Insurance and assurance. Definition. CHAPTER V. POLICIES OF INSURANCE. A very important description of personal property which we shall now proceed to consider is that of policies of insurance, or, as they may be more accurately denoted, policies of insurance and assurance. The term "assurance" is, in strictness, applied only to the contract of life insurance; the term "insurance," is properly reserved for the other forms of the contract, but the distinction is not very much observed, and is constantly neglected, even in judicial expositions of the law. The general idea of the contract of insurance may be conveyed to the mind of the reader by a definition which has been commended alike for its logic and its comprehensiveness. Insurance, with the exceptions which we shall next notice, is a contract whereby one for a consideration undertakes to compensate another for a loss (1). A contract whereby one party, in consideration of a stipulated sum, undertakes to indemnify the other against certain perils or risks to which he is exposed, or against the happening of some event. The attention of the reader ought, however, at once to be directed to the fact that a very important distinction exists between the contract of life insurance on the one hand, and the contracts of marine and fire insurance on the other. The contracts of marine and fire insurance are essentially contracts of indemnity, while it was conclusively settled in the year 1854, by a case to which we shall presently refer, that the contract of life insurance is a mere contract to pay a certain sum on the death of a certain person, and has in its nature nothing whatever to do with indemnity. The contract of insurance against accident is also not in the nature of indemnity (post, p. 278). The principle of indemnity implied in the contract of in- Consesurance leads to certain consequences, which may be shortly quence of principle of indem stated as follows: 1. The amount which the insured can recover is limited to nity. his actual loss, which may be recovered either by payment or reinstatement. No more than this can be commonly recovered, and if more is recovered, the insurer, if he paid in ignorance, may get the amount so paid back. 2. If the thing insured is only partially destroyed, or deteriorated, the insured can only claim the value of the injury actually done unless he surrenders the thing insured to the insurer. This is the doctrine of abandonment, the principle of which applies to all insurance of property, though chiefly to marine insurance (1). 3. The insured cannot "take with both hands." If he has ways and means independent of the insurer to repair his loss, he must either cede such ways and means to the insurer on being paid in full the amount of his loss, or he must exercise such ways and means for the benefit of the insurer. The principle on which this is founded is called "subrogation" (2). This Subrogadoctrine has been judicially defined or described as follows: "The doctrine is well established, that where something is insured against loss, either in a marine or in a fire policy, after the assured has been paid by the insurers for his loss, the insurers are put into the place of the assured with regard to every right given him by the law respecting the subject-matter insured, and which contract is affected by the loss or the safety of the subject-matter insured by reason of the peril insured against." tion. The contract of marine insurance has been defined as one Marine whereby one party for a stipulated sum undertakes to indem- insurance. nify 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 (3). The insurers are called "underwriters," because they subscribe the policy; and if the ship or goods insured are wholly or partially destroyed, perish, or are lost in whole or in part, each underwriter has to contribute rateably to the loss. The voyage must be a legal voyage. covered by a policy of marine (1) Porter on Insurance, pp. 4, 5; Darrell v. Tibbitts, 5 Q. B. D. 560; Castellain v. Preston, 11 Q. B. D. 380. (2) Arnold on Marine Insurance, The losses which are usually 15. See as to concealment of material (3) Smith's Mercantile Law, bk. 2, Subjects of marine insurance. Marine policies. sea, fire, capture, arrest, restraints and detainments, pirates, negligence of crew, barratry, and all other perils, losses and misfortunes (1). The result of the authorities bearing on the question what may be the subject of marine insurance has been summed up in a standard work (2) as follows:-"Ships, goods, or special property therein, e.g. that of a carrier, or money expended by a captain for the ship's use, his commission and privileges, expected profits, bottomry, or respondentia interest, freight, have all been held fit subjects of marine insurance. Under the term freight' may be insured the benefit an owner would derive from carrying his own goods in his own vessel; but in order to recover under a policy upon freight, the assured must prove that, but for the intervention of a peril insured against, some freight would have been earned, by showing, either that some goods were put on board, or that there was some contract for so doing. In a word, any person who has an interest in the subject-matter of insurance may be insured to the extent of that interest; and any person may be said to have an interest who may be injured by the risks to which that subject-matter is exposed, or would only, but for them, have a moral certainty of advantage." The contract of marine insurance, in order to be valid, must be embodied in a policy, the essential parts of which are the risk, the names of the subscribers or underwriters, and the sums insured (3). Marine policies are of two classes: "open" policies, i.e. where the value of the thing insured is not inserted in the policy, and must consequently in the event of loss be proved at the trial; and "valued," i.e. where the value of the thing insured is agreed by the parties and included in the policy (4). Marine policies in blank are void. The law on this subject is contained in a statute of Geo. 3 (5), which provides as follows: "It shall not be lawful for any person or persons to make or effect, or cause to be made or effected, any policy or policies of assurance upon any ship or ships, vessel or vessels, or upon any goods, merchandises, effects, or other property whatsoever, without first inserting, or causing to be inserted, in such policy (1) Newson's Law of Shipping and Marine Insurance, bk. 2, ch. .V pp. 250-262. (2) Smith's Mercantile Law, 10th ed. pp. 401-403. (3) No action can be maintained on "a slip." Fisher v. Liverpool Marine Insurance Co., L. R.9 Q. B. 418. () Lidgett v. Secretan, L. R. 6 C. P. 616; Burnand v. Rodocanachi, 7 App. Cas. 333. (5) 28 Geo. 3, c. 56, insurance. or policies of assurance the name or names or the usual style Marine and firm of dealing of one or more of the persons interested in such assurance, or without, instead thereof, first inserting or causing to be inserted in such policy or policies of assurance the name or names or the usual style and firm of dealing of the person or persons residing in Great Britain, who shall receive the order for and effect such policy or policies of assurance, or of the person or persons who shall give the order or direction to the agent or agents immediately employed to negotiate or effect such policy or policies of assurance." In order that an assignment of a marine policy should be Assignvalid there must be (a), an assignable interest in the assign- ment of ment; (b), the risk insured against must still be pending; policy. (c), there must be an insurable interest in the thing insured transferred to the assignee (1). The assignee may sue in his own name, but the defendant may set up any defence which would have been valid in an action by the assignor (2). And here it may be well to point out the distinction between "particular" and "general average." Particular average is the loss accidentally and proximately Particular caused by the perils insured against, to the subject-matter of average. the insurance; which loss, instead of falling on all interested in the voyage, falls solely on the owner of the property lost. General average is a contribution by the owners of the ship, General freight, and cargo, to compensate the owner of a particular part of average. the ship or cargo whose property was sacrificed for their common good, ex. gr., a jettison of cargo. The whole adventure must have been in imminent danger of being lost for a right to general average to exist; for the sacrifice must have been for the general good (3). Simple or particular average, said Lord Stowell (4), is not a (1) Newson's Law of Shipping and Marine Insurance, p. 219; North of England Oil Cake Co. v. Archangel Insurance Co., L. R. 10 Q. B. 255. (2) 31 & 32 Vict. c. 86. (3) The law of general average is derived from the Lex Rhodia, which provided "ut si levandæ navis gratiâ jactus mercium factus sit omnium contributione sarciatur quod pro omnibus datum est," on the principle that in the moment of jeopardy every one would, as Lord Tenterden said, adopt the words of the Latin poet, "fundite quæ mea sunt etiam pulcherrima." (*) The Copenhagen, 1 C. Rob. 293. It has been pointed out that average in fire policies is quite a different average. Particular very accurate expression; for it means damage incurred by or for one part of the concern, which that part must bear alone; so that in fact it is no average at all; but still this expression is sufficiently understood and received into familiar use. loss of an anchor or cable, the starting of a plank, are matters of simple or particular average, for which the ship alone is liable. Should a cargo of wine turn sour on the voyage, it would be a matter of simple average, which the goods alone must bear. Fire insurance. The Policies of fire insurance now usually contain certain conditions declaring the terms on which the insurance is effected, limiting the responsibility of the insurer, and imposing duties on the insured. These conditions may relate: (1) to the making of the contract; (2) to the right of action; (3) to the forfeiture of the contract; (4) to the settlement of disputes, and (5) to the time of making the claim. A usual proviso in fire policies is that, on happening of a loss, a notice in writing must be given within fifteen days at latest, with particulars, values, vouchers, and a statutory declaration of the truth of the account. The law with regard to this condition was stated in a recent case by the House of Lords, as follows: "It has long been the practice of companies insuring against fire, for the purpose of their own security, to incorporate in their policies by reference to their proposals various stipulations for matters to be done by the assured making a claim before the company is to pay him, and to make the fulfilment of those conditions a condition precedent to their obligation to pay. There was much controversy on the subject about a century ago, but since the case of Worsley v. Wood it has been settled law that this mode of protecting themselves which the companies have adopted is effectual" (1). Court of Appeal. In this case the cular average loss for the purpose of ascertaining the percentage under the memorandum, and the particular average loss being under three per cent., the plaintiffs could not recover it under the ordinary Lloyd's policy, and therefore were entitled to recover under the policy effected with the defendants. See also as to average, Marine Insurance Co. v. China, &c., Co., 11 App. Cas. 573. (') London Guarantee Co. v. Fearnley, 5 App. Cas. 911, citing Worsley v. Wood, 6 T. R. 710. See as to arbitration clause, Viney v. Bignold, 20 Q. B. D. 172. |