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the broker has two running accounts, one with the underwriter and the other with the assured. In accounting to the underwriter, he credits the latter with all premiums and debits him with any losses incurred. At certain periods, a balance is struck, and the underwriter receives or pays, according as the result of the account is favourable or the reverse. A similar account is opened by the broker with the assured, only that, in that case, the principal is debited with the premiums and credited with the losses. According to the usage of Lloyd's, when a loss occurs, on the production of the policy by the broker, the loss is signed off, and the amount is due in cash at the expiration of seven days. Where, at that time, premiums are due from the broker to the underwriter, there are two ways of arriving at a settlement, viz., either, (1) cheques are exchanged, i.e., a clean cheque is given for the loss in exchange for a cheque for the premiums to the end of the month previous to that in which the loss is settled ; or, (2) the loss is set against the premiums owing, and the balance paid either way at the end of the seven days. If, however, the balance is inconsiderable one way or another, or the claim is a small one, the amount due at the end of the seven days, instead of being then paid in cash, is often allowed to run on in account; but, this is entirely a matter of arrangement between the parties. If the loss is a considerable one, the settlement between broker and assured, as between underwriter and broker, is made at the expiration of seven days from the date when the loss is signed off upon the policy, provided the broker has been placed in funds by the underwriter : if the loss is a small one, it is generally credited in account, in which case settlement is made on the eighth of the ensuing month. Where the assured employs a broker to collect a loss, he is bound by the usage, if he have either expressly or by implication assented thereto; but he is not bound by the usage, if he were not cognizant of it; for, as was stated by Lord Tenterden in the course of his judgment in Bartlett v. Pentland (n):—“The usage in a particular place, or of a particular class of persons, cannot be binding upon other
(n) 10 B. & Cr. 760.
persons, unless those other persons are acquainted with the usage and adopt it.” Accordingly, at common law, nothing short of a payment in cash to the broker of the amount of the loss will discharge the underwriter of his liability to the assured ; but, where the usage is known and assented to, a settlement in account in the manner above described will be deemed a sufficient discharge (o).
In the companies' policies, it is usual to substitute for the acknowledgment of the receipt of the premium, a promise on the part of the assured to pay it, by some such clause as the following :-"Now this policy witnesseth that in consideration of the said person or persons effecting this policy promising to pay to the said Company the sum of
as a premium at and after the rate of per cent. for such insurance, the said Company takes upon itself the burthen of such insurance,” &c. (p).
Under the clause so worded, the obligation of each party to the other stands upon the same footing ; and, the person effecting the insurance, whether principal or agent, is accountable for the premium to the underwriter, there being no acknowledgment of its receipt in the policy, but only of the promise to pay it.
Before quitting this branch of the subject, we have to notice briefly the circumstances under which a return of premium is claimable by the assured from the underwriters. The principal rules applicable to the matter were formulated by Lord Mansfield (9) in the following terms :-" The first is, that where the risk has not been run, whether this be owing to the fault, pleasure, or will of the insured, or to any other cause, the premium shall be returned ; "_"another rule is, that if the risk has once commenced, there shall be no apportionment or return of premium afterwards.” These rules have to be received with some qualifications. First, when it is said that the premium is to be returned, if the risk be not run owing to the fault of the assured, it is clear that only innocent fault is meant; for, if the policy be void owing to the actual fraud on the part of the assured, or his agent, no return is due (qq). On the other hand, if the policy be vitiated owing to the fraud of the underwriter, the premium must be returned (r). Where the contract is void, owing to a known illegality, as in the case of the effecting of a wager policy contrary to statute, the premium is not recoverable, as the assured, being himself to blame, cannot set the law in motion. In an action for a return of premium under an illegal contract, Lord Mansfield observed :—“ This then is a gaming policy, and against an Act of Parliament; and therefore it is clear that the Court will not assist either party, according to the well-known rule that, in pari delicto, &c. Not that the defendant's right is better than that of the plaintiff's, but they must draw their remedy from pure fountains ” (s).
(0) Arnould, 5th ed., 197.
(p) Another form is the following: -" And the Company are contented, and do hereby hold themselves bound to the assured, his or their heirs, &c., for
the true performance of the premises, in consideration of the sum paid or to be paid them for this Assurance, at and after the rate of
(9) In Tyrie v. Fletcher, Park, 434.
Again, when it is said that, if the risk have once commenced there shall be no return, it is assumed that the risk is one and indivisible. Where, however, it is customary to divide the risk, and to make a proportionate return for the part not run, the Courts will allow the assured to recover for that part (t).
Where the policy is vitiated ab initio, owing to the breach of an express or an implied warranty, a return of premium will be allowed (u); but, a deviation, which has the effect of avoiding the policy from a certain point will not entitle the assured to claim a return, unless the risk were by usage divisible at that point.
The same rules which apply to a return of the whole premium owing to the absence of risk apply to a return of a part of the premium owing to a short interest, or double insurance. The underwriter is liable to make a return of premium corresponding with that part of the sum insured upon which no risk has
(r) Arnould, 4th ed., p. 994.
(u) Ibid., 995.
been run; but, if he were at any time liable to the full extent of the sum insured, no return is due for short interest, unless, as already observed, the risk were divisible at the point where interest ceased (x).
111.—THE STAMPING OF POLICIES. For fiscal purposes, the expression “sea insurance” has been defined to mean “ any insurance (including re-insurance) made upon any ship or vessel, or upon the machinery, tackle, or furniture of any ship or vessel, or upon any goods, merchandise, or property, of any description whatever, on board of any ship or vessel, or upon the freight of or any other interest which may be lawfully insured in or relating to any ship or vessel ;” and the word “policy” has been defined to mean “any instrument whereby a contract or agreement for any sea insurance is made or entered into" (y). An insurance upon goods, merchandise, or other property which includes, not only a sea risk, but also a land risk incidental to the transit insured, is a “sea insurance” within the meaning of the Stamp Acts (2).
Stamp Duties on Policies of Sea Insurance (a).
of one hundred pounds, and in respect of
insured . . . . . . . 0 3
one hundred pounds, and in respect of any
Where the insurance shall be made for
(x) For a full treatment of the subject, reference is made to Arnould. 4th ed., pp. 997—999.
(y) 31 & 32 Vict. c. 23, s. 4. () 47 & 48 Vict. c. 62, s. 8.
(a) As contained in Schedule B. of the Customs and Inland Revenue Act, 1867, 30 & 31 Vict. c. 23, see Appendix.
Where the insurance shall be made for any time exceeding six months and not exceeding twelve months . . . .
The other leading provisions of the Stamp Acts are in substance as follows :
No policy may be made for any time exceeding twelve months, and every policy made for any time exceeding twelve months shall be null and void to all intents and purposes (b).
No policy may be pleaded or given in evidence in any court or admitted in any court to be good or available in law or in equity, unless duly stamped (c). .
No policy may be stamped at any time after it is signed or underwritten by any person, except in the following cases (d):
(a.) Mutual insurance policies which, having been stamped for the amount originally insured, require to be additionally stamped to enable them to bear an increased amount.
(6.) Policies made abroad, but enforceable within the United Kingdom, which may be stamped at any time within fourteen days after they have been first received in the United Kingdom.
(c.) Policies may be stamped for the purpose of being given in evidence, after the execution thereof, subject to the penalty of one hundred pounds.
No alteration which may lawfully be made in the terms and conditions of any policy after it is underwritten is prohibited ; provided that, “such alteration be made before notice of the determination of the risk originally insured (e), and that it shall not prolong the time covered by the insurance thereby made beyond the period of six months in the case of a policy made for a less period than six months, or beyond the period allowed by this Act in the case of a policy made for a greater
(6) Ibid., s. 8. (c) Ibid., s. 9.
(d) Ibid. ; 39 Vict. c. 6, s. 2, and 33 & 34 Vict. c. 97, s. 117 ; 44 Vict. c. 12, s. 44.
(e) The determination of the risk
which is caused “by the loss or safe arrival of the thing insured, or by the final end and conclusion of the voyage.” Per Lord Ellenborough, in Kensington v. Inglis, 8 East, 273.