It is not generally understood by merchants that they have a different amount at risk as against total loss and particular average respectively; and, accordingly, when only the value for total loss has been insured, and it is discovered, on the adjustment of a particular average, that the full amount of the loss is not recoverable, great dissatisfaction is expressed at the result, and the system which produces such results is regarded as inequitable.

There is a disposition manifested in a recent treatise on marine insurance to sympathise with these complaints, and to advocate the making of adjustments upon net proceeds as a way out of the difficulty (o). That method of adjustment was, however, fully considered by the Court in adjudicating upon the issues in Johnson v. Sheddon, and condemned for reasons which appear insuperable.

XXI-OBJECTIONS TO THE METHOD OF ADJUSTMENT UPON NET VALUES.

The chief objection to the system of adjustment upon net proceeds is that, so far as it goes, it would have the effect of substituting for the goods, the commercial speculation entered into by the owner of the goods, as the subject-matter of the policy, which would be utterly at variance with the theory of marine insurance (p).

Insurable interest is, as we have already seen, a substantial concern in the preservation of property; and it can only suffer loss in relation to the subject in which it is inherent. In the case of an adjustment upon net values, however, the loss to be

ascertained would be, not that sustained by the assured, as owner of the goods, through damage by the perils insured against, but that sustained by the assured as the concerned in a mercantile adventure entered into in relation to the goods. In making an adjustment upon the latter principle, elements of a speculative character, such as the fluctuation of markets, would enter into the calculation, and subvert the ratio of the loss properly arising from sea-damage. For instance, as may be seen by referring to examples shown at foot, if the goods came to a rising market, the percentage of deterioration would be diminished, while, if they came to a falling market, it would be increased. In an extreme case of the latter kind, as shown below, there might be a total loss, although the goods arrived with only fifty per cent. of damage; while, if the goods came to a losing market, the adjustment would be impossible, as there would be no data afforded by the comparison upon which to base it (q).

A further objection to the same method is that it would enhance the underwriter's liability in case of particular average, by adding to the loss by sea-damage the further loss which the assured suffers owing to the same charges being payable on damaged as on sound goods. Thus, on reference to the first of the examples just given, it will be observed that the actual sea-damage to the goods is fifty per cent., the gross sound value being £600, and the gross damaged value £300; but that the loss, on comparing net values, amounts to seventy-five per cent. The difference between these two ratios of loss, i.e., twenty-five per cent., is an increased depreciation consequent upon com

modities of unequal value being subjected to equal freight, duty, &c. (r).

For the reasons above stated, the proposal to obviate the practical difficulties incidental to the adjustment of particular average upon gross values, by substituting for the latter the system of adjustment upon net values, is one that cannot be approved, as it would introduce an unsound principle into the settlement of claims, and lead to most unsatisfactory results (s). Nor is such an alteration called for, inasmuch as the objection entertained to the present method of adjusting particular average to goods does not arise from anything erroneous in the system itself, but from an omission on the part of those who effect insurance to recognise or provide for the fact that there is always a larger pecuniary value at risk as against particular average than there is against total loss.

XXII.-SUGGESTIONS FOR OBVIATING
PRACTICAL DIFFICULTIES.

The regular way out of the difficulty is to insure this excess (t) of the gross over the net value against the risk of particular average only (u). If the owner of goods who is desirous of being fully covered against "all risks" will insure for the amount of the estimated net value of his interest at destination against "all risks," and for the difference between that amount and the gross sound value against particular average only, which may be done either by the same or by different policies, his object will be attained (v). Failing that course, the only

alternative is to deal with the case by special clause in the policy (w).

XXIII-EXCEPTIONS TO THE METHOD OF ADJUSTMENT ON GROSS VALUES.

Although the principle of adjustment upon gross values is one of general application, it is subject to exceptions, both in theory and practice, which we have now to notice. Theoretically, the principle only obtains when market prices are fixed after payment of all charges; for the value in the market is, as we have seen, the criterion of the worth of every description of merchandise. In case of the market price being a bonded one, the ratio of deterioration on the goods is to be ascertained by a comparison of the sound and damaged values in bond. The true measure of depreciation can be ascertained in no other way; for to add the duty to the market price of goods which are usually sold in bond is to produce a value which is artificial and misleading. In principle, therefore, the exception specified should be conceded whenever goods are invariably sold in bond, either at home or abroad (x); but, in practice, it can hardly be said that the exception is so fully allowed. There has for many years been a "custom of Lloyd's" to adjust particular average on a comparison of bonded, instead of dutypaid, prices, in claims for damage to tea, tobacco, coffee, wines, and spirits, imported into this country. There appears no good reason why this exception should not be extended to all cases where it is the custom of the port to sell the goods in bond; for although, in the judgment in Johnson v. Sheddon, the rule of adjustment upon gross values is laid down without any express qualification, there is throughout the assumption that the market price is a gross one.

(w) In the case of an open policy, by the clause "Valued at so much as the gross proceeds of the goods will amount to at the port of discharge."

Ibid. p. 718.

(x) Hopkins on Average, 3rd ed.,

P. 48.

XXIV.-PROCEDURE IN CASE OF DAMAGE
TO GOODS.

Having considered at length the principle which regulates the adjustment of particular average on goods, we proceed to notice the course which is adopted in practice to arrive at a settlement of the claim. When goods arrive sea-damaged at the port of destination, the first step for the assured to take is to have a survey held upon them by brokers, merchants, or other competent surveyors, who certify to the nature and extent of the damage, and recommend the course to be followed with respect to the disposal of the damaged portion of the consignment. In the case of goods arriving abroad, it is generally advisable and customary for the consignees to call in Lloyd's agent, when there is one on the spot, in order that he may appoint duly qualified surveyors, and see that everything is done in accordance with the usual routine. The ordinary mode of disposing of sea-damaged goods is to sell them by public auction; but, not unfrequently, the deterioration is compromised for an allowance, or the damaged goods are disposed of by private treaty, by mutual agreement, to prevent a sacrifice, or to avoid the charges entailed by an auction sale.

XXV.-SEPARATION OF DAMAGED FROM
SOUND GOODS.

Where a parcel of goods arrives partly sound and partly damaged, the liability of the underwriter is confined to the loss actually sustained, to arrive at the amount of which the damaged portion is separated and sold by itself on account of whom it may concern. In disposing of the damaged goods, the assured and his agents are bound to exercise all due care and diligence, so that the property may be sold to the best advantage. With respect to the sound portion, there can be no liability on the part of underwriters for any loss which