CHAPTER XI.

OF INSURANCE.

1770. Insurance is an engagement by the insurer, in consideration of a specified sum advanced, or of a periodical payment made by the insured, called a premium, to indemnify him to a certain extent for such losses as may occur to his property from contingencies which are specified or understood. The arrange

ment forms a means of security, (1) against the dangers of the elements or of the enemy, to which ships or goods are exposed at sea; (2) against the danger of fire, to which property of all kinds is liable on land; and (3) against loss to the insurer from the death of others, or to his family or creditors from his own.

1771. There is no contract known to the law of which the benefits, in the general case, are more indisputable; for, on the one hand, the insurer, whilst he divides his loss with others, earns large profits on the average of his transactions; and, on the other hand, the insured is protected from losses which, to an individual, would involve utter ruin. It has been well remarked by our great authority in mercantile law, that "the obvious necessity of some such refuge from disaster amidst the perils of trade, and the impracticability of proceeding without this expedient, now that it is known, afford unquestionable proofs of the narrow limits of ancient commerce, in which insurance was not practised." (Bell's Com. i. 473.)

MARINE INSURANCE.

1772. The persons who undertake risks on ships, or goods on board of them, are termed underwriters, from their writing their names under the policy or instrument by which they respectively become liable. The transaction is commonly effected by a middleman, or broker as he is called, whom capitalists, on

the one hand, empower to incur risks for them, and to whom the merchant or shipowner, on the other hand, applies when he wishes to insure.

1773. The broker by this means is placed in a position which enables him to complete the transactions without delay. "The broker," says Mr. Burton, "is in the situation of debtor and creditor with both parties. To the credit of the underwriter he puts down premiums, which he credits as cash, undertaking the risk of recovering them; and in periodical accounts he may balance against these, returned premiums and losses. Against the insured he debits the premium, and credits an insured loss or a return premium." (Burton's Manual, 436; and Bell's Com., Shaw's ed. i. 494.)

1774. The subject of marine insurance generally is the ship or cargo, but under this is comprehended the freight to be earned by the ship and the anticipated profits of a sale of the cargo. Advances on freight may also be insured, and so may the bottomry and respondentia interests which may emerge in connection with the ship or cargo. (Bell's Prin. 470.)

1775. There can be no insurance where there is no interest, though it is not necessary that it be specified in the policy (Bell's Com., Shaw's ed. i. 477); insurances, "interest or no interest, or without further proof of interest than the policy, or by way of gaming or wagering, or without benefit of salvage to the insured," being suppressed by an Act of early date. (19 Geo. II. c. 37, sec. 1.) But an insurable interest need not be a direct right of property; it may consist of an expected profit or freight, or other interest in the ship. Seamen's wages cannot be insured, because "it is one object of all maritime laws to prevent the desertion of seamen, and interest them in the preservation of the ship." (Arnould on Marine Insurance, i. 258, edition 1857.) This prohibition extends to the mate and all inferior officers, but not to the captain or master.

1776. On the principle that immoral contracts are null, no insurance will be given effect to where the contract involves a breach of law, such as the insurance of smuggled goods. (Marshall, 5 et seq.)

1777. The risks to which marine insurance commonly applies are those of—1st, Loss by the sea; 2nd, by fire; 3rd, enemies; 4th, pirates; 5th, arrests by kings or states; 6th, "barratry," or fraudulent and illegal acts by the master and mariners; 7th, jettison or jactus, i.e. the casting overboard of parts of the cargo, or of the guns, stores, etc., for the common safety. (Bell's Com., Shaw's ed. 473, 485.) Barratry does not include bad stowage, exposure to wet, theft, etc. (Bell's Com., Shaw's ed. 478.) A special clause is now frequently inserted into policies by which the underwriter takes the risk of the damages which the ship may incur by running down or injuring another vessel, to the extent of three-fourths, such risk not being covered by an ordinary policy. (Guthrie's Bell's Prin. 472, 7 a.)

1778. Policy. The only legal evidence of the contract is a policy, written on stamped paper. It must specify the particular risk or adventure, the names of the subscribers or underwriters, and the sum or sums insured; and if any of these particulars is omitted, it is null and void to all intents and purposes. The policy must be stamped at the date of its being entered into. It can be after-stamped only-(1) In the case of policies of mutual insurance, additional stamps may be impressed where they are not already underwritten to an amount beyond what the original stamps warrant; and (2) policies entered into abroad need not be stamped unless they are to receive effect in this country, when they may be stamped within two months after they are received here. Contracts by shipowners and others undertaking risks, attending goods on board ship, or to indemnify the owner for loss, require to be stamped as policies of insurance under the existing Stamp Act. (Bell's Prin. 466.)

1779. It is usually preceded by a slip, which is merely a jotting or memorandum, to which the underwriters subscribe their initials. This slip cannot be received as evidence in contradiction to the policy. (Bell's Com., Shaw's ed. 473.) As to its effect before the policy is completed, Mr. Arnould says, "A memorandum of insurance, embodying an agreement to execute a regular stamped policy, and acknowledging the receipt or accompanied by the payment of premium, may be enforced, at all events in courts of equity, or in courts possessing a mixed legal and equitable jurisdiction, like the Court of Session in Scotland. In such cases, however, the memorandum is available not as in itself constituting a legal contract of insurance, but only as an agreement to execute such contract." (Arnould on Marine Insurance, p. 52; and Lord Denman, in Mead v. Davidson, 3 Ad. and Ell. 303.)

1780. The subject or subjects insured must be so described in the policy as to leave no doubt of their identity. The ship is described by her name and that of the master; but where there is no doubt as to the identity of the risk, a mistake in the name of the ship or captain would not be fatal to the contract; and a saving clause is usually inserted, "or by whatever other name the ship shall be called," and "or whoever else shall go as captain." Goods are identified as goods on board the particular ship or ships; but where the insurer does not yet know by what vessel the goods may be carried, they may be insured as "by ship or ships," and even goods unknown may be insured "to be afterwards declared and valued by ship or ships." (Bell's Prin. 469 and 470.)

1781. The commencement and termination of the risk must also be certain both as to time and place. The risk on the ship begins from the time mentioned in the policy, or from the date of the policy, if no time be mentioned. That on freight begins from the time of the ship being ready for her cargo, or from something being begun to be done under the contract of affreight

ment with a view to its fulfilment; and on goods with the loading. The usual termination for the ship is, "till moored twenty-four hours in good safety;" and for the goods, "till safely landed." (Bell's Prin. 471.) On a time policy the period is by statute restricted to twelve months. (30 and 31 Vict. c. 23, sec. 8.)

1782. A policy may be either a valued policy or an open policy. In the first case a sum is fixed which is agreed to be the value of the loss; in the other case no sum is fixed, and proof must be given of the amount. (Bell's Prin. 481.)

1783. Like other instruments in re mercatoria, a policy of insurance does not require to be subscribed according to the statutory formalities required in the subscription of probative deeds. No witnesses are required. (Bell's Com. 5th ed. i. 606.)

1784. Parole evidence will not control the popular meaning of the words of a policy, "unless it establish a usage which, in mercantile affairs, and when not inconsistent with law, controls the construction of all policies." (Bell's Com., Shaw's ed. 474; Robertson, 4 East, 135; Hunter v. Leathby, 10 Barn. and Cress. 871.)

1785. The policy bears the receipt of the premium, and it is therefore presumed to be paid. (Bell's Com. 5th ed. 600.)

1786. Insurance being a contract of good faith, misrepresentation, false insinuation, and concealment of facts materially affecting the risk will be fatal. As an example, may be given concealment of positive information of the day of sailing. (Bell's Com. 5th ed. 619; Bell's Prin. 474; Kinloch v. Duguid, Jan. 22, 1813, F. C. 108; Hill v. Sibbald and Co., June 16, 1809, F. C. 303, reversed 2 Dow's Rep. 263; Smith, March 9, 1810, F. C.) "Contracts of insurance are in this, among other particulars, exceptional, that they require on both sides uberrima fides." (Lord Pres. in case of Life Ass. of Scotland, 1873, 11 M. 351.) Concealment of a fictitious sale, transferring a ship