principles. The Act replaces some of the provisions of the 1906 Act, and therefore the scope of their application must be the same. Therefore, like CIDRA, the Act does not define these terms. The regulatory regime for insurance is governed by the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544), which largely adopts the common law approach to defining insurance, subject to some specific inclusions and exclusions. In practice, whether a contract is offered by an authorised insurance company is likely to influence a court’s categorisation of the contract. However, the courts will not be bound by any specific inclusions or exclusions within the Regulated Activities Order in force at the time. The courts are experienced in determining these matters. Contracts of reinsurance and retrocession are treated as contracts of insurance at common law,7 and are non-consumer insurance contracts for the purposes of the Act. In such contracts, the party purchasing the insurance (the insurer or the reinsurer) is the “insured” for the purposes of the Act, and the party providing the insurance (the reinsurer or the retrocessionaire) is the “insurer”.

PART 2: THE DUTY OF FAIR PRESENTATION Section 2: Application and interpretation 37. Part 2 of the Act, which addresses the duty of fair presentation, applies to non-consumer insurance contracts only. This is because the law in this area as it applies to consumer insurance contracts was reformed by CIDRA. 38. Section 2(2) provides that the duty of fair presentation, set out in the remainder of Part 2, applies in the event of a variation to a non-consumer insurance contract as well as upon the initial agreement of the contract. Section 2(2)(a)

7 Delver, Assignee of Bunn v Barnes (1807) 1 Taunt 48.

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follows the current law by stating that the duty to make a fair presentation of the “risk” relates only to the “changes in the risk” which are “relevant to the proposed variation”.8

Section 3: The duty of fair presentation 39. Section 3(1) introduces a requirement on the insured (at this stage, the person or party who would be the insured if the contract were entered into) to make to the insurer a “fair presentation of the risk” before the contract is entered into. 40. The duty of fair presentation replaces the existing duties in relation to disclosure and representations contained in sections 18, 19 and 20 of the 1906 Act.9 However, it retains essential elements of those provisions. It is important that potential insureds provide insurers with the information they require to decide whether to insure a risk, and on what terms. 41. Like the existing duties, the duty of fair presentation attaches before the insurance contract is entered into. Since the law regards renewals as new contracts, the duty also applies when an insurance contract is renewed. This is in accordance with the current law. 42. The duty falls on “the insured”, defined in section 1. In some situations, one party may enter into a contract on behalf of others. Who is “the insured” in such cases is, and will continue to be, a determined by reference to the particular contract. 43. Section 3(3) sets out the three elements of a “fair presentation of the risk”. 44. The first element of a fair presentation is a duty of disclosure, introduced in section 3(3) (a) and further defined in section 3(4), which provides two ways to satisfy the duty of disclosure. Section 3(4)(a) effectively replicates the disclosure duty in section 18(1) of the 1906 Act. Its key features are that the insured must disclose “every material circumstance”10 which the insured “knows or ought to know”.11 45. The second way to satisfy the duty of disclosure, set out in section 3(4)(b), is intended to operate where the insured has failed to satisfy the strict duty in section 3(4)(a) but has nevertheless disclosed enough information to put the insurer on notice that it needs to ask for further information from the insured before it makes the underwriting decision. This reflects the approach already taken by the courts in some cases.12 46. The second element of a fair presentation, in section 3(3)(b), relates to the form of presentation rather than the substance. It is intended to target, at one end of the scale, “data dumps”, where the insurer is presented with an overwhelming

8 See, for example, Manifest Shipping Co Ltd v Uni-Polaris Insurance Co Ltd (The Star Sea) [2001] UKHL 1, [2003] 1 AC 469, by Lord Hobhouse at [54]. There is no requirement to disclose information relating to the rest of the original policy; see Lishman v Northern Maritime (1875) LR 10 CP 179. 9 Sections 18, 19 and 20 of the 1906 Act are repealed by clause 21(2) of the Act. 10 Defined in s 7(3). 11 Defined in s 4. 12 For example, CTI v Oceanus [1984] 1 Lloyd’s LR 476; Garnat Trading and Shipping v Baominh Insurance Corporation [2011] EWCA Civ 773.

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amount of undigested information. At the other end, it is not expected that this requirement would be satisfied by an overly brief or cryptic presentation. 47. The third element of the duty of fair presentation is the duty not to make misrepresentations. It is contained in section 3(3)(c) and is based on section 20 of the 1906 Act.

Exceptions to the duty of fair presentation 48. As in section 18(3) of the 1906 Act, section 3(5) of the Act provides exceptions to the insured’s duty of disclosure. The exceptions do not apply to the requirement to make the disclosure in a clear and accessible manner, nor to the duty not to make misrepresentations. Anything which is the subject of an exception does not have to be disclosed by the insured to the insurer, unless the insurer makes enquiries about that matter. 49. Exceptions (a) and (e) replicate the relevant provisions in the 1906 Act almost exactly. The rest of the exceptions relate to circumstances which the insurer “knows”, “ought to know” and “is presumed to know”. They replace similar provisions in the 1906 Act. Each of these categories of “knowledge” is expanded on in section 5.

Section 4: Knowledge of insured 50. Section 4 defines what the insured “knows” and “ought to know” for the purposes of the duty of disclosure in section 3. It is based on the insured’s duty under section 18 of the 1906 Act to disclose every material circumstance known to them, including everything which “in the ordinary course of business, ought to be known” to them. 51. Section 4(2) addresses the position of an insured who is an individual (such as a sole trader or practitioner). As well as their own knowledge, the insured will be taken to “know” anything which is known by an individual who is “responsible for the insured’s insurance”. 52. Section 4(3) sets out the individuals whose knowledge will be directly attributed to the insured where the insured is not an individual (such as a company). They are the insured’s senior management and the person or people responsible for the insured’s insurance. These categories reflect important decisions on the common law rules of attribution in the insurance context. However, the intended effect of the phrase “knows only” is that the common law on attribution of knowledge to the insured is replaced by the terms of the Act. 53. Section 4(8)(b) defines who is “responsible for the insured’s insurance”. It is expected to catch, for example, the insured’s risk manager if they have one, and any employee who assists in the collection of data or negotiates the terms of the insurance. It may also include an individual acting as the insured’s broker. 54. Section 4(8)(c) defines “senior management”. It captures those individuals who play significant roles in the making of decisions about how the insured’s activities are to be managed or organised. In a corporate context, this is likely to include members of the board of directors but may extend beyond this, depending on the structure and management arrangements of the insured. 200

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55. Because the knowledge of the senior management and those individuals responsible for the insurance is directly imputed to the insured for the purposes of the duty of fair presentation, those categories of person are expected to be construed relatively narrowly, but are capable of being applied flexibly. The knowledge of those individuals who do not fall within the category of senior management, yet who perform management roles or otherwise possess relevant information or knowledge about the risk to be insured, may be captured by the “reasonable search” referred to in section 4(6). 56. Section 4(6) defines what an insured “ought to know” by reference to information that could reasonably be expected to be revealed by a reasonable search of available information. It largely codifies principles derived from some case law,13 namely that insureds should seek out information about their business by undertaking a reasonable search, which may include making enquiries of their staff and agents (such as their insurance broker). Section 4(7) makes clear that relevant information subject to the reasonable search may be held by persons other than the insured itself. Taken together with section 4(6), this means that the reasonable search may extend beyond the insured itself to other persons, where such a search would be reasonable in the circumstances and where information is available the insured. The scope of the phrase “information held … by any other person” in this context is intended to be flexible. 57. Future interpretation of sections 4(6) and 4(7) is likely to be guided by existing case law. For example, a search may not be expected to evince an admission by a servant of their own negligence.14 In contrast, the knowledge of an “agent to know”, who has a duty to communicate the relevant information to their employer or principal, may well be included.15 58. Unlike section 19 of the 1906 Act (which the Act repeals), the Act does not include a separate duty on the agent to disclose information to the insurer. The agent’s knowledge or other information held by the agent may be caught under section 4 as discussed above. 59. Section 4(4) makes further provision about the knowledge of an individual acting as an agent of the insured. Where such an individual acquired confidential information through a business relationship with someone other than the insured or any other person connected with the insurance being placed, that information will not be attributed to the insured. This provision is expected to be particularly relevant to the insured’s broker who is likely to hold confidential information on behalf of many unconnected clients.

Section 5: Knowledge of insurer 60. Section 5 defines what the insurer “knows”, “ought to know” and “is presumed to know” for the purposes of the section 3(5) exceptions to the duty of disclosure. These provisions are based on the exceptions contained in section 18(3) of the 1906 Act and the case law interpreting them. 13 See, for example, Aiken v Stewart Wrightson Members Agency Ltd [1995] 3 All ER 449. 14 See, for example, Australia & New Zealand Bank Ltd v Colonial & Eagle Wharves Ltd [1960] 2 Lloyd’s Rep 241. 15 See, for example, Proudfoot v Montefiore (1867) LR 2 QB 511.

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61. Section 5(1) sets out the individuals whose knowledge will be directly attributed to the insurer, being what the insurer “knows”. This provision is intended to capture the person or people involved in making the particular underwriting decision – essentially the underwriter. The relevant individuals may be, for example, employees of the insurer or of the insurer’s agent. Again, the intended effect of the phrase “knows … only” is that the common law on attribution of information to an insurer is replaced by the terms of the Act. 62. Section 5(2) sets out two types of information which an insurer “ought to know”. 63. The first, in section 5(2)(a), is information which an employee or agent of the insurer knows and ought reasonably to have passed on to the underwriter. This is intended to include, for example, information held by the claims department or reports produced by surveyors or medical experts for the purpose of assessing the risk. 64. The second category, at section 5(2)(b), is intended to require the relevant underwriter to make a reasonable effort to search such information as is available to them within the insurer’s organisation, such as in the insurer’s electronic records. 65. Section 5(3) defines what the insurer is “presumed to know”. 66. The reference to common knowledge in section 5(3)(a) replicates the language of the 1906 Act. The reference to “common notoriety” has not been retained, because the meaning of that phrase appears to have changed since 1906. At the time the 1906 Act was drafted, “notoriety” appeared to mean the state of being “well known”, whereas now it suggests an element of infamy. 67. Section 5(3)(b) is intended to be a modernisation of the reference in section 18(3)(b) of the 1906 Act to “matters which an insurer in the ordinary course of his business, as such, ought to know”. Many underwriters work by class of business (such as property or professional indemnity insurance) rather than by industry sector (such as oil and gas). An insurer ought to have some insight into the industry for which it is providing insurance, but this insight may reasonably be limited to matters relevant to the type of insurance provided.

Section 6: Knowledge: general 68. As set out above, sections 4 and 5 respectively set out the categories of individual whose knowledge will be directly attributed to the insured and insurer. These rules are intended to replace the common law in the context of the duty of fair presentation. Section 6 sets out two further rules about an individual’s knowledge. 69. Section 6(1) provides that what an individual knows includes not only what it actually knows but also “blind eye” knowledge. The courts have consistently interpreted knowledge to include cases where someone has deliberately failed to make an enquiry in case it results in the confirmation of a suspicion.16

16 See, for example, Lord Scott in Manifest Shipping Co Ltd v Uni-Polaris Insurance Co Ltd (The Star Sea) [2001] UKHL 1, [2003] 1 AC 469 at [112].

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70. Section 6(2) concerns the situation in which an individual (an employee or agent) perpetrates fraud against his or her principal (whether the insured or the insurer). It is intended to capture a common law exception to the general rules of attribution, known as the Hampshire Land principle, which broadly means that a company or other principal is not fixed with knowledge of a fraud practised against it by its agent or officer.17

Section 7: Supplementary 71. Section 7 makes further provision about the duty of fair presentation, including definitions of some terms used in earlier provisions. 72. Section 7(1) states that a “fair presentation” does not have to be made in a single document or oral presentation. The Act is intended to recognise that the insurer may need to ask questions about the information in the initial presentation in order to draw out the information it requires to make the underwriting decision. All information which has been provided to the insurer by the time the contract is entered into will therefore form part of the presentation to be assessed. 73. Section 7(2) concerns the scope of the term “circumstance”, which is the language used in the 1906 Act. Section 7(2) repeats the terms of section 18(5) of the 1906 Act in order to make clear that the terms are used in the same way in both pieces of legislation. 74. Section 7(3) contains a definition of material circumstance and material representation, used in section 3. It is based on sections 18(2) and 20(2) of the 1906 Act. The term “prudent insurer” is also taken from the 1906 Act. 75. Section 7(4) sets out three examples of things which may constitute material circumstances. Whether circumstances falling within these examples are in fact “material” will depend on the facts of each case.

Section 8: Remedies for breach 76. This section sets out the circumstances in which an insurer will be entitled to a remedy for an insured’s breach of the duty of fair presentation. 77. The insurer must show that it would have acted differently if the insured had not failed to make a fair presentation; that is, that the insurer would not have entered into the contract or variation at all, or would only have done so on different terms. This reflects the current law on inducement as developed following the decision in Pan Atlantic Insurance Co Ltd v Pine Top Insurance Co Ltd.18 78. A breach for which the insurer has a remedy is a “qualifying breach”. 79. Under the current law, a breach of section 18 or 20 of the 1906 Act gives the insurer a single remedy of avoidance of the contract. Under the Act, the insurer

17 From Re Hampshire Land Company [1896] 2 Ch 743. For Scotland, see L Macgregor, Agency (2013) para 13–24. 18 [1995] 1 AC 501.

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has different remedies depending on the situation. One distinction is whether or not the proposer’s breach of the duty of fair presentation was deliberate or reckless. 80. An insured will have acted deliberately if it knew that it did not make a fair presentation. An insured will have acted recklessly if it “did not care” whether or not it was in breach of the duty, but this is intended to indicate a greater degree of culpability than acting “carelessly”. “Deliberate or reckless” will include fraudulent behaviour. 81. The deliberate or reckless definition echoes that in CIDRA. However, in CIDRA a “qualifying breach” must be either deliberate/reckless or careless, since the consumer’s duty is to take reasonable care not to make a misrepresentation to the insurer. In non-consumer insurance, breaches do not have to be careless or deliberate/reckless in order to be actionable. “Innocent” breaches of the duty will also give an insurer a remedy if the insurer can show inducement. This reflects the current law for non-consumer insurance. 82. Section 8(2) provides a signpost to the details of the remedies available for breach of the duty of fair presentation, which are set out in Schedule 1.

PART 3: WARRANTIES AND OTHER TERMS Section 9: Warranties and representations 83. Under the current law, an insurer may add a declaration to a non-consumer insurance proposal form or policy stating that the insured warrants the accuracy of all the answers given, or that such answers form the “basis of the contract”.19 This has the legal effect of converting representations into warranties. The insurer is discharged from liability for claims if the insured made any misrepresentation, even if it was immaterial and did not induce the insurer to enter into the contract. 84. This section abolishes basis of the contract clauses in non-consumer insurance. Basis of the contract clauses in consumer insurance were abolished by section 6 of CIDRA. It remains possible for insurers to include specific warranties within their policies.

Section 10: Breach of warranty 85. Section 10 replaces the existing remedy for breach of a warranty in an insurance contract, which is contained in section 33(3) of the 1906 Act. Under that section, the insurer’s liability under the contract is completely discharged from the point of breach. Section 34(2) makes clear that remedying a breach of warranty does not change this. Sections 10(1) and 10(7) repeal these existing statutory rules, and any common law equivalent.

19 Dawsons Ltd v Bonnin [1922] 2 AC 413, 1922 SC (HL) 156; Genesis Housing Association Ltd v Liberty Syndicate Management Ltd for and on behalf of Liberty Syndicate 4472at Lloyd’s [2013] EWCA Civ 1173, [2013] WLR (D) 368.

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86. However, the Act does not make any change to the definition of warranty. Warranties are defined in section 33(1) of the 1906 Act with regard to marine warranties, and the common law has developed in parallel in regard to other types of insurance. A warranty “must be exactly complied with, whether material to the risk or not”.20 87. The effect of section 10(2) is that breach of warranty by an insured suspends the insurer’s liability under the insurance contract from the time of the breach, until such time as the breach is remedied. The insurer will have no liability for anything which occurs, or which is attributable to something occurring, during the period of suspension. 88. Section 10(4)(b) makes explicit that the insurer will be liable for losses occurring after a breach has been remedied. It acknowledges, however, that some breaches of warranty cannot be remedied. 89. The “attributable to something happening” wording is intended to cater for the situation in which loss arises as a result of an event which occurred during the period of suspension, but is not actually suffered until after the breach has been “remedied”. 90. Generally, a breach of warranty will be “remedied” where the insured “ceases to be in breach of warranty”. This is set out in section 10(5)(b). However, some warranties require something to be done by an ascertainable time. If a deadline is missed, the insured could never cease to be in breach because the critical time for compliance has passed. Sections 10(5)(a) and 10(6) are intended to mean that this type of breach will be remedied if the warranty is ultimately complied with, albeit late. 91. Section 10 applies to all express and implied warranties, including the implied marine warranties in sections 39, 40 and 41 of the 1906 Act.

Section 11: Terms not relevant to the actual loss 92. Section 11 applies to any warranty or other term which can be seen to relate to a particular type of loss, or the risk of loss at a particular time or in a particular place. In the event of non-compliance with such a term, it is intended that the insurer should not be able to rely on that non-compliance to escape liability unless the non-compliance could potentially have had some bearing on the risk of the loss which actually occurred. 93. Section 11(1) refers to contractual terms which, if complied with, “would tend to reduce the risk” of loss of a particular kind, or loss at a particular location or time. This is intended to enable an objective assessment of the “purpose” of the provision, by considering what sorts of loss might be less likely to occur as a consequence of the term being complied with. 94. Section 11(1) does not apply only to warranties and may catch other types of contractual provision such as conditions precedent or exclusion clauses – provided those terms relate to a particular type of loss or loss at a particular location or time. Section 11 does not apply to clauses which define the risk as a whole. This is expected to include, for example, a requirement that a property or vehicle is not to be used commercially. 20 1906 Act, s 33(3).

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95. If a loss occurs and a contractual term to which section 11 applies has not been complied with, sections 11(2) and 11(3) mean that the insurer cannot rely on that non-compliance to avoid or limit its liability for the loss, if the insured shows that the non-compliance could not have increased the risk of the loss which actually occurred in the circumstances in which it actually occurred. For example, where a property has been damaged by flooding, it is expected that an insured could show that a failure to use there quired type of lock on a window could not have increased the risk of that loss. In this case the insurer should pay out on the flood claim. 96. A direct causal link between the breach and the ultimate loss is not required. That is, the relevant test is not whether the non-compliance actually caused or contributed to the loss which has been suffered. 97. Section 11(4) provides that sections 10 and 11 may apply together. This will only arise where the relevant term is found to be a warranty, because section 10 only applies to warranties.

PART 4: FRAUDULENT CLAIMS Section 12: Remedies for fraudulent claims 98. This section sets out the insurer’s remedies where the insured makes a fraudulent claim. It does not apply where a third party commits a fraud against the insurer or the insured, such as where a fraudulent claim is made against an insured, who seeks recovery from its insurer under a liability policy. 99. The section does not define “fraud” or “fraudulent claim”. The remedies will apply once fraud has been determined in accordance with common law principles.21 100. Section 12(1) puts the common law rule of forfeiture on a statutory footing. Where the insured commits a fraud against the insurer, the insurer is not liable to pay the insurance claim to which the fraud relates. Where the insurer has already paid out insurance monies on the claim and later discovers the fraud, the insurer may recover those monies from the insured. 101. Section 12(1)(c) provides the insurer with a further remedy. It gives the insurer an option to treat the contract as if it had been terminated at the time of the “fraudulent act”. This is dependent on the insurer giving notice of their election to do so to the insured. 102. The “fraudulent claim” is to be distinguished from the “fraudulent act”. The latter is intended to be the behaviour that makes a claim fraudulent, which may be after the initial submission of the claim. The timing of the “fraudulent act” is relevant in determining when the liability of the insurer ceases for the purposes of section 12(1)(c). For example, if an insured submits a genuine claim in January and adds a fraudulent element in March (for example, adding an additional, fabricated, head of loss), the “fraudulent act” takes place in March. This is the point at which the contract may be treated as having been terminated, and from which the insurer’s liability ceases. 21 For example, see the test for fraud in Derry v Peek (1889) LR 14 App Cas 337.

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103. Section 12(2) sets out the consequences if the insurer elects to treat the contract as terminated under 12(1)(c). It may refuse to pay claims relating to “relevant events” occurring after the time of the fraudulent act. It does not have to return any premiums already paid by the insured. 104. “Relevant event”, as defined in section 12(4), refers to any event that would trigger the insurer’s liability under the particular insurance contract. Usually, this will be the occurrence of loss or damage which is insured under the contract. However, some insurance contracts, such as professional indemnity insurance contracts, are written on the basis of a “claims made” policy. In such cases, the “relevant event” may be the notification of a claim against the professional, even where no loss has actually occurred. 105. Section 12(3) confirms that the insurer remains liable in respect of relevant events that took place before the date of the fraudulent act.

Section 13: Remedies for fraudulent claims: group insurance 106. Group schemes are an important form of insurance. Many schemes are set up by employers to provide protection insurance for their employees. The policyholder is typically the employer, who arranges the scheme directly with the insurer. The group members (typically employees) have no specific status. As they are not policyholders, if a group member makes a fraudulent claim, the insurer’s remedies are uncertain. 107. This section is intended to give the insurer a remedy against a fraudulent group member, while protecting the other members who are covered by the insurance. 108. Section 13(1) defines a group scheme to which this section applies. It may cover not only the typical employment scheme, but many other types of arrangement including block building policies taken out by landlords for tenants, and potentially insurance arranged by one company for a group of companies, if the contract is so structured. It is possible for group insurance to cover only one member, where (for example) a freeholder takes out insurance for a single leaseholder. 109. This section envisages a policyholder (A) taking out a policy which is of direct benefit to one or more third parties who are not parties to the contract (the Cs). The contract must not simply insure A’s liability in respect of the Cs, though A may itself be a beneficiary under the policy. The section applies where one of the Cs (CF) makes a fraudulent claim. 110. Section 13(2) provides that the insurer has the same remedies against the fraudulent group member (CF) as it would have against a policyholder who makes a fraudulent claim. These remedies are set out in section 12. This means that where a fraudulent claim has been made by CF, the insurer is not liable to pay the fraudulent claim. It may retain any premiums paid by, or on behalf of, CF. It may also treat CF’s insurance cover as having been terminated at the time of the fraudulent act. To exercise this option, it must serve notice on both A and CF. 111. Importantly, the insurer may not treat its entire liability under the contract as terminated, but only its liability to CF. Sections 13(2)(a) and (b) provide that the remedies are only exercisable against, and can only affect the rights of, that fraudulent member. 207

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112. The arrangements for payment of insurance monies under a group insurance contract differ. The insurer may either pay insurance monies to the policyholder A (who would pass it on to the relevant group member), or may pay the group member directly. Section 13(3)(a) provides that the insurer may reclaim any sums paid in respect of the fraudulent claim from either A or CF, depending on which of them is (or was last) in possession of the money.

PART 5: GOOD FAITH AND CONTRACTING OUT Section 14: Good faith 113. Section 17 of the Marine Insurance Act 1906 provides that insurance contracts are contracts based upon the utmost good faith. It also provides that, “if the utmost good faith be not observed by either party, the contract may be avoided by the other party”. The common law mirrors this provision in relation to non-marine insurance. 114. Section 14 removes avoidance of the contract as a remedy for breach of this duty of good faith, both from the 1906 Act and at common law. 115. Section 14(4) repeals section 2(5) of CIDRA, which is superseded by the provisions of this section. 116. The intention of section 14 is that good faith will remain an interpretative principle, with section 17 of the 1906 Act and the common law continuing to provide that insurance contracts are contracts of good faith.

Section 15: Contracting out: consumer insurance contracts 117. This section applies to all consumer insurance contracts. 118. Section 15(1) prevents insurers from contracting out of the provisions of the Act to the detriment of the consumer. A term in a consumer insurance contract (or variation) or in another contract is void to the extent that it would put the consumer in a worse position than provided for in the Act. 119. Section 15(3) states that section 15 does not apply to contracts to settle claims. A settlement of a claim will therefore continue to provide certainty for the parties. It would not be possible for a consumer to go behind a settlement by alleging that it was less favourable than the statutory provisions in the Act.

Section 16: Contracting out: non-consumer insurance 120. This section applies to all non-consumer insurance contracts. It concerns the situations in which an insurer can “contract out” by using a term of the non-consumer insurance contract to put the insured in a worse position than it would be in under the default rules contained in the Act. 121. Section 16(2) provides that, generally speaking, parties can agree to contract terms which are less favourable to the insured than provisions of the Act. Such terms may appear in the insurance contract itself or any separate contract.

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However, such terms will only be valid if the insurer has complied with the “transparency requirements” contained in section 17. 122. There is only one situation in which the insurer cannot contract out to the detriment of the insured, which is set out in section 16(1). This is the prohibition on basis of the contract clauses and similar provisions in section 9.

Section 17: The transparency requirements 123. As discussed above, section 16(2) provides that a contractual term which puts the non-consumer insured in a worse position than it would be in under the terms of the Act is of no effect unless the requirements of section 17 are satisfied. Such a term is referred to in section 17(1) as a “disadvantageous term”. 124. The section 17 conditions (the “transparency requirements”) are set out in sections 17(2) and 17(3). 125. The requirement, in section 17(2), that the insurer take sufficient steps to draw the term to the insured’s attention is intended to ensure that the insured is given a reasonable opportunity to know that the disadvantageous term exists before it enters into the contract. 126. Under the general law of agency, this requirement could also be satisfied by taking sufficient steps to draw the term to the attention of the insured’s agent. Section 22(4) is also relevant here. That section explicitly states that references to something being done by or in relation to the insurer or the insured include its being done by or in relation to that person’s agent. 127. If the insured (or its agent) has actual knowledge of the disadvantageous term, section 17(5) makes clear that an insured may not claim that the insurer has failed to draw the term sufficiently to its attention. 128. Under section 17(3), the term must also be clear and unambiguous as to its effect. This is intended to require the effects of the disadvantageous term to be set out explicitly, not merely that the language is clear and unambiguous. 129. Section 17(4) provides that that in determining whether the transparency requirements have been met, the characteristics of insured persons of the kind in question should be taken into account, as should the circumstances of the transaction. What is sufficient for one type of insured may not be sufficient for another. 130. The extent to which the term is required to spell out the consequences will depend on the nature of the insured party and the extent to which it could be expected to understand the consequences of the provision.

Section 18: Contracting out: group insurance contracts 131. Section 18 addresses contracting out of section 13, which deals with the insurer’s remedies where a member of a group insurance contract makes a fraudulent claim. 132. Section 18(2) concerns group members who would each be a “consumer” if they had entered into the insurance contract directly with the insurer rather than it being a group policy. Section 18(2) provides that a term of a contract which 209

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seeks to put a consumer member of a group scheme in a worse position than they would be in under section 13 is, to that extent, of no effect. 133. Where a group member would not have been a “consumer” if they had entered the contract directly with the insurer, they are a “non-consumer C” and section 18(3) applies. This provides that an insurer must comply with the transparency requirements in order to use a contract term to put a non-consumer C in a worse position than it would be in under section 13. For the purposes of those requirements “the insured” means the person who took out the insurance on behalf of the group (referred to in section 13 as A).

PART 6: AMENDMENT OF THE THIRD PARTIES (RIGHTS AGAINST INSURERS) ACT 2010 Section 19: Power to change the meaning of “relevant person” 134. Section 19 inserts a new section 19 into the 2010 Act. The new section enables the Secretary of State to make regulations adding or removing circumstances in which a person is a “relevant person” for the purposes of the 2010 Act, provided that the Secretary of State considers that the proposed circumstances involve dissolution, insolvency or financial difficulty, or are similar to those for the time being prescribed in sections 4 to 7 of the 2010 Act.22 The regulations must be made by statutory instrument and are subject to an affirmative resolution procedure.23 135. New section 19(5) of the 2010 Act provides that where the regulations add circumstances, they may provide that section 1 of the 2010 Act applies where those circumstances or the liability under the insurance contract arose before the day on which the regulations come into force or where both of those events occurred before that day, as well as where both events happened afterwards. 136. New section 19(6) provides that, if the regulations are to apply where both of those events occurred before the day on which the regulations come into force, they must provide that the person is to be treated as not having become a “relevant person” until that day. As a result, the transfer of rights will take place upon the regulations comingin to force, and not when the two events were first satisfied. The intention is that nothing done before the regulations come into force will be undone. 137. Where regulations remove circumstances in which a person is a “relevant person” for the purposes of the 2010 Act, new section 19(7) provides that the regulations can apply where either those circumstances or the liability under the insurance contract arose before the day on which the regulations come into force, but not where both arose before that day. This prevents regulations from undoing transfers under section 1 that have already occurred. 138. In certain instances, the 2010 Act alters the effect of aspects of the transfer of rights under section 1 by making provision about: the persons to whom

22 New s 19(1) and (2). 23 New s 19(10) and (11).

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and the extent to which rights are transferred; the re-transfer of rights where circumstances change; and the effect of the transfer on the liability of the insured in particular circumstances.24 New section 19(3) enables regulations to address these issues in connection with the addition or removal of circumstances. 139. New section 19(4) provides that where the regulations add or remove circumstances involving actual or anticipated dissolution, they may change the cases in which section 9(3) and paragraph 3 of Schedule 1 to the 2010 Act apply. These provisions modify the duty to provide information in certain cases, including where a body corporate has been dissolved. If the circumstances in which a person is a “relevant person” due to being dissolved are changed, it may be appropriate to change these two provisions accordingly, and new section 19(4) provides for that situation. 140. Regulations may contain consequential, incidental, supplementary, transitional, transitory or saving provision25 and amend any enactment, whenever passed or made, including: the 2010 Act and any other Act; any Act or Measure of the National Assembly for Wales; any Act of the Scottish Parliament; and Northern Irish legislation.26

Section 20: Other amendments to the 2010 Act 141. This section gives effect to Schedule 2, which amends the 2010 Act by making provision relating to the insured persons to whom the 2010 Act applies.

PART 7: GENERAL Section 21: Provision consequential on Part 2 142. This section amends or repeals: a) the Marine Insurance Act 1906, sections 18, 19 and 20; b) the Road Traffic Act 1988, section 152; c) Road Traffic (Northern Ireland) Order 1981 (S.I. 1981/154 (N.I.)), Article 98A; and d) the Consumer Insurance (Disclosure and Representations) Act 2012, section 11.

Marine Insurance Act 1906, sections 18, 19 and 20 143. Part 2 of the Act now provides the content of the duty imposed on the non-consumer insured in the pre-contractual phase of the relationship between

24 See for example, s 6(6) [cf. new s 19(3)(a)]; ss 4(5), 6(7) and 7(2) [cf. new s 19(3)(b)]; and s 14(2)–(5) [cf. new s 19(3)(c)]. 25 New s 19(8). 26 New s 19(9) and new s 21A (introduced into the 2010 Act by s 19 and para 6 of Sch 2 to the Act respectively).

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insurer and insured. Section 21(2) therefore repeals sections 18 to 20 of the 1906 Act, which currently govern the pre-contractual relationship between insured and insurer. The 1906 Act applies directly to marine insurance but it has also been held to be an authoritative statement of common law principles to be applied to non-marine insurance contracts. Therefore, section 21(3) abolishes any rule of law to the same effect as those statutory provisions. 144. The combined effect of the relevant provisions of CIDRA and this Act is to replace sections 18, 19 and 20 of the Marine Insurance Act 1906.

Road Traffic Act 1988, section 152 145. Section 21(4) amends section 152 of the Road Traffic Act 1988 (RTA). The RTA provides for a scheme of compulsory motor insurance by which motor insurers generally have an obligation to satisfy judgments obtained by third parties, even if the insured has breached the insurance contract. However, there is a limited exception in section 152(2) of the RTA, by which an insurer may obtain a declaration that it is entitled to avoid a policy because the insured has made a non-disclosure or misrepresentation. The effect of this section is much more limited than first appears. Under an agreement between the Motor Insurance Bureau and the government, insurers have undertaken to ensure that the third party is compensated. 146. The amendments to this section made by these provisions mean that an insurer is only entitled to avoid a non-consumer insurance policy under section 152(2) if it may avoid the policy under Part 2 of the Act. 147. Section 21(5) amends the equivalent provisions for Northern Ireland.

Consumer Insurance (Disclosure and Representations) Act 2012 148. As a result of the amendments to the 1906 Act and the RTA 1988 set out in section 21, sections 11(1) and 11(2) of CIDRA, which deal with the points in relation to consumer insurance, are now superseded and are repealed by section 21(6).

Section 22: Application etc of Parts 2 to 5 149. Sections 22(1) to 22(3) confirm that the provisions of the Act relating to fair presentation and good faith apply only to insurance contracts entered into after the end of the period of 18 months from the Act’s entry into force, and to variations made after that same time period, to contracts entered into at any time. The provisions on warranties and other terms, and the remedies for fraudulent claims, apply only in relation to contracts made more than 18 months from the Act’s entry into force, and variations to such contracts. 150. Section 22(4) provides that in general references in Parts 2 to 5 of the Act to something being done by or in relation to the insurer or the insured include its being done by or in relation to that person’s agent.

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Section 23: Extent, commencement and short title 151. Section 23(1) provides that the Act extends to the whole of the United Kingdom, apart from the consequential provision in section 21(4), which does not extend to Northern Ireland, and section 21(5), which extends only to Northern Ireland. 152. Sections 23(2) to 23(4) deal with commencement and are explained at the end of this document.

SCHEDULE 1: INSURER’S REMEDIES FOR QUALIFYING BREACHES Part 1: Contracts 153. Part 1 of Schedule 1 sets out the remedies available for qualifying breaches of the duty of fair presentation in relation to non-consumer insurance contracts. This includes breaches of that duty in relation to renewals.

Deliberate or reckless breaches 154. Paragraph 2 specifies the remedies for qualifying breaches that are deliberate or reckless, as defined in section 8. The insurer is entitled to avoid the contract and retain premiums paid.

Other breaches 155. If the breach of the duty of fair presentation was not deliberate or reckless, the remedy is based on what the insurer would have done if the insured had not made the qualifying breach; that is, if the insured had made a fair presentation of the risk. 156. Under paragraph 4, where an insurer would have declined the risk altogether, the policy may be avoided, the claim refused and the premiums returned. 157. Paragraphs 5 and 6 set out the position where the insurer would have contracted on different terms. If the different terms do not relate to the premium, paragraph 5 provides that the insurer can treat the contract as having been entered into on those terms. Thus if the insurer would have included an exemption clause or imposed an excess, the claim would be treated as if the contract included that exemption clause or excess. 158. Where the insurer would have charged a higher premium, paragraph 6 allows the insurer to reduce the claim proportionately. The formula for calculating the reduction is contained in paragraph 6(2). For example, if an insurer only charged £10,000 but would have charged £15,000 had the insured made a fair presentation, the insurer is entitled to reduce the amount to be paid on a claim by a third. 159. In some cases, both paragraphs 5 and 6 will apply. If the insurer would have entered the contract on different terms and would have charged a higher premium, those alternative terms may be applied to the contract and, in addition, the claim may be reduced proportionately. 213

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Part 2: Variations 160. Part 2 of Schedule 1 sets out the remedies available for qualifying breaches of the duty of fair presentation made when an insurance contract is being varied.

Deliberate or reckless breaches 161. Paragraph 8 specifies the remedies for qualifying breaches that are deliberate or reckless in the context of variations. Under paragraph 8(a), the insurer is entitled to treat the contract as having been terminated with effect from the time the variation was made. Under paragraph 8(b), the insurer need not return the premiums paid.

Other breaches 162. If the breach of the duty of fair presentation was not deliberate or reckless, the remedy is based on what the insurer would have done had the insured made a fair presentation of the additional or changed risk on variation. 163. The Act makes a distinction between variations involving a reduction in premium (paragraph 10) and all other variations (that is, where the premium was increased, or not changed, as a result of the variation) (paragraph 9). This is intended to reflect the fact that, where the overall premium is reduced, the overall bargain between the parties is affected. The variation therefore goes to the heart of the insurance policy. 164. In either case, if the insurer would not have agreed to the variation on any terms, the insurer may treat the contract as if the variation was never made. If the premium was increased, the insurer must return the additional premium paid for the variation (paragraph 9(2)). If the premium was reduced, the insurer may reduce proportionately the amount to be paid on claims arising out of events after the variation (paragraphs 10(2) and 11). 165. Again, in either case, if the insurer would have included additional terms relating to the variation (for example, a warranty relating to the new risk), the insurer may treat the variation as if it contained those terms (paragraphs 9(3)(a) and 10(3)(a)). 166. If the insurer would have charged a different premium for the variation, or would not have changed the premium when in fact it increased or reduced it, the amount to be paid on claims arising out of events occurring after the variation may be reduced in proportion to the premium that the insurer would have charged (paragraphs 9(3)(b) and 10(3)(b)). Paragraph 11(3) makes further provision about the formula, depending on whether the insurer increased or reduced the premium or did not change it.

Part 3: Supplementary 167. Section 84 of the 1906 Act sets out an insurer’s duties to return premiums. Section 84(3)(a) states that where the policy is avoided by the insurer from

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the commencement of the risk, the premium is returnable, provided that there has been no fraud or illegality on the part of the assured. Under paragraph 12, this is to be read subject to the provisions of Schedule 1, which allows the insurer to retain premiums for deliberate or reckless breaches of the duty of fair presentation.

SCHEDULE 2: RIGHTS OF THIRD PARTIES AGAINST INSURERS: RELEVANT INSURED PERSONS Debt relief orders in Northern Ireland 168. Paragraph 2 adds debt relief orders (“DRO”) in Northern Ireland to the list of circumstances in which an individual is a relevant person for the purposes of the 2010 Act.27

Administration 169. An administrator may be appointed in three ways: by the court; by the holder of a floating charge; and by the company or its directors.28 Under the 2010 Act a company is a relevant person if it is subject to an administration order,29 but the 1930 Acts apply if a company enters administration, irrespective of whether there is an administration order in place.30 Paragraph 3 amends section 6 of the 2010 Act so that it includes all forms of administration under schedule B1 of the Insolvency Act 1986 and the equivalent legislation in Northern Ireland.31

Transitional cases 170. Paragraph 5 inserts a new paragraph 1A into Schedule 3 to the 2010 Act. The new paragraph describes some additional categories of relevant person for the purpose of the 2010 Act. These categories will catch people who fell within the 1930 Acts but do not fall within sections 4 to 7 of the 2010 Act. As these additional cases refer back to the circumstances in which the 1930 Acts apply, new paragraph 1A(7) provides that the insured is only a relevant person if the liability was insured at the relevant time.32

27 A DRO lasts for 12 months, during which creditors named in it cannot take any action to recover their money without permission from the court. At the end of the 12 months the person subject to the DRO will, provided his or her circumstances have not changed, be freed from all debts included in the DRO. 28 Insolvency Act 1986, Sch B1, para 2. 29 Section 6(2)(b). 30 See s 1(1)(b) of the 1930 Acts. 31 Insolvency (Northern Ireland) Order 1989, SI 1989/2405 (N.I. 19), Sch B1. 32 Cf. the opening words of s 1(1) of the 1930 Acts.

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Interpretation 171. Paragraph 6 inserts a new section 19A into the 2010 Act. The new section ensures that, subject to any contrary intention, references to enactments in the provisions of the 2010 Act specified in the new section 19A(1) are to be read as including those enactments as amended, extended or applied at any time, including in the future. That is intended to help to secure that the definition of a relevant person brings within the 2010 Act cases involving an insured person subject to a procedure described in sections 4 to 7, whenever it occurred. In particular, it is intended to help those sections to remain up to date if and when changes are made in the future to insolvency legislation and to legislation relating to bodies corporate and unincorporated bodies.

COMMENCEMENT DATES 172. Under section 23(2), the provisions relating to insurance contract law will come into force 18 months after Royal Assent (on 12 August 2016). This is to allow insurers and others to prepare for the changes made by the Act. 173. Under section 23(3), section 19 (power to change meaning of “relevant person” for purposes of 2010 Act) will come into force two months after Royal Assent (on 12 April2015). This will enable the power to be exercised before the 2010 Act is brought into force. Section 18 and Schedule 2, which further amend the 2010 Act, will come into force with the remainder of the 2010 Act.33

HANSARD REFERENCES 174. The following table sets out the dates and Hansard references for each stage of the Act’s passage through Parliament. Stage Introduction Second reading committee Second reading Special Public Bill Committee

Report stage Third reading

Date

Hansard reference

House of Lords 17 July 2014 29 July 2014

Vol. 755 Col. 705 Vol. 755 Cols. GC 621–630

30 July 2014 2, 3, 9 and 15 December2014

8 January 2015 15 January 2015

Vol. 755 Col. 1596 Lords Select Committee: Special Public Bill Committee on the Insurance Bill Vol. 758 Cols. 544–548 Vol. 758 Col. 980

33 Section 21(2) of the 2010 Act provides that the 2010 Act is to come into force on such day as the Secretary of State may byorder made by statutory instrument appoint.

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Stage First reading Committee Debate: Second Reading Committee Second reading Committee, Report and Third reading Royal Assent

Date Hansard reference House of Commons 16 January 2015 26 January 2015 Public Bill Committee(Session 2014–15) 27 January 2015 3 February 2015 Royal Assent 12 February 2015

Vol. 591 Col. 798 Vol. 591 Cols. 141–149

Commons Vol. 592 Col.1000 Lords Vol. 759 Col. 1353

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The Institute Clauses

The original Lloyd’s policy itself was framed as an insurance on ship and goods. To make it apply to other interests and to meet the constantly changing requirements of modern commerce, special clauses or sets of clauses were added to the policy. Many of these sets of clauses have now become standard, eg the clauses issued by the Institute of London Underwriters, and are almost universally introduced into the class of policies to which they apply. These clauses are business stipulations, and must be construed from a business, and not a technical, point of view. The decisions on these special provisions are numerous, but each case turns on the particular language used. If the special clause is inconsistent with the provisions of the printed policy, the special clause must prevail. In this Appendix are set out some of the more commonly used Institute Clauses. A new form of Lloyd’s policy was introduced in 1982, and in that year and in 1983 new Institute Clauses were introduced. The principal of these are: (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) (xi) (xii) (xiii)

the Institute Time Clauses (Hulls); the Institute Voyage Clauses (Hulls); the Institute War and Strikes Clauses (Hulls–Time); the Institute War and Strikes Clauses (Hulls–Voyage); the Institute Time Clauses (Freight); the Institute Voyage Clauses (Freight); the Institute War and Strikes Clauses (Freight–Time); the Institute War and Strikes Clauses (Freight–Voyage); the Institute Cargo Clauses (A); the Institute Cargo Clauses (B); the Institute Cargo Clauses (C); the Institute War Clauses (Cargo); and the Institute Strikes Clauses (Cargo).

The date which appears before the heading of each set of clauses is the date when those clauses were introduced.

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(1) HULL CLAUSES 1/10/83 (FOR USE ONLY WITH THE NEW MARINE POLICY FORM)

INSTITUTE TIME CLAUSES HULLS (This insurance is subject to English law and practice)

1. Navigation 1.1 The Vessel is covered subject to the provisions of this insurance at all times and has leave to sail or navigate with or without pilots, to go on trial trips and to assist and tow vessels or craft in distress, but it is warranted that the Vessel shall not be towed, except as is customary or to the first safe port or place when in need of assistance, or undertake towage or salvage services under a contract previously arranged by the Assured and/or Owners and/or Managers and/or Charterers. This Clause 1.1 shall not exclude customary towage in connection with loading and discharging. 1.2 In the event of the Vessel being employed in trading operations which entail cargo loading or discharging at sea from or into another vessel (not being a harbour or inshore craft) no claim shall be recoverable under this insurance for loss of or damage to the Vessel or liability to any other vessel arising from such loading or discharging operations, including whilst approaching, lying alongside and leaving, unless previous notice that the Vessel is to be employed in such operations has been given to the Underwriters and any amended terms of cover and any additional premium required by them have been agreed. 1.3 In the event of the Vessel sailing (with or without cargo) with an intention of being (a) broken up, or (b) sold for breaking up, any claim for loss of or damage to the Vessel occurring subsequent to such sailing shall be limited to the market value of the Vessel as scrap at the time when the loss or damage is sustained, unless previous notice has been given to the Underwriters and any amendments to the terms of cover, insured value and premium required by them have been agreed. Nothing in this Clause 1.3 shall affect claims under Clause 8 and/or 11.

2. Continuation Should the Vessel at the expiration of this insurance be at sea or in distress or at a port of refuge or of call, she shall, provided previous notice be given to the Underwriters, be held covered at a pro rata monthly premium to her port of destination.

3. Breach of Warranty Held covered in case of any breach of warranty as to cargo, trade, locality, towage, salvage services or date of sailing, provided notice be given to the Underwriters 220

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immediately after receipt of advices and any amended terms of cover and any additional premium required by them be agreed.

4. Termination This Clause 4 shall prevail notwithstanding any provision whether written typed or printed in this insurance inconsistent therewith. Unless the Underwriters agree to the contrary in writing, this insurance shall terminate automatically at the time of 4.1 change of the Classification Society of the Vessel, or change, suspension, discontinuance, withdrawal or expiry of her Class therein, provided that if the Vessel is at sea such automatic termination shall be deferred until arrival at her next port. However where such change, suspension, discontinuance or withdrawal of her Class has resulted from loss or damage covered by Clause 6 of this insurance or which would be covered by an insurance of the Vessel subject to current Institute War and Strikes Clauses (Hulls—Time) such automatic termination shall only operate should the Vessel sail from her next port without the prior approval of the Classification Society, 4.2 any change, voluntary or otherwise, in the ownership or flag, transfer to new management, or charter on a bareboat basis, or requisition for title or use of the Vessel, provided that, if the Vessel has cargo on board and has already sailed from her loading port or is at sea in ballast, such automatic termination shall if required be deferred, whilst the Vessel continues her planned voyage, until arrival at final port of discharge if with cargo or at port of destination if in ballast. However, in the event of requisition for title or use without the prior execution of a written agreement by the Assured, such automatic termination shall occur fifteen days after such requisition whether the Vessel is at sea or in port. A pro rata daily net return of premium shall be made.

5. Assignment No assignment of or interest in this insurance or in any moneys which may be or become payable thereunder is to be binding on or recognised by the Underwriters unless a dated notice of such assignment or interest signed by the Assured, and by the assignor in the case of subsequent assignment, is endorsed on the Policy and the Policy with such endorsement is produced before payment of any claim or return of premium thereunder.

6. Perils 6.1 This insurance covers loss of or damage to the subject-matter insured caused by 6.1.1 perils of the seas rivers lakes or other navigable waters 6.1.2 fire, explosion 6.1.3 violent theft by persons from outside the Vessel 221

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6.1.4 jettison 6.1.5 piracy 6.1.6 breakdown of or accident to nuclear installations or reactors 6.1.7 contact with aircraft or similar objects, or objects falling therefrom, land conveyance, dock or harbour equipment or installation 6.1.8 earthquake volcanic eruption or lightning. 6.2 This insurance covers loss of or damage to the subject-matter insured caused by 6.2.1 accidents in loading discharging or shifting cargo or fuel 6.2.2 bursting of boilers breakage of shafts or any latent defect in the machinery or hull 6.2.3 negligence of Master Officers Crew or Pilots 6.2.4 negligence of repairers or charterers provided such repairers or charterers are not an Assured hereunder 6.2.5 barratry of Master Officers or Crew, provided such loss or damage has not resulted from want of due diligence by the Assured, Owners or Managers. 6.3 Master Officers Crew or Pilots not to be considered Owners within the meaning of this Clause 6 should they hold shares in the Vessel.

7. Pollution Hazard This insurance covers loss of or damage to the Vessel caused by any governmental authority acting under the powers vested in it to prevent or mitigate a pollution hazard, or threat thereof, resulting directly from damage to the Vessel for which the Underwriters are liable under this insurance, provided such act of governmental authority has not resulted from want of due diligence by the Assured, the Owners, or Managers of the Vessel or any of them to prevent or mitigate such hazard or threat. Master, Officers, Crew or Pilots not to be considered Owners within the meaning of this Clause 7 should they hold shares in the Vessel.

8. 3/4ths Collision Liability 8.1 The Underwriters agree to indemnify the Assured for threefourths of any sum or sums paid by the Assured to any other person or persons by reason of the Assured becoming legally liable by way of damages for 8.1.1 loss of or damage to any other vessel or property on any other vessel 8.1.2 delay to or loss of use of any such other vessel or property thereon 8.1.3 general average of, salvage of, or salvage under contract of, any such other vessel or property thereon, where such payment by the Assured is in consequence of the Vessel hereby insured coming into collision with any other vessel. 8.2 The indemnity provided by this Clause 8 shall be in addition to the indemnity provided by the other terms and conditions of this insurance and shall be subject to the following provisions: 8.2.1 Where the insured Vessel is in collision with another vessel and both vessels are to blame then, unless the liability of one or both vessels becomes limited by law, the indemnity under this Clause 8 shall be calculated on the principle of cross-liabilities as if the respective Owners 222

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had been compelled to pay to each other such proportion of each other’s damages as may have been properly allowed in ascertaining the balance or sum payable by or to the Assured in consequence of the collision. 8.2.2 In no case shall the Underwriters’ total liability under Clauses 8.1 and 8.2 exceed their proportionate part of three-fourths of the insured value of the Vessel hereby insured in respect of any one collision. 8.3 The Underwriters will also pay three-fourths of the legal costs incurred by the Assured or which the Assured may be compelled to pay in contesting liability or taking proceedings to limit liability, with the prior written consent of the Underwriters.

EXCLUSIONS 8.4 Provided always that this Clause 8 shall in no case extend to any sum which the Assured shall pay for or in respect of 8.4.1 removal or disposal of obstructions, wrecks, cargoes or any other thing whatsoever 8.4.2 any real or personal property or thing whatsoever except other vessels or property on other vessels 8.4.3 the cargo or other property on, or the engagements of, the insured Vessel 8.4.4 loss of life, personal injury or illness 8.4.5 pollution or contamination of any real or personal property or thing whatsoever (except other vessels with which the insured Vessel is in collision or property on such other vessels).

9. Sistership Should the Vessel hereby insured come into collision with or 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 insurance as they would have were the other vessel entirely the property of Owners not interested in the Vessel hereby insured; but in such cases the liability for the collision or the amount payable for the services rendered shall be referred to a sole arbitrator to be agreed upon between the Underwriters and the Assured.

10. Notice of Claim and Tenders 10.1 In the event of accident whereby loss or damage may result in a claim under this insurance, notice shall be given to the Underwriters prior to survey and also, if the Vessel is abroad, to the nearest Lloyd’s Agent so that a surveyor may be appointed to represent the Underwriters should they so desire. 10.2 The Underwriters shall be entitled to decide the port to which the Vessel shall proceed for docking or repair (the actual additional expense of the voyage arising from compliance with the Underwriters’ requirements being refunded to the Assured) and shall have a right of veto concerning a place of repair or a repairing firm.

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10.3 The Underwriters may also take tenders or may require further tenders to be taken for the repair of the Vessel. Where such a tender has been taken and a tender is accepted with the approval of the Underwriters, an allowance shall be made at the rate of 30 per cent per annum on the insured value for time lost between the despatch of the invitations to tender required by Underwriters and the acceptance of a tender to the extent that such time is lost solely as the result of tenders having been taken and provided that the tender is accepted without delay after receipt of the Underwriters’ approval. Due credit shall be given against the allowance as above for any amounts recovered in respect of fuel and stores and wages and maintenance of the Master Officers and Crew or any member thereof, including amounts allowed in general average, and for any amounts recovered from third parties in respect of damages for detention and/or loss of profit and/or running expenses, for the period covered by the tender allowance or any part thereof. Where a part of the cost of the repair of damage other than a fixed deductible is not recoverable from the Underwriters the allowance shall be reduced by a similar proportion. 10.4 In the event of failure to comply with the conditions of this Clause 10 a deduction of 15 per cent shall be made from the amount of the ascertained claim.

11. General Average and Salvage 11.1 This insurance covers the Vessel’s proportion of salvage, salvage charges and/ or general average, reduced in respect of any under-insurance, but in case of general average sacrifice of the Vessel the Assured may recover in respect of the whole loss without enforcing their right of contribution from other parties. 11.2 Adjustment to be 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; but where the contract of affreightment so provides the adjustment shall be according to the York–Antwerp Rules. 11.3 When the Vessel sails in ballast, not under charter, the pro visions of the York–Antwerp Rules 1974 (excluding Rules XX and XXI) shall be applicable, and the voyage for this purpose shall be deemed to continue from the port or place of departure until the arrival of the Vessel at the first port or place thereafter other than a port or place of refuge or a port or place of call for bunkering only. If at any such intermediate port or place there is an abandonment of the adventure originally contemplated the voyage shall thereupon be deemed to be terminated. 11.4 No claim under this Clause 11 shall in any case be allowed where the loss was not incurred to avoid or in connection with the avoidance of a peril insured against.

12. Deductible 12.1 No claim arising from a peril insured against shall be payable under this insurance unless the aggregate of all such claims arising out of each separate accident or occurrence (including claims under Clauses 8, 11 and 13) exceeds …………in which case this sum shall be deducted. Nevertheless the expense of sighting the bottom after stranding, if reasonably incurred specially

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for that purpose, shall be paid even if no damage be found. This Clause 12.1 shall not apply to a claim for total or constructive total loss of the Vessel or, in the event of such a claim, to any associated claim under Clause 13 arising from the same accident or occurrence. 12.2 Claims for damage by heavy weather occurring during a single sea passage between two successive ports shall be treated as being due to one accident. In the case of such heavy weather extending over a period not wholly covered by this insurance the deductible to be applied to the claim recoverable hereunder shall be the proportion of the above deductible that the number of days of such heavy weather falling within the period of this insurance bears to the number of days of heavy weather during the single sea passage. The expression ‘heavy weather’ in this Clause 12.2 shall be deemed to include contact with floating ice. 12.3 Excluding any interest comprised therein, recoveries against any claim which is subject to the above deductible shall be credited to the Underwriters in full to the extent of the sum by which the aggregate of the claim unreduced by any recoveries exceeds the above deductible. 12.4 Interest comprised in recoveries shall be apportioned between the Assured and the Underwriters, taking into account the sums paid by the Underwriters and the dates when such payments were made, notwithstanding that by the addition of interest the Underwriters may receive a larger sum than they have paid.

13. Duty of Assured (Sue and Labour) 13.1 In case of any loss or misfortune it is the duty of the Assured and their servants and agents to take such measures as may be reasonable for the purpose of averting or minimising a loss which would be recoverable under this insurance. 13.2 Subject to the provisions below and to Clause 12 the Underwriters will contribute to charges properly and reasonably incurred by the Assured their servants or agents for such measures. General average, salvage charges (except as provided for in Clause 13.5) and collision defence or attack costs are not recoverable under this Clause 13. 13.3 Measures taken by the Assured or the Underwriters with the object of saving, protecting or recovering the subject-matter insured shall not be considered as a waiver or acceptance of abandonment or otherwise prejudice the rights of either party. 13.4 When expenses are incurred pursuant to this Clause 13 the liability under this insurance shall not exceed the proportion of such expenses that the amount insured hereunder bears to the value of the Vessel as stated herein, or to the sound value of the Vessel at the time of the occurrence giving rise to the expenditure if the sound value exceeds that value. Where the Underwriters have admitted a claim for total loss and property insured by this insurance is saved, the foregoing provisions shall not apply unless the expenses of suing and labouring exceed the value of such property saved and then shall apply only to the amount of the expenses which is in excess of such value. 13.5 When a claim for total loss of the Vessel is admitted under this insurance and expenses have been reasonably incurred in saving or attempting to save the Vessel and other property and there are no proceeds, or the expenses exceed 225

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the proceeds, then this insurance shall bear its pro rata share of such proportion of the expenses, or of the expenses in excess of the proceeds, as the case may be, as may reasonably be regarded as having been incurred in respect of the Vessel; but if the Vessel be insured for less than its sound value at the time of the occurrence giving rise to the expenditure, the amount recoverable under this clause shall be reduced in proportion to the under-insurance. 13.6 The sum recoverable under this Clause 13 shall be in addition to the loss otherwise recoverable under this insurance but shall in no circumstances exceed the amount insured under this insurance in respect of the Vessel.

14. New for Old Claims payable without deduction new for old.

15. Bottom Treatment In no case shall a claim be allowed in respect of scraping gritblasting and/or other surface preparation or painting of the Vessel’s bottom except that 15.1 gritblasting and/or other surface preparation of new bottom plates ashore and supplying and applying any ‘shop’ primer thereto, 15.2 gritblasting and/or other surface preparation of: the butts or area of plating immediately adjacent to any renewed or refitted plating damaged during the course of welding and/or repairs, areas of plating damaged during the course of fairing, either in place or ashore, 15.3 supplying and applying the first coat of primer/anti-corrosive to those particular areas mentioned in 15.1 and 15.2 above, shall be allowed as part of the reasonable cost of repairs in respect of bottom plating damaged by an insured peril.

16. Wages and Maintenance No claim shall be allowed, other than in general average, for wages and maintenance of the Master, Officers and Crew, or any member thereof, except when incurred solely for the necessary removal of the Vessel from one port to another for the repair of damage covered by the Underwriters, or for trial trips for such repairs, and then only for such wages and maintenance as are incurred whilst the Vessel is under way.

17. Agency Commission In no case shall any sum be allowed under this insurance either by way of remuneration of the Assured for time and trouble taken to obtain and supply information or documents or in respect of the commission or charges of any manager, agent, managing or agency company or the like, appointed by or on behalf of the Assured to perform such services.

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18. Unrepaired Damage 18.1 The measure of indemnity in respect of claims for unrepaired damage shall be the reasonable depreciation in the market value of the Vessel at the time this insurance terminates arising from such unrepaired damage, but not exceeding the reasonable cost of repairs. 18.2 In no case shall the Underwriters be liable for unrepaired damage in the event of a subsequent total loss (whether or not covered under this insurance) sustained during the period covered by this insurance or any extension thereof. 18.3 The Underwriters shall not be liable in respect of unrepaired damage for more than the insured value at the time this insurance terminates.

19. Constructive Total Loss 19.1 In ascertaining whether the Vessel is a constructive total loss, the insured value 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. 19.2 No claim for constructive total loss based upon the cost of recovery and/or repair of the Vessel shall be recoverable hereunder unless such cost would exceed the insured value. In making this determination, only the cost relating to a single accident or sequence of damages arising from the same accident shall be taken into account.

20. Freight Waiver In the event of total or constructive total loss no claim to be made by the Underwriters for freight whether notice of abandonment has been given or not.

21. Disbursements Warranty 21.1 Additional insurances as follows are permitted: 21.1.1 Disbursements, Managers’ Commissions, Profits or Excess or Increased Value of Hull and Machinery. A sum not exceeding 25 per cent of the value stated herein. 21.1.2 Freight, Chartered Freight or Anticipated Freight, insured for time. A sum not exceeding 25 per cent of the value as stated herein less any sum insured, however described, under 21.1.1. 21.1.3 Freight or Hire, under contracts for voyage. A sum not exceeding the gross freight or hire for the current cargo passage and next succeeding cargo passage (such insurance to include, if required, a preliminary and an intermediate ballast passage) plus the charges of insurance. In the case of a voyage charter where payment is made on a time basis, the sum permitted for insurance shall be calculated on the estimated duration of the voyage, subject to the limitation of

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two cargo passages as laid down herein. Any sum insured under 21.1.2 to be taken into account and only the excess thereof may be insured, which excess shall be reduced as the freight or hire is advanced or earned by the gross amount so advanced or earned. 21.1.4 Anticipated Freight if the Vessel sails in ballast and not under Charter. A sum not exceeding the anticipated gross freight on next cargo passage, such sum to be reasonably estimated on the basis of the current rate of freight at time of insurance plus the charges of insurance. Any sum insured under 21.1.2 to be taken into account and only the excess thereof may be insured. 21.1.5 Time Charter Hire or Charter Hire for Series of Voyages. A sum not exceeding 50 per cent of the gross hire which is to be earned under the charter in a period not exceeding 18 months. Any sum insured under 21.1.2 to be taken into account and only the excess thereof may be insured, which excess shall be reduced as the hire is advanced or earned under the charter by 50 per cent of the gross amount so advanced or earned but the sum insured need not be reduced while the total of the sums insured under 21.1.2 and 21.1.5 does not exceed 50 per cent of the gross hire still to be earned under the charter. An insurance under this Section may beginon the signing of the charter. 21.1.6 Premiums. A sum not exceeding the actual premiums of all interests insured for a period not exceeding 12 months (excluding premiums insured under the foregoing sections but including, if required, the premium or estimated calls on any Club or War etc Risk insurance) reducing pro rata monthly. 21.1.7 Returns of Premium. A sum not exceeding the actual returns which are allowable under any insurance but which would not be recoverable thereunder in the event of a total loss of the Vessel whether by insured perils or otherwise. 21.1.8 Insurance irrespective of amount against: Any risks excluded by Clauses 23, 24, 25 and 26 below. 21.2 Warranted that no insurance on any interests enumerated in the foregoing 21.1.1 to 21.1.7 in excess of the amounts permitted therein and no other insurance which includes total loss of the Vessel P.P.I., F.I.A., or subject to any other like term, is or shall be effected to operate during the currency of this insurance by or for account of the Assured, Owners, Managers or Mortgagees. Provided always that a breach of this warranty shall not afford the Underwriters any defence to a claim by a Mortgagee who has accepted this insurance without knowledge of such breach.

22. Returns for Lay-Up and Cancellation 22.1 To return as follows: 22.1.1 Pro rata monthly net for each uncommenced month if this insurance be cancelled by agreement.

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22.1.2 For each period of 30 consecutive days the Vessel may be laid up in a port or in a lay-up area provided such port or lay-up area is approved by the Underwriters (with special liberties as hereinafter allowed) (a) per cent net not under repair (b) per cent net under repair. If the Vessel is under repair during part only of a period for which a return is claimable, the return shall be calculated pro rata to the number of days under (a) and (b) respectively. 22.2 PROVIDED ALWAYS THAT 22.2.1 a total loss of the Vessel, whether by insured perils or otherwise, has not occurred during the period covered by this insurance or any extension thereof 22.2.2 in no case shall a return be allowed when the Vessel is lying in exposed or unprotected waters, or in a port or lay-up area not approved by the Underwriters but, provided the Underwriters agree that such non-approved lay-up area is deemed to be within the vicinity of the approved port or lay-up area, days during which the Vessel is laid up in such non-approved lay-up area may be added to days in the approved port or lay-up area to calculate a period of 30 consecutive days and a return shall be allowed for the proportion of such period during which the Vessel is actually laid up in the approved port or lay-up area 22.2.3 loading or discharging operations or the presence of cargo on board shall not debar returns but no return shall be allowed for any period during which the Vessel is being used for the storage of cargo or for lightering purposes 22.2.4 in the event of any amendment of the annual rate, the above rates of return shall be adjusted accordingly 22.2.5 in the event of any return recoverable under this Clause 22 being based on 30 consecutive days which fall on successive insurances effected for the same Assured, this insurance shall only be liable for an amount calculated at pro rata of the period rates 22.1.2(a) and/or (b) above for the number of days which come within the period of this insurance and to which a return is actually applicable. Such overlapping period shall run, at the option of the assured, either from the first day on which the Vessel is laid up or the first day of a period of 30 consecutive days as provided under 22.1.2(a) or (b), or 22.2.2 above. The following clauses shall be paramount and shall override anything contained in this insurance inconsistent therewith.

23. War Exclusion In no case shall this insurance cover loss damage liability or expense caused by 23.1 war civil war revolution rebellion insurrection, or civil strife arising therefrom, or any hostile act by or against a belligerent power

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23.2 capture seizure arrest restraint or detainment (barratry and piracy excepted), and the consequences thereof or any attempt thereat 23.3 derelict mines torpedoes bombs or other derelict weapons of war.

24. Strikes Exclusion In no case shall this insurance cover loss damage liability or expense caused by 24.1 strikers, locked-out workmen, or persons taking part in labour disturbances, riots or civil commotions 24.2 any terrorist or any person acting from a political motive.

25. Malicious Acts Exclusion In no case shall this insurance cover loss damage liability or expense arising from 25.1 the detonation of an explosive 25.2 any weapon of war and caused by any person acting maliciously or from a political motive.

26. Nuclear Exclusion In no case shall this insurance cover loss damage liability or expense arising from any weapon of war employing atomic or nuclear fission and/or fusion or other like reaction or radioactive force or matter.

INSTITUTE VOYAGE CLAUSES HULLS (This insurance is subject to English law and practice)

1. Navigation 1.1 The Vessel is covered subject to the provisions of this insurance at all times and has leave to sail or navigate with or without pilots, to go on trial trips and to assist and tow vessels or craft in distress, but it is warranted that the Vessel shall not be towed, except as is customary or to the first safe port or place when in need of assistance, or undertake towage or salvage services under a contract previously arranged by the Assured and/or Owners and/or Managers and/or Charterers. This Clause 1.1 shall not exclude customary towage in connection with loading and discharging. 1.2 In the event of the Vessel being employed in trading operations which entail cargo loading or discharging at sea from or into another vessel (not being a harbour or inshore craft) no claim shall be recoverable under this insurance

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for loss of or damage to the Vessel or liability to any other vessel arising from such loading or discharging operations, including whilst approaching, lying alongside and leaving, unless previous notice that the Vessel is to be employed in such operations has been given to the Underwriters and any amended terms of cover and any additional premium required by them have been agreed.

2. Change of Voyage Held covered in case of deviation or change of voyage or any breach of warranty as to towage or salvage services, provided notice be given to the Underwriters immediately after receipt of advices and any amended terms of cover and any additional premium required by them be agreed.

3. Assignment No assignment of or interest in this insurance or in any moneys which may be or become payable thereunder is to be binding on or recognised by the Underwriters unless a dated notice of such assignment or interest signed by the Assured, and by the assignor in the case of subsequent assignment, is endorsed on the Policy and the Policy with such endorsement is produced before payment of any claim or return of premium thereunder.

4. Perils 4.1 This insurance covers loss of or damage to the subject-matter insured caused by 4.1.1 perils of the seas rivers lakes or other navigable waters 4.1.2 fire, explosion 4.1.3 violent theft by persons from outside the Vessel 4.1.4 jettison 4.1.5 piracy 4.1.6 breakdown of or accident to nuclear installations or reactors 4.1.7 contact with aircraft or similar objects, or objects falling therefrom, land conveyance, dock or harbour equipment or installation 4.1.8 earthquake volcanic eruption or lightning. 4.2 This insurance covers loss of or damage to the subject-matter insured caused by 4.2.1 accidents in loading discharging or shifting cargo or fuel 4.2.2 bursting of boilers breakage of shafts or any latent defect in the machinery or hull 4.2.3 negligence of Master Officers Crew or Pilots 4.2.4 negligence of repairers or charterers provided such repairers or charterers are not an Assured hereunder 4.2.5 barratry of Master Officers or Crew, provided such loss or damage has not resulted from want of due diligence by the Assured, Owners or Managers. 4.3 Master Officers Crew or Pilots not to be considered Owners within the meaning of this Clause 4 should they hold shares in the Vessel.

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5. Pollution Hazard This insurance covers loss of or damage to the Vessel caused by any governmental authority acting under the powers vested in it to prevent or mitigate a pollution hazard, or threat thereof, resulting directly from damage to the Vessel for which the Underwriters are liable under this insurance, provided such act of governmental authority has not resulted from want of due diligence by the Assured, the Owners, or Managers of the Vessel or any of them to prevent or mitigate such hazard or threat. Master, Officers, Crew or Pilots not to be considered Owners within the meaning of this Clause 5 should they hold shares in the Vessel.

6. 3/4ths Collision Liability 6.1 The Underwriters agree to indemnify the Assured for three‑fourths of any sum or sums paid by the Assured to any other person or persons by reason of the Assured becoming legally liable by way of damages for 6.1.1 loss of or damage to any other vessel or property on any other vessel 6.1.2 delay to or loss of use of any such other vessel or property thereon 6.1.3 general average of, salvage of, or salvage under contract of, any such other vessel or property thereon, where such payment by the Assured is in consequence of the Vessel hereby insured coming into collision with any other vessel. 6.2 The indemnity provided by this Clause 6 shall be in addition to the indemnity provided by the other terms and conditions of this insurance and shall be subject to the following provisions: 6.2.1 Where the insured Vessel is in collision with another vessel and both vessels are to blame then, unless the liability of one or both vessels becomes limited by law, the indemnity under this Clause 6 shall be calculated on the principle of cross-liabilities as if the respective Owners had been compelled to pay to each other such proportion of each other’s damages as may have been properly allowed in ascertaining the balance or sum payable by or to the Assured in consequence of the collision. 6.2.2 In no case shall the Underwriters’ total liability under Clauses 6.1 and 6.2 exceed their proportionate part of three-fourths of the insured value of the Vessel hereby insured in respect of any one collision. 6.3 The Underwriters will also pay three-fourths of the legal costs incurred by the Assured or which the Assured may be compelled to pay in contesting liability or taking proceedings to limit liability, with the prior written consent of the Underwriters.

EXCLUSIONS 6.4 Provided always that this Clause 6 shall in no case extend to any sum which the Assured shall pay for or in respect of 6.4.1 removal or disposal of obstructions, wrecks, cargoes or any other thing whatsoever

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6.4.2 any real or personal property or thing whatsoever except other vessels or property on other vessels 6.4.3 the cargo or other property on, or the engagements of, the insured Vessel 6.4.4 loss of life, personal injury or illness 6.4.5 pollution or contamination of any real or personal property or thing whatsoever (except other vessels with which the insured Vessel is in collision or property on such other vessels).

7. Sistership Should the Vessel hereby insured come into collision with or 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 insurance as they would have were the other vessel entirely the property of Owners not interested in the Vessel hereby insured; but in such cases the liability for the collision or the amount payable for the services rendered shall be referred to a sole arbitrator to be agreed upon between the Underwriters and the Assured.

8. Notice of Claim and Tenders 8.1 In the event of accident whereby loss or damage may result in a claim under this insurance, notice shall be given to the Underwriters prior to survey and also, if the Vessel is abroad, to the nearest Lloyd’s Agent so that a surveyor may be appointed to represent the Underwriters should they so desire. 8.2 The Underwriters shall be entitled to decide the port to which the Vessel shall proceed for docking or repair (the actual additional expense of the voyage arising from compliance with the Underwriters’ requirements being refunded to the Assured) and shall have a right of veto concerning a place of repair or a repairing firm. 8.3 The Underwriters may also take tenders or may require further tenders to be taken for the repair of the Vessel. Where such a tender has been taken and a tender is accepted with the approval of the Underwriters, an allowance shall be made at the rate of 30 per cent per annum on the insured value for time lost between the despatch of the invitations to tender required by Underwriters and the acceptance of a tender to the extent that such time is lost solely as the result of tenders having been taken and provided that the tender is accepted without delay after receipt of the Underwriters’ approval. Due credit shall be given against the allowance as above for any amounts recovered in respect of fuel and stores and wages and maintenance of the Master Officers and Crew or any member thereof, including amounts allowed in general average, and for any amounts recovered from third parties in respect of damages for detention and/or loss of profit and/or running expenses, for the period covered by the tender allowance or any part thereof. Where a part of the cost of the repair of damage other than a fixed deductible is not recoverable from the Underwriters the allowance shall be reduced by a similar proportion. 8.4 In the event of failure to comply with the conditions of this Clause 8 a deduction of 15 per cent shall be made from the amount of the ascertained claim. 233

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9. General Average and Salvage 9.1 This insurance covers the Vessel’s proportion of salvage, salvage charges and/or general average, reduced in respect of any under-insurance, but in case of general average sacrifice of the Vessel the Assured may recover in respect of the whole loss without first enforcing their right of contribution from other parties. 9.2 Adjustment to be 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; but where the contract of affreightment so provides the adjustment shall be according to the York—Antwerp Rules. 9.3 When the Vessel sails in ballast, not under charter, the provisions of the York— Antwerp Rules 1974 (excluding Rules XX and XXI) shall be applicable, and the voyage for this purpose shall be deemed to continue from the port or place of departure until the arrival of the Vessel at the first port or place thereafter other than a port or place of refuge or a port or place of call for bunkering only. If at any such intermediate port or place there is an abandonment of the adventure originally contemplated the voyage shall thereupon be deemed to be terminated. 9.4 No claim under this Clause 9 shall in any case be allowed where the loss was not incurred to avoid or in connection with the avoidance of a peril insured against.

10. Deductible 10.1 No claim arising from a peril insured against shall be payable under this insurance unless the aggregate of all such claims arising out of each separate accident or occurrence (including claims under Clauses 6, 9 and 11) exceeds in which case this sum shall be deducted. Nevertheless the expense of sighting the bottom after stranding, if reasonably incurred specially for that purpose, shall be paid even if no damage be found. This Clause 10.1 shall not apply to a claim for total or constructive total loss of the Vessel, or in the event of such a claim, to any associated claim under Clause 11 arising from the same accident or occurrence. 10.2 Claims for damage by heavy weather occurring during a single sea passage between two successive ports shall be treated as being due to one accident. In the case of such heavy weather extending over a period not wholly covered by this insurance the deductible to be applied to the claim recoverable hereunder shall be the proportion of the above deductible that the number of days of such heavy weather falling within the period of this insurance bears to the number of days of heavy weather during the single sea passage. The expression ‘heavy weather’ in this Clause 10.2 shall be deemed to include contact with floating ice. 10.3 Excluding any interest comprised therein, recoveries against any claim which is subject to the above deductible shall be credited to the Underwriters in full to the extent of the sum by which the aggregate of the claim unreduced by any recoveries exceeds the above deductible.

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10.4 Interest comprised in recoveries shall be apportioned between the Assured and the Underwriters, taking into account the sums paid by the Underwriters and the dates when such payments were made, notwithstanding that by the addition of interest the Underwriters may receive a larger sum than they have paid.

11. Duty of Assured (Sue and Labour) 11.1 In case of any loss or misfortune it is the duty of the Assured and their servants and agents to take such measures as may be reasonable for the purpose of averting or minimising a loss which would be recoverable under this insurance. 11.2 Subject to the provisions below and to Clause 10 the Under‑writers will contribute to charges properly and reasonably incurred by the Assured their servants or agents for such measures. General average, salvage charges (except as provided for in Clause 11.5) and collision defence or attack costs are not recoverable under this Clause 11. 11.3 Measures taken by the Assured or the Underwriters with the object of saving, protecting or recovering the subject-matter insured shall not be considered as a waiver or acceptance of abandonment or otherwise prejudice the rights of either party. 11.4 When expenses are incurred pursuant to this Clause 11 the liability under this insurance shall not exceed the proportion of such expenses that the amount insured hereunder bears to the value of the Vessel as stated herein, or to the sound value of the Vessel at the time of the occurrence giving rise to the expenditure if the sound value exceeds that value. Where the Underwriters have admitted a claim for total loss and property insured by this insurance is saved, the foregoing provisions shall not apply unless the expenses of suing and labouring exceed the value of such property saved and then shall apply only to the amount of the expenses which is in excess of such value. 11.5 When a claim for total loss of the Vessel is admitted under this insurance and expenses have been reasonably incurred in saving or attempting to save the Vessel and other property and there are no proceeds, or the expenses exceed the proceeds, then this insurance shall bear its pro rata share of such proportion of the expenses, or of the expenses in excess of the proceeds, as the case may be, as may reasonably be regarded as having been incurred in respect of the Vessel; but if the Vessel be insured for less than its sound value at the time of the occurrence giving rise to the expenditure, the amount recoverable under this clause shall be reduced in proportion to the under-insurance. 11.6 The sum recoverable under this Clause 11 shall be in addition to the loss otherwise recoverable under this insurance but shall in no circumstances exceed the amount insured under this insurance in respect of the Vessel.

12. New for Old Claims payable without deduction new for old.

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13. Bottom Treatment In no case shall a claim be allowed in respect of scraping gritblasting and/or other surface preparation or painting of the Vessel’s bottom except that 13.1 gritblasting and/or other surface preparation of new bottom plates ashore and supplying and applying any ‘shop’ primer thereto, 13.2 gritblasting and/or other surface preparation of: the butts or area of plating immediately adjacent to any renewed or refitted plating damaged during the course of welding and/or repairs, areas of plating damaged during the course of fairing, either in place or ashore, 13.3 supplying and applying the first coat of primer/anti-corrosive to those particular areas mentioned in 13.1 and 13.2 above, shall be allowed as part of the reasonable cost of repairs in respect of bottom plating damaged by an insured peril.

14. Wages and Maintenance No claim shall be allowed, other than in general average, for wages and maintenance of the Master, Officers and Crew, or any member thereof, except when incurred solely for the necessary removal of the Vessel from one port to another for the repair of damage covered by the Underwriters, or for trial trips for such repairs, and then only for such wages and maintenance as are incurred whilst the Vessel is under way.

15. Agency Commission In no case shall any sum be allowed under this insurance either by way of remuneration of the Assured for time and trouble taken to obtain and supply information or documents or in respect of the commission or charges of any manager, agent, managing or agency company or the like, appointed by or on behalf of the Assured to perform such services.

16. Unrepaired Damage 16.1 The measure of indemnity in respect of claims for unrepaired damage shall be the reasonable depreciation in the market value of the Vessel at the time this insurance terminates arising from such unrepaired damage, but not exceeding the reasonable cost of repairs. 16.2 In no case shall the Underwriters be liable for unrepaired damage in the event of a subsequent total loss (whether or not covered under this insurance) sustained during the period covered by this insurance or any extension thereof. 16.3 The Underwriters shall not be liable in respect of unrepaired damage for more than the insured value at the time this insurance terminates.

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17. Constructive Total Loss 17.1 In ascertaining whether the Vessel is a constructive total loss, the insured value 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. 17.2 No claim for constructive total loss based upon the cost of recovery and/or repair of the Vessel shall be recoverable hereunder unless such cost would exceed the insured value. In making this determination, only the cost relating to a single accident or sequence of damages arising from the same accident shall be taken into account.

18. Freight Waiver In the event of total or constructive total loss no claim to be made by the Underwriters for freight whether notice of abandonment has been given or not.

19. Disbursements Warranty 19.1 Additional insurances as follows are permitted: 19.1.1 Disbursements, Managers’ Commissions, Profits or Excess or Increased Value of Hull and Machinery. A sum not exceeding 25 per cent of the value stated herein. 19.1.2 Freight, Chartered Freight or Anticipated Freight, insured for time. A sum not exceeding 25 per cent of the value as stated herein less any sum insured, however described, under 19.1.1. 19.1.3 Freight or Hire, under contracts for voyage. A sum not exceeding the gross freight or hire for the current cargo passage and next succeeding cargo passage (such insurance to include, if required, a preliminary and an intermediate ballast passage) plus the charges of insurance. In the case of a voyage charter where payment is made on a time basis, the sum permitted for insurance shall be calculated on the estimated duration of the voyage, subject to the limitation of two cargo passages as laid down herein. Any sum insured under 19.1.2 to be taken into account and only the excess thereof may be insured, which excess shall be reduced as the freight or hire is advanced or earned by the gross amount so advanced or earned. 19.1.4 Anticipated Freight if the Vessel sails in ballast and not under Charter. A sum not exceeding the anticipated gross freight on next cargo passage, such sum to be reasonably estimated on the basis of the current rate of freight at time of insurance plus the charges of insurance. Any sum insured under 19.1.2 to be taken into account and only the excess thereof may be insured. 19.1.5 Time Charter Hire or Charter Hire for Series of Voyages. A sum not exceeding 50 per cent of the gross hire which is to be earned under the charter in a period not exceeding 18 months. Any sum insured

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under 19.1.2 to be taken into account and only the excess thereof may be insured, which excess shall be reduced as the hire is advanced or earned under the charter by 50 per cent of the gross amount so advanced or earned but the sum insured need not be reduced while the total of the sums insured under 19.1.2 and 19.1.5 does not exceed 50 per cent of the gross hire still to be earned under the charter. An insurance under this Section may begin on the signing of the charter. 19.1.6 Premiums. A sum not exceeding the actual premiums of all interests insured for a period not exceeding 12 months (excluding premiums insured under the foregoing sections but including, if required, the premium or estimated calls on any Club or War etc. Risk insurance) reducing pro rata monthly. 19.1.7 Returns of Premium. A sum not exceeding the actual returns which are allowable under insurance but which would not be recoverable thereunder in the event of a total loss of the Vessel whether by insured perils or otherwise. 19.1.8 Insurance irrespective of amount against: Any risks excluded by Clauses 20, 21, 22 and 23 below. 19.2 Warranted that no insurance on any interests enumerated in the foregoing 19.1.1 to 19.1.7 in excess of the amounts permitted therein and no other insurance which includes total loss of the Vessel P.P.I., F.I.A., or subject to any other like term, is or shall be effected to operate during the currency of this insurance by or for account of the Assured, Owners, Managers or Mortgagees. Provided always that a breach of this warranty shall not afford the Underwriters any defence to a claim by a Mortgagee who has accepted this insurance without knowledge of such breach. The following clauses shall be paramount and shall override anything contained in this insurance inconsistent therewith.

20. War Exclusion In no case shall this insurance cover loss damage liability or expense caused by 20.1 war civil war revolution rebellion insurrection, or civil strife arising therefrom, or any hostile act by or against a belligerent power 20.2 capture seizure arrest restraint or detainment (barratry and piracy excepted), and the consequences thereof or any attempt thereat 20.3 derelict mines torpedoes bombs or other derelict weapons of war.

21. Strikes Exclusion In no case shall this insurance cover loss damage liability or expense caused by 21.1 strikers, locked-out workmen, or persons taking part in labour disturbances, riots or civil commotions 21.2 any terrorist or any person acting from a political motive.

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22. Malicious Acts Exclusion In no case shall this insurance cover loss damage liability or expense arising from 22.1 the detonation of an explosive 22.2 any weapon of war and caused by any person acting maliciously or from a political motive.

23. Nuclear Exclusion In no case shall this insurance cover loss damage liability or expense arising from any weapon of war employing atomic or nuclear fission and/or fusion or other like reaction or radioactive force or matter.

INSTITUTE WAR AND STRIKES CLAUSES HULLS—TIME (This insurance is subject to English law and practice)

1. Perils Subject always to the exclusions hereinafter referred to, this insurance covers loss of or damage to the Vessel caused by 1.1 war civil war revolution rebellion insurrection, or civil strife arising therefrom, or any hostile act by or against a belligerent power 1.2 capture seizure arrest restraint or detainment, and the consequences thereof or any attempt thereat 1.3 derelict mines torpedoes bombs or other derelict weapons of war 1.4 strikers, locked-out workmen, or persons taking part in labour disturbances, riots or civil commotions 1.5 any terrorist or any person acting maliciously or from a politicalmotive 1.6 confiscation or expropriation.

2. Incorporation The Institute Time Clauses Hulls 1/10/83 (including 4/4ths Collision Clause) except Clauses 1.2, 2, 3, 4, 6, 12, 21.1.8, 22, 23, 24, 25 and 26 are deemed to be incorporated in this insurance in so far as they do not conflict with the provisions of these clauses. Held covered in case of breach of warranty as to towage or salvage services provided notice be given to the Underwriters immediately after receipt of advices and any additional premium required by them be agreed.

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3. Detainment In the event that the Vessel shall have been the subject of capture seizure arrest restraint detainment confiscation or expropriation, and the Assured shall thereby have lost the free use and disposal of the Vessel for a continuous period of 12 months then for the purpose of ascertaining whether the Vessel is a constructive total loss the Assured shall be deemed to have been deprived of the possession of the Vessel without any likelihood of recovery.

4. Exclusions This insurance excludes 4.1 loss damage liability or expense arising from 4.1.1 any detonation of any weapon of war employing atomic or nuclear fission and/or fusion or other like reaction or radioactive force or matter, hereinafter called a nuclear weapon of war 4.1.2 the outbreak of war (whether there be a declaration of war or not) between any of the following countries: United Kingdom, United States of America, France, the Union of Soviet Socialist Republics, the People’s Republic of China 4.1.3 requisition or pre-emption 4.1.4 capture seizure arrest restraint detainment confiscation or expropriation by or under the order of the government or any public or local authority of the country in which the Vessel is owned or registered 4.1.5 arrest restraint detainment confiscation or expropriation under quarantine regulations or by reason of infringement of any customs or trading regulations 4.1.6 the operation of ordinary judicial process, failure to provide security or to pay any fine or penalty or any financial cause 4.1.7 piracy (but this exclusion shall not affect cover under Clause 1.4), 4.2 loss damage liability or expense covered by the Institute Voyage Clauses—Hulls 1/10/83 (including 4/4ths Collision Clause) or which would be recoverable thereunder but for Clause 10 thereof 4.3 any claim for any sum recoverable under any other insurance on the Vessel or which would be recoverable under such insurance but for the existence of this insurance 4.4 any claim for expenses arising from delay except such expenses as would be recoverable in principle in English law and practice under the York—Antwerp Rules 1974.

5. Termination 5.1 This insurance may be cancelled by either the Underwriters or the Assured giving 7 days notice (such cancellation becoming effective on the expiry of 7 days from midnight of the day on which notice of cancellation is issued by or to the Underwriters). The Underwriters agree however to reinstate this

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insurance subject to agreement between the Underwriters and the Assured prior to the expiry of such notice of cancellation as to new rate of premium and/or conditions and/or warranties. 5.2 Whether or not such notice of cancellation has been given this insurance shall TERMINATE AUTOMATICALLY 5.2.1 upon the occurrence of any hostile detonation of any nuclear weapon of war as defined in Clause 4.1.1 wheresoever or whensoever such detonation may occur and whether or not the Vessel may be involved 5.2.2 upon the outbreak of war (whether there be a declaration of war or not) between any of the following countries: United Kingdom, United States of America, France, the Union of Soviet Socialist Republics, the People’s Republic of China 5.2.4 in the event of the Vessel being requisitioned, either for title or use. 5.3 In the event either of cancellation by notice of automatic termination of this insurance by reason of the operation of this Clause 5, or of the sale of the Vessel, pro rata net return of premium shall be payable to the Assured. ___________________ This insurance shall not become effective if, subsequent to its acceptance by the Underwriters and prior to the intended time of its attachment, there has occurred any event which would have automatically terminated this insurance under the provisions of Clause 5 above. ___________________

INSTITUTE WAR AND STRIKES CLAUSES HULLS–VOYAGE (This insurance is subject to English law and practice)

1. Perils Subject always to the exclusions hereinafter referred to, this insurance covers loss of or damage to the Vessel caused by 1.1 war civil war revolution rebellion insurrection, or civil strife arising therefrom, or any hostile act by or against a belligerent power 1.2 capture seizure arrest restraint or detainment, and the consequences thereof or any attempt thereat 1.3 derelict mines torpedoes bombs or other derelict weapons of war 1.4 strikers, locked-out workmen, or persons taking part in labour disturbances, riots or civil commotion 1.5 any terrorist or any person acting maliciously or from a political motive 1.6 confiscation or expropriation.

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2. Incorporation The Institute Voyage Clauses—Hulls 1/10/83 (including 4/4ths Collision Clause) except Clauses 1.2, 10, 19.1.8, 20, 21, 22 and 23 are deemed to be incorporated in this insurance in so far as they do not conflict with the provisions of these clauses. Held covered in case of breach of warranty as to towage or salvage services provided notice be given to the Underwriters immediately after receipt of advices and any additional premium required by them be agreed.

3. Detainment In the event that the Vessel shall have been the subject of capture seizure arrest restraint detainment confiscation or expropriation, and the Assured shall thereby have lost the free use and disposal of the Vessel for a continuous period of 12 months then for the purpose of ascertaining whether the Vessel is a constructive total loss the Assured shall be deemed to have been deprived of the possession of the Vessel without any likelihood of recovery.

4. Exclusions This insurance excludes 4.1 loss damage liability or expense arising from 4.1.1 any detonation of any weapon of war employing atomic or nuclear fission and/or fusion or other like reaction or radioactive force or matter, hereinafter called a nuclear weapon of war 4.1.2 the outbreak of war (whether there be a declaration of war or not) between any of the following countries: United Kingdom, United States of America, France, the Union of Soviet Socialist Republics, the People’s Republic of China 4.1.3 requisition or pre-emption 4.1.4 capture seizure arrest restraint detainment confiscation or expropriation by or under the order of the government or any public or local authority of the country in which the Vessel is owned or registered 4.1.5 arrest restraint detainment confiscation or expropriation under quarantine regulations or by reason of infringement of any customs or trading regulations 4.1.6 the operation of ordinary judicial process, failure to provide security or to pay any fine or penalty or any financial cause 4.1.7 piracy (but this exclusion shall not affect cover under Clause 1.4), 4.2 loss damage liability or expense covered by the Institute Voyage Clauses—Hulls 1/10/83 (including 4/4ths Collision Clause) or which would be recoverable thereunder but for Clause 10 thereof 4.3 any claim for any sum recoverable under any other insurance on the Vessel or which would be recoverable under such insurance but for the existence of this insurance

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4.4 any claim for expenses arising from delay except such expenses as would be recoverable in principle in English law and practice under the York—Antwerp Rules 1974.

5. Termination 5.1 This insurance may be cancelled by either the Underwriters or the Assured giving 7 days notice (such cancellation becoming effective on the expiry of 7 days from midnight of the day on which notice of cancellation is issued by or to the Underwriters). The Underwriters agree however to reinstate this insurance subject to agreement between the Underwriters and the Assured prior to the expiry of such notice of cancellation as to new rate of premium and/or conditions and/or warranties 5.2 Whether or not such notice of cancellation has been given this insurance shall TERMINATE AUTOMATICALLY 5.2.1 upon the occurrence of any hostile detonation of any nuclear weapon of war as defined in Clause 4.1.1 wheresoever or whensoever such detonation may occur and whether or not the Vessel may be involved 5.2.2 upon the outbreak of war (whether there be a declaration of war or not) between any of the following countries: United Kingdom, United States of America, France, the People’s Republic of China, the Union of Soviet Socialist Republics 5.2.3 in the event of the Vessel being requisitioned, either for title or use 5.3 In the event either of cancellation by notice or of automatic termination of this insurance by reason of the operation of this Clause 5, or of the sale of the Vessel, a return of premium shall be payable to the Assured. This insurance shall not become effective if, subsequent to its acceptance by the Underwriters and prior to the intended time of its attachment, there has occurred any event which would have automatically terminated this insurance under the provisions of Clause 5 above.

(2) Freight Clauses 1/10/83 (FOR USE ONLY WITH THE NEW MARINE POLICY FORM)

INSTITUTE TIME CLAUSES FREIGHT (This insurance is subject to English law and practice)

1. Navigation The Vessel has leave to dock and undock, to go into graving dock, to sail or navigate with or without pilots, to go on trial trips and to assist and tow vessels or craft in 243

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distress, but it is warranted that the Vessel shall not be towed, except as is customary or when in need of assistance, or undertake towage or salvage services under a contract previously arranged by the Assured and/or Owners and/or Managers and/ or Charterers. This Clause I shall not exclude customary towage in connection with loading and discharging.

2. Craft Risk Including risk of craft and/or lighter to and from the Vessel.

3. Continuation Should the Vessel at the expiration of this insurance be at sea or in distress or at a port of refuge or of call, the subject-matter insured shall, provided previous notice be given to the Underwriters, be held covered at a pro rata monthly premium to her port of destination.

4. Breach of Warranty Held covered in case of any breach of warranty as to cargo, trade, locality, towage, salvage services or date of sailing, provided notice be given to the Underwriters immediately after receipt of advices and any amended terms of cover and any additional premium required by them be agreed.

5. Termination This Clause 5 shall prevail notwithstanding any provision whether written typed or printed in this insurance inconsistent therewith. Unless the Underwriters agree to the contrary in writing, this insurance shall terminate automatically at the time of 5.1 change of the Classification Society of the Vessel, or change, suspension, discontinuance, withdrawal or expiry of her Class therein, provided that if the Vessel is at sea such automatic termination shall be deferred until arrival at her next port. However where such change, suspension, discontinuance or withdrawal of her Class has resulted from loss or damage covered by Clause 7 of this insurance or which would be covered by an insurance of the Vessel subject to current Institute War and Strikes Clauses Hulls—Time such automatic termination shall only operate should the Vessel sail from her next port without the prior approval of the Classification Society, 5.2 any change voluntary or otherwise, in the ownership or flag, transfer ‘to new management, or charter on a bareboat basis, or requisition for title or use of the Vessel, provided that, if the Vessel has cargo on board and has already sailed from her loading port or is at sea in ballast, such automatic termination shall if required be deferred, whilst the Vessel continues her planned voyage, until arrival at final port of discharge if with cargo or at port of destination if in ballast. However, in the event of requisition for title or use without the prior execution of a written agreement by the 244

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Assured, such automatic termination shall occur fifteen days after such requisition whether the Vessel is at sea or in port. A pro rata daily net return of premium shall be made.

6. Assignment No assignment of or interest in this insurance or in any moneys which may be or become payable thereunder is to be binding on or recognised by the Underwriters unless a dated notice of such assignment or interest signed by the Assured, and by the assignor in the case of subsequent assignment, is endorsed on the Policy and the Policy with such endorsement is produced before payment of any claim or return of premium thereunder.

7. Perils 7.1 This insurance covers loss of the subject-matter insured caused by 7.1.1 perils of the seas rivers lakes or other navigable waters 7.1.2 fire, explosion 7.1.3 violent theft by persons from outside the Vessel 7.1.4 jettison 7.1.5 piracy 7.1.6 breakdown of or accident to nuclear installations or reactors 7.1.7 contact with aircraft or similar objects, or objects falling therefrom, land conveyance, dock or harbour equipment or installation 7.1.8 earthquake volcanic eruption or lightning. 7.2 This insurance covers loss of the subject-matter insured caused by 7.2.1 accidents in loading discharging or shifting cargo or fuel 7.2.2 bursting of boilers breakage of shafts or any latent defect in the machinery or hull 7.2.3 negligence of Master Officers Crew or Pilots 7.2.4 negligence of repairers or charterers provided such repairers or charterers are not an Assured hereunder 7.2.5 barratry of Master Officers or Crew, provided such loss has not resulted from want of due diligence by the Assured, Owners or Managers. 7.3 Master Officers Crew or Pilots not to be considered Owners within the meaning of this Clause 7 should they hold shares in the Vessel.

8. Pollution Hazard This insurance covers loss of the subject-matter insured caused by any governmental authority acting under the powers vested in it to prevent or mitigate a pollution hazard, or threat thereof, resulting directly from a peril covered by this insurance, provided such act of governmental authority has not resulted from want of due diligence by the Assured, the Owners, or Managers of the Vessel or any of them to prevent or mitigate such hazard or threat. Master, Officers, Crew or Pilots not to be considered Owners within the meaning of this Clause 8 should they hold shares in the Vessel. 245

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9. Freight Collision 9.1 It is further agreed that if the Vessel shall come into collision with any other vessel and the Assured shall in consequence thereof become liable to pay and shall pay by way of damages to any other person or persons any sum or sums in respect of the amount of freight taken into account in calculating the measure of the liability of the Assured for 9.1.1 loss of or damage to any other vessel or property on any other vessel 9.1.2 delay to or loss of use of any such other vessel or property thereon 9.1.3 general average of, salvage of or salvage under contract of, any such other vessel or property thereon, the Underwriters will pay the Assured such proportion of three-fourths of such sum or sums so paid applying to freight as their respective subscriptions hereto bear to the total amount insured on freight or, if greater, to the gross freight at risk at the time of the collision. 9.2 Provided always that: 9.2.1 liability of the Underwriters in respect of any one such collision shall not exceed their proportionate part of three-fourths of the total amount insured hereon on freight, and in cases in which, with the prior consent in writing of the Underwriters, the liability of the Vessel has been contested or proceedings have been taken to limit liability, they will also pay a like proportion of three-fourths of the costs, appertaining proportionately to the freight portion of damages, which the Assured shall thereby incur or be compelled to pay; 9.2.2 no claim shall attach to this insurance: 9.2.2.1 which attaches to any other insurances covering collision liabilities 9.2.2.2 which is, or would be, recoverable in the terms of the Institute 3/4ths Collision Liability Clause if the Vessel were insured in the terms of such Institute 3/4ths Collision Liability Clause for a value per ton of her gross registered tonnage not less than the equivalent in pounds sterling, at the time of commencement of this insurance, of 66.67 Special Drawing Rights as defined by the International Monetary Fund; 9.2.3 this Clause 9 shall in no case extend or be deemed to extend to any sum which the Assured may become liable to pay or shall pay for or in respect of: 9.2.3.1 removal or disposal, under statutory powers or otherwise, of obstructions, wrecks, cargoes or any other thing whatsoever 9.2.3.2 any real or personal property or thing whatsoever except other vessels or property on other vessels 9.2.3.3 pollution or contamination of any real or personal property or thing whatsoever (except other vessels with which the insured Vessel is in collision or property on such other vessels) 9.2.3.4 the cargo or other property on or the engagements of the Vessel 9.2.3.5 loss of life, personal injury or illness.

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10. Sistership Should the Vessel named herein come into collision with or 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 insurance as they would have were the other vessel entirely the property of Owners not interested in the Vessel named herein; but in such cases the liability for the collision or the amount payable for the services rendered shall be referred to a sole arbitrator to be agreed upon between the Underwriters and the Assured.

11. General Average and Salvage 11.1 This insurance covers the proportion of general average salvage and/or salvage charges attaching to freight at risk of the Assured, reduced in respect of any under-insurance. 11.2 Adjustment to be 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; but where the contract of affreightment so provides the adjustment shall be according to the York—Antwerp Rules. 11.3 No claim under this Clause 11 shall in any case be allowed where the loss was not incurred to avoid or in connection with the avoidance of a peril insured against.

12. Franchise This insurance does not cover partial loss, other than general average loss, under 3 per cent unless caused by fire, sinking, stranding or collision with another vessel. Each craft and/or lighter to be deemed a separate insurance if required by the Assured.

13. Measure of Indemnity 13.1 The amount recoverable under this insurance for any claim for loss of freight shall not exceed the gross freight actually lost. 13.2 Where insurances on freight other than this insurance are current at the time of the loss, all such insurances shall be taken into consideration in calculating the liability under this insurance and the amount recoverable hereunder shall not exceed the rateable proportion of the gross freight lost, notwithstanding any valuation in this or any other insurance. 13.3 In calculating the liability under Clause 11 all insurances on freight shall likewise be taken into consideration. 13.4 Nothing in this Clause 13 shall apply to any claim arising under Clause 15.

14. Loss of Time This insurance does not cover any claim consequent on loss of time whether arising from a peril of the sea or otherwise. 247

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15. Total Loss 15.1 In the event of the total loss (actual or constructive) of the Vessel named herein the amount insured shall be paid in full, whether the Vessel be fully or partly loaded or in ballast, chartered or unchartered. 15.2 In ascertaining whether the Vessel is a constructive total loss, the insured value in the insurances on hull and machinery 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. 15.3 Should the Vessel be a constructive total loss but the claim on the insurances on hull and machinery be settled as a claim for partial loss, no payment shall be due under this Clause 15.

16. Returns for Lay-Up and Cancellation 16.1 To return as follows: 16.1.1 Pro rata monthly net for each uncommenced month if this insurance be cancelled by agreement. 16.1.2 For each period of 30 consecutive days the Vessel may be laid up in a port or in a lay-up area provided such port or lay-up area is approved by the Underwriters (with special liberties as hereinafter allowed) (a) per cent net not under repair (b) per cent net under repair. If the Vessel is under repair during part only of a period of which a return is claimable, the return shall be calculated pro rata to the number of days under (a) and (b) respectively. 16.2 PROVIDED ALWAYS THAT 16.2.1 a total loss of the Vessel, whether by insured perils or otherwise, has not occurred during the period covered by this insurance or any extension thereof 16.2.2 in no case shall a return be allowed when the Vessel is lying in exposed or unprotected waters, or in a port or lay-up area not approved by the Underwriters but, provided the Underwriters agree that such non-approved lay-up area is deemed to be within the vicinity of the approved port or lay-up area, days during which the Vessel is laid up in such non-approved lay-up area may be added to days in the approved port or lay-up area to calculate a period of 30 consecutive days and a return shall be allowed for the proportion of such period during which the Vessel is actually laid up in the approved port or lay-up area 16.2.3 loading or discharging operations or the presence of cargo on board shall not debar returns but no return shall be allowed for any period during which the Vessel is being used for the storage of cargo or for lightering purposes 16.2.4 in the event of any amendment of the annual rate, the above rates of return shall be adjusted accordingly

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16.2.5 in the event of any return recoverable under this Clause 16 being based on 30 consecutive days which fall on successive insurances effected for the same Assured, this insurance shall only be liable for an amount calculated at pro rata of the period rates 16.1.2(a) and/or (b) above for the number of days which come within the period of this insurance and to which a return is actually applicable. Such overlapping period shall run, at the option of the Assured, either from the first day on which the Vessel is laid up or the first day of a period of 30 consecutive days as provided under 16.1.2(a) or (b), or 16.2.2 above. The following clauses shall be paramount and shall override anything contained in this insurance inconsistent therewith.

17. War Exclusion In no case shall this insurance cover loss damage liability or expense caused by 17.1 war civil war revolution rebellion insurrection, or civil strife arising therefrom, or any hostile act by or against a belligerent power 17.2 capture seizure arrest restraint or detainment (barratry and piracy excepted), and the consequences thereof or any attempt thereat 17.3 derelict mines torpedoes bombs or other derelict weapons of war.

18. Strikes Exclusion In no case shall this insurance cover loss damage liability or expense caused by 18.1 strikers, locked-out workmen, or persons taking part in labour disturbances, riots or civil commotions 18.2 any terrorist or any person acting from a political motive.

19. Malicious Acts Exclusion In no case shall this insurance cover loss damage liability or expense arising from 19.1 the detonation of an explosive 19.2 any weapon of war and caused by any person acting maliciously or from a political motive.

20. Nuclear Exclusion In no case shall this insurance cover loss damage liability or expense arising from any weapon of war employing atomic or nuclear fission and/or fusion or other like reaction or radioactive force or matter.

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INSTITUTE VOYAGE CLAUSES FREIGHT (This insurance is subject to English law and practice)

1. Navigation The Vessel has leave to dock and undock, to go into graving dock, to sail or navigate with or without pilots, to go on trial trips and to assist and tow vessels or craft in distress, but it is warranted that the Vessel shall not be towed, except as is customary or when in need of assistance, or undertake towage or salvage services under a contract previously arranged by the Assured and/or Owners and/or Managers and/ or Charterers. This Clause 1 shall not exclude customary towage in connection with loading and discharging.

2. Craft Risk Including risk of craft and/or lighter to and from the Vessel.

3. Change of Voyage Held covered in case of deviation or change of voyage or any breach of warranty as to towage or salvage services, provided notice be given to the Underwriters immediately after receipt of advices and any amended terms of cover and any additional premium required by them be agreed.

4. Assignment No assignment of or interest in this insurance or in any moneys which may be or become payable thereunder is to be binding on or recognised by the Underwriters unless a dated notice of such assignment or interest signed by the Assured, and by the assignor in the case of subsequent assignment, is endorsed on the Policy and the Policy with such endorsement is produced before payment of any claim or return of premium thereunder.

5. Perils 5.1 This insurance covers loss of the subject-matter insured caused by 5.1.1 perils of the seas rivers lakes or other navigable waters 5.1.2 fire, explosion 5.1.3 violent theft by persons from outside the Vessel 5.1.4 jettison 5.1.5 piracy

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5.1.6 breakdown of or accident to nuclear installations or reactors 5.1.7 contact with aircraft or similar objects, or objects falling there from, land conveyance, dock or harbour equipment or installation 5.1.8 earthquake volcanic eruption or lightning. 5.2 This insurance covers loss of the subject-matter insured caused by 5.2.1 accidents in loading discharging or shifting cargo or fuel 5.2.2 bursting of boilers breakage of shafts or any latent defect in the machinery or hull 5.2.3 negligence of Master Officers Crew or Pilots 5.2.4 negligence of repairers or charterers provided such repairers or charterers are not an Assured hereunder 5.2.5 barratry of Master Officers or Crew, provided such loss has not resulted from want of due diligence by the Assured, Owners or Managers. 5.3 Master Officers Crew or Pilots not to be considered Owners within the meaning of this Clause 7 should they hold shares in the Vessel.

6. Pollution Hazard This insurance covers loss of the subject-matter insured caused by any governmental authority acting under the powers vested in it to prevent or mitigate a pollution hazard, or threat thereof, resulting directly from a peril covered by this insurance, provided such act of governmental authority has not resulted from want of due diligence by the Assured, the Owners, or Managers of the Vessel or any of them to prevent or mitigate such hazard or threat. Master, Officers, Crew or Pilots not to be considered Owners within the meaning of this Clause 6 should they hold shares in the Vessel.

7. Freight Collision 7.1 It is further agreed that if the Vessel shall come into collision with any other vessel and the Assured shall in consequence thereof become liable to pay and shall pay by way of damages to any other person or persons any sum or sums in respect of the amount of freight taken into account in calculating the measure of the liability of the Assured for 7.1.1 loss of or damage to any other vessel or property on any other vessel 7.1.2 delay to or loss of use of any such other vessel or property thereon 7.1.3 general average of, salvage of or salvage under contract of, any such other vessel or property thereon, the Underwriters will pay the Assured such proportion of three-fourths of such sum or sums so paid applying to freight as their respective subscriptions hereto bear to the total amount insured on freight or, if greater, to the gross freight at risk at the time of the collision. 7.2 Provided always that: 7.2.1 liability of the Underwriters in respect of any one such collision shall not exceed their proportionate part of three-fourths of the total amount insured hereon on freight, and in cases in which, with the prior consent in writing of the Underwriters, the liability of the Vessel has been contested or proceedings have been taken to limit liability, they will

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also pay a like proportion of three-fourths of the costs, appertaining proportionately to the freight portion of damages, which the Assured shall thereby incur or be compelled to pay; 7.2.2 no claim shall attach to this insurance: 7.2.2.1 which attaches to any other insurances covering collision liabilities 7.2.2.2 which is, or would be, recoverable in the terms of the Institute 3/4ths Collision Liability Clause if the Vessel were insured in the terms of such Institute 3/4ths Collision Liability Clause for a value per ton of her gross registered tonnage not less than the equivalent in pounds sterling, at the time of commencement of this insurance, of 66.67 Special Drawing Rights as defined by the International Monetary Fund; 7.2.3 this Clause 7 shall in no case extend or be deemed to extend to any sum which the Assured may become liable to pay or shall pay for or in respect of: 7.2.3.1 removal or disposal, under statutory powers or otherwise, of obstructions, wrecks, cargoes or any other thing whatsoever 7.2.3.2 any real or personal property or thing whatsoever except other vessels or property on other vessels 7.2.3.3 pollution or contamination of any real or personal property or thing whatsoever (except other vessels with which the insured Vessel is in collision or property on such other vessels) 7.2.3.4 the cargo or other property on or the engagements of the Vessel 7.2.3.5 loss of life, personal injury or illness.

8. Sistership Should the Vessel named herein come into collision with or 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 insurance as they would have were the other vessel entirely the property of Owners not interested in the Vessel named herein; but in such cases the liability for the collision or 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. General Average and Salvage 9.1 This insurance covers the proportion of general average salvage and/or salvage charges attaching to freight at risk of the Assured, reduced in respect of any under-insurance. 9.2 Adjustment to be 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; but where the contract of affreightment so provides the adjustment shall be according to the York—Antwerp Rules. 9.3 No claim under this Clause 11 shall in any case be allowed where the loss was not incurred to avoid or in connection with the avoidance of a peril insured against. 252

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10. Franchise This insurance does not cover partial loss, other than general average loss, under 3 per cent unless caused by fire, sinking, stranding or collision with another vessel. Each craft and/or lighter to be deemed a separate insurance if required by the Assured.

11. Measure of Indemnity 11.1 The amount recoverable under this insurance for any claim for loss of freight shall not exceed the gross freight actually lost. 11.2 Where insurances on freight other than this insurance are current at the time of the loss, all such insurances shall be taken into consideration in calculating the liability under this insurance and the amount recoverable hereunder shall not exceed the rateable proportion of the gross freight lost, notwithstanding any valuation in this or any other insurance. 11.3 In calculating the liability under Clause 9 all insurances on freight shall likewise be taken into consideration. 11.4 Nothing in this Clause 11 shall apply to any claim arising under Clause 13.

12. Loss of Time This insurance does not cover any claim consequent on loss of time whether arising from a peril of the sea or otherwise.

13. Total Loss 13.1 In the event of the total loss (actual or constructive) of the Vessel named herein the amount insured shall be paid in full, whether the Vessel be fully or partly loaded or in ballast, chartered or unchartered. 13.2 In ascertaining whether the Vessel is a constructive total loss, the insured value in the insurances on hull and machinery 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. 13.3 Should the Vessel be a constructive total loss but the claim on the insurances on hull and machinery be settled as a claim for partial loss, no payment shall be due under this Clause 13. The following clauses shall be paramount and shall override anything contained in this insurance inconsistent therewith.

14. War Exclusion In no case shall this insurance cover loss damage liability or expense caused by 14.1 war civil war revolution rebellion insurrection, or civil strife arising therefrom, or any hostile act by or against a belligerent power

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14.2 capture seizure arrest restraint or detainment (barratry and piracy excepted), and the consequences thereof or any attempt thereat 14.3 derelict mines torpedoes bombs or other derelict weapons of war.

15. Strikes Exclusion In no case shall this insurance cover loss damage liability or expense caused by 15.1 strikers, locked-out workmen, or persons taking part in labour disturbances, riots or civil commotions 15.2 any terrorist or any person acting from a political motive.

16. Malicious Acts Exclusion In no case shall this insurance cover loss damage liability or expense arising from 16.1 the detonation of an explosive 16.2 any weapon of war and caused by any person acting maliciously or from a political motive.

17. Nuclear Exclusion In no case shall this insurance cover loss damage liability or expense arising from any weapon of war employing atomic or nuclear fission and/or fusion or other like reaction or radioactive force or matter.

INSTITUTE WAR AND STRIKES CLAUSES FREIGHT–TIME (This insurance is subject to English law and practice)

1. Perils Subject always to the exclusions hereinafter referred to, this insurance covers 1.1 loss (total or partial) of the subject-matter insured caused by 1.1.1 war civil war revolution rebellion insurrection, or civil strife arising therefrom, or any hostile act by or against a belligerent power 1.1.2 capture seizure arrest restraint or detainment, and the consequences thereof or any attempt thereat 1.1.3 derelict mines torpedoes bombs or other derelict weapons of war 1.2 loss (total or partial) of the subject-matter insured arising from loss of or damage to the Vessel caused by 1.2.1 strikers, locked-out workmen, or persons taking part in labour disturbances, riots or civil commotion 254

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1.2.2 any terrorist or any person acting maliciously or from a political motive 1.2.3 confiscation or expropriation.

2. Incorporation The Institute Time Clauses—Freight 1/10/83 except Clauses 2, 3, 4, 5, 12, 16, 17, 18, 19 and 20 are deemed to be incorporated in this insurance in so far as they do not conflict with the provisions of these clauses. Held covered in case of breach of warranty as to towage or salvage services provided notice be given to the Underwriters immediately after receipt of advices and any additional premium required by them be agreed.

3. Detainment In the event that a claim for a constructive total loss of the Vessel is paid on the war risks insurance of the Vessel under Clause 3 (Detainment) of the Institute War and Strikes Clauses—Hulls—Time 1/10/83 or the Institute War and Strikes Clauses— Hulls—Voyage 1/10/83 as a result of the loss of the free use and disposal of the Vessel for a continuous period of 12 months due to capture, seizure, arrest, restraint, detainment, confiscation or expropriation whilst this insurance is in force, the amount insured hereunder shall be paid in full less any claims otherwise arising during the said period of 12 months which have been paid or are recoverable hereunder or under insurances subject to the Institute Time Clauses—Freight 1/10/83 and/or the Institute Voyage Clauses—Freight 1/10/83 and any recoveries made in respect of the said period.

4. Exclusions This insurance excludes 4.1 loss (total or partial) or expense arising from 4.1.1 any detonation of any weapon of war employing atomic or nuclear fission and/or fusion or other like reaction or radioactive force or matter, hereinafter called a nuclear weapon of war 4.1.2 the outbreak of war (whether there be a declaration of war or not) between any of the following countries: United Kingdom, United States of America, France, the Union of Soviet Socialist Republics, the People’s Republic of China 4.1.3 requisition or pre-emption 4.1.4 capture seizure arrest restraint detainment confiscation or expropriation by or under the order of the government or any public or local authority of the country in which the Vessel is owned or registered 4.1.5 arrest restraint detainment confiscation or expropriation under quarantine regulations or by reason of infringement of any customs or trading regulations

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4.2 4.3

4.4 4.5

4.1.6 the operation of ordinary judicial process, failure to provide security or to pay any fine or penalty or any financial cause 4.1.7 piracy (but this exclusion shall not affect cover under Clause 1.2.1), loss (total or partial) or expense covered by the Institute Time Clauses—Freight 1/10/83 or which would be recoverable thereunder but for Clause 12 thereof, any claim (not being a claim recoverable under the Institute War and Strikes Clauses Freight—Voyage 1/10/83) for any sum recoverable under any other insurance on the subject-matter insured or which would be recoverable under such insurance but for the existence of this insurance, loss proximately caused by delay or any claim for expenses arisIng from delay except such expenses as would be recoverable in principle in English law and practice under the York–Antwerp Rules 1974, any claim based upon loss of or frustration of any voyage or adventure.

5. Termination 5.1 This insurance may be cancelled by either the Underwriters or the Assured giving 7 days notice (such cancellation becoming effective on the expiry of 7 days from midnight of the day on which notice of cancellation is issued by or to the Underwriters). The Underwriters agree however to reinstate this insurance subject to agreement between the Underwriters and the Assured prior to the expiry of such notice of cancellation as to new rate of premium and/or conditions and/or warranties. 5.2 Whether or not such notice of cancellation has been given this insurance shall TERMINATE AUTOMATICALLY 5.2.1 upon the occurrence of any hostile detonation of any nuclear weapon of war as defined in Clause 4.1.1 wheresoever or whensoever such detonation may occur and whether or not the Vessel may be involved 5.2.2 upon the outbreak of war (whether there be a declaration of war or not) between any of the following countries: United Kingdom, United States of America, France, the Union of Soviet Socialist Republics, the People’s Republic of China 5.2.3 in the event of the Vessel being requisitioned, either for title or use. 5.3 In the event either of cancellation by notice or of automatic termination of this insurance by reason of the operation of this Clause 5, or of the sale of the Vessel, pro rata net return of premium shall be payable to the Assured. This insurance shall not become effective if, subsequent to its acceptance by the Underwriters and prior to the intended time of its attachment, there has occurred any event which would have automatically terminated this insurance under the provisions of Clause 5 above.

(3) Cargo Clauses 1/1/82 (FOR USE ONLY WITH THE NEW MARINE POLICY FORM)

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INSTITUTE CARGO CLAUSES (A) RISKS COVERED 1. Risks Clause This insurance covers all risks of loss of or damage to the subject-matter insured except as provided in Clauses 4, 5, 6 and 7 below.

2. General Average Clause This insurance covers general average and salvage charges, adjusted or determined according to the contract of affreightment and/or the governing law and practice, incurred to avoid or in connection with the avoidance of loss from any cause except those excluded in Clauses 4, 5, 6 and 7 or elsewhere in this insurance.

3. ‘Both to Blame Collision’ Clause This insurance is extended to indemnify the Assured against such proportion of liability under the contract of affreightment ‘Both to Blame Collision’ Clause as is in respect of a loss recoverable hereunder. In the event of any claim by shipowners under the said Clause the Assured agree to notify the Underwriters who shall have the right, at their own cost and expense, to defend the Assured against such claim.

EXCLUSIONS 4. General Exclusions Clause In no case shall this insurance cover 4.1 loss damage or expense attributable to wilful misconduct of the Assured 4.2 ordinary leakage, ordinary loss in weight or volume, or ordinary wear and tear of the subject-matter insured 4.3 loss damage or expense caused by insufficiency or unsuitability of packing or preparation of the subject-matter insured (for the purpose of this Clause 4.3 ‘packing’ shall be deemed to include stowage in a container or liftvan but only when such stowage is carried out prior to attachment of this insurance or by the Assured or their servants) 4.4 loss damage or expense caused by inherent vice or nature of the subject-matter insured 4.5 loss damage or expense proximately caused by delay, even though the delay be caused by a risk insured against (except expenses payable under Clause 2 above) 4.6 loss damage or expense arising from insolvency or financial default of the owners managers charterers or operators of the vessel

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4.7 loss damage or expense arising from the use of any weapon of war employing atomic or nuclear fission and/or fusion or other like reaction or radioactive force or matter.

5. Unseaworthiness and Unfitness Exclusion Clause 5.1 In no case shall this insurance cover loss damage or expense arising from unseaworthiness of vessel or craft, unfitness of vessel craft conveyance container or liftvan for the safe carriage of the subject-matter insured, where the Assured or their servants are privy to such unseaworthiness or unfitness, at the time the subject-matter insured is loaded therein. 5.2 The Underwriters waive any breach of the implied warranties of seaworthiness of the ship and fitness of the ship to carry the subject-matter insured to destination, unless the Assured or their servants are privy to such unseaworthiness or unfitness.

6. War Exclusion Clause In no case shall this insurance cover loss damage or expense caused by 6.1 war civil war revolution rebellion insurrection, or civil strife arising therefrom, or any hostile act’ by or against a belligerent power 6.2 capture seizure arrest restraint or detainment (piracy excepted), and the consequences thereof or any attempt thereat 6.3 derelict mines torpedoes bombs or other derelict weapons of war.

7. Strikes Exclusion Clause In no case shall this insurance cover loss damage or expense 7.1 caused by strikers, locked-out workmen, or persons taking part in labour disturbances, riots or civil commotions 7.2 resulting from strikes, lock-outs, labour disturbances, riots or civil commotions 7.3 caused by any terrorist or any person acting from a political motive.

DURATION 8. Transit Clause 8.1 This insurance attaches from the time the goods leave the warehouse or place of storage at the place named herein for the commencement of the transit, continues during the ordinary course of transit and terminates either 8.1.1 on delivery to the Consignees’ or other final warehouse or place of storage at the destination named herein,

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8.1.2 on delivery to any other warehouse or place of storage,whether prior to or at the destination named herein, which the Assured elect to use either 8.1.2.1 for storage other than in the ordinary course of transit or 8.1.2.2 for allocation or distribution, or 8.1.3 on the expiry of 60 days after completion of discharge overside of the goods hereby insured from the oversea vessel at the final port of discharge, whichever shall first occur. 8.2 If, after discharge overside from the oversea vessel at the final port of discharge, but prior to termination of this insurance, the goods are to be forwarded to a destination other than that to which they are insured hereunder, this insurance, whilst remaining subject to termination as provided for above, shall not extend beyond the commencement of transit to such other destination. 8.3 This insurance shall remain in force (subject to termination as provided for above and to the provisions of Clause 9 below) during delay beyond the control of the Assured, any deviation, forced discharge, reshipment or transhipment and during any variation of the adventure arising from the exercise of a liberty granted to shipowners or charterers under the contract of affreightment.

9. Termination of Contract of Carriage Clause If owing to circumstances beyond the control of the Assured either the contract of carriage is terminated at a port or place other than the destination named therein or the transit is otherwise terminated before delivery of the goods as provided for in Clause 8 above, then this insurance shall also terminate unless prompt notice is given to the Underwriters and continuation of cover is requested when the insurance shall remain in force, subject to an additional premium if required by the Underwriters, either 9.1 until the goods are sold and delivered at such port or place, or, unless otherwise specially agreed, until the expiry of 60 days after arrival of the goods hereby insured at such port or place, whichever shall first occur, or 9.2 if the goods are forwarded within the said period of 60 days (or any agreed extension thereof) to the destination named herein or to any other destination, until terminated in accordance with the provisions of Clause 8 above.

10. Change of Voyage Clause Where, after attachment of this insurance, the destination is changed by the Assured, held covered at a premium and on conditions to be arranged subject to prompt notice being given to the Underwriters.

CLAIMS 11. Insurable Interest Clause 11.1 In order to recover under this insurance the Assured must have an insurable interest in the subject-matter insured at the time of the loss. 259

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11.2 Subject to 11.1 above, the Assured shall be entitled to recover for insured loss occurring during the period covered by this insurance, notwithstanding that the loss occurred before the contract of insurance was concluded, unless the Assured were aware of the loss and the Underwriters were not.

12. Forwarding Charges Clause Where, as a result of the operation of a risk covered by this insurance, the insured transit is terminated at a port or place other than that to which the subject-matter is covered under this insurance, the Underwriters will reimburse the Assured for any extra charges properly and reasonably incurred in unloading storing and forwarding the subject-matter to the destination to which it is insured hereunder. This Clause 12, which does not apply to general average or salvage charges, shall be subject to the exclusions contained in Clauses 4, 5, 6 and 7 above, and shall not include charges arising from the fault negligence insolvency or financial default of the Assured or their servants.

13. Constructive Total Loss Clause No claim for Constructive Total Loss shall be recoverable hereunder unless the subject-matter insured is reasonably abandoned either on account of its actual total loss appearing to be unavoidable or because the cost of recovering, reconditioning and forwarding the subject-matter to the destination to which it is insured would exceed its value on arrival.

14. Increased Value Clause 14.1 If any Increased Value insurance is effected by the Assured on the cargo insured herein the agreed value of the cargo shall be deemed to be increased to the total amount insured under this insurance and all Increased Value insurances covering the loss, and liability under this insurance shall be in such proportion as the sum insured herein bears to such total amount insured. In the event of claim the Assured shall provide the Underwriters with evidence of the amounts insured under all other insurances. 14.2 Where this insurance is on Increased Value the following clause shall apply: The agreed value of the cargo shall be deemed to be equal to the total amount insured under the primary insurance and all Increased Value insurances covering the loss and effected on the cargo by the Assured, and liability under this insurance shall be in such proportion as the sum insured herein bears to such total amount insured. In the event of claim the Assured shall provide the Underwriters with evidence of the amounts insured under all other insurances.

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BENEFIT OF INSURANCE 15. Not to Inure Clause This insurance shall not inure to the benefit of the carrier or other bailee.

MINIMISING LOSSES 16. Duty of Assured Clause It is the duty of the Assured and their servants and agents in respect of loss recoverable hereunder 16.1 to take such measures as may be reasonable for the purpose of averting or minimising such loss, and 16.2 to ensure that all rights against carriers, bailees or other third parties are properly preserved and exercised and the Underwriters will, in addition to any loss recoverable hereunder, reimburse the Assured for any charges properly and reasonably incurred in pursuance of these duties.

17. Waiver Clause Measures taken by the Assured or the Underwriters with the object of saving, protecting or recovering the subject-matter insured shall not be considered as a waiver or acceptance of abandonment or otherwise prejudice the rights of either party.

AVOIDANCE OF DELAY 18. Reasonable Despatch Clause It is a condition of this insurance that the Assured shall act with reasonable despatch in all circumstances within their control.

LAW AND PRACTICE 19. English Law and Practice Clause The insurance is subject to English law and Practice. NOTE: It is necessary for the Assured when they become aware of an event which is ‘held covered’ under this insurance to give prompt notice to the Underwriters and the right to such cover is dependent upon compliance with this obligation.

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INSTITUTE CARGO CLAUSES (B) RISKS COVERED 1. Risks Clause This insurance covers, except as provided in Clauses 4, 5, 6 and 7 below, 1.1 loss of or damage to the subject-matter insured reasonably attributable to 1.1.1 fire or explosion 1.1.2 vessel or craft being stranded grounded sunk or capsized 1.1.3 overturning or derailment of land conveyance 1.1.4 collision or contact of vessel craft or conveyance with any external object other than water 1.1.5 discharge of cargo at a port of distress 1.1.6 earthquake volcanic eruption or lightning, 1.2 loss of or damage to the subject-matter insured caused by 1.2.1 general average sacrifice 1.2.2 jettison or washing overboard 1.2.3 entry of sea lake or river water into vessel craft hold conveyance container liftvan or place of storage, 1.3 total loss of any package lost overboard or dropped whilst loading on to, or unloading from, vessel or craft.

2. General Average Clause This insurance covers general average and salvage charges, adjusted or determined according to the contract of affreightment and/or the governing law and practice, incurred to avoid or in connection with the avoidance of loss from any cause except those excluded in Clauses 4, 5, 6 and 7 or elsewhere in this insurance.

3. ‘Both to Blame Collision’ Clause This insurance is extended to indemnify the Assured against such proportion of liability under the contract of affreightment ‘Both to Blame Collision’ Clause as is in respect of a loss recoverable hereunder. In the event of any claim by shipowners under the said Clause the Assured agree to notify the Underwriters who shall have the right, at their own cost and expense, to defend the Assured against such claim.

EXCLUSIONS 4. General Exclusions Clause In no case shall this insurance cover 4.1 loss damage or expense attributable to wilful misconduct of the Assured 262

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4.2 ordinary leakage, ordinary loss in weight or volume, or ordinary wear and tear of the subject-matter insured 4.3 loss damage or expense caused by insufficiency or unsuitability of packing or preparation of the subject-matter insured (for the purpose of this Clause 4.3 ‘packing’ shall be deemed to include stowage in a container or liftvan but only when such stowage is carried out prior to attachment of this insurance or by the Assured or their servants) 4.4 loss damage or expense caused by inherent vice or nature of the subject-matter insured 4.5 loss damage or expense proximately caused by delay, even though the delay be caused by a risk insured against (except expenses payable under Clause 2 above) 4.6 loss damage or expense arising from insolvency or financial default of the owners managers charterers or operators of the vessel 4.7 deliberate damage to or deliberate destruction of the subject-matter insured or any part thereof by the wrongful act of any person or persons 4.8 loss damage or expense arising from the use of any weapon of war employing atomic or nuclear fission and/or fusion or other like reaction or radioactive force or matter.

5. Unseaworthiness and Unfitness Exclusion Clause 5.1 In no case shall this insurance cover loss damage or expense arising from unseaworthiness of vessel or craft unfitness of vessel craft conveyance container or liftvan for the safe carriage of the subject-matter insured, where the Assured or their servants are privy to such unseaworthiness or unfitness, at the time the subject-matter insured is loaded therein. 5.2 The Underwriters waive any breach of the implied warranties of seaworthiness of the ship and fitness of the ship to carry the subject-matter insured to destination, unless the Assured or their servants are privy to such unseaworthiness or unfitness.

6. War Exclusion Clause In no case shall this insurance cover loss damage or expense caused by 6.1 war civil war revolution rebellion insurrection, or civil strife arising therefrom, or any hostile act by or against a belligerent power 6.2 capture seizure arrest restraint or detainment, and the consequences thereof or any attempt thereat 6.3 derelict mines torpedoes bombs or other derelict weapons of war.

7. Strikes Exclusion Clause In no case shall this insurance cover loss damage or expense 7.1 caused by strikers, locked-out workmen, or persons taking part in labour disturbances, riots or civil commotions 263

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7.2 resulting from strikes, lock-outs, labour disturbances, riots or civil commotion 7.3 caused by any terrorist or any person acting from a political motive.

DURATION 8. Transit Clause 8.1 This insurance attaches from the time the goods leave the ware-house or place of storage at the place named herein for the commencement of the transit, continues during the ordinary course of transit and terminates either 8.1.1 on delivery to the Consignees’ or other final warehouse or place of storage at the destination named herein, 8.1.2 on delivery to any other warehouse or place of storage, whether prior to or at the destination named herein, which the Assured elect to use either 8.1.2.1 for storage other than in the ordinary course of transit or 8.1.2.2 for allocation or distribution, or 8.1.3 on the expiry of 60 days after completion of discharge over-side of the goods hereby insured from the oversea vessel at the final port of discharge, whichever shall first occur. 8.2 If, after discharge overside from the oversea vessel at the final port of discharge, but prior to termination of this insurance, the goods are to be forwarded to a destination other than that to which they are insured hereunder, this insurance, whilst remaining subject to termination as provided for above, shall not extend beyond the commencement of transit to such other destination. 8.3 This insurance shall remain in force (subject to termination as provided for above and to the provisions of Clause 9 below) during delay beyond the control of the Assured, any deviation, forced discharge, reshipment or transhipment and during any variation of the adventure arising from the exercise of a liberty granted to shipowners or charterers under the contract of affreightment.

9. Termination of Contract of Carriage Clause If owing to circumstances beyond the control of the Assured either the contract of carriage is terminated at a port or place other than the destination named therein or the transit is otherwise terminated before delivery of the goods as provided for in Clause 8 above, then this insurance shall also terminate unless prompt notice is given to the Underwriters and continuation of cover is requested when the insurance shall remain in force, subject to an additional premium if required by the Underwriters, either 9.1 until the goods are sold and delivered at such port or place, or, unless otherwise specially agreed, until the expiry of 60 days after arrival of the goods hereby insured at such port or place, whichever shall first occur, or

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9.2 if the goods are forwarded within the said period of 60 days (or any agreed extension thereof) to the destination named herein or to any other destination, until terminated in accordance with the provisions of Clause 8 above.

10. Change of Voyage Clause Where, after attachment of this insurance, the destination is changed by the Assured, held covered at a premium and on conditions to be arranged subject to prompt notice being given to the.Underwriters.

CLAIMS 11. Insurable Interest Clause 11.1 In order to recover under this insurance the Assured must have an insurable interest in the subject-matter insured at the time of the loss. 11.2 Subject to 11.1 above, the Assured shall be entitled to recover for insured loss occurring during the period covered by this insurance, notwithstanding that the loss occurred before the contract of insurance was concluded, unless the Assured were aware of the loss and the Underwriters were not.

12. Forwarding Charges Clause Where, as a result of the operation of a risk covered by this insurance, the insured transit is terminated at a port or place other than that to which the subject-matter is covered under this insurance, the Underwriters will reimburse the Assured for any extra charges properly and reasonably incurred in unloading storing and forwarding the subject-matter to the destination to which it is insured hereunder. This Clause 12, which does not apply to general average or salvage charges, shall be subject to the exclusions contained in Clauses 4, 5, 6 and 7 above, and shall not include charges arising from the fault negligence insolvency or financial default of the Assured or their servants.

13. Constructive Total Loss Clause No claim for Constructive Total Loss shall be recoverable hereunder unless the subject-matter insured is reasonably abandoned either on account of its actual total loss appearing to be unavoidable or because the cost of recovering, reconditioning and forwarding the subject-matter to the destination to which it is insured would exceed its value on arrival.

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14. Increased Value Clause 14.1 If any Increased Value insurance is effected by the Assured on the cargo insured herein the agreed value of the cargo shall be deemed to be increased to the total amount insured under this insurance and all Increased Value insurances covering the loss, and liability under this insurance shall be in such proportion as the sum insured herein bears to such total amount insured. In the event of claim the Assured shall provide the Underwriters with evidence of the amounts insured under all other insurances. 14.2 Where this insurance is on Increased Value the following clause shall apply: The agreed value of the cargo shall be deemed to be equal to the total amount insured under the primary insurance and all Increased Value insurances covering the loss and effected on the cargo by the Assured, and liability under this insurance shall be in such proportion as the sum insured herein bears to such total amount insured. In the event of claim the Assured shall provide the Underwriters with evidence of the amounts insured under all other insurances.

BENEFIT OF INSURANCE 15. Not to Inure Clause This insurance shall not inure to the benefit of the carrier or other bailee.

MINIMISING LOSSES 16. Duty of Assured Clause It is the duty of the Assured and their servants and agents in respect of loss recoverable hereunder 16.1 to take such measures as may be reasonable for the minimising such loss, and 16.2 to ensure that all rights against carriers, bailees or properly preserved and exercised and the Underwriters will, in addition to any loss reimburse the Assured for any charges properly and pursuance of these duties.

purpose of averting or other third parties are recoverable hereunder, reasonably incurred in

17. Waiver Clause Measures taken by the Assured or the Underwriters with the object of saving, protecting or recovering the subject-matter insured shall not be considered as a waiver or acceptance of abandonment or otherwise prejudice the rights of either party.

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AVOIDANCE OF DELAY 18. Reasonable Despatch Clause It is a condition of this insurance that the Assured shall act with reasonable despatch in all circumstances within their control.

LAW AND PRACTICE 19. English Law and Practice Clause This insurance is subject to English law and practice. NOTE: It is necessary for the Assured when they become aware of an event which is ‘held covered’ under this insurance to give prompt notice to the Underwriters and the right to such cover is dependent upon compliance with this obligation.

INSTITUTE CARGO CLAUSES (C) RISKS COVERED 1. Risks Clause This insurance covers, except as provided in Clauses 4, 5, 6 and 7 below, 1.1 loss of or damage to the subject-matter insured reasonably attributable to 1.1.1 fire or explosion 1.1.2 vessel or craft being stranded grounded sunk or capsized 1.1.3 overturning or derailment of land conveyance 1.1.4 collision or contact of vessel craft or conveyance with any external object other than water 1.1.5 discharge of cargo at a port of distress, 1.2 loss of or damage to the subject-matter insured caused by 1.2.1 general average sacrifice 1.2.2 jettison.

2. General Average Clause This insurance covers general average and salvage charges, adjusted or determined according to the contract of affreightment and/or the governing law and practice, incurred to avoid or in connection with the avoidance of loss from any cause except those excluded in Clauses 4, 5, 6 and 7 or elsewhere in this insurance.

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3. ‘Both to Blame Collision’ Clause This insurance is extended to indemnify the Assured against such proportion of liability under the contract of affreightment ‘Both to Blame Collision’ Clause as is in respect of a loss recoverable hereunder. In the event of any claim by shipowners under the said Clause the Assured agree to notify the Underwriters who shall have the right, at their own cost and expense, to defend the Assured against such claim.

EXCLUSIONS 4. General Exclusions Clause In no case shall this insurance cover 4.1 loss damage or expense attributable to wilful misconduct of the Assured 4.2 ordinary leakage, ordinary loss in weight or volume, or ordinary wear and tear of the subject-matter insured 4.3 loss damage or expense caused by insufficiency or unsuitability of packing or preparation of the subject-matter insured (for the purpose of this Clause 4.3 ‘packing’ shall be deemed to include stowage in a container or liftvan but only when such stowage is carried out prior to attachment of this insurance or by the Assured or their servants) 4.4 loss damage or expense caused by inherent vice or nature of the subject-matter insured 4.5 loss damage or expense proximately caused by delay, even though the delay be caused by a risk insured against (except expenses payable under Clause 2 above) 4.6 loss damage or expense arising from insolvency or financial default of the owners managers charterers or operators of the vessel 4.7 deliberate damage to or deliberate destruction of the subject-matter insured or any part thereof by the wrongful act of any person or persons 4.8 loss damage or expense arising from the use of any weapon of war employing atomic or nuclear fission and/or fusion or other like reaction or radioactive force or matter.

5. Unseaworthiness and Unfitness Exclusion Clause 5.1

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In no case shall this insurance cover loss damage or expense arising from unseaworthiness of vessel or craft, unfitness of vessel craft conveyance container or liftvan for the safe carriage of the subject-matter insured, where the Assured or their servants are privy to such unseaworthiness or unfitness, at the time the subject-matter insured is loaded therein.

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5.2 The Underwriters waive any breach of the implied warranties of seaworthiness of the ship and fitness of the ship to carry the subject-matter insured to destination, unless the Assured or their servants are privy to such unseaworthiness or unfitness.

6. War Exclusion Clause In no case shall this insurance cover loss damage or expense caused by 6.1 war civil war revolution rebellion insurrection, or civil strife arising therefrom, or any hostile act by or against a belligerent power 6.2 capture seizure arrest restraint or detainment, and the consequences thereof or any attempt thereat 6.3 derelict mines torpedoes bombs or other derelict weapons of war.

7. Strikes Exclusion Clause In no case shall this insurance cover loss damage or expense 7.1 caused by strikers, locked-out workmen, or persons taking part in labour disturbances, riots or civil commotion 7.2 resulting from strikes, lock-outs, labour disturbances, riots or civil commotions 7.3 caused by any terrorist or any person acting from a political motive.

DURATION 8. Transit Clause 8.1 This insurance attaches from the time the goods leave the ware-house or place of storage at the place named herein for the commencement of the transit, continues during the ordinary course of transit and terminates either 8.1.1 on delivery to the Consignees’ or other final warehouse or place of storage at the destination named herein, 8.1.2 on delivery to any other warehouse or place of storage, whether prior to or at the destination named herein, which the Assured elect to use either 8.1.2.1 for storage other than in the ordinary course of transit or 8.1.2.2 for allocation or distribution, or 8.1.3 on the expiry of 60 days after completion of discharge over side of the goods hereby insured from the oversea vessel at the final port of discharge, whichever shall first occur. 8.2 If, after discharge overside from the oversea vessel at the final port of discharge, but prior to termination of this insurance, the goods are to be forwarded to a destination other than that to which they are insured hereunder, this insurance,

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whilst remaining subject to termination as provided for above, shall not extend beyond the commencement of transit to such other destination. 8.3 This insurance shall remain in force (subject to termination as provided for above and to the provisions of Clause 9 below) during delay beyond the control of the Assured, any deviation, forced discharge, reshipment or transhipment and during any variation of the adventure arising from the exercise of a liberty granted to shipowners or charterers under the contract of affreightment.

9. Termination of Contract of Carriage Clause If owing to circumstances beyond the control of the Assured either the contract of carriage is terminated at a port or place other than the destination named therein or the transit is otherwise terminated before delivery of the goods as provided for in Clause 8 above, then this insurance shall also terminate unless prompt notice is given to the Underwriters and continuation of cover is requested when the insurance shall remain in force, subject to an additional premium if required by the Underwriters, either 9.1 until the goods are sold and delivered at such port or place, or, unless otherwise specially agreed, until the expiry of 60 days after arrival of the goods hereby insured at such port or place, whichever shall first occur, or 9.2 if the goods are forwarded within the said period of 60 days (or any agreed extension thereof) to the destination named herein or to any other destination, until terminated in accordance with the provisions of Clause 8 above.

10. Change of Voyage Clause Where, after attachment of this insurance, the destination is changed by the Assured, held covered at a premium and on conditions to be arranged subject to prompt notice being given to the Underwriters.

CLAIMS 11. Insurable Interest Clause 11.1 In order to recover under this insurance the Assured must have an insurable interest in the subject-matter insured at the time of the loss. 11.2 Subject to 11.1 above, the Assured shall be entitled to recover for insured loss occurring during the period covered by this insurance, notwithstanding that the loss occurred before the contract of insurance was concluded, unless the Assured were aware of the loss and the Underwriters were not.

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12. Forwarding Charges Clause Where, as a result of the operation of a risk covered by this insurance, the insured transit is terminated at a port or place other than that to which the subject-matter is covered under this insurance, the Underwriters will reimburse the Assured for any extra charges properly and reasonably incurred in unloading storing and forwarding the subject-matter to the destination to which it is insured hereunder. This Clause 12, which does not apply to general average or salvage charges, shall be subject to the exclusions contained in Clauses 4, 5, 6 and 7 above, and shall not include charges arising from the fault negligence insolvency or financial default of the Assured or their servants.

13. Constructive Total Loss Clause No claim for Constructive Total Loss shall be recoverable hereunder unless the subject-matter insured is reasonably abandoned either on account of its actual total loss appearing to be unavoidable or because the cost of recovering, reconditioning and forwarding the subject-matter to the destination to which it is insured would exceed its value on arrival.

14. Increased Value Clause 14.1 If any Increased Value insurance is effected by the Assured on the cargo insured herein the agreed value of the cargo shall be deemed to be increased to the total amount insured under this insurance and all Increased Value insurances covering the loss, and liability under this insurance shall be in such proportion as the sum insured herein bears to such total amount insured. In the event of claim the Assured shall provide the Underwriters with evidence of the amounts insured under all other insurances. 14.2 Where this insurance is on Increased Value the following clause shall apply: The agreed value of the cargo shall be deemed to be equal to the total amount insured under the primary insurance and all Increased Value insurances covering the loss and effected on the cargo by the Assured, and liability under this insurance shall be in such proportion as the sum insured herein bears to such total amount insured. In the event of claim the Assured shall provide the Underwriters with evidence of the amounts insured under all other insurances.

BENEFIT OF INSURANCE 15. Not to Inure Clause This insurance shall not inure to the benefit of the carrier or other bailee.

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MINIMISING LOSSES 16. Duty of Assured Clause It is the duty of the Assured and their servants and agents in respect of loss recoverable hereunder 16.1 to take such measures as may be reasonable for the minimising such loss, and 16.2 to ensure that all rights against carriers, bailees or properly preserved and exercised and the Underwriters will, in addition to any loss reimburse the Assured for any charges properly and pursuance of these duties.

purpose of averting or other third parties are recoverable hereunder, reasonably incurred in

17. Waiver Clause Measures taken by the Assured or the Underwriters with the object of saving, protecting or recovering the subject-matter insured shall not be considered as a waiver or acceptance of abandonment or otherwise prejudice the rights of either party.

AVOIDANCE OF DELAY 18. Reasonable Despatch Clause It is a condition of this insurance that the Assured shall act with reasonable despatch in all circumstances within their control.

LAW AND PRACTICE 19. English Law and Practice Clause This insurance is subject to English law and practice.

INSTITUTE WAR CLAUSES (CARGO) RISKS COVERED 1. Risks Clause This insurance covers, except as provided in Clauses 3 and 4 below, loss of or damage to the subject-matter insured caused by 1.1 war civil war revolution rebellion insurrection, or civil strife arising therefrom, or any hostile act by or against a belligerent power 272

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1.2 capture seizure arrest restraint or detainment, arising from risks covered under 1.1 above, and the consequences thereof or any attempt thereat 1.3 derelict mines torpedoes bombs or other derelict weapons of war.

2. General Average Clause This insurance covers general average and salvage charges, adjusted or determined according to the contract of affreightment and/or the governing law and practice, incurred to avoid or in connection with the avoidance of loss from a risk covered under these clauses.

EXCLUSIONS 3. General Exclusions Clause In no case shall this insurance cover 3.1 loss damage or expense attributable to wilful misconduct of the Assured 3.2 ordinary leakage, ordinary loss in weight or volume, or ordinary wear and tear of the subject-matter insured 3.3 loss damage or expense caused by insufficiency or unsuitability of packing or preparation of the subject-matter insured (for the purpose of this Clause 3.3 ‘packing’ shall be deemed to include stowage in a container or liftvan but only when such stowage is carried out prior to attachment of this insurance or by the Assured or their servants) 3.4 loss damage or expense caused by inherent vice or nature of the subject-matter insured 3.5 loss damage or expense proximately caused by delay, even though the delay be caused by a risk insured against (except expenses payable under Clause 2 above) 3.6 loss damage or expense arising from insolvency or financial default of the owners managers charterers or operators of the vessel 3.7 any claim based upon loss of or frustration of the voyage or adventure 3.8 loss damage or expense arising from any hostile use of any weapon of war employing atomic or nuclear fission and/or fusion or other like reaction or radioactive force or matter.

4. Unseaworthiness and Unfitness Exclusion Clause 4.1

In no case shall this insurance cover loss damage or expense arising from unseaworthiness of vessel or craft, unfitness of vessel craft conveyance container or liftman for the safe carriage of the subject-matter insured, where the Assured or their servants are privy to such unseaworthiness or unfitness, at the time the subject-matter insured is loaded therein.

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4.2 The Underwriters waive any breach of the implied warranties of seaworthiness of the ship and fitness of the ship to carry the subject-matter insured to destination, unless the Assured or their servants are privy to such unseaworthiness or unfitness.

DURATION 5. Transit Clause 5.1 This insurance 5.1.1 attaches only as the subject-matter insured and as to any part as that part is loaded on an oversea vessel and 5.1.2 terminates, subject to 5.2 and 5.3 below, either as the subject-matter insured and as to any part as that part is discharged from an oversea vessel at the final port or place of discharge, or on expiry of 15 days counting from midnight of the day of arrival of the vessel at the final port or place of discharge, whichever shall first occur; nevertheless, subject to prompt notice to the Underwriters and to an additional premium, such. insurance 5.1.3 reattaches when, without having discharged the subject-matter insured at the final port or place of discharge, the vessel sails therefrom, and 5.1.4 terminates, subject to 5.2 and 5.3 below, either as the subject-matter insured and as to any part as that part is thereafter discharged from the vessel at the final (or substituted) port or place of discharge, Or on expiry of 15 days counting from midnight of the day of re-arrival of the vessel at the final port or place of discharge or arrival of the vessel at a substituted port or place of discharge, whichever shall first occur. 5.2 If during the insured voyage the oversea vessel arrives at an intermediate port or place to discharge the subject-matter insured for on-carriage by oversea vessel or by aircraft, or the goods are discharged from the vessel at a port or place of refuge, then, subject to 5.3 below and to an additional premium if required, this insurance continues until the expiry of 15 days counting from midnight of the day of arrival of the vessel at such port or place, but thereafter reattaches as the subject-matter insured and as to any part as that part is loaded on an on-carrying oversea vessel or aircraft. During the period of 15 days the insurance remains in force after discharge only whilst the subject-matter is insured and as to any part as that part is at such port or place. If the goods are on-carried within the said period of 15 days or if the insurance reattaches as provided in this Clause 5.2

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5.2.1 where the on-carriage is by oversea vessel this insurance continues subject to the terms of these clauses, or 5.2.2 where the on-carriage is by aircraft, the current Institute War Clauses (Air Cargo) (excluding sendings by Post) shall be deemed to form part of this insurance and shall apply to the on-carriage by air. 5.3 If the voyage in the contract of carriage is terminated at a port or place other than the destination agreed therein, such port or place shall be deemed the final port of discharge and such insurance terminates in accordance with 5.1.2. If the subject-matter insured is subsequently reshipped to the original or any other destination, then provided notice is given to the Underwriters before the commencement of such further transit and subject to an additional premium, such insurance reattaches 5.3.1 in the case of the subject-matter insured having been discharged, as the subject-matter insured and as to any part as that part is loaded on the on-carrying vessel for the voyage; 5.3.2 in the case of the subject-matter not having been discharged, when the vessel sails from such deemed final port of discharge; thereafter such insurance terminates in accordance with 5.1.4. 5.4 The insurance against the risks of mines and derelict torpedoes, floating or submerged, is extended whilst the subject-matter insured or any part thereof is on craft whilst in transit to or from the oversea vessel, but in no case beyond the expiry of 60 days after discharge from the oversea vessel unless otherwise specially agreed by the Underwriters. 5.5 Subject to prompt notice to Underwriters, and to an additional premium if required, this insurance shall remain in force within the provisions of these Clauses during any deviation, or any variation of the adventure arising from the exercise of a liberty granted to shipowners or charterers under the contract of affreightment. (for the purpose of Clause 5 ‘arrival’ shall be deemed to mean that the vessel is anchored, moored or otherwise secured at a berth or place within the Harbour Authority area. If such a berth or place is not available, arrival is deemed to have occurred when the vessel first anchors, moors or otherwise secures either at or off the intended port or place of discharge ‘overseas vessel’ shall be deemed to mean a vessel carrying the subject-matter from one port or place to another where such voyage involves a sea passage by that vessel).

6. Change of Voyage Clause Where, after attachment of this insurance, the destination is changed by the Assured, held covered at a premium and on conditions to be arranged subject to prompt notice being given to the Underwriters.

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7. Anything contained in this contract which is inconsistent with Clauses 3.7, 3.8 or 5 shall, to the extent of such inconsistency, be null and void CLAIMS 8. Insurable Interest Clause 8.1 In order to recover under this insurance the Assured must have an insurable interest in the subject-matter insured at the time of the loss. 8.2 Subject to 8.1 above, the Assured shall be entitled to recover for insured loss occurring during the period covered by this insurance, notwithstanding that the loss occurred before the contract of insurance was concluded, unless the Assured were aware of the loss and the Underwriters were not.

9. Increased Value Clause 9.1 If any Increased Value insurance is effected by the Assured on the cargo insured herein the agreed value of the cargo shall be deemed to be increased to the total amount insured under this insurance and all Increased Value insurances covering the loss, and liability under this insurance shall be in such proportion as the sum insured herein bears to such total amount insured. In the event of claim the Assured shall provide the Underwriters with evidence of the amounts insured under all other insurances. 9.2 Where this insurance is on Increased Value the following clause shall apply: The agreed value of the cargo shall be deemed to be equal to the total amount insured under the primary insurance and all Increased Value insurances covering the loss and effected on the cargo by the Assured, and liability under this insurance shall be in such proportion as the sum insured herein bears to such total amount insured. In the event of claim the Assured shall provide the Underwriters with evidence of the amounts insured under all other insurances.

BENEFIT OF INSURANCE 10. Not to Inure Clause This insurance shall not inure to the benefit of the carrier or other bailee.

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MINIMISING LOSSES 11. Duty of Assured Clause It is the duty of the Assured and their servants and agents in respect of loss recoverable hereunder 11.1 to take such measures as may be reasonable for the minimising such loss, and 11.2 to ensure that all rights against carriers, bailees or properly preserved and exercised and the Underwriters will, in addition to any loss reimburse the Assured for any charges properly and pursuance of these duties.

purpose of averting or other third parties are recoverable hereunder, reasonably incurred in

12. Waiver Clause Measures taken by the Assured or the Underwriters with the object of saving, protecting or recovering the subject-matter insured shall not be considered as a waiver or acceptance of abandonment or otherwise prejudice the rights of either party.

AVOIDANCE OF DELAY 13. Reasonable Despatch Clause It is a condition of this insurance that the Assured shall act with reasonable despatch in all circumstances within their control.

LAW AND PRACTICE 14. English Law and Practice Clause This insurance is subject to English law and practice.

INSTITUTE STRIKES CLAUSES (CARGO) RISK COVERED 1. Risks Clause This insurance covers, except as provided in Clauses 3 and 4 below, loss of or damage to the subject-matter insured caused by 1.1 strikers, locked-out workmen, or persons taking part in labour disturbances, riots or civil commotions 1.2 any terrorist or any person acting from a political motive. 277

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2. General Average Clause This insurance covers general average and salvage charges, adjusted or determined according to the contract of affreightment and/or the governing law and practice, incurred to avoid or in connection with the avoidance of loss from a risk covered under these clauses.

EXCLUSIONS 3. General Exclusions Clause. In no case shall this insurance cover 3.1 loss damage or expense attributable to wilful misconduct of the Assured 3.2 ordinary leakage, ordinary loss in weight or volume, or ordinary wear and tear of the subject-matter insured 3.3 loss damage or expense caused by insufficiency or unsuitability of packing or preparation of the subject-matter insured (for the purpose of this Clause 3.3 ‘packing’ shall be deemed to include stowage in a container or liftvan but only when such stowage is carried out prior to attachment of this insurance or by the Assured or their servants) 3.4 loss damage or expense caused by inherent vice or nature of the subject-matter insured 3.5 loss damage or expense proximately caused by delay, even though the delay be caused by a risk insured against (except expenses payable under Clause 2 above) 3.6 loss damage or expense arising from insolvency or financial default of the owners managers charterers or operators of the vessel 3.7 loss damage or expense arising from the absence shortage or withholding of labour of any description whatsoever resulting from any strike, lockout, labour disturbance, riot or civil commotion 3.8 any claim based upon loss of or frustration of the voyage or adventure 3.9 loss damage or expense arising from the use of any weapon of war employing atomic or nuclear fission and/or fusion or other like reaction or radioactive force or matter 3.10 loss damage or expense caused by war civil war revolution rebellion insurrection, or civil strife arising therefrom, or any hostile act by or against a belligerent power.

4. Unseaworthiness and Unfitness Exclusion Clause 4.1

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In no case shall this insurance cover loss damage or expense arising from unseaworthiness of vessel or craft, unfitness of vessel craft conveyance container or liftvan for the safe carriage of the subject-matter insured, where the Assured or their servants are privy to such unseaworthiness or unfitness, at the time the subject-matter insured is loaded therein.

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4.2 The Underwriters waive any breach of the implied warranties of seaworthiness of the ship and fitness of the ship to carry the subject-matter insured to destination, unless the Assured or their servants are privy to such unseaworthiness or unfitness.

DURATION 5. Transit Clause 5.1 This insurance attaches from the time the goods leave the ware‑ house or place of storage at the place named herein for the commencement of the transit, continues during the ordinary course of transit and terminates either 5.1.1 on delivery to the Consignees’ or other final warehouse or place of storage at the destination named herein, 5.1.2 on delivery to any other warehouse or place of storage, whether prior to or at the destination named herein, which the Assured elect to use either 5.1.2.1 for storage other than in the ordinary course of transit or 5.1.2.2 for allocation or distribution, or 5.1.3 on the expiry of 60 days after completion of discharge over-side of the goods hereby insured from the oversea vessel at the final port of discharge, whichever shall first occur. 5.2 If, after discharge overside from the oversea vessel at the final port of discharge, but prior to termination of this insurance, the goods are to be forwarded to a destination other than that to which they are insured hereunder, this insurance, whilst remaining subject to termination as provided for above, shall not extend beyond the commencement of transit to such other destination. 5.3 This insurance shall remain in force (subject to termination as provided for above and to the provisions of Clause 6 below) during delay beyond the control of the Assured, any deviation, forced discharge, reshipment or transhipment and during any variation of the adventure arising from the exercise of a liberty granted to shipowners or charterers under the contract of affreightment.

6. Termination of Contract of Carriage Clause If owing to circumstances beyond the control of the Assured either the contract of carriage is terminated at a port or place other than the destination named therein or the transit is otherwise terminated before delivery of the goods as provided for in Clause 5 above, then this insurance shall also terminate unless prompt notice is given to the Underwriters and continuation of cover is requested when the insurance shall remain in force, subject to an additional premium if required by the Underwriters, either 6.1 until the goods are sold and delivered at such port or place, or, unless otherwise specially agreed, until the expiry of 60 days after arrival of the goods hereby insured at such port or place, whichever shall first occur, or

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6.2 if the goods are forwarded within the said period of 60 days (or any agreed extension thereof) to the destination named herein or to any other destination, until terminated in accordance with the provisions of Clause 5 above.

7. Change of Voyage Clause Where, after attachment of this insurance, the destination is changed by the Assured, held covered at a premium and on conditions to be arranged subject to prompt notice being given to the Underwriters.

CLAIMS 8. Insurable Interest Clause 8.1 In order to recover under this insurance the Assured must have an insurable interest in the subject-matter insured at the time of the loss. 8.2 Subject to 8.1 above, the Assured shall be entitled to recover for insured loss occurring during the period covered by this insurance, notwithstanding that the loss occurred before the contract of insurance was concluded, unless the Assured were aware of the loss and the Underwriters were not.

9. Increased Value Clause 9.1 If any Increased Value insurance is effected by the Assured on the cargo insured herein the agreed value of the cargo shall be deemed to be increased to the total amount insured under this insurance and all Increased Value insurances covering the loss, and liability under this insurance shall be in such proportion as the sum insured herein bears to such total amount insured. In the event of claim the Assured shall provide the Under-writers with evidence of the amounts insured under all other insurances. 9.2 Where this insurance is on Increased Value the following clause shall apply: The agreed value of the cargo shall be deemed to be equal to the total amount insured under the primary insurance and all Increased Value insurances covering the loss and effected on the cargo by the Assured, and liability under this insurance shall be in such proportion as the sum insured herein bears to such total amount insured. In the event of claim the Assured shall provide the Underwriters with evidence of the amounts insured under all other insurances.

BENEFIT OF INSURANCE 10. Not to Inure Clause This insurance shall not inure to the benefit of the carrier or other bailee.

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MINIMISING LOSSES 11. Duty of Assured Clause It is the duty of the Assured and their servants and agents in respect of loss recoverable hereunder 11.1 to take such measures as may be reasonable for the minimising such loss, and 11.2 to ensure that all rights against carriers, bailees or properly preserved and exercised and the Underwriters will, in addition to any loss reimburse the Assured for any charges properly and pursuance of these duties.

purpose of averting or other third parties are recoverable hereunder, reasonably incurred in

12. Waiver Clause Measures taken by the Assured or the Underwriters with the object of saving, protecting or recovering the subject-matter insured shall not be considered as a waiver or acceptance of abandonment or otherwise prejudice the rights of either party.

AVOIDANCE OF DELAY 13. Reasonable Despatch Clause It is a condition of this insurance that the Assured shall act with reasonable despatch in all circumstances within their control.

LAW AND PRACTICE 14. English Law and Practice Clause The insurance is subject to English law and practice.

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York-Antwerp Rules 2016

RULE OF INTERPRETATION In the adjustment of general average the following Rules shall apply to the exclusion of any law and practice inconsistent therewith. Except as provided by the Rule Paramount and the numbered Rules, general average shall be adjusted according to the lettered Rules.

RULE PARAMOUNT In no case shall there be any allowance for sacrifice or expenditure unless reasonably made or incurred.

RULE A 1.

2.

There is a general average act when, and only when, any extraordinary sacrifice or expenditure is intentionally and reasonably made or incurred for the common safety for the purpose of preserving from peril the property involved in a common maritime adventure. General average sacrifices and expenditures shall be borne by the different contributing interests on the basis hereinafter provided.

RULE B 1.

2. 3.

There is a common maritime adventure when one or more vessels are towing or pushing another vessel or vessels, provided that they are all involved in commercial activities and not in a salvage operation. When measures are taken to preserve the vessels and their cargoes, if any, from a common peril, these Rules shall apply. If the vessels are in common peril and one is disconnected either to increase the disconnecting vessel’s safety alone, or the safety of all vessels in the common maritime adventure, the disconnection will be a general average act. Where vessels involved in a common maritime adventure resort to a port or place of refuge, allowances under these Rules may be made in relation to each of the vessels. Subject to the provisions of paragraphs 3 and 4 of Rule G, 283

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allowances in general average shall cease at the time that the common maritime adventure comes to an end.

RULE C 1. 2.

3.

Only such losses, damages or expenses which are the direct consequence of the general average act shall be allowed as general average. In no case shall there be any allowance in general average for losses, damages or expenses incurred in respect of damage to the environment or in consequence of the escape or release of pollutant substances from the property involved in the common maritime adventure. Demurrage, loss of market, and any loss or damage sustained or expense incurred by reason of delay, whether on the voyage or subsequently, and any indirect loss whatsoever, shall not be allowed as general average.

RULE D Rights to contribution in general average shall not be affected, though the event which gave rise to the sacrifice or expenditure may have been due to the fault of one of the parties to the common maritime adventure, but this shall not prejudice any remedies or defences which may be open against or to that party in respect of such fault.

RULE E 1. 2.

3.

4.

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The onus of proof is upon the party claiming in general average to show that the loss or expense claimed is properly allowable as general average. All parties to the common maritime adventure shall, as soon as possible, supply particulars of value in respect of their contributory interest and, if claiming in general average, shall give notice in writing to the average adjuster of the loss or expense in respect of which they claim contribution, and supply evidence in support thereof. Failing notification, or if any party does not supply particulars in support of a notified claim, within 12 months of the termination of the common maritime adventure or payment of the expense, the average adjuster shall be at liberty to estimate the extent of the allowance on the basis of the information available to the adjuster. Particulars of value shall be provided within 12 months of the termination of the common maritime adventure, failing which the average adjuster shall be at liberty to estimate the contributory value on the same basis. Such estimates shall be communicated to the party in question in writing. Estimates may only be challenged within two months of receipt of the communication and only on the grounds that they are manifestly incorrect. Any party to the common maritime adventure pursuing a recovery from a third party in respect of sacrifice or expenditure claimed in general average, shall so advise the average adjuster and, in the event that a recovery is achieved, shall supply to the average adjuster full particulars of the recovery within two months of receipt of the recovery.

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RULE F Any additional expense incurred in place of another expense which would have been allowable as general average shall be deemed to be general average and so allowed without regard to the saving, if any, to other interests, but only up to the amount of the general average expense avoided.

RULE G 1. 2. 3.

4.

General average shall be adjusted as regards both loss and contribution upon the basis of values at the time and place when and where the common maritime adventure ends. This rule shall not affect the determination of the place at which the average adjustment is to be prepared. When a ship is at any port or place in circumstances which would give rise to an allowance in general average under the provisions of Rules X and XI, and the cargo or part thereof is forwarded to destination by other means, rights and liabilities in general average shall, subject to cargo interests being notified if practicable, remain as nearly as possible the same as they would have been in the absence of such forwarding, as if the common maritime adventure had continued in the original ship for so long as justifiable under the contract of carriage and the applicable law. The proportion attaching to cargo of the allowances made in general average by reason of applying the third paragraph of this Rule shall be limited to the cost which would have been borne by the owners of cargo if the cargo had been forwarded at their expense. This limit shall not apply to any allowances made under Rule F.

RULE I – JETTISON OF CARGO No jettison of cargo shall be allowed as general average, unless such cargo is carried in accordance with the recognised custom of the trade.

RULE II – LOSS OR DAMAGE BY SACRIFICES FOR THE COMMON SAFETY Loss of or damage to the property involved in the common maritime adventure 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 allowed as general average.

RULE III – 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 285

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ship, shall be allowed as general average; except that no allowance shall be made for damage by smoke however caused or by heat of the fire.

RULE IV – CUTTING AWAY WRECK Loss or damage sustained by cutting away wreck or parts of the ship which have been previously carried away or are effectively lost by accident shall not be allowed as general average.

RULE V – VOLUNTARY STRANDING When a ship is intentionally run on shore for the common safety, whether or not she might have been driven on shore, the consequent loss or damage to the property involved in the common maritime adventure shall be allowed in general average.

RULE VI – SALVAGE REMUNERATION (a) Expenditure incurred by the parties to the common maritime adventure in the nature of salvage, whether under contract or otherwise, shall be allowed in general average provided that the salvage operations were carried out for the purpose of preserving from peril the property involved in the common maritime adventure and subject to the provisions of paragraphs (b), (c) and (d). (b) Notwithstanding (a) above, where the parties to the common maritime adventure have separate contractual or legal liability to salvors, salvage shall only be allowed should any of the following arise: (i) there is a subsequent accident or other circumstances resulting in loss or damage to property during the voyage that results in significant differences between salved and contributory values, (ii) there are significant general average sacrifices, (iii) salved values are manifestly incorrect and there is a significantly incorrect apportionment of salvage expenses, (iv) any of the parties to the salvage has paid a significant proportion of salvage due from another party, (v) a significant proportion of the parties have satisfied the salvage claim on substantially different terms, no regard being had to interest, currency correction or legal costs of either the salvor or the contributing interest. (c) Salvage expenditures referred to in paragraph (a) above shall include any salvage remuneration in which the skill and efforts of the salvors in preventing or minimising damage to the environment such as is referred to in Article 13 paragraph 1(b) of the International Convention on Salvage, 1989 have been taken into account. (d) Special compensation payable to a salvor by the shipowner under Article 14 of the International Convention on Salvage, 1989 to the extent specified in paragraph 4 of that Article or under any other provision similar in substance (such as SCOPIC) shall not be allowed in general average and shall not

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be considered a salvage expenditure as referred to in paragraph (a) of this Rule.

RULE VII – DAMAGE TO MACHINERY AND BOILERS Damage caused to any 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; but where a ship is afloat no loss or damage caused by working the propelling machinery and boilers shall in any circumstances be allowed as general average.

RULE VIII – EXPENSES LIGHTENING A SHIP WHEN ASHORE, AND CONSEQUENT DAMAGE When a ship is ashore and cargo and ship’s fuel and stores or any of them are discharged as a general average act, the extra cost of lightening, lighter hire and reshipping (if incurred), and any loss or damage to the property involved in the common maritime adventure in consequence thereof, shall be allowed as general average.

RULE IX – CARGO, SHIP’S MATERIALS AND STORES USED FOR FUEL Cargo, ship’s materials and stores, or any of them, necessarily used for fuel for the common safety at a time of peril shall be allowed as general average, but when such an allowance is made for the cost of ship’s materials and stores the general average shall be credited with the estimated cost of the fuel which would otherwise have been consumed in prosecuting the intended voyage.

RULE X – EXPENSES AT PORT OF REFUGE, ETC. (a) (i) 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 entering such port or place shall be allowed 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 allowed as general average. (ii) When a ship is at any port or place of refuge and is necessarily removed to another port or place because repairs cannot be carried out in the first port or place, the provisions of this Rule shall be applied to the

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second port or place as if it were a port or place of refuge and the cost of such removal including temporary repairs and towage shall be allowed as general average. The provisions of Rule XI shall be applied to the prolongation of the voyage occasioned by such removal. (b) (i) The cost of handling on board or discharging cargo, fuel or stores, whether at a port or place of loading, call or refuge, shall be allowed as general average when the handling or discharge was necessary for the common safety or to enable damage to the ship caused by sacrifice or accident to be repaired, if the repairs were necessary for the safe prosecution of the voyage, except in cases where the damage to the ship is discovered at a port or place of loading or call without any accident or other extraordinary circumstances connected with such damage having taken place during the voyage. (ii) The cost of handling on board or discharging cargo, fuel or stores shall not be allowable as general average when incurred solely for the purpose of restowage due to shifting during the voyage, unless such restowage is necessary for the common safety. (c) Whenever the cost of handling or discharging cargo, fuel or stores is allowable as general average, the costs of storage, including insurance if reasonably incurred, reloading and stowing of such cargo, fuel or stores shall likewise be allowed as general average. The provisions of Rule XI shall apply to the extra period of detention occasioned by such reloading or restowing. (d) When the ship is condemned or does not proceed on her original voyage, storage expenses shall be allowed as general average only up to the date of the ship’s condemnation or of the abandonment of the voyage or up to the date of completion of discharge of cargo if the condemnation or abandonment takes place before that date.

RULE XI – WAGES AND MAINTENANCE OF CREW AND OTHER EXPENSES PUTTING IN TO AND AT A PORT OF REFUGE, ETC. (a) Wages and maintenance of master, officers and crew reasonably incurred and fuel and stores consumed during the prolongation of the voyage occasioned by a ship entering a port or place of refuge or returning to her port or place of loading shall be allowed as general average when the expenses of entering such port or place are allowable in general average in accordance with Rule X(a). (b) (i) When a ship shall have entered or been detained in any port or place in consequence of accident, sacrifice or other extra-ordinary circumstances which render that entry or detention necessary for the common safety, or to enable damage to the ship caused by sacrifice or accident to be repaired, if the repairs were necessary for the safe prosecution of the voyage, the wages and maintenance of the master, officers and crew reasonably incurred during the extra period of detention in such port or

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place until the ship shall or should have been made ready to proceed upon her voyage, shall be allowed in general average. (ii) Fuel and stores consumed during the extra period of detention shall be allowed as general average, except such fuel and stores as are consumed in effecting repairs not allowable in general average. (iii) Port charges incurred during the extra period of detention shall likewise be allowed as general average except such charges as are incurred solely by reason of repairs not allowable in general average. (iv) Provided that when damage to the ship is discovered at a port or place of loading or call without any accident or other extraordinary circumstance connected with such damage having taken place during the voyage, then the wages and maintenance of master, officers and crew and fuel and stores consumed and port charges incurred during the extra detention for repairs to damages so discovered shall not be allowable as general average, even if the repairs are necessary for the safe prosecution of the voyage. (v) When the ship is condemned or does not proceed on her original voyage, the wages and maintenance of the master, officers and crew and fuel and stores consumed and port charges shall be allowed as general average only up to the date of the ship’s condemnation or of the abandonment of the voyage or up to the date of completion of discharge of cargo if the condemnation or abandonment takes place before that date. (c) (i) For the purpose of these Rules wages shall include all payments made to or for the benefit of the master, officers and crew, whether such payments be imposed by law upon the shipowners or be made under the terms of articles of employment. (ii) For the purpose of these Rules, port charges shall include all customary or additional expenses incurred for the common safety or to enable a vessel to enter or remain at a port of refuge or call in the circumstances outlined in Rule XI(b)(i). (d) The cost of measures undertaken to prevent or minimise damage to the environment shall be allowed in general average when incurred in any or all of the following circumstances: (i) as part of an operation performed for the common safety which, had it been undertaken by a party outside the common maritime adventure, would have entitled such party to a salvage reward; (ii) as a condition of entry into or departure from any port or place in the circumstances prescribed in Rule X(a); (iii) as a condition of remaining at any port or place in the circumstances prescribed in Rule XI(b), provided that when there is an actual escape or release of pollutant substances, the cost of any additional measures required on that account to prevent or minimise pollution or environmental damage shall not be allowed as general average; (iv) necessarily in connection with the handling on board, discharging, storing or reloading of cargo, fuel or stores whenever the cost of those operations is allowable as general average.

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RULE XII – DAMAGE TO CARGO IN DISCHARGING, ETC. Damage to or loss of cargo, fuel or stores sustained in consequence of their handling, discharging, storing, reloading and stowing shall be allowed as general average, when and only when the cost of those measures respectively is allowed as general average.

RULE XIII – DEDUCTIONS FROM COST OF REPAIRS (a) Repairs to be allowed in general average shall not be subject to deductions in respect of “new for old” where old material or parts are replaced by new unless the ship is over fifteen years old in which case there shall be a deduction of one third. The deductions shall be regulated by the age of the ship from the 31st December of the year of completion of construction to the date of the general average act, except for insulation, life and similar boats, communications and navigational apparatus and equipment, machinery and boilers for which the deductions shall be regulated by the age of the particular parts to which they apply. (b) The deductions shall be made only from the cost of the new material or parts when finished and ready to be installed in the ship. No deduction shall be made in respect of provisions, stores, anchors and chain cables. Drydock and slipway dues and costs of shifting the ship shall be allowed in full. (c) The costs of cleaning, painting or coating of bottom shall not be allowed in general average unless the bottom has been painted or coated within the 24 months preceding the date of the general average act in which case one half of such costs shall be allowed.

RULE XIV – TEMPORARY REPAIRS (a)

Where temporary repairs are effected to a ship at a port of loading, call or refuge, for the common safety, or of damage caused by general average sacrifice, the cost of such repairs shall be allowed as general average. (b) Where temporary repairs of accidental damage are effected in order to enable the common maritime adventure to be completed, the cost of such repairs shall be allowed as general average without regard to the saving, if any, to other interests, but only up to the saving in expense which would have been incurred and allowed in general average if such repairs had not been effected there. (c) No deductions “new for old” shall be made from the cost of temporary repairs allowable as general average.

RULE XV – LOSS OF FREIGHT Loss of freight arising from damage to or loss of cargo shall be allowed as general average, either when caused by a general average act, or when the damage to or loss of cargo is so allowed. 290

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Deduction shall be made from the amount of gross freight lost, of the charges which the owner thereof would have incurred to earn such freight, but has, in consequence of the sacrifice, not incurred.

RULE XVI – AMOUNT TO BE ALLOWED FOR CARGO LOST OR DAMAGED BY SACRIFICE (a) (i) The amount to be allowed as general average for damage to or loss of cargo sacrificed shall be the loss which has been sustained thereby based on the value at the time of discharge, ascertained from the commercial invoice rendered to the receiver or if there is no such invoice from the shipped value. Such commercial invoice may be deemed by the average adjuster to reflect the value at the time of discharge irrespective of the place of final delivery under the contract of carriage. (ii) The value at the time of discharge shall include the cost of insurance and freight except insofar as such freight is at the risk of interests other than the cargo. (b) When cargo so damaged is sold and the amount of the damage has not been otherwise agreed, the loss to be allowed in general average shall be the difference between the net proceeds of sale and the net sound value as computed in the first paragraph of this Rule.

RULE XVII – CONTRIBUTORY VALUES (a) (i) The contribution to a general average shall be made upon the actual net values of the property at the termination of the common maritime adventure except that the value of cargo shall be the value at the time of discharge, ascertained from the commercial invoice rendered to the receiver or if there is no such invoice from the shipped value. Such commercial invoice may be deemed by the average adjuster to reflect the value at the time of discharge irrespective of the place of final delivery under the contract of carriage. (ii) The value of the cargo shall include the cost of insurance and freight unless and insofar as such freight is at the risk of interests other than the cargo, deducting therefrom any loss or damage suffered by the cargo prior to or at the time of discharge. Any cargo may be excluded from contributing to general average should the average adjuster consider that the cost of including it in the adjustment would be likely to be disproportionate to its eventual contribution. (iii) The value of the ship shall be assessed without taking into account the beneficial or detrimental effect of any demise or time charterparty to which the ship may be committed. (b) To these values shall be added the amount allowed as general average for property sacrificed, if not already included, deduction being made from the freight and passage money at risk of such charges and crew’s wages as would not have been incurred in earning the freight had the ship and cargo been totally 291

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lost at the date of the general average act and have not been allowed as general average; deduction being also made from the value of the property of all extra charges incurred in respect thereof subsequently to the general average act, except such charges as are allowed in general average. Where payment for salvage services has not been allowed as general average by reason of paragraph (b) of Rule VI, deductions in respect of payment for salvage services shall be limited to the amount paid to the salvors including interest and salvors’ costs. (c) In the circumstances envisaged in the third paragraph of Rule G, the cargo and other property shall contribute on the basis of its value upon delivery at original destination unless sold or otherwise disposed of short of that destination, and the ship shall contribute upon its actual net value at the time of completion of discharge of cargo. (d) Where cargo is sold short of destination, however, it shall contribute upon the actual net proceeds of sale, with the addition of any amount allowed as general average. (e) Mails, passengers’ luggage and accompanied personal effects and accompanied private motor vehicles shall not contribute to general average.

RULE XVIII – DAMAGE TO SHIP The amount to be allowed as general average for damage or loss to the ship, her machinery and/or gear caused by a general average act shall be as follows: (a) When repaired or replaced, The actual reasonable cost of repairing or replacing such damage or loss, subject to deductions in accordance with Rule XIII; (b) When not repaired or replaced, The reasonable depreciation arising from such damage or loss, but not exceeding the estimated cost of repairs. But where the ship is an actual total loss or when the cost of repairs of the damage would exceed the value of the ship when repaired, the amount to be allowed as general average shall be the difference between the estimated sound value of the ship after deducting therefrom the estimated cost of repairing damage which is not general average and the value of the ship in her damaged state which may be measured by the net proceeds of sale, if any.

RULE XIX – UNDECLARED OR WRONGFULLY DECLARED CARGO (a)

Damage or loss caused to goods loaded without the knowledge of the shipowner or his agent or to goods wilfully misdescribed at the time of shipment shall not be allowed as general average, but such goods shall remain liable to contribute, if saved. (b) Where goods have been wrongfully declared at the time of shipment at a value which is lower than their real value, any general average loss or damage shall be allowed on the basis of their declared value, but such goods shall contribute on the basis of their actual value. 292

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RULE XX – PROVISION OF FUNDS (a) The capital loss sustained by the owners of goods sold for the purpose of raising funds to defray general average disbursements shall be allowed in general average. (b) The cost of insuring general average disbursements shall be allowed in general average.

RULE XXI – INTEREST ON LOSSES ALLOWED IN GENERAL AVERAGE (a) Interest shall be allowed on expenditure, sacrifices and allowances in general average until three months after the date of issue of the general average adjustment, due allowance being made for any payment on account by the contributory interests or from the general average deposit fund. (b) The rate for calculating interest accruing during each calendar year shall be the 12month ICE LIBOR for the currency in which the adjustment is prepared, as announced on the first banking day of that calendar year, increased by four percentage points. If the adjustment is prepared in a currency for which no ICE LIBOR is announced, the rate shall be the 12-month US Dollar ICE LIBOR, increased by four percentage points.

RULE XXII – TREATMENT OF CASH DEPOSITS (a) Where cash deposits have been collected in respect of general average, salvage or special charges, such sums shall be remitted forthwith to the average adjuster who shall deposit the sums into a special account, earning interest where possible, in the name of the average adjuster. (b) The special account shall be constituted in accordance with the law regarding client or third party funds applicable in the domicile of the average adjuster. The account shall be held separately from the average adjuster’s own funds, in trust or in compliance with similar rules of law providing for the administration of the funds of third parties. (c) The sums so deposited, together with accrued interest, if any, shall be held as security for payment to the parties entitled thereto, of the general average, salvage or special charges in respect of which the deposits have been collected. Payments on account or refunds of deposits may only be made when such payments are certified in writing by the average adjuster and notified to the depositor requesting their approval. Upon the receipt of the depositor’s approval, or in the absence of such approval within a period of 90 days, the average adjuster may deduct the amount of the payment on account or the final contribution from the deposit. (d) All deposits and payments or refunds shall be without prejudice to the ultimate liability of the parties.

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RULE XXIII – TIME BAR FOR CONTRIBUTING TO GENERAL AVERAGE (a) Subject always to any mandatory rule on time limitation contained in any applicable law: (i) Any rights to general average contribution including any rights to claim under general average bonds and guarantees, shall be extinguished unless an action is brought by the party claiming such contribution within a period of one year after the date upon which the general average adjustment is issued. However, in no case shall such an action be brought after six years from the date of termination of the common maritime adventure. (ii) These periods may be extended if the parties so agree after the termination of the common maritime adventure. (b) This rule shall not apply as between the parties to the general average and their respective insurers.

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Rules of Practice

INTRODUCTION In the middle of the 19th Century, when average adjusting as a separate profession was in its infancy, there was very little in the way of established law to guide the practicing adjuster. As a consequence, many points of practice had to be decided in accordance with custom. Some of these customs were ratified subsequently by legal decisions, but others were disapproved. It became evident that, unless steps were taken to establish a reasonable measure of uniformity among average adjusters, the profession would fall into disrepute. In order to remedy this situation the Association of Average Adjusters was founded in 1869 with the principal object of the “the promotion of correct principles in the adjustment of Averages and uniformity of practice amongst average adjusters”. After the formation of the Association, one of its first tasks was to consider the areas of divergence in practice and to decide how the various so-called “customs” could be brought together into a uniform, if not universal, practice. This aim was achieved largely by the Association in the first fifteen years of its existence by a two-fold approach: (a) By the collection and refinement of the Customs of Lloyd’s. This task was undertaken by a Special Committee which reported to the Association in 1876. In the preamble to the Customs it was stated: “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.” (b) By the adoption of Rules of Practice relating to the adjustment of averages and the duties of adjusters in connection therewith. In the early days of the Association it was debated hotly whether or not these Rules of Practice should bind Members. In the event, it was decided that the Rules of Practice would not be binding although naturally they would carry considerable authority. Even now, if an average adjuster draws up a statement which is at variance with a Rule of Practice, he or she must place a note in the adjustment referring to the Rule of Practice and stating why he or she differs from it. Since 1890, when the Customs of Lloyd’s were reviewed and assimilated into the Rules of Practice, various new Rules and amendments to existing Rules have been

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adopted from time to time in order to regulate the practice of average adjusters in areas where the law is silent. The procedure for establishing a Rule of Practice is as follows. By the Rules of the Association, Representatives (who are appointed by Underwriting bodies as well as by Shipowners, Merchants and similar institutions) are entitled, equally with Members, on giving appropriate notice to move resolutions intended to become Rules of Practice at any General Meeting of the Association. After discussion, such a resolution will be voted upon by Members. If carried by the votes of a simple majority of the Members voting, it becomes a probationary Rule until the next following General Meeting. During the intervening period the probationary Rule is considered by the Advisory Committee (or a Special Committee) of the Association which may recommend its acceptance, rejection or amendment. At the next following General Meeting the probationary Rule, in the form approved by the Advisory Committee (or Special Committee), is discussed again and, if it is confirmed by a two-thirds majority, it becomes a Rule of Practice. The Rules of Practice are divided into six sections. The Rules relating to General Average appear in two sections: Section B: Rules which affect the adjustment of general average or the duties of adjusters in all cases, whatever may be the basis of adjustment. Section F: Rules relating to the adjustment of general average under English law and practice. The Rules contained in section F may be considered now to be of little more than historical interest in view of the fact that the vast majority of general averages are now adjusted in accordance with the York-Antwerp Rules. However, these Rules of Practice have been retained not only to deal with the minority of cases where the adjustment is prepared in accordance with English law and practice but also to demonstrate the early steps taken in the movement towards uniformity. December 1980 (amended 1997 and 2015).

SECTION A – GENERAL RULES A1 Adjustments for the Consideration of Underwriters That any claim prepared for the consideration of underwriters shall include a statement of the reasons of the average adjuster for stating such a claim, and when submitted in conjunction with a claim for which underwriters are liable, shall be shown in such a manner as clearly to distinguish the claim for consideration from other claims embodied in the same adjustment.

A2 Interest and Commission for Advancing Funds 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

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on account, an out-of-pocket expense for interest and/or commission for advancing funds is reasonably incurred.

A3 Agency Commission and Agency 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.

A4 Duty of Adjusters in Respect of Cost of Repairs (1) That in adjusting particular average on ship or general average which includes repairs, it is the duty of the adjuster to satisfy himself that such reasonable and usual precautions have been taken to keep down the cost of repairs as a prudent ship-owner would have taken if uninsured. (2) Where a claim for particular average arises and the Assured has elected to repair the vessel, the Assured is entitled to: (a) recover the reasonable cost of repairs in terms of section 69(1) of the Marine Insurance Act 1906, irrespective of whether repairs are carried out before or after the expiry of the policy. (b) defer repairs, subject to Class approval, to the first reasonable opportunity which is likely to be the next routine overhaul or dry-docking period. Any increase in the overall cost of repairs arising from deferment beyond the first reasonable opportunity will be for the account of the Assured.

A5 Claims on Ship’s Machinery 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 evidence showing what has become of the old propeller or shaft.

A6 Water Casks 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.

A7 Adjustment: Policies of Insurance and Names of Underwriters That no adjustment shall be drawn up showing the amount of payments by or to the underwriters, unless the policies or copies of the policies of insurance or certificates 297

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of insurance, for which the statement is required, be produced to the average adjusters. Such statement shall set out sufficient details of the underwriters interested and the amounts due on the respective policies produced.

A8 Apportionment of Costs in Collision Cases That when a vessel sustains and does damage by collision, and litigation consequently results for the purpose of testing liability, the technicality of the vessel having been plaintiff or defendant in the litigation shall not necessarily govern the apportionment of the costs of such litigation, which shall be apportioned between claim and counterclaim in proportion to the amount, excluding interest, which has been or would have been allowed in respect of each in the event of the claim or counter-claim being established; provided that when a claim or counter-claim is made solely for the purpose of defence, and is not allowed, the costs apportioned thereto shall be treated as costs of defence.

A9 Franchise Charges The expenses of protest, survey, and other proofs of loss, including the commission or other expenses of a sale by auction, are not admitted to make up the percentage of a claim; and are only paid by the underwriters in case the loss amounts to a claim without them.

SECTION B – GENERAL AVERAGE RULES OF GENERAL APPLICATION Note: In this edition, the Rules relating to the adjustment of general average under English law and practice have been transferred to Section F.

B1 Basis of Adjustment In all cases the adjuster shall: (a) Give particulars in a prominent position in the adjustment of the clause or clauses contained in the charter party and/or bills of lading that relate to the adjustment of general average or, if no such clause or clauses exist, the law and practice obtaining at the place where the adventure ends. (b) Set out the facts that give rise to the general average. (c) Where the York-Antwerp Rules or similar apply, identify the lettered and/or numbered Rules that are relied upon in making the principal allowances in the adjustment. B2–B8 inclusive – transferred to section F.

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B9 Claims arising out of Deficiency of Fuel 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. B10–B23 inclusive – transferred to section F.

B24 Contributory Value of Ship 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.

B25 Contributory Value of Freight 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 charges and wages deducted and any amount made good. The first paragraph of Rule B25, dealing with the basis of adjustment under English law and practice, has been transferred to Section F and re-numbered F22.

B26 Vessel in Ballast and under Charter: Contributing Interests For the purpose of ascertaining the liability of Underwriters on British policies of insurance, the following provisions shall apply:When a vessel is proceeding in ballast to load under a voyage charter entered into by the shipowner before the general average act, the interests contributing to the general average shall be the vessel, such items of stores and equipment as belong to parties other than the owners of the vessel (e.g. bunkers, wireless installation and navigational instruments) and the freight earned under the voyage charter computed in the usual way after deduction of contingent expenses subsequent to the general average act. Failing a prior termination of the adventure, the place where the adventure shall be deemed to end and at which the values for contribution to general average shall be calculated is the final port of discharge of the cargo carried under the charter but in the event of the prior loss of the vessel and freight, or either of them, the general average shall attach to any surviving interest or interests including freight advanced at the loading port deducting therefrom contingent expenses subsequent to the general average act. When a vessel is proceeding in ballast under a time charter alone or a time charter and a voyage charter entered into by the time charterer, the general average shall attach to the vessel and such items of stores and equipment as are indicated above. Failing a prior termination of the adventure, the adventure shall be deemed to end

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and the values for contribution to general average calculated at the first loading port upon the commencement of loading cargo. When the charter to which the shipowner is a party provides for York-Antwerp Rules, the general average shall be adjusted in accordance with those Rules and British law and practice and without regard to the law and practice of any foreign port at which the adventure may terminate; and in the interpretation of Rule XI it shall be immaterial whether the extra period of detention takes place at a port of loading, call or refuge, provided that the detention is in consequence of accident, sacrifice or other extraordinary circumstance occurring whilst the vessel is in ballast. In practice neither time charter hire, as such, nor time charterer’s voyage freight shall contribute to general average.

B27 Ulterior Chartered Freight: Contribution to General Average 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.

B28 Deductions from Freight at Charterer’s Risk That freight at the risk of the charterer shall be subject to no deduction for wages and charges, except in the case of charters in which the wages or 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.

B29 Forwarding Charges on Advanced Freight That in case of wreck, the cargo being forwarded to its destination, 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 to the shipowner at the port of destination under the original charter-party.

B30 Sacrifice for the Common Safety: Direct Liability of Underwriters 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 particular average is not taken into account in computing the memorandum 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. 300

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B31 Sacrifice of Ship’s Stores: Direct Liability of Underwriters That underwriters insuring ship’s stores, bunker coal or fuel, destroyed or used as part of a general average operation, shall only be liable for those articles as a direct claim on the policy when they formed part of the property at risk at the time of the peril giving rise to the general average act.

B32 Enforcement of General Average: Lien by Shipowners 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 enquiries.

B33 Underwriter’s Liability 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 deduction from the contributory value of the ship that must be deducted from the insured value to find upon what the underwriter contributes. This rule does not apply to foreign adjustments, when the basis of contribution is something other than the net value of the thing insured. That in practice, in applying the above rule for the purpose of ascertaining the liability of underwriters for contribution to general average and salvage charges, deduction shall be made from the insured value of all losses and charges for which underwriters are liable and which have been deducted in arriving at the contributory value. In adjusting the liability of underwriters on freight for general average contribution and salvage charges, effect shall be given to Section 73 of the Marine Insurance Act, 1906, by comparing the gross and not the net amount of freight at risk with the insured value in the case of a valued policy or the insurable value in the case of an unvalued policy.

B34 The Duty of Adjusters in Cases involving Refunds of General Average Deposits or Apportionment of Salvage, Collision Recoveries, or other Funds That in cases of general average where deposits have been collected and it is likely that repayments will have to be made, measures be taken by the adjuster to ascertain the names of underwriters who have reimbursed their assured in respect of such deposits; that the names of any such underwriters be set forth in the adjustment as claimants of refund, if any, to which they are apparently entitled; and that on 301

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completion of the adjustment, notice be sent to all underwriters whose names are so set forth as to any refund of which they appear as claimants and as to the steps to be taken in order to obtain payment of the same. That in cases where the names of any underwriters are not to be ascertained on completion of the adjustment, notice be sent to the Secretary of Lloyd’s, to the Institute of London Underwriters, to the Liverpool Underwriters’ Association, and to the Association of Underwriters of Glasgow, notifying such interests as have not been appropriated to underwriters. And that in cases of apportionment of salvage or other funds for distribution, similar measures be taken by the adjuster to safeguard the interests of any underwriters who may be entitled to benefit under the apportionment.

B35 Memorandum to Statements Showing Refunds in Respect of General Average Deposits That the following memorandum shall appear at the end of statements which show refunds to be due in respect of General Average Deposits, viz: Memorandum – Refunds of general average deposits shown in this statement should only be paid on production of the original deposit receipts.

B36 Interest on Deposits That, unless otherwise expressly provided, the interest accrued on deposits on account of salvage and/or general average and/or particular and/or other charges, or on the balance of such deposits after payments on account, if any, have been made, shall be credited to the depositor or those to whom his rights in respect of the deposits have been transferred.

B37 Apportionment of Interest on Amounts Made Good That in practice (in the absence of express agreement between the parties concerned) interest allowed on amounts made good shall be apportioned between assured and underwriters, taking into account the sums paid by underwriters and the dates when such payments were made, notwithstanding that by the addition of interest the underwriter may receive a larger sum than he has paid.

SECTION C – YORK-ANTWERP RULES C1 Salvage Services Rendered under an Agreement Expenses for salvage services rendered by or accepted under agreement shall in practice be treated as general average provided that such expenses were incurred for

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the common safety within the meaning of Rule “A” of the York-Antwerp Rules 1924 or York-Antwerp Rules 1950.

C2 Commission Allowed under York-Antwerp Rules That the commission of 2 per cent allowed on general average disbursements under the York-Antwerp Rules shall be credited in full to the party who has authorised the expenditure and is liable for payment, except that where the funds for payment are provided in the first instance in whole or in part from the deposit funds, or by other parties to the adventure, or by underwriters, the commission on such advances shall be credited to the deposit funds or to the parties or underwriters providing the funds for payment.

C3 York-Antwerp Rules, 1924: Rules X (a) and XI That, in practice, where a vessel is at any port or place in circumstances in which the wages and maintenance of crew during detention there for the purpose of repairs necessary for the safe prosecution of the voyage would be admissible in general average under Rule XI of the York-Antwerp Rules, 1924, and the vessel is necessarily removed thence to another port or place because such repairs cannot be effected at the first port or place, the provisions of Rule X (a) shall be applied to the second port or place as if it were a port or place of refuge within that Rule and the provisions of Rule XI shall be applied to the prolongation of the voyage occasioned by such removal.

C4 York-Antwerp Rules 1950, 1974 and 1994: Rule X (a) That in practice, in applying the second paragraph of Rule X (a), a vessel shall be deemed to be at a port or place of refuge when she is at any port or place in circumstances in which the wages and maintenance of the Master, Officers and crew incurred during any extra period of detention there would be admissible in General Average under the provisions of Rule XI.

SECTION D – DAMAGE AND REPAIRS TO SHIP D1 Expenses of Removing a Vessel for Repair 1.

For the purpose of ascertaining the reasonable cost of repairs, and subject to any express provisions in the policy, where a vessel is at any port place or location (hereinafter referred to as ‘port’) and is necessarily or reasonably removed to some other port for the purpose of repairs, either because the repairs cannot be effected at the first port, or cannot be effected prudently, the additional expenses reasonably incurred by the shipowner in removing the vessel (other than any expenses allowable in general average) shall be treated as part of the reasonable cost of repairs. 303

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2.

3.

4.

(a) Where the vessel after repairing forthwith returns to the port from which she was removed, the expenses incurred both in removing the vessel to the port of repair and in returning shall be treated as part of the expenses of removal. (b) Where the vessel loads a new cargo at the port of repair or proceeds thence to some other port for the same purpose, the expenses shall be calculated as though, but for the repairs, the vessel had previously been engaged to proceed direct from the port from which she was removed to the loading port. (c) Where, immediately following a casualty, or upon completion of the voyage on which the casualty occurred, the vessel is removed solely to enable repairs to be effected which are essential for continued trading, the expenses may, at the owners’ option, be calculated only for the single passage to the repair port. (a) The expenses of removal shall include, inter alia, the cost of any necessary temporary repairs, wages and provisions of crew and/or runners, pilotage, towage, extra marine insurance, port charges, bunkers and stores. (b) Where by moving the vessel to or from the port of repair any new freight or hire is earned, such net earnings shall be deducted from the expenses of removal. The expenses of removing the vessel for repair shall be charged as follows: (a) Where the vessel is removed to the port of repair as an immediate consequence of damage for the repair of which underwriters are liable, or the vessel is necessarily taken out of service especially to effect repairs arising from that damage, the whole cost of removal shall be treated as part of the cost of repairing that damage, notwithstanding that the shipowner may have taken advantage of the removal to carry out survey for classification purposes or to effect other average repairs or repairs on his own account. However, where the vessel is removed for owners’ purposes, other than a routine overhaul as in 4(b) below, or as an immediate consequence of damage for which underwriters are not liable, no part of the cost of removal shall be charged to underwriters, notwithstanding that repairs for which they are liable may be carried out at the port of repair. (b) Where the vessel is removed to the port of repair for routine overhaul at which repairs on both owners’ and underwriters’ accounts are effected, the expenses of removal shall be apportioned pro rata to the cost (including drydock dues and general services) of all work effected at the port, other than to any damage sustained after the commencement of the removal passage and the cost of any major parts shipped to the repair port from elsewhere.

D2 Fuel and Stores used in Repairs of Damage to the Vessel That the cost of replacing fuel and stores consumed either in the repair of damage to a vessel, in working the engines or winches to assist in the repairs of damage, or in moving her to a place or repair within the limits of the port where she is lying, shall be treated as part of the cost of repairs. 304

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D3 Rigging Chafed Rigging injured by straining or chafing is not charged to underwriters, unless such injury is caused by blows of the sea, grounding, or contact; or by displacement, through sea peril, of the spars, channels, bulwarks, or rails.

D4 Sails Split or Blown Away Sails split by the wind, or blown away while set, unless occasioned by the ship’s grounding or coming into collision, or in consequence of damage to the spars to which the sails are bent, are not charged to underwriters.

D5 Dry Dock Expenses 1.

2.

3. 4.

That, in practice, where repairs, for the cost of which underwriters are liable, are necessarily effected in dry dock as an immediate consequence of the casualty, or the vessel is taken out of service especially to effect such repairs in dry dock, the cost of entering and leaving the dry dock, in addition to so much of the dock dues as is necessary for the repair of the damage, shall be chargeable in full to the underwriters, notwithstanding that the shipowner may have taken advantage of the vessel being in dry dock to carry out survey for classification purposes or to effect repairs on his account which are not immediately necessary to make the vessel seaworthy. (a) Where repairs on Owners’ account which are immediately necessary to make the vessel seaworthy and which can only be effected in dry dock are executed concurrently with other repairs, for the cost of which underwriters are liable, and which also can only be effected in dry dock, (b) Where the repairs, for the cost of which underwriters are liable, are deferred until a routine dry-docking and are then executed concurrently with repairs on Owners’ account which require the use of the dry dock, whether or not such Owners’ repairs affect the seaworthiness of the vessel, the cost of entering and leaving the dry dock, in addition to so much of the dock dues as is common to both repairs, shall be divided equally between the shipowner and the underwriters, irrespective of the fact that the repairs for which underwriters are liable may relate to more than one voyage or accident or may be payable by more than one set of underwriters. Sub-division between underwriters of the proportion of dry-docking expenses chargeable to them shall be made on the basis of voyages, and/or such other franchise units as are specified in the policies. In determining whether the franchise is reached the whole cost of dry-docking necessary for the repair of the damage, less the proportion (if any) chargeable to Owners when Section (a) of paragraph 2 applies, shall be taken into consideration, notwithstanding that there are other damages to which a portion of the cost of dry-docking has to be apportioned in ascertaining the amount actually recoverable.

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D6 Tankers – Treatment of the cost of Tank Cleaning and/or Gas-Freeing 1.

2.

3. 4.

5.

That, in practice, where repairs, for the cost of which underwriters are liable, require the tanks to be rough cleaned and/or gas-freed as an immediate consequence of the casualty, or the vessel is taken out of service especially to effect such repairs, the cost of such rough cleaning and/or gas-freeing shall be chargeable in full to the underwriters, notwithstanding that the shipowner may have taken advantage of the vessel being rough cleaned and/or gas-freed to carry out survey for classification purposes or to effect repairs on his account which are not immediately necessary to make the vessel seaworthy. (a) Where repairs on Owners’ account which are immediately necessary to make the vessel seaworthy and which require the tanks being rough cleaned and/or gas-freed are executed concurrently with other repairs, for the cost of which underwriters are liable, and which also require the tanks being rough cleaned and/or gas-freed, (b) Where the repairs, for the cost of which underwriters are liable, are deferred until a routine dry-docking or repair period, at which time repairs on Owners’ account which also require the tanks being rough cleaned and/or gas-freed are effected, whether or not such Owners’ repairs affect the seaworthiness of the vessel, the cost of such rough cleaning and/or gas-freeing as is common to both repairs shall be divided equally between the shipowners and the underwriters, irrespective of the fact that the repairs for which underwriters are liable may relate to more than one voyage or accident or may be payable by more than one set of underwriters. The cost of fine cleaning specifically for a particular repair or particular repairs shall be divided in accordance with the principles set forth above. Sub-division between underwriters of the proportion of rough tank cleaning and/or gas-freeing and/or fine cleaning chargeable to them shall be made on the basis of voyages, and/or such other franchise units as are specified in the policies. In determining whether the franchise is reached the whole cost of rough cleaning and/or gas-freeing and/or fine cleaning necessary for the repair of the damage, less the proportion (if any) chargeable to Owners when Section (a) of paragraph 2 applies, shall be taken into consideration, notwithstanding that there are other damages to which a portion of the cost of rough tank cleaning and/or gas-freeing and/or fine cleaning has to be apportioned in ascertaining the amount actually recoverable.

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. Metal sheathing is 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 one-third.

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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 first voyage.

D8 Scraping and Painting Where the Policy includes a Clause to the effect that: “No claim shall in any case be allowed in respect of scraping or painting the vessel’s bottom”. (a) (Gritblasting and/or other surface preparation of new bottom plates ashore and supplying and applying any “shop” primer thereto (b) Gritblasting and/or other surface preparation of: (i) the butts or area of plating immediately adjacent to any renewed or refitted plating damaged during the course of welding and/or repairs (ii) areas of plating damaged during the course of fairing, either in place or ashore (d) Supplying and applying the first coat of primer/anticorrosive to those particular areas mentioned in (a) and (b) above shall be allowed as part of the reasonable cost of repairs in respect of bottom plating damaged by an insured peril and shall be deemed not to be excluded by the wording of this Clause. The gritblasting and/or other surface preparation and the painting of all other areas of the bottom is excluded by the Clause.

SECTION E – PARTICULAR AVERAGE ON GOODS E1 Adjustment on Bonded Prices In the following cases it is customary to adjust particular average on a comparison of bonded, instead of duty-paid prices: In claims for damage to tea, tobacco, coffee, wine, and spirits imported into this country.

E2 Adjustment of Average on Goods Sold in Bond That in consequence of the facilities generally offered to bond goods at their destination, at which terms they are often sold, the term “Gross Proceeds” shall, for the purpose of adjustment, be taken to mean the price at which the goods are sold to the consumer, after payment of freight and landing charges, but exclusive of Customs duty, in cases where it is the custom of the port to sell or deal with the goods in bond.

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E3 Apportionment of Insured Value of Goods That where different qualities or descriptions of cargo are valued in the policy at a lump sum, such sum shall, for the purpose of adjusting claims, be apportioned on the invoice values where the invoice distinguishes the separate values of the said different qualities or descriptions; and over the net arrived sound values in all other cases.

E4 Allowance for Water and/or Impurities in Picked Cotton When bales of cotton are picked, and the pickings are sold wet, the allowance for water in the pickings (where there are no means of ascertaining it) is by custom fixed at one-third. There is a similar custom to deduct one-sixth from the gross weight of pickings of country damaged cotton to take account of dirt, moisture and other impurities.

E5 Allowance for Water in Cut Tobacco When damaged tobacco is cut off, the allowance for water in the cuttings is one-fourth if the actual increase cannot be ascertained.

E6 Allowance for Water in Wool Damaged wool from Australia, New Zealand, and the Cape is subject to a deduction of 3 per cent. for wet, if the actual increase cannot be ascertained.

SECTION F – GENERAL AVERAGE ADJUSTMENT UNDER ENGLISH LAW AND PRACTICE F1 Deckload Jettison 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.

F2 Damage by Water used to Extinguish Fire That damage done by water poured down a ship’s hold to extinguish a fire be treated as general average.

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F3 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 by smoke or heat however caused.

F4 Voluntary Stranding Where a ship is intentionally run on shore for the common safety, whether or not she might have been driven on shore, the consequent loss or damage shall be allowed as general average.

F5 Expenses Lightening a Ship when Ashore When a ship is ashore in a position of peril and, in order to float her, cargo is put into lighters, and is then at once re-shipped, the whole cost of lightering, including lighter hire and re-shipping, is general average.

F6 Sails set to force a Ship off the Ground 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.

F7 Stranded Vessels: Damage to Engines in Getting off 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.

F8 Resort to Port of Refuge for General Average Repairs: Treatment of the Charges Incurred That when a ship puts into a port of refuge in consequence of 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 Attwood v. Sellar.)

F9 Resort to Port of Refuge on Account of Particular Average Repairs: Treatment of The Charges Incurred 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 309

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been discharged in consequence 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.)

F10 Treatment of Costs of Storage and Reloading at Port of Refuge 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.

F11 Insurance on Cargo Discharged under Average That in practice, where the cost of insurance has been reasonably incurred by the shipowner, or his agents, on cargo discharged under average, such cost shall be treated as part of the cost of storage.

F12 Expenses at a Port of Refuge 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 seaworthy at the commencement of the voyage, the Custom of Lloyd’s is as follows: (a) All cost of towage, pilotage, harbour dues, and other extraordinary 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 safety, or to repair the ship, together with the cost of conveying it to the warehouse, is general average. 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 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 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 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. (f) 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, 310

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cargo, and freight, in such proportions as may place the several contributing interests in nearly the same relative positions as if the cargo has been landed and stored.

F13 Treatment of Costs of Extraordinary Discharge 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.

F14 Towage from a Port of Refuge 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 to 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.

F15 Cargo Forwarded from a Port of Refuge 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, 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 parties to the adventure.

F16 Cargo Sold at a Port of Refuge 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, with 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.

F17 Interpretation of the Rule Respecting Substituted Expenses 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 311

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the crew’s wages and provisions, if any, which would have been incurred at the port of refuge, if the vessel has been repaired there, and does not include supposed losses or expenses, such as interest, loss of market, demurrage, or assumed damage by discharging.

F18 Damage to Cargo, Fuel and Stores in Discharging etc. Damage to or loss of cargo, fuel or stores, sustained in consequence of their handling, 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. A Custom of Lloyd’s concerning cargo discharged at a port of refuge was rescinded in 1890/91, and an earlier Rule of Practice adopted in 1883 and confirmed in 1884 was rescinded in 1968/69. The text of the earlier Rule is printed in the report for 1884, p.37.

F19 Deductions from Cost of Repairs in Adjusting General Average Repairs to be allowed in general average shall not be subject to deductions in respect of “new for old” where old materials or parts are replaced by new unless the ship is over fifteen years old in which case there shall be a deduction of one third. The deductions shall be regulated by the age of the ship from the 31st December of the year of completion of construction to the date of the general average act, except for insulation, life and similar boats, communications and navigational apparatus and equipment, machinery and boilers for which the deductions shall be regulated by the age of the particular parts to which they apply. The deductions shall be made only from the cost of the new material or parts when finished and ready to be installed in the ship. No deduction shall be made in respect of provisions, stores, anchors and chain cables. Drydock and slipway dues and costs of shifting the ship shall be allowed in full. The costs of cleaning, painting or coating of bottom shall not be allowed in general average unless the bottom has been painted or coated within the twelve months preceding the date of the general average act in which case one half of such costs shall be allowed.

F20 Freight Sacrificed: Amount to be Made Good in General Average 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. 312

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F21 Basis of Contribution to General Average 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 contributing 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.

F22 CONTRIBUTORY VALUE OF FREIGHT That freight at the risk of the shipowner shall contribute to general average upon its gross amount, deducting such charges and crew’s wages as would not have been incurred in earning the freight had the ship and cargo been totally lost at the date of the general average act and have not been allowed as general average.

UNIFORMITY RESOLUTION York-Antwerp Rules 1924: Application of Rule XIV That, in practice, in applying Rule XIV of the York-Antwerp Rules, 1924, the cost of the temporary repair of the accidental damage there referred to shall be allowed in general average up to the saving to the general average by effecting such temporary repair, without regard to the saving (if any) to other interests.

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No. 94 Order for production of documents in marine insurance claim

IN THE HIGH COURT OF JUSTICE QUEEN’S BENCH DIVISION [ ] District Registry COMMERCIAL COURT Claim No Before The Hon. Mr Justice (name) [sitting in Private] Claimant Defendant An Application was made by [application notice/letter] dated (date) or by [Counsel] [solicitor] for (party) and was attended by ( ) The Judge read the written evidence filed IT IS ORDERED that: (1) the claimant and all other persons interested in this claim, and in the insurance the subject of this claim, give specific disclosure to the defendant, his solicitors or agents, of the classes of documents set out in the schedule to this order by (date) by list verified by witness statement/ affidavit specifying which documents or classes of documents; (a) are in his control, (b) have never been in his control, (c) have been but are no longer in his control, and in that case, when they last were and what has become of them. (2) the persons giving disclosure under paragraph (1) above give inspection to the defendant by (date), (3) the costs of this application are [summarily assessed in the sum of £ ] [to be the subject of a detailed assessment] and to be paid by (party). [(4) in the meantime all further proceedings be stayed.] 315

Appendix V

SCHEDULE OF DOCUMENTS 1.

all insurance slips, policies, letters of instruction or other orders for effecting the slips or policies, or relating to the insurance or the subject matter of the insurance on the ship (name of ship) or the cargo on board or the freight, 2. all documents relating to the sailing or alleged loss of the ship, cargo or freight and all correspondence with any person relating in any manner to (a) effecting insurance of the ship, cargo or freight or (b) any other insurance effected on the ship, cargo or freight on the voyage insured by the policy in this claim, or (c) any other policy effected on the ship, cargo or freight on the same voyage, 3. all correspondence between the captain or agent of the ship and any other person with the owner or any person before commencement of or during the voyage on which the alleged loss happened, 4. all books and documents, whatever their nature and whether originals, duplicates or copies, which in any way relate or refer to any matter in question in this claim.

316

Appendix VI

318

Appendix VI

THE MARINE INSURANCE ACT, 1906.

319

320

Appendix VI

THE MARINE INSURANCE ACT, 1906. BY SIR M. D. CHALMERS, K.C.B., C.S.L, DRAFTSMAN OF THE ACT AND DOUGLAS OWEN, OF THE INNER TEMPLE, BARRISTER-AT-LAW, LATE SECRETARY OF THE ALLIANCE MARINE AND GENERAL ASSURANCE CO., LTD.

321

Appendix VI

LONDON: WILLIAM CLOWES AND SONS, LIMITED, 7, FLEET STREET. 1907. PRINTED BY WILLIAM CLOWES AND SONS, LIMITED, LONDON AND BECCLES. THIS edition of the Marine Insurance Act, 1906, is in substance a third edition of the Digest of Marine Insurance, the second edition of which was published, in 1903, by Mr. Douglas Owen and myself. Owing to Mr. Owen’s absence abroad, I have, unfortunately, been deprived of his valuable assistance during the later stages of the preparation of this edition. The sections of the Act in the present edition correspond with the large type propositions in the Digest, which were taken from the Bill of 1903. A comparison of the sections with the large type propositions of the last edition will show what changes were effected in the measure during its passage through Parliament last year. Although the language of the Act is now authoritative it may, nevertheless, be useful to the profession to be referred to the authorities on which each proposition was founded, and the cases before the Act are still in point as illustrations in so far as the Act does not alter the existing law. References to the sixth edition of Arnould have been retained instead of references to the excellent seventh edition, because the sixth edition was used when the Bill was prepared. M. D. CHALMERS. February, 1907.

322

Appendix VI

INTRODUCTION TO FIRST EDITION OF DIGEST.

THE large type propositions of this ‘Digest are taken, with a few slight corrections, and with the necessary verbal alterations (such as the substitution of the indicative for the imperative), from the clauses of the Marine Insurance Bill, which was introduced in the House of Lords in 1894, 1895, 1896, and 1899. The object of that Bill was to reproduce as exactly as possible the existing law, without making any attempt to amend it. Lord Herschell, who originally took charge of the Bill, was strongly of opinion that a codifying Bill, in its inception, ought to be a mere reproduction of existing law. If amendments in the law are made in the initial stage, the whole Bill becomes controversial. Any amendment which seems desirable should be deliberately inserted by the Legislature when the Bill is under consideration. In some instances, of course, the Bill has to deal with questions where the law is unsettled, and the framers of the Bill must decide what they believe the law to be. In the Digest, propositions which appear to be unsettled law are included in square brackets, and the doubt is dealt with in the notes. Again, in one or two instances, the Lords Select Committee, which partially examined the Bill, introduced some small amendment in the law. In those cases the Digest reverts to the original drafts, and the point is mentioned in the notes. The law of marine insurance rests almost entirely upon common law. Only a few isolated points are dealt with by statute. The reported cases are very numerous, being over 2000 in number. On some points there is a plethora of authority. On other points of apparently equal importance the decisions are meagre, and not always satisfactory. Some important questions are still untouched by authority, and the rule depends on recognised commercial usage. Again, many of the older cases turn upon commercial conditions which are now obsolete. The subject, therefore, is not an easy one to deal with in a brief Digest. It would be altogether beyond the scope of this Digest to attempt even to refer to the great bulk of decided cases, much more so to endeavour to criticise them in detail. The objects of the Digest are twofold: first, to state the main principles of marine insurance law in brief consecutive propositions; and, secondly, to support those propositions, where possible, by references to leading cases, or cases containing good expositions of principle by eminent commercial judges. Each case is dated, and if a later case reviews previous cases only a reference to the later case is given. Where rules of law seem difficult to apply, illustrations drawn from decided cases are inserted after the section to show the application of the abstract proposition to concrete states of fact. After the list of cases referred to, there is added a list of important cases, which have been overruled, doubted, or explained. This list has no pretensions to completeness, but may be useful as far as it goes.

323

Appendix VI

Occasional reference is made to foreign codes by way of illustration, but no attempt has been made to compare the English rules systematically with any foreign code. The Marine Insurance Bill was first introduced by Lord Herschell in 1894. Its history up to the present time sufficiently appears from the following extract from the Memorandum attached to it, viz.: “The Bill is founded on the Bill which was introduced in 1894. Its provisions and suggestions received from various sources have been carefully considered by a Committee appointed by the late Lord Chancellor (Lord Herschell). The Committee met at first under the presidency of the late Attorney-General (Sir E. T. Reid, Q.C.), and afterwards under the presidency of Lord Herschell. It consisted of Mr. John Glover and Mr. Milburn, representing the shipowners, Mr. McArthur (Chairman of the Liverpool Chamber of Commerce, and Mr. Hogg, representing the average adjusters, and Mr. J. E. Street, Deputy Chairman of Lloyd’s, Mr. Douglas Owen, of the Alliance Marine and General Assurance Company, Mr. William Walton (legal adviser to Lloyd’s), representing the underwriters and insurance companies, Mr. C. B. Vallence, Chairman of the Liverpool Underwriters’ Association, and the draftsman, Mr. Chalmers.* “In dealing with rules of law, which may be modified by the stipulations of the parties, it is to be borne in mind that the certainty of the rule laid down is of more importance than its theoretical perfection. As Willes, J.,said in 1776, ‘In all commercial transactions the great object is certainty; it will therefore be necessary for the Court to lay down some rule, and it is of more consequence that the rule should be certain, than whether it is established one way or the other.’ (Lockyer v. Offley, 1 T. R. at p. 259. See, too, Sailing Ship Blairmore v. Macredie (1898), A. C. at p. 597, per Lord Halsbury.)What mercantile men require is a clear rule to provide for cases where the parties have either formed no intention or have failed to express it clearly. Where the rule of law is certain, the parties know when to stipulate and what to stipulate for.” The future which awaits the Bill is uncertain. Mercantile opinion is in favour of codification, but probably the balance of legal opinion is against it. As long as freedom of contract is preserved, it suits the man of business to have the law stated in black and white. The certainty of the rule laid down is of more importance than its nicety. It is cheaper to legislate than to litigate; moreover, while a moot point is being litigated and appealed, pending business is embarrassed. The lawyer,

*

After Lord Herschell’s death, Lord Chancellor Halsbury again took up the Bill, and introduced it in the House of Lords in 1899, but did not proceed with it. Further criticisms on the Bill were obtained from Lord Justice Mathew, the Eight Hon. Arthur Cohen, K.C., and other friends, and the Bill was again introduced in 1900. Lord Halsbury then appointed another committee, on which the underwriters, shipowners, and average adjusters were represented, and, presiding himself, went through the Bill with them clause by clause. After this conference the Bill was passed through the Lords, but it was always blocked in the House of Commons until, in 1906, it was taken up by Lord Chancellor Loreburn in conjunction with Lord Halsbury. In the Commons the Bill was sent to Grand Committee, and was in charge of the Solicitor-General. A good many amendments were made in committee and on the report stage, and most of them were agreed to, with occasional modification, when the Bill returned to the Lords.

324

Appendix VI

on the other hand, feels cramped by codification. Discussions on the wording of the Act in question have to take the place of discussions of principles. No code can provide for every case that may arise, or always use language which is absolutely accurate. The cases which come before lawyers are the cases in which the code is defective. In so far as it works well it does not come before them. Every man’s view of a question is naturally coloured by his own experience, and a lawyer’s view of commerce is perhaps affected by the fact that he sees mainly the pathology of business. He does not often see its healthy physiological action. If the Bill passes, this Digest may be useful as showing the foundations on which it was built up. If it does not pass, it is hoped that the Digest may be useful as a brief and succinct exposition of the existing law. I may add that I am mainly responsible for the purely legal part of this Digest, though I have had throughout the benefit of the criticisms of my colleague, Mr. Douglas Owen. M. D. C. January, 1901.

325

326

Appendix VI

CONTENTS.

PAGE1 PREFACEv INTRODUCTION TO FIRST EDITION OF DIGEST vii TABLE OF CASES CITED xvii TABLE OF CASES OVERRULED, ETC xxvii Marine Insurance. SECT. 1. Marine insurance defined 2. Mixed sea and land risks 3. Marine adventure and maritime perils defined

1 3 4

Insurable Interest. 4. Wagering or gaming contracts are void 5. Insurable interest defined 6. When interest must attach 7. Defeasible or contingent interest 8. Partial interest 9. Re-insurance 10. Bottomry 11. Master’s and seaman’s wages 12. Advance freight 13. Charges of insurance 14. Quantum of interest 15. Assignment of interest

8 10 13 15 16 16 18 18 19 20 20 22

Insurable Value. 16. Measure of insurable value

22

1

Please note these page references refer to the page numbers in the 1st (1907) edition and not the page numbers in the 11th (2019) edition.

327

Appendix VI

Disclosure and Representations. 17. Insurance is uberrimae fidei 18. Disclosure by assured 19. Disclosure by agent effecting insurance 20. Representations pending negotiation of contract 21. When contract is deemed to be concluded.

25 26 29 30 32

The Policy. 22. Contract must be embodied in policy 23. What policy must specify 24. Signature of insurer 25. Voyage and time policies 26. Designation of subject-matter 27. Valued policy 28. Unvalued policy 29. Floating policy by ship or ships 30. Construction of terms in policy 31. Premium to be arranged

33 34 35 36 37 39 42 43 44 44

Double Insurance. 32. Double insurance

45

Warranties, etc. 33. Nature of warranty 34. When breach of warranty excused 35. Express warranties 36. Warranty of neutrality 37. No implied warranty of nationality 38. Warranty of good safety 39. Warranty of seaworthiness of ship 40. No implied warranty that goods are seaworthy 41. Warranty of legality

47 49 50 51 52 53 53 57 59

The Voyage. 42. Implied condition as to commencement of risk 43. Alteration of port of departure 44. Sailing for different destination 45. Change of voyage 46. Deviation

60 61 61 62 63

328

Appendix VI

47. Several ports of discharge 48. Delay in voyage 49. Excuses for deviation or delay

64 65 66

Assignment of Policy. 50. When and how policy is assignable 51. Assured who has no interest cannot assign

67 68

The Premium. 52. When premium payable 53. Policy effected through broker 54. Effect of receipt on policy

69 70 72

Loss and Abandonment. 55. Included and excluded losses 56. Partial and total loss 57. Actual total loss 58. Missing ship 59. Effect of transhipment, etc 60. Constructive total loss defined 61. Effect of constructive total loss 62. Notice of abandonment 63. Effect of abandonment

72 78 79 80 81 81 87 88 92

Partial Losses (including Salvage and General Average and Particular Charges). 64. Particular average loss 65. Salvage charges 66. General average loss

94 95 97

Measure of Indemnity. 67. Extent of liability of insurer for loss 68. Total loss 69. Partial loss of ship 70. Partial loss of freight 71. Partial loss of goods, merchandise, etc 72. Apportionment of valuation 73. General average contributions and salvage charges 74. Liabilities to third parties 75. General provisions as to measure of indemnity

102 103 103 105 106 108 109 110 111

329

Appendix VI

76. Particular average warranties 77. Successive losses 78. Suing and labouring clause

112 115 116

Rights of Insurer on Payment. 79. Right of subrogation 80. Right of contribution 81. Effect of under insurance

119 123 123

Return of Premium. 82. Enforcement of return 83. Return by agreement 84. Return for failure of consideration

124 124 125

Mutual Insurance. 85. Modification of Act in case of mutual insurance

128

Supplemental. 86. Ratification by assured 87. Implied obligations varied by agreement or usage 88. Reasonable time, etc., a question of fact 89. Slip as evidence 90. Interpretation of terms 91. Savings 92. Repeals 93. Commencement 94. Short Title

130 130 132 132 133 134 137 137 137

SCHEDULE I. Form of Lloyd’s policy Rules for construction of policy

138 142

SCHEDULE II. Enactments repealed

153

CUSTOMARY DEDUCTIONS.

154

APPENDIX I. STATUTES. 54 & 55 Viet. c. 39 (Stamps) 56 & 57 Viet. c. 71 (Sale of Goods)

155 159

330

Appendix VI

57 & 58 Viet. c. 60 (Merchant Shipping) 1 Edw. 7, c. 7 (Continuation Clauses) 3 Edw. 7, c. 46 (Revenue Act)

159 159 160

APPENDIX II. NOTES. Note A. Definitions of marine insurance Note B. Definitions of barratry Note C. Definition of average Note D. Definition of abandonment Note E. Definition of piracy Note F. History of marine insurance Note G. Certain Rules of Practice of Association of Average Adjusters.

161 163 164 166 168 170 173

INDEX179

331

332

Appendix VI

TABLE OF CASES CITED. A Adams v. Mackenzie��78 Aitchison v. Lohre��2, 82, 95, 96, 103, 115, 116, 118 Ajam Ghulam v. Union Mar. Ins. Co��57 Allison v. Bristol Mar. Ins. Co��11, 19, 37 Allkins v. Jupe��9, 127 Alps, The��77 Alsace Lorraine, The��150 Anderson v. Morice��2, 8, 13, 14, 15, 38, 57 —v. Ocean Mar. Ins. Co��95 Anderson v. Pacific Mar. Ins. Co��30, 32 Anderson v. Thornton��31, 127 Angel v. Merchants Ins. Co.��39, 82, 83, 85 Anglo-Californian Bank v. London and Provincial Mar. Ins. Co��36, 102, 162 Annen v. Woodman��127 Anon��171 Appollinaris Co. v. Nord Deutsche Ins. Co.��151 Arrow Shipping Co. v. Tyne Improvement Commissioners��122 Asfar v. Blundell��80 Atkinson v. Great Western Ins. Co��163 Attorney-General for Hong Kong v. Kwok-a-Sing.��170 Atwood v. Sellar��132 Aubert v. Gray��147 B Bainbridge v. Neilson��89 Baines v. Holland��48, 49 Ballantyne v. Mackinnon��76, 96 Barber v. Fleming��10, 11, 15, 143 Barker v. Janson��39, 40 Baring Brothers v. Marine Ins. Co��112, 133 Barnard v. Faber��49 Barraclough v. Brown��122 Bates v. Hewitt��28 Bean v. Stupart��50 Bedouin, The��28, 31, 32, 77 Behn v. Burness��32, 50 Bell v. Bromfield��52 —v. Humphries��16 Bensaude v. Thames and Mersey Ins. Co��77 Benson v. Chapman��78, 84, 118 Bentsen v. Taylor��50 Berridge v. Man On Ins. Co.��9 Bhugwandass v. Netherlands Sea Ins. Co��33

333

Appendix VI Biccard v. Shepherd��53, 55, 56 Birkley v. Presgrave��100 Birrell v. Dryer��51 Blackburn v. Haslam��27, 29, 30 — v. Liverpool Steam Nav. Co��145 Blackburn v. Vigors��26, 28. 29, 30 Blackett v. Royal Exchange��114, 132 Blackhurst v. Cockell��53 Boehm v. Bell��5, 12, 15, 126 Bold v. Rotherham��81 Boston Fruit Co. v. British and Foreign Mar. Ins. Co.��35, 130 Bottomley v. Bovill��62 Bouillon v. Lupton.��54, 66, 67 Boulton v. Holder Bros.��25 Boyd v. Dubois��57, 146 Bradford v. Symondson��2, 16, 126, 127, 142 Brandon v. Curling��136 Brankelow v. Canton Ins. Office��72 Brigella, The��98,100 British Columbia Co. v. Nettleship��108 British Marine Mutual Ins. Co. v. Jenkins.��129 Brooks v. MacDonnell��116, 120 Broomfield v. Southern Ins. Co��18 Brongh v. Whitmore��23, 131, 141 Brown Brothers v. Fleming��108 Brown v. Tayleur��64 Browning v. Provincial Ins. Co��68, 87 Bruce v. Jones��40, 45, 123 Buchanan v. Faber��38 Burger v. Indemnity Mutual Mar. Ins. Co��111 Burges v. Wickham��56 Burnand v. Rodocanachi��40, 42, 119, 121, 122, 162 Byas v. Miller��130 Byrne v. Schiller��20 C. Cahill v. Davidson Cammell v. Sewell��70, 81 Carlton Steamship Co. v. Castle Mail Packets Co.��132 Carter v. Boehm��25, 26, 28 Castellain v. Preston��2, 20, 21, 121, 162, 167 Cator v. Great Western Ins. Co��108, 112 Chandler v. Blogg��111 Charlesworth v. Faber��17, 28, 37, 160 Chavasse, Ex parte��6 China Traders Assn. v. Royal Exchange��17 Chippendale v. Holt��17 City of Paris, The��77 Clapham v. Langton��54 Clay v. Harrison��15 Cochrane v. Fisher��51

334

Appendix VI Col. Ins. of New Zealand v. Adelaide Ins. Co.��14, 15 Company of African Merchants v. British Ins. Co.��65 Company of South African Merchants v. Harper��42 Cornfoot v. Royal Exchange��144 Cory v. Burr��59, 72, 75, 147, 163 — v. Patton��30, 33, 133 Cossman v. West��79, 80 Cousins v. Nantes��8 Crocker v. Sturge��17 Cronan v. Stanier��118 Crooks v. Allan��101 Crowley v. Cohen��11 Cullen v. Butler��149 Cunard v. Hyde��. 59 Cunard Co. v. Marten��5, 11, 110, 117, 118, 119 Currie v. Bombay Ins. Co.��88, 117, 132 D. Dalby v. Ind. Life Ass. Co.��162 Daniels v. Harris��55, 56 Darrell v. Tibbitts��119 Davidson v. Burnand��74, 111 Davies v. National Ins. Co. of New Zealand��4, 43 Davis v. Garrett��63 Dean v. Hornby��89 De Cuadra v. Swann��55 De Hahn v. Hartley��48, 50 De Hart v.Compania Anonima Aurora��99 Delany v. Stoddart��66 De Mattos v. North��9 — v. Saunders��84, 112 Denoon v. Home and Colonial Ass. Co.��38, 40, 42, 105, 134, 151 Dent v. Smith��52, 74 Devaux v. Salvador��72, 76, 111 — v. Steele��10 De Wolf v. Archangel Ins. Co��60 Dickinson v. Jardine��98, 99, 100, 120, 132 Difiori v. Adams��64 Dixon v. Sadler��54, 55, 56, 73 — v. Stansfeld��70 — v. Wentworth��117 Dora Foster, The��116 Driefontein Consolidated Mines v. Janson��136 Dudgeon v. Pembroke��54, 55, 59, 141 Duff v. Mackenzie��112, 113 Dufourcet v. Bishop��20, 21, 121 Duus Brown & Co. v. Binning��116 E. Earle v. Rowcroft��163 Ebsworth v. Alliance Mar. Ins. Co��16,20,21 Eden v. Parkinson��52

335

Appendix VI Edwards v. Aberayron Mutual Ins. Society��34, 129 Eglinton v. Norman��122 Elgood v. Harris��70 Elton v. Brogden��66 Empress Ass. Cor. v. Bowring��70, 133 F. Falcke v. Scottish Ins. Co.��97 Farnworth v. Hyde��79, 83, 84, 89 Fawcus v. Sarsfield��54 Field Steamship Co. v. Burr��75, 104 Fisher v. Liverpool Mar. Ins. Co��33 Fisher v. Smith��70, 71 Fisk v. Masterman��127, 128 Fleming v. Smith��79, 83, 87 Fletcher v. Alexander��99, 107 Flint v. Flemyng��133, 151 Foley v. United Mar. Ins. Co.��143 Forwood v. North Wales Ins. Co��78 Francis v. Boulton��79, 107 — v. Sea Ass. Co.��6 G. Gamba v. Le Mesurier��59 Gambles v. Ocean Ins. Co.��36 Gardner v. Salvador��83 Garrels v. Kensington��52 Gedge v. Royal Exchange Ass. Corpn��6, 9, 59 General Ins. Co. of Trieste v.Cory��50 Gibson v. Small��55 Gledstanes v. Royal Exchange Ass. Corpn��43, 142 Glenlivet, The��146 Glover v. Black��39 Goodwin v. Robarts��132 Gordon v. Rimington��146 Gorsedd Steamship Co. v. Forbes��125 Grainger v. Martin��83 Grant v. King��61 Great Indian Peninsular Railway v. Saunders��113 Green v. Brown��80 Greenock Steamship Co. v. Maritime Ins. Co.��44, 54, 56, 76 Greer v. Poole��74, 109, 135 Guthrie v. North China Ins. Co.��85 H Haabet,The��18 Hagedorn v. Whitmore��112 Hall v. Janson��19 Hamilton v. Pandorf��73, 75, 146 Hansen v. Dunn��81 Harding v. Bussell��25 Harris v. Scaramanga��98 Harrower v. Hutchinson��26

336

Appendix VI Hart v. Standard Mar. Ins. Co��51,131,141 Haughton v. Empire Mar. Ins. Co��53, 141, 143 Haywood v. Rodgers��27 Henderson v. Shankland��104, 109 Hickie v. Rodocanachie��92 Hill v. Patten��24 Hine v. Steamship Ins. Syndicate��70 Hobbs v. Hannam��21 Hogarth v. Walker��23, 24 Home Mar. Ins. Co. v. Smith��35, 172 Hore v. Whitmore��50 Hoskins v. Pickersgill��24 Houlder v. Merchants Mar. Ins. Co��144 Houstman v. Thornton��89, 120 Hunter v. Northern Mar. Ins. Co��64 Hunter v. Potts��73 Hydarnes S.S. Co. v. Indemnity Mutual Mar. Ass. Co.��141 Hyderabad (Deccan) Co. v. Willoughby��4, 44, 66 I Imperial Mar. Ins. Co. v. Fire Ins. Corpn��43 Inchmaree, The. See Thames and Mersey Mar. Ins. Co. v. Hamilton. Inglis v. Stock��16 Inman v. Bischoff��7, 76, 77 lonides v. Pacific Mar. Ins. Co.��21, 30, 32, 34, 35, 132, 133 lonides v. Fender��26, 27, 31, 42, 164 — v. Universal Mar. Ins. Assn��74 Iredale v. China Traders Ins. Co.��75, 97 Irving v. Richardson��20, 39 r. Manning��39, 41, 42, 43, 82, 85, 103, 106 J. Jackson v. Mumford��3 Jackson v. Union Mar. Ins. Co��72, 77, 85 Jacobs v. Gaviller��4 Jamieson, Re.��77, 85 Janson v. Driefontein Cons. Mines��4, 137 Jardine v. Leathly��91 Johnson v. Sheddon��107 Johnston v. Hogg��148 — v. The Salvage Assn��119 Jones v. Neptune Ins. Co.��143 — v. Nicholson��164 Joyce v. Kennard��3, 110, 162 Juarez v. Williams��70 K Kaltenbach v. Mackenzie��79, 81, 87, 88, 89, 91, 168 Keighley v. Durant��130 Keith v. Protector Mar. Ins. Co��10 Kellner v. Le Mesurier��6, 59, 125

337

Appendix VI Kemp v. Halliday.��82 Kent v. Bird��2 Kidston v. Empire Ins. Co.��94, 112, 113, 116, 117, 165 King v. Victoria Ins. Co.��4, 121, 122 King v. Walker��78 Knight of St. Michael, The.��75, 146, 149 Knill v. Hooper��56 Koebel v. Saunders��57, 58, 73 L. Laing v. Union Ins. Co.��26 Lane v. Nixon��57 Laurie v. West Hartlepool Indemnity Assn.��67 Laveroni v. Drury��73 Law v. Hollingworth.��56 Lawrence v. Aberdein��74 Lawther v. Black��38, 114 Le Cheminant v. Pearson��115, 141 Lee v. Southern Ins. Co.��117 Leitrim, The��77 Letchford v. Oldham��150 Lewis v. Rucker��42, 106 Lidgett v. Secretan��37, 40, 42, 116, 143, 144 Lion Ins. Assn. v. Tucker��129 Lishman v. Northern Mar. Ins. Co��133 Livie v. Janson��115 Lloyd v. Fleming��2, 12, 67, 68, 69, 162 Lockyer v. Offley��163 Lohre v. Aitchison��79, 82, 102, 116 London Assurance v. Williams��90, 92 Lower Rhine Ins. Assn. v. Sedgwick��17 Lucena v. Crauford��8, 9, 10, 12, 15, 18, 21, 162 Lysaght v. Coleman��108 M Macdowell v. Frazer��30 Mackenzie v. Whitworth��7, 37 38, 39, 152, 172 Main,The��39, 40, 41, 42, 105 Manchester Liners v. British and Foreign Mar. Ins. Co.��77 Manfield v. Maitland.��10, 11 Maori King, The��58 Margetts v. Ocean Guarantee Corpn��111 Marine Ins. Co. v. China Trans-Pacific Co. (Vancouver case)��104, 114 Marine Mutual Ins. Assn. Ltd. v. Young��128 Maritime Ins. Co. v. Stearns��17, 61 Marsden v. Reid��65, 141 Marten v. Nippon��144 — v. Steamship Owners Assn��17 Mary Thomas, The��98, 99, 109 Mason v. Sainsbury��168 Mavro v. Ocean Mar._ Ins. Co.��99 McSwinney v. Royal Exchange��37 Mead v. Davison��33, 142 Mercantile Marine Ins. Co. v. Titherington��144

338

Appendix VI Mercantile Steamship Co. v. Tyser��27 Metcalfe v. Parry.��65 Meyer v. Ralli��84, 117 Middlewood v. Blakes��63, 64 Midland Ins. Co. v. Smith��121 Mildred v. Maspons��69, 70 Miller v. Law Accident Ins. Co��148 — v. Woodfall��92 Montgomery v. Indemnity Mutual Mar. Ins.��95, 96, 98, 99 Montoya v. London Assurance��73 Moran, Galloway & Co. v. Uzielli��2, 5, 11, 13, 23 Morgan v. Oswald��136, 137 — v. Price��45 Morrison v. Universal Mar. Ins. Co��25, 27, 33 Moss v. Smith��2, 81, 82, 85, 86 Muirhead v. Forth Mutual Ins. Assn��41 Munroe, The��111 N. Navone v. Haddon��112 Naylor v. Taylor��66 Nelson v. Empress Ass. Co.��17 Nesbitt v. Lushington��148 Newby v. Reed��45, 123 Nickells v. London and Provincial Mar. Ins. Co.��61 Nigel Gold Mining Co. v. Hoade��136 Niobe, The��110, 111 North Atlantic Steamship Co. v. Barr��82 North British Ins. Co. v. London, etc. Ins. Co.��20, 21, 45, 47, 123 North British Ins. Co. v. Moffatt��11 North Eastern Steamship Assn. v. Red “ S “ Steamship Co��129 North of England Oil Cake Co. v. Archangel Mar. Ins. Co��22, 68, 69 North of England Ins. Assn. v. Armstrong��40, 121, 122 Notara v. Henderson��118 Nourse v. Liverpool Sailing Ship Assn��97 O Ocean Iron Steamship Assn. v. Leslie��1, 21, 34, 129, 130 Ocean Steamship Co. v. Anderson��97 Oceanic Steamship Co. v. Faber��7 Oppenheim v. Fry��113 O’Reilly v. Royal Exchange Ass. Co.��67 P Padstow Ass. Assn., Re��129 Page v. Fry��16 Palmer v. Blackburn��23, 132 — v. Fenning��61 — v. Marshall��142 Palyart v. Leckie��127 Parker v. Budd��82 Parkin v. Tunno��61 Parkinson v. Collier��132 Paterson v. Harris��145

339

Appendix VI Pawson v. Watson��30, 48 Pearson v. Commercial Union Ass. Co��64, 65 Pellas v. Neptune Ins. Co.��68 Phillpott v. Swann��78, 85 Pickup v. Thames Ins. Co.��57 Pickwick, The��118 Pink v. Fleming��73, 75 Pipon v. Cope��59 Pirie v. Middle Dock Co.��146 Pitman v. Universal Mar. Ins. Co��2, 103, 104, 105 Pomeranian, The��118, 133 Powles v. Innes��22, 69 Price v. A 1 Small Damage Assn��94, 113, 150 Price v. Maritime Ins. Co.��5, 18, 114 Proudfoot v. Montefiore��26, 28 Provincial Ins. Co. v. Leduc.��48, 50, 88, 89 Puller v. Glover��66 Q. Quebec Mar. Ins. Co. v. Commercial Bank of Canada��3, 48, 50, 53, 54, 56 R Ralli v. Janson��112, 114 Rankin v. Potter��5, 13, 39, 78. 79, 82, 85, 86, 87, 89, 90, 91, 92, 94, 105, 119, 167 Rayner v. Preston��6, 22 Redmond v. Smith��60 Red Sea, The��93 Reg. v. McCleverty��170 Reischer v. Borwick��72 Rhind v. Wilkinson��13 Rivaz v. Gerussi��26, 27, 30, 31 Roberts v. Security Co. Ltd.��36, 72, 162 Robinson Gold Mining Co. v. Alliance Mar. Ass. Co.��148 Roddick v. Indemnity Mar. Ins. Co��10, 25, 50 Rodocanachi v. Elliott��3, 4, 82, 84,86 Ross v. Hunter��66 Roux v. Salvador��78,79, 80, 82, 85,87 Rowland v. Maritime Ins. Co.��83 Royal Exchange v. Vega��37, 136, 160 Ruabon Steamship Co. v. London Assurance��104, 114 Russell v. Erwin.��150 — v. Thornton��29 Rnys v. Royal Exchange��90 S. Sadler v. Dixon��56 Sailing Ship Blairmore v. Macredie��78, 82, 85, 90, 91, 103 St. Paul Fire & Mar. Ins. Co. v. Morice��148, 149 Salacia, The��20 Samuel v. Royal Exchange��65, 144 Scaramanga Stamp��66 Schloss Brothers v. Stevens��4, 7

340

Appendix VI Scott, v. Mannheim Ins. Co.��152 Scottish Marine Ins. Co. v. Turner��84, 92 Seagrave v. Union Mar. Ins. Co.��10, 12, 42 Sea Ins. Co. v. Blogg��51 —v. Hadden��92, 93, 121 Seaton v. Heath��25, 162 Sellar v. McVicar��61 Sharpe v. Gladstone.��93, 96 Shee v. Clarkson.��124 Shelbourne v. Law Investment Ins. Co.��3, 73, 111 Shepherd v. Henderson��81 Shoolbred v. Nutt.��27 Sibbald v. Hill��31 Simon Israel & Co. v. Sedgwick��61, 62 Simpson v. Thompson��93, 119, 120, 121, 122, 168 Simpson Steamship Co. v. Premier Underwriting Assn.��51, 62 Sleigh v. Tyser��50, 57, 133 Small v. U. K. Mar. Ins. Assn��21, 76, 164 Smith v. Pyman��19 South British F. & M. Ins. Co. v. Da Costa��17 South Staffordshire Tramways v. Sickness Ass. Assn.��36 Spalding v. Crocker��134 Sparkes v. Marshall��14, 15 Spence v. Union Mar. Ins. Co.��78, 80, 108 Stainbank v. Fenning.��10, 18 Steamship Balmoral v. Marten��41, 95, 110 Steamship Carisbrook Co. v. London & Provincial Mar. Ins. Co��100, 173 Stearns v. Village Main Reef Co��121 Steel v. Lacey��52 Stephens v. Australasian Ins. Co.��43, 132 Stewart v. Greenock Ins. Co.��92, 122 — v. Merchants Mar. Ins. Co.��37, 114, 115 Stewart v. Steele��104, 105 Stockdale v. Dunlop��12 Strang, Steel and Co. v. Scott��101 Stringer v. English Mar. Ins. Co��91 Sutherland v. Pratt��13 Svensden v. Wallace��97, 98 Sweeting v. Pearce��70, 132 T. Tasker v. Cunningham��62 Tate v. Hyslop��26, 27 Tatham v. Burr��5, 111, 141 — v. Hodgson��73 Taylor v. Dunbar��73 — v. Liverpool G. W. Steam Co��147 Thames and Mersey Mar. Ins. Co. v. Hamilton��5, 7, 73, 75, 145, 149 Thames and Mersey Mar. Ins. Co. v. Pitts��146, 150 Thompson v. Hopper��73 — v. Reynolds.��40 Tobin v. Harford��42, 106 Todd v. Ritchie��164

341

Appendix VI Trinder v. Thames and Mersey Mar. Ins. Co.��51, 59, 72, 73, 76, 90 Tudor��62 Tunno v. Edwards��120 Turnbull v. Janson��54 — v. Hull Underwriters’ Assn��77 Turquand, Ex parte��132 Tyser v. Shipowners’ Syndicate��36 U. Union Mar. Ins. Co. v. Borwick�� Ill Union Mar. Ins. Co. v. Martin��46 United States Shipping Co. v. Empress Ass. Cor��23, 105 Universal Ins. Co. v. Merchants Mar. Ins. Co.��70 Universo Ins. Co. v. Merchants Mar. Ins. Co.��71, 132 Usher v. Noble��20, 23, 107 Uzielli v. Boston Mar. Ins. Co.��16, 17, 89, 96, 118 V. Vagliano v. Bank of England��137 Vancouver, The. See Marine Ins. Co. v. Chiua Trans-Pacific Co. Vaudyck v. Hewitt��127 Vortigern, The��54, 56 W Waugh v. Morris��60 Wavertree Co. v. Love��135 Way v. Modigliani��61 Wells v. Hopwood��150 Western Ass. Co. (Toronto) v. Poole��17 Western Ins. Co., Ex parte��17 West of England Fire Ins. Co. v. Isaacs��121 Westport Coal Co. v. McPhail��76, 164 Westwood v. Bell��70 Wetherell v. Jones��6 Whincup v. Hughes��128 Williams v. Canton Ins. Office��75, 80 — v. North China Ins. Co��42, 130 Wilson v. Jones��4, 8, 9, 10, 11, 12, 16, 38 — v. Martin��10 — v. Nelson��39 — v. Owners of Cargo, per Xantho��146 Wilson v. Rankin��59 — v. Salamandra Ass. Co.��26 Wingate v. Foster��64 Woodside v. Globe Ins. Co.��3, 41 Woolridge v. Boydell X. Xantho, The��73, 146 Xenos v. Fox��. 40, 111, 117 — v. Wickham��36, 69 Y Yates v. White��21, 168

342

Appendix VI

TABLE OF CASES OVERRULED, ETC. Adams v. Mackenzie (1863), 13 C. B. (N. S.) 446; discussed, SAILING SHIP BLAIRMORE v. MACREDIE (1898), A. C. at p. 598. Aitchison v. Lohre (1879), 4 App. Cas. 755; explained MONTGOMERY v. INDEMNITY MAR. INS. Co. (1900), 6 Com. Cas. at p. 23. Alps, The (1893), P. 109; followed and approved, THE BEDOUIN (1894), P. 1, C. A. Anderson v. Morice (1876), 1 App. Cas. 713; distinguished, COLONIAL INS. Co. OF NEW ZEALAND v. ADELAIDE MAR. INS. Co. (1886), 12 App. Cas. at p. 135. Assecurazioni Generali v. SS. Bessie Morris (1892), 1 Q. B. 571; affirmed, (1892) 2 Q. B. 652, C. A. Atwood v. Sellar (1880), 5 Q. B. D. 286, C. A.; discussed, SVENSDEN v. WALLACE (1885), 10 App. Cas. 404. Barber v. Fleming (1869), L. R. 5 Q. B. 59; followed, FOLEY v. UNITED FIRE AND MAR. INS. Co. (1870), L. R. 5 C. P. 155. Barker v. Janson (1868), L. R. 3 C. P. 303; discussed, LIDGETT v. SECRETAN (1871), L. R. 6 C. P. at p. 628. Beatson v. Haworth (1786), 6 T. R. 531; explained, MARSDEN v. REID (1803), 4 East at p. 577. Beaver Line v. London and Provincial Ins. Co. (1899), 5 Com. Cas. 269; discussed, ANGEL v. MERCHANTS MAR. INS. Co. (1903), 1 K. B. at p. 825, C. A. Blackburn v. Vigors (1887), 12 App. Cas. 531; considered, BLACKBURN v. HASLAM (1888), 21 Q. B. D. 144. Blackett v. Royal Exchange (1832), 2 C. & J. 244; distinguished, STEWART v. MERCHANTS MAR. INS. Co. (1885), 16 Q. B. D. 619, C. A. Booth v. Gair (1864), 33 L. J. C. P. 99; explained, KIDSTON v. EMPIRE INS. Co. (1866), L. R. 1 C. P. at p. 549. Brigella, The (1893), P. 195; overruled MONTGOMERY v. INDEMNITY MUTUAL MAR. INS. Co. (1902), 1 K. B. 734, C. A. Burnand v. Rodocanachi (1882), 7 App. Cas. 382; distinguished, STEARNES v. VILLAGE REEF MINING Co. (1904), 10 Com. Cas. 89, C. A. Cator v. Great Western Ins. Co. (1873), L. R. 8 C. P. 592; distinguished, BROWN BROTHERS v. FLEMING (1902), 7 Com. Cas. 245. Conway v. Gray (1809), 10 East, 547; disapproved, AUBERT v. GRAY (1861), 3 B. & S. 163. Cory v. Patton (1872), L. R. 7 Q. B. 304; followed, LISHMAN v. NORTHERN MAR. INS. Co. (1875), L. R. 10 C. P. 179, Ex. Ch. Cullen v. Butler (1816), 5 M. & S. 461; approved, THAMES AND MERSEY MAR. INS. Co. v. HAMILTON (1884), 12 App. Cas. at p. 501. Davy v. Milford (1812), 15 East, 559; explained, RALLI v. JANSON (1856), 6 E. & B. at p. 431. De Mattos v. North (1868), L. R. 3 Ex. 185; followed, BERRIDGE v. MAN ON INS. Co. (1887), 18 Q. B. D. 346, C. A. Devaux v. 1’Anson (1839), 5 Bing. N. C. 519, 540; criticised, THAMES AND MERSEY MAR. INS. Co. v. HAMILTON (1884), 12 App. Cas. at p. 496, H. L. Dickinson v. Jardine (1868), L. R. 3 C. P. 639; discussed, THE MARY THOMAS (1894), P. at pp. 114, 118; THE KNIGHT OF ST. MICHAEL (1898), P. at p. 34; MONTGOMERY v. INDEMNITY INS. Co. (1902), 1 K. B. at p. 741, C. A.

343

Appendix VI Dixon v. Whitworth (1879), 4 C. P. D. 371; reversed, DIXON v. WHITWORTH (1880), 4 Asp. Mar. Cas. 327, C. A., and W. N. (1880), p. 43. Eglinton v. Norman (1877), 3 Asp. Mar. Cas. 471; overruled, ARROW SHIPPING Co. v. TYNE COMMISSIONERS (1894), A. C. 508, H. L. Farnworth v. Hyde (1865), 18 C. B. (N. S.) 835; reversed on one point, FARNWORTH v. HYDE (1866), L. R. 2 C. P. 204, Ex. Ch.; see at p. 226. Farnworth v. Hyde (1866), L. R. 2 C. P. 204, Ex. Ch.; criticised, MCARTHUR, Ed. 2, p. 151; LOWNDES, Ed. 2, p. 137. Fawcus v. Sarsfield (1856), 6 E. & B. 192; explained, DUDGEON v. PEMBROKE (1877), 2 App. Cas. 284. Fttzherbert v. Mather (1785), 1 T. R. 12; commented on, BLACKBURN v. VIGORS (1887), 12 App. Cas. 531. Forbes v. Aspinall (1811), 13 East, 323; discussed, UNITED STATES SHIPPING Co. v. EMPRESS ASS. CORPN. (1907), 1 K. B. 259. Garston Sailing Ship v. Hickie (1885), 15 Q. B. D. 580; discussed, HUNTER v. NORTHERNMAR. INS. Co. (1888), 13 App. Cas. 717. Gibson v. Small (1852), 4 H. L. C. 353; distinguished, COUCH v. STEEL (1854), 3 E. & B. at pp. 407, 408; followed, DUDGEON v. PEMBROKE (1877), 2 App. Cas. 284. Gladstone v. King (1813), 1 M. & S. 35; disapproved, BLACKBURN v. VIGORS (1887), 12 App. Cas. at pp. 530, 540. Great Indian Peninsular Ry. Co. v. Saunders (1861), 1 B. & S. 41; 2 B. & S. 266; explained, KIDSTON v. EMPIRE INS. Co. (1866), L. R. 1 C. P. at p. 548. Hagedorn v. Oliverson (1814), 2 M. & S. 485; followed, CORY v. PATTON (1874), L. K. 9 Q. B. 577, Ex. Ch. Hamilton v. Mendes (1761), 2 Burr. 1198; discussed, RUYS v. ROYAL EXCHANGE (1897), 2 Q. B. at p. 138. Harris v. Scaramanga (1872), L. B. 7 C. P. 481; followed, DE HART v. COMPANIA ANONIMA “ AURORA” (1903), 2 K. B. 503, C. A. Havelock v. Hancill (1789), 3 T. R. 277; discussed, CORY v. BURR (1883), 8 App. Cas. at p. 399. Hicks v. Shield (1857), 7 E. & B. 633; discussed, ALLISON v. BRISTOL MAR. INS. Co. (1876), 1 App. Cas. at p. 221. Holdsworth v. Wise (1828), 7 B. & C. 794; discussed, SAILING SHIP BLAIRMORE v. MACREDIE (1898), A. C. at p. 609. Hurst v. Usborne (1856), 18 C. B. 144; doubted, RANKIN v. POTTER (1873), L. R. 6H. L. at p. 117. Hydarnes Steamship Co. v. Indemnity Mutual Mar. Ins. (1894), 2 Q. B. 500; reversed (1895), 1 Q. B. 500, C. A. Jackson v. Union Mar. Ins. Co. (1874), L. R. 10 C. P. 125; distinguished, INMAN STEAMSHIP Co. v. BISHOFF (1882), 7 App. Cas. at p. 676; followed, Re JAMIESON (1895), 1 Q. B. at p. 95, C. A. Joyce v. Kennard (1871), L. R. 7 Q. B. 78; discussed, CUNARD STEAMSHIP Co. v. MARTEN (1902), 2 K. B. at p. 629. Kirchner v. Venus (1859), 12 Moore P. C. 361; explained, ALLISON v. BRISTOL MAR. INS. Co. (1876), 1 App. Cas. 209, at p. 224. Kleinwort v. Shepard (1859), 1 E. & E. 447; discussed, CORY v. BURR (1883), 8 App. Cas. at p. 396. Knight v. Faith (1850), 15 Q. B. 649; criticised, RANKIN v. POTTER (1873), L. R. 6 H. L. at pp. 102, 130; TRINDER v. THAMES AND MERSEY INS. Co. (1898), 2 Q. B. at p. 119, C. A. Laveroni v. Drury (1853), 22 L. J. Ex. 2; discussed, HAMILTON v. PANDORF (1887), 12 App. Cas. at p. 523.

344

Appendix VI Law v. Hollingsworth (1797), disapproved, DIXON v. SADLER (1839), 5 M. & W. at p. 408; disapproved with a qualification, SADLER v. DIXON (1841), 8 M. & W. at p. 900, Ex. Ch. Le Cheminant v. Pearson (1812), 4 Taunt. 367, 380; discussed, AITCHISON v. LOHRE (1879), 4 App. Cas. at p. 763. Lewis v. Rucker (1761), 2 Burr. 1167; discussed, IRVING v. MANNING (1847), 1 H. of L. Cas. at p. 305; Duus BROWN & Co. v. BINNING (1906), 11 Com. Cas. at p. 194. Livie v. Janson (1812), 12 East, 647; explained, IONIDES v. UNIVERSAL MAR. INS. Co. (1863), 14 C. B. (N. S.) at p. 294; LIDGETT v. SECRETAN (1871), L. R. 6 C. P. at p. 625. Lohre v. Aitchison (1878), 3 Q. B. D. 558, C. A.; reversed, AITCHISON v. LOHRE (1879), 4 App. Cas. 755. Mason v. Sainsbury (1748), 1 Ves. Sen. 98; explained, SIMPSON v. THOMPSON (1877), 3 App. Cas. at p. 293. Moss v. Smith (1850), 9 C. B. 94; approved, AITCHISON v. LOHRE (1879), 4 App. Cas. at p. 762. North Britain, The (1894), P. 77; approved, TATHAM v. BURR (1808), A. C. 382, H. L. North of England Ins. Assn. v.Armstrong (1870), L. R. 5 Q. B. 244; doubted, BURNAND v. RODOCANACHI (1882), 7 App. Cas. at p. 342. Palmer v. Blackburn (1822), 1 Bing. 61; followed, UNITED STATES SHIPPING Co. v. EMPRESS Ass. CORPN. (1907), 1 K. B. 259. Parmeter v. Todhunter (1808), 1 Camp. 541; disapproved, CURRIE v. BOMBAY NATIVE INS. Co. (1869), L. R. 3 P. C. at p. 78. Pink v. Fleming (1890), 25 Q. B. D. 396; distinguished, SCHLOSS BROTHERS v. STEVENS (1906), 11 Com. Cas. at p. 279. Pipon v. Cope (1808), 1 Camp. 434; explained, TRINDER v. THAMES AND MERSEY MAR. INS. Co. (1898), 2 Q. B. at p. 129, C. A. Pitman v. Universal Mar. Ins. Co. (1882), 9 Q. B. D. 192, C. A.; discussed, MARINE INS. Co. v. CHINA STEAMSHIP Co. (1886), 11 App. Cas. at p. 590. Powell v. Hyde (1855), 5 E. & B. 607; discussed, CORY v. BURR (1883), 8 App. at p. 396. Price v. A 1 Ships’ Small Damage Assn. (1889), 22 Q. B. D. 580, C. A.; criticised, MCARTHUR, ED. 2, p. 386. Proudfoot v. Montefiore (1866), L. R. 2 Q. B. 511, 521; approved, BLACKBURN v. VIGORS (1887), 12 App. Cas. at p. 537. Randal v. Cockran (1748), 1 Ves. Sen. 98; distinguished, BURNAND v. RODOCANACHI (1882), 7 App. Cas. at p. 339. Rankin v. Potter (1873) L. R. 6 H. L. 83; discussed, KALTENBACH v. MACKENZIE (1878), 3 C. P. D, at pp. 474, 480, C. A. Rosetto v. Gurney (1851), 11 C. B. 176; approved, FARNWORTH v. HYDE (1866), L. R. 20. P. 204, Ex. Ch. Roux v. Salvador (1836), 3 Bing. N. C. 266; discussed, FARNWORTH v. HYDE (1865), 18 C. B. (N. S.) at p. 856; TRINDER v. THAMES AND MERSEY MAR. INS. Co. (1898), 2 Q. B. at p. 119, C. A. Sailing Ship Garston v. Hickie (1885), 15 Q. B. D. 580; discussed, HUNTER v. NORTHERN, MAR. INS. Co. (1888), 13 App. Cas. 717. Scottish Mar. Ins. Co. v. Turner (1853), 1 Macq. H. L. 334; discussed, RANKIN v. POTTER (1873), L. R. 6 H. L. at p. 100. Smith v. Reynolds (1856), 1 H. & N. 221; followed, BERRIDGE v. MAN ON INS. Co. (1887), 18 Q. B. D. 346, C. A. Sparkes v. Marshall (1836), 2 Bing. N. C. 761; explained, ANDERSON v. MORICE (1876), 1 App. Cas. at p. 735. Stephens v. Australasian Ins. Co. (1873), L. R. 8 C. P. 18; discussed, IMPERIAL MAR. INS. Co. v. FIRE INS. CORPN. (1856), 4 C. P. D. 166.

345

Appendix VI Stribley v. Imperial Mar. Ins. Co. (1876), 1 Q. B. D. 507; disapproved, BLACKBURN v. VIGORS (1887), 12 App. Cas. at p. 540. Thompson v. Hopper (1856), 6 E. & B. 172; reversed, THOMPSON v. HOPPER (1858), E. B. & E. 1038; discussed and explained, DUDGEON v. PEMBROKE (1877), 2 App. Cas. 284. Thompson v. Taylor (1795), 6 T. R. 478; followed, FOLEY v. UNITED MAR. AND FIRE INS. Co. (1870), L. R. 5 C. P. 155. Thornely v. Hobson (1819), 2 B. & Ald. 513; discussed, COSSMAN v. WEST (1887), 13 App. Cas. at pp. 177, 178. Uzielli v. Boston Mar. Ins. Co. (1884), 15 Q. B. D. 11; discussed, WESTERN Ass. Co. (TORONTO) v. POOLE (1903), 1 K. B., at p. 384. The Vortigern (1899), P. 140; followed, GREENOCK STEAMSHIP Co. v. MARITIME INS. Co. (1903), 2 K. B. 657, C. A. Watson v. Clark (1813), 1 Dow. 336, H. L.; discussed, PICKUP v. THAMES AND MERSEY MAR. INS. Co. (1878), 3 Q. B. D. 594, C. A. Weir v. Aberdeen (1819), 2 B. & Ald. 320; discussed, QUEBEC MAR. INS. Co. v. COMMERCIAL BANK OF CANADA (1870), L. R. 3 P. C. 234. West India and Panama Tel. Co. v. Home and Col. Mar. Ins. Co. (1880), 6 Q. B. D. 51, C. A.; overruled, THAMES AND MERSEY MAR. INS. Co. v. HAMILTON (1887), 12 App. Cas. 484, H. L. Williams v. London Ass. Co. (1813), 1 M. & S. 318; approved, STEAMSHIP CARISBROOK Co. v. LONDON AND PROV. MAR. INS. Co. (1902), 2 K. B. 692, C. A. Westwood v. Bell (1815), 4 Camp. 349; explained, FISHER v. SMITH (1876), 34 L. T. at p. 916. Wilson v. Rankin (1865), L. R. 1 Q. B. 162; followed, DUDGEON v. PEMBROKE (1874), L. R. 9 Q. B. 581. Woodley v. Mitchell (1883), 11 Q. B. D. 47, C. A.; overruled, THE XANTHO (1887), 12 App. Cas. 503. Yates v. Whyte (1838), 4 Bing. N. C. 272; explained, SIMPSON v. THOMSON (1877), 3 App. Cas. at p. 293.

346

Appendix VI

THE MARINE INSURANCE ACT, 1906.

(6 EDW. 7, CH. 41.) An Act to codify the Law relating to Marine Insurance. [21st December, 1906.]

MARINE INSURANCE. § 1. Marine insurance defined 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. NOTE.—For various definitions of marine insurance, and discussion thereof, see post, p. 161; for history of marine insurance, see post, p. 170. The formal instrument in which the contract is embodied is called the “policy.”1 The informal note or memorandum which is drawn up when the contract is entered into is called the “slip” or “covering note.”2 The party who undertakes to indemnify the other, that is to say, the promisor, is called the “insurer” or “underwriter” (so called because he subscribes or underwrites the policy). The party to be indemnified is called the “insured,” or, more commonly, the “assured.”3 The consideration which the insurer receives for his undertaking is called the “premium.” But in the case of mutual insurance a guarantee or other arrangement may take the place of the premium.4 The term “loss” includes damage or detriment as well as actual loss of property.5

From Latin pollicitatio, a promise, through Italian polizza or French police. Oddly enough, in an English policy the promise to pay in case of loss is implied, not expressed. Continental policies contain an express promise to pay within so many days after notice of loss. 2 See McArthur; Ed. 2, p. 21, and §§ 21, 22, 89. 3 As to what is included in the term “assured,” see Ocean I. S. Ins. Assn. v. Leslie (1889), 22 Q. B. D. at pp. 724, 726, per Mathew, J. 4 As to premium, see §§ 52–54, and as to mutual insurance, § 85. 5 As to loss, see §§ 56–66. For a useful discussion of the mercantile meaning of loss, see Moss v. Smith (1850), 19 L. J. C. P. 225, 228. 1

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The term “risk” is used in different senses, and must always be construed by the light of its context. Sometimes it is used to denote the perils themselves to which insurable property may be exposed, as when sea risks are contrasted with land risks, or when goods are insured against “all risks.” Sometimes it is used to denote the risk run by the person whose property is exposed to danger. But, more commonly perhaps, it is used to denote the liability undertaken by the insurer in respect of his contract, as, for example, when goods are lost, and it is said that “the risk had not attached,” that is to say, that the goods were not covered by the policy.6 Marine insurance, in legal theory, is essentially a contract of indemnity.7 The legal consequences and incidents of the contract are deductions from this cardinal principle. Hence arise its distinctive characteristics, such as the rules requiring interest, the necessity for full disclosure by the assured, the rules as to double insurance, the right of subrogation which arises on settlement of the loss, and the right to return of premium in certain events. But it has often been pointed out that in practice marine insurance is not a perfect contract of indemnity.8 For example, under an unvalued policy on goods, in the ordinary form, and without any special clause, the assured will probably receive less than his real loss,9 while under a valued policy he may receive an amount which either exceeds or falls short of his real loss.10 But this deviation in practice from true indemnity depends rather on the form of policies in actual use than on the nature of the contract itself; see Phillips on Insurance, § 3. The contract is always in principle a contract of indemnity, but the extent and amount of indemnity are matters of convention between the parties. The main principles of marine insurance law are well settled. The difficulties that occur in practice arise chiefly out of the crabbed and obscure language of the timehonoured Lloyd’s policy, which was framed with reference to the conditions of commerce in a bygone era. New wine has continually to be put into the old bottle, with inconvenient results. See note to Sched. I., post, p. 140.

§ 2. Mixed sea and land risks. (1.) 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.11 Cf. Bradford v. Symondson (1881), 7 Q. B. D. at p. 464, per Lord Bramwell. Arnould, Ed. 6, p. 3; McArthur, Ed. 2, p. 23; per Lord Mansfield, Kent v. Bird (1777), 2 Cowp. at p. 585 (wager policy); per Lord Blackburn, Lloyd v. Fleming (1872), L. R. 7 Q. B. at p. 302 (assignment after loss); per Lord Blackburn, Anderson v. Morice (1875), L. R. 10 C. P. at p. 615 (insurable interest); per Jessel, M.R., Pitman v. Universal Mar. Ins. Co. (1882), 9 Q. B. D. at p. 204 (partial loss); per Lord Esher and Lord Bowen, Castellain v. Preston (1883), 11 Q. B. D. at pp. 386 and 397 (subrogation); Moran Galloway & Co. v. Uzielli (1905), 2 K. B. at p. 563 C. A. (insurable interest). 8 Aitchison v. Lohre (1879), 4 App. Cas. at p. 761. 9 Arnould, Ed. 6, pp. 297, 298; McArthur, Ed. 2, pp. 24 and 68. In practice the expected profits are covered by special provision; see Owen’s Notes and Clauses, Ed. 3, p. 79. 10 Cf. Woodside v. Globe Ins, Co. (1896), 1 Q. B. at p. 107. 11 McArthur, Ed. 2, p. 88. As to trade usage, which hitherto has been of very limited scope, see Rodocanachi v. Elliott (1873), 42 L. J. C. P. at p. 254, per Lord Esher. 6 7

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(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 thereto; 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.12 NOTE.—As commerce has progressed, and insurance has developed, new forms of risks are included in marine policies. But in order to cover them, special and appropriate forms of words must, in the absence of any well-ascertained trade usage, be inserted in the policy. Thus goods may be insured “from Japan to London, viâ Marseilles and [or] Southampton;”13 wool may be insured “at and from Townsville to London, including risk of fire and flood, from sheep’s back until waterborne at Townsville;”14 and bullion may be insured “at and from Boodini to London, including all risks of every description, from the mines by escort to railway station at Raichur, thence by rail to Bombay, and thence to London;”15 and a fox terrier may be insured against all risks from London to Bombay, and thence by rail to Lahore;16 and goods may be insured “against all risks by land or by water” from Cartagena to any place in the interior of Columbia.17 These mixed sea and land risks may be compared, by way of analogy, with “through bills of lading,” which are the invention of modern commerce. Compare also the definition of “policy of sea insurance,” given by § 92 of the Stamp Act, 1891 (54 & 55 Vict. c. 39), post, p. 155. Policies on ships in course of building are to be stamped as voyage, and not as time policies, see § 8 of the Revenue Act, 1903 (3 Edw. 7, c. 46), post, p. 160.

§ 3. Marine adventure and maritime perils defined. (1.) Subject to the provisions of this Act, every lawful marine adventure may be the subject of a contract of marine insurance.18 (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:”19

12

13

14

15

18 19 16 17

For form of launch and trial trip insurance, see Owen’s Notes and Clauses, Ed. 3, p. 83. Jackson v. Mumford (1904), 9 Com. Cas. 114 C. A. (ships when building insured against “fire in ship and on bond stocks, trials, and all marine risks to completion and acceptance by Admiralty”). As to the words “so far as applicable,” see Quebec Mar. Ins. Co. v. Commercial Bank of Canada (1870), L. R. 3 P. C. 234 (lake, river, and canal insurance); Joyce v. Kennard (1871), L. R. 7 Q. B. 78 (insurance of lighterman’s liability); Shelbourne v. Law Invest. Ins. Co. (1898), 8 Asp. Mar. Cas. 445 (river insurance). Rodocanachi v. Elliott (1873), L. R. 8 C. P. 649; affirmed L. R. 9 C. P. 518, Ex. Ch. (goods detained in Paris during siege). King v. Victoria Ins. Co. (1896), A. C. 250 P. C.; see, too, Davies v. National Ins. Co. of New Zealand (1891), A. C. 485. Hyderabad Deccan Co. v. Willoughby (1899), 2 Q. B. 530; see, too, Janson v. Driefontein Consolidated Mines, A. C. (1902) 484 (bullion insured from Transvaal Mines to London). Jacobs v. Gaviller (1902), 7 Com. Cas. 116. Schloss Brothers v. Stevens (1906), 2 K. B. 665. Arnould, Ed. 6, p. 688; Wilson v. Jones (1867), L. R. 2 Ex. 139, Ex. Ch. Arnould, Ed. 6, pp. 18–29; and as to “moveables,” see § 90, post.

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(b.) 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:20 (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.21 “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, seizures, 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.22 NOTE.—Strictly speaking, it is the risk or adventure of the assured and not the property exposed to peril, which is the subject of insurance. Ex hypothesi, the ship or goods may be lost. What is really insured is the pecuniary interest of the assured in or in respect of the property exposed to peril, in other words, the risk or adventure.23 Lord Esher has sought to reconcile the underlying facts with popular language, by drawing a distinction between the subject insured and the subject-matter of insurance.24 The Netherlands Com. Code, Art. 268, provides simply that “the subjectmatter of an insurance may be any interest appreciable in money, and not excepted by law.” See, too, German Com. Code of 1897, Art. 778. If an insurer, with his eyes open, insures an unlawful adventure, the policy is obviously a mere “honour policy,” for ex turpi causa non oritur action.25 Speaking generally, an adventure is illegal if it is prohibited by statute, or contrary to good morals or public policy;26 and illegality in any part of the adventure taints the whole of it.27 The lawfulness of an English adventure or insurance must be determined by English law.28 For example, if two foreign states are at war, there is nothing unlawful in sending an English ship to run a blockade, though the ship may be liable to confiscation by the blockading belligerent.29 So, too, as a general rule, English law

McArthur, Ed. 2 pp. 59, 65; cf. Rankin v. Potter (1873), L. R. 6 H. L. 83 (chartered freight on homeward voyage insured as to outward voyage); Price v. Maritime Ins. Co. (1900), 5 Com. Cas. 332, affirmed (1901) 2 K. B. 412, C. A. (advauces); Moran Galloway & Co. v. Uzielli (1905), 2 K. B. 555 (disbursements). 21 McArthur, Ed. 2, p. 59; Boehm v. Bell (1799), 8 T. R. at p. 161 (damages and costs for illegal capture); Tatham v. Burr (1898), A. C. at p. 385 (liability for running down another ship); Cunard Co. v. Marten (1902), 2 K. B. 624 (liability of shipowner under contract of carriage); and see §§ 14, 75. 22 Cf. Thames and Mersey Ins. Co. v. Hamilton (1887), 12 App. Cas. at p. 498, per Lord Herschell. 23 A good illustration of this principle is furnished by the rule that there may be a total loss of goods when the adventure is wholly frustrated though the goods themselves remain in specie, and consider the case of re-insurance. See § 60, post. 24 Rayner v. Preston (1881), 18 Ch. D. at p. 9, C. A. 25 Cf. Gedge v. Royal Exchange Ass. Corpn. (1900), 2 Q. B. at p. 220. 26 Wetherell v. Jones (1832), 3 B. & Ad. at pp. 225, 226. 27 Arnould, Ed. 6, p. 691. 28 Cf. Kellner v. Le Mesurier (1803), 4 East, at pp. 402, 403. 29 Arnould, Ed. 6, p. 713, Ex p. Chavasse (1865), 34 L. J. (Bank.) 17. 20

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takes no cognizance of foreign trade or revenue laws.30 But a distinction must be drawn between the lawfulness of the adventure and the implied warranty of legality by the assured (see § 41, post). If insurer and assured like to insure an illegal venture, the contract is an honour contract; but where the assured does not disclose the illegality of the venture, the contract is binding neither in law nor honour. Again, if there be anything in foreign law or international relations which increases the particular risk, and is not a matter of common knowledge, it must be disclosed to the insurer before the contract is entered into, for the nature of the risk and the amount of premium charged will necessarily be affected thereby. Cf. § 18, post. The terms of subsect. (2) are inclusive, not exhaustive. As the conditions of maritime commerce change, new dangers and matters require to be covered by insurance. For example, shipments of live cattle, which are insured against mortality and all other risks, have to be covered by special provisions, as such risks are not contemplated by the old form of policy. The subject-matter, says Lord Blackburn, “is generally described very concisely as being so much ‘on ship,’ ‘on goods,’ ‘on freight,’ ‘on profit on goods,’ ‘on advances on coolies,’ ‘on emigrant money,’ and so on.”31 See further, § 26, post. The insurer, as a rule, is not liable for damages consequent on delay, even though the delay be caused by a peril insured against (see § 55 (2) (b), post, p. 73). But policies may be effected to protect the assured against the cancelling clause in charter parties, and to protect the owner of perishable goods. Subsect. (3).—Lloyd’s policy, after enumerating the ordinary perils, proceeds with the words “and of all other perils, losses, and misfortunes that have or shall come to the hurt, detriment, or damage of the said goods,” etc. But these general words have always been interpreted to refer to perils of a like kind with those already enumerated.32 Perils of a dissimilar kind may be insured against (see, e.g., the note to § 2), but they must be covered by express terms.33 Insurances are sometimes effected against “all risks,” or even against all risks by land or by water.34 On the other hand, a policy may be confined to some only of the specified perils. In that case a so-called warranty is added, excluding particular perils, e.g. “warranted free from capture, seizure, and detention, and all the consequences of hostilities.” (See Owen’s Notes and Clauses, Ed. 3, p. 28, et seq.) The result of maritime perils is to cause “marine damage,” which, says Lord Herschell, does not mean only damage which has been caused by the seas,

Westlake, Private International Law, Ed. 3, § 213; Lowndes, Ed. 2, p. 102; cf. Francis v. Sea Ass. Co. (1898), 8 Asp. Mar. Cas. 418. 31 Mackenzie v. Whitworth (1875), 1 Ex. D. at p. 40, C. A. 32 Arnould, Ed. 6, p. 789; McArthur, Ed. 2, p. 136; Thames and Mersey Ins. Co. v. Hamilton (1882), 12 App. Cas. at p. 495. 33 See, e.g., Inman v. Bischoff (1882), 7 App. Cas. at p. 686 (abatement clause in charter party); Thames and Mersey Ins. Co. v. Hamilton (1887), 12 App. Cas. 484, at p. 491 (donkey engine explosion), which gave rise to the “Inchmaree clause,” as to which see Oceanic Steamship Co. v. Faber (1906), 11 Com. Cas. 179. 34 Schloss v. Stevens (1906), 2 K. B. 665, and see cases cited ante, p. 4. 30

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“but damage of a character to which a marine adventure is subject. Such an adventure has its own perils, to which either it is exclusively subject or which possess in relation to it a special or peculiar character. To secure an indemnity against them is the object of marine insurance.”35 As to the narrower expression “perils of the seas,” see Sched. I., rule 7, post, p. 145.

INSURABLE INTEREST. § 4. Wagering or gaming contracts are void [cf. 8 & 9 Vict. c. 109, s. 18] (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— (a.) Where the assured has not an insurable interest as defined by this Act, and the contract is entered into with no expectation of acquiring such an interest:36 or (b.) Where the policy is made “interest or no interest,” or “without further proof of interest than the policy itself,” or “without benefit of salvage to the insurer,” or subject to any other like term: Provided that, where there is no possibility of salvage, a policy may be effected without benefit of salvage to the insurer.37 NOTE.—This section appears to reproduce the effect of the 19 Geo. 2, c. 37, § 1 to 3, as read with the 8 & 9 Vict. c. 109. The Act of 1845 avoids all policies which are in fact wagering policies. The Act of 1745 (now repealed) avoided policies which bear on the face of them the indicia of wagering, whether in fact they are wagering policies or not. A policy without interest is not necessarily a wager policy. For example, when the assured bonâ fide expects to have an interest, but the expectation is not realized, the policy is not a wager policy.38 The assured cannot recover on the policy, but he may be entitled to a return of the premium; see § 84. Subsect. (1).—See the Gaming Act, 1845 (8 & 9 Vict. c. 109), s. 18, which provides that “all contracts or agreements, whether by parole or in writing, by way of gaming or wagering, shall be null and void.” As to subsect. (2) (b), which reproduces with slight modification the effect of §§ 1–3 of the Marine Insurance Act, 1745 (19 Geo. 2, c. 37), repealed by Sched. II. of this Act, the following points may be noted:— (1.) The statute was confined in terms to British ships, and goods and effects laden thereon. Therefore a p.p.i. policy on a foreign ship was not illegal if, as a fact,

Thames and Mersey Ins. Co. v. Hamilton (1887), 12 App. Cas. at p. 498. McArthur, Ed. 2, p. 24; Cousins v. Nantes (1811), 3 Taunt. 513 (presumption of interest and averment in pleading) Ex. Ch.; Wilson v. Jones (1867), L. R. 2 Ex. at p. 141, per Willes, J. See §§ 4–15. 37 Cf. Lucena v. Crauford (1806), 2 B. & P. at p. 310, and note, post. 38 See, e.g., Anderson v. Morice (1876), 1 App. Cas. 713. 35 36

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(2.)

(3.) (4.)

(5.) (6.) (7.)

the insurer had a lawful interest and could prove it. As, however, such a policy bears the mark of wagering on the face of it, the Lords’ Select Committee thought that the provision should be generalized. The statute spoke of ships, and goods and effects laden thereon. But a wide construction was put on these terms, and the scope of the statute was by judicial decision extended to policies on profits, and commission on ships and goods, effected, “without benefit of salvage.”39 The scope of the statute was not confined to the exact terms prohibited. Any similar terms avoid the policy. Thus a policy on cash advances, “full interest admitted,” is void.40 A distinction must be drawn between p.p.i. policies and policies “without benefit of salvage” that is to say, in modern language, “without benefit of abandonment.” The nature of an insurance may be such that, in case of loss, there could be nothing to abandon to the insurer, and therefore such a policy may lawfully be effected “without benefit of salvage.” Nine judges, in giving their opinion to the House of Lords in Lucena v. Crauford,41 say that the 19 Geo. 2, c. 37, “which prohibited insurances without benefit of salvage, was not to be understood as prohibiting the insurance of things not capable of salvage, but only as prohibiting the insertion of a clause to that effect in a policy upon things which were capable of salvage.” For example, a man may have an interest, but no property, in the thing imperilled, and then he has nothing which he can abandon.42 The statute further contained two more or less obsolete exceptions, viz. policies on privateers, and policies on ships in the Spanish trade. These are not reproduced. The statute did not extend to Ireland.43 The present section extends to the whole United Kingdom. It is an open question whether an honour policy (e.g. a p.p.i. policy on disbursements) constitutes a breach of a warranty to keep a certain proportion of the value of a ship uninsured.44

§ 5. Insurable interest defined. (1.) Subject to the provisions of this Act, every person has an insurable interest who is interested in a marine adventure.45

De Mattos v. North (1868), L. R. 3 Ex. 185; Allkins v. Jupe (1877), 2 C. P. D. 375; see at p. 388 as to possibility of salvage in such a case. 40 Berridge v. Man On Ins. Co. (1887), 18 Q. B. D. 346, C. A.; see, too, Gedge v. Royal Exchange (1900), 2 Q. B. 214. 41 Lucena v. Crauford (1806), 2 B. & P. at p. 310; 6 R. R. at p. 694. 42 Cf. Wilson v. Jones (1867), L. R. 2 Ex. 139 (policy on successful laying of submarine cable effected by shareholder in company). 43 Keith v. Protector Mar. Ins. Co. (1882), 10 L. R. Ir. 51. 44 Roddick v. Indemnity Mar. Ins. Co. (1895), 2 Q. B. 380, C. A. 45 Arnould, Ed. 6, p. 55; Wilson v. Jones (1867), L. R. 2 Ex. 139, Ex. Ch. 39

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(2.) In particular a person is interested in a marine adventure where he stands in any legal or equitable relation to the adventure, or to any insurable property at risk therein, in consequence of which he may benefit by the safety or due arrival of insurable property, or may be prejudiced by its loss, or by damage thereto, or by the detention thereof, or may incur liability in respect thereof.46 Illustrations. 1.

2. 3.

4.

5.

Floating policy for £1200 on goods as interest may appear. The assured, who are canal carriers, have an insurable interest in respect of their liability for the safe carriage of the goods, and this interest is sufficiently described as “on goods.”47 Policy effected by shareholder in Submarine Cable Co. on the successful laying of the cable. The assured has an insurable interest in the adventure, although he has no property in the cable.48 A. lends money to B., a small shipowner, whose solvency depends on the safe arrival of his ship, but the loan is not secured on the ship or freight. The loan is not at risk, and A. has no insurable interest which can be covered by a marine policy.49 Policy on freight, chartered or otherwise, per Cambodia from Bombay to Howlands Island, and thence to a port of discharge in the United Kingdom. Under charter the ship is to go to Howlands Island in ballast, and then load a cargo for England. On the way to Howlands Island she is disabled by perils of the seas, so the freight cannot be earned. The assured has an insurable interest, and the risk has attached.50 The agents of a foreign ship effect a policy on disbursements against the risk of total loss only. The ship becomes a constructive total loss. The agents have an insurable interest in the advances they have made to the ship in so far as they could arrest the ship under § 6 of the Admiralty Act, 1840 (3 & 4 Vict. c. 65) for the purpose of founding an action in rem.51

Arnould, Ed. 6, p. 101; as to equitable assignee of freight, see Wilson v. Martin (1856), 11 Ex. Ch. 684. Conversely, a prospect or possibility of loss or gain which is not founded on any right or liability in, or in respect of the subject-matter insured, is not insurable. Lucena v. Crauford (1806), 2 B. & P. 269; 6 R. R. 623, H. L.; Seagrave v. Union Mar. Ins. Co. (1866), L. R. 1 C. P. 305, at p. 320 (cargo); Barber v. Fleming (1869), L. R. 5 Q. B. at p. 71 (freight); and see, e.g., Manfield v. Maitland (1821), 4 B. & Ald. 582 (loan to shipowner); Devaux v. Steele (1840), 6 Bing. N. C. 358; 54 R. R. 818 (expected fishing bounty from French Government); Stainbank v. Fenning (1851), 11 C. B. 51 (invalid bottomry bond). 47 Crowley v. Cohen (1832), 3 B. & Ad. 478, 37 R. R. 472; see Cunard Steamship Co. v. Marten, 2 K. B. (1902), 624, for an insurance in express terms against liability of carrier owing to the omission of the negligence clause in a charter party. As to insurance by a bailee (who is not responsible) by virtue of his special property in the goods bailed, see North British Ins. Co. v. Moffatt (1871), L. R. 7 C. P. 25, 31 (fire insurance). 48 Wilson v. Jones (1867), L. R. 2 Ex. 139. 49 Cf. Manfield v. Maitland (1821), 4 B. & Ald. 582; Allison v. Bristol Marine Ins. Co. (1876), 1 App. Cas. at p. 220. Of course B.’s solvency can be insured by an appropriate contract, but that is not a marine policy. 50 Barber v. Fleming (1869), L. R. 5 Q. B. 59. 51 Moran Galloway & Co. v. Uzielli (1905), 2 K. B. 555. 46

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NOTE.—Three questions, often confused, must be kept distinct, viz.: 1. Has the assured an insurable interest? 2. Is the subject matter in respect of which his interest arises sufficiently described in the policy? 3. What is the quantum of his interest? The definition of insurable interest has been continuously expanding, and dicta in some of the older cases, which would tend to narrow it, must be accepted with caution. The essence of interest is (a) that there should be a physical object exposed to sea perils, and (b) that the assured should stand in some relationship, cognizable by law, to that object, in consequence of which he either benefits by its preservation, or is prejudiced by its loss, or mishap thereto. It appears to have been held that a person who had bought goods at sea under a verbal contract, which was unenforceable by reason of the Statute of Frauds, had not an insurable interest.52 But would this be the case now that it is established that the statute affects the remedy only and not the right? It is clear, since Wilson v. Jones (1867), L. R. 2 Ex. 139 (insurance by shareholder in an Atlantic Cable Company on the successful laying of its cable), that interest is not confined to rights in the nature of property or arising out of contract, for the assured had no property in the cable nor any contract respecting it. Suppose A. is offered an appointment abroad on the condition that his acceptance of the offer is received by return of post. Why should he not insure the safe arrival of the letter, although he has no legal rights in respect of it after it is posted? Subsect. (2) is, therefore, framed as being inclusive, not exhaustive, and its language was somewhat broadened in the Commons Committee. Interest can hardly be defined exhaustively, and probably the criterion proposed by Lawrence, J., a century ago, cannot be improved upon: “Interest,” he says, “does not necessarily imply a right to the whole or a part of a thing, nor necessarily or exclusively that which may be the subject of privation; but the having some relation to or concern in the subject of insurance, which relation or concern, by the happening of the perils insured against, may be so affected as to produce a 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.”53 Elsewhere, speaking of liability to third persons, he says, “Did they mean to game, or was there not a loss against which they might indemnify themselves by insurance?”54 “The general rule,” says Willes, J., “is clear, that to constitute interest insurable against a peril, there must be an interest such that the peril would, by its proximate effect, cause damage to the assured.”55

52 53

54 55

Stockdale v. Dunlop (1840), 6 M. & W. 224. Lucena v. Crauford (1806), 2 B. & P. at p. 302. cited and approved by Lord Blackburn in Lloyd v. Fleming (1872), L. R. 7 Q. B. at p. 302. Boehm v. Bell (1799), 8 T. R. 162 (prize insured by captors). Seagrave v. Union Mar. Ins. Co. (I866), L. R. 1 C. P. at p. 326.

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“Any interest may be insured,” says Walton, J., “which is dependent on the safety of the thing exposed to the risks insured against, still it must in all cases at the time of loss be an interest legal or equitable, and not merely an expectation however probable.”56 French law formerly drew a distinction between “frêt acquis” and “fret à faire,” the former being insurable, the latter not.57 English law draws no such distinction. Thus chartered freight on homeward voyage may be insured against loss by perils on the previous outward voyage.58

§ 6. When interest must attach. (1.) The assured must be interested in the subject-matter insured at the time of the loss, though he need not be interested when the insurance is effected.59 Provided that where the subject-matter is insured, “lost or not lost,” the assured may recover although he may not have acquired his interest until after the loss, unless at the time of effecting the contract of insurance the assured was aware of the loss, and the insurer was not.60 (2.) Where the assured has no interest at the time of the loss, he cannot acquire interest by any act or election after he is aware of the loss.61 Illustrations. 1.

Policy on rice, as interest may appear, by ship Sunbeam from Rangoon to London. The assured had contracted to buy a “cargo” of rice to be shipped in that ship. When three-fourths of the cargo are on board, the ship and rice are lost by perils of the sea. The rice is not at the assured’s risk till a complete cargo is loaded, and he has therefore no insurable interest.62 Policy on “wheat cargo now on board or to be shipped” in the ship Sutherland from New Zealand to England. Under the terms of the contract between the vendors and the assured, the property (and risk) pass to him as the wheat is shipped. Before the whole cargo is loaded the ship and wheat are lost by perils of the seas. The assured has an insurable interest which has attached, and can recover for the wheat lost.63

2.

NOTE.—The section relates only to the existence of interest as a condition to effective insurance. A policy founded on interest may, of course, be assigned after loss.64

58 59 60 61 62 63 64 56 57

Moran Galloway & Co. v. Uzielli (1905), 2 K. B. at p. 562. Code de Commerce, Art. 347; but this rule has now been modified by the Law of 1885. Rankin v. Potter (1873), L. R. 6 H. L. 83, at p. 114. Rhind v. Wilkinson (1810), 2 Taunt, at p. 243; Anderson v. Morice (1876), 1 App. Cas. 713. Sutherland v. Pratt (1843), 11 M. & W. 296, and post, p. 122. Anderson v. Morice (1876), 1 App. Cas. 713, H. L. Anderson v. Morice (1875), L. R. 10 C. P. 609, Ex. Ch, affirmed 1 App.Cas. 713, H. L. Colonial Ins. Co. v. Adelaide Mar. Ins. Co. (1886), 12 App. Cas. 128, P.C. Sparkes v. Marshall (1836), 2 Bing. N. C. 761, and see further, Sched. I., rule 1, post, p. 142.

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It has been argued that the rule contained in the proviso to subsect. (1) only applies to the case of a partial loss, but that is not so. Suppose a man buys a cargo while at sea. It turns out that before the purchase was completed the cargo had perished. As a rule, the contract is void, and, therefore, the buyer has no insurable interest; but there is such a thing as an emptio spei, as opposed to the purchase of a thing itself.65 In the old form of pleading, interest was averted as existing during the risk and at the time of the loss. But if interest was traversed, it was sufficient to prove interest at the time of the loss.66 Until interest was acquired, the policy could not attach. It is often a difficult question to determine the exact moment when, under a contract of sale, the risk passes from seller to buyer. Primâ facie, the risk passes when the property passes, but under the terms of the contract they may pass at different times. When goods are insured by the buyer, the question is whether, on the true construction of the contract, the risk has passed to him at the time the loss occurs.67

§ 7. Defeasible or contingent interest. (1.) A defeasible interest is insurable, as also is a contingent interest. (2.) In particular, where the buyer of goods has insured them, he has an insurable interest, notwithstanding that he might, at his election, have rejected the goods, or have treated them as at the seller’s risk, by reason of the latter’s delay in making delivery or otherwise.68 NOTE.—As regards contingent interests, the main difficulty is to determine, not whether there is an interest, but whether the interest has attached at the time of loss.69 Where captors of a ship insured her, but the Prize Court afterwards restored her to her owners, it was held that the premium was not returnable, for the risk had attached. The interest in this case may be regarded either as defeasible or contingent.70 In Lucena v. Crauford (1806), 2 B. & P. pp. 294, 295, seven of the judges, in their opinion to the House of Lords, say, “Inchoate rights, founded on subsisting titles, unless prohibited by positive laws, are insurable. Freight, respondentia, and bottomry are of this description.” And then, after discussing various ancient definitions of insurance, they go on to say: “These definitions clearly embrace a

See Chalmers’ Sale of Goods Act (1893), § 5, and notes thereto. Bullen and Leake, Prec. of Pleading, Ed. 3, p. 611. 67 As to when the risk passes from seller to buyer under a contract of sale, see Chalmers’ Sale of Goods Act, 1893, §§ 20 and 32, and notes thereto. 68 Sparkes v. Marshall (1836), 2 Bing. N. C. 761, as explained in Anderson v. Morice (1875), L. R. 10 C. P. at p. 620: Colonial Ins. Co. of New Zealand v. Adelaide Ins. Co. (1886), 12 App. Cas. 128, at p. 140, P. C. 69 Cf. Barber v. Fleming (1870), L. R. 5 Q. B. at p. 73. 70 Boehm v. Bell (1799), 8 T. R. 154. 65 66

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contingent interest which is subject to the perils of the sea, and for the loss of which a compensation may be made.” Re-insurance is a good example of a contingent interest. In Clay v. Harrison (1830), 10 B. & C. 99, the seller stopped goods in transitu after partial loss. Held that the buyer could not recover on his policy, as his interest was defeated by the seller’s resumption of possession. But how far would that case be followed, now that it is established that stoppage in transit does not, as a rule, rescind the contract?71 The facts, too, were peculiar. In the case provided for by subsect. (2), the assured has an actual interest, defeasible only at his own option. Suppose A. buys goods by sample, to be shipped from abroad, and insures them. Goods which are inferior to sample are shipped, and then partially sea-damaged on the voyage. A. may accept the goods, and claim on the policy. If A. rejects the goods, presumably he could not claim on the policy; but could he assign the policy to the seller, and then reject the goods? Probably not; but various complications may be suggested which still await decision.

A PARTIAL INTEREST OF ANY NATURE IS INSURABLE. § 8. Partial interest. NOTE.—An undivided interest in a parcel of goods shipped f.o.b. is insurable.72 So, too, a shareholder may insure his interest in the adventure of a company engaged in laying a submarine cable;73 and a “hotchpot” interest in cargo may be insured.74 “I do not see,” says Heath, J., “why a joint tenant or tenant in common has not such an interest in the entirety as will entitle him to insure.”75 By § 5 of the Merchant Shipping Act, 1894 (57 & 58 Vict. c. 60), ships are divided into sixty-four shares, and any number of persons not exceeding five may be registered as joint owners of a ship or any share therein. But a part owner has no implied authority to insure on behalf of the other part owners.76 Lloyd’s policy (post, p. 138) is expressed to enure for the benefit of all to whom the subject-matter appertains “in part or in all;” but these general words must be restrained by the circumstances of the particular insurance.

See Chalmers’ Sale of Goods Act, 1893, § 48, and notes. Inglis v. Stock (1885), 10 App. Cas. pp. 263, 274 (390 tons of sugar sent off to satisfy two contracts, for 200 tons each, without any appropriation to either contract). 73 Wilson v. Jones (1867), L. R. 2 Ex. 139, Ex. Ch. 74 Ebsworth v. Alliance Mar. Ins. (1873), L. R. 8 C. P. at p. 613. 75 Page v. Fry (1800), 2 B. & P. 240, 243 (cargo). 76 Bell v. Humphries (1816), 2 Stark. 345; Arnould, Ed. 6, p. 160; but quaere the effect of s. 14 (2) as amended in the Commons. 71 72

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§ 9. Re-insurance. (1.) The insurer under a contract of marine insurance has an insurable interest in his risk, and may re-insure in respect of it.77 (2.) Unless the policy otherwise provides, the original assured has no right or interest in respect of such re-insurance.78 NOTE.—Re-insurance, that is to say, an insurance effected by an insurer to cover wholly or in part the risk he has undertaken, must be distinguished from double insurance, that is to say, a second insurance effected by or on behalf of an assured on a risk already covered, as to which see § 32. At common law re-insurance was valid, but it was prohibited in 1745 by the 19 Geo. 2, c. 37, § 4, unless the insurer was dead or insolvent. The prohibition was removed in 1864 by the 27 & 28 Vict. c. 56, § 1 (since repealed), and re-insurance is now expressly recognized by § 92 of the Stamp Act, 1891 (54 & 55 Vict. c. 39), post, p. 155, and by this Act. The common form of a re-insurance policy runs thus—“being a re-insurance subject to all clauses and conditions of the original policy or policies, and to pay as may be paid thereon.” Then follow the exceptions, if any.79 As to specifying in policy that it is a re-insurance, and as to notice of abandonment, see §§ 27 and 62, post. In an action by an original assured against his insurer, the re-insurer cannot be brought in as a third party against whom indemnity is claimed.80

§ 10. Bottomry. The lender of money on bottomry or respondentia has an insurable interest in respect of the loan.81

Arnould, Ed. 7, p. 386; Uzielli v. Boston Mar. Ins. Co. (1884), 15 Q. B. D. at p. 16; and cf. Bradford v. Symondson (1881), 7 Q. B. D. at p. 463, C. A. 78 McArthur, Ed. 2, p. 332; Arnould, Ed. 7, p. 388. Cf. Nelson v. Empress Ins. Co. (1905), 2 K. B. 281, C. A. (re-insurer not liable as third party in action by original assured). 79 As to construction of this provision, see Uzielli v. Boston Mar. Ins. Co. (1884), 15 Q. B. D. C. A. (re-insurer not liable for expenses under sue and labour clauses); Ex p. Western Ins. Co. (1892), 2 Ch. 423 (“pay as paid”—payment by original insurer not condition precedent); Chippendale v. Holt (1895), 65 L. J. Q. B. 104 (re-insurer not bound by improper payment by original insurer); Crocker v. Sturge (1897), 1 Q. B. 330 (re-insurance of portion of risk—construction of “final port”); China Traders Assn. v. Royal Exchange (1898), 2 Q. B. 187, C. A. (right of re-insurer to discovery of ship’s papers); Lower Rhine Ins. Assn. v. Sedgwick (1899), 1 Q. B. 199, C. A. (lapse of original policy, and issue of new one); Charlesworth v. Faber (1900), 5 Com. Cas. 408 (continuation clause exceeding twelve months’ limit for time policy); Maritime Ins. Co. v. Stearns (1901), 2 K. B. 912, 6 Com. Cas. 182 (variation of risk from summer to winter); Marten v. Steamship Owners Assn. (1902), 7 Com. Cas. 195 (“pay as may be paid” = pay as re-assured may be compellable to pay); Western Ass. Co. (Toronto) v. Poole (1903), 1 K. B. 376 (reinsurance against total loss, salvage charges excluded). South British F. & M. Ins. Co. v. Da Costa (1906), 1 K. B. 456, 11 Com. Cas. 81 (re-insurance for £1000 in excess of £500). 80 Nelson v. Empress Ass. Corporation (1905), 2 K. B. 281, C. A. 81 See McArthur, Ed. 2, pp. 59, 62, 214; and § 7. 77

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Illustrations. 1.

The master of a damaged British ship requires money for necessary repairs. A merchant abroad advances the money, taking a bond mortgaging the ship, and making the money repayable whether she arrives or not. The merchant has no insurable interest, for the master has no authority to give such a bond, or do more than hypothecate the ship for the advances82 (sed. qu. now). Policy on bottomry bond in old form. The ship becomes a constructive total loss. The assured cannot recover, for the bond stands good unless there is an actual total loss.83

2.

NOTE.—By the law of the sea the master may, in case of necessity, and under certain restrictions, raise money on the security of the ship, freight, and cargo.84 The condition of a loan on bottomry or respondentia is that the money is not repayable if the ship or cargo does not arrive. Consequently it is the lender, and not the borrower, who must insure.85 As to describing the subject-matter insured in the policy, see § 26, post. As to the general law of bottomry, see Carver’s Carriage by Sea, Ed. 3, §§ 310–319.

§ 11. Master’s and seaman’s wages. The master or any member of the crew of a ship has an insurable interest in respect of his wages. NOTE.—The law as to the insurability of seamen’s wages was doubtful. The master of a ship could always insure his wages, but formerly at any rate a seaman under the rank of master could not (Arnould, Ed. 6, p. 45). “Wages of seamen,” said the judges in an old case, “are in their nature insurable, though universally prohibited to be insured on principles of policy.”86 But when this was laid down the doctrine prevailed that “freight was the mother of wages,” and if freight was not earned the seaman was not entitled to his wages. This doctrine was abandoned in 1854, and § 183 of the Merchant Shipping Act of that year (17 & 18 Vict. c. 104) provided that the right to wages should not be dependent on the earning of freight, but that in all cases of wreck or loss of the ship, proof that the seaman had not exerted himself to the utmost to save the ship and cargo should bar his claim to wages. This provision is now reproduced in § 157 of the Merchant Shipping Act, 1894 (57 & 58 Vict. c. 60). On the principle cessante ratione cessat ipsa lex, it may be that seamen’s wages were insurable in England, but the point is now cleared up by an amendment made in the Commons Committee. The German Commercial Code of 1897, on grounds of public policy, forbids either masters or seamen to insure their wages.

82

83

84 85

86

Stainbank v. Fenning (1851), 11 C. B. 51; Carver’s Carriage by Sea, Ed. 3, § 312; but see The Haabet (1899), P. 295, per Buckuill, J.; and Price v. Maritime Ins. Co. (1901), 2 K. B. 412, C. A. Broomfield v. Southern Ins. Co. (1870), L. R. 5 Ex. 192. Modern forms provide for constructive total loss. Abbott on Shipping, Ed. 12, pp. 110, 121. For forms of insurance on bottomry, see Owen’s Notes and Clauses, Ed. 3, p. 143, and for modern forms of bottomry and respondentia bonds, see ibid., pp. 209, 211. Lucena v. Crauford (1806), 2 B. & P. at p. 294, H. L.

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§ 12. Advance freight. In the case of advance freight, the person advancing the freight has an insurable interest, in so far as such freight is not repayable in case of loss.87 Illustration. Policy by shipowner on freight. Under the charter party, half the freight is to be prepaid and half is to be paid on right delivery of the cargo. The ship is lost, but half the cargo is saved and delivered. No further freight is payable in respect of the half so delivered, inasmuch as it is covered by the prepayment of half the freight. This is a total loss of half the shipowner’s freight, the prepaid freight being at the charterer’s and not at the shipowner’s risk.88 NOTE.—By English law advance freight, as such, is not repayable in case of loss; the shipowner therefore has not an insurable interest in it, but the person advancing it has.89 But by special contract it may be repayable,90 and then the positions are reversed. Though advance freight may not be repayable in case of loss, the shipowner may be liable in damages to the cargo owner if the loss is occasioned by his negligence or fault, and in estimating the damages the amount advanced for freight must be taken into account.91 An advance to a shipowner by a shipper or charterer in respect of a voyage may fall into three categories: (a) It may be advance freight not repayable in case of loss; (b) it may be advance freight specially repayable in case of loss; or, (c) it may be a mere loan repayable in any event. In the last case it is not at risk, and therefore not insurable.92 As to the tests for determining within which category a given advance falls, see Carver’s Carriage by Sea, Ed. 3, §§ 562, 566. By the law of most foreign countries, prepaid freight is repayable in case of loss.93

§ 13. Charges of insurance. The assured has an insurable interest in the charges of any insurance which he may effect.94 NOTE.—Ordinarily the charges of insurance consist of the premium, the brokerage, and the stamp. Cf. § 16 as to insurable value.

89 90 91 92 93 94 87 88

Arnould, Ed. 6, p. 62; McArthur, Ed. 2, p. 65; cf. Smith v. Pyman (1891), 1 Q. B. at pp. 744, 745, C. A. Allison v. Bristol Mar. Ins. Co. (1876), 1 App. Cas. 209, see at pp. 235, 238. Allison v. Bristol Ins. Co. (1876), 1 App. Cas. 208, 238, H. L., reviewing the cases. Ibid., at p. 221, citing Hall v. Janson (1855), 4 E. & B. 500. Dufourcet v. Bishop (1886), 18 Q. B. D. 373. The Salacia (1862), Lush. 578, at p. 582. Byrne v. Schiller (1871), L. R. 6 Ex. at p. 325, Ex. Ch. McArthur, Ed. 2, p. 68; Phillips on Insurance, § 1221; Usher v. Noble (1810), 12 East, 639. As to the premium in case of re-insurance, see Arnould, Ed. 6, p. 104.

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§ 14. Quantum of interest. (1.) Where the subject-matter insured is mortgaged, the mortgagor has an insurable interest in the full value thereof, and the mortgagee has an insurable interest in respect of any sum due or to become due under the mortgage.95 (2.) A mortgagee, consignee, or other person having an interest in the subject-matter insured may insure on behalf and for the benefit of other persons interested as well as for his own benefit.96 (3.) The owner of insurable property has an insurable interest in respect of the full value thereof, notwithstanding that some third person may have agreed, or be liable, to indemnify him in case of loss.97 NOTE.—In Small v. U. K. Mar. Assn. (1897), 2 Q. B. 311, C.A., a policy was effected by ships-husbands for the mortgagee, at the instance of the mortgagor, who was part owner and master. The mortgagee was held entitled to recover, although the loss was occasioned by the barratry of the mortgagor. Subsect. (2), which was inserted in committee in the Commons, affirms the judgment of Bovill, C.J., and Denman, J., in Ebsworth v. Alliance Mar. Ins. Co., L. R. 8 C. P. 596. The correctness of the rule in the text is assumed by Bowen, L.J.,98 who, in a later case, says: “A person having a limited interest may insure either for himself, and to cover his own interest only, or he may insure so as to cover not only his own limited interest, but the interest of all others who are interested in the property,” and then proceeds to discuss various instances.99 Lloyd’s policy in terms expresses that it is effected by J.S. “as well in his own name as for, and in the name and names of, all and every other person to whom the same doth, may, or shall appertain.”100 The provision, of course, is confined to interests bonâ fide intended to be covered; and see further the note to sect. 23, post. Subsect. (3) generalizes a case where the charterer had agreed to indemnify the shipowner. Obviously a cargo owner may insure his cargo, though if it is lost through the negligence of the shipowner, he may have his remedy by damages.101

Arnould, Ed. 6, pp. 84, 118; Irving v. Richardson (1831), 2 B. & Ad. 193; North British Ins. Co. v. London, etc., Ins. Co. (1877), 5 Ch. D. at pp. 583, 584, C. A. 96 Ebsworth v. Alliance Ins. Co. (1873), L. R. 8 C. P. 596, at pp. 608 and 641; Castellain v. Preston (1883), 11 Q. B. D. at p. 398, C. A. This subsection was inserted in the Commons Committee. 97 Hobbs v. Hannam (1811), 3 Camp. 93. 98 Castellain v. Preston (1883), 11 Q. B. D. at p. 398, C. A. 99 As to the complications which might arise in the case of double insurance, see McArthur, Ed. 2, p. 63, n.; but see a solution suggested by Mellish, L.J., in North British Ins. Co. v. London Ins. Co. (1877), 5 Ch. D. at p. 583. 100 Perhaps some light is thrown on this ancient formula by the statement that a trustee may insure in his own name, “as the law does not regard the use or trust of a chattel” (Lucena v. Crauford (1806), 2 B. & P. at p. 290; 6 R. R. 676 in H. L.). See, too, lonides v. Pacific Ins. Co. (1871), L. R. 6 Q. B. at p. 678; cf. Ocean I. S. Ins. Assn. v. Leslie (1889), 22 Q. B. D. 724, as to the scope of the term “assured.” 101 Cf. Dufourcet v. Bishop (1886), 18 Q. B. D. 373, and Yates v. White (1838), 4 Bing. N. C. 272. As to the insurer’s right of subrogation consequent on payment, see § 79, post. 95

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Theoretically, at any rate, the rules as to double insurance, and the right of subrogation, work out the equities resulting from two persons being allowed to insure the same subject-matter for its full value. See §§ 32, 79, and 81.

§ 15. Assignment of interest. Where the assured assigns or otherwise parts with his interest in the subject-matter insured, he does not thereby transfer to the assignee his rights under the contract of insurance, unless there be an express or implied agreement with the assignee to that effect.102 But the provisions of this section do not affect a transmission of interest by operation of law. NOTE.—As to the converse case of an assignee insuring for his assignor, see § 14. In Rayner v. Preston, cited below, Lord Esher says: “Where the subject-matter of the insurance is sold during the running of the policy, no interest under the policy passes unless it is made part of the contract of sale, so that it will be considered in a court of equity as an assignment.” Where there is such an agreement, it may be given effect to either by an assignment of the policy, or by the assignor holding the policy as trustee for the assignee. The ordinary cases of transmission of interest by act of law are death and bankruptcy, but the subrogation of the insurer to the rights of the assured on payment of the claim may perhaps be regarded as coming under this category. As to assignment of policy, see § 50, post, and as to assignment of interest, see § 51, post.

INSURABLE VALUE. § 16. Measure of insurable value. Subject to any express provision or valuation in the policy, the insurable value of the subject-matters insured must be ascertained as follows:— (1.) In insurance on ship, the insurable value is the value, at the commencement of the risk, of the ship, including her outfit, provisions and stores for the officers and crew, money advanced for seamen’s wages, and other disbursements (if any) incurred to make the ship fit for the voyage or adventure contemplated by the policy, plus the charges of insurance upon the whole;103

Arnould, Ed. 6, p. 115; Lowndes, Ed. 2, p. 8; Powles v. Innes (1841), 11 M. & W. 10 (sale of shares in a ship); North of England Oil Cake Co. v. Archangel Mar. Ins. Co. (1875), L. R. 10 Q. B. 249 (sale of cargo); Rayner v. Preston (1881), 18 Ch. D. at p. 12, C. A. 103 McArthur, Ed. 2, p. 67; Lowndes, Ed. 2, p. 56; Brough v. Whitmore (1791), 4 T. R. 206 (stores and provisions for crew); Moran Galloway & Co. v. Uzielli (1905), 2 K. B. at p. 558 (disbursements). 102

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The insurable value, in the case of a steamship, includes also the machinery, boilers, and coals and engine stores, if owned by the assured, and in the case of a ship engaged in a special trade, the ordinary fittings requisite for that trade:104 (2.) In insurance on freight, whether paid in advance or otherwise, the insurable value is the gross amount of the freight at the risk of the assured, plus the charges of insurance:105 (3.) In insurance on goods or merchandise, the insurable value is the prime cost of the property insured, plus the expenses of and incidental to shipping and the charges of insurance upon the whole:106 (4.) In insurance on any other subject-matter, the insurable value is the amount at the risk of the assured when the policy attaches, plus the charges of insurance.107 Illustrations. 1. 2.

Policy on ship in usual form. This does not cover fishing-tackle for the Greenland trade. Such tackle must be insured specially, as it is no part of the outfit of the ship.108 Time policy on ship in usual form, the ship being generally engaged in the grain trade. This policy covers separation cloths and dunnage mats as part of the ship’s outfit, even though at the time of loss the cloths and mats were not in use.109

NOTE.—A clear delimitation of insurable value is necessary, (a) to fix the measure of indemnity in the case of an unvalued policy, (b) to fix the measure of indemnity in the few cases in which a valued policy can be opened up, and (c) to furnish an approximate standard for fixing the value in a valued policy. Though marine insurance is universally admitted to be a contract of indemnity (see note to § 1), there are two opposing theories as to what is the nature of the indemnity to be aimed at. According to some, the assured ought to be put in the same position as if he had not undertaken the adventure. According to others, he ought to be put in the same position as if the adventure had been carried to a successful issue.110 English law steers a halting course between these two theories, but with a strong leaning towards the former. According to modern practice, unvalued policies are practically confined to goods and to freight payable on arrival. Other interests are almost invariably insured by valued policies. When the amount to be insured on goods cannot be fixed till the receipt of what are known as “closing particulars,” provision is usually made that, in the event of loss before declaration, the declaration shall be on the basis of invoice cost and charges, plus a certain agreed percentage for anticipated profits. See Owen’s Notes and Clauses, Ed. 3, p. 79. See McArthur, Ed. 2, p. 67, and as to fittings, see Hogarth v. Walker (1900), 2 Q. B. 283, C. A. McArthur, Ed. 2, p. 68; Palmer v. Blackburn (1822), 1 Bing. 61; United States Shipping Co. v. Empress Assurance Corpn. (1906), Times, December 6 (gross not net freight); Report of Commission on Unseaworthy Ships, 1874, vol. 2, p. xvi. 106 McArthur, Ed. 2, p. 68; Usher v. Noble (1810), 12 East, 639, as to charges of insurance, see at p. 646. 107 McArthur, Ed. 2, p. 69. 108 Hoskins v. Pickersgill (1783), 3 Dougl. 222; cf. Hill v. Patten (1807), 8 East, 373. 109 Hogarth v. Walker (1900), 2 Q. B. 282, C. A. 110 McArthur, Ed. 2, p. 67, citing Benecke, Principles of Indemnity. 104 105

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As regards “ship,” it is to be noted that Lloyd’s policy expresses the insurance to be upon “the body, tackle, apparel, ordnance, munition, artillery, boat and other furniture of and in the good ship—.” The words, “if owned by the assured,” are inserted in the second paragraph of subsect. (1) because it may happen that coals and engine stores are the property of the charterer and not of the shipowner. It appears that a policy on “hull and machinery” covers less than a policy on “ship,” e.g. it may not cover coals and stores.111 As to measure of indemnity, see further, §§ 67–78.

DISCLOSURE AND REPRESENTATIONS. § 17. Insurance is uberrimœ fidei. A contract of marine insurance is a contract based upon the utmost good faith, and, if the utmost good faith be not observed by either party, the contract may be avoided by the other party.112 NOTE.—The general principle is stated in this section because the special sections which follow are not exhaustive. Insurance is a contract uberrimœ fidei, and the obligation is binding upon both parties alike, though necessarily the question usually arises with reference to the conduct of the assured. “Good faith,” says Lord Mansfield, “forbids either party, by concealing what he privately knows, to draw the other into a bargain from his ignorance of that fact, and from his believing the contrary. … The policy would be equally [void] against the underwriter if he concealed; as if he insured a ship on her voyage which he privately knew to be arrived, an action would lie to recover the premium.”113 The contract is often said to be rendered void by concealment or misrepresentation, but it is clear that it is only voidable at the option of the party prejudiced, and that the ordinary rules of law as to voidable contracts apply to insurance.114 Ships’ papers. It follows from the nature of the contract that even in litigation both parties must play with the cards on the table; hence the full discovery allowed as to ships’ papers and other material documents.115

Roddick v. Indemnity Mutual Mar. Ins. Co. (1895), 2 Q. B. at p. 386, C. A. Arnould, Ed. 6, pp. 5, 513, 548; Pothier, Traité d’Assurance, §§ 280 to 290; cf. Seaton v. Heath (1899), 1 Q. B. at p. 792, C. A. 113 Carter v. Boehm (1765), 3 Burr. 1905. 114 Morrison v. Universal Ins. Co. (1873), L. R. 8 Ex. 187, Ex. Ch. 115 Boulton v. Holder Brothers (1904), 1 K. B. 784, C. A. (ships’ papers—action by underwriters for misrepresentation); Harding v. Bussell (1905), 2 K. B. 83, C. A. (ship’s papers—mixed sea and land risk). 111 112

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§ 18. Disclosure by assured. (1.) Subject to the provisions of this section, the assured must disclose to the insurer, before the contract is concluded, every material circumstance which is known to the assured, and the assured is deemed to know every circumstance which, in the ordinary course of business, ought to be known by him. If the assured fails to make such disclosure the insurer may avoid the contract.116 (2.) Every circumstance is material which would influence the judgment of a prudent insurer in fixing the premium, or determining whether he will take the risk.117 (3.) In the absence of inquiry the following circumstances need not be disclosed, namely:— (a.) Any circumstance which diminishes the risk:118 (b.) Any circumstance which is known or presumed to be known to the insurer. The insurer is presumed to know matters of common notoriety or knowledge, and matters which an insurer in the ordinary course of his business, as such, ought to know:119 (c.) Any circumstance as to which information is waived by the insurer:120 (d.) Any circumstance which it is superfluous to disclose by reason of any express or implied warranty:121 (4.) Whether any particular circumstance, which is not disclosed, be material or not is, in each case, a question of fact.122 (5.) The term “circumstance” includes any communication made to, or information received by, the assured.123 Illustrations. 1.

Insurance on ship. Lloyd’s List contains an entry that a ship of a similar name had stranded. The broker, after inquiry, comes to the conclusion that the entry must relate to another ship, and does not disclose the information to the insurer. The insurer, not having seen the entry, may avoid the contract.124

Arnould, Ed. 6, p. 548; Parsons on Insurance, vol. i. p. 467; Ionides v. Pender (1874), L. R. 9 Q. B. at p. 537, per Blackburn, J. As to facts which assured ought to know, see Proudfoot v. Montefiore (1867), L. R. 2 Q. B. 511, 519; Blackburn v. Vigors (1887), 12 App. Cas. at pp. 537, 541. As to Lloyd’s agents abroad, see Wilson v. Salamandra Ass. Co., Times, Feb. 10, 1903. 117 Rivaz v. Gerussi (1880), 6 Q. B. D. at P. 229, Per Lord Esher; Tate v. Hyslop (1885), 15 Q. B. D. at p. 379, per Lord Bowen. 118 Arnould, Ed. 6, pp. 579, 591; Carter v. Boehm (1766), 3 Burr, at p. 1910 per Lord Mansfield. 119 Arnould, Ed. 6, p. 579; Carter v. Boehm (1766), 3 Burr, at p. 1910; Harrower v. Hutchinson (1870), L. R. 5 Q. B. at p. 590. 120 Arnould, Ed. 6, p. 587; Phillips on Insurance, § 568; Carter v. Boehm (1766), 3 Burr, at pp. 1910, 1911; cf. Laing v. Union Ins. Co. (1895), 11 Times L. R. 359. 121 Arnould, Ed. 6, p. 588; Shoolbred v. Nutt (1782), Marshall on Insurance, Ed. 4, p. 366; Haywood v. Rodgers (1804), 4 East, 590; 1 Parsons on Insurance, p. 485. 122 lonides v. Pender (1874), L. R. 9 Q. B. 531. 123 Blackburn v. Haslam (1888), 21 Q. B. D. 144. 124 Morrison v. Universal Mar. Ins. Co. (1873), L. R. 8 Ex. 197, Ex. Ch. 116

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2. 3.

4. 5.

6. 7.

Policy on goods which are grossly over-valued. The assured does not disclose the over-valuation. The insurer may avoid the contract.125 Assured effects a series of consecutive policies on shipments to be declared. The goods declared on the earlier policies are systematically under-valued, so as to conceal the fact that the earlier policies are more exhausted than they appear to be. The insurer may avoid the latter policies on the ground of non-disclosure.126 Insurance on chartered freight. If the charter contains a cancelling clause, this must be disclosed.127 Insurance on goods, including risk of craft. The assured does not disclose that he gets his lighterage done on cheaper terms in consideration of the lighterman limiting his liability as a common carrier. The insurer may avoid the contract.128 Insurance on chartered freight, one-third diminishing each mouth. The slip sufficiently discloses that this is a time charter, which may contain the common cesser clause.129 Policy on goods. The plaintiff’s shipping agent at Smyrna hears that the vessel on which the goods were shipped has stranded. Instead of telegraphing, he informs plaintiff of this by letter, so that plaintiff may have time to insure. Before receipt of the letter the plaintiff insures the goods. The insurer may avoid the contract.130

NOTE.—Non-disclosure by the assured is commonly referred to as concealment, but the expression non-disclosure is preferable. Aliud est celare, aliud tacere. The duty of the assured to disclose material facts is a positive, not a negative duty. Mere silence, and even innocent silence, as to a material fact may entitle the insurer to avoid the contract.131 It has been suggested that if the master of a ship, or a ship’s agent, innocently omits to disclose a material fact to his employer, who accordingly cannot disclose it to the insurer, the contract will stand, but the House of Lords appear to have repudiated this notion.132 If insurance be undertaken by an agent for the insurer, the ordinary rules of agency appear to apply, but special rules apply to the agent of the assured; see next section. Subsect. (2), Rivaz v. Gerussi, cited in illustration 3, was a case of fraud, but it was laid down generally that a circumstance might be material, though it had no direct bearing on the particular risk. An apparently well-founded rumour, though it turns out afterwards to be incorrect, must be disclosed (Arnould, Ed. 6, p. 574).

127 128

lonides v. Pender (1874), L. R. 9 Q. B. 531 (fraud). Rivaz v. Gerussi (1881), 6 Q. B. D. 222, C. A. (fraud). Mercantile Steamship Co. v. Tyser (1881), 7 Q. B. D. 73. Tate v. Hyslop (1885), 15 Q. B. D. 368, C. A. A common carrier is responsible as an insurer, and not merely for negligence. 129 The Bedouin (1894), P. 1, C. A.; cf. Charlesworth v. Faber (1900), 5 Com. Cas. 408 (continuation clause). 130 Proudfoot v. Montefiore (1867), L. R. 2 Q. B. 511. 131 See Bates v. Hewitt (1867), L. R. 2 Q. B. 595, at p. 607 (failure to disclose that a merchant ship had formerly been a Confederate cruiser). 132 Blackburn v. Vigors (1887), 12 App. Cas. at pp. 536, 540. 125 126

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The rule which exempts from disclosure circumstances covered by an implied warranty (Arnould, Ed. 6, p. 588) appears to be of doubtful policy, but it is an old one. It seems still to be a moot point whether expert evidence is admissible to prove the materiality of a fact which has not been disclosed.133

§ 19. Disclosure by agent effecting insurance. Subject to the provisions of the preceding section as to circumstances which need not be disclosed, where an insurance is effected for the assured by an agent, the agent must disclose to the insurer— (a.) Every material circumstance which is known to himself, and an agent to insure is deemed to know every circumstance which in the ordinary course of business ought to be known by, or to have been communicated to, him:134 and (b.) Every material circumstance which the assured is bound to disclose, unless it come to his knowledge too late to communicate it to the agent.135 Illustrations. 1.

Time policy on ship. The broker who effects the insurance omits to disclose a letter in his possession from the captain saying that the ship has been ashore, and that she is being repaired. This is not done dishonestly. The insurer may avoid the contract.136 A., who has insured an overdue ship, instructs his Glasgow brokers to re-insure it. The Glasgow brokers effect an insurance with B. through their London agents, having received some material information about the ship which they do not disclose. Afterwards A. effects another policy with B. through R., his London agent, who knows nothing of the news about the ship, so that both parties act honestly. A. can recover on the latter policy from B.137 Plaintiff, in Glasgow, employs a broker there to re-insure an overdue ship. The Glasgow broker employs a broker in London to effect the re-insurance. The Glasgow broker does not communicate either to the plaintiff or to the London broker information which he has received tending to show that the ship was lost. The insurer may avoid the contract.138

2.

3.

NOTE.—The knowledge of an agent to insure, who does not effect the particular insurance, is immaterial,139 but if an agent to insure employs a sub-agent, all material facts known to the agent must be communicated to the sub-agent.140

135 136 137 138 139 140 133 134

See notes to Carter v. Boehm, 1 Smith, L. C. Ed. 10, p. 874; Roscoe’s Nisi Prius, Ed. 17, p. 177. Blackburn v. Vigors (1887), 12 App. Cas. at p. 541; Blackburn v. Haslam (1888), 21 Q. B. D. 144. Blackburn v. Vigors (1887), 12 App. Cas. at p. 537. Russell v. Thornton (1859), 4 H. & N. 788; affirmed 6 H. & N. 140, Ex. Ch. Blackburn v. Vigors (1887), 12 App. Cas. 531. Blackburn v. Haslam (1888), 21 Q. B. D. 144. Blackburn v. Vigors (1887), 12 App. Cas. 530. Blackburn v. Haslam (1888), 21 Q. B. D. 144.

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If before the contract is made the assured hears of a loss, but has not time to communicate with his agent, the contract would stand. The assured must use “due diligence” to communicate with his agent.141

§ 20. Representations pending negotiation of contract. (1.) Every material representation made by the assured or his agent to the insurer during the negotiations for the contract, and before the contract is concluded, must be true. If it be untrue the insurer may avoid the contract.142 (2.) A representation is material which would influence the judgment of a prudent insurer in fixing the premium, or determining whether he will take the risk.143 (3.) A representation may be either a representation as to a matter of fact, or as to a matter of expectation or belief.144 (4.) A representation as to a matter of fact is true, if it be substantially correct,145 that is to say, if the difference between what is represented and what is actually correct would not be considered material by a prudent insurer.146 (5.) A representation as to a matter of expectation or belief is true if it be made in good faith.147 (6.) A representation may be withdrawn or corrected before the contract is concluded.148 (7.) Whether a particular representation be material or not is, in each case, a question of fact.149 Illustrations. 1. 2. 3.

Insurance on ship. The assured falsely informs the insurer that he has partially insured the ship elsewhere on certain specified terms. The insurer, relying on this, gives a policy on similar terms. The insurer may avoid the contract.150 Policy on goods at sea. The assured represents to the insurer that the ship sailed from Baltimore for London on the 12th January. As a fact she sailed on the 1st January. The insurer may avoid the contract.151 Policy on goods to be shipped from abroad. The assured, mistaking the old ship “Socrates” for a new ship called the “Socrate,” informs the insurer that the goods are to be shipped on the new ship. The insurer may avoid the contract.152

Cory v. Patton (1872), L. R. 7 Q. B. at p. 308. Arnould, Ed. 6, pp. 519, 520; Anderson v. Pacific Mar. Ins. Co. (1872), L. R. 7 C. P. at p. 68, per Willes, J.; lonides v. Pacific Ins. Co. (1871), L. R. 6 Q. B. at p. 683, per Blackburn, J. 143 Arnould, Ed. 6, p. 518; Rivaz v. Gerussi (1880), 6 Q. B. D. at p. 229. 144 Arnould, Ed. 6, p. 514. 145 Ibid., pp. 518, 521; Pawson v. Watson (1778), 2 Cowp. 785. As to a warranty, see § 33 (2). 146 Macdowell v. Frazer (1779), 1 Doug. 260, 261. 147 Arnould, Ed. 6, p. 524. 148 Arnould. Ed. 6, pp. 538, 544. 149 Rivaz v. Gerussi (1880), 6 Q. B. D. at p. 229, C. A. 150 Sibbald v. Hill (1814), 2 Dow. H. L. 263. 151 Anderson v. Thornton (1853), 8 Exch. 425. 152 lonides v. Pender (1871), L. R. 6 Q. B. 674, 683. 141 142

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NOTE.—Sibbald v. Hill,153 where the contract was avoided, though the representation had no direct bearing on the particular risk, was a case of fraud, but according to Rivaz v. Gerussi,154 it seems that the rule would apply whether there was fraud or not. Lord Esher, in a later case, says: “The assured is not bound to tell the insurer what the law is. He is bound to tell him, not every fact, but every material fact. His other obligation is this, that if he is asked a question—whether a material fact or not—by the underwriters, he must answer it truly. If he answers it falsely, with intent to deceive, though it may not be a material fact, it will vitiate the policy.”155 Arnould, Ed. 6, pp. 514, 530, specifies a further class of representation, viz. a communication of information which the assured has received from others, but it is submitted that this supposed third case must always fall within one of the two classes specified in subsect. (3). The cases seem generally to assume that it is sufficient if a representation as to expectation or belief is made in good faith, but there was an obiter dictum by Blackburn, J., that the assured must have reasonable ground for his belief.156 This section deals with representations made during the negotiation of the contract. A representation expressed in, or implied from the terms of, the policy itself, constitutes a warranty or condition.157 The policy is the final expression of the contract, and extrinsic evidence is inadmissible to contradict its terms. A representation differs from a warranty in this—a warranty must be literally complied with, while it is sufficient if a representation is substantially correct. See §§ 33–41 as to warranties. As to the rule, or supposed rule, that a misrepresentation made to the first underwriter is presumed to be made to subsequent underwriters, see Arnould, Ed. 6, p. 544. The assured, or his agent, is not bound to give his opinion to the insurer on any matter relating to the adventure.158 The assured is bound to disclose facts within his knowledge and not the opinions which he forms on those facts. For example, the assured may think that war between two States is imminent; but unless he has special information, he may leave the insurer to form his own judgment on the matter. If the assured chooses to give his opinion, he must, of course, give it honestly.159

§ 21. When contract is deemed to be concluded. A contract of marine insurance is deemed to be concluded when the proposal of the assured is accepted by the insurer, whether the policy be then issued or not; Sibbald v. Hill (1814), 2 Dow. H. L. 263. Rivaz v. Gerussi (1880), 6 Q. B. D. 222, 229. 155 The Bedouin (1894), P. at p. 12, C. A. 156 lonides v. Pacific Ins. Co. (1871), L. R. 6 Q. B. at pp. 683, 684. 157 Behn v. Burness (1863), 32 L. J. Ex. 204, 205, Ex. Ch. and § 33. 158 Anderson v. Pacific Ins. Co. (1872), L. R. 7 C. P. 65, 69. 159 Cf. The Bedouin (1894), P. at p. 12, per Lord Esher. 153 154

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and for the purpose of showing when the proposal was accepted, reference may be made to the slip or covering note or other customary memorandum of the contract, although it be unstamped.160 NOTE.—“In effecting marine insurance,” says the Court of Exchequer Chamber, “the matter is considered merely as negotiation till the slip is initialled, but when that is done the contract is considered to be concluded. It was proved to be the usage of underwriters to issue a stamped policy in accordance with the slip, notwithstanding anything that might happen after the initialling of the slip.”161 In Cory v. Patton,162 the proposal of the agent of the assured was accepted by the insurer subject to the ratification by the assured of an increased premium, and it was held that a material fact which came to the knowledge of the assured after the acceptance, but before the ratification, need not be disclosed, for the ratification related back to the acceptance. As to ratification by assured, see § 86, post, and see further, notes to §§ 22, 23, 89.

THE POLICY. § 22. Contract must be embodied in policy. Subject to the provisions of any statute, a contract of marine insurance is inadmissible in evidence unless it is embodied in a marine policy in accordance with this Act. The policy may be executed and issued either at the time when the contract is concluded or afterwards.163 Illustration. Policy or ship in mutual association. The ship is accepted as insurable in February, and after this a loss occurs. The policy may be issued in October, taking effect from February, although when the policy is executed it is known to both parties that the loss has occurred.164 NOTE.—No action can be maintained in the United Kingdom upon the implied promise to grant a policy when the slip is initialled.165 It is otherwise where revenue laws do not interpose.166 When a stamped policy has been duly issued, then reference may be made to the slip or covering note for the purpose of showing when the contract was concluded, or for the purpose of rectifying or avoiding the policy, see §§ 21, 23, 89.

Arnould, Ed. 6, p. 259; lonides v. Pacific Mar. Ins. Co. (1871), L. R. 6 Q. B. at p. 684. See further, § 89, as to slip as evidence. 161 Morrison v. Universal Mar. Ins. Co. (1873), L. R. 8 Ex. at p. 199. 162 Cory v. Patton (1874), L. R. 9 Q. B. 577, Ex. Ch. 163 See McArthur, Ed. 2, pp. 21, 29 and notes to next section. As to issuing a policy after notice of loss, see Mead v. Davison (1835), 3 A. & E. 303. 164 Mead v. Davison (1835), 3 A. & E. 303, 42 R. R. 401. 165 Fisher v. Liverpool Mar. Ins. Co. (1874), L. R. 9 Q. B. 418 Ex. Ch. 166 Bhugwandass v. Netherlands Sea Ins. Co. (1888), 14 App. Cas. 83 P. C. (Rangoon foreign policy). 160

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§ 23. What policy must specify. A marine policy must specify— (1.) The name of the assured, or of some person who effects the insurance on his behalf:167 (2.) The subject-matter insured and the risk insured against:168 (3.) The voyage, or period of time, or both, as the case may be, covered by the insurance: (4.) The sum or sums insured: (5.) The name or names of the insurers. NOTE.—Subsect. (1).—The Marine Insurance Act, 1788 (28 Geo. 3, c. 56), was construed as merely prohibiting insurances in blank or to bearer, and is, therefore, sufficiently reproduced by this subsection. Where different interests are concerned it is common practice, as Blackburn, J., points out, for the broker to enter into the policy in his own name “but on behalf of and to protect the interests of different constituents.” A policy is often effected by J. S. “and [or] as agent.”169 Lloyd’s policy in terms expresses that it is effected by J. S. “as well in his own name as for, and in the name and names of, all and every other person to whom the same doth, may, or shall appertain.” But this provision is confined to interests intended to be covered. For example, A. & Co. charter a ship from the owners. The owners’ broker effects a policy on the ship in the ordinary form, with a collision clause. The charterers after long litigation have to pay damages to another ship for collision. There being no evidence of any intention by the owners to insure on A. & Co.’s behalf, they cannot recover on this policy in reliance on the general words.170 Subsects. (2) to (5).—By § 93 of the Stamp Act, 1891 (54 & 55 Vict. c. 39), set out post, p. 156, a policy is invalid unless it specifies “the particular risk or adventure, the names of the subscribers or underwriters, and the sum or sums insured.” Where under an open cover the insurer undertook to re-insure the plaintiffs to the extent of the excess over certain amounts upon risks which plaintiff had undertaken, or might undertake, on goods by certain ships, with a limit of £4000, it was held that the cover could not be stamped as a policy, inasmuch as it did not specify the sum or sums insured.171 Although the requirement that a contract of marine insurance must be embodied in a policy was before this Act contained in a Revenue Act, it is more than a fiscal rule. The rule is clearly stated in the

See Arnould, Ed. 6, pp. 107–109; McArthur, Ed. 2, p. 29; and the common form of Lloyd’s policy. As to ratification by assured, see § 86. 168 Cf. Edwards v. Aberayron Mutual Ins. Society (1875), 1 Q. B. D. 563, Ex. Ch. (mutual insurance), at p. 573; and see § 26. 169 lonides v. Pacific Ins. Co. (1871), L. R. 6 Q. B. at p. 678; cf. Ocean I. S. Ins. Assn. v. Leslie (1889), 22 Q. B. D. 724 as to scope of the term “assured.” 170 Boston Fruit Co. v. British and Foreign Mar. Ins. Co. (1905), 1 K. B. 637, C. A., affirmed A. C. (1906), 336 H. L. 171 Home Mar. Ins. Co. v. Smith (1898), 2 Q. B. 351, C. A. 167

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Guidon de la Mer in 1600, and may be regarded as a general rule of public policy. The Continental codes contain minute regulations as to the particulars to be inserted in marine policies.172 An error in describing the name of the ship is not usually material.173 The error then comes under the maxim falsa demonstratio non nocet.

§ 24. Signature of insurer. (1.) A marine policy must be signed by or on behalf of the insurer, provided that in the case of a corporation the corporate seal may be sufficient, but nothing in this section shall be construed as requiring the subscription of a corporation to be under seal.174 (2.) Where a policy is subscribed by or on behalf of two or more insurers, each subscription, unless the contrary be expressed, constitutes a distinct contract with the assured.175 NOTE.—In a recent case,176 underwriters formed a syndicate, and an ordinary Lloyd’s policy was subscribed “The S. Syndicate, C. Manager;” afterwards followed the names of the members and the amounts of their subscriptions. Held, that the contract of the members was several, and not joint. Issue of policy. A marine policy, like every other instrument, is incomplete and revocable until delivery to, or for the benefit of, the person entitled to hold it. In the case of Lloyd’s underwriters the assured’s broker gets the signatures, so that no difficulty arises. In the case of a company’s policy delivery is presumed on very slight evidence.177

§ 25. Voyage and time policies. (1.) Where the contract is to insure the subject-matter at and from, or from one place to another or others, the policy is called a “voyage policy,” and where the contract

See, for example, French Commercial Code, Art. 332; Netherlands Commercial Code, Art. 592. Art. 605 of the Italian Commercial Code provides that, where possible, the name of the master, and the nationality and tonnage of the ship must be inserted in the policy. It has also been suggested that a policy should specify the place where it is made (McArthur, Ed. 2, p. 29, n.). 173 lonides v. Pacific Ins. Co. (1871), L. R.6 Q. B. 674, affirmed L. R. 7 Q. B. 517. 174 Arnould, Ed. 6, p. 271, and compare § 91 of the Bills of Exchange Act, 1882 (45 & 46 Vict. c. 61). 175 Arnould, Ed. 6, pp. 150, 250; Lloyd’s Act, 1871 (34 & 35 Viet. c. xxi.), Rule 4 in schedule; and see per Walton, J., in Anglo-Californian Bank v. London & Prov. Mar. Ins. Co. (1904), 10 Com. Cas. at p. 8. 176 Tyser v. Shipowners’ Syndicate (1896), 1 Q. B. 135. 177 Xenos v. Wickham (1867), L. R. 2 H. L. 296 (policy executed by two directors, and ordered to lie in the office till assured called for it); see to like effect, Roberts v. Security Co., Ltd. (1897), 1 Q. B. 111, C. A. (accident policy). 172

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is to insure the subject-matter for a definite period of time the policy is called a “time policy.” A contract for both voyage and time may be included in the same policy.178 [1 Edw. 7, c. 7.] (2.) Subject to the provisions of § 11 of the Finance Act, 1901, a time policy which is made for any time exceeding twelve months is invalid.179 NOTE.—A ship may be insured “from London to Hong Kong for six months,” or “from London to New York, and thirty days after arrival.” Subsect. (2) reproduces § 93 of the Stamp Act, 1891 (54 & 55 Vict. c. 39), post, p. 156. The rule prohibiting time policies for a longer period than twelve months dates from the Stamp Act of 1795.180 The prohibition was held to apply to a continuation clause, as well as to the original policy,181 but the rigour of this rule has been mitigated by § 11 of the Finance Act, 1901, post, p. 159. For stamp purposes policies on ships in course of building, &c., are deemed to be voyage and not time policies, see § 8 of the Revenue Act, 1903 (3 Edw. 7, c. 46), post, p. 160. A voyage policy which covers a ship for thirty days after arrival may be stamped as a voyage policy only, but if any longer period be covered it must be stamped both as a voyage and time policy. See § 94 of the Stamp Act, 1891, post, p. 156. Time policies sometimes give rise to difficult questions where the cause of loss comes into operation before the policy expires, but the actual loss occurs after it expires.182 As to calculating time, when ship’s time differs from English time, see note to § 91.

§ 26. Designation of subject-matter. (1.) The subject-matter insured must be designated in a marine policy with reasonable certainty.183 (2.) The nature and extent of the interest of the assured in the subject-matter insured need not be specified in the policy.184 (3.) Where the policy designates the subject-matter insured in general terms, it shall be construed to apply to the interest intended by the assured to be covered.185 Arnould, Ed. 6, pp. 230, 373; and Gambles v. Ocean Ins. Co. (1876), 1 Ex. D. 141, C. A. See 54 & 55 Vict. c. 39, §§ 93, 94, 96; and as to calculation of dates, see South Staffordshire Tramways v. Sickness Ass. Assn. (1891), 1 Q. B. 402. 180 Stewart v. Merchants’ Mar. Ins. Co. (1885), 16 Q. B. D. at p. 622. 181 Charlesworth v. Faber (1900), 5 Com. Cas. 408; Royal Exchange v. Vega (1901), 2 K. B. 567, affirmed 2 K. B. (1902), 384, C. A. 182 See the cases reviewed in Lidgett v. Secretan (1870), L. R. 5 C. P. 190; and see Rule 5 of First Sched., post, p. 144. 183 Arnould, Ed. 6, c. 49; McArthur, Ed. 2, p. 61; Mackenzie. v. Whitworth (1875), 1 Ex. D. 36, at p. 40, C. A. 184 Mackenzie v. Whitworth (1875), 1 Ex. D. at p. 41. 185 Allison v. Bristol Mar. Ins. Co. (1876), 1 App. Cas. at pp. 216, 235; but cf. McSwinney v. Royal Exchange (1850), 14 Q. B. 634, where “profits on rice” was under the circumstances held an insufficient description. 178 179

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(4.) In the application of this section regard shall be had to any usage regulating the designation of the subject-matter insured.186 NOTE.—In Mackenzie v. Whitworth,187 in 1875, a policy of reinsurance was effected simply as a policy “on cotton.” It was held to be sufficient, and that it was unnecessary to specify that it was a re-insurance. The decision at the time was supposed to be opposed to the ordinary understanding and practice, and the Lords Select Committee in 1896 proposed to alter the rule there laid down. But having regard to the length of time during which this decision has been unquestioned law, it was thought better not to disturb it. If an insurer does not know whether a proposed insurance is original or by way of re-insurance, he can always ask the question. The quantum of the assured’s interest need not be specified in the policy. Thus it is not necessary to specify whether the assured insures for himself or as trustee for another, as full owner, or as mortgagor or mortgagee. The subject-matter is usually very briefly described as being “on ship,” “on goods,” “on freight,” “on advances on coolies,” “on emigrant money,” and so on; but the description must not be misleading, thus a policy on “piece goods” will not cover a loss on hats;187 so, too, a policy “on freight” will not cover passage money.188 Prospective profits may be insured apart from the goods out of which they are expected to arise, but in that case they must be specifically described as profits. “The subject-matter of this insurance is on rice,” says Blackburn. J., “and though that is to be construed liberally as covering any interest in the rice, it cannot be construed as covering an interest in profits that might arise collaterally from a contract relating to the rice.”189 “In some cases,” says Blackburn, J., “the nature of the interest in the thing insured is such as to vary the nature of the risk, and then it should be stated … in all cases when the peculiar nature of the interest alters the risk, it may probably be said that such interest is the subject-matter of the insurance,” and he then goes on to instance a case of profits dependent on various contingencies.190 But it is difficult to see how the nature of the interest of the assured in the subject-matter can vary the risk. The true question seems to be whether, having regard to usage, the subjectmatter is sufficiently described. Loans on bottomry and respondentia, must, it seems, be insured as such.191

§ 27. Valued policy. (1.) A policy may be either valued or unvalued.192 Mackenzie v. Whitworth (1875), 1 Ex. D. at p. 40. Mackenzie v. Whitworth (1875), 1 Ex. D. at p. 40. 188 Denoon v. Home and Colonial Ass. Co. (1872), L. R. 7 C. P. 351. As to what is covered by the wide term “disbursements,” see Buchanan v. Faber (1899), Times L. R. 684; 4 Com. Cas. 223; Lawther v. Black (1901), 6 Com. Cas. 5; affirmed by C. A., ibid., p. 197; and as to what is, or is not, covered by “goods,” see Sched. I., Rule 17, post. 189 Anderson v. Morice (1875), L. R. 10 C. P. at p. 621, Ex. Ch. 190 Mackenzie v. Whitworth (1875), 1 Ex. D. at p. 41; cf. Wilson v. Jones (1867), L. R. 2 Ex. at p. 151 (submarine cable). 191 Mackenzie v. Whitworth (1875), 1 Ex. D. at p. 43, citing Glover v. Black (1765), 3 Burr. 1394. 192 Arnould, Ed. 6, pp. 301–309; McArthur, Ed. 2, p. 71; Irving v. Manning (1847), 1 H. of L. Cas. at pp. 305, 307. 186 187

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(2.) A valued policy is a policy which specifies the agreed value of the subject-matter insured.193 (3.) Subject to the provisions of this Act, and in the absence of fraud, the value fixed by the policy is, as between the insurer and assured, conclusive of the insurable value of the subject intended to be insured, whether the loss be total or partial.194 (4.) Unless the policy otherwise provides, the value fixed by the policy is not conclusive for the purpose of determining whether there has been a constructive, total loss.195 Illustrations. 1. 2.

3. 4.

5.

6.

A ship is insured with one company for £1700, and with another company for £2000. In both policies she is valued at £3000. The assured, in case of total loss, is not entitled to recover more than £3000 in all.196 Ship and freight valued at £3000, with running-down clause under which insurers were to pay such proportion of three-fourths of any damages paid by the assured as the sum insured bore to the value of the ship insured and freight. The assured had to pay £2110 damages for running down another ship. His ship was sold under a decree of the Admiralty Court to satisfy these damages. Held, that an underwriter for £100 must pay £52 15s.197 Ship valued at £9000 is insured for £2000. By another policy the same ship is valued at £8000, and insured for £8000. The insurer on the second policy pays for total loss. The insurer on the first policy is liable to pay £1000.198 A ship at sea is insured by time policy for £6000, and valued at £8000. At the time the policy is effected, the ship has been sea-damaged to the extent of £5000, but the assured is not aware of the fact. Afterwards, during the currency of the policy, she is totally lost. The assured can recover the full £6000.199 A ship valued at £6000 is insured for £6000. Her real value is £9000. She is run down by another ship and lost. The insurers pay for a total loss. Afterwards the assured recovers £5000 damages from the owners of the ship in fault. The insurers are entitled to the whole of this sum as salvage.200 Ship insured by same insurer in two successive valued policies. The first policy covers her to Calcutta and for thirty days after arrival. The second policy

Ibid.; and as to distinctly specifying the valuation, see Wilson v. Nelson (1864), 33 L. J. Q. B. 220. As to reforming a defective valuation, see Rankin v. Potter (1873), L. R. 6 H. L. at p. 114. 194 Arnould, Ed. 6, p. 301; Barker v. Janson (1868), L. R. 3 C. P. 303; The Main (1894), P. at p. 325. As to concealment of over-valuation, see § 18 and notes. 195 Arnould, Ed. 2, p. 309; Irving v. Manning (1847), 1 H. of L. Cas. at p. 305; but it is now common to provide that the insured value is to be taken as the repaired value, see, e.g., Angel v. Merchants’ Mar. Ins. Co. (1903), 1 K. B. 811, C. A. 196 Irving v. Richardson (1831), 2 B. & Ad. 193. 197 Thompson v. Reynolds (1857), 26 L. J. Q. B. 93; cf. Xenos v. Fox (1868), L. R. 3 C. P. at p. 636 to like effect. 198 Bruce v. Jones (1863), 32 L. J. Ex. 132; discussed McArthur, Ed. 2, p. 73. 199 Barker v. Janson (1868), L. R. 3 C. P. 303; cf. The Main (1894), P. 320 (freight). 200 North of England Ins. Assn. v. Armstrong (1870), L. R. 5 Q. B. 244; but Lord Blackburn has thrown doubts on this case in Burnard v. Rodocanachi (1882), 7 App. Cas. at p. 342, and see at p. 335. But see § 81 as to under insurance. 193

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covers her at and from Calcutta to London. On the voyage out she is damaged by storms. While she is being repaired at Calcutta, and after the thirty days have expired, she is destroyed by fire. The insurer must pay on the first policy for the partial loss, and on the second policy for the total loss, without deducting what was paid on the first policy.201 7. A policy for £1000 is effected on freight valued at £2000. Only half the intended cargo is put on board, the rest of the ship being used for emigrants. The ship is lost. The insurer is only liable for £500.202 8. Policy on freight valued at £5500. The ship is detained by an accident, and, during this delay, there is a great fall in freights. When a full cargo is loaded, the freight comes to £3250, of which £925 is paid in advance. The ship is lost. The valuation stands, and the assured is entitled to receive £5500, less £1611, which is the proportion of the prepaid freight to the gross freight.203 9. Policy for £1000 on ship valued at £3750, with warranty that one-fifth shall remain uninsured. The real value of the ship is £5000. For the purpose of determining whether the warranty has been broken by a subsequent insurance, regard must be had to the policy value, and not to the real value.204 10. A ship is insured against fire by a valued time policy. While the policy is running, she is so injured by stranding that the cost of repairing her would exceed her repaired value. After this she is destroyed by fire. The insurer must pay the full amount insured.205 11. Policy on ship valued at £33,000. Her real value is £40,000. The ship incurs certain general average and salvage expenses, which are adjusted abroad on her real value. The assured can only recover 33–40ths of the adjustment from the insurer.206 12. Policy for £3000 on ship valued at £17,500. The ship is much injured by storms, and it is shown that it would cost £10,500 to repair, and that her market value when repaired would be £9000. The assured, notwithstanding the valuation, is entitled to abandon the ship and claim for a total loss.207 NOTE.—An unvalued policy is commonly spoken of by lawyers as an “open policy,” but as that term is applied in mercantile language to a floating policy, it seems better to adhere to the term “unvalued policy.” In 1761 the validity of valued policies was contested on the ground that in substance they were wagering policies. Lord Mansfield disposed of this contention, and the validity of valued policies has never since been questioned. He pointed out that the effect of the valuation was merely to fix the insurable value of the goods or other subject-matter insured, “just as if the parties admitted it at the trial.”208 Lidgett v. Secretan (1871), L. R. 6 C. P. 616. Denoon v. Home and Colonial Ass. Co. (1872), L. R. 7 C. P. 341. 203 The Main (1894), P. 320. The assured must, of course, also deduct any sum which he has received on any other policy. 204 Muirhead v. Forth Mutual Ins. Assn. (1894), A. C. 72 H. L. 205 Woodside v. Globe Ins. Co. (1896), 1 Q. B. 105. 206 Steamship “Balmoral” v. Marten (1900), 2 Q. B. 748; affirmed A. C. (1902), 511 H. L. 207 Irving v. Manning (1847), 1 H. of L. Cas. 287. 208 Lewis v. Rucker (1761), 2 Burr. 1167, see at p. 1171 (partial loss); cf. Irving v. Manning (1847), 1 H. of L. Cas. at p. 305; Lidgett v. Secretan (1871), L. R. 6 C. P. at p. 627, per Willes, J. 201 202

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Speaking of a total loss, the judges in Irving v. Manning say, “In an open policy the compensation must be ascertained by evidence; in a valued policy the agreed total value is conclusive.’’209 It is commonly said that the valuation is conclusive “for the purposes of the policy.” It is probably more correct to say that it is conclusive for all purposes relating to the insurable value of the subject-matter insured by a given policy.210 For other purposes it is not conclusive, and in some cases not even relevant. Notwithstanding the valuation, the interest of the assured may be disproved, or short interest may be shown, or it may be shown that the whole or part of the subject-matter insured was not at risk.211 In lonides v. Pender212 it was held that non-disclosure of an excessive valuation was ground for avoiding a policy; but that was a gross case of fraud. Non-disclosure of an over-valuation made in good faith would presumably be immaterial.213 But grossly excessive valuation, if not disclosed, would, of course, always be evidence of fraud. As to mistake, see § 91, post. For a useful discussion of the English law of valuation, see Report of Commission on Unseaworthy Ships, 1874, vol. 2, p. xvi., and a memorandum by Mr. Justice Willes, p. 426. Under the Continental Codes the policy valuation is only primâ facie evidence of the real value.

§ 28. Unvalued policy. An unvalued policy is a policy which does not specify the value of the subjectmatter insured, but, subject to the limit of the sum insured, leaves the insurable value to be subsequently ascertained, in the manner herein-before specified.214

§ 29. Floating policy by ship or ships. (1.) A floating policy is a policy which describes the insurance in general terms, and leaves the name of the ship or ships and other particulars to be defined by subsequent declaration.215 (2.) The subsequent declaration or declarations may be made by indorsement on the policy, or in other customary manner.216 Irving v. Manning (1847), 1 H. of L. Cas. at p. 307. Cf. Burnand v. Rodocanachi (1882), 7 App. Cas. at p. 335, per Lord Selborne. 211 As to disproving interest entirely, see Seagrave v. Union Ins. Co. (1866), L. R. 1 C. P. 316–320; as to short interest, see Denoon v. Home and Colonial Ass. Co. (1872), L. R. 7 C. P. 351; Williams v. North China Ins. Co. (1876), 1 C. P. D. 757, C. A.; and as to part of the subject-matter not being at risk, see Tobin v. Harford (1865), 34 L. J. C. P. 57 Ex. Ch.; The Main (1894), P. 320. 212 lonides v. Pender (1874), L. R. 9 Q. B. 531. 213 See The Main (1894), P. 320, 325, where the unreported case, Company of South African Merchants v. Harper, is discussed. 214 Arnould, Ed. 6, p. 318; McArthur, Ed. 2, p. 67; Irving v. Manning (1847), 1 H. L. Cas. at p. 307. As to insurable value, see § 16; and as to measure of indemnity, see §§ 68–71. 215 Arnould, Ed. 6, p. 337; McArthur, Ed. 2, p. 77. 216 Ibid. 209 210

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(3.) Unless the policy otherwise provides, the declarations must be made in the order of despatch or shipment. They must, in the case of goods, comprise all consignments within the terms of the policy, and the value of the goods or other property must be honestly stated, but an omission or erroneous declaration may be rectified even after loss or arrival, provided the omission or declaration was made in good faith.217 (4.) Unless the policy otherwise provides, where a declaration of value is not made until after notice of loss or arrival, the policy must be treated as an unvalued policy as regards the subject-matter of that declaration.218 NOTE.—The legality of the practice under floating policies was affirmed in England in 1794 (Arnould, Ed. 6, p. 337). When two or more floating policies, effected with different insurers, are open, it is said that “the assured has a right to declare on any of the policies a loss on board any ship he pleases that comes within the terms of that policy.”219 That may have been the law formerly, but floating policies are now commonly effected “to follow and succeed,” that is to say, the prior policy must be exhausted before the next policy is declared on (McArthur, Ed. 2, p. 78).

§ 30. Construction of terms in policy. (1.) A policy may be in the form in the First Schedule to this Act. (2.) Subject to the provisions of this Act, and unless the context of the policy otherwise requires, the terms and expressions mentioned in the First Schedule to this Act shall be construed as having the scope and meaning in that schedule assigned to them.220 NOTE.—It would be beyond the scope of an Act of Parliament to attempt to reproduce the many decisions which interpret particular terms in particular policies. But the rules in the schedule record the interpretation which has been put on the more important terms and expressions in the common Lloyd’s policy. This may assist the parties to see the scope and effect of the ordinary printed contract, and to add to or alter its terms to meet their special requirements. In subsect. (2) the words “Subject to the provisions of this Act” were added in the Commons Committee, and the word “may” was altered into “shall.”

Arnould, Ed. 6, p. 337; and Stephens v. Australasian Ins. Co. (1872), L. R. 8 C. P. 18; Imperial Mar. Ins. Co. v. Fire Ins. Corporation (1879), 4 C. P. D. 166; cf. Davies v. National Ins. Co. of New Zealand (1891), A. C. at p. 491 (form of policy requiring double declaration). 218 McArthur, Ed. 2, p. 78; Gledstanes v. Royal Exchange Ass. Corporation (1864), 34 L. J. Q. B. 30, 35. Special clauses as to valuation in event of loss before declaration are now frequently inserted. 219 Arnould, Ed. 6, p. 340; note that in the cases cited the declaration was made before loss, and see the cases cited for subsect. (3). 220 See Lloyd’s policy set out, post, p. 138, and the main rules for its construction, post, p. 142. 217

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§ 31. Premium to be arranged. (1.) Where an insurance is effected at a premium arranged, and no arrangement is made, a reasonable premium is payable. (2.) Where an insurance is effected on the terms that an additional premium is to be arranged in a given event, and that event happens but no arrangement is made, then a reasonable additional premium is payable.221 NOTE.—This section is hardly covered by express decision, but it accords with the mercantile understanding, and follows the analogy of “reasonable price” in the case of contracts of sale.222 Policies are often effected on the terms that a given departure or deviation from the conditions of the policy shall be “held covered at a premium to be arranged.”

DOUBLE INSURANCE. § 32. Double insurance. (1.) Where two or more policies are effected by or on behalf of the assured on the same adventure and interest or any part thereof, and the sums insured exceed the indemnity allowed by this Act, the assured is said to be over-insured by double insurance.223 (2.) Where the assured is over-insured by double insurance— (a.) The assured, unless the policy otherwise provides, may claim payment from the insurers in such order as he may think fit, provided that he is not entitled to receive any sum in excess of the indemnity allowed by this Act;224 (b.) Where the policy under which the assured claims is a valued policy, the assured must give credit, as against the valuation, for any sum received by him under any other policy without regard to the actual value of the subject-matter insured;225 (c.) Where the policy under which the assured claims is an unvalued policy he must give credit, as against the full insurable value, for any sum received by him under any other policy;226

Cf. Hyderabad (Deccan) Co. v. Willoughby (1899), 2 Q. B. at p. 535 (deviation clause); and Greenock Steamship Co. v. Maritime Ins. Co. (1903), 1 K. B. 367 at p. 374 (any breach of warranty or unprovided incidental risk). 222 Chalmers’ Sale of Goods Act, 1893, § 8, and notes thereto. 223 Arnould, Ed. 6, p. 327, and Ed. 7, p. 396; McArthur, Ed. 2, p. 73; North British Ins. Co. v. London and Globe Ins. Co. (1877), 5 Ch. D. at p. 583, C. A. 224 Arnould, Ed. 6, p. 328; Newly v. Reed (1763), 1 W. Bl. 416, Lord Mansfield; Morgan v. Price (1849), 4 Exch. 621. 225 Arnould, Ed. 6, p. 332; Bruce v. Jones (1863), 1 H. & C. 769. 226 Arnould, Ed. 6, p. 329; Park on Insurance, p. 423. As to insurable value, see § 16. 221

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(d.) Where the assured receives any sum in excess of the indemnity allowed by this Act, he is deemed to hold such sum in trust for the insurers, according to their right of contribution among themselves.227 NOTE.—The following case may be put in illustration. Suppose a merchant to have £3000 by one policy, and £2000 by another, on cotton, and that the insurable value of his cotton on board is £4000, and the loss on it £400, the merchant can recover the whole £400, and a return of premium on £1000, just as if he had one policy for £5000; but he may at his option claim from one policy three-fifths and from the other policy two-fifths of this total; or he may claim from either policy as if the other did not exist.228 For further illustrations, see the illustrations to § 27; and see also § 80 (contribution between insurers), which supplements this section. There is very little English authority on the rules relating to double insurance, but the theory on which they rest is well explained in Lowndes on Insurance, Ed. 2, pp. 33–35. Insurance is a contract of indemnity, and the assured is entitled to indemnity, but not to a gambling profit. Correlatively the insurer must not make a profit where he runs no risk, hence the rules as to return of premium detailed in § 84. The English rule that the same subject-matter may be differently valued, in different policies, while the valuation in a policy is conclusive for the purposes of that policy gives rise to curious anomalies in working out the rules of double insurance under valued policies; see § 27. As to under insurance, see § 81, post. There appears to be no decision as to overlapping policies. Suppose a ship is insured from A. to B., and thirty days while there after arrival, and is also insured at and from B. to C. If she is lost at B. during the thirty days she is doubly covered.229 The question of mortgagor and mortgagee, among others, is discussed by Mellish, L.J., in an important case on a fire policy, where both merchant and wharfinger insured the same goods against fire. The goods were destroyed by fire, and it was held that the loss must be wholly borne by the wharfinger’s insurers, as the wharfinger was liable to the merchant. The Lord Justice says: “The rule is perfectly established in the case of a marine policy that contribution only applies where it is an insurance by the same person having the same rights, and does not apply where different persons insure in respect of different rights. Where different persons insure the same property in respect of their different rights, they may be divided into two classes. It may be that the interest of the two between them makes up the whole property, as in the case of tenant for life and remainderman. Then if each insures, although they may use words apparently insuring the whole property, yet they would recover from their respective insurers the value of their own interests, and of course these values added together would make up the value of the whole property. Therefore it would not be a case of either subrogation or contribution, because the loss would be divided between the two companies in proportion to the interests which the

This is consequential. See § 80 supplementing this provision. Lowndes, Ed. 2, p. 35 (unvalued policy). 229 See the point raised in argument in Union Mar. Ins. Co. v. Martin (1866), 35 L. J. C. P. 182, where the second policy superseded the first. 227 228

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respective persons assured had in the property. But then there may be cases where, although two different persons insured in respect of different rights, each of them can recover the whole, as in the case of mortgagor and mortgagee. But whenever that is the case, it will necessarily follow that one of these two has a remedy over against the other, because the same property cannot in value belong at the same time to two different persons. Each of them may have an interest which entitles him to insure for the full value, because in certain events—for instance, if the other person became insolvent—it may be he would lose the full value of the property, and therefore would have in law an insurable interest, but yet it must be that if each recover the full value of the property from their respective offices with whom they insure, one office must have a remedy against the other. Whenever that is the case, the company which has insured the person who has the remedy over succeeds to his right of remedy over, and then it is a case of subrogation.”230

WARRANTIES, ETC. § 33. Nature of warranty. (1.) A warranty, in the following sections, relating to warranties,231 means a promissory warranty, that is to say, a warranty by which the assured undertakes that some particular thing shall or shall not be done, or that some condition shall be fulfilled, or whereby he affirms or negatives the existence of a particular state of facts.232 (2.) A warranty may be expressed or implied.233 (3.) A warranty, as above defined, is a condition which must be exactly complied with, whether it be material to the risk or not. If it be not so complied with, then, subject to any express provision in the policy, the insurer is discharged from liability as from the date of the breach of warranty, but without prejudice to any liability incurred by him before that date.234 Illustrations. 1. 2.

232 233

A ship is warranted to sail from L. with “fifty hands or upwards.” She sails from L. with a crew of forty-six only, but afterwards takes on six more hands. The insurer is not liable.235 A ship is insured from New York to Quebec, whilst there, and thence to London, and is warranted to sail from Quebec on or before the 1st of November.

North British Ins. Co. v. London and Globe Ins. Co. (1877), 5 Ch. D. at p. 583. See §§ 34–41. Arnould, Ed. 6, p. 599; Marshall on Insurance, p. 353. Arnould, Ed. 6, p. 648; cf. Quebec Mar. Ins. Co. v. Commercial Bank of Canada (1870), L. R. 3 P. C. 234. 234 Arnould, Ed. 6, pp. 602, 604; McArthur, Ed. 2, p. 36; Lowndes, Ed. 2, p. 93; Pawson v. Watson (1778), 2 Cowp. 785; De Haln v. Hartley (1786), 1 T. R. 343. As to the final words of proviso, see note next page. 235 De Hahn v. Hartley (1786), 1 T. R. 343; 1 R. R. 221. 230 231

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3.

The ship sails from New York too late to arrive at Quebec by the 1st of November, and is lost before reaching that port. The insurer is liable.236 Policy on ship, with warranty not to be in Gulf of St. Lawrence after the 15th of November. After the 15th of November the ship is wrecked in the Gulf. The assured gives notice of abandonment, and the insurer, with knowledge of the facts, accepts the notice. The insurer is liable, having waived the breach of warranty.237

NOTE.—The use of the term “warranty” as signifying a condition precedent is inveterate in marine insurance, but it is unfortunate, because in other branches of the law of contract the term has a different meaning. It there signifies a collateral stipulation, the breach of which gives rise merely to a claim for damages and not to a right to avoid the contract. Again, in marine insurance the term is used to denote two wholly different kinds of conditions. First, it is used to denote a condition to be performed by the assured. Secondly, it is used to denote a mere limitation on, or exception from, the general words of the policy. In the case of a promissory warranty, e.g. that a ship should sail on or before a particular date, the insurer may avoid the contract if the warranty is not strictly complied with. But take the case of the warranty “free from capture and seizure.” The assured does not undertake that the ship or cargo shall not be captured. There is merely a stipulation that the policy shall not apply to such a loss. The final words of subsect. (3) represent the American rule.238 The point is said by Arnould not to have been decided in England.239 In the analogous case of deviation the rule is clear. The policy is only avoided from the time of deviation. It is often said that breach of a warranty makes the policy void. But this is not so. A void contract cannot be ratified, but a breach of warranty may be waived. A breach of warranty in insurance law appears to stand on the same footing as the breach of a condition in any other branch of contract.240 When a breach of warranty is proved, the insurer is discharged from further liability, unless the assured proves that the breach has been waived. A special clause is often inserted holding the assured covered in the event of breach of warranty at a premium to be arranged (see § 31, ante).

§ 34. When breach of warranty excused. (1.) Non-compliance with a warranty is excused when, by reason of a change of circumstances, the warranty ceases to be applicable to the circumstances of

238 239

Baines v. Holland (1855), 10 Exch. 802. Provincial Ins. Co. v. Leduc (1874), L. R. 6 P. C. 224. See § 34 (3) as to waiver. Phillips on Insurance, § 771. Arnould, Ed. 6, p. 604; but see Lowndes, Ed. 2, p. 93, citing Baines v. Holland (1855), 10 Exch. 802, which seems in point. 240 Barnard v. Faber (1893), 1 Q. B. 340, C. A. (fire policy). 236 237

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the contract, or when compliance with the warranty is rendered unlawful by any subsequent law.241 (2.) Where a warranty is broken, the assured cannot avail himself of the defence that the breach has been remedied, and the warranty complied with, before loss.242 (3.) A breach of warranty may be waived by the insurer.243 NOTE.—The cases, in terms, assume that there is no distinction between the effects of an express and an implied warranty. Suppose a ship is warranted to sail on or before a particular day, but owing to the outbreak of war she has to wait for convoy. Probably in that case the policy never attaches.244 See further, the illustration to § 33.

§ 35. Express warranties. (1.) An express warranty may be in any form of words from which the intention to warrant is to be inferred.245 (2.) An express warranty must be included in, or written upon, the policy, or must be contained in some document incorporated by reference into the policy.246 (3.) An express warranty does not exclude an implied warranty, unless it be inconsistent therewith.247 NOTE.—The following are instances of express warranties which in recent years have been the subject of judicial interpretation:— “Warranted [50] per cent, uninsured.”248 “Warranted, no iron or ore in excess of registered tonnage.”249 “Warranted not to sail for North America after August 15.”250 “Warranted, no St. Lawrence between October 1 and April 1.”251

Arnould, Ed. 6, p. 605; McArthur, Ed. 2, p. 37. De Hahn v. Hartley (1786), 1 T. R. 343 (express warranty); Quebec Mar. Ins. Co. v. Commercial Bank of Canada (1870), L. R. 3 P. C. 234 (implied warranty). 243 See Quebec Mar. Ins. Co. v. Commercial Bank of Canada (1870), L. R. 3 P. C. at p. 244; Provincial Ins. Co. v. Leduc (1874), L. R. 6 P. C. at p. 243; and see Owen’s Notes and Clauses, Ed. 3, p. 120. 244 See Hore v. Whitmore (1778), 2 Cowp. 784 (effect of embargo). 245 Arnould, Ed. 6, p. 601; cf. De Hahn v. Hartley (1786), 1 T. R. 343; Behn v. Burness (1863), 32 L. J. Ex. 204, 205; Bentsen v. Taylor (1893), 2 Q. B. at p. 281, C. A. 246 Arnould, Ed. 6, p. 600, and Bean v. Stupart (1778), 1 Dougl. 11. 247 Quebec Mar. Ins. Co. v. Bank of Canada (1870), L. R. 3 P. C. 234; Sleigh v. Tyser (1900), 2 Q. B. 333 (seaworthiness). 248 Roddick v. Indemnity Mutual Ins. Co. (1895), 2 Q. B. 380 (subsequent honour policy); General Ins. Co. of Trieste v. Cory (1897), 1 Q. B. 335 (insolvency of insurer). 249 Hart v. Standard Mar. Ins. Co. (1889), 22 Q. B. D. 499, C. A. (“iron” includes steel). 250 Cochrane v. Fisher (1835), 1 C. M. & R. 809, Ex. Ch. (time policy). 251 Birrell v. Dryer (1884), 9 App. Cas. 345. 241 242

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“Warranted not to proceed east of Singapore.”252 “Sailing on or after March 1st.”253

§ 36. Warranty of neutrality. (1.) Where insurable property, whether ship or goods, is expressly warranted neutral, there is an implied condition that the property shall have a neutral character at the commencement of the risk, and that, so far as the assured can control the matter, its neutral character shall be preserved during the risk.254 (2.) Where a ship is expressly warranted “neutral” there is also an implied condition that, so far as the assured can control the matter, she shall be properly documented; that is to say, that she shall carry the necessary papers to establish her neutrality, and that she shall not falsify or suppress her papers, or use simulated papers. If any loss occurs through breach of this condition the insurer may avoid the contract.255 Illustrations. 1. 2.

3.

Policy on a Dutch ship warranted neutral, at and from A. to B. After the ship sails war breaks out between England and Holland, and the ship is captured by the English. There is no breach of the warranty of neutrality.256 Policy on goods. Ship and goods belong to the same owner, and are both warranted Danish (i.e. neutral). The master commits a breach of the laws of neutrality by forcibly resisting search, and the ship and goods are captured and condemned as prize. The assured cannot recover on the policy.257 Policy on goods from America to England with leave to carry simulated papers. The ship and goods are in fact American, but she carries irregularly simulated British papers, and is captured by a privateer belonging to a Power at war with England, and is condemned on the ground of having false papers. The insurer is liable for this loss.258

NOTE.—In an old case a ship not properly documented was held unseaworthy; but the case seems to come under this section.259 The implied conditions may of course be negatived or varied by the terms of the particular express warranty.

Simpson Steamship Co. v. Premier Underwriting Association (1905), 10 Com. Cas. 198). Sea Ins. Co. v. Blogg (1898), 1 Q. B. 27, affirmed 2 Q. B. (1898), 398, C. A. (what is a “sailing”?). As to sailing warranties, see further, McArthur, Ed. 2, p. 37; Lowndes, Ed. 2, p. 94. 254 Arnould, Ed. 6, pp. 621, 622. 255 Ibid., p. 680. As to documents, see Arnould, Ed. 6, p. 681, and Trinder v. Thames and Mersey Mar. Ins. Co. (1898), 2 Q. B. at p. 128, per Collins, L.J.; and as to simulated papers, see Arnould, Ed. 6, p. 685. 256 Eden v. Parkinson (1781), 2 Dougl. 732, Lord Mansfield. Point not raised that there can be no insurance against British capture. 257 Garrels v. Kensington (1799), 8 T. R. 230. 258 Bell v. Bromfield (1812), 15 East, 364. 259 Steel v. Lacey (1810), 3 Taunt. 285. 252 253

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The conditions of maritime commerce and war have altered so much in recent years that it would be misleading to attempt to deduce any rules from the numerous decisions at the beginning of the last century as to the effect of the warranty to sail with convoy.260

§ 37. No implied warranty of nationality. There is no implied warranty as to the nationality of a ship, or that her nationality shall not be changed during the risk.261 In Dent v. Smith, decided in 1869, Lush, J., points out that the fact that there was no decision on any such implied warranty was very good evidence that no such warranty existed. The facts were as follows:— Policy on a parcel of gold shipped on the ss. Dutchman, which was a British ship. Next day the ship was transferred to Russian owners. In consequence of damage to the ship the gold had to be landed in Turkey, and deposited with the Russian consul. In Turkish territory all matters relating to shipping have to be decided by the consular court of the country to which the ship belongs. The Russian Consular court made the shippers pay salvage charges, which would not have been payable by English law, as a condition to releasing the gold. Held, that the risk had not been varied, and that the assured was entitled to recover these charges as a loss by perils of the seas. But suppose the shipper had also been the shipowner? Possibly in that case it would be held that the loss was the consequence of his own act, and not of the perils of the seas. As to the express warranty of nationality, see Arnould, Ed. 6, pp. 122, 136, 620.

§ 38. Warranty of good safety. Where the subject-matter insured is warranted “well” or “in good safety” on a particular day, it is sufficient if it be safe at any time during that day.262

§ 39. Warranty of sea-worthiness of ship. (1.) In a voyage policy there is an implied warranty that at the commencement of the voyage the ship shall be seaworthy for the purpose of the particular adventure insured.263 (2.) Where the policy attaches while the ship is in port, there is also an implied warranty that she shall, at the commencement of the risk, be reasonably fit to encounter the ordinary perils of the port.264 See Arnould, Ed. 6, pp. 620, 698; also Owen’s Declaration of War, p. 386. Dent v. Smith (1869), L. R. 4 Q. B. 414. 262 See Lowndes, Ed. 2, p. 94; Blackhurst v. Cockell (1789), 3 T. R. 360 (ship). 263 Arnould, Ed. 6, p. 648; McArthur, Ed. 2, p. 13; Lowndes, Ed. 2, p. 98; Biccard v. Shepherd (1861), 14 Moore P. C. at p. 493. 264 Quebec Mar. Ins. Co. v. Commercial Bank of Canada (1870), L. R. 3 P. C. at p. 241; cf. Haughton v. Empire Mar. Ins. Co. (1866), L. R. 1 Ex. 206 (overlapping policies). 260 261

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(3.) Where the policy relates to a voyage which is performed in different stages, during which the ship requires different kinds of or further preparation or equipment, there is an implied warranty that at the commencement of each stage the ship is seaworthy in respect of such preparation or equipment for the purposes of that stage.265 (4.) A ship is deemed to be seaworthy when she is reasonably fit in all respects to encounter the ordinary perils of the seas of the adventure insured.266 (5.) In a time policy there is no implied warranty that the ship shall be seaworthy at any stage of the adventure, where, with the privity of the assured, the ship is sent to sea in an unseaworthy state, the insurer is not liable for any loss attributable to unseaworthiness.267 Illustrations. 1.

2.

3. 4. 5.

Policy on ship from Montreal to Halifax. At the time the ship sailed there was a defect in her boiler. The defect did not appear in the river, but disabled her when she got out to sea. She put back to port, and the defect was repaired. Afterwards she proceeded on her voyage, and was lost in bad weather. Held, that she was unseaworthy at the commencement of the voyage, and that the insurer was not liable.268 Steamer, built for inland navigation in Trinidad, is insured from the Clyde to Trinidad. In a rather heavy sea in the Atlantic she breaks asunder and is lost. With the exercise of reasonable care she might have been made more fit for the ocean transit. The insurer is not liable.269 Voyage policy on freight. The ship, being badly damaged, has to put into a port of distress, and the cargo is sent on in a substituted ship, which is lost. There is, it seems, no implied warranty that the substituted ship is seaworthy.270 Time policy on ship. As she is nearing port the master imprudently, and through bad seamanship, throws his ballast overboard. Before the ship reaches port she is struck by a squall and capsized. The insurer is liable.271 Time policy on ship, lost or not lost, is effected in London in November, but to take effect from the 25th September previous. On the 24th September the ship was in the Indian Ocean badly damaged, but the assured did not know this when he effected this policy. The insurer is liable.272

Bouillon v. Lupton (1864), 33 L. J. C. P. at p. 43; Quebec Mar. Ins. Co. v. Commercial Bank of Canada (1870), L. R. 3 P. C. at p. 241; The Vortigern (1899), P. 140, C. A. (coals); Greenock Steamship Co. v. Maritime Ins. Co. (1903), 2 K. B. 657, C. A. (insufficient coal). This subsection was amended and redrafted in the Commons Committee. 266 Dixon v. Sadler (1839), 5 M. & W. at p. 414; Bouillon v. Lupton (1864), 33 L. J. C. P. at p. 43. This includes manning, equipment, and stowage. A Commons amendment inserting these words was cut out in the Lords as unnecessary. 267 McArthur, Ed. 2, p. 15; Fawcus v. Sarsfield (1856), 6 E. & B. 192; Dudgeon v. Pembroke (1877), 2 App. Cas. 284, H. L. 268 Quebec Mar. Ins. Co. v. Commercial Bank of Canada (1870), L. R. 3 P. C. 234. 269 Turnbull v. Janson (1877), 3 Asp. Mar. Cas. 433, C. A. Aliter if all reasonable means had been used, Clapham v. Langton (1864), 5 B. & S 729, Ex. Ch. 270 De Cuadra v. Swann (1864), 16 C. B. N. S. 771, 3rd plea. 271 Dixon v. Sadler (1839), 5 M. & W. 414, affirmed 8 M. & W. 895. This would equally apply to a voyage policy, ibid. 272 Gibson v. Small (1853), 4 H. L. Cas. 352. 265

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6. 7.

8.

9.

Time policy on ship lying in her owner’s yard. She is sent to sea in an unseaworthy condition, and lost. The owner did not know she was unseaworthy. The insurer is liable.273 Voyage policy on “wine in casks on or under deck.” The wine is all stowed on deck. The effect of this is to endanger the safety of the ship in rough weather, unless the wine be jettisoned, but the wine is so stowed as to be easily jettisoned. The ship meets with bad weather in the Bay of Biscay and the wine is jettisoned. The ship was not seaworthy at the time of sailing, and the insurer is not liable.274 Policy on copper from Port H. and Port N. to S. At H. 150 tons are loaded, and at N. 250 tons more are loaded. The additional load is too heavy for the ship, she sinks, and the copper is lost. The insurers are liable for the first 150 tons, but not for the second load of 250 tons.275 Policy on round voyage from England to port or ports in South America, with liberty to call at any ports, and back again to England. The ship calls at Monte Video, but neglects to take in sufficient coal to bring her to St. Vincent, her next port, so that some of her fittings and cargo have to be burnt as fuel. For coaling purposes this voyage is necessarily divided into stages. When she leaves Monte Video she is not seaworthy as to her coaling equipment, and the loss incurred by burning the fittings and cargo cannot be recovered under the policy.276

NOTE.—The implied warranty, unless expressly waived, attaches to every voyage policy, whether on ship, freight, cargo, profits, commission, or any other interest.277 The warranty applies only to the commencement of the voyage, or, as the case may be, of each distinct stage of the voyage. At one time it was thought that the omission to employ a pilot, where pilotage was compulsory, constituted unseaworthiness, but that doctrine was subsequently disapproved.278 Lord Wensleydale, speaking of a voyage policy, says that a ship is seaworthy when she is in a fit state, “as to repairs, equipment, and crew, and in all other respects, to encounter the ordinary perils of the voyage insured at the time of sailing upon it.”279 The state of seaworthiness is a relative, not an absolute state. It must be determined with reference to the particular voyage and adventure in contemplation. As the Privy Council says, “There is seaworthiness for the port, seaworthiness in some cases for the river, and seaworthiness in some cases (as in a case which has been

275 276

Dudgeon v. Pembroke (1877), 2 App. Cas. 284. Daniels v. Harris (1874), L. R. 10 C. P. 1. Biccard v. Shepherd (1861), 14 Moore P. C. 471. Greenock Steamship Co. v. Maritime Ins. Co. (1903), 1 K. B. 367; affirmed 2 K. B. (1903) 657, C. A., and following The Vortigern (1899), P. 140 (contract of affreightment). 277 Daniels v. Harris (1874), L. R. 10 C. P. at p. 5; cf. Knill v. Hooper (1857), 26 L. J. Ex. 377, 379 (policy on salvage of abandoned ship); Biccard v. Shepherd (1861), 14 Moore P. C. at p. 494 (goods). 278 Law v. Hollingworth (1797), 7 T. R. 160; disapproved, Dixon v. Sadler (1839), 5 M. & W. at p. 408; Sadler v. Dixon (1841), 8 M. & W. at p. 900, Ex. Ch. 279 Dixon v. Sadler (1839), 5 M. & W. at p. 414. 273 274

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put forward of a whaling voyage) for some definite, well-recognized, and distinctly separate stage of the voyage.280 So, too, a ship may be seaworthy of herself, but not seaworthy for the purpose of the particular adventure, e.g. carrying deck cargo.281 On the other hand, if the insurer knows the nature of the risk it is sufficient if every reasonable precaution be taken.282 Subsection (3) was redrafted in the Commons Committee. It originally provided, in accordance with the older dicta, that the ship must be seaworthy, i.e. seaworthy in all respects, at the commencement of each stage, but having regard to the implied coaling warranty in the case of round voyages it was narrowed to its present form. It is usual to pay “innocent shippers” as a matter of honour, though the ship be unseaworthy.283 There is no implied warranty that the lighters in which the goods are landed shall be seaworthy.284 Evidence of unseaworthiness. The burden of proving unseaworthiness rests on the insurer,285 but cases might arise where the maxim res ipsa loquitur would apply.286 In Anderson v. Morice287 the insurance was on a cargo of rice. The ship sank while loading at her moorings in the river near Rangoon in ordinary weather. Evidence was given that the ship had been recently overhauled and repaired. The jury found that she was seaworthy, and the courts refused to disturb the verdict. In Pickup v. Thames Ins. Co.288 the insurance was on freight. The vessel left Rangoon and met with heavy weather. Eleven days after sailing she had to put back, and was then found to be strained and unseaworthy. Held, that these facts did not establish the presumption of unseaworthiness when she sailed; it was a question for the jury. In Ajum Ghulam v. Union Mar. Ins.289 the insurance was on cargo. The ship capsized and sank twenty-four hours after leaving Port Louis, but there was no evidence to explain why she did so. Some evidence was given tending to show that the ship was seaworthy when she started. Held, that the evidence of unseaworthiness was not made out. Quebec Mar. Ins. Co. v. Commercial Bank of Canada (1870), L. R. 3 P. C. at p. 241. And see per Collins, M.R., in The Vortigern (1899), P. at p. 160, C. A. 281 Daniels v. Harris (1874), L. R. 10 C. P. 1 (policy on wine stowed on deck). 282 Burges v. Wickham (1863), 33 L. J. Q. B. 17 (river steamer sent across the sea to her destination). 283 See McArthur, Ed. 2, p. 15; but see Sleigh v. Tyser (1900), 2 Q. B. at p. 336, where shipper was partly to blame. 284 Lane v. Nixon (1866), L. R. 1 C. P. 412. 285 Arnould, Ed. 7, § 725; Pickup v. Thames Ins. Co. (1878), 3 Q. B. D. 594, C. A. 286 Cf. Pickup v. Thames Ins. Co. (1878), 3 Q. B. D. at p. 600, per Lord Esher. 287 Anderson v. Morice (1875), L. R. 10 C. P. 58, 609, affirmed on this point (1876), 1 App. Cas. at p. 752. 288 Pickup v. Thames Ins. Co. (1878), 3 Q. B. D. 594, C. A. 289 Ajum Ghulum v. Union Mar. Ins. Co. (1901), A. C. 362, P. C. 280

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§ 40. No implied warranty that goods are seaworthy. (1.) In a policy on goods or other moveables there is no implied warranty that the goods or moveables are seaworthy.290 (2.) In a voyage policy on goods or other moveables there is an implied warranty that at the commencement of the voyage the ship is not only seaworthy as a ship, but also that she is reasonably fit to carry the goods or other moveables to the destination contemplated by the policy.291 NOTE.—Under a voyage policy the shipper, equally with the shipowner, is responsible for the seaworthiness of the ship. See note to last section. Though the shipper does not warrant the seaworthiness of goods insured, the insurer is not liable for any loss occasioned by vice propre.292 Questions of seaworthiness frequently arise in cases between shipper and shipowner;293 but such cases must be applied with caution to insurance law. A ship might be seaworthy as between shipowner and insurer on ship, though unseaworthy as between shipowner and shipper of a particular cargo, e.g. frozen meat, which requires special freezing apparatus, though that does not affect the safety of the ship.294 Again, the warranty as to goods may apply at a different time from the warranty on ship, as in the case where goods are shipped at an intermediate port (cf. Lowndes, Ed. 2, p. 99). Suppose a ship is insured from Malta to London. She calls at Gibraltar, and there takes on board a consignment of apes for the Zoological Gardens. If the apes are insured, the ship must, for the purposes of the policy on apes, be reasonably fit (i.e. in the matter of appliances) to carry the animals safely to their destination, that is to say, she must be “ape-worthy” as well as being seaworthy quà ship. This implied condition is commonly included in the warranty of seaworthiness, but that seems rather a strain upon language, and it is better to regard the condition as a supplementary warranty by the assured on goods. The Californian Code, § 2687, provides that “a ship which is seaworthy for the purpose of an insurance upon ship, may nevertheless, by reason of being unfitted to receive the cargo, be unseaworthy for the purpose of insurance upon cargo.”

§ 41. Warranty of legality. There is an implied warranty that the adventure insured is a lawful one, and that, so far as the assured can control the matter, the adventure shall be carried out in a lawful manner.295

Arnould, Ed. 6, p. 650; Koebel v. Saunders (1864), 33 L. J. C. P. 310 (cocca-nut oil); cf. Boyd v. Dubois (1811), 3 Camp. 133. 291 Cf. The Maori King (1895), 2 Q. B. 550, 558, C. A. (frozen meat case). 292 Koebel v. Saunders (1864), 33 L. J. C. P. 310; and see § 55, post. 293 See Carver’s Carriage by Sea, Ed. 3 (1900), §§ 17–22. 294 Cf. The Maori King (1895), 2 Q. B. 550, 558, C. A. 295 Arnould, Ed. 6, p. 686; McArthur, Ed. 2, p. 19; Dudgeon v. Pembroke (1874), L. R. 9 Q. B. at 586. 290

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Illustrations. 1. 2.

3.

4.

Time policy on ship. The master, with the connivance of the owner, engages in smuggling. The ship is arrested in England. The insurer is not liable.296 Policy on freight, from a British port abroad to Liverpool. The master, unknown to the owner, stows a part of the cargo (timber) on deck, and sails without a certificate from the clearing office, thereby contravening the statute 16 & 17 Vict. c. 107. The timber is lost by perils of the seas. The assured can recover.297 Policy for £400, insurer to pay for a total loss if ship does not arrive at Yokohama by a certain date. The ship does not arrive in time. As a fact, the assured had no interest in ship or cargo, and the policy was a wagering policy, but the insurer did not know this. The policy cannot be enforced.298 Policy on a French ship, effected in England, capture and seizure being among the perils insured against. After the policy is effected war breaks out between France and England, and the ship is captured by a British cruiser. The assured cannot recover on this policy.299

NOTE.—“Where a voyage is illegal an insurance upon such a voyage is invalid. Thus during the war policies on vessels sailing in contravention of the Convoy Acts were held void, so too when the voyage was against the East India Company Acts, or the general Navigation Act (6 Geo. 4, c. 109), which statutes were made with reference to the general policy of the realm.”300 A contract to do a thing which cannot be done without a violation of the law is void, whether the parties know the law or not. But if a contract is capable of being performed in a legal manner, it is necessary to show clearly the intention to perform it in an illegal manner in order to avoid it.301 An insurance on enemies’ goods or against British capture is illegal. See notes to § 91 (2), post, and see further, notes to §§ 3 and 4, ante, and Owen’s Declaration of War, p. 405.

THE VOYAGE. § 42. Implied condition as to commencement of risk. (1.) Where the subject-matter is insured by a voyage policy “at and from” or “from” a particular place, it is not necessary that the ship should be at that place when the contract is concluded, but there is an implied condition that the adventure shall be

Pipon v. Cope (1808), 1 Camp. 434, as explained, Trinder v. Thames and Mersey Ins. Co. (1898), 2 Q. B. at p. 129, C. A. If the master smuggles without the owner’s connivance it is barratry, Cory v. Burr (1883), 8 App. Cas. at p. 399. 297 Wilson v. Rankin (1865), L. R. 1 Q. B. 162, Ex. Ch. Aliter, if the owner was privy to the illegality; Cunard v. Hyde (1860), 29 L. J. Q. B. 6 (policy on goods). 298 Gedge v. Royal Exchange (1900), 2 Q. B. 214, at p. 222. 299 Kellner v. Le Mesurier (1803), 4 East, 396, and Gamba v. Le Mesurier (1803), 4 East, 407. See note to § 91 (2), post. 300 Redmond v. Smith (1844), 7 M. & Gr. at p. 474. 301 Waugh v. Morris (1873), L. R. 8 Q. B. 202. 296

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commenced within a reasonable time, and that if the adventure be not so commenced the insurer may avoid the contract.302 (2.) The implied condition may be negatived by showing that the delay was caused by circumstances known to the insurer before the contract was concluded, or by showing that he waived the condition.303 Illustration. Floating policy on cargo by a particular ship for twelve months from May 11th. A declaration of a cargo of coals having been made under this policy the insurers, on August 2nd, effected a reinsurance of the coals by that ship from the Tyne to Lulea at a specified premium. The vessel did not sail on the insured voyage till September 25th, and was lost with her cargo on October 2nd. The reinsurer is not liable on this policy, for the delay alters the risk from a summer risk to a winter risk.304 NOTE.—As to the attachment of a policy in ordinary form under “from” and “at and from” risks, see further, Rules 2 and 3 in Sched. I., post, p. 142. Reasonable time is a question of fact; see § 88. Where the assured abandons the adventure insured, the contract of marine insurance is determined.305 The abandonment of the adventure by not commencing the voyage within a reasonable time appears to be distinct from the implied condition that the risk shall not be altered by delay or otherwise. As to frustration of adventure, see note to § 60, post.

§ 43. Alteration of port of departure. Where the place of departure is specified by the policy, and the ship instead of sailing from that place sails from any other place, the risk does not attach.306 NOTE.—By usage, it is said, an intermediate voyage may be interposed, but the evidence of such a usage would have to be very clear.307 Suppose a ship is insured from London to New York. If she starts from Southampton to Liverpool it is a wholly different risk. Unless the ship starts from the terminus à quo it is clear that the risk cannot attach.

De Wolf v. Archangel Ins. Co. (1874), L. R. 9 Q. B. 451 (summer risk turned into winter risk). This seems fair, but before the Act was a somewhat doubtful proposition. See ibid, at p. 457, and see Arnould, Ed. 6, p. 409, as to usage. 304 Maritime Ins. Co. v. Stearns (1901), 2 K. B. 912, 6 Com. Cases, 182. 305 Grant v. King (1802), 4 Esp. 175 (delay of six months, policy not avoided); Palmer v. Fenning (1833), 9 Bing. 460 (delay of four months in case of a yacht, policy avoided); cf. Parkin v. Tunno (1809), 11 East, 22 (abandonment of voyage in consequence of war perils); Nickells v. London and Prov. Mar. Ins. Co. (1900), Times, November 17 (abandonment of voyage under apprehension of hostilities); Owen’s Declaration of War, p. 39. 306 Arnould, Ed. 6, p. 452; Way v. Modigliani (1787), 2 T. R. 30. 307 Arnould, Ed. 6, p. 409. 302 303

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§ 44. Sailing for different destination. Where the destination is specified in the policy, and the ship, instead of sailing for that destination, sails for any other destination, the risk does not attach.308 Illustration. Policy on ship from the Mersey to any port or ports west of Gibraltar. The ship sails from Liverpool for Carthagena, which is east of Gibraltar. The policy does not attach, and a clause authorizing change of voyage does not come into operation.309

§ 45. Change of voyage. (1.) Where, after the commencement of the risk, the destination of the ship is voluntarily changed from the destination contemplated by the policy, there is said to be a change of voyage.310 (2.) Unless the policy otherwise provides, where there is a change of voyage the insurer is discharged from liability as from the time of change, that is to say, as from the time when the determination to change it is manifested; and it is immaterial that the ship may not in fact have left the course of voyage contemplated by the policy when the loss occurs.311 Illustration. Policy on ship at and from Cadiz to Liverpool. Afterwards, without the consent of the insurer, the destination of the ship is changed to Newfoundland. The ship is stranded and burnt in the bay of Cadiz. The insurer is discharged from liability.312 NOTE.—Three different states of fact must be distinguished. First, the ship may sail on a voyage not contemplated by the policy. In that case the risk does not attach. See §§ 43 and 44. Secondly, a ship may start on the voyage insured, but afterwards change her destination. There is then a change of voyage. In that case the risk attaches, but is afterwards avoided. Thirdly, a ship may proceed from the terminus a quo to the terminus ad quem, but sail thither by an improper track. In that case there is a deviation.313 A clause, holding the assured covered in case of deviation or change of voyage at a premium to be arranged, is often inserted in the policy.

Sellar v. McVicar (1804), 1 B. & P. (N. R.) 22; 8 R. R. 744, as explained, Phillips on Insurance, § 930; Simon Israel & Co. v. Sedgwick (1893), 1 Q. B. 303, C. A. 309 Simon Israel & Co. v. Sedgwick (1893), 1 Q. B. 303, C. A.; distinguished in the case of a warranty, Simpson v. Premier Underwriting Association (1905), 10 Com. Cas. 198. 310 Arnould, Ed. 6, pp. 453, 458; McArthur, Ed. 2, p. 84; Woolridge v. Boydell (1778), Dougl. 16; Tudor, Mar. Cas. Ed. 3, p. 125; Bottomley v. Bovill (1826), 5 B. & C. 210; Simon Israel & Co. v. Sedgwick (1893) 1 Q. B. 303, C. A. 311 Ibid.; and Tasker v. Cunningham (1819), 1 Bligh H. L 87; 20 R R. 33. 312 Tasker v. Cunningham (1819), 1 Bligh H. L. 87, 102. 313 As to distinction between deviation and change of voyage, see further, Arnould, Ed. 6, p. 452. 308

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§ 46. Deviation. (1.) Where a ship, without lawful excuse, deviates from the voyage contemplated by the policy, the insurer is discharged from liability as from the time of deviation, and it is immaterial that the ship may have regained her route before any loss occurs.314 (2.) There is a deviation from the voyage contemplated by the policy:— (a.) Where the course of the voyage is specifically designated by the policy, and that course is departed from;315 or (b.) Where the course of the voyage is not specifically designated by the policy, but the usual and customary course is departed from.316 (3.) The intention to deviate is immaterial; there must be a deviation in fact to discharge the insurer from his liability under the contract.317 Illustrations. 1.

Policy on ship from L. to J. There are two tracks to J., one going north and the other south of the island of D. Sometimes one track and sometimes the other is the best, and the master ought to exercise his own discretion in each case. The owners direct him to call at a port in the north of the island of D. He therefore takes the northern course, and his ship is captured. This is a deviation.318 Policy on ship from her “port of lading in North America to Liverpool.” She loads part of her cargo at K., proceeds to B., which is seven miles off, to complete her cargo, and returns to K. for provisions, and then sails for England, and is lost on the voyage. The proceeding to B. and back again is a deviation, and the insurer is not liable.319 Time policy against fire on ship “lying in the Victoria Docks with liberty to go into dry dock and light the boiler once or twice during the currency of the policy.” The ship goes up to the dry dock, and, after leaving it, delays in the river to replace her paddle wheels. It is usual and also cheaper to put on the paddle wheels in the river. This is a deviation.320 Insurance on salvage pumps from A. to the ss. Alexandra ashore in the neighbourhood of D., “and while there engaged at the wreck and until again returned to A.” The pumps are lost on the wreck while it is being towed to N., a port of safety. This is a deviation.321

2.

3.

4.

NOTE.—It is immaterial that the insurer may not be prejudiced by the deviation, see Arnould, Ed. 6, p. 450. As to usage to call at intermediate ports, see Arnould, Ed. 6, p. 462. As to causes which justify deviation, see 49, post. As to change of voyage, see § 45, ante. 316 317 318 319 320 321 314 315

Arnould, Ed. 6, pp. 451, 462; McArthur, Ed. 2, pp. 18, 84. Arnould, Ed. 6, p. 463. Davis v. Garrett (1830), 6 Bing. 716; Arnould, Ed. 6, p. 462. Arnould, Ed. 6, pp. 453, 455; cf. Middlewood v. Blakes (1797), 7 T. R. at p. 168; 4 R. R. 409. Middlewood v. Blakes (1797), 7 T. R. 162. Brown v. Tayleur (1835), 4 A. & E. 241; 43 R. R. 331. Pearson v. Commercial Union Ass. Co. (1876), 1 App. Cas. 498. Wingate v. Foster (1878), 3 Q. B. D. 582; followed Difiori v. Adams (1884), 53 L. J. Q. B. 437.

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§ 47. Several ports of discharge. (1.) Where several ports of discharge are discharge, specified by the policy, the ship may proceed to all or any of them,322 but in the absence of any usage or sufficient cause to the contrary, she must proceed to them or such of them as she goes to, in the order designated by the policy. If she does not, there is a deviation.323 (2.) Where the policy is to “ports of discharge,” within a given area, which are not named, the ship must, in the absence of any usage or sufficient cause to the contrary, proceed to them, or such of them as she goes to, in their geographical order. If she does not there is a deviation.324 NOTE.—In a case where three ports of discharge were specified in the policy, Lord Ellenborough says, “I think that the voyage insured to Palermo, Messina, and Naples meant a voyage to all or any of the places named; with this reserve only, that if the ship went to more than one place she must visit them in the order described in the policy.”325

§ 48. Delay in voyage. In the case of a voyage policy, the adventure insured must be prosecuted throughout its course with reasonable despatch, and if without lawful excuse it is not so prosecuted, the insurer is discharged from liability as from the time when the delay became unreasonable.326 Illustration. A ship is insured from England to the coast of West Africa, and “during her stay and trade there,” and back to England. After completing her cargo for homeward voyage, she delays sailing for a month to salve the cargo of another ship which has been wrecked. On the voyage home she is lost. The assured cannot recover.327 NOTE.—Unjustifiable delay in prosecuting the voyage is usually classed under the heading of deviation; but it seems clearer to draw a distinction between time and locality. Compare Rule 5 in the Sched., post, p. 144, as to the termination of risk on goods.

Arnould, Ed. 6, p. 460; McArthur, Ed. 2, p. 85; Lowndes, Ed. 2, p. 48. As to the meaning of “port” in a policy, see McArthur, Ed. 2, p. 486, and Hunter v. Northern Mar. Ins. Co. (1888), 12 App. Cas. 726. 323 Arnould, Ed. 6, pp. 464, 466. 324 Ibid., p. 466; McArthur, Ed. 2, p. 85; cf. Metcalf v. Parry (1814), 4 Camp. 123. 325 Marsden v. Reid (1803), 4 East, at p. 576. 326 Arnould, Ed. 6, pp. 462, 486–493; Company of African Merchants v. British Ins. Co. (1873), L. R. 8 Ex. 154, Ex. Ch.; cf. Samuel v. Royal Exchange (1828), 8 B. & C. 119 (delay in entering port of destination caused by ice held justified). 327 Arnould, Ed. 6, pp. 462, 486–493; Company of African Merchants v. British Ins. Co. (1873) L. R. 8 Ex. 154, Ex. Ch.; and cf. Pearson v. Commercial Union Ass. Co. (1876), 1 App. Cas. 498. 322

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§ 49. Excuses for deviation or dely. (1.) Deviation or delay in prosecuting the voyage contemplated by the policy is excused:— (a.) Where authorized by any special term in the policy;328 or (b.) Where caused by circumstances beyond the control of the master and his employer;329 or (c.) Where reasonably necessary in order to comply with an express or implied warranty;330 or (d.) Where reasonably necessary for the safety of the ship or subject-matter insured;331 or (e.) For the purpose of saving human life, or aiding a ship in distress where human life may be in danger;332 or (f.) Where reasonably necessary for the purpose of obtaining medical or surgical aid for any person on board the ship;333 or (g.) Where caused by the barratrous conduct of the master or crew, if barratry be one of the perils insured against.334 (2.) When the cause excusing the deviation or delay ceases to operate, the ship must resume her course, and prosecute her voyage, with reasonable despatch.335 Illustrations. 1. 2.

Ship insured from Lyons to Galatz. She starts from Lyons on July 24th, properly equipped for the river voyage. She is detained for three weeks at Marseilles to equip herself for the open sea voyage. This delay is justifiable.336 Ship warranted “free from capture in port.” To avoid capture she slips her cable before she is ready for sea, and then proceeds to a port out of her direct course to load. She is afterwards wrecked. The insurer is not liable.337 Sed qu. since the Act?

NOTE.—Where a policy contains a permissive clause, the scope of that clause must be determined in each case by the wording of the particular clause. For special clauses authorizing deviation or change of voyage at an additional premium to be arranged, see Owen’s Notes and Clauses, Ed. 3, pp. 35, 120.

Arnould, Ed. 6, p. 486; Puller v. Glover (1810), 12 East, 124; Naylor v. Taylor (1829), 9 B. & C. 718; Hyderabad Co. v. Willoughby (1899), 2 Q. B. 530. 329 Arnould, Ed. 6, p. 499; Elton v. Brogden (1740), 2 Stra. 1264 (master forced out of his course by crew); Delany v. Stoddart (1776), 1 T. R. 22 (stress of weather). 330 Generalized from Bouillon v. Lupton (1863), 15 C. B. (N. S.) 113 delay to make ship seaworthy for a particular stage of the voyage). 331 Arnould, Ed. 6, p. 508. 332 Scaramanga Stamp (1880), 5 C. P. D. 295, C. A.; Arnould, Ed. 6, p. 507. 333 Said to be so held in United States, and agreed to by insurers in Lord Chancellor’s Committee. 334 Ross v. Hunter (1790), 4 T. R. 33. 335 Arnould, Ed. 6, p. 500; and see § 49. 336 Bouillon v. Lupton (1863), 15 C. B. N. S. 113. 337 O’Reilly v. Royal Exchange Ass. Co. (1865), 4 Camp. 246, criticized Phillips on Insurance, 578. Sub-clause (d) perhaps overrides this decision. 328

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ASSIGNMENT OF POLICY. § 50. When and how policy is assignable. (1.) A marine policy is assignable unless it contains terms expressly prohibiting assignment. It may be assigned either before or after loss.338 (2.) Where a marine policy has been assigned so as to pass the beneficial interest in such policy, the assignee of the policy is entitled to sue thereon in his own name; and the defendant is entitled to make any defence arising out of the contract which he would have been entitled to make if the action had been brought in the name of the person by or on behalf of whom the policy was effected. (3.) A marine policy may be assigned by indorsement thereon or in other customary manner. NOTE.—Some American policies require the insurer’s assent to assignment. Subsect. (2) reproduces § 1 of the Policies of Marine Insurance Act (31 & 32 Vict. c. 86), which is repealed by this Act. That Act in terms only applied to policies on ship, freight, or goods; but it would probably have been held to extend to all marine policies. The words “arising out of the contract” are inserted to give effect to Pellas v. Neptune Ins. Co. (1879), 5 C. P. D. 34, C. A., where it was held that a mere set-off was not a defence against an assignee. Where a policy was effected by an agent in his own name, the person for whose benefit it was effected could always sue on it in his own name.339 The difficulty arose in the case of an assignee. Subsect. (3) reproduces the effect of § 2 of the Act, which in addition prescribed an optional form of indorsement. The subsection is permissive in its terms, and presumably a marine policy may be assigned in any way by which an ordinary chose in action may be assigned.340

§ 51. Assured who has no interest cannot assign. Where the assured has parted with or lost his interest in the subject-matter insured, and has not, before or at the time of so doing, expressly or impliedly agreed to assign the policy, any subsequent assignment of the policy is inoperative.341 Provided that nothing in this section affects the assignment of a policy after loss.342

Lloyd v. Fleming (1872), L. R. 7 Q. B. 299 (action by executor of assignee after loss). As to policy prohibiting assignment, see Parsons on Insurance, p. 60; Laurie v. West Hartlepool Indemnity Assn. (1899), Times L. R. v. 15, p. 486 (mutual association). 339 Browning v. Provincial Ins. Co. (1874), L. R. 5 P. C. at p. 272. 340 See Judicature Act, 1873 (36 & 37 Vict. c. 66, § 25 (6); Parsons on Insurance, p. 52. 341 North of England Oil Cake Co. v. Archangel Mar. Ins. Co. (1875), L. R. 10 Q. B. 249, and authorities cited for § 15. 342 Lloyd v. Fleming (1872), L. R. 7 Q. B. 299. 338

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Illustrations. 1.

2.

A., B., and C. each own a third share of a ship. A. and B. jointly insure their shares in a policy for £500. Afterwards B. sells his share to C., but no arrangement is made as to the policy. The ship is lost. On this policy only A.’s share (£250) can be recovered.343 A., who is abroad, insures a cargo to London, including all risk of craft. While the cargo is afloat, A.’s agent sells the cargo to B., but A. retains the policy, as the cargo is not to be paid for till arrival. Part of the cargo is damaged while being landed in B.’s lighters. After A.’s interest has ceased he assigns the policy to B. B. cannot recover on the policy.344

NOTE.—After loss, the right to indemnity accrues and is fixed, and this right can be assigned. “It is every day’s practice, where a ship has sustained damage, to sell the injured hull for the benefit of whom it concerns, and then sue on the policy. If it can be made out that the loss is total, the sale is for the benefit of the underwriters, who pay the total loss. If the loss proves partial only, it is for the benefit of the assured; but no one ever thought of saying that the sale of the damaged hull put an end to the right to recover an indemnity for the partial loss.”345 As to the time at which the risk passes from seller to buyer under a contract of sale, see Chalmers’ Sale of Goods Act, 1893, §§ 20 and 32, and notes thereto. Primâ facie, property and risk pass together.

THE PREMIUM. § 52. When premium payable. Unless otherwise agreed, the duty of the assured or his agent to pay the premium, and the duty of the insurer to issue the policy to the assured or his agent, are concurrent conditions, and the insurer is not bound to issue the policy until payment or tender of the premium.346 NOTE.—The term “agreed” includes a binding usage, for usage is binding as being an implied term of the agreement. Payment, it is to be noted, is not a technical term. It includes a settlement in account when that is the agreed way of doing business. See also note to next section. The broker in drawing up a policy is not the insurer’s agent, or responsible to him for any want of care.347

346

Powles v. Innes (1841), 11 M. & W. 10. North of England Oil Cake Co. v. Archangel Mar. Ins. Co. (1875), L. R. 10 Q. B. 249. Lloyd v. Fleming (1872), L. R. 7 Q. B. at p. 302, per Lord Blackburn. Arnould, Ed. 6, pp. 195, 196; cf. Xenos v. Wickham (1863), 33 L. J. C. P. at p. 18, per Blackburn, J. As to correcting error in premium by subsequent indorsement on policy, see Mildred v. Maspons (1883), 8 App. Cas. at p. 878. As to issue of policy, see note to § 24, ante. 347 Empress Ass. Corporation v. Bowring (1905), 11 Com. Cas. 107. 343 344 345

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§ 53. Policy effected through broker. (1.) Unless otherwise agreed, where a marine policy is effected on behalf of the assured by a broker, the broker is directly responsible to the insurer for the premium, and the insurer is directly responsible to the assured for the amount which may be payable in respect of losses, or in respect of returnable premium.348 (2.) Unless otherwise agreed, the broker has, as against the assured, a lien upon the policy for the amount of the premium and his charges in respect of effecting the policy;349 and where he has dealt with the person who employs him as a principal he has also a lien on the policy in respect of any balance on any insurance account which may be due to him from such person, unless when the debt was incurred he had reason to believe that such person was only an agent.350 Illustration. A, instructs B., a broker at Hartlepool, to insure his ships. B. employs C., another broker at Liverpool, to effect the insurances. C. has a lien on the policies for the premiums and charges, even though A. may have paid B.351 NOTE.—In a case on a company’s policy which instead of reciting payment of the premium, contained a promise by the assured to pay it, it was held that the ordinary custom applied, and the broker, not the assured, was liable to the insurer for the premium.352 Collins, J., there says, “A Lloyd’s policy contains a recital that the premium has been paid; but supposing that the recital were made in a policy not under seal, so as not to amount to an estoppel, then upon the contract of insurance there would be an obligation upon the person insured to pay the premium. But that obligation is treated as discharged, although it is not discharged in fact; it is considered to be discharged by reason of a fiction based upon a custom which has received judicial sanction. It is a well-recognized practice in marine insurance for the broker to treat himself as responsible to the underwriter for the premium; by a fiction he is deemed to have paid the underwriter, and to have borrowed from him the money with which he pays.” As regards payment of the premium, the London practice is for the underwriter to allow abatements of 5 per cent, and 10 per cent., known respectively as brokerage and discount, to the assured or his broker. If no broker is employed, the assured has

See Arnould, Ed. 6, pp. 193, 194; and Universal Ins. Co. v. Merchants Mar. Ins. Co. (1897), 2 Q. B. at pp. 97, 98 (premium); cf. Hine v. Steamship Ins. Syndicate (1895), 7 Asp. Mar. Cas. 558, C. A.; Sweeting v. Pearce (1859), 29 L. J. C. P. 265 (losses). 349 Arnould, Ed. 6, pp. 211, 214; McArthur, Ed. 2, p. 40; Fisher v. Smith (1878), 4 App. Cas. 1, H. L.; and cf. Mildred v. Maspons (1883), 8 App. Cas. at p. 879. 350 As to lien for general balance, see Arnould, Ed. 6, p. 212; Westwood v. Bell (1815), 4 Camp.,349; cf. Cahill v. Davidson (1857), 3 C. B. (N. S.) 106; Juarez v. Williams (Feb. 3, 1903), Shipping Gazette. The lien is confined to insurance business, Dixon v. Stansfeld (1850), 10 C. B. 398; and cf. Elgood v. Harris (1896), 2 Q. B. 491, as to effect of bankruptcy on a set-off. 351 Fisher v. Smith (1878), 4 App. Cas. 1, H. L. 352 Universo Ins. Co. v. Merchants’ Mar. Ins. Co. (1897), 1 Q. B. 205, affirmed 2 Q. B. (1897) 93, C. A. 348

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the benefit of both abatements. If he employs a broker, the 5 per cent is retained by the broker as his remuneration. Thus:—

Premium .................................................................... Brokerage, 5 per cent. ............................................... Discount, 10 per cent. ............................................... The underwriter receives net .................................

£ 3 0 2 0 2

s. 0 3 17 5 11

d. 0 0 0 8 4

If a broker is employed, the broker receives from the assured £2 14s. 4d., and pays the underwriter £2 11s. 4d. The 10 per cent discount is allowed nominally on the condition of the premium being paid when due, the due date being, in the case of insurance companies, the eighth day of the month next following that in which the insurance has been effected. In the case of Lloyd’s underwriters, the due date is nominally the same.

§ 54. Effect of receipt on policy. Where a marine policy, effected on behalf of the assured by a broker, acknowledges the receipt of the premium, such acknowledgment is, in the absence of fraud, conclusive as between the insurer and the assured, but not as between the insurer and broker.353 NOTE.—The acknowledgment is not conclusive as between the insurer and the broker.354 Probably then it is not conclusive as between insurer and assured, where the latter effects the policy directly. But it ought to be conclusive in favour of an assignee for value without notice.355

LOSS AND ABANDONMENT. § 55. Included and excluded losses. (1.) Subject to the provisions of this Act, and unless the policy otherwise provides, the insurer is liable for any loss proximately caused by a peril insured against, but, subject as aforesaid, he is not liable for any loss which is not proximately caused by a peril insured against.356 Arnould, Ed. 6, p. 197, and note to § 53. Taylor on Evidence, § 774. 355 See further, note to last section, and cf. Roberts v. Security Co. Ltd. (1897), 1 Q. B. 111 (accident policy). 356 Arnould, Ed. 6, p. 727; Broom’s Legal Maxims, Ed. 7, p. 175; Carver’s Carriage by Sea, Ed. 3, §§ 87–90; Devaux v. Salvador (1835), 4 Ad. & El. at p. 431 (collision); Jackson v. Union Mar. Ins. Co. (1874), L. R. 10 C. P. at p. 148, Ex. Ch. (freight); Cory v. Burr (1883), 8 App. Cas. at p. 398 (barratry); 353 354

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(2.) In particular,— (a.) The insurer is not liable for any loss attributable to the wilful misconduct of the assured, but, unless the policy otherwise provides, he is liable for any loss proximately caused by a peril insured against, even though the loss would not have happened but for the misconduct or negligence of the master or crew.357 (b.) Unless the policy otherwise provides, the insurer on ship or goods is not liable for any loss proximately caused by delay, although the delay be caused by a peril insured against.358 (c.) Unless the policy otherwise provides, the insurer is not liable for ordinary wear and tear, ordinary leakage and breakage, inherent vice or nature of the subject-matter insured, or for any loss proximately caused by rats or vermin, or for any injury to machinery not proximately caused by maritime perils.359 Illustrations. 1.

2.

3.

357

358

359

360 361

362

Policy on goods, which consists of hides and tobacco. Sea-water is shipped during a storm, which wets the hides. The hides become putrid, and the fumes from them spoil the flavour of the tobacco. The damage to the tobacco is proximately caused by perils of the seas.360 Policy on cargo warranted “free from all consequences of hostilities.” During the American war the Confederates extinguish the light on Cape Hatteras. Owing to the absence of the light, the ship runs on to the rocks and is wrecked. The proximate cause of loss is the perils of the seas, and the insurer is liable.361 Policy on living animals warranted free from mortality and jettison. In a storm some of the animals are so injured as to cause their death. The insurer is liable notwithstanding the warranty.362

Reischer v. Borwick (1894), 2 Q. B. at p. 550, C. A. (collision); Trinder v. Thames and Mersey Mar. Ins. Co. (1898), 2 Q. B. at p. 124, C. A. (negligent navigation); Brankelow v. Canton Ins. Office (1899), 2 Q. B. 178, 186, C. A. (loss of freight due to form in which bills of lading were given). McArthur, Ed. 2, p. 143; Arnould, Ed. 6, p. 731; Thompson v. Hopper (1858), E. B. & E. at p. 1047, Ex. Ch. (act of assured himself); Dixon v. Sadler (1839), 5 M. & W. 405 (bad seamanship of master); Trinder v. Thames and Mersey Ins. Co. (1898), 2 Q. B. 114, C. A. (negligent navigation by master and co-owner). Tatham v. Hodgson (1796), 6 T. R. 656 (mortality among slaves); Taylor v. Dunbar (1869), L. R. 4 C. P. 206 (cargo of meat); Pink v. Fleming (1890), 25 Q. B. D. 356 (cargo of fruit); cf. Shelbourne v. Law Investment Corpn. (1898), 2 Q. B. at p. 629 (collision, delay during repairs). See note, post, as to freight. McArthur, Ed. 2, p. 141; The Xantho (1887), 12 App. Cas. at p. 509 (wear and tear, sea damage); Thames and Mersey Mar. Ins. Co. v. Hamilton (1887), 12 App. Cas. 484 (donkey-engine explosion); Koebel v. Saunders (1864), 33 L. J. C. P. 310 (vice propre). As to rats, see Hunter v. Potts (1815), 4 Camp. 203; Laveroni v. Drury (1852), 22 L. J. Ex. 2; but see Hamilton v. Pandorf (1887), 12 App. Cas. 518, where the action of the rats was not the proximate cause of loss. Montoya v. London Assurance (1851), 6 Exch. 451. lonides v. Universal Mar. Ins. Assn. (1863), 32 L. J. C. P. 170. Most of the cargo was destroyed by the sea, but a small part was saved, and a further part could have been saved but for the action of the Confederates, who prevented its being landed. Held, as to this part, that the warranty exempted the insurers from liability. Lawrence v. Aberdein (1821), 5 B. & Ald. 107, 24 R. R. 299. Mortality = mortality from natural causes.

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4.

Voyage policy on goods at and from K. to Y. While ship is loading at K., the weight of the cargo brings the discharge pipe below water. In consequence of a valve being negligently left open, water from the discharge pipe gets into the hold and damages the cargo. This is a loss proximately caused by perils of the seas, or other perils of a like kind, for which the insurer is liable.363 5. Policy on a parcel of gold shipped by a Russian ship to Turkey. The ship is stranded in Turkey, and the gold taken charge of by the Russian Consul. As the ship is Russian, the Russian Consular Court has jurisdiction, and that court awards salvage charges against the gold which would not be payable by English law. The assured has to pay these charges to get his gold. This is a loss by perils of the seas, for which the insurer is liable.364 6. Policy on goods shipped in a French ship. The ship is injured by collision, and the master, not having the funds requisite for the necessary repairs, gives a bottomry bond on ship, freight, and cargo. The ship and freight not being sufficient to satisfy the bond, the assured has to pay the amount deficient to get his goods. The insurer is not liable. The loss is not caused by perils of the seas, but by the want of funds on the part of the master.365 7. Policy on cargo of fruit warranted free from average “unless damage be consequent on collision.” The ship gets into collision and has to go into port for repairs. The cargo has to be landed and reshipped, and it is damaged partly by handling and partly by the delay. The collision is not the proximate cause of the damage, and the insurer is not liable.366 8. Policy on ship, warranted free from capture and seizure. The master engages in smuggling, and in consequence she is seized by the Spanish revenue authorities. The proximate cause of the loss is the seizure, not the barratry of the master. The insurer is not liable.367 9. Policy on ship and machinery, including donkey-engine. Owing to a valve being kept closed, which ought to have been kept open, water is forced into, and splits open, the chamber of the donkey-pump. The insurer is not liable for this accident, for it is not caused by perils of the seas, or by any peril covered by the ordinary form of policy.368 10. Policy on freight from New South Wales to Valparaiso. The cargo consists of coal. The coal heats, and is in imminent danger of taking fire. Half of it has to be landed at Sydney. The rest is carried on and delivered. This is a partial loss of freight caused by fire (or other like perils) within the meaning of the policy.369 11. Policy on chartered freight for £3000. The master signs bills of lading without reserving a lien on the cargo as a whole. Part of the goods are jettisoned, and,

365 366

Davidson v. Burnand (1868), L. R. 4 C. P. 117. Dent v. Smith (1869), L. R. 4 Q. B. 414. Greer v. Pool (1880), 5 Q. B. D. 272. Pink v. Fleming (1890), 25 Q. B. D. 396, C. A.; cf. Field Steamship Co. v. Burr (1899), 1 Q. B. 579, C. A. 367 Cory v. Burr (1883), 8 App. Cas. 393. 368 Thames and Mersey Ins. Co. v. Hamilton (1887), 12 App. Cas. 484, 494. (The Inchmaree case.) 369 The Knight of St. Michael (1898), P. 30; cf. Iredale v. China Traders Ins. Co. (1900), 2 Q. B. at p. 518, C. A. The insurer on goods is not liable if the combustion is caused by vice propre. See note to § 40. 363 364

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in consequence, the actual freight received is only £2400. The assured cannot recover the difference, viz. £600, from the insurer, for the proximate cause of this loss was not the perils of the seas, but the form in which the bills of lading were given.370 12. Cargo of rice. Rats gnaw a hole in a pipe which passes through the cargo, and sea-water enters through the hole and damages the rice. The sea damage is the proximate cause of the loss, not the rats.371 13. Time policy on ship. The ship starts on a voyage with a short quantity of coal, and engages the services of a trawler to tow her to her port of discharge. The owner of the trawler gets judgment for salvage services, which assured has to pay. The steamer met with no extraordinary weather, and might in time have proceeded to her port under sail. The loss is not due to the perils of the seas, but to the improper deficiency of coal.372 NOTE.—No principle of marine insurance law is better established than the rule causa proxima, non remota, spectatur. “It were infinite,” says Lord Bacon, “for the law to judge the causes of causes, and their impulsion one of another; therefore it contenteth itself with the immediate cause.”373 But though the rule is universally admitted, lawyers have never attempted to work out any philosophical theory of cause and effect, and probably it is as well for commerce that they should not have made the attempt.374 The numerous decisions on the rule are rough and ready applications of it to particular facts. As might be expected, many of the decisions are difficult to reconcile. But the apparent inconsistencies may be regarded as depending rather on inferences of fact than on matters of law. Subsect. (2) embodies important deductions from the general rule of proximate cause laid down in subsect. (1). Subsect. (2) (a). As Collins, L.J., points out, a man may lawfully stipulate against the consequences of his own negligence,375 and he may stipulate against the consequences of his servants’ negligence or misconduct. In the case of negligent or unskilful navigation, it now appears to be settled that the loss is regarded as caused proximately by perils of the seas, and only remotely by the negligence or unskilfulness of the master or crew. But when the loss is consequent on the wilful act or default of the assured, that act or default must be regarded as proximately causing the loss. Dolus circuitu non purgatur.376 Where, however, a ship is lost through the barratry of the master, who is a part owner, the co-owners are entitled to recover.377

Williams v. Canton Insurance Office (1901), A. C. 402. Hamilton v. Pandorf (1887), 12 App. Cas. 518 (bill of lading case, but the principle was said to apply to insurance). 372 Ballantyne v. MacKinnon (1896), 2 Q. B. 455, C. A.; see at p. 461 as to “inherent vice.” 373 Maxims of the Law, cited Devaux v. Salvador (1835), 4 A. & E. at p. 431; 43 R. R. at p. 383; cf. Greenock Steamship Co. v. Maritime Ins. Co. (1903), 1 K. B. at p. 374, distinguishing causa causans from causa sine qua non. 374 Inman v. Bischoff (1882), 7 App. Cas. at p. 683. 375 Westport Coal Co. v. McPhail (1898), 2 Q. B. at p. 132. 376 Cf. Trinder v. Thames and Mersey Mar. Ins. Co. (1898), 2 Q. B. at p. 127, C. A. 377 Westport Coal Co. v. McPhail (1898), 2 Q. B. at p. 132; and see Small v. U. K. Mar. Ins. Assn. (1897), 2 Q. B. 311, C. A. (mortgagor and mortgagee). 370 371

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Compare the language of sect. 506 of the Merchant Shipping Act,1894 (57 & 58 Vict. c. 60), which authorizes insurances effected “against the happening, without the owner’s actual fault or privity” of certain events in respect of which the liability of owners is limited under that Act. Subsect. (2) (b). As a rule, the insurer is not liable for damage caused by delay, though the delay result from a peril insured against. But difficult cases arise with regard to freight, especially as regards time charters. Where the adventure is frustrated by a peril insured against, and freight is thereby lost, the insurer is liable.378 Thus, where a ship was delayed by the operation of perils of the seas, and the charterer justifiably refused to load, it was held to be a loss of freight by perils of the seas.379 On the other hand, in the City of Paris case,380 a policy was effected “on freight outstanding.” The ship was hired to the Admiralty, and the charter-party provided that if the ship became inefficient the charterers might make such abatement out of the freight as they thought fit. The ship struck on a rock and became inefficient for a time. The charterers made an abatement from the freight. Held, that the insurers were not liable, as the loss was not proximately caused by the perils of the seas, but by the action of the Admiralty. The line between the principles laid down by these cases is difficult to draw with certainty, and, as the result, special clauses are often inserted to protect the insurer or the assured, as the case may be, from the consequences of delay.381 Loss of time-freight, resulting from detention for repair of general average damage, is not allowed in general average.382 Subsect. (2) (c). The final words at the end of subsect. (2) (c) are awkward. They were inserted to cover the decision in the Inchmaree case (illustration 9), where it was held that a donkey-engine explosion at sea had nothing to do with any maritime peril. The accident might just as well have happened on dry land, and therefore the insurer was not liable. So, too, a distinction must be drawn between the actual operation of a peril insured against, and the apprehension of its operation. As Willes, J., says in one case, the insurer is not liable for a loss caused by the prudence of the master or owner.383 “It has often been observed,” says Blackburn, J., “that a sale by the master is not one of the underwriter’s perils, and is only material as showing that there is no longer anything which can be done to save the thing sold for whom it may concern.”384

§ 56. Partial and total loss. (1.) A loss may be either total or partial. Any loss other than a total loss, as hereinafter defined, is a partial loss.385 See Re Jamieson (1895), 2 Q. B. at p. 95. Jackson v. Union Mar. Ins. Co. (1874), L. R. 10 C. P. 125, Ex. Ch.; see, too, The Alps (1893), P. 109; and The Bedouin (1894), P. 1, C. A., also cases of chartered freight. 380 Inman v. Bischoff (1882), 7 App. Cas. 670. See to like effect Manchester Liners v. British and Foreign Mar. Ins. Co. (1901), 7 Com. Cas. 26. 381 See, e.g., Bensaude v. Thames and Mersey Ins. Co. (1897), A. C. 609, H. L.; Turnbull v. Hull Underwriters’ Association (1900), 2 Q. B. 402 (warranty, free from any claim consequent on loss of time). 382 The Leitrim (1902), P. 256. 383 Philpott v. Swann (1861), 11 C. B. (N. S.) at p. 282. 384 Rankin v. Potter (1873), L. R. 6 H. L. at p. 122. 385 McArthur, Ed. 2, p. 242; Arnould, Ed. 6, p. 1016. 378 379

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(2.) A total loss may be either an actual total loss, or a constructive total loss.386 (3.) Unless a different intention appears from the terms of the policy, an insurance against total loss includes a constructive, as well as an actual, total loss.387 (4.) Where the assured brings an action for a total loss and the evidence proves only a partial loss, he may, unless the policy otherwise provides, recover for a partial loss.388 (5.) Where goods reach their destination in specie, but by reason of obliteration of marks, or otherwise, they are incapable of identification, the loss, if any, is partial and not total.389 NOTE.—A loss must be either total or partial. A total loss of part is a partial loss. For example, if 100 bags of seed be insured, and 10 be destroyed by perils insured against, this is a partial loss (cf. Arnould, Ed. 6, p. 1017). An apparent, but not a real, exception to this rule occurs when two or more distinct interests are covered by a single valuation. This is provided for by §§ 72 and 76 (1). Primâ facie, and the presumption is a strong one, an insurance against total loss covers a constructive, as well as an actual, total loss. But the presumption may be rebutted, see McArthur, Ed. 2, p. 312.

§ 57. Actual total loss. (1.) Where the subject-matter insured is destroyed, or so damaged as to cease to be a thing of the kind insured, or where the assured is irretrievably deprived thereof, there is an actual total loss.390 (2.) In the case of an actual total loss no notice of abandonment need be given.391 Illustrations. 1.

2.

Hides are insured from Valparaiso to Bordeaux. In consequence of sea damage they arrive at Rio in a state of incipient putridity, and are sold there. Their state is such that they would be wholly putrid if carried on to Bordeaux. This is an actual total loss.392 Sed qu. now? Insurance on goods in barges, as interest may appear. A cargo of rice valued at £450 is declared. The barge is sunk, and the rice remains under water for

Arnould, Ed. 6, pp. 951, 988; Roux v. Salvador (1836), 3 Bing. N. C. at p. 285, Ex. Ch. Adams v. Mackenzie (1863), 13 C. B. (N. S.) 446; Sailing Ship Blairmore v. Macredie (1898), A. C. at p. 598; and see Forwood v. North Wales Ins. Co. (1880), 9 Q. B. D. 732, C. A. as to by-laws of a mutual society. 388 Arnould, Ed. 6, p. 1163; Benson v. Chapman (1849), 2 H. L. C. 696; King v. Walker (1864), 2 H. & C. 384. 389 Spence v. Union Mar. Ins. Co. (1868), L. R. 3 C. P. 427, and note to § 57. 390 Arnould, Ed. 6, pp. 951, 988; McArthur, Ed. 2, p. 145; Fleming v. Smith (1848), 1 H. of L. Cas. at 535; Lohre v. Aitchison (1878) 3 Q. B. D. at p. 562; Cossman v. West (1887), 13 App. Cas. 160; Rankin v. Potter (1873), L. R. 6 H. L. at p. 127. 391 Kaltenbach v. Mackenzie (1878), 3 C. P. D. at p. 471, C. A.; cf. Rankin v. Potter (1873), L. R. 6 H. L. at p. 106. 392 Roux v. Salvador (1836), 3 Bing. N. C. 266, Ex. Ch.; cf. Farnworth v. Hyde (1865), 18 C. B. (N. S.) 835, as dealt with L. R. 2 C. P. at p. 226. 386 387

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3. 4.

two tides. The rice is so damaged that the consignee refuses to accept it. Afterwards it is kiln-dried at a cost of £60, and then sold for £110. The rice still remains in specie, so this is only a partial loss.393 A ship is deserted in a sinking condition. She is afterwards towed into port by salvors and sold, by order of the Court, for less than the salvage costs. This is an actual total loss.394 Insurance on “profit on charter” warranted free from all average. The assured, having chartered a ship for a lump sum, puts her up as a general ship. The bill of lading freight exceeds the chartered freight, but in consequence of sea damage to cargo only a portion of it becomes payable, and the portion payable is less than the charter freight which assured has to pay. This is a total loss of profit on charter.395

NOTE.—Where by a peril insured against the goods of different owners are damaged and become so inextricably mixed as to be incapable of identification (e.g. marks obliterated), the loss is partial, not total.396 See further, the note to § 60. Before the Act the rule as to goods was stated thus—goods are deemed to be an actual total loss where they are so damaged as to cease to exist in specie, or as that they cannot be rendered capable of arriving at their destination in specie. Goods cease to exist in specie when they no longer answer to the commercial denomination under which they were insured.397 A subsection to this effect was cut out in Committee, and the possible result may be, that goods which still exist in specie, though they could not be rendered capable of arriving at their destination in specie, must henceforth be regarded as a constructive total loss.

§ 58. Missing ship. Where the ship concerned in the adventure is missing, and after the lapse of a reasonable time no news of her has been received, an actual total loss may be presumed.398 NOTE.—Under the Continental Codes, arbitrary limits of time are fixed, after the expiration of which a missing ship may be presumed to be lost.

§ 59. Effect of transhipment etc. Where, by a peril insured against, the voyage is interrupted at an intermediate port or place, under such circumstances as, apart from any special stipulation in

Francis v. Boulton (1895), 65 L. J. Q. B. 153. Cossman v. West (1887), 13 App. Cas. 160, P. C. reviewing the cases. 395 Asfar v. Blundell (1896), 1 Q. B. 123, C. A. Semble an actual total loss. But distinguish Williams v. Canton Ins. Office, A. C. (1901) 462 H. L. 396 Spence. v. Union Mar. Ins. Co. (1868), L. R. 3 C. P. 427, and § 56 (5). 397 McArthur, Ed. 2, p. 146; Roux v. Salvador (1836). 3 Bing. N. C. 266, 287, Ex. Ch.; Asfar v. Blundell (1896), 1 Q. B. at p. 127, C. A. 398 Green v. Brown (1744), 2 Stra. 1199; McArthur, Ed. 2, p. 109. 393 394

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the contract of affreightment, to justify the master in landing and re-shipping the goods or other moveables, or in transhipping them, and sending them on to their destination, the liability of the insurer continues, notwithstanding the landing or transhipment.399 NOTE.—The English rules as to transhipment are not very well settled.400 In the United States, and under some of the foreign codes, it is the duty of the master to tranship whenever it is reasonable to do so. Concerning the master’s authority or duty to tranship as between shipper and shipowner, see Carver’s Carriage by Sea, Ed. 3, §§ 294, 304. The extent of his powers is determined by the law of the flag.401

§ 60. Constructive total loss defined. (1.) Subject to any express provision in the policy, there is a constructive total loss where the subject-matter insured is reasonably abandoned on account of its actual total loss appearing to be unavoidable, or because it could not be preserved from actual total loss without an expenditure which would exceed its value when the expenditure had been incurred.402 (2.) In particular, there is a constructive total loss, (i.) Where the assured is deprived of the possession of his ship or goods by a peril insured against, and (a) it is unlikely that he can recover the ship or goods, as the case may be, or (b) the cost of recovering the ship or goods, as the case may be, would exceed their value when recovered;403 or (ii.) In the case of damage to a ship, where she is so damaged by a peril insured against, that the cost of repairing the damage would exceed the value of the ship when repaired.404 In estimating the cost of repairs, no deduction is to be made in respect of general average contributions to those repairs payable by other interests,

Arnould, Ed. 6, p. 358; McArthur, Ed. 2, p. 263; cf. Bold v. Rotherham (1846), 8 Q. B. at p. 808. Hansen v. Dunn (1906), 11 Com. Cas. 100 (general principles as to transhipment), is the most recent exposition. 401 Carver’s Carriage by Sea, Ed. 3, § 204; and see Cammell v. Sewell (1860), 29 L. J. Ex. 350, Ex. Ch. (power to sell). 402 Arnould, Ed. 6, p. 951; McArthur, Ed. 2, p. 146; Kaltenbach v. Mackenzie (1878), 3 C. P. D. at pp. 473 and 479, per Lord Esher; Shepherd v. Henderson (1884), 7 App. Cas. at p. 70, per Lord Blackburn; cf. Moss v. Smith (1850), 19 L. J. C. P. at p. 228. 403 Arnould, Ed. 6, pp. 1041, 1058; Roux v. Salvador (1836), 3 Bing. N. C. at p. 286 (goods); Rodocanachi v. Elliott (1874), L. R. 9 C. P. 518, Ex. Ch. (goods in besieged town); Sailing Ship Blairmore v. Macredie (1898), A. C. 593; and see illustrations to § 62. 404 McArthur, Ed. 2, pp. 147, 149; Arnould, Ed. 6, p. 1031; Moss v. Smith (1850), 19 L. J. C. P. 225; Lohre v. Aitchison (1878), 3 Q. B. D. at pp. 562, 563, affirmed on this point, Aitchison v. Lohre (1879), 4 App. Cas. at p. 762; Rankin v. Potter (1873), L. R. 6 H. L. at p. 116. In applying this test, the real value and not the policy valuation is to be regarded, Irving v. Manning (1847), 1 H. of L. Cas. 287, and § 28 (4) ante. Cf. Angel v. Merchants’ Mar. Inc. Co. (1903) 1 K. B 811, C. A. (value of wreck not to be added to cost of repairs). As to construction of a special clause, “the insured value to be taken as the repaired value,” see North Atlantic Steamship Co. v. Barr (1904), 9 Com. Cas. 164. 399 400

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but account is to be taken of the expense of future salvage operations and of any future general average contributions to which the ship would be liable if repaired.405 (iii.) In the case of damage to goods, where the cost of repairing the damage and forwarding the goods to their destination would exceed their value on arrival.406 Illustrations. Ship. 1.

2.

3.

4.

5.

Policy on ship. The ship gets on a rock and the master bonâ fide comes to the opinion that she cannot be saved. He therefore sells her for £18. The buyer gets her off the rock and repairs her at a cost of £750, when she is worth £1200. This is not a total loss.407 A ship is damaged by sea perils and puts into a foreign port. The master, after communicating with the owners, has her repaired at a cost exceeding her repaired value. After her arrival in London the owners give notice of abandonment. This is ineffectual. There is only a partial loss.408 Ship of a special class and size is valued at £17,000. In consequence of sea damage she puts into Mauritius, where she is sold for £1400. Her cost four years before the insurance was £20,000. The cost of repairing her would have been £10,500, and her selling value when repaired would have been £7500; but a ship of that class and size, fitted for the particular trade, could not be built or bought for £10,500. The assured can only claim for a partial loss.409 Policy on ship with stipulation that if the ship is stranded for six months, and it is impracticable to save her, the assured may abandon her. The ship strands and remains stranded for more than six months, but it would be practicable to save her eventually. This is a constructive total loss under the policy.410 Policy on ship valued at £23,000, the insured value to be taken as the repaired for purpose of C. T. L. The ship strands in Sicily, and notice of abandonment is given but not accepted. She is got off, temporarily repaired, and brought home. The cost of permanent repairs is estimated at £22,500. The value of the wreck, unrepaired, is £7000 only. This cannot be taken into account. She is not a constructive total loss.411

Goods. 6.

Policy on goods. The ship becomes a constructive total loss, and the goods have to be landed in a damaged condition. There is a constructive total loss of the goods if the cost of landing, warehousing, conditioning, reshipping, and

Kemp v. Halliday (1866), L. R. 1 Q. B. 520, Ex. Ch. Conversely, freight which has been earned is not to be taken into account, Parker v. Budd (1896), 2 Com. Cas. 133; see further McArthur, Ed. 2, p. 148. This subsection was redrafted in Committee. 406 McArthur, Ed. 2, pp. 150, 152; Farnworth v. Hyde (1866), L. R. 2 C. P. 294, Ex. Ch. (sea damage to goods). 407 Gardner v. Salvador (1831), 1 Moo. & R. 116; 42 R. R. 767. 408 Fleming v. Smith (1848), 1 H. L. Cas. 513. 409 Grainger v. Martin (1862), 2 B. & S. 456; affirmed 4 B. & S. 9, Ex. Ch. 410 Rowland v. Maritime Insurance Co. (1901), 6 Com. Cas. 160. 411 Angel v. Merchants’ Mar. Ins. Co. (1903), 1 K. B. 811, C. A. 405

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7.

8.

forwarding them to their destination (minus the original freight) would exceed their value on arrival.412 Insurance on goods from Bombay to London with liberty to send them through France. On arrival in Paris they are detained in consequence of the siege, and it is uncertain what will become of them. The assured may treat this as a constructive total loss.413 Policy on cargo of salt. The ship meets with bad weather, and is towed into a port of refuge by salvors. The salt is landed in a damaged condition, and is sold under a decree of the Court for salvage costs. This is a partial loss, not a constructive total loss.414

Freight. 9.

Policy on freight valued at £2000. The ship strikes on a rock. The master puts into Pernambuco, and, instead of abandoning as he might have done, repairs the ship at a cost exceeding her repaired value, borrowing the money on bottomry. The ship arrives with her cargo. On arrival the ship is sold to satisfy the claim of the lender on bottomry, and the freight also is paid to him. The owner cannot repudiate the acts of the master, and, as freight has been earned, there is no loss of freight.415 10. Policy on freight. The ship becomes a constructive total loss at her port of destination, but freight is earned. On the abandonment of the ship by the assured, the freight passes to insurers on ship. The assured cannot claim for a loss of freight, for it has been earned.416 11. Policy on chartered freight from Chittagong to Dundee. The ship is wrecked fifty miles from Dundee, and notice of abandonment is properly given in respect of ship, cargo, and freight. Underwriters employ salvors, who bring the cargo into Dundee. This is a total loss of freight. No freight is earned, because the goods are brought to their destination under a salvage contract, and not under the contract of affreightment.417 NOTE.—For further illustrations, see § 62, and compare § 57. The Bill originally contained a subsection dealing with freight, which was agreed to by the Lord Chancellor’s Committee, but it was contended that it was too broadly expressed, and it was afterwards cut out. Constructive total loss of freight is therefore now governed by the general provision contained in subsection (1) of this section.418

Farnworth v. Hyde (1866), L. R. 2 C. P. 204, Ex. Ch. Average adjusters are agreed that this case is commercially wrong so far as relates to the deduction of freight; McArthur, Ed. 2, p. 151; Lowndes, Ed. 2, p. 137; Gow on Insurance, p. 157. 413 Rodocanachi v. Elliott (1873), L. R. 8 C. P. 649; affirmed L. R. 9 C. P. 520, Ex. Ch. 414 De Mattos v. Saunders (1872), L. R. 7 C. P. 570; cf. Meyer v. Ralli (1876), 1 C. P. D. 358. 415 Benson v. Chapman (1849), 2 H. L. C. 696, 723. 416 Scottish Maritime Insurance Co. v. Turner (1853), 1 Macq. H. L. Cas. 334. 417 Guthrie v. North China Ins. Co. (1902), 7 Com. Cas., 130, C. A. 418 See as to freight, McArthur, Ed. 2, p. 152; Moss v. Smith (1850), 19 L. J. C. P. 225; Rankin v. Potter (1873), L. R. 6 H. L. at pp. 102, 104; Jackson v. Union Marine Ins. Co. (1873), L. R. 8 C. P. 572; Re Jamieson (1895), 2 Q. B. at p. 95, C. A. 412

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There is a constructive total loss, says Mr. McArthur, “when the subject insured, though existing in specie, is justifiably abandoned, on account of its destruction being highly probable, or because it cannot be preserved from actual total loss unless at a cost greater than its value would be if such expenditure were incurred.”419 It is commonly laid down that, for the purpose of determining whether the assured is entitled to treat a loss as a constructive total loss, regard must be had to the course which would be pursued by a prudent uninsured owner under the circumstances of the case.420 But as decisions multiply “the prudent uninsured owner” test becomes of diminishing importance, because the decisions tend to settle as a matter of law the course which a prudent uninsured owner would be bound to take. This, perhaps, is fortunate, because the test is not an easy one to apply. When the test is applicable, the question is, not what the particular owner, if uninsured, would do, but what a man of average prudence ought to do under similar circumstances.421 Constructive total loss lies midway between actual loss on the one hand and partial loss on the other. It is in effect a hybrid loss, and its dual character has complicated the decisions. In some instances notice of abandonment has been given as a matter of precaution, and a case is treated as one of constructive total loss when the facts would have justified its being treated as an actual total loss. In other instances due notice of abandonment has not been given, and the case has to be treated as a partial loss, though the facts show a constructive total loss. Again, when there is a warranty F.P.A., and the loss is heavy, juries sometimes struggle to bring the case within the line of constructive total loss. The result is that the outlines of the law are somewhat blurred. Take the case of a consignment of tobacco as a normal instance. If it is so sea damaged as no longer to answer to the description of tobacco, there is an actual total loss. If by any process the tobacco could be reconditioned, so as to make it saleable as tobacco, but the cost of the operation is prohibitive, there is a constructive total loss. If a portion only of the consignment is spoilt, or if the whole of it is damaged, but not so damaged that it cannot be made into saleable tobacco and forwarded to its destination at a reasonable cost, there is a partial loss. In the majority of cases the distinction between actual total loss and constructive total loss corresponds with the distinction which has been drawn between physical impossibility and mercantile impossibility.422 A merchant trades for profit, not for pleasure, and the law will not compel him to carry on business at a loss.

McArthur, Ed. 2, p. 146. Roux v. Salvador (1836), 3 Bing. N. S. at p. 286 (goods); Irving v. Manning (1847), 1 H. of L. Cas., at p. 306 (ship); Rankin v. Potter (1873), L,. R. 6 H. L. at p. 155; Sailing Ship Blairmore v. Macredie (1898), A. C. 503 H. L. (ship); but perhaps the test does not apply to freight; see Philpot v. Swann (1861), 11 C. B. (N. S.) at p. 282, per Willes, J. 421 The prudent or reasonable man of English law corresponds with the bonus pater familias of Roman law. The standard is an objective one, and any personal equation must be excluded from consideration; cf. Angel v. Merchants’ Mar. Ins. Co. (1903), 1 K. B. at p. 819, C. A. 422 Moss v. Smith (1850), 19 L. J. C. P. at p. 228, per Maule, J.; cf. Rankin v. Potter (1873), L. R. 6 H. L. at p. 104. 419 420

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A commercial operation is regarded as impracticable, from the mercantile point of view, when the cost of performing it is prohibitive. The same general principle as to loss by frustration of the adventure seems to cover goods, freights, and profits. See the application of the rule to goods criticized, Lowndes, Ed. 2, p. 238, but it is settled law. “It is well established,” says Lord Bramwell, “that there may be a loss of the goods by a loss of the voyage in which the goods are being transported, if it amounts, to use the words of Lord Ellenborough, to a destruction of the contemplated adventure.”423 With the object of avoiding the uncertainty and complication of the English rule, the laws of most foreign countries arbitrarily detail certain facts which authorize the assured to abandon and claim for a total loss. Thus, in the United States, unless the policy otherwise provides, there is a constructive total loss if the damage to a ship exceeds 50 per cent of her repaired value. (Phillips on Insurance, § 1539.) In France, among other conditions, the assured may abandon when the damage to the subject-matter insured amount to three-fourths of its value. (Code de Commerce, art. 369.) Mr. Justice Willes in 1867 furnished a memorandum on constructive total loss and valuation to the Royal Commission on Unseaworthy Ships.424 It may still be usefully referred to. See, too, a valuable paper read to the International Law Association by Mr. T. G. Carver, Q.C., in which he discusses the English and foreign laws as to constructive total loss, and suggests the following definition:— (a) Where, by a peril insured against a ship is so damaged or so placed that the cost of recovering and making her fit for the same service as before will probably exceed her value when recovered and repaired, there is a constructive total loss of the ship. (b) Where, by a peril insured against, the owner of an insured subject is deprived of the possession or control and use of it indefinitely, or for a period which is unreasonable, having regard to the adventure on which it is insured, there is a constructive total loss of the subject.425

§ 61. Effect of constructive total loss. Where there is a constructive total loss the assured may either treat the loss as a partial loss, or abandon the subject-matter insured to the insurer and treat the loss as if it were an actual total loss.426 NOTE.—As Cotton, L.J., puts it, “A constructive total loss is when the damage is of such a character that the assured is entitled, if he thinks fit, to treat it as a total loss.”427

425 426

Rodocanachi v. Elliott, L. R. 9 C. P. at p. 522, Ex. Ch. See illustration 7. Report, 1874, Vol. II., App. No. Ivii., p. 426. International Law Association, 18th Report, 1899, pp. 106, 172. Arnould, Ed. 6, pp. 951–953; Roux v. Salvador (1836), 3 Bing. N. C. at pp. 286, 287, Ex. Ch.; Fleming v. Smith (1848), 1 H. of L. Cas. 513; Rankin v. Potter (1873), L. R. 6 H. L. at pp. 118, 131, 135; and Kaltenbach v. Mackenzie (1878), 3 C. P. D. 467,479, C. A., where abandonment and notice of abandonment are distinguished. As to election, see ibid., and Browning v. Provincial Ins. Co. (1873), L. R. 5 P. C. 263. 427 Kaltenbach v. Mackenzie (1878), 3 C. P. D. at p. 479. 423 424

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The section, of course, does not apply to a case where by the terms of the policy the assured is only entitled to claim for an actual total loss, see § 56 (3), ante.

§ 62. Notice of abandonment. (1.) Subject to the provisions of this section, where the assured elects to abandon the subject-matter insured to the insurer he must give notice of abandonment. If he fails to do so the loss can only be treated as a partial loss.428 (2.) Notice of abandonment may be given in writing, or by word of mouth, or partly in writing and partly by word of mouth, and may be given in any terms which indicate the intention of the assured to abandon his insured interest in the subjectmatter insured unconditionally to the insurer.429 (3.) Notice of abandonment must be given with reasonable diligence after the receipt of reliable information of the loss, but where the information is of a doubtful character the assured is entitled to a reasonable time to make inquiry.430 (4.) Where notice of abandonment is properly given, the rights of the assured are not prejudiced by the fact that the insurer refuses to accept the abandonment.431 (5.) The acceptance of an abandonment may be either express or implied from the conduct of the insurer. The mere silence of the insurer after notice is not an acceptance.432 (6.) Where notice of abandonment is accepted the abandonment is irrevocable. The acceptance of the notice conclusively admits liability for the loss and the sufficiency of the notice.433 (7.) Notice of abandonment is unnecessary where at the time when the assured receives information of the loss there would be no possibility of benefit to the insurer if notice were given to him.434 (8.) Notice of abandonment may be waived by the insurer.435 (9.) Where an insurer has re-insured his risk, no notice of abandonment need be given by him.436

Arnould, Ed. 6, pp. 953–970; McArthur, Ed. 2, p. 153. As to origin of notice of abandonment, see Kaltenbach v. Mackenzie (1878), 3 C. P. D. at p. 471, C. A., where the whole subject is discussed. 429 Arnould, Ed. 6, p. 957; Currie v. Bombay Ins. Co. (1869), L. R. 3 P. C. at p. 78. 430 Arnould, Ed. 6, p. 960; Currie v. Bombay Ins. Co. (1869), L. R. 3 P. C. at p. 79; Rankin v. Potter (1873), L. R. 6 H. L. at p. 105; Kaltenbach v. Mackenzie (1878), 3 C. P. D. at pp. 472, 478. 431 McArthur, Ed. 2, p. 156: and illustrations below. 432 Arnould, Ed, 6, pp. 968, 969; Provincial Ins. Co. v. Leduc (1874), L. R. 6 P. C. 224. 433 Arnould, Ed. 6, p. 968; Provincial Ins. Co. v. Leduc (1874), L. R. 6 P. C. 224 (implied acceptance, waiver of breach of warranty). Where notice of abandonment is not accepted, there is a conflict between the English and Scottish rules. See note, post, p. 91. 434 Arnould, Ed. 6, p. 959; Farnworth v. Hyde (1865), 18 C. B. (N. S.), 835; Rankin v. Potter (1873), L. R. 6 H. L. 83; Kaltenbach v. Mackenzie (1878), 3 C. P. D. 467, C. A. 435 Arnould, Ed. 6, p. 958; Houstman v. Thornton (1816), Holt N. P. 242. 436 Uzielli v. Boston Mar. Ins. Co. (1884), 15 Q. B. D. 11, C. A. 428

412

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Illustrations. 1. 2.

3.

4.

5.

6.

7.

Policy on ship. On the 7th of February assured is informed that she is a constructive total loss. On the 23rd of February she is sold for what she will fetch. On the 10th of March notice of abandonment is given. This is too late.437 A ship is captured by the enemy. The owner, hearing of this capture, gives notice of abandonment. The ship is recaptured and restored to her owner before action brought. The notice of abandonment is ineffectual. This is only a partial loss.438 A ship insured against war risks is captured, and the assured gives notice of abandonment. The insurer declines to accept it. The assured commences an action. After the issue of the writ, the Prize Court, on the termination of the war, decrees the restoration of the ship. This is a valid abandonment, and the assured can recover for a total loss439 A ship is sunk in deep water in harbour. Notice of abandonment is given, but not accepted, and then the underwriter, on his own initiative, and at great expense, recovers the ship before action brought. The notice is valid, and the assured can recover for a total loss.440 Chartered freight on homeward voyage is insured by policy en prior outward voyage. On the outward voyage the ship becomes a constructive total loss, so freight on homeward voyage is lost. No notice of abandonment need be given.441 Policy on chartered freight from Pensacola to England. The ship gets into Havannah as a constructive total loss, and is abandoned. The cargo is brought home by the insurers. The adjustment is made at Liverpool, but by agreement in accordance with the law of Havannah. Under that law pro rata freight to Havannah is payable. The insurer is entitled to this freight.442 Policy on freight from New Zealand to San Francisco. The ship strands near Honolulu, and the cargo, which consists of coal, gets wetted. Ship and cargo are both sold at Honolulu. If the coal had been dried and sent on, the costs would have been more than its worth. There is a total loss of freight, and no notice of abandonment is necessary.443

NOTE.—The term “abandonment” is used in three different, but allied, senses. First, and strictly, it denotes the voluntary cession by the assured to the insurer of whatever remains of the subject-matter insured in case of a constructive total loss. Secondly, but incorrectly, it is used as equivalent to notice or tender of abandonment, that is to say, the act by which the assured signifies to the insurer his election to abandon what remains and claim for a total loss. Thirdly, it denotes the cession which takes place, by operation of law of whatever remains of the subject-matter insured when the insurer settles for a total loss; see Note D., post, p. 166.

Kaltenbach v. Mackenzie (1878), 3 C. P. D. 467, C. A. Bainbridge v. Neilson (1808), 10 East, 329; cf. Dean v. Hornby (1854), 3 E. & B. 180, 190. 439 Ruys v. Royal Exchange (1897), 2 Q. B. 135, reviewing previous cases. Aliter it seems in Scotland, Sailing Ship Blairmore v. Macredie (1898), A. C. 593, at pp. 606, 609. See note next page. 440 Sailing Ship Blairmore v. Macredie (1898), A. C. 593. 441 Rankin v. Potter (1873), L. R. 6 H. L. 83. 442 London Assurance v. Williams (1893), Times L. R. 97; affirmed, ibid. p. 257, C. A. 443 Trinder v. Thames and Mersey Mar. Ins. Co. (1898), 2 Q. B. at p. 119, C. A. 437 438

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Suppose notice of abandonment is given, and the insurer does not either refuse or accept it. Can the assured withdraw the notice? Lord Blackburn’s language appears to imply that he cannot, on the ground that an election once made is determined for ever.444 But with the assent of the insurer the notice may be withdrawn. Cuilibet licet renunciare juri pro se introducto.445 It is an open question whether notice must be given if the subject-matter must inevitably perish before notice could be received and acted on, though the subjectmatter exists when the election to abandon is made.446 Notice of abandonment can only be given by or on behalf of the owner of the subjectmatter insured, e.g. it cannot be given by a pledgee of the policy, but it can be given by a joint owner who manages for the rest.447 It seems that where due notice of abandonment has not been given, the right to give notice of abandonment may revive on change of circumstances.448 According to the law of Scotland and of most foreign countries, the validity of a notice of abandonment must be determined by reference to the state of facts at the time when notice is given, but in England, as Lord Herschell says, the rule is “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, or, in other words, if at the time of action brought the circumstances are such that a notice of abandonment would not be justifiable, the assured can only recover for a partial loss,” but this rule does not extend to a change of circumstances when brought about by the action of the insurer.449 The issue of the writ is therefore all important in England. Until that be done, the notice of abandonment is liable to be defeated. A subsection embodying the English rule was cut out in Committee on objection taken by the Scottish members.

§ 63. Effect of abandonment. (1.) Where there is a valid abandonment, the insurer is entitled to take over the interest of the assured in whatever may remain of the subject-matter insured, and all proprietary rights incidental thereto.450 (2.) Upon the abandonment of a ship the insurer thereof is entitled to any freight in course of being earned, and which is earned by her subsequent to the casualty causing the loss,451 less the expenses of earning it incurred after the casualty; and where the ship is carrying the owners’ goods the insurer is entitled to a reasonable remuneration for the carriage of them subsequent to the casualty causing the loss.452 Cf. Rankin v. Potter (1873), L. R. 6 H. L. at p. 119. See Arnould, Ed. 6, pp. 968, 970. 446 Kaltenbach v. Mackenzie (1878), C. P. D. at p. 475, per Brett, L.J. 447 Arnould, Ed. 6, p. 956; Jardine v. Leathly (1863), 32 L. J. Q. B. 132. 448 Stringer v. Eng. Mar. Ins. Co. (1870), L. R. 5 Q. B. 599, at p. 604. 449 Sailing Ship Blairmore v. Macredie (1898), A. C. at p. 610. See at pp. 606, 609 as to Scottish rule. 450 Arnould, Ed. 6, p. 973; McArthur, Ed. 2, p. 157; Stewart v. Greenock Ins. Co. (1848), 2 H. of L. Cas. at p. 183; Rankin v. Potter (1873), L. R. 6 H. L., at pp. 118, 144; and § 80. 451 Sea Ins. Co. v. Hadden (1884), 13 Q. B. D. 706, C. A. 452 Miller v. Woodfall (1857), 27 L. J. Q. B. 120; see at p. 123 as to the American rule of apportionment. 444 445

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Illustrations. 1.

2.

3.

4.

Ship insured from Quebec to Liverpool. She is first damaged by an iceberg, and again damaged in entering the dock at Liverpool. The cargo is delivered and freight paid. After survey the ship is found to be not repairable, and the owner abandons her to the insurer. The freight belongs to the insurer on ship.453 Policy on ship. The ship halfway on the voyage becomes a total loss and is abandoned to the insurers, but the cargo is landed, and sent on by the master in another ship to its destination. The insurer on ship is not entitled to the freight so earned.454 Policy on ship, which has been chartered. The ship is injured by collision and cannot earn freight. Her injuries are such that she is abandoned to the insurer. The insurer on ship is not entitled to the damages which assured may recover from the ship in fault for loss of freight.455 Policy on ship from Pensacola to Hartlepool. Part of the freight is prepaid. The ship is stranded getting in to Hartlepool, but the cargo is delivered, and freight earned. Assured abandons the ship. The insurer is not entitled to the prepaid freight, but only to the balance payable on arrival.456

NOTE.—As to effect of under-insurance, see § 81, and see § 79. All authorities agree that abandonment operates as a cession or transfer of whatever remains of the subject-matter insured, from the assured to the insurer. But is the transfer absolute or conditional? In the first place, a valid abandonment may be defeated by a subsequent change of circumstances before action brought, e.g. in the case of capture and recapture: see § 62 and notes. In the second place, can the insurer disclaim an onerous property which is properly abandoned to him? See that question discussed in the note to § 79, and see further, Note D on abandonment, post, p. 166. An amendment made in the Commons Committee to subsect. (1) strengthens the view that he can disclaim. The words “is entitled to whatever remains” were altered to “is entitled to take over, etc.” The proprietary rights which pass to the insurer on a valid abandonment must be distinguished from the fuller rights which pass to the insurer when he pays for a total loss. As Lord Blackburn says, “the right of the assured to recover damages from a third person is not one of those rights which are incident to the property in the ship. It does pass to the underwriters in case of payment for a total loss, but on a different principle; and on the same principle it does pass to the underwriters who have satisfied a claim for a partial loss, though no property in the ship passes.”457

Stewart v. Greenock Ins. Co. (1848), 2 H. of L. Cas. 159; on these facts there is no loss of freight for which assured can claim against insurer on freight, Scottish Mar. Ins. Co. v. Turner (1853), 1 Macq. H. L. 334. 454 Hickie v. Rodocanachi (1859), 28 L. J. En. 273. But the insurer is entitled to pro rata freight earned under a foreign contract of affreightment; see London Assurance v. Williams (1893), Times L. R. 97, affirmed ibid., p. 257, C. A. 455 Sea Ins. Co. v. Hadden (1884), 13 Q. B. D. 706, C. A. 456 The Red Sea (1896), P. 20, C. A. 457 Arnould, Ed. 7, pp. 1388, 1392; Simpson v. Thomson (1877), 3 App. Cas. at p. 292. 453

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It has been suggested by text writers that abandoned freight should be apportioned between the insurer on ship and the insurer on freight: see a curious case where this was done by consent.458 Upon abandonment, any act or thing done subsequent to the casualty causing the loss by the assured or his agents for the protection of the subject-matter insured, is at the risk of the insurer and for his benefit, provided such an act or thing be done in good faith and reasonably.459

PARTIAL LOSSES (INCLUDING SALVAGE AND GENERAL AVERAGE AND PARTICULAR CHARGES). § 64. Particular average loss. (1.) A particular average loss is a partial loss of the subject-matter insured, caused by a peril insured against, and which is not a general average loss.460 Particular charges. (2.) Expenses incurred by or on behalf of the assured for the safety or preservation of the subject-matter insured, other than general average and salvage charges, are called particular charges. Particular charges are not included in particular average.461 NOTE.—The expression “particular average loss” involves a redundancy, but the use of the term among lawyers is inveterate. “A general average differs from a particular average in its nature and incidence. The former is a partial loss, voluntarily incurred for the common safety, and made good proportionably by all parties concerned in the adventure; the latter is a partial loss, fortuitously caused by a maritime peril, and which has to be borne by the party upon whom it falls.”462 The distinction in English law between “particular average” and “particular charges” corresponds with the distinction in French law between “avarie particulière matérielle” and “avarie particulière en frais.”463 As to particular charges, see § 65 (2), § 76 (2) and § 78; and as to particular average warranties (or franchises, as they are sometimes inaccurately called), see § 76. See further, Note C on definition of “average,” post, p. 164, and the illustrations to §§ 69, 71 and 76.

Sharpe v. Gladstone (1805), 7 East, 35. Rankin v. Potter (1873), L. R. 6 H. L. at p. 119. 460 Arnould, Ed. 6, p. 927; Gow on Insurance, p. 189; McArthur, Ed. 2, pp. 163, 212, 241; Kidston v. Empire Ins. Co. (1866), L. R. 1 C. P. at p. 544; Price v. A 1 Small Damage Assn. (1889), 22 Q. B. D. at p. 590, C. A. 461 Ibid., and McArthur, Ed. 2, p. 201; Arnould, Ed. 7, p. 978. 462 McArthur, Ed. 2, p. 163. 463 Gow on Insurance, p. 221. 458 459

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§ 65. Salvage charges. (1.) Subject to any express provision in the policy, salvage charges incurred in preventing a loss by perils insured against may be recovered as a loss by those perils.464 (2.) “Salvage charges” means the charges recoverable under maritime law by a salvor independently of contract. They do not include the expenses of services in the nature of salvage rendered by the assured or his agents, or any person employed for hire by them, for the purpose of averting a peril insured against. Such expenses, where properly incurred, may be recovered as particular charges or as a general average loss, according to the circumstances under which they were incurred.465 Illustrations. 1.

2.

A ship valued at £2600 is insured with D. for £1200. After encountering very bad weather, the ship is rescued by a steamer, with which no contract is made, and which afterwards obtains an award of £800 as salvage money. The owner does not abandon the ship, but elects to repair her. D.’s proportion of the expenses of repair comes to £1200; that is to say, the full sum insured. He is not liable for any portion of the salvage or general average expenses in excess of the £1200.466 Time policy on ship. The ship starts on a voyage with a short quantity of coal, and engages the services of a trawler to tow her to her port of discharge. The owner of the trawler gets judgment for salvage services, which assured has to pay. The steamer met with no extraordinary weather, and might in time have sailed to her port. The loss is not due to the perils of the seas, but to the improper deficiency of coal.467

NOTE.—The decision of the House of Lords in 1879 (Aitchison v. Lohre),468 that salvage charges could not be recovered under the “sue and labour clause” occasioned some surprise (see Arnould, Ed. 6, p. 792). The case proceeded on the ground that salvors, who intervene voluntarily and not under contract, are not the agents of the assured, for English law does not recognize the foreign doctrine of “agents of necessity.” The practical effect of the decision is this. As salvage charges, strictly so called, are recoverable under the policy, and not under the sue and labour clause, they cannot, like particular charges, be recovered in addition to the sum insured, but the total liability of the insurer is limited to the sum insured.469

McArthur, Ed. 2, pp. 171, 312; Aitchison v. Lohre (1879), 4 App. Cas. at p. 765; cf. Steamship Balmoral v. Marten (1901), 2 K. B. at p. 904, C. A. This subsection was redrafted in Committee. 465 McArthur, Ed. 2, pp. 171, 261; cf. Anderson v. Ocean Mar. Ins. Co. (1884), 10 App. Cas. 107. As to the meaning of “salvage,” see Aitchison v. Lohre (1879), 4 App. Cas. at pp. 765, 766; Carver’s Carriage by Sea, §§ 361–445. 466 Aitchison v. Lohre (1879), 4 App. Cas. 755; discussed Montgomery v. Indemnity Mutual Mar. Ins. Co. (1901), 1 K. B. at p. 152. 467 Ballantyne v. McKinnon (1896), 2 Q. B. 455, C. A. 468 Aitchison v. Lohre (1879), 4 App. Cas. at p. 765; and cf. Uzielli v. Boston Mar. Ins. Co. (1884), 15 Q. B. D. 11, C. A. 469 Cf. Montgomery v. Indemnity Mutual Mar. Ins. Co. (1901), 1 K. B. at p. 152, per Mathew, J. 464

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The payment of salvage charges under a foreign adjustment is usually provided for by a special clause in the policy, a common form of which runs: “General average and salvage charges payable according to foreign statement, if so made up, or per York-Antwerp Rules, 1890, if in accordance with the contract of affreightment.” The expression “salvage” requires definition, because it is used in various senses. In maritime law it is applied alike ‘to the salvor’s service and the salvor’s reward. It is used to denote the services of a salvor, who intervenes voluntarily, and whose rights are given him by maritime law, and also the services of a salvor who is employed by the ship, and whose rights depend on contract. In insurance law it is also used to denote the thing saved, as, for instance, in the phrase “without benefit of salvage,” or when a loss is referred to as a “salvage loss.”470 Life salvage, apart from the salvage of property, is the creation of modern statutes, and the shipowner’s liability therefore is not covered by the ordinary form of policy on ship. It must be covered by a special insurance.471 In the present section the term is used to denote salvage strictly so called, that is to say, the salvor’s reward, under maritime law, for saving property, or property and life conjointly. “With regard to salvage, general average, and contribution,” says Lord Bowen, “the maritime law differs from the common law. That has been so from the time of the Roman law downwards. The maritime law, for the purposes of public policy, and for the advantage of trade, imposes in these cases a liability upon the thing saved—a liability which is a special consequence arising out of the character of mercantile enterprise, the nature of sea perils, and the fact that the thing saved was saved under great stress and exceptional circumstances.”472 As to the adjustment of salvage charges, see § 73 (2), post.

§ 66. General average loss. (1.) A general average loss is a loss caused by or directly consequential on a general average act. It includes a general average expenditure as well as a general average sacrifice.473 (2.) There is a general average act where any extraordinary sacrifice or expenditure is voluntarily and reasonably made or incurred in time of peril for the purpose of preserving the property imperilled in the common adventure.474 (3.) Where there is a general average loss, the party on whom it falls is entitled, subject to the conditions imposed by maritime law, to a rateable contribution from the other parties interested, and such contribution is called a general average contribution.475 Cf. Sharpe v. Gladstone (1805), 7 East, at p. 37. Nourse v. Liverpool Sailing Ship Association (1896), 2 Q. B. 16, C. A.; cf. Kennedy’s Law of Civil Salvage, p. 46. 472 Falcke v. Scottish Ins. Co. (1887), 34 Ch. D. at p. 248; Kennedy’s Law of Civil Salvage, p. 6. 473 McArthur, Ed. 2, p. 164; Lowndes on General Average, Ed. 4, p. 20 Ocean Steamship Co. v. Anderson (1883), 13 Q. B. D. at p. 666, C. A.; Svensden v. Wallace (1884), 13 Q. B. D. at p. 84, C. A. 474 Ibid.; Iredale v. China Traders’ Ins. Co. (1900), 2 Q. B. at p. 519, C. A. The usual phrase is “ship and cargo” instead of “common adventure,” but cases might be put where there was a common adventure, but no cargo, e.g. ship in ballast going out to earn chartered freight. 475 Lowndes on Average, Ed. 4, p. 304; Svensden v. Wallace (1885), 10 App. Cas. at p. 415. 470 471

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(4.) Subject to any express provision in the policy, where the assured has incurred a general average expenditure, he may recover from the insurer in respect of the proportion of the loss which falls upon him; and in the case of a general average sacrifice he may recover from the insurer in respect of the whole loss without having enforced his right of contribution from the other parties liable to contribute.476 (5.) Subject to any express provision in the policy, where the assured has paid, or is liable to pay, a general average contribution in respect of the subject insured, he may recover therefor from the insurer.477 (6.) In the absence of express stipulation, the insurer is not liable for any general average loss or contribution where the loss was not incurred for the purpose of avoiding, or in connection with the avoidance of, a peril insured against.478 (7.) Where ship, freight, and cargo, or any two of those interests, are owned by the same assured, the liability of the insurer in respect of general average losses or contributions is to be determined as if those subjects were owned by different persons.479 Illustrations. 1.

2.

3.

Policy on goods. Certain goods are jettisoned by a general average act. The insurer of these goods must pay the insured value of them as an ordinary loss under the policy, but he then stands in the place of the assured as regards claims for contribution from the other contributories.480 Policy on ship from London to Liverpool and thence to Calcutta. The ship strands on a bank in Ireland. Half the cargo, consisting of salt, is jettisoned. The remainder is brought back much damaged to Liverpool. The amount to be made good in general average must be ascertained by valuing the jettisoned salt at the price it would have fetched in Liverpool, and the probability that it would have been damaged like the rest must be taken into account.481 Policy on cargo of corn from Varna to Marseilles, general average “as per foreign statement.” The ship springs a leak, part of the corn is sea-damaged, and the voyage has to be broken up at Constantinople. Average is adjusted according to the law prevailing there, and the damage to the wheat is charged to general average, though, according to English law, it would be particular average excluded by the memorandum. The insurer is liable to pay this sum.482

McArthur, Ed. 2, p. 134; Dickinson v. Jardine (1868), L. R. 3 C. P. 639; The Mary Thomas (1894), P. at p. 125, C. A. 477 McArthur, Ed. 2, p. 206; The Brigella (1893), P. 198; 7 Asp. Mar. Cas. at p. 405. 478 Harris v. Scaramanga (1872), L. R. 7 C. P. at p. 496. 479 Montgomery v. Indemnity Mutual Marine Ins. Co. (1901), 1 K. B. 147; affirmed 1 K. B. (1902) 734, C. A. This subsection was redrafted in Committee. The word “subjects” more correctly should be “interests.” 480 Dickinson v. Jardine (1868), L. R. 3 C. P. 639. (London usage to hold insurer only liable for the share of the loss cast upon the assured of the jettisoned goods held invalid.) See, too, Owen’s Notes and Clauses, Ed. 3, p. 249. 481 Fletcher v. Alexander (1868), L. R. 3 C. P. 375. 482 Mavro. Ocean Mar. Ins. Co. (1875), L. R. 10 C. P. 415, Ex. Ch.; cf. The Mary Thomas (1894), P. 808, C. A.; and De Hart v. Compañia Anonima Aurora (1903), 1 K. B. 109 (general average payable as per foreign statement, stipulation in charter party as to general average). 476

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4.

Policy on goods. Both ship and goods belong to the same owner. In stormy weather the mast has to be cut away for the safety of ship and cargo. The shipowner is entitled to a general average contribution from the insurer on goods in respect of the general average sacrifice.483 Policy on ship. Under charter party the ship sails in ballast for Savannah, where she is to load a cargo of cotton for England. On the voyage out the ship grounds, and a general average loss is incurred in respect of the ship’s machinery. The chartered freight is liable to contribute, and the amount of the contribution can be deducted from the sum due under the policy on ship.484

5.

NOTE.—The definition of general average given by Lawrence, J., in 1801, still remains the standard definition. “All loss,” he says, “which arises in consequence of an extraordinary sacrifice made, or expense incurred, for the preservation of the ship and cargo comes within general average, and must be borne proportionately by all who are interested.”485 Subsects. (1) to (3) are merely explanatory, and perhaps belong more properly to the law of general average than to the law of marine insurance. As Barnes, J., says, “The obligation to contribute to general average exists between the parties to the adventure, whether they are insured or not. The circumstance of a party being insured can have no influence on the adjustment of general average, the rules of which are entirely independent of insurance. If a contracting party is insured he can claim an indemnity against his underwriter in respect of the contribution which he has been compelled to pay in general average, but that is all. I do not forget that in some cases an assured may have a right to recover in full for the loss of sacrificed property, but the underwriters have the right to contribution from the various contributories, and, subject to certain differences of values, the result to the underwriters should be practically the same as if the assured had only claimed his contribution from them.”486 Subsect. (7) was twice altered during the passage of the Bill through Parliament, and is not now very happily expressed. It was intended to affirm the recently established rule that there might be a claim on the insurer for a loss in the nature of a general average loss though there were no contributing interests, owing to single ownership. But take this case. A mast is jettisoned for the benefit of ship and cargo. If they are owned by different owners the assured on ship gets the full value of the mast from the underwriter on ship, but the latter then becomes entitled to contribution from the cargo owner.487 But where the shipowner is the same person as the cargo owner it would be absurd to pay him the full value of the mast and thereby become entitled to claim from him the cargo contribution. No doubt as a matter of adjustment the contributory value of the cargo will have to be deducted.

485 486 487 483 484

Montgomery v. Indemnity Mutual Mar. Ins. Co. (1901), 1 K. B. 147; affirmed (1902), 1 K. B. 734, C. A. Steamship Carisbrooke Co. v. London and Provincial Mar. Ins. Co. (1901), 6 Com. Cas. 291. Birkley v. Presgrave (1801), 1 East, at p. 228. The Brigella (1893), P. at p. 195; 7 Asp. Mar. Cas. at p. 404. Dickinson v. Jardine (1868), L. R. 3 C. P. 369.

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The whole subject of general average is in an unsatisfactory condition.488 The liability to contribute is a common law liability, independent of insurance, and consequently the liability of the assured under the contract of affreightment may differ from that of the insurer under the policy. For example, suppose goods are insured with a warranty free from capture and seizure. General average expenses may be incurred in avoiding capture, but the insurer would not be liable for them. The English rule of law, though not always logically carried out in details, is narrower than the consistent practice of average adjusters, and considerably narrower than the rule which prevails in nearly all foreign countries. In England general average is only payable when the sacrifice was made, or the expenditure incurred, for the preservation of the ship and cargo. Foreign laws for the most part include in general average nearly all expenses incurred for the benefit of the common adventure. As to the place of adjustment, and the law to be followed, see note to § 91, post. In practice the normal English rule only applies in exceptional cases, because nearly every policy contains a foreign adjustment clause. Lloyd’s clause runs:— ‘‘General average and salvage charges payable as per foreign official adjustment, if so made up, or per York-Antwerp Rules [1890] if in accordance with the contract of affreightment.” The York-Antwerp Rules, though generally accepted, only cover a portion of the field. It seems a moot point whether salvage charges, properly so called, can ever be recovered as general average (McArthur, Ed. 2, p. 171, n.). Mr. Carver contends that they cannot.489 Concerning general average as between ship, freight, and cargo, see Carver’s Carriage by Sea, Ed. 3 (1900), §§ 361–445. It is the duty of the shipowner and his agents to take such steps as may be reasonable to provide that all general average contributions (whether due to himself or others) are adjusted and collected, and he has a lien on the cargo until this be done.490

MEASURE OF INDEMNITY. § 67. Extent of liability of insurer for loss. (1.) The sum which the assured can recover in respect of a loss on a policy by which he is insured, in the case of an unvalued policy, to the full extent of the insurable value, or, in the case of a valued policy, to the full extent of the value fixed by the policy, is called the measure of indemnity.

See discussion in McArthur, Ed. 2, p. 186, and article by T. G. Carver, on Port of Refuge Expenses, Law Quarterly Review, vol. viii. p. 229. See Carver’s Carriage by Sea, Ed. 3, §§ 394–396, distinguishing salvors, properly so called, who intervene voluntarily, from salvors employed by the ship. 490 McArthur, Ed. 2, p. 199; Lowndes on Average, Ed. 4, p. 335; Crooks v. Allan (1879), 5 Q. B. D. 38; approved Strang, Steel & Co. v. Scott (1889), 14 App. Cas. at p. 607. 488

489

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(2.) Where there is a loss recoverable under the policy, the insurer, or each insurer if there be more than one, is liable for such proportion of the measure of indemnity as the amount of his subscription bears to the value fixed by the policy, in the case of a valued policy, or to the insurable value, in the case of an unvalued policy.491 NOTE.—Insurance is a contract of indemnity, but in marine insurance the indemnity is conventional, and the following sections supply the standard or measure for ascertaining it. The adjustment of marine losses proceeds upon the hypothesis that the subject-matter insured is fully covered by insurance. Suppose a ship valued at £10,000 is insured for £1000 only. The shipowner is said to be “his own insurer” for £9000, and any loss which occurs must be adjusted on this basis, see § 81.492 The following cases may be put in illustration of this principle:— 1. 2.

A cargo valued at £10,000 is insured for £1000 by ten underwriters, who each subscribe for £100. It is damaged by sea perils to the extent of £1000. Each underwriter is liable for £10 only. A ship valued at £5000 is insured for £1000. The ship is stranded, and the owner spends £1000 in trying to get her off, but eventually she is totally lost. The insurer must pay £1000 on the policy, and £200 (i.e. one-fifth) under the suing and labouring clause. It is immaterial whether the real value of the ship be £4500 or £5500.493

As to the suing and labouring clause, which is a distinct engagement in the policy, see § 79; and for a quasi exception, see § 74.

§ 68. Total loss Subject to the provisions of this Act, and to any express provision in the policy, where there is a total loss of the subject-matter insured:— (1.) If the policy be a valued policy, the measure of indemnity is the sum fixed by the policy.494 (2.) If the policy be an unvalued policy, the measure of indemnity is the insurable value of the subject-matter insured.495 NOTE.—As to valued and unvalued policies, see §§ 27 and 28, and as to insurable value and the rules for determining it, see §16.

Cf. Lohre v. Aitchison (1878), 3 Q. B. D. at pp. 564, 565, C. A. affirmed on this point, but reversed on another, 4 App. Cas. 759. 492 Fire insurance losses are adjusted on a different basis. See post, p. 162. See principle explained by Walton, J., in Anglo-Californian Bank v. London and Prov. Mar. Ins. Co. (1906), 10 Com. Cas. at pp. 8, 9. 493 See McArthur, Ed. 2, p. 269; and § 78, post. 494 Arnould, Ed. 6, p. 1157; Irving v. Manning (1847), 1 H. of L. Cas. at pp. 305, 307; Sailing Ship Blairmore v. Macredie (1898), A. C. at p. 610. 495 Arnould, Ed. 6, p. 1156; Irving v. Manning (1847), 1 H. of L. Cas. at pp. 305, 307; and as to “insurable value,” see § 16 and notes. 491

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§ 69. Partial loss of ship. Where a ship is damaged, but is not totally lost, the measure of indemnity, subject to any express provision in the policy, is as follows:— (1.) Where the ship has been repaired, the assured is entitled to the reasonable cost of the repairs, less the customary deductions,496 but not exceeding the sum insured in respect of any one casualty.497 (2.) Where the ship has been only partially repaired, the assured is entitled to the reasonable cost of such repairs, computed as above, and also to be indemnified for the reasonable depreciation, if any, arising from the unrepaired damage, provided that the aggregate amount shall not exceed the cost of repairing the whole damage, computed as above.498 (3.) Where the ship has not been repaired, and has not been sold in her damaged state during the risk, the assured is entitled to be indemnified for the reasonable depreciation arising from the unrepaired damage, but not exceeding the reasonable cost of repairing such damage, computed as above.499 Illustrations. 1.

2.

Policy on hull and machinery. The ship is injured in a collision and has to put into dock for repairs. The cargo becomes putrid, and the shipowner incurs expenses in landing it. These expenses cannot be recovered under the policy on ship.500 Policy on ship. In consequence of damage the ship is put into dry dock for repairs. The owners take the opportunity to have her surveyed for Lloyd’s classification, but this does not increase the time in dock. The insurer must pay the whole expenses of docking the ship.501

NOTE.—In the case of wooden ships, except on first voyage, the custom is to make an arbitrary deduction of “one-third new for old” from the cost of the repairs.502 But this rule is inapplicable to iron ships, and the practice is to provide for them by special clauses. Lloyd’s clause for steamers and iron ships runs, “No thirds to be deducted except as regards hemp rigging and ropes, sails, and wooden deck.”503 The “customary deductions” are set out, post, p. 154. They were originally set out as a schedule to the Bill, but the schedule was cut out afterwards as it was thought better to leave it to custom, which may alter from time to time to meet new needs.

As to the customary deductions, see post, p. 154. McArthur, Ed. 2, pp. 212, 219; Aitchison v. Lohre (1879), 4 App. Cas. at p. 762; Pitman v. Universal Mar. Ins. Co. (1882), 9 Q. B. D. at p. 208. 498 McArthur, Ed. 2, p. 220; cf. Stewart v. Steele (1852), 5 Scott N. R. 927, at p. 948. 499 Ibid. 500 Field Steamship Co. v. Burr (1899), 1 Q. B. 579, C. A. 501 Ruabon Steamship Co. v. London Assurance (1900), A. C. 6 H. L., distinguishing the Vancouver Case (1886), 11 App. Cas. 573. 502 See McArthur, Ed. 2, p. 213; Pitman v. Universal Mar. Ins. Co. (1882), 9 Q. B. D. at p. 215; cf. Henderson v. Shankland (1896), 1 Q. B at p. 530, C. A. 503 See McArthur, Ed. 2, pp. 313, 403. 496 497

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The Act does not provide for the case where the ship is not repaired but is sold in her damaged state during the risk. In that case according to the majority of the Court in Pitman v. Universal Mar. Ins. Co.,504 the assured is entitled to the reasonable cost of repairing such damage, computed as above, but not exceeding the actual depreciation in the value of the ship as ascertained by the sale. Lord Esher dissented from the judgment, thinking the principle it laid down a dangerous innovation, and that the estimated cost of repair, less the usual deductions, should be the sole measure of indemnity. The decision is unsatisfactory, because the other judges on appeal expressly refrained from deciding what was to be taken as the basis of depreciation. The sale price is one factor in the comparison, but what is the other factor? Is it the value of the ship at the commencement of the risk, or at the time of the casualty, or what other value? The matter must be left for future decision. As to total loss following a partial loss, see § 77, post.

§ 70. Partial loss of freight. Subject to any express provision in the policy, where there is a partial loss of freight, the measure of indemnity is such proportion of the sum fixed by the policy, in the case of a valued policy, or of the insurable value, in the case of an unvalued policy, as the proportion of freight lost by the assured bears to the whole freight at the risk of the assured under the policy.505 NOTE.—As to insurable value in the case of freight, see § 16 (2), ante.

§ 71. Partial loss of goods, merchandise, etc. Where there is a partial loss of goods, merchandise, or other moveables, the measure of indemnity, subject to any express provision in the policy, is as follows:— (1.) Where part of the goods, merchandise, or other moveables insured by a valued policy is totally lost, the measure of indemnity is such proportion of the sum fixed by the policy as the insurable value of the part lost bears to the insurable value of the whole, ascertained as in the case of an unvalued policy.506 (2.) Where part of the goods, merchandise, or other moveables insured by an unvalued policy is totally lost, the measure of indemnity is the insurable value of the part lost, ascertained as in case of total loss.507

Pitman v. Universal Mar. Ins. Co. (1882), 9 Q. B. D. 192, at pp. 218, 219, C. A.; McArthur, Ed. 2, p. 220; cf. Stewart v. Steele (1852), 5 Scott N. E. 927, at p. 948. 505 See McArthur, Ed. 2, p. 235; Lowndes, Ed. 2, p. 195; Denoon v. Home and Col. Ins. Co. (1872), L. R. 7 C. P. at p. 351; The Main (1894), P. 320; United States Shipping Co. v. Empress Assurance Corpn. (1906), Times, December 6. As to the facts which constitute a partial, as distinguished from a total loss of freight, see Rankin v. Potter (1873), L. R. 6 H. L. at pp. 98–100, per Brett, J. 506 McArthur, Ed. 2, p. 246; Lewis v. Rucker (1761), 2 Burr. 1167; Irving v. Manning (1847), 1 H. of L. Cas. at p. 305. 507 McArthur, Ed. 2, p. 246; Lewis v. Rucker (1761), 2 Burr. 1167; Irving v. Manning (1847), 1 H. of L. Cas. at p. 305; cf. Tobin v. Harford (1863), 32 L. J. C. P. 134, 136; see § 16 (3) as to insurable value. 504

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(3.) Where the whole or any part of the goods or merchandise insured has been delivered damaged at its destination, the measure of indemnity is such proportion of the sum fixed by the policy, in the case of a valued policy, or of the insurable value in the case of an unvalued policy, as the difference between the gross sound and damaged values at the place of arrival bears to the gross sound value.508 (4.) “Gross value” means the wholesale price, or, if there be no such price, the estimated value, with, in either case, freight, landing charges, and duty paid beforehand; provided that in the case of goods or merchandise customarily sold in bond, the bonded price is deemed to be the gross value. “Gross proceeds” mean the actual price obtained at a sale where all charges on sale are paid by the sellers.509 Illustrations. 1.

2.

3.

Unvalued policy on coffee from Jamaica to London. The insurable value, i.e. the invoice cost, plus shipping expenses and charges of insurance, is £200. Half the coffee is damaged on the voyage. The value of the damaged coffee in London is half that of the undamaged coffee. The selling price in London fixes the measure or percentage of depreciation, but not the amount the insurer has to pay. That must be determined by applying the depreciation to the insurable value, so that in this case the insurer has to pay £50.510 Policy on 40 bales of cotton, which are shipped as part of a cargo of 1600 bales of cotton belonging to different owners. Owing to sea perils 200 bales have to be jettisoned, and the rest are damaged and the marks wholly obliterated. The 1400 bales are sold for the benefit of whom it may concern. This is a partial loss, and the assured is entitled to recover as if five of his 40 bales had been jettisoned, and the rest damaged to the extent shown by the sale of the whole.511 Policy on 1700 packages of tea, valued at £6000. Part of the tea is sea-damaged, and the remainder, which arrives undamaged, sells in consequence for a smaller price. The insurer is not liable for the depreciation so caused.512

McArthur, Ed. 2, p. 247; Johnson v. Sheddon (1802), 2 East, 580 (the “brimstone case”). As to estimating the value of jettisoned goods, cf. Fletcher v. Alexander (1868), L. R. 3 C. P. 375 (general average case). The values must, of course, be reduced to the same cash basis. 509 McArthur, Ed. 2, p. 253; cf. Gow on Insurance, p. 198; Rules of Practice of Association of Average Adjusters, 1906, post, p. 173. Where any sale or other preliminary charges on damaged goods or merchandise are paid or payable by the buyers, such charges must be added to the gross proceeds before establishing the ratio of damage, as above provided, and in the event of a claim being established, such charges are subsequently recoverable from the insurer as “extra charges.” McArthur, Ed. 2, p. 271; cf. Gow on Insurance, p. 125; Francis v. Boulton (1895), 65 L. J. Q. B. 153 (conditioning charges). 510 Usher v. Noble (1810), 12 East, 639, and § 16, ante. The test adopted excludes the rise or fall of the London market. 511 Spence v. Union Mar. Ins. Co. (1868), L. R. 3 C. P. 427. 512 Cator v. Great Western Ins. Co. (1873), L. R. 8 C. P. 552, 561. There was a special warranty as to sea-damage, but the judgment establishes the general principle. See this case distinguished, Brown Brothers v. Fleming (1902), 7 Com. Cas. 245 (policy on cases of whisky, damage to labels and packing by sea perils). 508

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4.

Policy on cargo of sheet iron in separate packages, average payable “on each packet separately or on the whole.” Damage is sustained before the termination of the risk. The whole of the iron is unpacked and examined. The damaged iron is sold, and the rest is repacked and sent on. The insurer is not liable for the expenses incurred in examining and repacking the packages which were not damaged.513

NOTE.—The policy of the rules contained in subsects. (3) and (4) has often been criticized, but they are only primâ facie rules, applicable to ordinary merchandise. There are many matters to which they could not apply, e.g. loss of part of a machine, rendering the whole valueless.514 Such cases are usually provided for by special clauses. See, further, § 75, post. As to insurable value, see § 16 (3).

§ 72. Apportionment of valuation (1.) Where different species of property are insured under a single valuation, the valuation must be apportioned over the different species in proportion to their respective insurable values, as in the case of an unvalued policy. The insured value of any part of a species is such proportion of the total insured value of the same as the insurable value of the part bears to the insurable value of the whole ascertained in both cases as provided by this Act.515 (2.) Where a valuation has to be apportioned, and particulars of the prime cost of each separate species, quality, or description of goods cannot be ascertained, the division of the valuation may be made over the net arrived sound values of the different species, qualities, or descriptions of goods.516 NOTE.—As to “insurable value,” see § 16 (3), ante; and for the mode of ascertaining the value referred to in subsect. (1), see sect. 71 as read with sect. 16.

§ 73. General average contributions and salvage charges. (1.) Subject to any express provision in the policy, where the assured has paid, or is liable for, any general average contribution, the measure of indemnity is the full amount of such contribution if the subject-matter liable to contribution is insured for its full contributory value; but if such subject-matter be not insured for its full contributory value, or if only part of it be insured, the indemnity payable by the insurer must be reduced in proportion to the under insurance, and where there has been a particular average loss which constitutes a deduction from

Lysaght v. Coleman (1895), 1 Q. B. 49, C. A. Cf. British Columbia Co. v. Nettleship (1868), L. R. 3 C. P. 499 (measure of damage against shipowner); and see § 75, post. 515 McArthur, Ed. 2, pp. 244–246; Gow on Insurance, p. 191; Rules of Practice of Association of Average Adjusters, 1906, post, p. 173; and see § 76, post. 516 Ibid. 513 514

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the contributory value, and for which the insurer is liable, that amount must be deducted from the insured value in order to ascertain what the insurer is liable to contribute.517 (2.) Where the insurer is liable for salvage charges the extent of his liability must be determined on the like principle.518 Illustration. Policy on ship valued at £33,000, for that sum. Her real value is £40,000. The ship incurs certain general average and salvage expenses which are adjusted abroad on her real value. The assured can only recover thirty-three fortieths of the amount so adjusted from the insurer.519 NOTE.—This section deals with adjustment. As to liability, see § 66, ante. Suppose goods are insured for £1500 by a valued policy. General average is incurred, of which £80 is found to be the proportion payable by the owner of the goods, their contributory value being taken at £1600. The insurer is liable for 15–16ths of £80, viz. £75. But if the contributory value of the goods be £1200, the insurer is liable for the whole £80. See § 81 as to under insurance.

§ 74. Liabilities to third parties. Where the assured has effected an insurance in express terms against any liability to a third party, the measure of indemnity, subject to any express provision in the policy, is the amount paid or payable by him to such third party in respect of such liability.520 NOTE.—An insurance against liability to a third person is a distinct engagement added to the ordinary policy. In a case where it was held that the “sue and labour” clause in the policy could not be read in with the running-down clause, so as to supplement it, the Court, speaking of the latter, say, “It is in each case a special contract, very different from the contract of insurance in its ordinary form; and the liability under it does not depend upon the ordinary perils covered by the policy, but upon the special matters mentioned in the clause itself.”521

See McArthur, Ed. 2, pp. 206, 210; Gow on Insurance, p. 301; Rules of Practice of Association of Average Adjusters, 1906. As to the effect to be given to the foreign general average clause, see McArthur, Ed. 2, p. 208, and Greer v. Poole (1880), 5 Q. B. D. 272; The Mary Thomas (1894), P. 108, C. A. As to contribution by goods where ship is a constructive total loss, see Henderson v. Shankland (1896), 1 Q. B. 525, C. A. 518 See footnote (3) on p. 109. 519 Steamship Balmoral v. Marten (1901), 2 K. B. 896, C. A.; affirmed A. C. (1902) 511, H. L. 520 Arnould, Ed. 6, pp. 23, 24, and 730; McArthur, Ed. 2, pp. 320, 370, and the ordinary forms of running-down clauses; The Niobe (1891), A. C. 401, H. L. (collision); cf. Joyce v. Kennard (1871), L. R. 7 Q. B. 78 (lighterman’s liability); Cunard Steamship Co. v. Marten (1902), 2 K. B. 624, 629 (carriers’ liability). 521 Xenos v. Fox (1868), L. R. 3 C. P. at p. 635; affirmed L. R. 4 C. P. 665. 517

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Running-down clauses were introduced into policies in consequence of the decision in Devaux v. Salvador,522 that the insurer under the ordinary form of policy was not liable for the balance which one ship had to pay to the other when both were to blame for a collision. The forms at first introduced have again been modified to meet other decisions.523 The insurer is liable under the ordinary form of policy for injury caused by collision to the assured’s ship, whether she be in fault or not.524 The construction of a collision or running-down clause depends entirely on the language used by the parties in the particular clause in question.525 Though the shipowner’s liability for collision under British law is limited by statute, he is expressly authorized to insure: see Merchant Shipping Act, 1894 (57 & 58 Viet. c. 60), § 506, post, p. 159.

§ 75. General provisions as to measure of indemnity. (1.) Where there has been a loss in respect of any subject-matter not expressly provided for in the foregoing provisions of this Act, the measure of indemnity shall be ascertained, as nearly as may be, in accordance with those provisions, in so far as applicable to the particular case.526 (2.) Nothing in the provisions of this Act relating to the measure of indemnity shall affect the rules relating to double insurance, or prohibit the insurer from disproving interest wholly or in part, or from showing that at the time of the loss the whole or any part of the subject-matter insured was not at risk under the policy.527

§ 76. Particular average warranties. (1.) Where the subject-matter insured is warranted free from particular average, the assured cannot recover for a loss of part, other than a loss incurred by a general average sacrifice, unless the contract contained in the policy be apportionable; but,

Devaux v. Salvador (1836), 4 Ad. & E. 420. See Tatham v. Burr (1898), A. C. at p. 385. 524 Davidson v. Burnand (1868), L. R. 4 C. P. at p. 121, per Willes, J. As to the scope to be given to the term “collision.” see Chandler v. Blogg (1897), 1 Q. B. 32 (collision with sunken barge); The Niobe (1891), A. C. 401 (collision with tug); and cases cited in next note. 525 The undermentioned recent cases may be referred to:—The Niobe (1891), A. C. 401 (tug and tow regarded as identical); The Munroe (1893), P. 248 (meaning of sunken wreck); Union Mar. Ins. Co. v. Borwick (1895), 2 Q. B. 279 (“piers or similar structures” include artificial bank); Shelbourne v. Law Investment Ins. Corpn. (1898), 2 Q. B. 626 (loss by detention during repairs not recoverable); Tatham v. Burr (1898), A. C. 382 (removal of obstructions under statutory powers); Burger v. Indemnity Mutual Mar. Ins. Co. (1900), 2 Q. B. 348, C. A. (injury to ship or vessel itself); Margetts v. Ocean Guarantee Corporation (1901), 2 K. B. 792 (collision with anchor of another vessel). 526 See notes to §§ 71 and 74, and such cases as Baring v. Marine Ins. Co. (1893), W. N., p. 164 (stock sent abroad by registered letter). 527 See § 32 (double insurance), and note to § 27 as to short interest. 522 523

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if the contract be apportionable, the assured may recover for a total loss of any apportionable part.528 (2.) Where the subject-matter insured is warranted free from particular average, either wholly or under a certain percentage, the insurer is nevertheless liable for salvage charges, and for particular charges and other expenses properly incurred pursuant to the provisions of the suing and labouring clause in order to avert a loss insured against.529 (3.) Unless the policy otherwise provides, where the subject-matter insured is warranted free from particular average under a specified percentage, a general average loss cannot be added to a particular average loss to make up the specified percentage.530 (4.) For the purpose of ascertaining whether the specified percentage has been reached, regard shall be had only to the actual loss suffered by the subject-matter insured. Particular charges and the expenses of and incidental to ascertaining and proving the loss must be excluded.531 Illustrations. 1.

2.

3.

Policy on master’s effects, “free of all average.” The effects include articles of different species, e.g. feather bed, chronometer, spyglass, etc. Some of the effects are totally lost by perils of the seas, others are saved. The assured can recover for those which are totally lost.532 Policy on iron rails, warranted “free from particular average unless the ship be stranded.” The ship is not stranded, but becomes a constructive total loss. The rails are saved, landed, and sent on to their destination in another ship at an increased freight. The assured cannot recover the extra freight he has had to pay.533 Policy on 2000 bags of linseed “warranted free from average, unless general, etc.” 1000 bags are so sea-damaged as to become rotten and valueless. The insurer is not liable. This is not a separate insurance of each bag, but of the whole of the linseed, and the warranty applies accordingly.534

McArthur, Ed. 2, pp. 242, 341; Gow on Insurance, p. 191; RalIi v. Janson (1856), 6 E. & B. 422 (bags of seed), read with Duff v. Mackenzie (1857), 3 C. B. (N. S.) 16 (master’s effects), and Cator v. Great Western Ins. Co. (1873), L. R. 8 C. P. at p. 559. In Duff v. Mackenzie it was held that where the goods were different in specie the contract was apportionable, but it is submitted that this is only one test of severability. For cases on the F.P.A. warranty, see Hagedorn v. Whitmore (1816), 1 Stark. 157; Navone v. Haddon (1850), 9 C. B. 30; Kidston v. Empire Ins. Co. (1866), L. R. 1 C. P. at p. 548 (reviewing cases); De Mattos v. Saunders (1872), L. R. 7 C. P. 570. 529 McArthur, Ed. 2, p. 312; Kidston v. Empire Ins. Co. (1866). L. R.1 C. P. 535; and § 79. 530 Price v. A 1 Small Damage Assn. (1889), 22 Q. B. D. 580, C. A.; and cf. Oppenheim v. Fry (1863), 3 B. & S. at p. 884. The decision has been criticized as being contrary to the mercantile understanding. See McArthur, Ed. 2, pp. 135, 386. 531 As to two last paragraphs, see Rules of Practice of Association of Average Adjusters, 1906. The expenses of protest, survey, and other proofs of loss are not included in the 3 per cent. See post, p. 177. 532 Duff v. Mackenzie (1857), 3 C. B. (N. S.) 16. 533 Great Indian Peninsula Railway v. Saunders (1861), 1 B. & S. 41; affirmed 2 B. & S. 266; discussed and explained Kidston v. Empire Ins. Co. (1866), L. R. 1 C. P. at p. 548. 534 Ralli v. Janson (1856), 6 E. & B. 422, Ex. Ch. 528

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4.

5.

6.

7.

Policy on disbursements and advances warranted free from all average. The disbursements include outlay, before the ship sails, on provisions, stores, port dues, and insurance. The ship was chartered to take a cargo to South America, and the intention of the assured was to obtain a homeward cargo there. On the voyage out the ship catches fire, and the assured abandons the voyage and brings the ship home for repairs. This is an average and not a total loss.535 Policy on ship from London to Calcutta warranted “free from average under 3 per cent., etc.” The ship loses a boat, and afterwards sustains other sea damage, which, if added to the loss of the boat, brings up the total to more than 3 per cent. The losses can be aggregated.536 Time policy on ship warranted “free from average under 3 per cent, etc.” The ship makes several distinct voyages during the currency of this policy, and on the several voyages incurs small damages. These cannot be added together to make up the 3 per cent.537 Policy on ship warranted “free from average under 3 per cent., etc.” The ship goes into dock to have her bottom cleaned in ordinary course. It is then discovered that her stern post has been broken while at sea. This takes eight days to repair. The cleaning would have taken only three days. The dock dues can be apportioned, so as to bring up the particular average loss to more than 3 per cent.538

NOTE.—A policy, or rather the contract contained in it, is apportionable where the policy itself provides for apportionment, or where by usage it is treated as apportionable. The particular average warranty is sometimes spoken of as a franchise, but in England it is a condition, and not a limitation or franchise. Thus if a ship, warranted free from average under 3 per cent., is damaged to the extent of 5 per cent, the assured is entitled to recover the whole 5 per cent, and not merely the balance of 2 per cent.539 In the case of a voyage policy, successive losses may be added together to make up the specified percentage.540 In the case of a time policy, successive losses on the same voyage may be added together, but losses occurring on different voyages cannot be added together to make up the specified percentage.541 These rules have been questioned on the ground of expediency, and sub-clauses embodying them were cut out from the Bill.

Lawther v. Black (1900), 6 Com. Cas. 5, aff. 6 Com. Cas. 196, C. A.; cf. Price v. Maritime Insurance Co. (1901), 2 K. B. 412, C. A., as to distance freight. 536 Blackcett v. Royal Exchange (1832), 2 Cr. & J. 244. 537 Stewart v. Merchants’ Mar. Ins. Co. (1885), 16 Q. B. D. 619, C. A. But cf. McArthur, Ed. 2, p. 297. 538 Marine Ins. Co. v. China Trans-Pacific Co. (1886), 11 App. Cas. 573; discussed Ruabon Steamship Co. v. London Assurance (1900), A. C. 6, H. L. See Rules of Practice of Association of Average Adjusters in this connection, post, p. 173. 539 As to the French “franchise,” see Gow, p. 195. 540 McArthur, p. 295; and illustration 5. 541 Stewart v. Merchants’ Mar. Ins. Co. (1885), 16 Q. B. D. 619, C. A.; see this case criticized, McArthur, Ed. 2, p. 297. 535

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§ 77. Successive losses. (1.) Unless the policy otherwise provides, and subject to the provisions of this Act, the insurer is liable for successive losses, even though the total amount of such losses may exceed the sum insured.542 (2.) Where, under the same policy, a partial loss, which has not been repaired or otherwise made good, is followed by a total loss, the assured can only recover in respect of the total loss. Provided that nothing in this section shall affect the liability of the insurer under the suing and labouring clause.543 Illustrations. 1. 2.

A ship is insured against perils of the seas, but not against fire. She is seadamaged, but the sea-damage is not repaired. Afterwards she is destroyed by fire. The assured cannot recover anything on this policy.544 A ship is insured by her owners by a time policy. After insurance she is chartered. On the voyage out the ship is damaged, and the repairs are paid for by the charterers, and the cost specially insured. On the voyage home she is totally lost. The shipowner can only recover for the total loss.545

NOTE.—In Lidgett v. Secretan,546 where the assured recovered for both a partial and total loss, the losses were covered by different and consecutive policies, and the fact that the insurer was the same person in both cases was held to be immaterial. “It is clear,” says Lord Abinger, “that whenever the underwriter adjusts a partial loss, he still remains liable on the policy, and may go on paying partial losses exceeding in the whole cent, per cent., and may ultimately have to pay a total loss of cent, per cent. Such a case is possible.”547 As to suing and labouring clause, see next section.

§ 78. Suing and labouring clause. (1.) Where the policy contains a suing and labouring clause, the engagement thereby entered into is deemed to be supplementary to the contract of insurance, and the assured may recover from the insurer any expenses properly incurred pursuant to the clause, notwithstanding that the insurer may have paid for a total loss, or that the subject-matter may have been warranted free from particular average, either wholly or under a certain percentage.548 Arnould, Ed. 6, p. 985; Le Cheminant v. Pearson (1812), 4 Taunt. 367; cf. Aitchison v. Lohre (1879), 4 App. Cas. at p. 763. 543 McArthur, Ed. 2, p. 220; Livie v. Janson (1810), 12 East, 648. As to proviso, see ibid, at p. 655. 544 Livie v. Janson (1810), 12 East, 648, at p. 654, where this case is put. 545 The Dora Forster (1900), P. 241. 546 Lidgett v. Secretan (No. 2), L. R. 6 C. P. 616. 547 Brooks v. MacDonnell (1835), 1 Y. & C. 500, at p. 515; 41 R. R. at p. 342. 548 McArthur, Ed. 2, p. 262; Gow on Insurance, p. 226; Lowndes, Ed. 2, p. 202; Lohre v. Aitchison (1878), 3 Q. B. D. at p. 567, C. A. (reversed on another point); and Kidston v. Empire Ins. Co. (1866), 542

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(2.) General average losses and contributions and salvage charges, as defined by this Act, are not recoverable under the suing and labouring clause.549 (3.) Expenses incurred for the purpose of averting or diminishing any loss not covered by the policy are not recoverable under the suing and labouring clause.550 (4.) It is the duty of the assured and his agents, in all cases, to take such measures as may be reasonable for the purpose of averting or minimizing a loss.551 Illustrations. 1.

Insurance on chartered freight, warranted free from particular average. The ship in consequence of sea-damage becomes a constructive total loss, but the cargo is lauded and sent on in another ship. The expenses of landing, warehousing, and reloading the cargo can be recovered as particular charges under the sue and labour clause.552 Policy containing a collision clause. The assured is sued for running down another ship, and incurs costs in defending the action. These costs are not recoverable from the insurer under the sue and labour clause.553 Policy on freight. A ship bound for L. is stranded at P. The cargo is landed, and, in order to earn freight, is sent on by rail to L. at a cost of £200. It might have been sent on by ship at a cost of £70. The insurer on freight is liable for £70 only, under the sue and labour clause.554 Policy for £1000 on ship and cargo valued at £4000. Expenses are incurred under the sue and labour clause to the extent of £2000. The insurer is liable to contribute £500.555 Live cattle are insured against all risks. The ship, owing to sea perils, is detained in a port of refuge for some weeks. The cost of extra fodder supplied to the cattle during the detention is recoverable under the sue and labour clause.556 A ship valued at £2600 is insured with D. for £1200. After encountering very heavy weather the ship is rescued by a steamer with which no contract is made, and which afterwards obtains an award of £800 for salvage. The owner, instead of abandoning, elects to repair the ship at a cost of £2600. The insurer is only liable for £1200. He is not liable under the sue and labour clause for any

2. 3.

4. 5.

6.

549

550

551

554 555 552 553

556

L. R. 1 C. P. 535, affirmed L. R. 2 C. P. 357, Ex. Ch.; cf. Duus Brown & Co. v. Binning (1906), 11 Com. Gas. 190. Aitchison v. Lohre (1879), 4 App. Cas. 755, especially at pp. 765, 768. For definition of salvage charges, see § 65, ante. Kidston v. Empire Ins. Co. (1866), L. R. 1 C. P. at pp. 546, 547, per Willes, J.; Meyer v. Ralli (1876), 1 C. P. D. 358. McArthur, Ed. 2, p. 263; Kidston v. Empire Ins. Co. (1866), L. R. 1 C. P. at p. 544; Currie v. Bombay Ins. Co. (1869), L. R. 3 P. C. 72. Kidston v. Empire Ins. Co. (1866), L. R. 1 C. P. 535; affirmed L. R. 2 C. P. 357, Ex. Ch. Xenos v. Fox (1869), L. R. 4 C. P. 665, Ex. Ch. Lee v. Southern Ins. Co. (1870), L. R. 5 C. P. 397. Dixon v. Wentworth (1879), 4 C. P. D. at pp. 377, 378. The case is overruled only so far as it decided that salvage expenses were recoverable under the clause. See, too, Cunard Steamship Co. v. Marten (1902), 2 K. B. at p. 629. The Pomeranian (1895), P. 349.

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7.

8.

9.

additional sum for salvage charges, for the salving steamer is not the “factor, servant, or assign” of the assured.557 A ship is insured by A., an underwriter, who re-insures with B., who again re-insures with C. for £100. The ship becomes a constructive total loss. A. settles with the original assured, and then at great expense refloats the ship and sells her. His expenses amount to 112 per cent, on the insured value. If B. pays A., he can only recover £100 from C., for A., the first insurer, is not the factor, servant, or assign of B. within the meaning of the sue and labour clause.558 Policy effected by shipowner “to cover shipowner’s liability of any kind to owners of mules and cargo up to £20,000 owing to the omission of the negligence clause in the contract.” The mules are worth £40,000. The ship is stranded, and expenses are incurred in landing some of the mules which were saved. The sue and labour clause does not apply to a policy in this form, and the expenses so incurred cannot be recovered under the clause.559 A ship insured against total loss is stranded, and abandoned. The insurers employ a firm of ship repairers, who succeed in getting her off and saving her, and the assured fails in his claim for a total loss. The insurers cannot counterclaim under the sue and labour clause, or otherwise, for the expenses of salving the ship.560

NOTE.—The assured and his agents are bound by law to use all reasonable efforts to avert or minimize a loss.561 The suing and labouring clause enables the assured to recover the expenditure involved in those efforts from the insurer. The Continental Codes embody the conditions of the suing and labouring clause, so that under those codes the liability of the insurer is determined by law, whereas in England it rests on contract. The sue and labour clause is usually supplemented by the “waiver clause,” which provides that “no acts of the insurer or insured in recovering, saving, or preserving the property insured shall be considered as a waiver or acceptance of abandonment.”562 For forms of the sue and labour and waiver clauses, see Lloyd’s policy, post, p. 140. The sue and labour clause is not a contract of indemnity, therefore if an assured shipowner is sued for work done in endeavouring to salve his ship, he cannot bring in his underwriters under the third party procedure.563 As to general average and salvage, see note to §§ 65 and 73, ante. Sue and labour expenses are apportioned on the like principle.564

559 560 561

Aitchison v. Lohre (1879), 4 App. Cas. 755. Uzielli v. Boston Marine Insurance Co. (1884), 15 Q. B. D. 11 C. A. Cunard Steamship Co. v. Marten (1902), 2 K. B. 624, affirmed 2 K. B. (1903), p. 511, C. A. Cronan v. Stanier (1903), 1 K. B. 87, distinguishing The Pickwick (1852), 16 Jur. 669. Benson v. Chapman (1849), 2 H. L. C. 496; Notara v. Henderson (1872), L. R. 7 Q. B. 225, Ex. Ch. (shipper v. shipowner). 562 McArthur, Ed. 2, p. 272; Lowndes, Ed. 2, p. 165. 563 Johnston v. The Salvage Association (1887), 19 Q. B. D. 458, C. A. 564 Cunard Steamship Co. v. Marten (1902), 2 K. B. at p. 629. 557 558

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RIGHTS OF INSURER ON PAYMENT. § 79. Right of subrogation. (1.) Where the insurer pays for a total loss, either of the whole, or in the case of goods of any apportionable part, of the subject-matter insured,565 he thereupon becomes entitled to take over the interest of the assured in whatever may remain of the subject-matter so paid for, and he is thereby subrogated to all the rights and remedies of the assured in and in respect of that subject-matter as from the time of the casualty causing the loss.566 (2.) Subject to the foregoing provisions, where the insurer pays for a partial loss, he acquires no title to the subject-matter insured, or such part of it as may remain, but he is thereupon subrogated to all rights and remedies of the assured in and in respect of the subject-matter insured as from the time of the casualty causing the loss, in so far as the assured has been indemnified, according to this Act, by such payment for the loss.567 Illustrations. 1.

2. 3.

4. 5.

Goods insured by a valued policy are captured and sold. The underwriters pay down 50 per cent of the loss on account. Afterwards the assured receives half the proceeds of the goods from the captors. The insurers are not entitled to this or any part of it.568 A ship is missing, and the insurer pays for a total loss. If the ship afterwards arrives she belongs to the insurer.569 Policy on goods. The ship is captured by a Brazilian cruiser as a blockaderunner. The assured offers to abandon. The insurer declines to accept the abandonment, but eventually compromises the claim by paying 35 per cent. Some years afterwards, the Brazilian Government, under a Convention with Great Britain, make compensation. The insurer is not entitled to any part of the compensation so paid.570 Insured goods are jettisoned. The insurer of these goods must pay as for a total loss, but he then stands in the place of the assured as regards claims for general average contribution.571 A ship valued at £6000 is insured for £6000. Her real value is £9000. She is run down by another ship, and the insurers pay for a total loss. Afterwards

The words as to total loss of part were added after some discussion by the Lord Chancellor’s Committee. Before the Act they were very doubtful law. 566 Arnould, Ed. 7, p. 1386; McArthur, Ed. 2, p. 158; Rankin v. Potter (1873), L. R. 6 H. L. at pp. 118, 119, 144; Simpson v. Thomson (1877), 3 App. Cas. at p. 284, 292; Burnand v. Rodocanachi (1882), 7 App. Cas. at p. 339; Darrell v. Tibbitts (1880), 5 Q. B. D. at p. 563, C. A., per Lord Esher. 567 Simpson v. Thomson (1877), 3 App. Cas. at p. 292, H. L.; Arnould, Ed. 7, p. 1388. See § 81 as to effect of under-insurance. 568 Tunno v. Edwards (1810), 12 East, 488; 11 R. R. 458. 569 Houstman v. Thornton (1816), Holt N. P. 242. 570 Brooks v. Macdonnell (1835), 41 R. R. 336. 571 Dickinson v. Jardine (1868), L. R. 3 C. P. 639; and Rules of Practice of Average Adjusters’ Association, 1906. 565

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the assured recovers £5000 damages from the owners of the ship in fault. The insurers are entitled to the whole of this sum as salvage.572 6. Cargo insured under a valued policy is destroyed by a Confederate cruiser. The cargo is worth more than the valuation. After the war, compensation is paid to the cargo owner by the United States under an Act which expressly refuses to recognize claims made by or on behalf of insurers. The insurers who have paid for a total loss are not entitled to this compensation.573 7. Two ships belonging to the same owner come into collision. The insurers of the ship not in fault have no claim against the ship in fault, for they stand in the place of the assured, who cannot have a claim against himself.574 8. Goods, on which freight has been prepaid, are lost through the negligence of the shipowner. Subject to any special provision in the contract of affreightment, the shipper can recover as damages the prepaid freight for the benefit of the insurers on freight.575 9. A ship is run down, and the insurer pays for a total loss. The insurer on ship is not entitled to the damages recovered by the ship-owner from the ship in fault for loss of freight.576 10. Wool is damaged in a collision between lighters. The insurers pay the claim, and the assured assigns to them his rights against the owner of the lighter in fault. That owner cannot set up the defence that the payment was outside the policy.577 NOTE.—The right of subrogation is a necessary incident of a contract of indemnity, and it operates on every right and remedy “by which the loss insured against can be or has been diminished.”578 If the assured is indemnified it seems the insurer may recover from a third party more than he has paid.579 But suppose a ship valued at £5000 is insured for £4000, how is the subrogation to be apportioned? Presumably the assured, being “his own insurer” for £1000, is entitled to a fifth of the salvage.580 The cases do not suggest a rule of apportionment, but such a rule seems required. It is recognized in French law. See Pothier, Traité d’ Assurance, § 133, and see § 81, post, as to effect of under-insurance. The authorities fully bear out the proposition that whatever remains of the subjectmatter insured vests in the insurer when he settles for a total loss. “The assured,”

North of England Ins. Assn. v. Armstrong (1870), L. R. 5 Q. B. 244, doubted, Burnand v. Rodocanachi (1882), 7 App. Cas. at p. 342; and see Arnould, Ed. 7, p. 1390, and see § 81. 573 Burnand v. Rodocanachi (1882), 7 App. Cas. 333, explained Castellain v. Preston (1883), 11 Q. B. D. at p. 404, per Lord Bowen; and Stearns v. Village Main Reef Co. (1904), 10 Com. Cas. 89, C. A. 574 Simpson v. Thomson (1877), 3 App. Cas. 279, H. L.; discussed Midland Ins. Co. v. Smith (1881), 6 Q. B. D. at p. 565; and Lowndes, Ed. 2, p. 226. 575 Dufourcet v. Bishop (1886), 18 Q. B. D. 373. 576 Sea Ins. Co. v. Hadden (1884), 13 Q. B. D. 706, C. A. 577 King v. Victoria Ins. Co. (1896), A. C. 250, P. C. 578 Castellain v. Preston (1883), 11 Q. B. D. at pp. 388, 404, C. A.; and cf. West of England Fire Ins. Co. v. Isaacs (1896), 2 Q. B. 377 (fire policy). 579 North of England Ins. Assn. v. Armstrong (1870), L. R. 5 Q. B. 244; but cf. Burnand v. Rodocanachi (1882), 7 App. Cas. at p. 342, as to valuation. 580 Arnould, Ed. 6, p. 980; and Ed. 7, p. 1390. But see other cases of difficulty suggested, Lowndes, Ed. 2, pp. 227, 229. 572

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says Lord Cottenham, “must give up to the underwriters all the remains of the property recovered, together with all benefit and advantage belonging or incident to it, or rather such property vests in the underwriters.”581 But is the vesting absolute or conditional, that is to say, can the insurer disclaim the property if it is onerous? Suppose a ship is wrecked in harbour and the insurer pays for a total loss. There may be an obligation to remove the wreckage, the expense of which would exceed the value of the wreckage. The question has been discussed, but not decided, in England.582 In France, it seems, the insurer can disclaim. See Pothier, Traité d’Assurance, § 136. In Committee the words “is entitled to take over” were substituted for the words “is entitled to,” and this amendment strengthens the view that the insurer is not compelled to accept an onerous property. Again, in the case of a British ship, at any rate, it is the equitable and not the legal title which vests in the insurer. Speaking broadly, the insurer, in the absence of special contract, must exercise all remedies in the name of the assured.583 It follows that the insurer is entitled to the use of the assured’s name; but if the insurer wishes to bring an action he must, of course, indemnify the assured as regards costs. As to the effect of the rule of subrogation on the doctrine of contribution between insurers of the same property, see note to § 33, ante, and see further, note, post, p. 166, as to abandonment.

§ 80. Right of contribution. (1.) Where the assured is over-insured by double insurance, each insurer is bound, as between him-self and the other insurers, to contribute rateably to the loss in proportion to the amount for which he is liable under his contract.584 (2.) If any insurer pays more than his proportion of the loss, he is entitled to maintain an action for contribution against the other insurers, and is entitled to the like remedies as a surety who has paid more than his proportion of the debt.585 NOTE.—Under the foreign codes provision is made for successive liability to avoid the complication of the English rule (see Arnould, Ed. 6, pp. 329–331). Co-insurers are not co-sureties, but in many respects they have similar relations inter se. As Martin, B., says, when two or more policies are effected on the same subject-matter and interest “the policies are one insurance as between all the underwriters, but not one insurance for all purposes.”586 But for a qualification of this principle as regards return of premium, see note to § 84, and as to double insurance, see § 32, ante. Stewart v. Greenock Mar. Ins. Co. (1848), 2 H. L. C. at p. 183. Eglinton v. Norman (1877), 3 Asp. Mar. Cas. 471, C. A.; and see Arrow Shipping Co. v. Tyne Improvement Commissioners (1894), A. C. 508, H. L.; and Barraclough v. Brown (1897), A. C. 615. 583 Simpson v. Thomson (1877), 3 App. Cas. 290, 293; but see King v. Victoria Ins. Co. (1896), A. C. 250 (special assignment of rights). 584 Arnould, Ed. 6, p. 329; Lowndes, Ed. 2, p. 35; Leake on Contracts, Ed. 3, pp. 62, 655; Newby v. Reed (1763), 1 W. Bl. 416; North British Ins. Co. v. London and Globe Ins. Co. (1877), 5 Ch. D. at p. 583, C. A. 585 Subsect. (2) is consequential. 586 Bruce v. Jones (1863), 32 L. J. Ex. at p. 135. 581 582

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§ 81. Effect of under insurance. Where the assured is insured for an amount less than the insurable value, or, in the case of a valued policy, for an amount less than the policy valuation, he is deemed to be his own insurer in respect of the uninsured balance.587 NOTE.—All marine adjustment rests on the hypothesis that the subject-matter insured is to be regarded as fully insured. Suppose a ship, valued at £3000, is insured with A. for £1000 and with B. for £1000. If she is damaged by collision to the extent of £300, A. is liable for £100 and B. is liable for £100. That being so, it is obviously immaterial to A. and B. whether the remaining £1000 is uninsured, or whether it is insured with C. The same principle must be applied to salvage. Suppose, then, that the assured recovers £300 in damages from another ship which caused the collision. A. and B. will each be entitled to £100 of these damages, and the assured who is “his own insurer” will be entitled to the remaining £100. As to valued policies, see § 27 (3).

RETURN OF PREMIUM. § 82. Enforcement of return. Where the premium, or a proportionate part thereof, is, by this Act, declared to be returnable:— (a.) If already paid, it may be recovered by the assured from the insurer, and, (b.) If unpaid, it may be retained by the assured or his agent.588 NOTE.—The broker is directly responsible to the insurer for the payment of the premium, but when returnable it is repayable to the assured.589 There is said to have been a custom that when the premium was returnable, the insurer was nevertheless allowed to make a deduction of one-half per cent. (Arnould, Ed. 6, p. 1121). But this custom is now believed to be obsolete.

§ 83. Return by agreement. Where the policy contains a stipulation for the return of the premium, or a proportionate part thereof, on the happening of a certain event, and that event happens, the premium, or, as the case may be, the proportionate part thereof, is thereupon returnable to the assured.590 Added at instance of Lord Chancellor’s Committee. Cf. Arnould, Ed. 6, p. 980, and Ed. 7, p. 1374; Pothier, Traité d’Assurance, § 133, and note to § 79. 588 Arnould, Ed. 6, pp. 194, 197, 206; Shee v. Clarkson (1810), 11 R. R. 473; 12 East, 507 (broker); cf. McArthur, Ed. 2, p. 40. 589 Arnould, Ed. 6, p. 198. See also §§ 52, 53, ante. 590 Arnould, Ed. 6, p. 1115; Owen’s Notes and Clauses, Ed. 3, p. 122; Kellner v. Le Mesurier (1803), 4 East, 396, 7 R. R. 581; Gorsedd Steamship Co. v. Forbes (1900), 5 Com. Cas. 413 (return after loss); cf. Rules of Practice of Association of Average Adjusters, 1906, post, p. 173. 587

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§ 84. Return for failure of consideration. (1.) Where the consideration for the payment of the premium totally fails, and there has been no fraud or illegality on the part of the assured or his agents, the premium is thereupon returnable to the assured.591 (2.) Where the consideration for the payment of the premium is apportionable and there is a total failure of any apportionable part of the consideration, a proportionate part of the premium is, under the like conditions, thereupon returnable to the assured.592 (3.) In particular— (a.) Where the policy is void, or is avoided by the insurer as from the commencement of the risk, the premium is returnable, provided that there has been no fraud or illegality on the part of the assured; but if the risk is not apportionable, and has once attached, the premium is not returnable.593 (b.) Where the subject-matter insured, or part thereof, has never been imperilled, the premium, or, as the case may be, a proportionate part thereof, is returnable: Provided that where the subject-matter has been insured “lost or not lost,” and has arrived in safety at the time when the contract is concluded, the premium is not returnable unless, at such time, the insurer knew of the safe arrival.594 (c.) Where the assured has no insurable interest throughout the currency of the risk the premium is returnable, provided that this rule does not apply to a policy effected by way of gaming or wagering.595 (d.) Where the assured has a defeasible interest which is terminated during the currency of the risk the premium is not returnable.596 (e.) Where the assured has over-insured under an unvalued policy, a proportionate part of the premium is returnable.597 (f.) Subject to the foregoing provisions, where the assured has over-insured by double insurance, a proportionate part of the several premiums is returnable.598 Provided that, if the policies are effected at different times, and any earlier policy has at any time borne the entire risk, or if a claim has been paid on the policy in respect of the full sum insured thereby, no premium is returnable in respect of that policy, and when the double insurance is effected knowingly by the assured no premium is returnable.599

593 594 595 596 597 598 599 591 592

McArthur, Ed. 2, p. 43. Ibid., pp. 43, 44. Arnould, Ed. 6, p. 1109; and as to the proviso, see ibid., p. 1100; Leake on Contracts, Ed. 3, p. 92. Arnould, Ed. 6, p. 1111; and as to the proviso, see Bradford v. Symondson, 7 Q. B. D. 456, C. A. Arnould, Ed. 6, p. 1109, and see § 4 (2) ante. Boehm v. Bell (1799), 8 T. R. 154. Arnould, Ed. 6, p. 1112. Ibid., p. 1113; McArthur, Ed. 2, p. 44, and see § 32 as to double insurance. Fisk v. Masterman (1841), 8 M. & W. 165. The final words were added at the instance of the Lord Chancellor’s Committee, but they were redrafted in the Commons Committee.

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Illustrations. 1. 2. 3.

4.

5. 6.

7.

Goods are insured from London to a port in an enemy’s country. The ship is captured. The insurance is void, as trading with an enemy, and the premium is not returnable.600 A ship insured at and from A., sails from A. with an insufficient crew, and is lost. The insurer is not liable, and the premium is not returnable.601 Cotton, at sea and overdue, valued at £30,000, is insured by policies effected on the 12th of April for £20,000, and by policies effected on the 13th of April for £16,000. In case of safe arrival, no premium is returnable on the policies effected on the 12th, for they bore the whole risk till the other policies were effected. But premium on £6000, the extent of the over-insurance, is returnable on the policies effected on the 13th.602 Policy on goods at sea. The assured represents to the insurer that the ship sailed from Baltimore on the 12th of January. As a fact she sailed on the 1st of January. The insurer is not liable. If the representation was an honest mistake, the premium is returnable, aliter if it was made dishonestly.603 Insurance on profits and commission “without benefit of salvage.” The policy is illegal under 19 Geo. 2, c. 37, and the premium is not returnable.604 A., who has insured the cargo on a ship believed to be overdue, re-insures his risk with B. At the time the re-insurance is effected the ship has safely arrived, but neither party knows this. The re-insurance policy attaches, and the premium is not returnable.605 Insurance on 500 bales of cotton to be shipped by a particular ship. Only 250 bales are shipped. Half the premium is returnable.606

NOTE.—Apart from agreement, the return of the premium seems to rest on the doctrine of failure of consideration. The principle has been generalized in subsects. (1) and (2), as the subordinate rules in subsect. (3) may not be exhaustive. “The general rule of law,” says Bovill, C. J., “is that where a contract has been in part performed, no part of the money paid under such contract can be recovered back. There may be some cases of partial performance which form an exception to this rule, as, for instance, if there were a contract to deliver ten sacks of wheat, and six only were delivered, the price of the remaining four might be recovered back. But there the consideration is clearly severable.”607 The case of double insurance gives rise to complications. “The assured has the right to elect under which policy or set of policies he will claim for a loss, and under which policy or set of policies he will claim for a return of premium; but the

Vandyck v. Hewitt (1800), 1 East, 96; 5 R. R. 516; see, too, Palyart v. Leckie (1817). 6 M. & S. 290, when the voyage was abandoned. 601 Annen v. Woodman (1810), 3 Taunt. 299. 602 Fisk v. Masterman (1841), 8 M. & W. 165. 603 Anderson v. Thornton (1853), 8 Exch. 425. 604 Allkins v. Jupe (1877), 2 C. P. D. 375, see at p. 388 as to possibility of salvage in such a case; cf.§ 5, ante, reproducing this statute. 605 Bradford v. Symondson (1881), 7 Q. B. D. 456, C. A. 606 Cf. McArthur, Ed. 2, p. 44. 607 Whincup v. Hughes (1871), L. R. 6 C. P. at p. 81. 600

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underwriters, having settled with the assured, must proceed to readjust the entire claim among themselves, so that each underwriter shall ultimately bear his proportionate part both of the loss and of the return premium.”608 But as regards return premium this rule is subject to qualification. When, as commonly happens, the risk under some of the policies attaches before the risk under later policies, so that under the earlier policies the entire risk is run for a time, then the premium is only returnable by the underwriter of the later policies.609 This qualification is really a deduction from subsect (3) (a). To get rid of this complication, and to discourage over-insurance, Lord Herschell proposed that in case of double insurance, premium should not be returnable, but the clause now stops somewhat short of this.

MUTUAL INSURANCE. § 85. Modification of Act in case of mutual insurance. (1.) Where two or more persons mutually agree to insure each other against marine losses there is said to be a mutual insurance.610 (2.) The provisions of this Act relating to the premium do not apply to mutual insurance, but a guarantee, or such other arrangement as may be agreed upon, may be substituted for the premium.611 (3.) The provisions of this Act, in so far as they may be modified by the agreement of the parties, may in the case of mutual insurance be modified by the terms of the policies issued by the association, or by the rules and regulations of the asoociation.612 (4.) Subject to the exceptions mentioned in this section, the provisions of this Act apply to a mutual insurance.613 NOTE.—Mutual marine associations consisting of more than twenty members must be registered under the Companies Acts,614 and the insurances effected by them must be embodied in marine policies in conformity with the Stamp Acts.615 “Mutual insurance,” says Matthew, J., “is the simplest thing in the world if you have not to record it in written documents. It is a system by which every one insured is at once underwriter and assured. This very simple principle was acted upon successfully for many years, till technical difficulties began to be interposed. The first technical difficulty was this: all mutual insurance associations were ordered

McArthur, Ed. 2, p. 44. See, too, § 32. Fisk v. Masterman (1841), 8 M. & W. 165; Lowndes, Ed. 2, p. 36. 610 McArthur, Ed. 2, p. 345; and for history of mutual insurance, see Marine Mutual Ins. Assn. Ltd. v. Young (1880), 4 Asp. Mar. Cas. at p. 358. 611 McArthur, Ed. 2, p. 346; Lion Ins. Assn. v. Tucker (1883), 12 Q. B. D. at p. 187, C. A. 612 Ocean Iron Steamship Assn. v. Leslie (1889), 22 Q. B. D. 722; British Marine Mutual Ins. Co. v. Jenkins (1900), 1 Q. B. 299; North Eastern Steamship Assn. v. Red “S” Steamship Co. (1905), 10 Com. Cas. 245. 613 British Marine Mutual Ins. Co. v. Jenkins (1900), 1 Q. B. 299. 614 Re Padstow Ass. Assn. (1882), 20 Ch. D. 137, C. A. 615 Edwards v. Aberayron Mutual Ins. Society (1875), 1 Q. B. D. 563, Ex. Ch. 608 609

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by statute to be incorporated as joint stock companies. The second technical difficulty was, that under statutes framed for different purposes, which were positive in their terms, every contract of marine insurance had to be recorded in a written document; there must be a policy of insurance. These two conditions having to be complied with, the mutual associations set themselves to work to reconcile the rules of the law with the conduct of their business, and different regulations have been adopted to meet the decisions.”616 The policies issued by mutual associations omit the ordinary provision as to premium. The omission is provided for by rules of the association which regulate members’ contributions to losses. Their policies therefore have to be construed together with the rules and regulations of the association.

SUPPLEMENTAL. § 86. Ratification by assured. Where a contract of marine insurance is in good faith effected by one person on behalf of another, the person on whose behalf it is effected may ratify the contract even after he is aware of a loss.617 NOTE.—This is an old rule of insurance law. It was questioned in Williams v. North China Ins. Co.,618 but affirmed. “I think,” says Cockburn, C. J., “that this is a legitimate exception from the general rule, because the case is not within the principle of that rule. Where an agent effects an insurance subject to ratification, the loss is very likely to happen before ratification, and it must be taken that the insurance so effected involves that possibility as the basis of the contract.” The insurance can only be ratified by the person on whose behalf it is effected.619 Thus, if A. takes out a policy in his own name on behalf of B., the transaction cannot be adopted by C.620 See further the notes to § 23 (1), ante.

§ 87. Implied obligations varied by agreement or usage. (1.) Where any right, duty, or liability would arise under a contract of marine insurance by implication of law, it may be negatived or varied by express agreement, or by usage, if the usage be such as to bind both parties to the contract.621 (2.) The provisions of this section extend to any right, duty, or liability declared by this Act, which may be lawfully modified by agreement.

Ocean Iron Steamship Assn. v. Leslie (1889), 22 Q. B. D. at p. 724. Arnould, Ed. 6, p. 166; Williams v. North China Ins. Co. (1876), 1 C. P. D. 757, C. A., see at p. 764. 618 Williams v. North China Ins. Co. (1876), 1 C. P. D. 757, C. A., see at p. 764. As to the common law rule, to which this is an exception, see Keighley v. Durant, A. C. (1901), 240 H. L. 619 Boston Fruit Co. v. British and Foreign Mar. Ins. Co. (1905), 1 K. B. 637, C. A.; affirmed A. C. (1906), 336 H. L. (policy effected for shipowner cannot afterwards be adopted by charterer). 620 Byas v. Miller (1897), 3 Com, Cas. 39. 621 McArthur, Ed. 2, pp. 33–35; Hart v. Standard Ins. Co. (1889), 22 Q, B. D. at p. 501, C. A. 616 617

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NOTE.—This section is suggested by § 55 of the Sale of Goods Act, 1893 (56 & 57 Vict. c. 71). The cases are analogous. As Pothier long ago pointed out, marine insurance is a consensual contract, and in the absence of positive legal prohibition, the parties may make any stipulation they please. As regards “express agreement,” the maxims of the law are Expressum facit cessare taciturn, and Modus et conventio vincunt legem. For example, it is a well-known rule of law that deviation is ground for avoiding the insurance, but the parties may agree to a deviation clause. On the other hand, the parties cannot by agreement dispense with the provisions against gaming and wagering which are prohibited in the public interest. But, speaking generally, the main object of the Act is to declare the law, that is to say, to indicate to the parties what the law will do if they do not make any express bargain, leaving them free to make any bargain they like to suit their own needs. Usage. As regards usage, it is to be noted that when one party relies on and gives evidence of usage, the other party is at liberty to prove—“first, the non-existence of the usage; or, secondly, its illegality or unreasonableness; or, thirdly, that in fact it formed no part of the agreement between the parties.”622 Speaking, in 1791, of a marine policy, Buller, J., says, “it is founded on usage and must be governed by usage.”623 This proposition must now be taken with qualifications. A usage may be either a general usage of trade, or a particular usage, prevailing only among particular classes or in particular localities. When a general usage has been affirmed by judicial decision, it becomes incorporated with the law merchant, and thenceforward evidence of any usages inconsistent therewith is inadmissible.624 A particular usage must be proved by evidence in each case, at any rate till it becomes so notorious that the Courts will take judicial notice of it.625 It is only binding in so far as it forms an implied term of the contract between the parties concerned. As a marine policy is an instrument in writing, evidence of usage is not admissible to contradict anything which is plainly expressed.626 Such evidence is only admissible either to explain what is technical or ambiguous, or, as lawyers put it, to annex incidents to the contract.627

Taylor on Evidence, § 1077. As to usage in maritime law generally, see Carver’s Carriage by Sea, §§ 160–200. 623 Brough v. Whitmore (1791), 4 T. R. at p. 210. 624 Goodwin v. Robarts (1875), L. R. 10 Ex. at p. 357, Ex. Ch. 625 Cf. Ex parte Turquand (1885), 14 Q. B. D. at p. 645. 626 Arnould, Ed. 6, p. 291; Parkinson v. Collier, 2 Park. Ins. 653. 627 For illustrations of the part played by usage, see Universo Ins. Co. v. Merchants’ Mar. Ins. Co. (1897), 2 Q. B. 93 (liability of broker for premium); Attwood v. Sellar (1880), 5 Q. B. D. 286, C. A. (practice of average adjusters to charge certain general average expenses to particular average, invalid); Stephens v. Australasian Ins. Co. (1872), L. R. 8 C. P. at p. 23 (declarations on floating policies); Dickinson v. Jardine (1868), L. R. 3 C. P. 639 (special usage as to jettison, invalid); Sweeting v. Pearce (1861), 30 L. J. C. P. 109 (usage of Lloyd’s as to settlement of losses); Blackett v. Royal Exchange (1832), 2 Cr. & J. 244 (usage not to pay for boat slung outside, invalid); Palmer v. Blackburn (1822), 1 Bing. 60, 64 (measure of indemnity, gross freight). 622

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§ 88. Reasonable time, etc., a question of fact. Where by this Act any reference is made to reasonable time, reasonable premium, or reasonable diligence, the question what is reasonable is a question of fact.628 NOTE.—This section follows the lines of § 56 of the Sale of Goods Act, 1893 (56 & 57 Vict, c. 71).

§ 89. Slip as evidence Where there is a duly stamped policy, reference may be made as heretofor, to the slip or covering note, in any legal proceeding.629 NOTE.—Lord Blackburn says, “As the slip is clearly a contract for marine insurance, and is equally clearly not a policy, it is, by virtue of these enactments (the stamp laws), not valid—that is, not enforceable at law or in equity; but it may be given in evidence, wherever it is, though not valid material.”630 For example, the slip is evidence for the purpose of correcting an error in the name of the ship. So, too, if the insurer seeks to avoid the policy on the ground of concealment of a material fact, the date of the slip would be material to show whether, when the fact came to the knowledge of the assured, the contract had or had not been concluded.631

§ 90. Interpretation of terms. In this Act, unless the context or subject-matter otherwise requires— “Action” includes counter-claim and set off:632 “Freight” includes the profit derivable by a shipowner from the employment of his ship to carry his own goods or moveables, as well as freight payable by a third party, but does not include passage money:633 “Moveables” mean any moveable tangible property, other than the ship, and include money, valuable securities, and other documents:634 “Policy” means a marine policy. As to reasonable time, see Carlton Steamship Co. v. Castle Mail Packets Co. (1898), A. C. at p. 491, per Lord Herschell; Currie v. Bombay Native Ins. Co. (1869), L. R. 3 P. C. at p. 79; as to premium, see note to § 31. 629 McArthur, Ed. 2, p. 23; Arnould, Ed. 6, p. 260; Leake on Contracts Ed. 3, pp. 270, 342; Ionides v. Pacific Mar. Ins. Co. (1872), L. R. 7 Q. B. 517, Ex. Ch. 630 lonides v. Pacific Mar. Ins. Co. (1871), L. R. 6 Q. B. at p. 685 (name of ship); cf. Empress Assurance Corporation v. Bowring (1905), 11 Com. Cas. 107 (evidence not admitted). 631 Cory v. Patton (1872), L. R. 7 Q. B. 704; cf. Lishman v. Northern Mar. Ins. Co. (1875), L. R. 10 C. P. 179, Ex. Ch. 632 Cf. § 62 (1) of the Sale of Goods Act, 1893 (56 & 57 Vict. c. 71). 633 Arnould, Ed. 6, p. 31; Flint v. Flemyng (1830), 1 B. & Ad. 45; see note, post. 634 See Baring Brothers v. Mar. Ins. Co. (1893), W. N. p. 164 (postal packet containing stock certificates); The Pomeranian (1895), P. 349 (live cattle); Sleigh, v. Tyser (1900), 2 Q. B. 333 (live cattle). The term “goods” in a marine policy has a restricted meaning. See post, p. 151. 628

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NOTE.—In ordinary shipping law the term “freight” is sometimes used to denote the goods or cargo laden on board ship. More commonly it is used to denote the sum payable to a shipowner by a third person for the use of a ship as a vehicle for merchandise.635 In insurance law the term has a wider meaning. In a case where it was held that an insurance “on freight” did not cover coolies’ passage money, Willes, J., after commenting on the different meanings of the word, says it has been “decided that ‘freight’ sufficiently represents the interest of the shipowner in the carriage of his own goods, and includes the value of their carriage.”636 It is immaterial to the insurer whether the ship be regarded as hired to an actual or to a hypothetical charterer. As to “advance freight,” see § 12.

§ 91. Savings. (1.) Nothing in this Act, or in any repeal effected thereby, shall affect:— 54 & 55 Vict. c. 39. (a.) The provisions of the Stamp Act, 1891, or any enactment for the time being in force relating to the revenue;637 25 & 26 Vict. c. 89. (b.) The provisions of the Companies Act, 1862, or any enactment amending or substituted for the same:638 (c.) The provisions of any statute not expressly repealed by this Act. (2.) The rules of the common law, including the law merchant, save in so far as they are inconsistent with the express provisions of this Act, shall continue to apply to contracts of marine insurance.639 NOTE.—In continental countries marine and mercantile cases are relegated to special commercial tribunals. In England, as in the United States, they are dealt with by the ordinary courts of justice. The law merchant is part of the common law, and its special rules are enforced as part of the ordinary law of the land. Marine insurance is a contract, and, in so far as that contract has not special incidents peculiar to itself, it is dealt with on the same footing as other contracts. If the law of contract were codified in England, the special rules relating to marine insurance would form a chapter in that code. Conflict of Laws. Conflict of Laws.—Mr. Dicey sums up the decisions in the following rules. An underwriter is bound by an average adjustment duly taken according to the law of

By English law, apart from special contract, freight is only payable on right delivery of the cargo, and freight pro ratâ itineris is not recognized. Cf. Carver’s Carriage by Sea, Ed. 3, § 542. 636 Denoon v. Home and Col. Ass. Co. (1872), L. R. 7 C. P. at p. 349. 637 See the stamp provisions set out, post, pp. 155–8. 638 See the notes to § 85. 639 As to fraud and misrepresentation, see Leake on Contracts, Ed. 3, pp. 291, 330; as to illegality, ibid. p. 620; as to mistake, ibid. pp. 262–287, and Spalding v. Crocker (1897), 13 Times L. R. 396. 635

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the place of adjustment, that is to say, when the voyage is completed in due course, by the law of the port of destination, or, when the voyage is not so completed, by the law of the place where the voyage is rightly broken up and the ship and cargo part company. An English insurer of goods shipped by an English merchant on board a foreign ship is not affected by the law of the flag.640 As Lush, L.J., says, an insurer on an English policy may, if he chooses, stipulate “that such policy shall be construed in whole or in part according to the law of any foreign state, as if it had been made in and by a subject of the foreign state, and the policy in question does so stipulate as regards general average; but, except when it is so stipulated, the policy must be construed according to our law, and without regard to the nationality of the vessel.”641 Calculation of time. The differences in time in different places raise some curious points. Suppose a ship is insured in London with A. up to midnight of the 31st of December, without any special provision as to time, and with B. from the 1st of January. The ship founders in the West Indies on the 31st of December at 10 p.m. according to ship’s time. According to London time A.’s policy would have expired, and the risk would be on B.’s policy. In the case of an English policy it seems that, in the absence of any provision to the contrary, the liability must be determined according to Greenwich time: see the Statutes (Definition of Time) Act, 1880 (43 & 44 Vict. c. 9), which applies to every English “Act of Parliament, deed, or other legal instrument.” But if the policy were effected in India the point would be a debatable one. The stamp laws are part of the lex fori. Therefore, if a risk under a Lloyd’s policy is re-insured with a Swedish insurance company, the re-insurance policy must conform to the English stamp laws if it is sought to enforce it in England.642 Effect on policy of subsequent hostilities. Subject to the provisions of any license to trade,643 the insurer is not liable for any loss suffered by an alien enemy during the continuance of hostilities, even though the policy may have been effected before the commencement of hostilities. For example.644 1.

Policy on goods from London to Bayonne, effected on behalf of a Frenchman. War afterwards breaks out between England and France, and the goods are captured by a Spanish cruiser, i.e. by a British ally. The insurer is not liable, even though the action is brought after peace has been concluded.645 2. Policy on gold bullion from Johannesburg to London, effected by a company registered and carrying on business in the South African Republic. On October 2nd the gold is seized in transit by the Government of the

642 643 644 645 640 641

Dicey’s Conflict of Laws, pp. 597, 598; cf. Wavertree Co. v. Love (1897), A. C. 373, P. C. Greer v. Poole (1880), 5 Q. B. D. 272 (English policy with foreign adjustment clause). Royal Exchange v. Vega (1901), 2 K. B. 567. Morgan v. Oswald (1812), 3 Taunt. 554. Brandon v. Curling (1803), 4 East, 410. Ibid.

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3.

South African Republic. On that day war with England was anticipated, but it did not break out until October 11th. The assured is entitled to recover.646 Policy on gold bullion from the mine in the Transvaal to London effected in May. In October war breaks out between the Transvaal Government and England, and the gold is seized. The assured are a company registered in Natal, though working the mine in the Transvaal. The gold is not enemy’s property, and the insurer is liable under the policy.647

As a general rule, after hostilities have ceased, an alien enemy may enforce a contract made before the commencement of hostilities, for the plea in such an action that the plaintiff is an alien enemy is only a plea in abatement.648 But obviously this rule does not apply to insurance, otherwise by an English contract an alien enemy could indemnify himself against British capture. Lord Ellenborough rests the principle of this clause on the ground of implied condition, but it is really a rule of public policy which cannot be waived or varied. “There are three rules,” says Lord Davey, “which are established in our common law. The first is that the King’s subjects cannot trade with an alien enemy, i.e. a person owing allegiance to a Government at war with the king, without the king’s licence. Every contract made in violation of this principle is void, and goods which are the subject of such a contract are liable to confiscation. “The second principle is a corollary from the first, but is also rested on distinct grounds of public policy. It is that no action can be maintained against an insurer of an enemy’s goods or ships against capture by the British Government. One of the most effectual instruments of war is the crippling of the enemy’s commerce, and to permit such an insurance would be to relieve enemies from the loss they incur by the action of British arms, and would, therefore, be detrimental to the interests of the insurer’s own country. The principle equally applies where the insurance is made previously to the commencement of hostilities, and was therefore legal in its inception, and whether the person claiming on the policy be a neutral or even a British subject, if the insurance be effected on behalf of an alien enemy. “The third rule is that, if a loss has taken place before the commencement of hostilities, the right of action on a policy of insurance by which the goods lost were insured is suspended during the continuance of war and revives on the restoration of peace.”649 Licenses to trade must be construed liberally.650

§ 92. Repeals. The enactments mentioned in the Second Schedule to this Act are hereby repealed to the extent specified in that Schedule. NOTE.—For list of repeals, see post, p. 153. Driefontein Consolidated Mines v. Janson (1901), 2 K. B. 419, C. A.; affirmed A. C. (1902), 484 H. L. 647 Nigel Gold Mining Co. v. Hoade (1901), 2 K. B. 849, 6 Com. Cases, 208. 648 Bullen and Leake’s Precedents of Pleading, Ed. 3, p. 475. 649 Janson v. Driefontein Consolidated Mines (1902), A. C. at p. 499. 650 Morgan v. Oswald (1812), 3 Taunt. 554. 646

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§ 93. Commencement. This Act shall come into operation on the first day of January, one thousand nine hundred and seven.

§ 94. Short Title. This Act may be cited as the Marine Insurance Act, 1906. NOTE.—This Act, like all Acts passed subsequent to 1889, must be read subject to the provisions of the Interpretation Act, 1889 (52 & 53 Vict. c. 63). A codifying Act, as Lord Herschell has pointed out, must be construed according to its natural meaning without regard to the previous state of the law. It is only in case of doubt that resort to the previous law is legitimate.651

Vagliano v. Bank of England (1891), A. C. at p. 145 H. L.

651

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Schedules.

FIRST SCHEDULE FORM OF POLICY (SEE § 30). Lloyd’s S.G. policy. BE IT KNOWN THAT*1 as well in2 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 cause3 and them, and every of them, to be insured lost or not lost, at and from4 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 the5 whereof is master under God, for this present voyage,6 or whosoever else shall go for master in the said ship, or by whatsoever 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 merchandises from the loading thereof aboard the said ship,7 upon the said ship, etc.8 and so shall 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 at8 upon the said ship, etc., until she hath moored at anchor twenty-four hours 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 whatsoever9 without prejudice to this insurance. The said ship, etc., goods and merchandises, etc., for so much as concerns the assured by agreement between the assured and assurers in this policy, are and shall be valued at10 The blanks in the policy are filled up in writing. At the end special Clauses are inserted, or they may be put in the margin. The Company form usually provides a blank in which the amount insured is expressed in words. Lloyd’s policy has no such blank, probably because the sum insured is split up among the various “names” subscribing the policy. Taking a policy on goods as an illustration, the blanks might be filled up as follows:— 1 “John Brown,” or “John Brown and [or] as agent”; 2 “his”; 3 “himself”; 4 “Madras to London”; 5 “Calliope”; 6 “William Smith,” but commonly left blank; 7 “as above”; 8 “as above”; 9 usually left blank; 10 “A. B. 100 bales of cotton valued at £1000.” *

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Sue and labour clause. Waiver clause. Touching the adventures and perils which we, the assurers, are contented 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 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 whereof we, the assurers, will contribute each one according to the rate and quantity of his sum herein assured. And it is especially declared and agreed that no acts of the insurer or insured in recovering, saving, or preserving the property insured shall be considered as a waiver, or acceptance of abandonment. 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 ourselves, 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 consideration 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. Memorandum. 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. NOTE.—Lloyd’s Policy. The policy was settled in its present form in 1779, but most of its provisions are of much older date. The “Memorandum” was added in 1749. Lloyd’s policy has twice been scheduled to statutes now repealed (see 35 Geo. 3, c. 63, and 30 & 31 Vict. c. 23). The judges have not been complimentary to its drafting. Mansfield, C.J., has described it as “a very strange instrument.”11 Lawrence, J., has described it as “drawn with much laxity,”12 and Buller, J., says that “a policy of assurance has at all times been considered in courts of law as an absurd and incoherent instrument, but it is founded on usage, and must be governed

11 12

Le Cheminant v. Pearson (1812), 4 Taunt. 380. Marsden v. Reid (1802), 3 East, 579.

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and construed by usage.”13 The classes concerned nevertheless cling to it with inveterate constancy. Many of the insurance companies have slightly altered some of its provisions, but it is recognized as the typical British policy. Every line, and almost every word, of it has been judicially construed, and has now acquired a conventional meaning. The policy is framed as a ship and goods policy. Hence presumably the letters S.G. in the margin, though some learned persons suggest that those letters stand for “salutis gratiâ” The policy consists of three inter-related but distinct engagements, namely, the insurance, the sue and labour clause, and the memorandum, and if a collision or “running down” clause be inserted that also is a distinct engagement added to the policy. All British insurance law has been developed through cases arising on the policy. In so far as those cases appear to establish general principles, which are independent of the terms of the policy, they are summarized in the provisions of the Act. The main rules to be derived from the cases on the printed terms of the policy are summarized in this schedule. The policy itself, as noted above, is framed as an insurance on ship and goods. To make it apply to other interests and to meet the constantly changing requirements of modern commerce, special terms or “clauses” are written in to the policy. These are constantly being altered to meet new requirements. These clauses are business stipulations, and must be construed from a business, and not a technical, point of view.14 The decisions on these special provisions are numerous, but each case turns on the particular language used. If the special clause be inconsistent with the provisions of the printed policy, the special clause must prevail.15 For a general canon of construction, see Hart v. Standard Ins. Co. (1889), 22 Q. B. D. at p. 501, per Lord Bowen. For a form of company policy (Alliance Marine), see Owen’s Notes and Clauses, Ed. 3, p. 6; and for forms of American policies and clauses, see ibid. pp. 230–244. For the form of the oldest extant English policy (1613), see Martin’s History of Lloyd’s, p. 46. For a form of an Italian policy, dated 1523, see Lowndes, Ed. 2, p. 233. See further the note on the history of marine insurance, post, p. 170.

RULES FOR CONSTRUCTION OF POLICY. The following are the rules referred to by this Act for the construction of a policy in the above or other like form, where the context does not otherwise require:— NOTE.—By § 30 (2) of the Act, ante, p. 44, “subject to the provisions of this Act, and unless the context of the policy otherwise requires the terms and impressions

15 13 14

Brough v. Whitmore (1791), 4 T. R. at p. 210. Tatham v. Burr (1898), A. C. at p. 386. Hydarnes S.S. Co. v. Indemnity Mutual Mar. Ass. Co. (1895), 1 Q. B. 500, C. A.; cf. Dudgeon v. Pembroke (1877), 2 App. Cas. 284.

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mentioned in the first schedule to this Act shall be construed as having the scope and meaning in that schedule assigned to them.” It is to be noted then that these constructions are subordinate to the provisions of the Act.

1. Lost or not lost. Where the subject-matter is insured “lost or not lost,” and the loss has occurred before the contract is concluded, the risk attaches unless, at such time, the assured was aware of the loss, and the insurer was not.16

2. From. Where the subject-matter is insured “from” a particular place, the risk does not attach until the ship starts on the voyage insured.17

3. At and from. [Ship.] (a.) Where a ship is insured “at and from” a particular place, and she is at that place in good safety when the contract is concluded, the risk attaches immediately.18 (b.) If she be not at that place when the contract is concluded, the risk attaches as soon as she arrives there in good safety, and, unless the policy otherwise provides, it is immaterial that she is covered by another policy for a specified time after arrival.19 [Freight.] (c.) Where chartered freight is insured “at and from” a particular place, and the ship is at that place in good safety when the contract is concluded, the risk attaches immediately. If she be not there when the contract is concluded, the risk attaches as soon as she arrives there in good safety.20 (d.) Where freight, other than chartered freight, is payable without special conditions, and is insured “at and from” a particular place, the risk attaches pro rata as the goods or merchandise are shipped; provided that if there be cargo in readiness which belongs to the shipowner, or which some other person has contracted with him to ship, the risk attaches as soon as the ship is ready to receive such cargo.21

16

19 20 17 18

21

McArthur, Ed. 2, p. 80; cf. Mead v. Davison (1835), 3 A. & E. 303; Gledstanes v. Royal Exchange Corporation (1864), 34 L. J. Q. B. 35 (floating policy); Bradford v. Symondson (1881), 7 Q. B. D. 456, C. A. (re-insurance); and see § 6 and notes. McArthur, Ed. 2, p. 81; Arnould, Ed. 6, p. 388; and § 43 and notes. McArthur, Ed. 2, p. 81; Palmer v. Marshall (1831), 8 Bing, 79. McArthur. Ed. 2, p. 82; Haughton v. Empire Mar. Ins. Co. (1865), L. R. 1 Ex. 205. McArthur, Ed. 2, p. 101; Foley v. United Mar. Ins. Co. (1870), L. R. 5 C. P. 155; cf. Barber v. Fleming (1870), L. R. 5 Q. B. 59 (freight to be earned on return voyage). McArthur, Ed. 2, p. 100; cf. Jones v. Neptune Ins. Co. (1872), L. R. 7 Q. B. at pp. 706, 707. But as to advance freight, see § 12, ante, p. 19.

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NOTE.—The expression “good safety” has a technical meaning. It denotes (a) that the ship is in the possession of the assured, and not under capture or arrest, and (b) that she exists as a ship, even though damaged.22 Paragraph (d) relates to ordinary freight. The object of the words “without special conditions” is to exclude advanced or other special freight.

4. From the loading thereof. Where goods or other moveables are insured “from the loading thereof,” the risk does not attach until such goods or moveables are actually on board, and the insurer is not liable for them while in transit from the shore to the ship.23 NOTE.—Risk of craft to and from the vessel is commonly included by a supplementary provision.

5. Safely landed. Where the risk on goods or other moveables continues until they are “safely landed,” they must be landed in the customary manner and within a reasonable time after arrival at the port of discharge, and if they are not so landed the risk ceases.24 NOTE.—Ordinarily the risk on freight terminates at the same time as the risk on goods; but in the case of chartered freight the terms of the policy often define its termination.25 The risk on ship under the ordinary form of policy terminates when she has been “moored for twenty-four hours in good safety.” As to “good safety,” see note to Rule 3. Difficult questions sometimes arise where the cause of loss comes into operation before the expiration of the policy, but the actual loss occurs afterwards.26 In a case on a policy in the ordinary form, with the added provision that the ship was to be covered “during thirty days’ stay in her last port of discharge,” it was held that the thirty days must be added to the twenty-four hours given by the policy.27 Where a ship was to be held covered for “thirty days” it was held that “thirty days” meant thirty consecutive periods of 24 hours.28

24 22 23

25 26

27

28

McArthur, Ed. 2, p. 94; Gow on Insurance, p. 55; Lidgett v. Secretan (1870). L. R. 5 C. P. at p. 198. McArthur, Ed. 2, p. 91; Arnould, Ed. 6, p. 378. McArthur, Ed. 2, p. 97; Arnould, Ed. 6, p. 392; Gow on Insurance, p. 56; cf. Houlder v. Merchants Mar. Ins. Co. (1886), 17 Q. B. D. 354 (goods put in lighters for transhipment, risk ended); Marten v. Nippon (1898), 14 Times L. R. 333 (re-insurance, warehouse clause); Samuel v. Royal Exchange Ass. Co. (1828), 8 B. & Cr. 119 (ship detained outside port of destination by ice, risk not ended). McArthur, Ed. 2, pp. 100, 101. See the cases reviewed in Lidgett v. Secretan (1870), L. R. 5 C. P. at p. 199; cf. McArthur, Ed. 2, p. 93. Mercantile Mar. Ins. Co. v. Titherington (1864), 5 B. & S. 765 (ship arrived on the 25th of May at 7 p.m. and was lost on the 24th of June at 3 a.m.; held covered). Cf. Lidgett v. Secretan, suprà, at p. 200. As to computation of time, see Gornfoot v. Royal Exchange (1903), 2 K. B. 363. Cornfoot v. Royal Exchange (1903), 2 K. B 363; affirmed 1 K. B. (1904), 40 C. A.

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6. Touch and stay. In the absence of any further license or usage, the liberty to touch and stay “at any port or place whatsoever” does not authorize the ship to depart from the course of her voyage from the port of departure to the port of destination.29

7. Perils of the seas. The term “perils of the seas” refers only to fortuitous accidents or casualties of the seas. It does not include the ordinary action of the winds and waves.30 NOTE.—It is unsafe to attempt a complete definition of the expression “perils of the seas,” because in practice the question “what is a peril of the seas” is inextricably woven up with the further question, was the loss proximately caused by the sea peril? Lord Bramwell has tentatively suggested the following definitions, namely, “Every accidental circumstance, not the result of ordinary wear and tear, delay, or of the act of the assured, happening in the course of the navigation of a ship and incidental to the navigation, and causing loss to the subject-matter of the insurance.” He then goes on to approve an alternative definition given by Lopes, L.J., namely, “In a seaworthy ship, damage to goods caused by the action of the sea during transit, not attributable to the fault of anybody.”31 These definitions certainly are open to criticism, but the following points may be noted. First, the term “peril” denotes something which is accidental and fortuitous. As Lord Herschell says, “the purpose of the policy is to secure an indemnity against accidents which may happen, not against events which must happen.” Secondly, the expression is “perils of the seas,” not “perils on the seas.” For example, the policy enumerates many maritime perils, such as capture, seizure, fire, etc., which are incidental to marine adventure, but which are not perils of the seas; so, too, risks, not ordinarily covered by the policy, may be expressly covered, e.g. the risk of mortality in insurance on cattle, and frozen meat risks. Thirdly, the expression “perils of the seas” has the same meaning in a marine policy that it has in a bill of lading or charter party, though its application to the contract is different.32 As to the rule of proximate cause, see § 55, ante, and notes thereto. Fire. The term “fire” does not cover a loss caused by the explosion of steam, nor a fire caused by the inherent vice of the subject-matter insured, but it does cover a

Arnould, Ed. 6, p. 471; Gow on Insurance, p. 58; cf. §§ 46, 47. McArthur, Ed. 2, p. 110; Arnould, Ed. 6, p. 754; cf. Carver’s Carriage by Sea, Ed. 3, § 85; cf.§ 55 (2) ante. 31 Thames and Mersey Mar. Ins. Co. v. Hamilton (1887), 12 App. Cas.at p. 492 (the Inchmaree case); see Paterson v. Harris (1861), 30 L. J. Q. B. 354, distinguishing the chemical from the mechanical action of the sea; cf. Blackburn v. Liverpool Steam Navigation Co. (1902), 1 K. B. 290 (bill of lading case). 32 Hamilton v. Pandorf (1887), 12 App. Cas. at p. 525; Wilson v. Owners of Cargo per Xantho (1887), 12 App. Cas. at p. 509. 33 See McArthur, Ed. 2, p. 115; Arnould, Ed. 6, p. 759; Gordon v. Rimmington (1807), 1 Camp. 123; 10 R. R. 656 (fire to avoid capture); Thames and Mersey Mar. Ins. Co. v. Hamilton (1887), 12 App. Cas. 484, 493 (explosion of steam). 29 30

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fire voluntarily caused in order to avoid capture by an enemy.33 A rule to this effect was formerly included in the Bill, but was cut out by the Lord Chancellor’s Committee, as it was suggested that the decisions it embodied might some day be questioned. For example— Policy on hemp. If hemp is put on board in a damaged condition, liable to ferment, and fire is in consequence generated, and the hemp is consumed, the insurer is not liable.34 Though the insurer of goods is not liable for a loss caused by fire from vice propre, yet, if the goods have to be landed, and freight is thereby lost, the insurer on freight may be liable.35 As regards the phrase “unless the ship be stranded, sunk, or burnt,’” it has been held that the ship must be substantially burnt to fulfil the condition.36

8. Pirates. The term “pirates” includes passengers who mutiny and rioters who attack the ship from the shore.37 NOTE.—See further, Note E, post, p. 168, on definition of piracy. For different purposes the definition varies.

9. Thieves. The term “thieves” does not cover clandestine theft, or a theft committed by any one of the ship’s company, whether crew or passengers.38 NOTE.—The terms “thief” and “theft” are used in a special sense in certain maritime documents. Among the perils insured against in an ordinary policy, and among the excepted perils in most charter parties and bills of lading are “pirates, rovers, and thieves.” In this context the term, “thief” seems only to apply to a person who commits theft by violent means. “The theft that is insured against by name in the policy means that which is accompanied by violence (latrocinium), and not simple theft (furtum); it being an elementary rule of the law of insurance that furtum non est casus fortuitus” (Arnould, Ed. 6. p. 770). Some American policies use the words “pirates and assailing thieves.” In a case on a bill of lading containing the exceptions “pirates, robbers, thieves,” it was held that the word “thieves” applied only to strangers, and not to persons belonging to the vessel; and Archibald, J., after

36 37 34 35

38

Boyd v. Dubois (1811), 3 Camp. 133; cf. Pirie v. Middle Dock Co. (1881), 4 Asp. Mar. Cas. 388. The Knight of St. Michael (1898), P. 30. The Glenlivet (1894), p. 48, C. A. McArthur, Ed. 2, p. 121; Arnould, Ed. 6, p. 770; cf. Carver’s Carriage by Sea, Ed. 3, §§ 11, 94; Owen’s Declaration of War, p. 437. Arnould, Ed. 6, p. 770; Gow on Insurance, p. 113; cf. Carver’s Carriage by Sea, Ed. 3, § 94.

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pointing out that the words were no doubt copied originally from the ordinary marine policy, expresses the opinion that a similar construction must be put upon both instruments.39

10. Restraint of princes. The term “arrests, etc., of kings, princes, and people” refers to political or executive acts, and does not include a loss caused by riot or by ordinary judicial process.40 Illustrations. 1.

Policy on goods owned by a Spaniard from London to Alicante. The ship calls at Corunna, and while there is seized by the Spanish Government for the purposes of transport, there being war between Spain and Morocco. The goods are unladen and damaged. This is a seizure of the goods within the meaning of the policy.41 Policy on gold from the Transvaal to London warranted free from capture and seizure. The gold is the property of a company registered in the Transvaal. On October 2 the gold while in transit is seized by the Transvaal Government in anticipation of war, and on October 11 war is declared. This is a seizure within the meaning of the warranty, and the insurer is not liable.42 Policy on consignment of bulls from England to Buenos Ayres. The bulls are prevented from landing under a law prohibiting the importation of live cattle from infected countries. The bulls have to be sent on to another country at great expense. This is a loss through the restraint of princes.43 Voyage policy on a bull to Buenos Ayres, the policy being against all risks, including mortality, but containing a warranty against capture, seizure, and the consequences of detention. There having been cattle disease on board, the bull on arrival is slaughtered by the local authority. The insurer is protected by the warranty.44

2.

3.

4.

NOTE.—An insurance against British capture is illegal, see note to § 91. The word “people” in this context, says Lord Kenyon, “means the ruling power of the country.”45 In a case, in 1883, where a ship, warranted free from capture and seizure, was forcibly seized and practically destroyed by natives in the Brass River, whose object was to plunder the cargo, Cave, J., held that this was a seizure within the warranty. After commenting on the various attempts to define the terms “capture” and “seizure,”

39 40

41 42

43

44 45

Taylor v. Liverpool G. W. Steam Co. (1874), L. R. 9 Q. B. 546, at p. 551. McArthur, Ed. 2, p. 128; Arnould, Ed. 6, p. 765; Gow on Insurance, p. 115; Carver’s Carriage by Sea, Ed. 3, § 82; cf. Cory v. Burr (1883), 8 App. Cas. at p. 396. Aubert v. Gray (1862), 32 L. J. Q. B. 50, Ex. Ch. Robinson Gold Mining Co. v. Alliance Marine Assurance Co. (1902), 2 K. B. 489, C. A.; affirmed A. C. (1904), 359 H. L. Miller v. Law Accident Insurance Co. (1903), 1 K. B. 712, C. A., reversing on one point, ibid. (1902), 2 K. B. 694. St. Paul Fire and Mar. Ins. Co. v. Morice (1906), 11 Com. Cas. 153. Nesbitt v. Lushington (1792), 4 T. R. at p. 787.

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he says, “The seeming confusion in some of these passages arises from the desire of the authors in question to give a distinct and different meaning to such words as ‘capture,’ ‘seizure,’ ‘arrest,’ ‘detention,’ and ‘restraint,’ and the impossibility of accomplishing the task is shown by their attempts to distinguish between ‘arrest,’ ‘restraint,’ and ‘detention.’ I have no doubt that the word ‘seizure,’ like many other words, is sometimes used with a more general, and sometimes with a more restricted, meaning; and whether it is used in a particular case with the one meaning or the other depends, not on any general rule, but on the context and circumstances of the case.”46 As to takings at sea and the warranty “free from capture and seizure,” see Owen’s Declaration of War, p. 68; as to embargo, ibid., p. 39; and as to blockade, ibid., p. 123.

11. Barratry. The term “barratry” includes every wrongful act wilfully committed by the master or crew to prejudice of the owner, or, as the case may be, the charterer.47 NOTE. This definition is inclusive, not exhaustive. See Note B, post, p. 163, on definitions of barratry, and discussion thereof.

12. All other perils. The term “all other perils” includes only perils similar in kind to the perils specifically mentioned in the policy.48 NOTE. The practical effect of the words is to prevent a narrow and technical construction being placed upon the perils specifically enumerated. If the assured wants to go further than this, he must cover his risk by special terms. For instance, policies on animals are sometimes expressed to be against “all risks,” or “all risks, including mortality.” The expression “mortality” appears only to include death from natural causes.49 See § 3 (2), ante, defining “maritime perils.”

13. Average unless general. The term “average unless general” means a partial loss of the subject-matter insured other than a general average loss, and does not include “particular charges.”50

48

Johnston v. Hogg (1883), 10 Q. B. D. at p. 435. Arnould, Ed. 6, p. 774; cf. Carver’s Carriage by Sea, Ed. 3, §§ 99, 100. Arnould, Ed. 6, p. 789; Cullen v. Butler (1816), 5 M. & S. at p. 465; Thames and Mersey Ins. Co. v. Hamilton (1887), 12 App. Cas. 484, reviewing the cases at p. 495; The Knight of St. Michael (1898), P. at p. 35 (fire). Compare § 2199 of the California Code, which uses the words, “all other dangers peculiar to the seas.” 49 St. Paul Fire and Mar. Ins. Co. v. Morice (1906), 11 Com. Cas. 153. 50 See McArthur, Ed. 2, pp. 173, 261; see, too, § 64 and § 66 and notes thereto, and Note C on Average, post, p. 164. 46 47

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NOTE.—In a case where it was held that general average could not be added to particular average to make up the 3 per cent warranty, Lord Esher says that the words “average unless general” “must be read as equivalent to warranted free from partial loss under 3 per cent., unless it be a general average loss;” and Lord Bowen points out that from the time of Lord Mansfield the words have been read “as an exception, and not a condition, with this consequence, that the occurrence of a general average loss was held not to entitle the assured to recover for a particular average loss.”51 See further, Rule 14, and notes, and Note C, post, p. 164.

14. Stranded. Where the ship has stranded the insurer is liable for the excepted losses, although the loss is not attributable to the stranding, provided that when the stranding takes place the risk has attached and, if the policy be on goods, that the damaged goods are on board.52 NOTE. It is unsafe to attempt a complete legal definition of “stranding.” The question is mainly one of fact. Lord Tenterden, in an often-quoted case, says, “Where a vessel takes the ground in the ordinary and usual course of navigation and management in a tide river or harbour upon the ebbing of the tide or from natural deficiency of water so that she may float again upon the flow of tide or increase of water, such an event shall not be considered as stranding within the sense of the memorandum. But where the ground is taken under any extraordinary circumstances of time or place, by reason of some unusual or accidental occurrence, such an event shall be considered as stranding within the meaning of the memorandum. According to the construction that has long been put upon the memorandum, the words ‘unless general or the ship be stranded’ are to be considered as an exception out of the exception as to the amount of the average or partial loss provided for by the memorandum, and consequently to leave the matter at large, according to the contents of the policy.”53 See also note to last rule.

15. Ship. The term “ship” includes the hull, materials and outfit, stores and provisions for the officers and crew, and, in the case of vessels engaged in a special trade, the ordinary fittings requisite for the trade, and also, in the case of a steamship, the machinery, boilers, and coals and engine stores, if owned by the assured.54 NOTE.—This definition is inclusive, and not necessarily exhaustive. See § 16, ante; and see § 30 (2).

Price v. A 1 Small Damage Assn. (1889), 22 Q. B. D. at pp. 586, 591. See McArthur, Ed. 2, p. 283; Arnould, Ed. 6, p. 821; Thames and Mersey Mar. Ins. Co. v. Pitts (1893), 1 Q. B. 476 (goods in lighters, not on board); The Alsace Lorraine (1893), P. 209 (goods landed at port of refuge); cf. Russell v. Erwin (1890), 6 Times L. R. 353, as to when a barge is stranded. 53 Wells v. Hopwood (1832), 3 B. & Ad. 20, at p. 34; see this passage approved in Letchford v. Oldham (1880), 5 Q. B. D. 538, 545, C. A., where the cases are reviewed. 54 See McArthur, Ed. 2, p. 67; and § 16, ante. 51 52

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16. Freight. The term “freight” includes the profit derivable by a shipowner from the employment of his ship to carry his own goods or moveables, as well as freight payable by a third party, but does not include passage money.55 NOTE.—The term “freight” is used throughout the Act in the same sense as in the policy. See § 90, ante.

17. Goods. The term “goods” means goods in the nature of merchandise, and does not include personal effects or provisions and stores for use on board. In the absence of any usage to the contrary, deck cargo and living animals must be insured specifically, and not under the general denomination of goods.56 NOTE.—The expression “goods,” in ordinary law, covers all moveable tangible property.57 But when used in a policy, the nature of the contract imposes a restricted meaning. If the insurer is required to undertake anything more than an ordinary risk, the policy ought to disclose the particular nature or the subject-matter insured. Hence it has been held that machinery is not covered by a policy on goods.58 So, too, if the policy is on a particular kind of goods, goods of another kind cannot be substituted.59 The construction of the rule would presumably be influenced by the fact whether or not the particular subject-matter was in fact made known to the insurer before the conclusion of the contract. See further, § 26 and notes thereto.

SECOND SCHEDULE. SECT. 92. ENACTMENTS REPEALED. Session and Chapter. Title or Short Title. 19 Geo. 2. c. 37. An Act to regulate insurance on ships belonging to the subjects of Great Britain, and on merchandizes or effects laden thereon.1

Extent of Repeal. The whole Act.

See Arnould, Ed. 6, p. 31; Flint v. Flemyng (1830), 1 B. & Ad. 45; Denoon v. Home and Colonial Ass. Co. (1872), L. R. 7 C. P. at p. 349. 56 See McArthur, Ed. 2, p. 58; Arnould, Ed. 6, pp. 24–28; Gow on Insurance, pp. 44-46. As to meaning of “merchandise” in a contract of affreightment, see Carver’s Carriage by Sea, Ed. 3, § 263. The rule as to deck cargo probably does not apply to inland voyages by river or canal, Apollinaris Co. v. Nord Deutsche Ins. Co. (1904), 1 K. B. 252, cessante ratione, cessat ipsa lex. 57 See, e.g., Chalmers’ Sale of Goods Act. 1893, § 62, and notes. 58 Scott v. Mannheim Ins. Co., Times, April 19, 1899. 59 MacKenzie v. Whitworth (1875), 1 Ex. D. at p. 41. 55

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Session and Chapter. Title or Short Title. 28 Geo. 3. c. 56. An Act to repeal an Act made in the twenty-fifth year of the reign of his present Majesty, intituled “An Act for regulating Insurances on Ships, and on goods, merchandizes, or effects,” and for substituting other provisions for the like purpose in lieu thereof.2 31 & 32 Vict. c. 86. The Policies of Marine Assurance Act, 1868.3

Extent of Repeal. The whole Act so far as it relates to marine insurance.

The whole Act.

See § 4, pp. 8 and 9, reproducing this statute. See Arnould, Ed. 6, p. 107, for history of this legislation, and § 23 (1). 3 See § 50, reproducing this statute. 1 2

CUSTOMARY DEDUCTIONS. (See Section 69 (1).) In the adjustment of claims for particular average in a policy on ship, in the absence of any special provision in the policy, the following items for repairing damage or making good losses are recoverable from the insurer without deduction, new for old:— Graving dock expenses. Cost of removals. Use of shears, stages, and graving dock appliances, and cost of cartage and carriage. Cost of anchors and of provisions and stores which have not been in use. Cost of temporary repairs. Cost of straightening bent ironwork. All repairs of damage sustained by a vessel on her first voyage. Chain cables are subject to a deduction of one-sixth. All other repairs of damage sustained after the first voyage are subject to a deduction of one-third.60 Metal sheathing must be dealt with by allowing in full the cost of a weight equal to the gross weight of metal sheathing stripped off, minus proceeds of the old metal. Nails, felt, and labour metalling are subject to one-third, also the cost of replacing metal lost.

See McArthur, Ed. 2, pp. 184, 213; cf. Gow on Insurance, p. 339, and Rules of Practice of Association of Average Adjusters, post, p. 173.

60

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Appendix I

Statutes

THE STAMP ACT, 1891. (54 & 55 VICT. c. 39.)

POLICIES OF INSURANCE. 91. Meaning of policy of insurance 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.1

POLICIES OF SEA INSURANCE. 92. Meaning of policy of sea insurance. (1.) For the purposes of this Act the expression “policy of sea insurance” means any insurance (including re-insurance) 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 description whatever on board of any ship or vessel, or upon the freight of, or any other interest2 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 commencement 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, merchandise, or property of any description whatever while on board of any

1

2

As to the provisions which follow, see generally Highmore’s Stamp Laws. pp. 147–153, and see correspondence with Inland Revenue in Owen’s Notes and Clauses, Ed. 3, and Allen’s Stamp Duties on Sea Insurances. The word “interest” in this context clearly includes liability.

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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 engagement shall be deemed to be a contract for sea insurance.

93. Contract to be in writing 25 & 26 Vict. c. 63. (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)3 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.4 (3.) A policy of sea insurance shall not be valid unless it specifies 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.5

94. Policy for voyage and time chargeable with two duties. 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 destination 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. No policy valid unless duly stamped. (1.) 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 when 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: (b.) Any policy made or executed out of, but being in any manner enforceable within, the United Kingdom, may be stamped at any time within ten days after it has been first received in the United Kingdom on payment of the duty only. 3

4

5

Section 55 of the Merchant Shipping Act Amendment Act, 1862 (25 & 26 Vict. c. 63), is now repealed, and reproduced in § 506 of the Merchant Shipping Act, 1894 (57 & 58 Vict. c. 60). The saving effected by this section is curious. The object of the Merchant Shipping Act was to make it clear that although the shipowner’s common-law liability was limited by the Act, he was nevertheless entitled to insure against this limited liability. The apparent effect of the saving is to dispense with the necessity for a policy in those cases. This provision is reproduced in § 25 (2) of the Act, ante, p. 36. It must be read with § 11 of the Finance Act, 1901, post, p. 159, which, with certain conditions and qualifications, authorizes continuation clauses in marine policies. The effect of these provisions is reproduced in § 23 of the Act, ante, p. 34. The words “the names of the subscribers or underwriters,” though more applicable to individual insurers, include a body corporate.

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(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 one hundred pounds.

96. Legal alterations in policies may be made under certain restrictions. 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 policy 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.6

97. Penalty on assuring unless policy duly stamped. (1.) 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 knowingly 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 insurance is expressed in a policy of sea insurance duly stamped, or (b.) 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 insurance, or whereby the duties may be evaded, he shall for every such offence incur a fine of one hundred pounds. (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 6

At common law a contract may be altered with the consent of the parties thereto. A material alteration made by one party, without the consent of the other, avoids the contract, and, if the alteration is made fraudulently, it may amount to forgery. As to the alterations which do or do not require a new stamp, see Arnould, Ed. 6, p. 267; McArthur, Ed. 2, pp. 47–49.

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insurance 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, commission, 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 one hundred pounds. FIRST SCHEDULE.

POLICY OF SEA INSURANCE (1.) Where the premium or consideration does not exceed the rate of 2s. 6d. per centum of the sum insured ................................... (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 £100 thereby insured .............. (b.) For time— In respect of every full sum of £100, and also any fractional part of £100 thereby insured— Where the insurance shall be made for any time not exceeding six months .................. Where the insurance shall be made for any time exceeding six months and not exceeding twelve months ....................................... And sec §§ 91, 92, 93, 94, 95, 96, and 97.

£

s.

d.

0

0

1

0

0

3

0

0

3

0

0

6

SALE OF GOODS ACT, 1893. (56 & 57 VICT. c. 71.)

§ 20. Risk primâ facie passes with property Unless otherwise agreed, the goods remain at the seller’s risk until the property therein is transferred to the buyer; but when the property therein is transferred to the buyer, the goods are at the buyer’s risk, whether delivery has been made or not. Provided that where delivery has been delayed through the fault of either buyer or seller, the goods are at the risk of the party in fault as regards any loss which might not have occurred but for such fault. 464

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Provided also that nothing in this section shall affect the duties or liabilities of either seller or buyer as a bailee of the goods of the other party.7

§ 32. Duty of seller as to insurance (3.) Unless otherwise agreed, where goods are sent by the seller to the buyer by a route involving sea transit, under circumstances in which it is usual to insure, the seller must give such notice to the buyer as may enable him to insure them during their sea transit, and, if the seller fails to do so, the goods shall be deemed to be at his risk during sea transit.8 THE MERCHANT SHIPPING ACT, 1894. (57 & 58 VICT. c. 60.)

§ 506. Insurances of certain risks not invalid. An insurance effected against the happening, without the owner’s actual fault or privity, of any or all of the events in respect of which the liability of owners is limited under this Part (VIII.) of this Act, shall not be invalid by reason of the nature of the risk.9 THE FINANCE ACT, 1901. (1 EDW. 7, c. 7.)

§ 11. Provision as to continuation clauses in policies of sea insurance. 54 & 55 Vict. c. 39. (1.) Notwithstanding anything contained in the Stamp Act, 1891, a policy of sea insurance made for time may contain a continuation clause as defined in this section, and such a policy shall not be invalid on the ground only that by reason of the continuation clause it may become available for a period exceeding twelve months. (2.) There shall be charged on a policy of sea insurance containing such a continuation clause a stamp duty of sixpence in addition to the stamp duty which is otherwise chargeable on the policy. (3.) If the risk covered by the continuation clause attaches and a new policy is not issued covering the risk, the continuation clause shall be deemed to be new and

9 7 8

See notes to these provisions Chalmers’ Sale of Goods Act. Ibid. Part VIII. limits the liability of the owners of British ships. The object of this section is to make it clear that although the liability of a shipowner is limited, he is still at liberty to insure. See ante, p. 155, as to the saving in the Stamp laws for this provision.

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separate contract of sea insurance expressed in the policy in which it is contained, but not covered by the stamp thereon, and the policy shall be stamped in respect of that contract accordingly, but may be so stamped without penalty at any time not exceeding thirty days after the risk has so attached. (4.) For the purposes of this section, the expression “continuation clause” means an agreement to the following or the like effect, namely, that in the event of the ship being at sea or the voyage otherwise not completed on the expiration of the policy, the subject-matter of the insurance shall be held covered until the arrival of the ship, or for a reasonable time thereafter not exceeding thirty days.10 THE REVENUE ACT, 1903. (3 EDW. 7, c. 46.)

§ 8. Stamping of policies on ships under construction, etc. A policy of insurance made or purporting to be made upon, or to cover any ship or vessel, or the machinery or fittings belonging to the ship or vessel whilst under construction, or repair, or on trial, shall be sufficiently stamped for the purposes of the Stamp Act, 1891, and the Acts amending that Act, if stamped as a policy of sea insurance made for a voyage, and though made for a time exceeding twelve months shall not be deemed to be a policy of sea insurance made for time.

10

This section was inserted in consequence of the decisions in Charlesworth v. Faber (1900), 5 Com. Cas. 408, and Royal Exchange v. Vega (1901), 2 K. B. 567; affirmed (1902), 2 K. B. 384, C. A. In the latter case, a twelve-months-time policy contained a continuation clause to the following effect: “Should the vessel be at sea or abroad on the expiration of this policy, it is agreed to hold her covered until her arrival at the port of final destination in the United Kingdom at a pro rata daily premium to the within.” It was held that the continuation clause must be construed as part of the original time policy, and as extending the insurance beyond the legal twelve months.

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Appendix II

Notes

NOTE A.—DEFINITIONS OF MARINE INSURANCE. See § 1, ante THE following definitions of marine insurance may be referred to:— 1.

2. 3.

4.

5.

6.

“Marine insurance is a contract whereby one party, for a stipulated sum, undertakes to indemnify the other against loss arising from certain perils or sea risks to which his ship, merchandise, or other interest may be exposed during a certain voyage or a certain period of time.” Arnould, Ed. 6, p. 16. “Marine insurance is a contract whereby one party, for a specified consideration, agrees to indemnify another who is interested in property exposed to marine risks, against loss incidental thereto.” McArthur, Ed. 2, p. 1. “Marine insurance is a contract whereby for a consideration stipulated to be paid by one interested in a ship, freight, or cargo subject to marine risks, another undertakes to indemnify him against some or all of those risks during a certain period or voyage.” Phillips on Insurance, § 1 (U.S.). “Assurance maritime, c’est un contrat par lequel l’un des contractants se charge des risques et fortunes de mer que doivent courir un vaisseau, ou les marchandises qui y doivent être chargées, et promet en indemniser l’autre contractant pour une certaine somme que celui-ci lui donne pour le prix du risque dont il se charge.” Pothier, Traité du Contrat d’Assurance, § 4. After fancifully comparing insurance to a contract of sale in which the assured buys from the insurer an indemnity from risk, Pothier proceeds to classify the contract by describing it as (a) consensual, (b) synallagmatic, for it gives rise to reciprocal obligations, (c) aleatory, not commutative, and (d) universal, i.e. du droit des gens. “L’assurance est un contrat par lequel on promet indemnité des choses qui sont transportées par mer, moyennant un prix convenu entre l’assuré qui fait ou fait faire le transport et l’assureur qui prend le péril sur soi et le charge de lévénement. Cette définition est tirée du Guidon de la mer et de la doctrine de tous nos auteurs.” Emerigon, Ch. I. “Assecuratio est conventio seu contractus quo quis in se suscipit incertum periculum cui alter est obnoxius que e contrario eo nomine illi premium retribuere tenetur.” Grotius; cited by Lawrence, J., in Lucena v. Crauford (1806), 2 B. & P. at p. 300, H. L., and see other ancient definitions cited at p. 295.

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7.

“A policy of marine insurance is a contract of indemnity against all losses accruing to the subject-matter of the policy from certain perils during the adventure.” Lloyd v. Fleming (1872), L. R. 7 Q. B. at p. 302, per Lord Blackburn.

Most of these definitions assume that the premium is an essential part of the contract. Generally it is so, but there are exceptions, so that it does not necessarily enter into the definition. In the case of mutual insurance the policy is silent as to premium, and the contributions of members are provided for by the rules of the association. Besides, a policy may be under seal, and a contract under seal imports consideration.11 Comparing marine with life insurance, the former is a contract of indemnity, the latter is not.12 Death is a certainty, the date of its occurrence only is uncertain. Moreover, human life is incapable of money valuation. Comparing marine insurance with fire insurance, both of them are contracts of indemnity,13 but the measure of indemnity is assessed on wholly different principles.14 In a fire insurance (unless the policy otherwise provides) if goods valued at £20,000 be insured for £1000, and a loss of £1000 occurs, the insurer is liable for that amount; but with regard to marine insurance, if goods to the value of £20,000 are insured for £1000, and a loss occurs, it is necessary to show what proportion the goods lost bear to the whole value, for the owner of the goods is his own insurer for £19,000. See a clear exposition of the principle per Walton, J.15 For a comparison between a contract of insurance and a contract of guarantee, see Seaton v. Heath (1899), 1 Q. B. at p. 792, and Rowlatt’s Principal and Surety, p. 9.

NOTE B.—DEFINITIONS OF BARRATRY. See Sched. I., Rule 11. Barratry, in the maritime sense of the term, is derived from the Italian word “barrateria,” which is supposed to be of Arabic origin, and which signifies “cheating.” The following definitions may be referred to:— 1.

2.

“Barratry, in English law, may be said to comprehend not only every species of fraud and knavery covinously 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 charterers of the ship (in cases where the latter are considered owners pro tempore) are in fact damnified.” Arnould, Ed. 6, p. 775. “Any act, with criminal intent, committed by the master or crew of a vessel, in violation of their duty to the shipowner, and without his connivance, is barratry.” McArthur, Ed. 2, p. 130.

Roberts v. Security Co., Ltd. (1897), 1 Q. B. Ill, C. A. Dalby v. Ind. Life Ass. Co., 15 C. B. 355; Burnand v. Rodocanachi (1882), 12 App. Cas. at p. 340. 13 Castellain v. Preston (1883), 11 Q. B. D. 380, C. A. 14 See Joyce v. Kennard (1871), L. R. 7 Q. B. at p. 81. 15 Anglo-Californian Bank v. London and Prov. Mar. Ins. Co. (1904), 10 Com. Cas. at pp. 8, 9 (guarantee and marine policy contrasted). 11 12

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3.

4.

5.

6.

7.

“Barratry or barratry of the master or mariners means any wilful act of spoliation, or violence to the ship or goods, or any fraudulent or consciously illegal act which exposes the ship or goods to danger of damage, destruction, or confiscation, done by the master or crew without the consent of the shipowner.” Carver’s Carriage by Sea, Ed. 3, § 99. “Barratry is an unlawful, fraudulent, or dishonest act of the master mariners or other carriers, or of gross misconduct, or very gross and culpable negligence, contrary in either case to their duty to the owner, and that might be prejudicial to him or to others interested in the voyage or adventure.” Phillips on Insurance, § 1062 (U.S.). “Barratry is every species of fraud or knavery in the master of a ship by which the freighters or owners are injured; and in this light a criminal deviation is barratry, if the deviation be without their consent,” Lockyer v. Offley (1786), 1 T. R. 259; 1 R. R. 197, per Willes, J. “Barratry is considered as being precisely tantamount to fraud, in the particular relation which subsists between master, mariners, and owners; being such by which a loss may happen to the subjectmatter insured.” Earle v. Rowcroft (1806), 8 East, 134; 9 R. R. 385, 392; approved Cory v. Burr (1883), 8 App. Cas. 399. All the definitions and cases up to 1870 are reviewed in an American case, Atkinson v. Great Western Ins. Co. (1872), 1 Asp. Mar. Cas. (N. S.) 382. “Les termes baratteries du patron comprennent toutes les espèces, tant de dol que de simple imprudence, défaut de soin et impéritie, tant du patron que des gens de l’équipage.” Pothier, Traité d’Assurance, § 65.

Comparing the French with the English definition, it appears that the French definition includes losses caused by unskilful and improper navigation, which in England would be attributed to losses by perils of the seas. In England the essence of barratry is a criminal or quasi-criminal breach of duty to the owners for the time being. As Lord Ellenborough says, “In order to constitute barratry, which is a crime, the captain must be proved to have acted against his better judgment,”16 If the master commits a criminal act with the privity of his owners it is not barratry; but if the master be a part-owner his barratrous act is none the less barratry as against innocent co-owners and shippers.17 The general opinion is that barratry can only be committed against the owner, or a charterer who pro hac vice is in the position of an owner (Arnould, Ed. 6, p. 785); but Hannen, J., in one case ruled that if a ship was scuttled with the consent of the owners it would be barratry as regards an innocent shipper of goods.18 The following acts are instances of barratry:—Engaging in smuggling, deviation in order to smuggle, fraudulent sale of ship and cargo, scuttling the ship.

16 17

18

Todd v. Ritchie (1815), 1 Stark. 240. Jones v. Nicholson (1854), 10 Exch. 28, 37; Westport Coal C., v. McPhail (1898), 2 Q. B 132; Small v. U. K. Mar. Assn. (1897), 2 Q. B. 311, C. A. (innocent mortgagee). Ionides v. Pender (1872), 1 Asp. Mar. Cas. (N. S.), 432, 435.

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NOTE C.—DEFINITION OF AVERAGE. See § 64, ante. Much learning and ingenuity have been spent on the endeavour to define the true meaning of the term “average.” See McArthur, Ed. 2. p. 386; Arnould, Ed. 6, p. 828. The fact is that the term is used in different senses, and its meaning in each case must be sought in its context. The word is derived from the French “avarie” or Italian “avaria.” which themselves are of uncertain derivation. The final syllable follows the form of such words as “towage” and “poundage.” Originally the term “average” signified a toll or duty. In ordinary shipping law it denotes an extra charge, as in the expression “primage and avenge as accustomed.” In insurance law the use of the word “average” is very puzzling. The fact is, the law has been developed piecemeal by decisions, and no uniform theory has been worked out. A partial loss, as distinguished from a total loss, may be either a general average loss or a particular average loss, that is to say, it may be a loss which gives rise to a right of contribution, or a loss which does not do so. But here a complication comes in. The term “particular average loss” applies only to damage to the subject-matter insured. Expenses incurred for the purpose of preserving the subject-matter from peril are known as particular charges, and are recoverable under the sue and labour clause, and not under the body of the policy (see §§ 66 and 78); but the expression “general average” includes a general average expenditure as well as a general average sacrifice, and also a general average contribution. Therefore, the scope of the word “average” in the two classes of cases is different. The expression “average unless general,” as used in the memorandum to Lloyd’s policy, is a good illustration of the confused use of the word. It appears to mean “a partial loss of the subject-matter insured, which is not a general average loss.” See ante, p. 149. But the case of a general average sacrifice gives rise to a further complication. If, for example, insured goods be jettisoned so as to constitute a general average loss, the insurer who has insured against jettison is liable under the express terms of the policy. As between insurer and assured, the loss is to this extent a particular average loss, though for other purposes the loss is a general average loss (see ante, pp. 98, 100). But even this rule is not carried to its logical conclusion, because it has been held that for the purpose of making up the 3 per cent franchise a general average loss cannot be added to a particular average loss. (See McArthur, Ed. 2, p. 386, and ante. P. 113.) According to French law, “le mot avarie désigne un dommage matérial et aussi une depense extraordinaire faite pour le navire et pour les merchandises, conjointement ou separément.” Code de Commerce, Art. 397. “Les avaries se divisent en deux classes. Elles sont (1) simples ou particulières; (2) grosses ou communes.” BravardDemangeat, Ed. 7, p. 475. French law, therefore, differs from English law by including expenses which, under our law, would be classed as “particular charges,” See Kidston v. Empire Ins. Co.

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(1866), L. R. 1 C. P. at p. 550, per Willes, J. See particular charges distinguished from general average, McArthur, Ed. 2, p. 173.

NOTE D.—DEFINITION OF ABANDONMENT. See §§ 63 and 79 ABANDONMENT (from the French “abandonner,” but the corresponding term in insurance is “délaissement”).—In ordinary language the term “abandonment” is used as the equivalent of “relinquishment.” But in marine insurance law the term has a highly special though indefinite meaning. It is used to denote (1) the voluntary cession by the assured to the insurer of whatever remains of the subject-matter insured, in case of constructive total loss; (2) the notice by which the assured signifies to the insurer his election to abandon; and (3) the cession which takes place, by operation of law, of whatever remains of the subject-matter insured when the insurer pays for total loss. I. In marine insurance, where there is a constructive total loss, the assured may elect either to treat the loss as a partial loss or, within a reasonable time, to cede to the insurer, as from the date of the casualty causing the loss, whatever may remain of the subject-matter insured, together with all proprietary rights and remedies incident thereto, and claim for a total loss. This cession is called abandonment. “Abandonment is the act of cession, by which in cases where the loss or destruction of the property, though not absolute, is highly imminent, or its recovery is too expensive to be worth the attempt, the assured, on condition of receiving at once the whole amount of the insurance, relinquishes to the underwriters all his property and interest in the thing insured, as far as it is covered by the policy, with all the claims that may ensue from its ownership, and all the profits that may arise from its recovery.” Arnould, Marine Insurance, Ed. 6, p. 953, citing in notes 2 Pardessus 400 “Le délaissement equipolle à, un transport.” But see Arnould, Ed. 7, pp. 1388, 1390, distinguishing abandonment from subrogation. “Abandonment is a relinquishment to the underwriter, in case of loss constructively total, of all right, title, and claim to what may be saved, leaving it to him to make the most of it for his own benefit. It operates as an assignation.” Bell’s Principles of the Laws of Scotland, § 484. “L’acte par lequel l’assuré quitte et délaisse aux assureurs les droits, noms, raisons et actions de propriété qu’il a en la chose assurée.” Emérigon, Traité des Assurances, c. 17, citing Guidon de la Mer, Ch. 7, Art. 1. As to the modern French definition, see Sacre, Dictionnaire de Droit Commercial, Tit. Avarie, No. 5. “In reference to constructive total loss, it is defined to be a cession or transfer of the ship from the owner to the underwriter, and of all his property and interest in it, with all the claims that may arise from its ownership, and all the profits that may arise from it, including the freight then being earned. Its operation is as effectually to transfer the property in the ship to the underwriter as a sale for valuable consideration.” Per Martin, B., Rankin v. Potter (1873), L. R. 6 H. L. at p. 144.

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II. The notice by which the assured signifies to the insurer his election to abandon and claim for a total loss is frequently confused with the abandonment or cession itself. Thus the Draft New York Civil Code, § 1486, proposes to define abandonment as “the act by which after a constructive total loss the person insured declares to the insurer that he relinquishes to him his interest in the thing insured.” “The cession or abandonment,” says Blackburn, J., “is a very different thing from a notice of abandonment, though the ambiguous word ‘abandonment’ often leads to confounding the two.” Rankin v. Potter (1873), L. R. 6 H. L. at pp. 118, 119, 156. III. Where the insurer pays or settles for a total loss, the assured is bound to abandon or cede to the insurer, as from the date of the casualty causing the loss, whatever may remain of the subject-matter insured, together with all rights and remedies incident thereto. This cession is sometimes called abandonment, and sometimes is referred to as the “subrogation” of the insurer for the assured. See Castellain v. Preston (1883), 11 Q. B. D. 380, C. A. Abandonment in this sense of the term is not peculiar to marine insurance, but is a necessary incident of every contract of indemnity. It is to be noted that life insurance, unlike the insurance of property, is not a contract of indemnity. Rankin v. Potter (1873), L. R. 6 H. L. at pp. 118, 119. “On general principles of equity, not at all peculiar to marine insurance, he who recovers on a contract of indemnity must and does by taking satisfaction from the person indemnifying him, cede all his right in respect of that for which he obtains indemnity. There is no notice of abandonment in fire insurance, but the salvage is transferred on the principle of equity, expressed by Lord Hardwicke, that the person who originally sustains the loss was the owner, but, after satisfaction made to him, the insurer.” Per Blackburn, J., Rankin v. Potter (1873), L. R. 6 H. L. at p. 118 (loss of freight). “Where the owners of an insured ship have claimed or been paid as for a total loss, the property in what remains of the ship, and all rights incident to the property, are transferred to the underwriters as from the time of the disaster in respect of which the total loss is claimed for and paid. The right to receive payment of freight accruing due but not earned at the time of the disaster is one of those rights so incident to the property in the ship, and it therefore passes to the underwriters, because the ship has become their property, just as it would have passed to a mortgagee of the ship who before the freight was completely earned had taken possession of the ship. This is at times very hard upon the insured owner of the ship; he can, however, avoid it by claiming only for a partial loss, keeping the property in himself, and so keeping the right to earn the accruing freight. In such a case he recovers an indemnity for the amount of the loss actually sustained, in calculating which all the benefits incident to the property retained by the shipowner must be considered. “But the right of the assured to recover damages from a third person is not one of those rights which are incident to the property in the ship; it does pass to the underwriters in case of payment for a total loss, but on a different principle. And on this same principle it does pass to the underwriters, who have satisfied a claim for a partial loss, though no property in the ship passes. ******

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“Mason v. Sainsbury (3 Douglas’ Rep. 61) and Yates v. Whyte (4 Bing. N. C. 272) were both cases of partial loss only. The right of the underwriters could not arise in those cases by relation back to the passing of the property at the time of the loss, for there was no such passing of the property. It could only arise, and did only arise, from the fact that the underwriters had paid an indemnity, and so were subrogated for the person whom they had indemnified in his personal rights from the time of the payment of the indemnity.” Per Lord Blackburn, Simpson v. Thomson (1877), 3 App. Cas. at pp. 292, 293. In a later case, Brett, L.J., proceeds to point out that abandonment is applicable to every claim for a total loss, whether actual or constructive. “If there is anything to abandon, abandonment must take place; as, for instance, when there is an actual total loss, and that which remains of a ship is what has been called a congeries of planks, there must be an abandonment of the wreck. … But that abandonment must take place at the time of the settlement of the claim. It need not take place before.” Kaltenbach v. Mackenzie (1878), 3 C. P. D. at p. 471.

NOTE E.—DEFINITION OF PIRACY. See Sched. I., Rule 8. PIRACY (from Lat. piratica, sea robbery).—Robbery with violence at sea is called piracy, but no precise general definition of the term can be given. There are certain acts which all civilized nations recognize as piratical, and which constitute piracy, jure gentium. Then there is the common law definition of piracy, and then by the statute law of various countries certain acts are deemed to constitute piracy for the purposes to which the statute apply. Thus “the slave trade is piratical in England and the United States, and in France the crew of an armed vessel navigating in time of peace with irregular papers become pirates upon the mere fact of irregularity, without the commission of any act of violence. Hall’s International Law, Ed. 3, p. 264. It is obvious that different legal consequences may ensue according as an act comes within one or another of these overlapping but not coincident descriptions of piracy. For instance, the master of a ship might be criminally liable for piracy on facts which would not constitute piracy within the meaning of a mercantile document, such as a charter party or marine policy. The following definitions may be cited:— 1.

2.

“Piracy is defined by the text writers to be the offence of depredating on the seas without being authorized by any sovereign state, or with commissions from different sovereigns at war with each other.” Wheaton, International Law, Ed. 2, p. 246. As to piracy by municipal law, see at p. 247. “The crime of piracy, or robbery and depredation upon the high seas, is an offence against the universal law of society, a pirate being, according to Sir Edward Coke, hostis humani generis. … The offence of piracy, by common law, consists in committing those acts of robbery and depredation upon the high seas which if committed upon land would have amounted to felony there. But by statute some other offences are made piracy also.” Blackstone, Commentaries, vol. 4, pp. 71, 72, citing 2 Inst. 113. Cf. Cicero, off. 3, 29. Pirata non est perduellium numero definitus, sed communis hostis omnium.

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3.

“Piracy, by the law of nations, is taking a ship on the high seas, or within the jurisdiction of the Lord High Admiral, from the possession or control of those who are lawfully entitled to it, and carrying away the ship itself, or any of its goods, tackle, apparel, or furniture, under circumstances which would have amounted to robbery if the act had been done within the body of an English county. … It is doubtful whether persons cruising in armed vessels with intent to commit piracies are pirates or not.” Stephen’s Digest of Criminal Law, Ed. 3, Art. 104; as to piracy by statute for criminal purposes, see Arts. 106-117. 4. “Piracy is forcible robbery at sea, whether committed by marauders from outside the ship or by mariners or passengers within it. The essential element is that they ‘violently dispossess the master, and afterwards carry away the ship itself or any of the goods with felonious intent.” Carver’s Carriage by Sea, Ed. 3. § 94, citing A.-G. for Hong Kong v. Kwok-a-Sing (1873), L. R. 5 P. C. at p. 179. 5. “Piracy is robbery on the sea, or by descent from the sea upon the coast, committed by persons not holding a commission from or at the time pertaining to any established state. … Piracy, being a crime against nations, may be brought before any court, no matter what the nationality of the plaintiff or the origin of the pirate may be. The law of such state may enlarge the definition of the crime of piracy, but must confine the operation of the new definition to its own citizens and foreigners on its own vessels.” Wolsey, International Law, § 137. 6. “The charge of Sir Charles Hedges (13 St. Tr. 454) contains a correct exposition of the law as to what constitutes piracy jure gentium. Piracy is only a sea term for robbery, piracy being a robbery within the jurisdiction of the Admiralty. … If the mariners of any ship shall violently dispossess the master and afterwards carry away the ship itself, or any of the goods, with a felonious intention, in any place where the Lord Admiral hath jurisdiction, this is robbery and piracy.” A.-G. for Hong Kong v. Kwok-a-Sing (1873), L. R. 5 P. C. at p. 199. (Murder of a Frenchman on a French ship by a Chinese. Piracy justiciable in any court) 7. “The taint of piracy does not, in the absence of conviction or condemnation, continue, like a maritime lien, to travel with the ship through her transfers to various owners.” R. v. McCleverty (1871), L. R. 3 P. C. at p. 689. 8. “Piracy may be said to consist in acts of violence done upon the ocean or unappropriated lands, or within the territory of a state through descent from the sea, by a body of men acting independently of any politically organized society.” Hall’s International Law (1892), Ed. 3, p. 257.

NOTE F.—HISTORY OF MARINE INSURANCE. The origin of marine insurance is obscure. Loans on bottomry are of very ancient date. Money lent on bottomry is not repayable in case of loss, and marine insurance, the earliest form of insurance, may well have been a development of this maritime usage. There is evidence that marine insurance was known to the Lombards in the twelfth century, and some time later it was introduced into England, probably by the merchants of the Steelyard, the representatives of the Hanseatic League, whose treaty privileges in England were abolished in 1578. Its English history is 474

Appendix VI

ably and exhaustively traced by Mr. F. Martin in his History of Lloyd’s and Marine Insurance, published in 1876. It will be sufficient here to give the leading dates in that history.19 1589.—First reported case, Anon, 6 Coke R. 47B, tried before Wray, C.J. 1601.—First mention in the statute book. The 43 Eliz. c. 12 established a special court for the trial of marine insurance cases. The court fell into disuse by the end of the seventeenth century, but the Act was not repealed expressly till 1863. See Martin, p. 49. 1613.—Earliest extant English policy. It almost exactly resembles the form given in the Guidon de la Mer, published in France in 1600, and for the most part is in accord with the Lloyd’s policy now in use. See Martin, p. 46. 1688.—First mention of Lloyd’s coffee-house, resorted to by merchants and underwriters. 1720.—The “Royal Exchange Assurance Corporation” and the “London Assurance Corporation,” incorporated by charter pursuant to the 6 Geo. 1, c. 18, with the privilege of being the only corporations or societies who were allowed to insure marine risks or lend money on bottomry. 1726.—Lloyd’s List established. See Martin, p. 107. 1730.—Lloyd’s Register of Shipping first published. See Martin, p. 325. 1745.—The Marine Insurance Act, 1745 (19 Geo. 2, c. 37), passed to prohibit wagering policies and re-insurance. See Martin, p. 139. 1749.—The “Memorandum” added to the common form of policy. See McArthur, Ed. 2, p. 274. 1756.—Lord Mansfield raised to the Bench. He sat till 1788, and settled the principles of English insurance law. 1769.—Lloyd’s formed into a society with rules and regulations, and established in the Royal Exchange. See Martin, p. 145. 1779.—Lloyd’s policy settled in its present form and printed. In 1850 a verbal alteration was made by omitting the introductory words “In the name of God, Amen,” and substituting “Be it known that.” 1788.—The Marine Insurance Act, 1788 (28 Geo. 3, c. 56), requires the name of the assured to be inserted in all policies. 1795.—Marine policies first required to be in writing and stamped by 35, Geo. 3, c. 63. See Home Marine Ins. Co. v. Smith (1898), 1 Q. B. at p. 834. 1824.—Monopoly of “Royal Exchange” and “London Assurance” Corporations abolished by 5 Geo. 4, c. 114, and companies and partnerships allowed to engage in marine insurance. See Martin, p. 290.

19

Mr. Marsden’s Select Pleas of the Court of Admiralty, published for the Selden Society, contain some interesting antiquities of marine insurance.

475

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1834.—Establishment of “Lloyd’s Register of British and Foreign Shipping” on modern basis. See Martin, p. 345. (N.B. The society of “Lloyd’s Register” is altogether apart from Lloyd’s.) 1845. The Gaming Act, 1845 (8 & 9 Viet. c. 109), makes void all contracts by way of gaming or wagering. 1862.—The Companies Act, 1862 (25 & 26 Vict. c. 89), provides for incorporation of limited companies, and prohibits associations of more than twenty persons from carrying on business unless incorporated. 1864.—Re-insurance again legalized by 27 & 28 Vict. c. 56. See Mackenzie v. Whitworth, 1 Ex. D. at p. 40. 1868.—The policies of Marine Assurance Act (31 & 32 Vict. c. 86) provides for assignment of policies and empowers assignee to sue in his own name. 1871.—Lloyd’s incorporated and regulated by Lloyd’s Act, 1871 (34 & 35 Vict. c. xxi.). See Martin, p. 356. 1891.—Stamp law consolidated by Stamp Act, 1891 (54 & 55 Vict. c. 39). Contracts of sea assurance required to be embodied in policy, specifying certain particulars, and not to be made for more than twelve months. 1894.—The Merchant Shipping Act, 1894 (56 & 57 Vict. c. 60), consolidates the laws relating to merchant shipping. 1901.—§ 11 of the Finance Act, 1901 (1 Edw. 7, c. 7), authorizes continuation clauses under certain conditions. 1906.—Marine Insurance law codified by Marine Insurance Act, 1906 (6 Edw. 7, c. 41). The law of marine insurance developed more rapidly in France than in England. The Guidon de la Mer, published at Rouen about 1600, is a very complete exposition of the practice of that day. In 1681 the French law of marine insurance was codified by the Ordonnance de la Marine. The great works of Pothier and Emerigon appeared in the eighteenth century, and with their assistance the Ordonnance of 1681, with various improvements and additions, was re-enacted in 1808, by the existing Code de Commerce, Arts. 332 to 439. The French code formed the basis of the other continental codes, but most of the continental nations have now re-enacted their commercial codes, and in so doing have departed more or less widely from the original model. The latest is the German Commercial Code of 1897, which came into force in 1900.

NOTE G.—RULES OF PRACTICE OF ASSOCIATION OF AVERAGE ADJUSTERS.20 The following Rules of Practice of the Association of Average Adjusters with regard to particular average may be cited in amplification of the notes to the text of

20

As to the effect to be given to these rules of practice, see Steamship Carisbrook Co. v. London and Prov: Mar. Ins. Co. (1901), 6 Com. Cas. at p. 297, per Mathew, J.

476

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the Act. The complete Rules, relating both to general and to particular average, are appended to the annual Reports of the Association. The following are taken from the Report for 1906. PARTICULAR AVERAGE ON SHIP Statement of Particular Average on Ships. (Proposed and accepted 1874, p. 23. Confirmed 1875, p. 19.) That claims for particular average on ships shall not be stated unless the policies or copies of policies of insurance, for claiming on which the statement is required, be produced to the adjusters. (Proposed and accepted 1874, p. 23. Confirmed 1875, p. 19.) That such statements shall give the names of the underwriting firms and companies interested, and the amounts payable on the respective policies produced. Apportionment of Costs in Collision Cases. (Proposed and accepted 1889, p. 42. Confirmed 1890, p. 30. Referred to a Special Committee 1888, p. 38.) That when a vessel sustains and does damage by collision, and litigation consequently results for the purpose of testing liability, the technicality of the vessel having been plaintiff or defendant in the litigation shall not necessarily govern the apportionment of the costs of such litigation, which shall be apportioned between claim and counterclaim in proportion to the amount which has been or would have been allowed in respect of each in the event of the claim or counterclaim being established; provided that when a claim or counterclaim is made solely for the purpose of defence, and is not allowed, the costs apportioned thereto shall be treated as costs of defence. Expenses of Removing a Vessel for Repair. (Proposed and accepted 1896, p. 23. Confirmed 1897, p. 24.) Where a vessel is in need of repair at any port and is removed thence to some other port for the purpose of repairs, either because the repairs cannot be effected, or cannot be effected prudently— (a) The necessary expenses incurred in moving the vessel to the port of repair shall be allowed as part of the cost of repair, and where the vessel after repairing forthwith returns to the port from which she was removed, the necessary expenses incurred in so returning shall also be allowed. (b) Where by moving the vessel to the port of repair any new freight is earned, or any expenses are saved in relation to the current voyage of the vessel, such net earnings or savings shall be deducted from the expenses of moving her, and where the vessel loads a new cargo at the port of repair no expenses subsequent to the completion of repair shall be allowed. The expenses of removal include the cost of temporary repair, ballasting, wages and provisions of crew and [or] runners, pilotage, towage, extra marine insurance, port charges, and, in case of a steamer, coal and engine-room stores.

477

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(c) This rule shall not admit any ordinary expenses incurred in fulfilment of a contract of affreightment, though such expenses are increased by the removal to a port of repair. Coals and Stores used in Repair of Damage to the Hull. (Proposed and accepted 1876, p. 23. Confirmed 1877, p. 53.) That the cost of replacing coals and engine-room stores consumed either in the repair of damage to a steamer, in working the engines or winches to assist in the repairs of damage, or in moving her to a place of repair within the limits of the port where she is lying, shall be charged to the underwriters on ship as particular average. Rigging Chafed (Custom of Lloyd’s, 1876). Rigging injured by straining or chafing is not charged to underwriters, unless such injury is caused by blows of the sea, grounding, or contact; or by displacement, through sea peril, of the spars, channels, bulwarks, or rails. Sails split or blown away (Custom of Lloyd’s, 1876). Sails split by the wind, or blown away while set, unless occasioned by the ship’s grounding or coming into collision, or in consequence of damage to the spars to which the sails are bent, are not charged to underwriters. Scraping and Painting. (Proposed and accepted 1900, p. 26. Confirmed 1901, p. 41.) That when in consequence of damage by a peril insured against, a vessel’s bottom has to be scraped and painted, the cost of such scraping and painting shall be charged to underwriters on ship, without any deduction on account of the vessel having become due for ordinary painting at any time subsequent to the accident. Dry Dock Expenses. (Proposed and accepted July, 1891, p. 26. Confirmed 1892, p. 28.) That where repairs on owner’s account which can only be effected in dry dock are executed concurrently with other repairs, for the cost of which the underwriters are liable, and which also can only be effected in dry dock, the cost of entering and leaving the dry dock, in addition to so much of the dock dues as is common to both repairs, shall be divided equally between the shipowner and the underwriters. This division shall apply in those cases where a vessel is due for ordinary dry docking or for repairs on owner’s account necessary for procuring or retaining her class; but it shall not apply when the shipowner has only taken advantage of the vessel being in dry dock to scrape or paint or to effect any other repairs not immediately necessary, but which it may then be convenient to effect. Deduction of One-third (Custom of Lloyd’s, amended 1890–91). (1876)

The deduction for new work in place of old is fixed by custom at onethird, with the following exceptions:— Anchors are allowed in full. Chain cables are subject to one-sixth only.

478

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Metal sheathing is 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 one-third. 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 first voyage. (1890–91) N.B. Articles belonging to, or repairs done to, a ship, other than an iron ship, allowed in general average, are subject to similar deductions in respect to new for old materials as are made in adjusting claims of particular average on ship. In lieu of note to Custom of Lloyd’s, 1876, viz.:— N.B.—Articles belonging to, or repairs done to, a ship, allowed in general average, are subject to similar deductions in respect to new for old materials as are made in adjusting claims of particular average on skip. PARTICULAR AVERAGE ON GOODS. Adjustment on Bonded Prices (Custom of Lloyd’s, 1876). In the following cases it is customary to adjust particular average on a comparison of bonded instead of duty paid prices:— In claims for damage to tea, tobacco, coffee, wine, and spirits imported into this country. Adjustment of Average on Goods sold in Bond. (Proposed and accepted 1885, p. 64. Confirmed 1868, p. 24.) That in consequence of the facilities generally offered to bond goods at their destination, on which terms they are often sold, the term “gross proceeds” shall, for the purpose of adjustment, be taken to mean the price at which the goods are sold to the consumer, after payment of freight and landing charges, but exclusive of Customs duty, in cases where it is the custom of the port to sell or deal with the goods in bond. Apportionment of Insured Value of Goods. (Proposed and accepted 1885, p. 43. Confirmed 1886, p. 23.) That where different qualities or descriptions of cargo are valued in the policy at a lump sum, such sum shall, for the purpose of adjusting claims, be apportioned on the invoice values, where the invoice distinguishes the separate values of the said different qualities or descriptions; and over the net arrived sound values in all other cases.

479

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Under-insured Interest made good in General Average (Proposed and accepted 1882, p. 47. Confirmed 1883, p. 48.) That an underwriter who has paid for loss by jettison of the thing insured is entitled, in the proportion that the sum insured bears to the policy value, to whatever is recovered in general average in respect to such loss, although the amount so recovered may exceed the amount paid by hin. Allowance for Water in Picked Cotton (Custom of Lloyd’s, 1876). When bales of cotton are picked, and the pickings are sold wet, the allowance for water in the pickings (where there are no means of ascertaining it) is by custom fixed at one-third. Allowance for Water in Cut Tobacco (Custom of Lloyd’s, 1876). When damaged tobacco is cut off, the allowance for water in the cuttings is one-fourth. Allowance for Water in Wool (Custom of Lloyd’s, 1876). Damaged wool from Australia, New Zealand, and the Cape is subject to a deduction of 3 per cent. for wet, if the actual increase ‘cannot be ascertained. Franchise Charges (Custom of Lloyd’s, 1876). The expenses of protest, survey, and other proofs of loss, including the commission or other expenses of a sale by auction, are not admitted to make up the percentage of a claim; and are only paid by the underwriters in case the loss amounts to a claim without them. Extra Charges (Custom of Lloyd’s, 1876). Extra charges payable by underwriters, when incurred at the port of destination, are recovered in full; but when charges of the same nature are incurred at an intermediate port they are subjected to the same treatment, in respect of insured and contributory values, as general average charges. Adjustment of Return of Premium (Custom of Lloyd’s, 1876). When the words “and arrival” follow the stipulation for a return of premium on a policy on goods, the particular average, but not the special charges, is deducted from the amount insured to arrive at the amount on which the return is taken.

480

Index [all references are to PAGE number]

Abandonment ademption of loss, 108 definition, 471–473 Digest, 412–415 effect Digest, 414–416 general provision and note, 111–114 notice Digest, 412–414 general provision and note, 106–111 ‘Action’ meaning, 154 Actual total loss Digest, 405–406 general provision and note, 94–97 Ademption loss, of, 108 Advance freight insurable interest Digest, 361 general provision and note, 19 Alteration of port of departure voyage, 71 Apportionment of valuation measure of indemnity, 129 Apprehended peril loss, 86 Assignment of interest Digest, 363 general provision and note, 21 Assignment of policy assured with no interest Digest, 397–398 general provision and note, 80–81 Digest, 397–398 method Digest, 397 general provision and note, 78–80 timing Digest, 397 general provision and note, 78–80 Assured meaning, 1

Average see also General average definition, 470–471 Barratry definitions, 468–469 Boiler damage York-Antwerp Rules, 287 Bottomry insurable interest Digest, 359–360 general provision and note, 18 Calculation of time generally, 155 Cargo amount allowed where lost or damaged by sacrifice, 290 damage in discharging, 290 jettison, 285 undeclared, 292 used for fuel, 287 wrongfully declared, 292 Cargo clauses (A), 256–261 (B), 262–267 (C), 267–272 introduction, 219 Strikes, 277–281 War, 272–277 Cash deposits York-Antwerp Rules, 293 Change of voyage Digest, 393 general provision and note, 72–73 Charges of insurance insurable interest Digest, 361 general provision and note, 20 Claims production of documents, 315–316

481

Index Commencement of risk implied condition Digest, 391–392 general provision and note, 70–71 Common maritime adventure York-Antwerp Rules, 283–284 Common peril York-Antwerp Rules, 283 Common safety cargo, materials and stores used for fuel, 287 loss or damage by sacrifices, 285 Conflict of laws generally, 155 Construction of policy rules Digest, 451–459 general provision, 159–162 Construction of policy terms Digest, 379 general provision and note, 49–50 Constructive total loss date of cause of action, 106 definition Digest, 407–411 general provision and note, 98–105 Digest, 407–412 effect Digest, 411–412 general provision and note, 105–106 freight Digest, 409 general provision and note, 101–103 goods Digest, 408–409 general provision and note, 101 ships Digest, 408 general provision and note, 100–101 Consumer insurance contracts commentary, 197–198 contracting out commentary, 208 general provision, 178 definition, 163–164 Contingent interest Digest, 357–358 general provision and note, 15 Contraband of war warranties, 68 Contracting out commentary, 208–210 consumer insurance contracts commentary, 208 general provision, 178 explanatory notes, 195 general provisions, 178–181 group insurance contracts commentary, 209–210 general provision, 180–181

482

Contracting out – contd non-consumer insurance contracts commentary, 208–209 general provision, 178–179 payment of claims, 179–180 transparency requirements commentary, 209 general provision, 180 Contribution Digest, 436 general average, to adjustment of general average, 313 generally, 300 general provision, 143–144 York-Antwerp Rules, 284 Contributory value freight, of adjustment of general average, 313 generally, 299 generally, 291–292 Rule E, 284 ship, of, 299 Court orders production of documents marine insurance claims, in, 315–316 Crew wages insurable interest Digest, 360 general provision and note, 18–19 putting in to and at a port of refuge, 288–289 Customary deductions generally, 460 Cutting away wreck generally, 286 Damage cargo in discharging, to, 290 machinery and boilers, to, 287 sacrifices for common safety, by, 285 ship, to, 292 Deductions from cost of repairs York-Antwerp Rules, 290 Defeasible interest Digest, 357–358 general provision and note, 15 Definitions Digest, 443–444, 467–474 general provision, 153–154 Delay Digest, 395 excuses Digest, 396 general provision and note, 77–78 general provision and note, 75–77 loss, 85–86 Deviation of voyage Digest, 394

Index Deviation of voyage – contd excuses Digest, 396 general provision and note, 77–78 general provision and note, 73–75 Disclosure agent effecting insurance, by Digest, 368–369 general provision and note, 34–35 assured, by Digest, 366–368 general provision and note, 27–33 contract deemed concluded Digest, 370–371 general provision and note, 38–39 Digest, 365–371 fraudulent claims, 26 post-contractual duty of good faith, 25 representations pending negotiation of contract, Digest, 369–370 general provision and note, 35–38 ship’s papers Digest, 365 general provision and note, 25–26 uberrimae fidei Digest, 365 general provision and note, 24–27 Double insurance different assured, 52 Digest, 380–382 general provision and note, 51–53 Duty of fair presentation application commentary, 198–199 general provision, 164 commentary, 198–204 consequential provision commentary, 211–212 general provision, 183–184 definition, 163 exceptions, 200 explanatory notes, 194 general provision commentary, 199–200 general provision, 164–165 interpretation commentary, 198–199 general provision, 164 knowledge commentary, 202–203 general provision, 169 knowledge of insured commentary, 200–201 general provision, 166–167 knowledge of insurer commentary, 201–202 general provision, 168–169

Duty of fair presentation – contd remedies for breach commentary, 203–204, 213–215 general provision, 170–171, 186–190 supplementary commentary, 203 general provision, 169–170 Expenses York-Antwerp Rules lightening ship when ashore, 287 port of refuge, 287–288 Express agreement variation of implied obligations, 151 Express warranties Digest, 384–385 general provision and note, 58–60 Extinguishing fire shipboard, on, 285–286 Failure of consideration return of premium Digest, 438–440 general provision and note, 146–149 Floating policy Digest, 378–379 general provision and note, 48–49 Foreign law generally, 155 Forgery insurance policy, of, 2 Forwarding charges advanced freight, on, 300 Franchise charges generally, 298 Fraudulent claims, remedies for commentary, 206–208 explanatory notes, 195 fraudulent act’, 175 general provisions commentary, 206–207 general provision, 174–176 group insurance commentary, 207–208 general provision, 175–176 ‘relevant event’, 175 Freight constructive total loss Digest, 409 general provision and note, 101–103 definition, 153–154 losses constructive total loss, 101–103 included and excluded, 87–88 partial loss, 126–127 York-Antwerp Rules, 290–291 measure of indemnity, 126–127

483

Index Freight – contd partial loss Digest, 424 general provision and note, 126–127 Freight clauses introduction, 219 Time, 243–249 Voyage, 250–254 War and Strikes, 254–256 Freight loss York-Antwerp Rules, 290–291 Gaming contracts insurable interest Digest, 352–353 general provision and note, 8–10 General average adjustment amount to be made good, 312 basis, 298–299 contribution, 313 contributory value of freight, 313 damage by water used to extinguish fire, 308 damage or loss to cargo, fuel and stores in discharge, 312 damage to engines to refloat, 309 deckload jettison, 308 deductions from cost of repairs, 312 expenses at port of refuge, 310–311 expenses lightening ship when ashore, 309 extinguishing fire on shipboard, 309 extraordinary discharge costs, 311 forwarding cargo from port of refuge, 311 freight sacrificed, 312 insurance on cargo discharged, 310 reloading costs at port of refuge, 310 resort to port of refuge for repairs, 309–310 sails set to force ship off ground, 309 sale of cargo at port of refuge, 311 storage costs at port of refuge, 310 stranded vessels, 309 substituted expenses, 311–312 towage from port of refuge, 311 voluntary stranding, 309 apportionment of interest on amounts made good, 302 apportionment of salvage, collision recoveries or other funds, 301–302 ‘average’, 470–471 basis of adjustment, 298–299 contributing interests, 299–300 contribution to adjustment of general average, 313 generally, 300 contributory value of freight adjustment of general average, 313 generally, 299 contributory value of ship, 299

484

General average – contd deductions from freight at charterer’s risk, 300 deficiency of fuel, 299 definition of ‘average’, 470–471 direct liability of underwriters, 300–301 enforcement, 301 forwarding charges on advanced freight, 300 interest on deposits, 302 lien by shipowners, 301 loss Digest, 418–421 general provision and note, 117–121 measure of indemnity, 129–130 partial loss Digest, 418–421 general provision and note, 117–121 refunds of general average deposits, 301–302 rules of general application, 298–30 Rules of Practice 1980 (as amended) adjustment, 308–313 general application, 298–302 sacrifice for common safety, 300 sacrifice of ship’s stores, 301 ulterior chartered freight, 300 underwriter’s liability, 301 vessel in ballast, 299–300 vessel under charter, 299–300 York-Antwerp Rules interest on losses allowed, 293 Rules A–G, 283–285 time bare for contributing, 294 General average act York-Antwerp Rules, 283 Good safety warranties Digest, 386 general provision and note, 61–62 Good faith commentary, 208 explanatory notes, 195 general provision, 177–178 Goods constructive total loss Digest, 408–409 general provision and note, 101 losses constructive total loss, 101 included and excluded, 86–87 partial loss, 127–129 measure of indemnity, 127–129 partial loss Digest, 424–426 general provision and note, 127–129 Group insurance contracting out, 180–181 fraudulent claims, 175–176 Guarantee meaning, 1

Index Hull clauses introduction, 219 Time, 220–230 Voyage, 230–239 War and Strikes, 239–243 Implied condition commencement of risk Digest, 391–392 general provision and note, 70–71 Implied term late payment of claims, as to contracting out, 179–180 general provision, 176–177 Implied warranties generally, 66–67 Institute clauses Cargo clauses (A), 256–261 (B), 262–267 (C), 267–272 Strikes, 277–281 War, 272–277 Freight clauses Time, 243–249 Voyage, 250–254 War and Strikes, 254–256 Hull clauses Time, 220–230 Voyage, 230–239 War and Strikes, 239–243 introduction, 219 Time clauses Freight, 243–249 Hulls, 220–230 Voyage clauses Freight, 230–239 Hulls, 230–239 War and Strikes clauses Cargo, 272–281 Freight–Time, 254–256 Hulls–Time, 239–241 Hulls–Voyage, 241–243 Insurable interest advance freight Digest, 361 general provision and note, 19 assignment of interest Digest, 363 general provision and note, 21 avoidance of wagering or gaming contracts Digest, 352–353 general provision and note, 8–10 bottomry Digest, 359–360 general provision and note, 18 charges of insurance, Digest, 361 general provision and note, 20

Insurable interest – contd contingent interest Digest, 357–358 general provision and note, 15 defeasible interest Digest, 357–358 general provision and note, 15 definition Digest, 353–356 general provision and note, 10–13 Digest, 352–363 examples, 12 Master’s wages Digest, 360 general provision and note, 18–19 partial interest Digest, 358 general provision and note, 16 quantum of interest Digest, 362–363 general provision and note, 20–21 reinsurance, Digest, 359 general provision and note, 16–18 seamen’s wages Digest, 360 general provision and note, 18–19 time of attachment Digest, 356–357 general provision and note, 13–15 Insurable value Digest, 363–365 general provision and note, 22–24 Insurance Act 2015 amendment of Third Parties (Rights Against Insurers) Act 2010 commentary, 210–211 explanatory notes, 194, 196–197 insured persons, 183, 211 ‘relevant person’, 181–183, 190–192, 210–211, 215–216 application commentary, 212 explanatory notes, 193 general provision, 185 background, 193–194 citation commentary, 213 general provision, 185 commencement commentary, 213 dates, 216 general provision, 185–186 commentary on sections, 197–230 consumer insurance contracts commentary, 197–198 contracting out, 178, 208 definition, 163–164 contract law, 193–194

485

Index Insurance Act 2015 – contd contracting out commentary, 208–210 consumer insurance contracts, 178, 208 explanatory notes, 195 general provisions, 178–181 group insurance contracts, 180–181, 209–210 non-consumer insurance contracts, 178–179, 208–209 payment of claims, 179–180 transparency requirements, 180, 209 definitions commentary, 197–198 general provision, 163–164 duty of fair presentation application, 164, 198–199 commentary, 198–204 consequential provision, 183–184, 211–212 definition, 163 exceptions, 200 explanatory notes, 194 general provision, 164–165, 199–200 interpretation, 164, 198–199 knowledge, 169, 202–203 knowledge of insured, 166–167, 200–201 knowledge of insurer, 168–169, 201–202 remedies for breach, 170–171, 186–190, 203–204, 213–215 supplementary, 169–170, 203 explanatory notes, 192–197 extent commentary, 213 general provision, 185–186 fraudulent claims, remedies for commentary, 206–208 explanatory notes, 195 fraudulent act’, 175 general provisions, 174–176, 206–207 group insurance, 175–176, 207–208 ‘relevant event’, 175 good faith commentary, 208 explanatory notes, 195 general provision, 177–178 group insurance contracting out, 180–181 fraudulent claims, 175–176 Hansard references, 216–217 implied term as to late payment of claims contracting out, 179–180 general provision, 176–177 insurance contract law, 193–194 insurance contracts, 163–164 ‘insured’ commentary, 198 general provision, 163 ‘insurer’ commentary, 198 general provision, 163

486

Insurance Act 2015 – contd insurers’ remedies for fraudulent claims commentary, 206–208 explanatory notes, 195 fraudulent act’, 175 general provisions, 174–176, 206–207 group insurance, 175–176, 207–208 ‘relevant event’, 175 insurers’ remedies for qualifying breaches commentary, 213–215 general provision, 186–190 late payment of claims contracting out, 179–180 general provision, 176–177 long title, 163 non-consumer insurance contract commentary, 198 contracting out, 178–179, 208–209 definition, 163 payment of claims contracting out, 179–180 general provision, 176–177 representations commentary, 204 general provision, 171–172 rights of third parties against insurers commentary, 215–216 general provision, 190–192 schedules commentary, 213--216 insurers’ remedies for qualifying breaches, 186–190 rights of third parties against insurers, 190–192 short title commentary, 213 general provision, 185–186 territorial extent, 193 transparency requirements contracting out, 180, 209 warranties breach, 172–173, 204–205 commentary, 204–206 explanatory notes, 194–195 general provision, 171–172, 204 terms not relevant to the actual loss, 174, 205–206 Insured Insurance Act 2015 commentary, 198 general provision, 163 Marine Insurance Act 1906, 1 Insurers Insurance Act 2015 commentary, 198 general provision, 163 Marine Insurance Act 1906, 1 signature Digest, 373 general provision and note, 41–42

Index Insurers’ remedies for fraudulent claims commentary, 206–208 explanatory notes, 195 fraudulent act’, 175 general provisions commentary, 206–207 general provision, 174–176 group insurance commentary, 207–208 general provision, 175–176 ‘relevant event’, 175 Insurers’ remedies for qualifying breaches commentary, 213–215 general provision, 186–190 Interest losses allowed in general average, on, 293 Interest insured meaning, 1 Jettison of cargo York-Antwerp Rules, 285 Late payment of claims implied terms contracting out, 179–180 general provision, 176–177 Lawfulness marine adventure, 5 Legality warranties Digest, 390–391 general provision and note, 67–70 Liabilities to third parties measure of indemnity, 130–131 Lightening ship when ashore York-Antwerp Rules, 287 Lloyd’s S.G. policy Digest, 451–459 form, 158–159 rules for construction, 159–162 Loss abandonment ademption, 108 Digest, 412–415 effect, 111–114 notice, 106–111 actual total loss Digest, 405–406 general provision and note, 94–97 ademption, 108 apportionment of valuation Digest, 426 general provision and note, 129 apprehended peril, 86 constructive total loss date of cause of action, 106 definition, 98–105 Digest, 407–412 effect, 105–106, 411–412

Loss – contd constructive total loss – contd freight, 101–103, 409 goods, 101, 408–409 ships, 100–101, 408 contracting out, 86 date of cause of action, 106 delay, 85–86 Digest, 400–433 effect of abandonment, 111–114 effect of constructive loss, 105–106 excluded losses Digest, 400–404 general provision and note, 83–93 extent of liability of insurer for loss Digest, 421–422 general provision and note, 121–122 freight Digest, 409 general provision and note, 87–88, 101–103 partial loss, 126–127, 424 York-Antwerp Rules, 290–291 general average, 117–121 general average contributions Digest, 426–427 general provision and note, 129–130 goods Digest, 408–409 general provision and note, 86–87, 101 partial loss, 127–129, 424–426 included losses Digest, 400–404 general provision and note, 83–93 liabilities to third parties Digest, 427–428 general provision and note, 130–131 meaning, 1 measure of indemnity apportionment of valuation, 129 Digest, 421–433 extent of liability of insurer for loss, 121–122 general average contributions, 129–130 general provisions, 131–132 liabilities to third parties, 130–131 partial loss of freight, 126–127 partial loss of goods, 127–129 partial loss of merchandise, 127–129 partial loss of ship, 124–126 particular average warranties, 132–133 salvage charges, 129–130 successive losses, 133–134 suing and labour clause, 135–138 total loss, 123 merchandise Digest, 424–426 general provision and note, 127–129 missing ship Digest, 406 general provision and note, 97

487

Index Loss – contd negligence, 84 notice of abandonment, 106–111 partial loss see also Partial loss Digest, 404–405, 415–421 general average loss, 117–121 general provision and note, 93–94 particular average loss, 114–115 salvage charges, 115–117 partial loss of freight Digest, 424 general provision and note, 126–127 partial loss of goods Digest, 424–426 general provision and note, 127–129 partial loss of merchandise Digest, 424–426 general provision and note, 127–129 partial loss of ship Digest, 423–424 general provision and note, 124–126 particular average, 114–115 particular average warranties Digest, 428–430 general provision and note, 132–133 proximate cause rule, 84 sacrifices for common safety, by, 285 sale by master, 86–93 salvage charges general provision and note, 115–117 measure of indemnity, 129–130, 426–427 scuttling, 85 ships Digest, 408 general provision and note, 88–89, 100–101 partial loss, 124–126, 423–424 successive losses Digest, 430 general provision and note, 133–134 suing and labour clause Digest, 430–432 general provision and note, 135–138 total loss actual, 94–97 Digest, 404–406 general provision and note, 93–95 measure of indemnity, 123, 422 transhipment Digest, 406–407 general provision and note, 97–98 York-Antwerp Rules sacrifices for common safety, 285 freight, 290–291 Machinery York-Antwerp Rules, 287 Marine adventure definition, 4–5

488

Marine adventure – contd Digest, 349–352 generally, 5–7 lawfulness, 5 subject-matter of insurance, 5 Marine insurance definition Digest, 347–348 general provision and note, 1–3 Note, 467–468 Digest, 347–352 history, 474–476 marine adventure Digest, 349–352 general provision and note, 4–7 maritime perils Digest, 349–352 general provision and note, 5–6 mixed sea and land risks Digest, 348–349 general provision and note, 3–4 nature, 2 Marine Insurance Act 1906 abandonment ademption of loss, 108 Digest, 412–415 effect, 111–114 notice, 106–111 ‘action’, 154 actual total loss, 94–97 ademption of loss, 108 advance freight, 19 arrangement of sections, 327–331 assignment of policy assured with no interest, 80–81 Digest, 397–398 method, 78–80 timing, 78–80 bottomry, 18 calculation of time, 155 citation Digest, 447 general provision, 158 commencement, 447 conflict of laws, 155 construction of policy rules Digest, 451–459 general provision, 159–162 constructive total loss date of cause of action, 106 effect, 105–106 freight, 101–103 generally, 98–105 goods, 101 ships, 100–101 contribution Digest, 436 general provision, 143–144 customary deductions, 460

Index Marine Insurance Act 1906 – contd definitions Digest, 443–444, 467–474 general provision, 153–154 delay, 75–77 deviation excuses, 77–78 generally, 75–77 Digest abandonment, 412–415 appendices, 460–480 arrangement of sections, 327–331 assignment of policy, 397–398 citation, 447 commencement, 447 construction of policy rules, 451–459 contribution, 436 customary deductions, 460 definitions, 443–444, 467–474 disclosure, 365–371 double insurance, 380–382 form of policy, 449–451 history of marine insurance, 474–476 insurable interest, 352–363 insurable value, 363–365 introduction to first edition, 324–325 loss, 400–433 marine insurance, 347–352 measure of indemnity, 421–433 mutual insurance, 440–441 Notes, 467–480 partial loss, 415–421 policy, 371–380 premium, 398–400 repeals, 446, 459–460 representations, 369–370 return of premium, 437–440 rights of insurer on payment, 434–437 rules of construction of policy, 451–459 Rules of Practice, 476–480 savings, 444–446 schedules, 449–460 short title, 447 statutes, 460–466 subrogation, 434–436 supplemental provisions, 441–447 table of cases cited, 333–342 table of cases overruled, 343–346 under-insurance, 437 voyage, 391–396 warranties, 382–391 disclosure agent effecting insurance, by, 34–35 assured, by, 27–33 contract deemed concluded, 38–39 Digest, 365–371 fraudulent claims, 26 post-contractual duty of good faith, 25

Marine Insurance Act 1906 – contd disclosure – contd representations pending negotiation of contract, 35–38 ship’s papers, 25–26 uberrimae fidei, 24–27 double insurance different assured, 52 Digest, 380–382 generally, 51–53 express agreement variation of implied obligations, 151 express warranties, 58–60 floating policy, 48–49 foreign law, 155 form of policy Digest, 449–451 general provision, 158–162 ‘freight’, 153–154 history of marine insurance, 474–476 insurable interest advance freight, 19 assignment of interest, 21 avoidance of wagering or gaming contracts, 8–10 bottomry, 18 charges of insurance, 20 contingent interest, 15 defeasible interest, 15 definition, 10–13 Digest, 352–363 examples, 12 Master’s wages, 18–19 partial interest, 16 quantum of interest, 20–21 reinsurance, 16–18 seamen’s wages, 18–19 time of attachment, 13–15 insurable value Digest, 363–365 measure, 22–24 interpretation of terms, 153–154 Lloyd’s S.G. policy Digest, 451–459 form, 158–159 rules for construction, 159–162 loss abandonment, 106–114 actual total loss, 94–97 ademption of loss, 108 apprehended peril, 86 constructive total loss, 98–106 contracting out, 86 date of cause of action, 106 delay, 85–86 Digest, 400–433 effect of abandonment, 111–114 effect of constructive loss, 105–106 excluded losses, 83–93

489

Index Marine Insurance Act 1906 – contd loss – contd freight, 87–88, 101–103 general average, 117–121 goods, 86–87, 101 included losses, 83–93 meaning, 1 measure of indemnity, 121–138 missing ship, 97 negligence, 84 notice of abandonment, 106–111 partial loss, 93–94, 114–121 particular average, 114–115 proximate cause rule, 84 sale by master, 86–93 salvage charges, 115–117 scuttling, 85 ships, 88–89, 100–101 total loss, 93–97 transhipment, 97–98 marine adventure definition, 4–5 generally, 5–7 lawfulness, 5 subject-matter of insurance, 5 marine insurance definition, 1–3 Digest, 347–352 marine adventure, 4–7 maritime perils, 5–6 mixed sea and land risks, 3–4 nature, 2 maritime perils, 5–6 Master’s wages, 18–19 measure of indemnity apportionment of valuation, 129 Digest, 421–433 extent of liability of insurer for loss, 121–122 general average contributions, 129–130 general provisions, 131–132 liabilities to third parties, 130–131 partial loss of freight, 126–127 partial loss of goods, 127–129 partial loss of merchandise, 127–129 partial loss of ship, 124–126 particular average warranties, 132–133 salvage charges, 129–130 successive losses, 133–134 suing and labour clause, 135–138 total loss, 123 measure of insurable value, 22–24 mixed sea and land risks, 3–4 ‘moveables’, 153–154 mutual insurance Digest, 440–441 modification of Act, 149–150 partial loss Digest, 415–421 general average loss, 117–121

490

Marine Insurance Act 1906 – contd partial loss – contd generally, 93–94 particular average loss, 114–115 salvage charges, 115–117 parties to policy, 1 policies construction of terms in policy, 49–50 content, 41 designation of subject-matter, 43–45 Digest, 371–380 effect of subsequent hostilities, 156–157 embodiment of contract, 40–41 floating, 48–49 form, 158–162 generally, 40–51 Lloyd’s S.G., 158–162 premium to be arranged, 50–51 signature of insurer, 41–42 specified content, 41 subject-matter, 43–45 subsequent declaration of ship, 48–49 time, 42–43 unvalued, 48 valued, 45–48 voyage, 42–43 premium Digest, 398–400 effect of receipt, 83 meaning, 1 policy effected through broker, 81–83 return, 145–149 time of payment, 81 to be arranged, 50–51 ratification by assured, 150–151 reasonable time, 152 reinsurance, 16–18 repeals, 446, 459–460 representations Digest, 369–370 general provision pending negotiation of contract, 35–38 return of premium agreement, by, 145–146 Digest, 437–440 enforcement, 145 failure of consideration, by, 146–149 rights of insurer on payment contribution, 143–144 Digest, 434–437 subrogation, 139–143 under-insurance, 144–145 rules of construction of policy Digest, 451–459 general provision, 159–162 Rules of Practice, 476–480 savings Digest, 444–446 general provision, 154–157

Index Marine Insurance Act 1906 – contd schedules Digest, 449–460 form of policy, 158–162 seamen’s wages, 18–19 seaworthiness of ship evidence, 63 examples, 64–65 generally, 62–66 implied warranty, 66–67 mixed policy, 64 ship’s papers, 25–26 short title Digest, 447 general provision, 158 slip evidence, as, 153 meaning, 1 subject-matter designation, 43–45 marine adventure, 5 subrogation Digest, 434–436 general provision, 139–143 supplemental provisions Digest, 441–447 interpretation of terms, 153–154 ratification by assured, 150–151 reasonable time, 152 savings, 154–157 slip evidence, 153 variation by agreement or usage, 151–152 table of cases cited, 333–342 table of cases overruled, 343–346 time calculation, 155 time policy, 42–43 uberrimae fidei, 24–27 under-insurance Digest, 437 general provision, 144–145 unvalued policy, 48 usage variation of implied obligations, 151–152 valued policy, 45–48 variation of implied obligations express agreement, by, 151 generally, 151 usage, by, 151–152 voyage alteration of port of departure, 71 change of voyage, 72–73 commencement of risk, 70–71 delay, 75–77 deviation, 73–75 Digest, 391–396 excuses for deviation, 77–78 implied condition, 70–71 policy, 42–43

Marine Insurance Act 1906 – contd voyage – contd sailing for different destination, 71–72 several ports of discharge, 75 warranties breach, 54 contraband of war, 68 Digest, 382–391 examples, 54–55 excused breaches, 56–58 express, 58–60 good safety, of, 61–62 implied, 66–67 legality, of, 67–70 meaning, 53–54 nationality, and, 61 nature, 53–56 neutrality, of, 60–61 seaworthiness of ship, of, 62–67 use of expression, 54 Maritime perils Digest, 349–352 general provision and note, 5–6 Master’s wages insurable interest, Digest, 360 general provision and note, 18–19 Measure of indemnity apportionment of valuation Digest, 426 general provision and note, 129 Digest, 421–433 extent of liability of insurer for loss Digest, 421–422 general provision and note, 121–122 general average contributions Digest, 426–427 general provision and note, 129–130 general provisions Digest, 428 general provision and note, 131–132 liabilities to third parties Digest, 427–428 general provision and note, 130–131 partial loss of freight Digest, 424 general provision and note, 126–127 partial loss of goods Digest, 424–426 general provision and note, 127–129 partial loss of merchandise Digest, 424–426 general provision and note, 127–129 partial loss of ship Digest, 423–424 general provision and note, 124–126

491

Index Measure of indemnity – contd particular average warranties Digest, 428–430 general provision and note, 132–133 salvage charges Digest, 426–427 general provision and note, 129–130 successive losses Digest, 430 general provision and note, 133–134 suing and labour clause Digest, 430–432 general provision and note, 135–138 total loss Digest, 422 general provision and note, 123 Measure of insurable value generally, 22–24 Merchandise partial loss Digest, 424–426 general provision and note, 127–129 Missing ship Digest, 406 general provision and note, 97 Mixed sea and land risks Digest, 348–349 general provision and note, 3–4 Moveables definition, 153–154 Mutual insurance Digest, 440–441 modification of Act, 149–150 Nationality warranties Digest, 386 general provision and note, 61 Negligence loss, 84 Neutrality warranties Digest, 385–386 general provision and note, 60–61 Non-consumer insurance contract commentary, 198 contracting out commentary, 208–209 general provision, 178–179 definition, 163 Notice of abandonment Digest, 412–414 general provision and note, 106–111 Onus of proof York-Antwerp Rules, 284 Orders production of documents marine insurance claims, in, 315–316

492

Partial interest Digest, 358 general provision and note, 16 Partial loss Digest, 415–421 freight, of Digest, 424 general provision and note, 126–127 general average loss Digest, 418–421 general provision and note, 117–121 general provision and note Digest, 404–405 generally, 93–94 goods, of Digest, 424–426 general provision and note, 127–129 measure of indemnity Digest, 424–426 freight, 126–127 goods, 127–129 merchandise, 127–129 ship, 124–126 merchandise, of Digest, 424–426 general provision and note, 127–129 particular average loss Digest, 416 general provision and note, 114–115 salvage charges Digest, 417–418 general provision and note, 115–117 ship, of Digest, 423–424 general provision and note, 124–126 Particular average loss Digest, 416 general provision and note, 114–115 measure of indemnity Digest, 428–430 general provision and note, 132–133 warranties Digest, 428–430 general provision and note, 132–133 Payment of claims implied terms contracting out, 179–180 general provision, 176–177 rights of insurer on contribution, 143–144 Digest, 434–437 subrogation, 139–143 under-insurance, 144–145 Piracy definition, 473–474 Policy assignment assured with no interest, 80–81

Index Policy – contd assignment – contd Digest, 397–398 method, 78–80 timing, 78–80 construction of terms Digest, 379 general provision and note, 49–50 content, 41 designation of subject-matter Digest, 374–375 general provision and note, 43–45 Digest, 371–380 effect of subsequent hostilities, 156–157 embodiment of contract Digest, 371 general provision and note, 40–41 floating Digest, 378–379 general provision and note, 48–49 form, 158–159 generally, 40–51 Lloyd’s S.G. policy Digest, 451–459 form, 158–159 rules for construction, 159–162 premium to be arranged Digest, 380 general provision and note, 50–51 rules for construction, 159–162 signature of insurer Digest, 373 general provision and note, 41–42 specified content Digest, 372–373 general provision and note, 41 subject-matter, 43–45 subsequent declaration of ship, 48–49 time Digest, 373–374 general provision and note, 42–43 unvalued Digest, 378 general provision and note, 48 valued Digest, 375–378 general provision and note, 45–48 voyage Digest, 373–374 general provision and note, 42–43 Port of departure alteration Digest, 392 general provision and note, 71 Port of refuge expenses Rules of Practice, 310–311 York-Antwerp Rules, 287–288 forwarding cargo, 311

Port of refuge – contd reloading costs, 310 resort for repairs, 309–310 sale of cargo, 311 storage costs, 310 towage from, 311 wages of crew putting in to and at, 288–289 York-Antwerp Rules, 287–289 Premium Digest, 398–400 effect of receipt Digest, 400 general provision and note, 83 meaning, 1 policy effected through broker Digest, 399–400 general provision and note, 81–83 return of agreement, by, 145–146 Digest, 437–440 enforcement, 145 failure of consideration, by, 146–149 time of payment Digest, 398 general provision and note, 81 to be arranged Digest, 380 general provision and note, 50–51 Production of documents marine insurance claims, in, 315–316 Proximate cause rule loss, 84 Quantum of interest Digest, 362–363 general provision and note, 20–21 Ratification assured, by Digest, 441 general provision and note, 150–151 Reasonable time Digest, 443 general provision and note, 152 Reinsurance insurable interest Digest, 359 general provision and note, 16–18 Repairs deductions from costs, 290 temporary, 290 Representations Digest, 369–370 Insurance Act 2015 commentary, 204 general provision, 171–172 pending negotiation of contract Digest, 369–370 general provision and note, 35–38

493

Index Return of premium agreement, by Digest, 437 general provision and note, 145–146 Digest, 437–440 enforcement Digest, 437 general provision and note, 145 failure of consideration, by Digest, 438–440 general provision and note, 146–149 Rights of insurer on payment contribution Digest, 436 general provision and note, 143–144 Digest, 434–437 subrogation Digest, 434–436 general provision and note, 139–143 under-insurance Digest, 437 general provision and note, 144–145 Rights of third parties against insurers commentary, 215–216 general provision, 190–192 Risk meaning, 1 Rule of Interpretation York-Antwerp Rules, 283 Rule Paramount York-Antwerp Rules, 283 Rules of construction of policy Digest, 451–459 general provision, 159–162 Rules of Practice 1980 (as amended) adjustment of general average amount to be made good, 312 basis, 298–299 contribution, 313 contributory value of freight, 313 damage by water used to extinguish fire, 308 damage or loss to cargo, fuel and stores in discharge, 312 damage to engines to refloat, 309 deckload jettison, 308 deductions from cost of repairs, 312 expenses at port of refuge, 310–311 expenses lightening ship when ashore, 309 extinguishing fire on shipboard, 309 extraordinary discharge costs, 311 forwarding cargo from port of refuge, 311 freight sacrificed, 312 insurance on cargo discharged, 310 reloading costs at port of refuge, 310 resort to port of refuge for repairs, 309–310 sails set to force ship off ground, 309 sale of cargo at port of refuge, 311 storage costs at port of refuge, 310 stranded vessels, 309

494

Rules of Practice 1980 (as amended) – contd adjustment of general average – contd substituted expenses, 311–312 towage from port of refuge, 311 voluntary stranding, 309 adjustment of particular average bonded prices, 307 goods sold in bond, 307 adjustments consideration of underwriters, for, 296 names of underwriters, 297–298 advanced freight forwarding charges, 300 advancing funds interest and commission, 296–297 agency commission, 297 allowance water and/or impurities in picked cotton, 308 water in cut tobacco, 308 water in wool, 308 apportionment insured value of goods, 308 interest on amounts made good, 302 salvage, collision recoveries or other funds, 301–302 collision cases apportionment of costs, 298 commission advancing funds, for, 296–297 agency, of, 297 York-Antwerp Rules, under, 303 contributing interests, 299–300 contribution to general average adjustment of general average, 313 generally, 300 contributory value of freight adjustment of general average, 313 generally, 299 contributory value of ship, 299 cost of repairs duty of adjusters, 297 damage and repairs to ship dry dock expenses, 305–306 engines to refloat, 309 fuel and stores used, 304 painting, 307 removal expenses, 303–304 rigging chafed, 305 sails blown away, 305 sails split, 305 scraping, 307 tank cleaning or gas-freeing costs, 306–307 water used to extinguish fire, 308 damage or loss to cargo, fuel and stores in discharge, 312 damage to engines to refloat, 309 deckload jettison, 308

Index Rules of Practice 1980 (as amended) – contd deductions cost of repairs, from, 312 freight at charterer’s risk, from, 300 deficiency of fuel, 299 deposits interest, 302 Digest, 476–480 dry dock expenses, 305–306 expenses dry dock, 305–306 expenses at port of refuge, at, 310–311 lightening ship when ashore, 309 extinguishing fire on shipboard, 309 extraordinary discharge costs, 311 forwarding cargo from port of refuge, 311 forwarding charges advanced freight, on, 300 franchise charges, 298 freight sacrificed, 312 fuel and stores used in repairs of damage, 304 general average adjustment, 308–313 apportionment of interest on amounts made good, 302 apportionment of salvage, collision recoveries or other funds, 301–302 basis of adjustment, 298–299 contributing interests, 299–300 contribution to general average, 300 contributory value of freight, 299 contributory value of ship, 299 deductions from freight at charterer’s risk, 300 deficiency of fuel, 299 direct liability of underwriters, 300–301 enforcement, 301 forwarding charges on advanced freight, 300 interest on deposits, 302 lien by shipowners, 301 refunds of general average deposits, 301–302 rules of general application, 298–302 sacrifice for common safety, 300 sacrifice of ship’s stores, 301 ulterior chartered freight, 300 underwriter’s liability, 301 vessel in ballast, 299–300 vessel under charter, 299–300 general rules, 296–298 insurance on cargo discharged, 310 insured value of goods apportionment, 308 interest advancing funds, for, 296–297 deposits, on, 302 introduction, 295–206 lien by shipowners, 301 Note, 476–480 painting, 307

Rules of Practice 1980 (as amended) – contd particular average on goods adjustment of average on goods sold in bond, 307 adjustment on bonded prices, 307 allowance for water and/or impurities in picked cotton, 308 allowance for water in cut tobacco, 308 allowance for water in wool, 308 apportionment of insured value of goods, 308 Note, 479–480 port of refuge expenses, 310–311 forwarding cargo, 311 reloading costs, 310 resort for repairs, 309–310 sale of cargo, 311 storage costs, 310 towage from, 311 refunds of general average deposits, 301–302 reloading costs at port of refuge, 310 removal expenses of vessel for repair, 303–304 repairs to ship dry dock expenses, 305–306 fuel and stores used, 304 painting, 307 removal expenses of vessel, 303–304 rigging chafed, 305 sails blown away, 305 sails split, 305 scraping, 307 tank cleaning or gas-freeing costs, 306–307 resort to port of refuge for repairs, 309–310 rigging chafed, 305 sacrifice common safety, for, 300 ship’s stores, of, 301 sails blown away, 305 sails set to force ship off ground, 309 sails split, 305 sale of cargo at port of refuge, 311 salvage services rendered under agreement, 302–303 scraping, 307 ship damage and repairs, 303–307 ship’s machinery claims, 297 storage costs at port of refuge, 310 stranded vessels, 309 substituted expenses, 311–312 tank cleaning or gas-freeing costs, 306–307 towage from port of refuge, 311 ulterior chartered freight, 300 underwriters direct liability, 300–301 liability, 301 uniformity resolution, 313 vessel in ballast, 299–300 voluntary stranding, 309

495

Index Rules of Practice 1980 (as amended) – contd water allowances cut tobacco, 308 picked cotton, 308 wool, 308 apportionment of insured value of goods, 308 water casks, 297 York-Antwerp Rules commission allowed, 303 salvage services rendered under agreement, 302–303 Sacrifice amount allowed where cargo lost or damaged, 290 geenrally, 283 loss or damage where made for common safety, 285 Sailing for different destination Digest, 393 general provision and note, 71–72 Sale by master loss, 86–93 Salvage charges loss Digest, 417–418 general provision and note, 115–117 measure of indemnity Digest, 426–427 general provision and note, 129–130 Salvage remuneration York-Antwerp Rules, 286–287 Scuttling loss, 85 Seamen’s wages insurable interest Digest, 360 general provision and note, 18–19 putting in to and at a port of refuge, 288–289 Seaworthiness of ship Digest, 386–390 evidence Digest, 389 general provision and note, 63 examples, 64–65 generally, 62–66 implied warranty Digest, 390 general provision and note, 66–67 mixed policy, 64 Several ports of discharge Digest, 395 general provision and note, 75 Ships constructive total loss Digest, 408 general provision and note, 100–101

496

Ships – contd damage and repairs dry dock expenses, 305–306 engines to refloat, 309 fuel and stores used, 304 painting, 307 removal expenses, 303–304 rigging chafed, 305 sails blown away, 305 sails split, 305 scraping, 307 tank cleaning or gas-freeing costs, 306–307 water used to extinguish fire, 308 losses constructive total loss, 100–101 Digest, 408 included and excluded, 88–89 partial loss, 124–126 measure of indemnity Digest, 423–424 general provision and note, 124–126 missing ship Digest, 406 general provision and note, 97 partial loss Digest, 423–424 general provision and note, 124–126 York-Antwerp Rules damage, 292 materials used for fuel, 287 Ship’s papers disclosure Digest, 365 general provision and note, 25–26 Signature of insurer Digest, 373 general provision and note, 41–42 Slip evidence, as Digest, 443 general provision and note, 153 meaning, 1 Stores used for fuel York-Antwerp Rules, 287 Subject-matter of insurance designation, 43–45 marine adventure, 5 Subrogation Digest, 434–436 general provision, 139–143 Successive losses Digest, 430 general provision and note, 133–134 suing and labour clause Suing and labour clause Digest, 430–432 general provision and note, 135–138

Index ‘Take a line’ meaning, 1 Temporary repairs York-Antwerp Rules, 290 Third Parties (Rights Against Insurers) Act 2010 commentary, 210–211 explanatory notes background, 194 summary, 196–197 insured persons, 183, 211 ‘relevant person’ commentary, 210–211, 215–216 general provision, 181–183, 190–192 Time calculation, 155 insurable interest Digest, 356–357 general provision and note, 13–15 payment of premium Digest, 398 general provision and note, 81 Time clauses Freight, 243–249 Hulls, 220–230 introduction, 219 War and Strikes Freight, 254–256 Hulls, 239–241 Time policy generally, 42–43 Total loss actual Digest, 405–406 general provision and note, 94–97 Digest, 404–405 general provision and note, 93–95 measure of indemnity Digest, 422 general provision and note, 123 ‘Transit’ clause meaning, 3 Transhipment Digest, 406–407 general provision and note, 97–98 Transparency requirements contracting out commentary, 209 general provision, 180 Undeclared cargo York-Antwerp Rules, 292 Uberrimae fidei Digest, 365 general provision and note, 24–27 Under-insurance Digest, 437 general provision, 144–145

Underwriter meaning, 1 Unvalued policy Digest, 378 general provision and note, 48 Usage variation of implied obligations Digest, 441–442 general provision and note, 151–152 Valued policy Digest, 375–378 general provision and note, 45–48 Variation of implied obligations express agreement, by, 151 generally, 151 usage, by, 151–152 Voluntary stranding York-Antwerp Rules, 286 Voyage alteration of port of departure Digest, 392 general provision and note, 71 change of voyage Digest, 393 general provision and note, 72–73 commencement of risk Digest, 391–392 general provision and note, 70–71 delay Digest, 395 general provision and note, 75–77 deviation Digest, 394 general provision and note, 73–75 Digest, 391–396 excuses for deviation or delay Digest, 396 general provision and note, 77–78 implied condition of risk Digest, 391–392 general provision and note, 70–71 policy Digest, 373–374 general provision and note, 42–43 sailing for different destination Digest, 393 general provision and note, 71–72 several ports of discharge Digest, 395 general provision and note, 75 Voyage clauses Freight, 250–254 Hulls, 230–239 introduction, 219 War and Strikes, 241–243

497

Index Wagering contracts insurable interest Digest, 352–353 general provision and note, 8–10 Wages of crew putting in to and at a port of refuge, 288–289 War and Strikes clauses Cargo, 272–281 Freight–Time, 254–256 Hulls–Time, 239–241 Hulls–Voyage, 241–243 introduction, 219 Warranties see also Warranties (Insurance Act 2015) breach, 54 contraband of war, 68 Digest, 382–391 examples, 54–55 excused breaches Digest, 383–384 general provision and note, 56–58 express Digest, 384–385 general provision and note, 58–60 good safety, of Digest, 386 general provision and note, 61–62 implied, 66–67 legality, of Digest, 390–391 general provision and note, 67–70 meaning, 53–54 nationality, and Digest, 386 general provision and note, 61 nature Digest, 382–383 general provision and note, 53–56 neutrality, of Digest, 385–386 general provision and note, 60–61 seaworthiness of ship, of Digest, 386–390 evidence, 63, 389 examples, 64–65 general provision and note, 62–66 implied warranty, 66–67, 390 mixed policy, 64 use of expression, 54 Warranties (Insurance Act 2015) breach commentary, 204–205 general provision, 172–173 commentary, 204–206 explanatory notes, 194–195 nature commentary, 204 general provision, 171–172 terms not relevant to the actual loss, 174, 205–206

498

Wrongfully declared cargo generally, 292 York-Antwerp Rules 2016 A–G, 283–285 boiler damage, 287 cargo amount allowed where lost or damaged by sacrifice, 290 damage in discharging, 290 undeclared, 292 used for fuel, 287 wrongfully declared, 292 cash deposits, 293 common maritime adventure, 283–284 common peril, 283 common safety cargo, materials and stores used for fuel, 287 loss or damage by sacrifices, 285 contribution, 284 contributory values generally, 291–292 Rule E, 284 crew wages putting in to and at a port of refuge, 288–289 cutting away wreck, 286 damage to cargo in discharging, 290 damage to machinery and boilers, 287 damage to ship, 292 deductions from cost of repairs, 290 expenses at port of refuge, 287–288 expenses lightening ship when ashore, 287 extinguishing fire on shipboard, 285–286 freight loss, 290–291 funds provision, 293 general average interest on losses allowed, 293 Rules A–G, 283–285 time bare for contributing, 294 general average act, 283 interest on losses allowed in general average, 293 Interpretation, 283 jettison of cargo, 285 lightening ship when ashore, 287 loss or damage by sacrifices for common safety, 285 loss of freight, 290–291 machinery, 287 onus of proof, 284 Paramount, 283 port of refuge expenses, 287–288 wages of crew putting in to and at, 288–289 provision of funds, 293 recovery from third parties, 284 repairs deductions from costs, 290 temporary, 290 right to contribution, 284

Index York-Antwerp Rules 2016 – contd Rule of Interpretation, 283 Rule Paramount, 283 sacrifice amount allowed where cargo lost or damaged, 290 loss or damage where made for common safety, 285 Rule A, 283 salvage remuneration, 286–287 ship damage, 292

York-Antwerp Rules 2016 – contd ship’s materials used for fuel, 287 stores used for fuel, 287 temporary repairs, 290 treatment of cash deposits, 293 undeclared cargo, 292 voluntary stranding, 286 wages of crew putting in to and at a port of refuge, 288–289 wrongfully declared cargo, 292

499

500