Chapter 11

The reports of the insurance department of New York cover more companies than those of any other state. The institutions not included in them are about thirty-five in number, mostly small and local. The New York reports represent very nearly 95% of the entire business of the United States. While the amount of life assurance done by British and other foreign offices in the United States is insignificant, fourteen companies of the United States have agencies in Canada (ten for new business), and four transact business in Europe and in other parts of the world. The home business of the American companies is in the aggregate about 87½% of the whole.In the principal countries of continental Europe life assurance is offered by the chief international institutions of Great Britain and the United States, and their policies are in force probably to the aggregate amount of £140,000,000. The domestic companies have been stimulated to increased activity by the aggressive canvassing of the foreign agencies, and the business in recent years has grown rapidly, until now the total sum insured upon lives on the continent of Europe is little less than a milliard of pounds sterling. Much information about life assurance in the different countries of Europe will be found in Ehrenzweig’sAssekuranzjahrbuch(Vienna).

In the principal countries of continental Europe life assurance is offered by the chief international institutions of Great Britain and the United States, and their policies are in force probably to the aggregate amount of £140,000,000. The domestic companies have been stimulated to increased activity by the aggressive canvassing of the foreign agencies, and the business in recent years has grown rapidly, until now the total sum insured upon lives on the continent of Europe is little less than a milliard of pounds sterling. Much information about life assurance in the different countries of Europe will be found in Ehrenzweig’sAssekuranzjahrbuch(Vienna).

(C. T. L.; T. A. I.)

V. British Post Office Insurance

In 1864 Mr Gladstone, then chancellor of the exchequer, advocated the extension of life insurance amongst persons of small means, and, encouraged by the remarkable success of thePost Office Savings Bank, then recently established, proposed that the services of the postmaster-general should be enlisted in the promotion of insurance. The result was the passing of the Government Annuities Act 1864. This act authorized the commissioners for the reduction of the national debt, for the first time, to insure a life without granting an annuity upon it, and enabled the postmaster-general to act as the agent of the commissioners in the issue of life policies and the grant of annuities. The limits of insurance were fixed at £20 and £100, and of annuities at £4 and £50; and the purchase of deferred annuities or old-age pay, by monthly, or even more frequent instalments, was sanctioned. The work was eagerly accepted by Lord Stanley of Alderley, the postmaster-general of the day, and the machinery for putting the act in action was elaborated by Frank Ives Scudamore of the Post Office and Sir Alexander Spearman of the National Debt office. The business was commenced on the 17th of April 1865. By the end of the year 560 policies of insurance had been issued, and 94 immediate and 54 deferred annuities granted. In the first twelve months these figures had increased to 809 policies and 230 annuities. The opportunity thus given of insuring through the Post Office with government security was not, however, embraced with the warmth which had been anticipated. In 1882, when Mr Henry Fawcett, then in office, examined the subject, he found that the average number of policies of insurance granted annually during the seventeen years which had elapsed was under 400—less, in fact, than during the first twelve months of the system. The purchase of annuities had increased slightly, but the business was transacted chiefly in immediate annuities, and hardly indicated any progress in provision for old age by means of early savings. Mr Fawcett procured a Select Committee of the House of Commons on the subject. Before this committee Mr James Cardin, then assistant receiver and accountant-general of the Post Office, propounded a scheme for combining the annuity and insurance business of the Post Office with that of the savings bank. The Committee recommended the adoption of this scheme, together with some enlargement of range and some relaxation of conditions. The recommendations of the Committee were embodied in the Government Annuities Act 1882, which came into operation on the 3rd of June 1884, and which forms the basis of the present system.

Any person between 14 and 65 can now insure through the medium of the Post Office Savings Bank for any amount from £5 to £100; and the life of a young person between 8 and 14 can be insured for £5. Through the same channel can be purchased annuities, immediate or deferred, from £1 to £100, on the life of any person from 5 years old upwards. Old-age policies, that is, policies securing payment of a specific sum either at the expiration of a fixed period (varying from 10 to 40 years), or upon the attainment of a certain age, or sooner in case of death, can also be obtained. Policies for a fixed period can only be purchased by a single payment, but in all other cases the purchase can be effected by payment either of a lump sum or of annual instalments. Further, all purchases are effected through the Post Office Savings Bank. As soon as a contract is completed, the purchaser is required to pay the first instalment to his account in the bank, or, if he has no account already, to open an account for the purpose. This and all further instalments are then transferred by the postmaster-general, as they become due, to the credit of the National Debt Commissioners; all the purchaser has to do is to keep his banking account in funds; he can pay his savings into the bank when and as he pleases. So, also, when old-age pay, secured either by a deferred annuity or an endowment policy, becomes due, it is paid to the account of the purchaser; and, if it does not cause the sum standing to his credit to exceed the statutory limits, it can remain there earning interest, and be drawn out in such amounts as may be convenient from time to time. The purchaser has also the advantage of the ubiquity of the Post Office Savings Bank. He can make his deposits, and can draw out his old-age pay when it becomes due, at any one of the 13,000 odd post offices where savings bank business is transacted. He can even, if his savings are made from day to day, use the penny stamp slips introduced by Mr Fawcett, affixing a stamp whenever he has a penny to spare, and paying in the slip when it is worth a shilling. In short, every advantage open to the ordinary depositor in the Savings Bank is placed at the service of the working man or woman who wishes to secure old-age pay, or to have a small sum to aid those who may suffer pecuniarily from his or her death. Even the reluctance of many persons to submit themselves to medical examination is tenderly regarded. A policy for any sum up to £25 may, if the information afforded is satisfactory, be obtained without a doctor’s certificate, on condition that, if death happens during the first year, only the premium paid is returned, and if during the second year, only half the sum insured is paid. As regards old-age pay, a purchaser can, by adopting a slightly higher scale of payment, secure the return of his purchase money if at any time before the annuity falls in he repents of his bargain. Further, employers of labour and friendly societies can, on behalf of their workmen or members, make all the payments necessary to buy an insurance or annuity, and recoup themselves out of wages or members’ contributions.The act of 1882 directed that the tables upon which annuities and policies of insurance are granted should be revised from time to time; and in February 1896 new tables reducing the rates of annual premiums, and giving greater facilities for old-age insurance, were issued. The rates are now but very slightly (less than 3%) higher than the average rates of the larger insurance offices. But the expense of small insurance business must necessarily be above the average, and it is fairer to compare the Post Office rates with those of the office which stands pre-eminent in the insurance of the working classes. Such a comparison shows that up to the age of 40 a life insurance can be effected with the Post Office at a cheaper rate than with the Prudential Insurance Company; between 40 and 60 the advantage is slightly on the side of the company.In 1885, the first complete year after Mr Fawcett’s improvement took effect, 103 deferred annuities and 457 insurance policies were granted; in 1905, 158 deferred annuities and 741 policies. The increase of business, measured in percentages, is no doubt appreciable, but the figures themselves are so small as to make such a comparison trivial. If we compare the two periods, before and after Mr Fawcett’s reforms, we find that between the 17th of April 1865 and the 2nd of June 1884 (about nineteen years) 7064 policies of insurance, amounting to £557,625, were issued, and between the latter date and the end of 1905, 16,577 policies, amounting to £875,496. For the whole period the figures are 23,641 policies for £1,433,121. During the same time 3144 contracts for old-age pay, amounting in all to £64,378, were made. When we contrast with this sum total the fact that in 1905 alone 1,435,329 new accounts were opened in the Post Office Savings Bank, and more than £42,000,000 deposited in the bank in the course of the year, it becomes apparent that, while the Savings Bank has reached the mass of the population, insurance against old age and death through the Post Office has not.In 1894 Mr C. D. Lang, the Controller of the Post Office Savings Bank, and Mr Cardin, giving evidence before the Commission on Old-Age Pensions, ascribed the small insurance and annuity business of the Post Office to the want of a personal canvass. They pointed out that there had been some temporary increase in insurance, through an appeal to the Post Office employés themselves, and they suggested that something might be done if the masters of the elementary schools could be induced to interest themselves in recommending to their scholars and the parents of their scholars the advantages offered by the Post Office. It was also pointed out that the friendly societies might, if they were so disposed, act as intermediaries between their members and the Post Office, and thereby, as it were, reinsure their risks with the government; but it was added that all overtures of this nature to the societies had failed, apparently from the fear—quite groundless—of introducing government control of the societies’ affairs. There may, indeed, be another reason for the failure of the deferred annuity system. The insurance of old-age pay is not popular even amongst the members of friendly societies, or even in Germany, where it has been given to the workmen largely at the expense of other people. Insurance against death, sickness and accidents appeals to the young working man; but old age is too far off to be an object of solicitude, especially since the grant of old-age pensions by the state has made the future secure from destitution at least. However, if at any time opinion changes, the Post Office stands ready to make foresight or philanthropy easy. Though no great results have been achieved, a machinery has been established which works with perfect smoothness, and which may some day be of service to the nation.

The act of 1882 directed that the tables upon which annuities and policies of insurance are granted should be revised from time to time; and in February 1896 new tables reducing the rates of annual premiums, and giving greater facilities for old-age insurance, were issued. The rates are now but very slightly (less than 3%) higher than the average rates of the larger insurance offices. But the expense of small insurance business must necessarily be above the average, and it is fairer to compare the Post Office rates with those of the office which stands pre-eminent in the insurance of the working classes. Such a comparison shows that up to the age of 40 a life insurance can be effected with the Post Office at a cheaper rate than with the Prudential Insurance Company; between 40 and 60 the advantage is slightly on the side of the company.

In 1885, the first complete year after Mr Fawcett’s improvement took effect, 103 deferred annuities and 457 insurance policies were granted; in 1905, 158 deferred annuities and 741 policies. The increase of business, measured in percentages, is no doubt appreciable, but the figures themselves are so small as to make such a comparison trivial. If we compare the two periods, before and after Mr Fawcett’s reforms, we find that between the 17th of April 1865 and the 2nd of June 1884 (about nineteen years) 7064 policies of insurance, amounting to £557,625, were issued, and between the latter date and the end of 1905, 16,577 policies, amounting to £875,496. For the whole period the figures are 23,641 policies for £1,433,121. During the same time 3144 contracts for old-age pay, amounting in all to £64,378, were made. When we contrast with this sum total the fact that in 1905 alone 1,435,329 new accounts were opened in the Post Office Savings Bank, and more than £42,000,000 deposited in the bank in the course of the year, it becomes apparent that, while the Savings Bank has reached the mass of the population, insurance against old age and death through the Post Office has not.

In 1894 Mr C. D. Lang, the Controller of the Post Office Savings Bank, and Mr Cardin, giving evidence before the Commission on Old-Age Pensions, ascribed the small insurance and annuity business of the Post Office to the want of a personal canvass. They pointed out that there had been some temporary increase in insurance, through an appeal to the Post Office employés themselves, and they suggested that something might be done if the masters of the elementary schools could be induced to interest themselves in recommending to their scholars and the parents of their scholars the advantages offered by the Post Office. It was also pointed out that the friendly societies might, if they were so disposed, act as intermediaries between their members and the Post Office, and thereby, as it were, reinsure their risks with the government; but it was added that all overtures of this nature to the societies had failed, apparently from the fear—quite groundless—of introducing government control of the societies’ affairs. There may, indeed, be another reason for the failure of the deferred annuity system. The insurance of old-age pay is not popular even amongst the members of friendly societies, or even in Germany, where it has been given to the workmen largely at the expense of other people. Insurance against death, sickness and accidents appeals to the young working man; but old age is too far off to be an object of solicitude, especially since the grant of old-age pensions by the state has made the future secure from destitution at least. However, if at any time opinion changes, the Post Office stands ready to make foresight or philanthropy easy. Though no great results have been achieved, a machinery has been established which works with perfect smoothness, and which may some day be of service to the nation.

VI. Marine Insurance

Marine insurance long antedates the kindred businesses of fire and life insurance. Villani, a 14th-century Florentine historian, speaks of marine insurance as having originated in Lombardy in 1182. This proves, atHistory.least, that in his day it was no novelty. It is mentioned in a Pisan ordinance of 1318, and in Venetian public documents of the early years of the 15th century. The earliest form of policy known is that given in the Florentine statute of 1523. It is uncertain whether insurance was introduced into England directly from Italy or by way of Flanders. The earliest policies issued in England which have yet been discovered are in Italian, but the subscriptions are in English (“Santa Maria di Venetia,” Cadiz to London, 1547, “Santa Maria de Porto Salvo,” Hampton to Messina, 1548).

The earliest known policies in English are one of 1555 on the “Sancta Crux” “from any porte of the Isles of Indea of Calicut unto Lixborne,” and one of 1557 on the “Ele” from Velis Maliga to Antwerp. The authority for this statement is Mr R. G. Marsden, who edited for the Selden Society the records of the Admiralty Court; nothing earlier had been found at the Record Office down to May 1907. In the “Sancta Crux” policy there is no detailed statement of perils insured against, or of risks undertaken by the underwriter; the whole obligation of the underwriter to the assured is embodied in the following words: “We will that this assurans shall be so strong and good as the most ample writinge of assurans, which is used to be maid in the strete of London, or in the burse of Andwerp, or in any other forme that shulde have more force.” This reference to Antwerp usage is 67 years before the date of C. Malynes’ statement that all Antwerp policies contained a clause providing that they should in all things be the same as policies made in Lombard Street of London. The wording of the English policies written in Italian is very much simpler than the Florentine form of 1523, from which it almost seems that the wording used in England followed an earlier Italian form. But even the Italian policies in the two “Santa Marias” mention the uses and customs of “questa strada Lombarda di Londra” as the standard of the assurance they afford. The next most ancient policy we possess is dated 1613; it covers goods on the “Tiger” from London to “Zante, Petrasse and Saphalonia.” The “Tiger” policy is interesting in another connexion. It recalls Shakespeare’sMacbethI. iii. 7 (written about 1605):—“Her husband’s to Aleppo gone, master of the ‘Tiger.’”Clark & Wright’s note (in the “Clarendon Press” series edition) cites Sir Kenelm Digby’s journal of 1628 mentioning “the ‘Tyger’ of London going for Scanderone” (Alexandretta). Hakluyt (Voyages) gives letters and journals of a voyage of the “Tyger of London” to Tripolis in 1583. Shakespeare again mentions a ship called the “Tiger” inTwelfth Night, V. iii. 63:—“And this is he that did the ‘Tiger’ board.”The policy by the “Tiger” is much more ample than any of those already mentioned; it details the perils insured against in words closely resembling the Florentine formula of 1523, and differing only slightly from the form adopted by Lloyd’s at a general meeting held in 1779, and afterwards incorporated in the Sea Insurance Stamp Act of 1795, which is the stem form of all modern British and American marine insurance policies.While the form of the insurance policy was thus developing, there was a singular absence of legislation (and, as far as we can yet trace, of litigation) on the subject. Till 1601 differences seem to have been generally settled by arbitration. This accounts for the poverty of the British Admiralty records in matters of marine insurance. In 1601 a special tribunal was established by statute for summary trial of disputes arising on insurance policies; but, owing mainly to the opposition of the common-law judges, the new court languished, and by 1720 it had fallen into utter disuse. J. A. Park states that not more than sixty insurance cases were reported between 1603 and 1756. Consequently, when Lord Mansfield came to the court of king’s bench in the latter year, he found a clear field. He practically created the insurance law of England. He made use of all the continental ordinances and codes extant in his day, taking his legal principles largely from them; the customs of trade he learnt from mercantile special jurors. Subsequent legislation referred solely to the prohibiting of certain insurances (wager policies, &c.), the naming in the policy of parties interested therein, and the stamp duty levied on marine insurances. In 1894 Lord Herschell introduced his Marine Insurance Bill, which endeavoured “to reproduce as exactly as possible the existing law relating to marine insurance.” After Lord Herschell’s death, Lord Chancellor Halsbury took up the bill, introducing it in the House of Lords in 1899 and again in 1900; he appointed a committee on which underwriters, shipowners and average adjusters were represented, and, presiding himself, went through the bill with them clause by clause. The bill was then passed by the Lords, but was always blocked in the House of Commons till 1906, when it was taken up by Lord Chancellor Loreburn in conjunction with Lord Halsbury. After some amendment and modification it was finally passed by both Houses and became law on the 1st of January 1907 (6 Ed. VII., c. 41).3In America a less happy fate has attended the insurance code, forming part of the proposed civil code of New York, completed and published in 1865, of which a very slightly altered version was adopted in California and has been in effect there since the 1st of January 1873. On the continent of Europe legislation at first took the form of local ordinances of commercial cities, such as Barcelona (1434-1484), Florence (1523), Burgos (1538), Bilbao (1560), Middelburg (1600), Rotterdam (1604-1655). In the third quarter of the 16th century Rouen produced a handy guide to marine insurance,Le Guidon de la mer; and in 1656 Étienne Cleirac published there hisUs et coutumes de la mer. This was followed in 1681 by theOrdonnance de la marine, which, through Lord Mansfield, had a great effect on English case law. In 1807 France produced theCode de commerce, on the model of which nearly every European nation has issued a similar code. Probably the “best considered” (Willes, J.) of these, and the most adequate as regards marine insurance, is that of the German empire; but Hamburg and Bremen still preserve many of their local conditions by special contract in their policies. In fact it is doubtful whether the German Code could have been produced without the previous elaboration of the Conditions of Hamburg and of Bremen. The Hamburg Conditions of 1847, revised 1867, constitute an admirable compendium of marine insurance as practised in that city.Marine insurance being peculiarly an international business, being a factor in 95% of the operations of oversea trade, it is natural that those engaged in this business or making use of marine insurance in their business should experience the difficultyConflict of laws.and hardship arising from the differences between the marine insurance law of different states, and should attempt to find a remedy. Such an attempt was made at the Buffalo conference of the International Law Association in 1899 to prepare a body of rules dealing with those parts of marine insurance on which the laws of maritime countries differ. This undertaking was of the same nature as the earlier efforts of the same association which resulted in the formulation of the York-Antwerp rules of general average. There are four important subjects on which great divergence prevails: (a) Constructive total loss; (b) Deductions from costs of repairs, new from old; (c) Effect of unseaworthiness and negligence; (d) Double insurance.(a) Constructive total loss results, according to the law of France, Italy, Spain, Belgium, Holland, in case of loss or deterioration of the things insured amounting to not less than three-quarters; in German law a ship is considered to be “unworthy of repair” when the cost of the repair, without deductions new for old, would amount to over three-fourths of the ship’s former value (no similar provision seems to exist in Germany for goods); in the law of America a damage over 50% of the value of the vessel when repaired is a constructive total loss of the vessel, in case of the policy containing no express provision to the contrary. None of these varying systems appears to be so equitable to all concerned as the British rule, which was for this reason suggested to the Buffalo conference for international adoption. As regards the time when the test for constructive total loss should be applied, it was suggested to reject the British rule, prescribing that it shall be the time of commencing action against underwriters, and to adopt the continental and American rule referring to the facts as they existed at the time of abandonment. Then, as respects the effect of a valid abandonment on the rights in the property insured, the conference proposed to adopt the British and American rule of making the abandonment refer back to the time of the loss, as against the continental European system of making the transfer operative only from the date of the notice of abandonment. Finally, as to the freight of a properly-abandoned ship, it was proposed to follow for international purposes the American rule of dividing the freight of the voyage between shipowner and underwriter in the proportion of the distances run before the disaster and to be run thereafter, rejecting the British rule of complete transfer to the underwriter and the various continental rules of proportional division between shipowner and underwriter.(b) It was proposed to adopt the deductions set forth in the York-Antwerp rules as being suitable for international adoption in marine insurance contracts.(c) As regards unseaworthiness and its effect on insurances on ships and goods, it was proposed in the case of ships to reduce materially the obligations of the insured as required by English and American law; to diminish the requirement from the absolute attainment of seaworthiness to the mere exercise of all reasonable care to make the vessel seaworthy. Even this attenuation did not appear sufficient, as it was proposed to degrade the performance of the already minimized warranty from being a condition of the insurance, and its non-performance from invalidating the policy. As to goods, they were proposed to be exempted from any warranty of seaworthiness of ship. Concerning negligence, it was proposed to hold the underwriter liable (subject to the new seaworthiness warranty) for any loss caused proximately by a peril insured against, although wholly or partly the result of the neglect of the insured, or his servants or agents, or by the wilful act of his servants or agents, or the inherent nature or unsoundness of the article insured.(d) In case of double or multiple insurance, the conference proposed to adopt the British rule of making all the policies effectual, independently of the order in which they were effected, and of making all the underwriters entitled to contributionsinter se. As regards the premium, it was proposed that no premium should be returnable, where the risk has attached.With the exception of those embodying the two suggestions named in par. (a), all the resolutions proposed were accepted by the conference. But it appears extremely unlikely that British and American underwriters will voluntarily consent to the practical annihilation of the seaworthiness warranty, and no less improbable that American and continental assured will voluntarily accept the stricter rule of constructive total loss embodied in English law, when their nationallaw enforces on the underwriter terms more favourable to the assured. The fewness of the international insurance markets of the world diminishes the need for uniform international regulations in this matter. The matter may be one for adjustment by variation in the rate of premium, but this is not certain.The Glasgow conference of 1901 adopted the rules, after excepting time policies from the scope of the rule respecting seaworthiness. The rules are known as the Glasgow Marine Insurance Rules. The writer knows of no instance in which they have been adopted in practice.Returning to marine insurance in the United Kingdom, it is to be observed that the passing of the Marine Insurance Act of 1906 sharply marks an important change in the nature of the law of the subject. Till then it was based almost entirely on common law, only a few disconnected points having been dealt with by statute. The reported cases were thus of great importance, and being about 2000 in number (testeSir M. D. Chalmers) were not easy to master. No doubt many of them referred to commercial conditions no longer prevalent; still they could not be entirely ignored. But the original introducer of the bill described it as an endeavour “to reproduce as exactly as possible the existing law relating to marine insurance,” and as by being made law the language of the act has become authoritative, insured and insurers have now no call to go behind the wording of the act in any matter with which it deals. It thus appears that the case law of the subject existing before the 1st of January 1907 may be left aside, unless, perhaps, for use as affording examples of the way in which the provisions of the act work.

“Her husband’s to Aleppo gone, master of the ‘Tiger.’”

Clark & Wright’s note (in the “Clarendon Press” series edition) cites Sir Kenelm Digby’s journal of 1628 mentioning “the ‘Tyger’ of London going for Scanderone” (Alexandretta). Hakluyt (Voyages) gives letters and journals of a voyage of the “Tyger of London” to Tripolis in 1583. Shakespeare again mentions a ship called the “Tiger” inTwelfth Night, V. iii. 63:—

“And this is he that did the ‘Tiger’ board.”

The policy by the “Tiger” is much more ample than any of those already mentioned; it details the perils insured against in words closely resembling the Florentine formula of 1523, and differing only slightly from the form adopted by Lloyd’s at a general meeting held in 1779, and afterwards incorporated in the Sea Insurance Stamp Act of 1795, which is the stem form of all modern British and American marine insurance policies.

While the form of the insurance policy was thus developing, there was a singular absence of legislation (and, as far as we can yet trace, of litigation) on the subject. Till 1601 differences seem to have been generally settled by arbitration. This accounts for the poverty of the British Admiralty records in matters of marine insurance. In 1601 a special tribunal was established by statute for summary trial of disputes arising on insurance policies; but, owing mainly to the opposition of the common-law judges, the new court languished, and by 1720 it had fallen into utter disuse. J. A. Park states that not more than sixty insurance cases were reported between 1603 and 1756. Consequently, when Lord Mansfield came to the court of king’s bench in the latter year, he found a clear field. He practically created the insurance law of England. He made use of all the continental ordinances and codes extant in his day, taking his legal principles largely from them; the customs of trade he learnt from mercantile special jurors. Subsequent legislation referred solely to the prohibiting of certain insurances (wager policies, &c.), the naming in the policy of parties interested therein, and the stamp duty levied on marine insurances. In 1894 Lord Herschell introduced his Marine Insurance Bill, which endeavoured “to reproduce as exactly as possible the existing law relating to marine insurance.” After Lord Herschell’s death, Lord Chancellor Halsbury took up the bill, introducing it in the House of Lords in 1899 and again in 1900; he appointed a committee on which underwriters, shipowners and average adjusters were represented, and, presiding himself, went through the bill with them clause by clause. The bill was then passed by the Lords, but was always blocked in the House of Commons till 1906, when it was taken up by Lord Chancellor Loreburn in conjunction with Lord Halsbury. After some amendment and modification it was finally passed by both Houses and became law on the 1st of January 1907 (6 Ed. VII., c. 41).3In America a less happy fate has attended the insurance code, forming part of the proposed civil code of New York, completed and published in 1865, of which a very slightly altered version was adopted in California and has been in effect there since the 1st of January 1873. On the continent of Europe legislation at first took the form of local ordinances of commercial cities, such as Barcelona (1434-1484), Florence (1523), Burgos (1538), Bilbao (1560), Middelburg (1600), Rotterdam (1604-1655). In the third quarter of the 16th century Rouen produced a handy guide to marine insurance,Le Guidon de la mer; and in 1656 Étienne Cleirac published there hisUs et coutumes de la mer. This was followed in 1681 by theOrdonnance de la marine, which, through Lord Mansfield, had a great effect on English case law. In 1807 France produced theCode de commerce, on the model of which nearly every European nation has issued a similar code. Probably the “best considered” (Willes, J.) of these, and the most adequate as regards marine insurance, is that of the German empire; but Hamburg and Bremen still preserve many of their local conditions by special contract in their policies. In fact it is doubtful whether the German Code could have been produced without the previous elaboration of the Conditions of Hamburg and of Bremen. The Hamburg Conditions of 1847, revised 1867, constitute an admirable compendium of marine insurance as practised in that city.

Marine insurance being peculiarly an international business, being a factor in 95% of the operations of oversea trade, it is natural that those engaged in this business or making use of marine insurance in their business should experience the difficultyConflict of laws.and hardship arising from the differences between the marine insurance law of different states, and should attempt to find a remedy. Such an attempt was made at the Buffalo conference of the International Law Association in 1899 to prepare a body of rules dealing with those parts of marine insurance on which the laws of maritime countries differ. This undertaking was of the same nature as the earlier efforts of the same association which resulted in the formulation of the York-Antwerp rules of general average. There are four important subjects on which great divergence prevails: (a) Constructive total loss; (b) Deductions from costs of repairs, new from old; (c) Effect of unseaworthiness and negligence; (d) Double insurance.

(a) Constructive total loss results, according to the law of France, Italy, Spain, Belgium, Holland, in case of loss or deterioration of the things insured amounting to not less than three-quarters; in German law a ship is considered to be “unworthy of repair” when the cost of the repair, without deductions new for old, would amount to over three-fourths of the ship’s former value (no similar provision seems to exist in Germany for goods); in the law of America a damage over 50% of the value of the vessel when repaired is a constructive total loss of the vessel, in case of the policy containing no express provision to the contrary. None of these varying systems appears to be so equitable to all concerned as the British rule, which was for this reason suggested to the Buffalo conference for international adoption. As regards the time when the test for constructive total loss should be applied, it was suggested to reject the British rule, prescribing that it shall be the time of commencing action against underwriters, and to adopt the continental and American rule referring to the facts as they existed at the time of abandonment. Then, as respects the effect of a valid abandonment on the rights in the property insured, the conference proposed to adopt the British and American rule of making the abandonment refer back to the time of the loss, as against the continental European system of making the transfer operative only from the date of the notice of abandonment. Finally, as to the freight of a properly-abandoned ship, it was proposed to follow for international purposes the American rule of dividing the freight of the voyage between shipowner and underwriter in the proportion of the distances run before the disaster and to be run thereafter, rejecting the British rule of complete transfer to the underwriter and the various continental rules of proportional division between shipowner and underwriter.

(b) It was proposed to adopt the deductions set forth in the York-Antwerp rules as being suitable for international adoption in marine insurance contracts.

(c) As regards unseaworthiness and its effect on insurances on ships and goods, it was proposed in the case of ships to reduce materially the obligations of the insured as required by English and American law; to diminish the requirement from the absolute attainment of seaworthiness to the mere exercise of all reasonable care to make the vessel seaworthy. Even this attenuation did not appear sufficient, as it was proposed to degrade the performance of the already minimized warranty from being a condition of the insurance, and its non-performance from invalidating the policy. As to goods, they were proposed to be exempted from any warranty of seaworthiness of ship. Concerning negligence, it was proposed to hold the underwriter liable (subject to the new seaworthiness warranty) for any loss caused proximately by a peril insured against, although wholly or partly the result of the neglect of the insured, or his servants or agents, or by the wilful act of his servants or agents, or the inherent nature or unsoundness of the article insured.

(d) In case of double or multiple insurance, the conference proposed to adopt the British rule of making all the policies effectual, independently of the order in which they were effected, and of making all the underwriters entitled to contributionsinter se. As regards the premium, it was proposed that no premium should be returnable, where the risk has attached.

With the exception of those embodying the two suggestions named in par. (a), all the resolutions proposed were accepted by the conference. But it appears extremely unlikely that British and American underwriters will voluntarily consent to the practical annihilation of the seaworthiness warranty, and no less improbable that American and continental assured will voluntarily accept the stricter rule of constructive total loss embodied in English law, when their nationallaw enforces on the underwriter terms more favourable to the assured. The fewness of the international insurance markets of the world diminishes the need for uniform international regulations in this matter. The matter may be one for adjustment by variation in the rate of premium, but this is not certain.

The Glasgow conference of 1901 adopted the rules, after excepting time policies from the scope of the rule respecting seaworthiness. The rules are known as the Glasgow Marine Insurance Rules. The writer knows of no instance in which they have been adopted in practice.

Returning to marine insurance in the United Kingdom, it is to be observed that the passing of the Marine Insurance Act of 1906 sharply marks an important change in the nature of the law of the subject. Till then it was based almost entirely on common law, only a few disconnected points having been dealt with by statute. The reported cases were thus of great importance, and being about 2000 in number (testeSir M. D. Chalmers) were not easy to master. No doubt many of them referred to commercial conditions no longer prevalent; still they could not be entirely ignored. But the original introducer of the bill described it as an endeavour “to reproduce as exactly as possible the existing law relating to marine insurance,” and as by being made law the language of the act has become authoritative, insured and insurers have now no call to go behind the wording of the act in any matter with which it deals. It thus appears that the case law of the subject existing before the 1st of January 1907 may be left aside, unless, perhaps, for use as affording examples of the way in which the provisions of the act work.

A contract of marine insurance is a contract of indemnity whereby the insurer undertakes to indemnify the insured, in the manner and to the extent agreed, against marine losses,i.e.the losses incident to marine adventure.Definition.The contract may by its express terms or by usage be extended to cover risks on inland waters or land risks incidental to any sea voyage. There is a “maritime adventure,” where any ship, goods or other movables are exposed to maritime perils, such property being termed “insurable property”; also where the earning of any freight, hire or other pecuniary profit or benefit, or the security for any loan or expenditure, is endangered by the exposure of insurable property to maritime perils; and where any liability to a third party may be incurred by the person interested in or responsible for insurable property by reason of its exposure to maritime perils. By “maritime perils” are meant the perils consequent on or incidental to the navigation of the sea,i.e.perils of the seas, fire, war perils, pirates, rovers, thieves, captures, seizures and 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.

The contract being one of indemnity against maritime perils, it is evident that no one can derive benefit from it who has not some interest exposed to these perils. Consequently while, subject to the provisions of the act, every lawful marine adventure may be insured, all contracts of marine insurance are void when (1) the assured has no insurable interest, and has entered into the contract without expectation of acquiring such interest; (2) when the policy is a “wager” policy, being made “interest or no interest,” “without further proof of interest than the policy itself,” “without benefit of salvage to the insurer,” or subject to any similar terms. But if there is no possibility of salvage a policy “without benefit of salvage to the insurer” is legally valid. Wager policies are illegal only in the sense of being void to all legal purposes. They cannot be sued upon, hence they are known as “honour” policies. They are of frequent use, generally for the protection of interests which, though real, are not easily defined, or are of pecuniary value hard to determine. But they are ignored by the courts. The essential of insurable interest is the pecuniary advantage seen at the time of insurance as arising to the assured from the safety or due arrival of the adventure, or the pecuniary disadvantage similarly arising from its loss or deterioration. But such interest may lapse before arrival or destruction of the venture, and with the interest lapses the right of the assured to recover from the underwriter. Without interest at the time of the loss there is no right to recover from the underwriter. Should the assured simply transfer his interest to another,e.g.by sale, he can assign his policy to the party who acquires his interest—unless, of course, the policy contains terms expressly prohibiting assignment. The customary form of assignment is endorsement of the policy either in blank or to a specified party. Within the limits already named, interests are insurable whether complete or partial, defeasible or contingent; similarly loans on bottomry or respondentia, advance freight not repayable in case of loss, charges of insurance, also shipmaster’s, officers’ and seamen’s wages.

The owner of insurable property may insure its full value even though some third party have agreed or become liable to indemnify him in case of loss: a mortgagor has the same right of insuring to full value; while a mortgagee may insure only up toValue.the sum due or to become due to him under the mortgage, unless the mortgagee is insuring for the benefit of the mortgagor as well as for himself, in which case, even though he insure in his own name only, he may insure up to the full value. A consignee may insure in his own name the total amount of his interest and that of others for whose benefit he insures. Where no special contract is made between insured and underwriter, the insurable value of certain matters of insurance is ascertained as follows:—Ship—Her value at the commencement of the risk, including outfit, provisions, stores, advances of wages, and any other outlays expended to make the ship fit for the voyage or period of navigation covered,pluscost of insurance upon the whole. In the case of a steamship, the word “ship” includes machinery, boilers, coals and engine stores. In the case of a vessel engaged in a special trade, the word “ship” includes the ordinary fittings necessary for that trade.Freight(whether paid in advance or not)—The gross amount of freight at the risk of the assured,pluscost of insurance.Goods—The prime cost,plusexpenses of and incidental to shipping and cost of insurance.Other interests—The amount at the insured’s risk when the policy attaches,pluscost of insurance.

To be admissible in evidence a contract of marine insurance must be embodied in a document called a policy, which must specify the name of the assured (or of his agent in the effecting of the policy), the objects insured, and the riskPolicy.insured against, the voyage or time (or both) covered, the sum insured, the name of the assurers. The signature of the assurer is necessary; it is found at the end of the policy, and the assurer is often on this account called theunderwriter. The objects insured must be designated with reasonable certainty, regard being had to customary usage. The undertaking to insure is usually expressed by saying that the insured or his agent “doth make assurance and cause himself to be insured.” The risks are either the whole body of maritime perils detailed above, or any one or set of these, or any other named peril against which the assured desires protection. There is no restriction by law of the length of voyage that may be insured, but time policies are, subject to the Finance Act 1901, invalid if made for more than one year; a voyage and a period of time may be covered on one policy. Policies are classed as “time” or “voyage” policies. It is not necessary to state in the policy the value of the objects insured, but generally the value is given; policies are therefore classed as “valued” or “unvalued,” the latter being often called “open” policies. The values of objects insured under open or unvalued policies are the insurable values given above. As it frequently happens that merchants desire to have all their shipments of whatever nature covered, by whatever vessel they may come, they require insurance in general terms; such a policy is termed a “floating” policy. It states the limits of voyage and value covered by the underwriter, and the class of ships to be employed. The particulars of each shipment are declared as the shipments occur, and in the order of despatch or shipment, the declarations being usually endorsed on the policy. All shipments within the terms of the policy must be declared at their honest value, or in accordance with the special provisions of the policy, if any. An omission or erroneous declaration may be corrected even after loss or arrival, provided it was made in good faith.

The consideration paid by the insured to the underwriter in return for the protection granted by the latter is called thepremium. Until payment be made or tendered the policy is not ordinarily issuable,i.e.unless otherwise agreed. When the insured effects insurance with an underwriter through a broker, then, unless otherwise agreed, the broker is liable for the premium to the underwriter, who is, however, directly responsible to the assured for losses or liabilities falling on the policy and for returnable premium. But the broker has a lien on the policy for the premium and for his brokerage, and in case he has had dealings as a principal with the insured, he has a lien on the policy for any balance due to himself in insurance transactions, unless he should have known that in these transactions the insured was merely an agent. Some policy forms state definitely that the premium has been paid; when such a form is used and no fraud is proved, this receipt is binding between assured and underwriter, but not between broker and underwriter. If an insurance is effected at a premium “to be arranged,” and noarrangement is made, then a reasonable premium is payable. The same holds where additional premiums have to be charged at a rate to be arranged and no arrangement is made.It is evident that in nearly all the particulars of any adventure insured by an underwriter he is entirely dependent upon the insured for correct information. It is therefore the law that an insurance contract can be avoided and broken by either of the parties to it if the utmost good faith (uberrima fides) be not observed by the other. The obligation of perfect good faith is thus made reciprocal. Bad faith may show itself either inconcealmentor inmisrepresentation. It is therefore made essential to the stability of any insurance contract that the insured must disclose before conclusion of the contract every material circumstance known by him, failing which the underwriter may avoid the contract. The insured is deemed to know every circumstance which in the ordinary course of business ought to be known by him. Every circumstance is deemed material which would influence the underwriter in his decision as to acceptance of the risk or the fixing of the rate of premium. Consequently the insured is not bound, unless specially asked by the underwriter, to disclose the favourable features of the risk offered, or matters known or presumably known by the underwriter (matters which are of common knowledge, and such as an underwriter ought in his usual business to be aware of), or matters respecting which the underwriter waives or declines information, or which any express or implied warranty renders superfluous. An agent effecting an insurance must, in addition to his principal’s material knowledge, disclose everything material known tohimself, or thatheshould know in the ordinary conduct ofhisbusiness. Every representation of material fact made to an underwriter before conclusion of a contract by the insured or his agent must be true, or the underwriter may avoid the contract. Every representation is material which would influence the underwriter in his decision as to acceptance of the risk or to fixing the rate of premium. A representation of fact is regarded as true if it be substantially correct; literal correctness is not essential. A representation of expectation or belief is true if it is made in good faith. A representation may be withdrawn or corrected before the contract is concluded. The contract is deemed to be concluded when the underwriter accepts the risk, whether the policy be then issued or not.

It is evident that in nearly all the particulars of any adventure insured by an underwriter he is entirely dependent upon the insured for correct information. It is therefore the law that an insurance contract can be avoided and broken by either of the parties to it if the utmost good faith (uberrima fides) be not observed by the other. The obligation of perfect good faith is thus made reciprocal. Bad faith may show itself either inconcealmentor inmisrepresentation. It is therefore made essential to the stability of any insurance contract that the insured must disclose before conclusion of the contract every material circumstance known by him, failing which the underwriter may avoid the contract. The insured is deemed to know every circumstance which in the ordinary course of business ought to be known by him. Every circumstance is deemed material which would influence the underwriter in his decision as to acceptance of the risk or the fixing of the rate of premium. Consequently the insured is not bound, unless specially asked by the underwriter, to disclose the favourable features of the risk offered, or matters known or presumably known by the underwriter (matters which are of common knowledge, and such as an underwriter ought in his usual business to be aware of), or matters respecting which the underwriter waives or declines information, or which any express or implied warranty renders superfluous. An agent effecting an insurance must, in addition to his principal’s material knowledge, disclose everything material known tohimself, or thatheshould know in the ordinary conduct ofhisbusiness. Every representation of material fact made to an underwriter before conclusion of a contract by the insured or his agent must be true, or the underwriter may avoid the contract. Every representation is material which would influence the underwriter in his decision as to acceptance of the risk or to fixing the rate of premium. A representation of fact is regarded as true if it be substantially correct; literal correctness is not essential. A representation of expectation or belief is true if it is made in good faith. A representation may be withdrawn or corrected before the contract is concluded. The contract is deemed to be concluded when the underwriter accepts the risk, whether the policy be then issued or not.

It frequently happens that before a vessel has completed the venture on which she is engaged arrangements have already been made for her future employment. Where a vessel is insured on time, this is of no moment as respects herVoyage insured.insurance. It has likewise been decided that where any insurable object is covered by a voyage policy “from” or “at and from” a named place, the policy is not rendered invalid by her not being at that place when the insurance is concluded; but, on the other hand, there is an implied condition that she will begin the venture within a reasonable time, and that if she fails in this the underwriter may avoid the contract. If the delay springs from circumstances known to the underwriter at the time of conclusion of the contract, or if the underwriter then acquiesces in it, the implied condition is nullified. If the insured abandons the venture insured, the contract expires;e.g.if, before the risk commences, the vessel’s destination is changed to one not covered by the policy. Where the policy specifies a place of departure, and the ship does not sail from that place, the risk does not attach. If, however, the vessel actually starts from her intended port of departure, and commences the venture, and thereafter it is decided to change her destination, this decision constitutes achange of voyage. In default of provision to the contrary, the underwriter may elect to avoid his insurance from the time of that decision, although the ship be still in the course she would have followed in her originally intended venture.

Should a ship depart from the proper course of the voyage she starts upon, and for which she is insured, such departure, when made without lawful excuse or justification, is termeddeviation. From the moment it occurs, even though she subsequently return to her proper course without loss or injury, the underwriter may avoid his contract; but the mere intention to deviate is immaterial. Deviation occurs (1) when in a policy a course is definitely specified and the vessel departs from it; (2) when, in absence of such definite specification in the policy, the vessel departs from the course usually and customarily followed in the voyage insured. If a policy provides for several named ports of discharge, the vessel may, without committing deviation, omit to proceed to one or more; but whether she goes to all or to some she must (in absence of usage or sufficient cause to the contrary) take them in the order in which they appear in the policy, if not there is a deviation. If the policy provides for “ports of discharge” in a given district, then (in absence of usage or sufficient cause to the contrary) unless the vessel proceeds to them in their geographical order she makes a deviation. Similarly, in the case of a voyage policy, the want of reasonable despatch throughout, unless lawful excuse or justification exists, entitles the underwriter to avoid the contract from the time that the delay becomes unreasonable. As excuses for deviation or delay on the voyage contemplated by the policy, the following are regarded as valid: authorization by licence or other provision in the policy,force majeure, compliance with express or implied conditions of the policy (e.g.warranties, see below), reasonable steps taken for the safety of the ship or other objects insured, saving life, helping a ship in such distress that life may be in danger, or obtaining medical or surgical aid for some person on board. If barratry is insured against, delay arising from barratrous conduct of master or crew does not avoid the policy. A deviation ceases to be excusable unless the ship resumes her proper course and proceeds on her voyage with reasonable promptitude after the cause of the excusable deviation or delay ceases to be effective.

In every contract of insurance there are certain conditions precedent to the liability of the underwriter and incumbent on the insured, which must be fully and literally complied with, whether material to the risk or not. TheseWarranties.conditions are known in insurance aswarranties. The name is unfortunate, as in every other branch of the law of contract it bears another meaning; still it is convenient, and its insurance signification is now firmly established. Failure on the part of the insured to fulfil a warrantyliterallyentitles the underwriter to avoid his contract as from the moment of breach,4but it does not limit his obligation up to that moment. Breach of warranty is not nullified by subsequent remedy of the breach, consequently loss occurring after breach of warranty is not at the charge of the underwriter, even although before the loss the insured has again complied with the warranty. But breach of warranty may be waived by the insurer. Breach of warranty is excused in two cases only: (a) when by change of circumstances the warranty ceases to be applicable to the contract, (b) when by subsequent legislation the warranty becomes unlawful.

Warranties are of two classes: (1) express (2) implied. Express warranties must be written or printed on the policy, or contained in some document explicitly referred to in the policy, and so regarded as incorporated in the contract. No special form of words is essential to the validity of a warranty if the intention to warrant can be inferred. Express warranties may refer to anything which the parties to the contract choose,e.g.the nationality of the vessel, her sailing on a named day, proceeding under convoy, being excluded from certain voyages or trades or the carriage of certain cargoes, being “well” or “in good safety” on a named day (in which case the warranty is fulfilled if she be safe at any time of that day). As regardsnationality, if no express warranty be given there is no undertaking on the part of the insured that the vessel is of any particular nationality or that she will not change it while the risk lasts. The warranty ofneutralityin case of insurance of ship or goods means that at the beginning of the risk the property concerned is actually neutral, and that as far as the insured can control the matter it shall so continue during the whole course of the risk. It is also an implied condition of the ship being warranted neutral that to the utmost of the insured’s power she must carry the papers necessary to establish her neutrality, must not falsify or suppress these papers, or use simulated papers; if this condition is broken the insurer can avoid the contract. The words of an express warranty are always to be taken in their commercial sense; within that sense they are to be strictly and literally taken. An “express” warranty does not exclude an “implied” warranty (see below) unless it be inconsistent therewith.In addition to these expressed conditions, there are also certain essential factors or conditions inherent in each and every contract of marine insurance without exception; these areimpliedwarranties, which are presumed from the very fact of the making of the insurance. They are (a) completion of the prescribed venture withoutdeviation, (b)legalityof the venture (viz. that the adventure insured is a lawful one, and that, so far as the insured can control it, it shall be carried out in a lawful manner), (c)seaworthinessof the ship. In a voyage policy it is an implied warranty that at the commencement of the voyage the ship shall be seaworthy for the particular venture insured. If the risk commences when the ship is in port, then she must in addition be reasonably fit to stand the ordinary dangers of the port. If the voyage insured is one in which different degrees of peril are to be encountered, or for which the ship needs different kinds of outfit at different stages, then she must be seaworthy for each stage atits commencement, and the warranty will be fulfilled if she is at the beginning of each stage seaworthy for that stage. The warranty of seaworthiness is held to be fulfilled when the ship is reasonably fit in every respect to meet the ordinary marine dangers of the venture insured; that is to say, the mere loss of a vessel by perils of the sea is not a proof of unseaworthiness in the sense of this warranty. The only ship policies not subject to the warranty of seaworthiness are policies on time (the reason given being that there is nothing to prevent a time policy lapsing and a new one commencing when the vessel is at sea beyond her owner’s control as to seaworthiness); but where the insured knowingly sends a ship to sea in an unfit state and a loss is attributable to that unseaworthiness, the underwriter is not liable for such loss. It is not implied in a policy on goods or movables that these goods, &c., are seaworthy, but it is implied that at the beginning of the voyage the carrying vessel is not only seaworthy as a ship but reasonably fit to carry the goods to the destination named in the policy.

In addition to these expressed conditions, there are also certain essential factors or conditions inherent in each and every contract of marine insurance without exception; these areimpliedwarranties, which are presumed from the very fact of the making of the insurance. They are (a) completion of the prescribed venture withoutdeviation, (b)legalityof the venture (viz. that the adventure insured is a lawful one, and that, so far as the insured can control it, it shall be carried out in a lawful manner), (c)seaworthinessof the ship. In a voyage policy it is an implied warranty that at the commencement of the voyage the ship shall be seaworthy for the particular venture insured. If the risk commences when the ship is in port, then she must in addition be reasonably fit to stand the ordinary dangers of the port. If the voyage insured is one in which different degrees of peril are to be encountered, or for which the ship needs different kinds of outfit at different stages, then she must be seaworthy for each stage atits commencement, and the warranty will be fulfilled if she is at the beginning of each stage seaworthy for that stage. The warranty of seaworthiness is held to be fulfilled when the ship is reasonably fit in every respect to meet the ordinary marine dangers of the venture insured; that is to say, the mere loss of a vessel by perils of the sea is not a proof of unseaworthiness in the sense of this warranty. The only ship policies not subject to the warranty of seaworthiness are policies on time (the reason given being that there is nothing to prevent a time policy lapsing and a new one commencing when the vessel is at sea beyond her owner’s control as to seaworthiness); but where the insured knowingly sends a ship to sea in an unfit state and a loss is attributable to that unseaworthiness, the underwriter is not liable for such loss. It is not implied in a policy on goods or movables that these goods, &c., are seaworthy, but it is implied that at the beginning of the voyage the carrying vessel is not only seaworthy as a ship but reasonably fit to carry the goods to the destination named in the policy.

When the main points of the preceding particulars of the contract of insurance are summarized it may be said that the transaction is (1) a contract of indemnity reduced to written or printed words, (2) made in good faith, (3) referring to a defined proportion or amount, (4) of a genuine interest in a named object, (5) being against contingencies definitely expressed, to which that object is actually exposed, and (6) in return for a fixed and determined consideration.

It may happen by accident or by design that an insurance object has been covered twice or more times, and that in consequence the sum of the insurance effected exceeds the value in the policy or the insurable value, if an unvaluedMultiple Insurance.policy has been employed. This occurrence involves a new set of relations between the insured and his various underwriters; the underwriters themselves are brought into relation to one another. As regards the insured, he may, in the absence of agreement to the contrary, claim payment from whomsoever of the underwriters he may select, but he is not entitled to receive in all more than his proper indemnity. Each underwriter, whether his policy be valued or unvalued, is entitled to receive credit for his proper proportion of the sum obtained by the insured under any other policy. If the insured does obtain any sum in excess of indemnity, he is regarded as holding it in trust for his whole body of underwriters. It thus appears that in case of multiple insurance each underwriter is bound, as between himself and the other underwriters, to contribute to the loss rateably in proportion to the amount of his liability under the policy; and if any one pays more than his proper share, he is entitled to sue the rest for contribution. Should the insured get any of his premium back? It would not be equitable to enforce a return from any underwriter who has at any time stood alone so as to be liable to the full extent of his policy; but if overlapping policies were accidentally effected all at the same time, the case is rather different. This leads to the general question ofreturn of premium. Such return may be claimed under the terms of the policy, in which case the claim for return is simply the carrying out of the agreement between the parties; it may refer to the whole or to a part of the interest insured. But there are other circumstances in which returns can legally be claimed. For instance, it may turn out that interest insured by a particular vessel and for a particular voyage is never shipped in that vessel for that voyage; the underwriter has in this case run no risk, and therefore the consideration for which he received the premium totally fails, and the premium is properly returnable to the intending insured, unless there has been fraud or illegality on the part of the insured. Similarly, in the case of part of the interest insured on a policy, if that part is distinguishable in the policy or by custom of trade. But the interest might have made the voyage in the vessel, and the intending insured might yet remain without insurable interest. In this case, in absence of fraud or illegality, and if the policy is not merely a gaming or wagering contract, the insured is entitled to return of his premium. Similarly, in the absence of fraud or illegality, if the underwriter legally voids his policy from the beginning of the risk; as he runs no risk, he receives no premium. The only cases, except those of fraud and illegality, in which the underwriter can retain his premium without running risk, are those of risks underwritten “lost or not lost,” and arrived safely without the underwriter’s knowledge, in which the underwriter takes his chance as to the condition and situation of the ship when he assumes the risk. But this is practically a case of agreement that there shall be no return.

When the insured has overinsured on an unvalued policy, a proportionate part of the premium is returnable. But where double insurance has been knowingly effected by the insured or any earlier policy has at any time borne the entire risk or a claim has been paid on a policy in respect of its full value, no premium is returnable.

The policy issued by the underwriter to the insured makes mention of certain perils against which the insurance is granted, and unless the policy otherwise provides, the underwriter is liable for any loss proximately caused by any of these perils, but is not liable for any loss not proximately caused by a peril insured against. He is not responsible for any loss due to the wilful misconduct of the insured but, unless the policy otherwise provides, he is liable for any loss proximately caused by a peril insured against even though it would not have happened but for the misconduct or negligence of master or crew. Nor is he responsible for any loss caused by delay, although the delay be caused by a peril insured against; nor for ordinary wear and tear, ordinary leakage or breakage, inherent vice or character of objects insured, loss from rats or vermin, or injury to machinery not proximately caused by sea-perils.

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