sum, say 1000, as the minimum limit of liability. The practice of the Mutual Insurance Clubs of the north-east coast is to pay all claims for average exceeding I per cent. In former years this practice was to a limited extent adopted by underwriters at Lloyd's and elsewhere, but recently that course has been almost entirely abandoned. It was found that the reduction of the franchise to even I per cent was not all that was required by many steamship-owners, who desired to protect themselves against every loss, however small. They founded mutual associations worked on the assessment principle, called Small Damage Clubs, which reimburse to owners any loss excluded from the ordinary policy by the condition of franchise whether that be 3 or 1 per cent. The existence of these facilities for insurance of small damage has deprived the franchise of all its moral value: there is no longer any certainty that the shipowner runs any part of the risk himself. The franchise is now nothing but an expression of the minimum limit of liability on the policy in which it appears. As we have already seen, something of the same kind has happened with the deduction for thirds which used to prevail universally.

The fact is that shipowning as a business has entirely changed in character since the adoption of steam in the ordinary carrying trade of the world. The values exposed to loss have so much increased that it would be impossible for the average steamship-owner to run the risks which the shipowner used to run. Then, increasing competition has reduced the margin of profit so much that he can less than ever afford to run serious risks uncovered. Lastly, free advantage has been taken of the facilities offered by capitalists for the financing of fleets of steamers. The lenders naturally require full protection against loss, so that again the altered state of trade is the cause of changes in the methods of insurance.

(3) The Return Clause. It is evident that if the premium on a time risk is fixed on the supposition that the vessel is to be at work during the whole duration of the insurance—either actually carrying cargo at sea, or loading or discharging in port-some provision may fairly be made by the assured

for the reduction of the premium in case the vessel does not find employment of this continuous nature. Such provision is embodied in the return clause. There is great diversity of wording in the different forms of this clause. Mr. Owen (Notes and Clauses, pp. 121 to 123) gives about a dozen varieties. But the main content of all is that when for a stipulated number of consecutive days, usually thirty, the vessel is in the comparative safety of dock or port, although still remaining for the modified perils at the risk of the underwriters, a return is made to the assured of so much per cent per period. Under some forms of the clause the vessel has merely to be in port for the stipulated period to justify claim for the return; under others she must remain unemployed, or be laid up and not be under average. It is also usual to stipulate that no amount of the nature of return be paid unless the vessel reaches the close of the policy without the occurrence of a total loss, actual or constructive; and it is consequently not usual to credit returns for laying up until the policy has expired. This is secured by the addition of the words "and arrival" at the end of the return clause.

It appears equally equitable that if, for some valid reason or other, the insurance be cancelled there should be a return to the assured for the period during which no risk attaches to the underwriter, unless the vessel is actually or constructively a total loss. The provisions for the laid-up return and the cancelling return are usually contained in one clause, as for instance

To return

per cent for every

consecutive days the vessel may be laid up in port or in dock, the vessel during such period being at the risk of the underwriters; and per cent for every days of unexpired time on cancelling and arrival.

Or

per cent for each uncommenced month if this policy be cancelled.

As follows for each consecutive 30 days the To return vessel may be laid up in port, viz.

per cent if in the United Kingdom not under average.

per cent under average, or if abroad.

and

arrival.

The latter is the form adopted in the 1894 time clauses.

It is to be remarked regarding the cancelling return, that the clause in the policy contains no provision for cancelling, but only for the amount of return payable in case cancellation takes effect. In fact there is no reason for regarding policies of insurance as different from other documents of contract with respect to resiliation without previous agreement to the contrary a contract can only be cancelled by mutual consent of the parties. It therefore appears to be impossible for either assured or underwriter to enforce the cancellation of a policy without consent of the other.1

Warranty of Seaworthiness. In one respect time policies are strikingly diverse from voyage policies: the former are exempt from the warranty of seaworthiness to which the latter are always subject (see below, p. 270, Warranties).

1 This appears to differ from what is laid down by Mr. Justice Charles in his decision of the Abrotas case (26th Jan. 1895, 11 Times L. R. 195) respecting the cancellation of a charter-party. In that case the voyage for which the vessel was chartered became, through stranding, impracticable in a commercial sense; and a loss would have fallen on the freight policy but for the words: "No claim from the cancelling of any charter . . . allowed." Mr. Justice Charles observed that it true that the word cancellation originally imported an act done, but it might mean that on the occurrence of certain facts the contract should be deemed to be cancelled or put an end to.' But it is submitted that there is no state of facts, except mutual agreement of the parties, which can bring into play the cancelling return clause of a marine policy.

was

The decision of the Divisional Court was reversed on appeal (Ct. App. May 1895: II Times L. R., 416), Lord Esher, M. R., said: "As a general rule, neither of the two parties to a contract could by him. self cancel the contract. It could only be cancelled by the mutual assent of both parties."

R

CHAPTER XV

LIABILITIES

IT became apparent early in the history of seagoing commerce that the owners of ships might be liable for damage done by their vessels, or by persons in their employment, to goods carried on board these vessels, to other vessels, or to goods carried by them. The most obvious form of accident giving rise to liability of this kind is the collision of two vessels.

Collision Liabilities not covered by ordinary Lloyd's Policy. As respects insurance of collision liabilities we do not find that any provision existed in England before 1836, when the case of De Vaux v. Salvador1 came before Lord Denman in the Court of King's Bench. The ship La Valeur came into collision with a steamer in the Hugli River, considerable damage occurring to both vessels. The owner of La Valeur claimed compensation from the owners of the steamer; and the claim having been referred to arbitration, it was awarded that each vessel should pay half of the sum of the damage sustained by both vessels. Under this award the ship had a balance to pay to the steamer. The owner of La Valeur brought an action against his underwriter to recover the sum he had thus been compelled to pay: he claimed it as a particular average loss, alleging that it arose out of a peril of the sea. The Court held that he could not recover, the ground of this decision, as stated by Lord Denman, being that the obligation to pay the sum in question was neither “ a necessary nor a proximate effect of the perils of the sea, 1 4 A. & E. 420.

but growing out of an arbitrary provision of the law of nations. . . not dictated by natural justice, nor possibly quite consistent with it." It is worth remarking how near the commencement of the era of steam-shipping is the date of this decision regarding the indirect effects of the peril which has become almost the most frequent and disastrous in modern navigation.

Running-down Clause.-As the shipowner had no protection from his ordinary policy in the matter of his collision liabilities, it became necessary to draw up a special contract to cover him. This contract is known as the collision clause, or as it is better named the running-down clause (R.D.C.). It is now extremely unusual to find a ship policy without some form of this contract either printed in it in the body of the text, or in the margin, or attached to the policy.

Extent of Shipowner's Liability. By the Merchant Shipping Act of 1894 (57 & 58 Vict. c. 60), § 503,2 the full amount for which a shipowner, British or foreign, is in our courts liable for loss of life or personal injury either alone or together with loss or damage to property-provided he is not by his own default or privity concerned in the same -is £15 per ton.3 The liability under the latter head alone is £8 per ton. The tonnage on which this liability is calculated is in the case of sailing ships the net register tonnage, in the case of steamers the gross tonnage without deduction on account of engine-room space.

1 It is striking that in the same year 1836, in the case of the ship Paragon, before the Supreme Court of Massachusetts (Peters v. Warren Insurance Company), Mr. Justice Story held that American law was of exactly the opposite effect. In a later case (General Mutual Insurance Company v. Sherwood) Mr. Justice Curtis adopted Lord Denman's view, so that now American and English jurisprudence agree on this matter. See Phillips, Law of Insurance, § 1137a.

2 Reproducing the provisions of the Merchant Shipping Amendment Act of 1862 (25 & 26 Vict. cap. 63), § 54.

3 For apportionment see the Victoria (Admiralty 3rd July 1881, Butt. J.) Aspinall M. L. Cases VI. N.S. p. 335: £7 a ton to be exclusively applied to life claims, and the balance of such claims and the cargo claims are to rank pari passi against the balance of £15 a

ton.