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Policies are distinguished by different names, according to the form in which they are executed. Thus, there are interest, wager, voyage, time, valued, open, special, and floating policies.
An interest policy is one, the form of which signifies that the assured has a real and substantial interest at risk; as, for example, "on 100 bales of cotton."
A wager policy is one which shows, on the face of it, either that the assured has no real or substantial interest at risk, or that the underwriters agree to dispense with proof of interest. This disclaimer by the parties of the intention to make a contract of indemnity is generally expressed by one of the following clauses, viz.—“interest or no interest ; ” “ policy proof of interest ;” “without benefit of salvage ; ” or by other words to the same effect.
A voyage policy is one which is so drawn as to attach to the subject insured for a specified voyage, or part of a voyage, the termini of which are designated by places ; as, “ London to New York.”
A time policy is one which is so framed as to cover the subject, wherever it may be, for a specified time, the termini of which are designated by dates; as,“ noon of the 1st January, 1881, till noon of the 1st January, 1882.” (e)
A valued policy is one in which the agreed value of the subject, so far as concerns the assured, is expressed on the face of the policy; as, “on ship, valued at £10,000.”
An open (f) policy is one in which the value of the subject insured is not stated, but left to be proved in case of loss; as, “on 100 bales of merchandise.”
A special, or named policy, is one which contains the name of the vessel by which the insurance is effected.
A floating policy is one in which the name of the vessel does not appear upon its execution, the policy being so framed as to apply to any “ship or ships," "steamer or steamers,” &c.,
(e) By the Stamp Acts, no policy is valid, if made for any time exceeding twelve months. 30 Vict. cap. 23, sect. 8.
(f) The term "open" is also sometimes used in reference to a “floating" policy which has not been fully declared.
by which the assured may have an insurable interest. The endorsations subsequently made upon the policy of the names of the vessels to which the contract is applied, with the particulars of the interest attaching to each vessel, are termed “ declarations.” When the whole of the sum insured is thus accounted for, the policy is said to be “fully declared,” or « written off.”
II.-INTEREST AND WAGER POLICIES. The law of marine insurance rests upon the fundamental principle that the policy is, both in its nature and extent, a contract of indemnity. The fitness of this principle to serve as a governing rule in determining the rights and liabilities of the parties is evident; for, the proper object of insurance is to alleviate the injurious consequences of accident by distributing among a number of persons losses which would otherwise fall heavily upon a few; and that object is fully attained where the assured is so protected that, in the event of loss, he will be placed in the same pecuniary position as if the loss had not happened. The policy of marine insurance is therefore, in its legitimate use, a contract of indemnity only, and, as such, is not to be converted into an instrument of profit to the assured, or degraded into a contrivance for gambling upon the uncertain events of maritime adventure.
The fundamental principle above stated, though held in theory by our courts of justice (g) from the time of Lord Mansfield (h) to the present day (ë), does not fully operate in practice,
(q) In this respect, the law of England, being derived from the common law of merchants, is in conformity with that of foreign countries.
(h) Per Lord Mansfield :-“A policy of insurance is, in the nature of it, a contract of indemnity." Kent v. Bird Cowp. 583. "There are two sorts of policies of insurance, mercantile and gaming policies. The first sort are contracts of indemnity, and indernnity only." Lowry and another v. Bour. dicu, Doug. 451.
(i) Per Brett, L. J., in Castellain v. Preston. "The very foundation, in my opinion, of every rule which has been applied to insurance law is this, namely, that the contract of insurance contained in a marine or fire policy is a contract of indemnity, and of indemnity only, and that this contract means that the assured, in case of a loss against which the policy has been made, shall be fully indemnified, but shall never be more than fully indemnified. That is the fundamental
owing to the latitude which the law accords to usages at variance with it, and also, to some extent, to the anomalies existing in the law itself. The result of these disturbing influences is that, while in some respects the policy exceeds, in other respects it falls short of attainment to the standard of indemnity. Notwithstanding these exceptions, the fundamental principle of marine insurance is that which has been enunciated; and, as a necessary consequence, it is essential to the making of a legitimate contract of this nature, that the party on whose behalf it is made should have something to insure, i.e., as already stated, a real and substantial interest in property exposed to marine risks. Accordingly, every policy, which does not by its terms assert the contrary, is understood to be an interest policy; whereby, in the event of loss, it is incumbent upon the assured to have, and if so required to prove, an insurable interest in the subject at the time of loss, failing which, the policy will be of no effect (k).
At an early period in the history of marine insurance, there arose, in this and other countries, a practice of effecting insurances upon terms which relieved the assured from the obligation of proving an insurable interest. These contracts, wbich received the name of “wager policies,” were at first discountenanced by our courts of justice, notwithstanding which they gained ground, and were at length held to be legal and valid (7). In course of time, this irregular branch of marine insurance increased to so great an extent, and was found to be productive of so many and serious abuses, that it was deemed advisable to appeal to the legislature for its suppression. Accordingly, about the year 1746, an Act of Parliament was passed (m), which enacted—“ That no insurance shall be made on any ship or ships belonging to His Majesty or any of his subjects, or on any goods or effects laden on board such ships, “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 insurer,' and that every such insurance shall be void” (n).
principle of insurance, and if ever a proposition is brought forward which is at variance with it, that is to say, which will either prevent the assured from obtaining a full indemnity, or which will give to the assured more than a full indemnity, that proposition
must certainly be wrong.” L. R. 11 Q. B. D. 386.
(k) Cousins v. Nantes, 3 Taunt. 513.
il) See Arnould on Marine Insurance, 4th ed., p. 112.
(m) 19 Geo. 2, c. 37.
It is to be observed that this prohibition is expressly confined to British ships, and the goods or effects laden on board thereof; and the statute has accordingly been held to be inapplicable to insurances upon foreign ships, or their cargoes (o), It is, however, to be presumed that all contracts of marine insurance made by way of gaming or wagering, whether by British or foreign ships, fall within the terms of a statute subsequently enacted to invalidate wagering contracts in general (p); though it would be stretching the terms of that enactment too far to suppose that they would vitiate a policy which covered a legitimate interest by a foreign ship or her cargo, on account of the insertion therein of a clause dispensing with the proof of interest.
The net result of the legislation on this subject, as interpreted by the Courts, is—1st, to invalidate all policies devoid of interest, or otherwise made by way of gaming or wagering; 2nd, to invalidate all policies upon British property, which by their terms dispense with the proof of interest, subject to the exceptions specified in the Wager Policies Act.
Clauses dispensing with the proof of interest are sometimes inserted when the assured has an insurable interest but wishes to be relieved of the obligation of proving the same in case of loss. The result of writing any such clause upon the face of the policy is, however, in all cases of insurance on British property, to invalidate the contract. The following cases will show the application of the principles already laid down to the ordinary course of business. In an action upon a policy on five tierces coffee, valued at £27 per tierce, containing the clause " the policy to be deemed sufficient proof of interest,” it was held that the contract was void under the Wager Policies Act, though it was bonâ fide made to cover an insurable interest, and was in no respect, excepting in form, a gaming policy (9). A policy on “profit on cotton valued at £350, and in case of loss or accident the said policy to be considered sufficient proof of interest,” was pronounced void under the statute, although there was an insurable interest to the full amount of the policy (r).
(1) Ibid., s. 1.
8 & 9 Vict. c. 109, of which s. 18 provides that “all contracts or
agreements, whether by parole or in writing, by way of gaming or wagering, shall be null and void."
In the case of a policy on profits “ free from average," and “ without benefit of salvage," it was held that the presence of the latter clause nullified the contract on the same grounds as in the last case (s).
In an action under a policy upon commission and profit by any “ship or ships, steamer or steamers,” with the clause, “ warranted free from average, and without benefit of salvage, but to pay loss on such part as shall not arrive,” it was held that, as the terms of the policy did not exclude British ships, the policy was illegal by statute, and that the illegality was so far the fault of the assured that they could not recover back the premium (t).
III.—THE EFFECTING OF THE INSURANCE.
At this point it may be useful to give an outline of the usual mode of procedure in effecting contracts of insurance, with a brief reference to the chief points to be attended to by the assured and the underwriters respectively.
A person desirous of effecting a marine insurance will either negotiate with the underwriters direct, or employ an insurance broker to make the contract on his behalf. It is immaterial which of these courses is followed, so far as regards the rules to be hereafter mentioned; for if an insurance broker be employed, his conduct will be governed by the same principles