was decided that as the venture had been made of no effect by perils insured against, there was a constructive total loss of freight, and the sum insured on this interest was due to be paid by the underwriter.

In the charter of the Spirit of the Dawn there was no cancelling date, so that the charterer had not by the contract of affreightment the option of accepting or declining at his pleasure the services of the ship had she arrived at Newport after that date. But it seems unlikely that a loss of freight resulting from the exercise of a charterer's option to cancel would be sufficient to substantiate a claim for loss under a marine policy in the common form, unless perhaps the delay which gave the opportunity of cancelling to the charterer was the direct consequence of perils of the sea, or other perils insured against.

One result of the decision in Jackson v. Union Marine was the framing and general adoption of a clause to the following effect :

Warranted free from all claim for loss of freight consequent on detention whether arising from perils of the seas or otherwise, which is in modern practice inserted in all policies on freight. It puts an end to all question of liability of freight underwriters for loss arising from lapse of time whether the charter under which the freight is due be provided with a cancelling date or not.1

TOTAL LOSS OF OTHER INTERESTS

The secondary interests, such as profit, increased value of goods, etc., commissions and brokerages of all kinds, follow in their fate the ship, cargo, and freight which have already been discussed, so that it is unnecessary to discuss separately total loss of these derivative interests.

Summary of Documents.-The documents required to establish a claim for total loss are:

(1) Protest of master.

(2) Set of bills of lading (endorsed if necessary, so as to be available to the underwriter).

1 This principle holds also in the case of a time policy on freight. Bensaude v. Thames and Mersey M. I. Co., House of Lords, 1897; 13 Times L. R. 501.

(3) Policy or certificate of insurance (endorsed if necessary).

(4) In United States of America. in detail.

Statement of loss

In the United States of America certified copies of Nos. (1), (2), and (3) are taken; but as none of these copydocuments can transfer possession to the underwriter there is necessary for that purpose another document, viz.—

(5) Bill of sale and abandonment with subrogation to underwriter; that is, an assignment of all interest to the underwriter.

In the absence of the full set of bills of lading a similar document should be taken in England, especially in all cases in which salvage operations are likely to be undertaken. Such a document handed to a salvage association or a manager of salvage (whether acting for shipowner or for underwriter) settles the ownership of salved goods, and ensures that any claim for salvage expenses will be sent direct to the underwriter. This is from the assured's point of view desirable, and it greatly simplifies the management of salvage cases.

As a claim for total loss cannot extend beyond the full amount insured in the policy, it follows that the documents required to substantiate such a claim must be supplied to the underwriter free of charge.

Subrogation.

In connection with abandonment and total loss it is convenient to consider subrogation.

When a person insured suffers a total loss and is indemnified for it by his underwriter, there is in virtue of this very payment and acceptance of indemnity a transfer from the assured to the underwriter of all interest in the article insured, the underwriter acquiring all the rights of ownership at least up to the value which he has paid. If the assured absolutely abandons to the underwriter, then the latter's rights of property and recovery are not limited to the amount he has paid. In the case of North of England Iron Steamship Insurance Association v. Armstrong, 1870,1 there is a striking instance of this. A steamer valued in her policies at £6000 was run down by another steamer.

1 L. R. 5 Q. B. 244.

The

latter was held to blame and had to pay up to the limit of her statutory liability (at £8 per ton) £5684 or thereabouts. So far, it seems only right that the underwriter should receive this amount in full. But it appeared that in the statement made by the owner of the sunken steamer and accepted by the court, the actual value of that steamer was stated at £9000. The assured claimed the portion of £5684 attaching to the difference between £9000, the actual value, and £6000 the insured value, namely, onethird or £1895. But it was held that he had no right to any share of the amount recovered, and as far as can be seen the decision would have been the same had the full £9000 been recovered. Lord Cockburn in the course of his judgment said: "Just as the underwriter would be entitled to the ship if it could have been got bodily back, so they are entitled to that which is the representative of the ship in the shape of damages to be paid by the owners of the vessel which caused the collision."

If this is carried a step further, it will be found in the case of loss of a vessel by collision with another vessel of the same owner, that although the owner has to pay for the cargo lost in the vessel not in fault, the underwriters on the hull of that vessel have no claim for their loss against him or his underwriters of the other vessel. The principle of this distinction is that in each vessel the underwriters are simply the bearers of a part of the shipowner's responsibilities. When a loss to either vessel occurs by the fault of the other, the underwriters on the injured ship have no rights of action beyond those enjoyed by the owner, which are in payment of the loss or damage subrogated to them; their rights of action are only his rights of action passed on to them. But as a man cannot have a claim against himself or raise an action against himself, his underwriters, although interested in entirely different and independent parts of his property, have no claim or right of action against one another (Simpson v. Thompson, House of Lords, 1877, reversing decision of First Division, Court of Session).1

1 3 App. Cas. 279. But to provide for cases of damage done in collision of ships of one owner special agreements are made in the shape of "same ownership" or "sister ship" clauses; vide p. 253.

"In King v. Victoria Ins. Co. (Privy Council, March 1896: 12 Times L. R. 285) it was held that where underwriters bona fide paid a loss for which they were not legally liable, they were subrogated to the rights of the assured." Lord Hobhouse said that such "a payment .

was a

claim made under the policy and entitled the insurers to the remedies available to the insured."

Course of Settlement of Constructive Total Loss.-At whatever point in a voyage, short of destination, the existence of a constructive total loss is proved, as soon as the loss is paid, the whole property passes over to the underwriter. The result of this is, that when a ship is sold at an intermediate port because it cannot be repaired or proceed on the voyage without repairs, and when goods are sold because they cannot be forwarded, they are sold on the underwriter's account, and the net proceeds are accounted for to him. The ordinary course of business, however, does not follow the matter thus particularly. The person who takes charge of the venture at the intermediate port, probably the captain of the ship or his agent, sends the proceeds to the shipowner, who passes over to the shippers the proceeds of their respective parcels of goods. Then the various underwriters have claims made on them for the difference between the insured value of the ship and its net proceeds, and of the goods and their net proceeds. Thus practically the claim takes the form of a total loss less proceeds. As proceeds are in such a case technically termed salvage, this form of settlement is known in the language of insurance by the name salvage loss."

It is important to bear in mind the reason for the system followed in this payment. It is not that the goods are damaged, or that they are at an intermediate port in a damaged state; but that at a point which is not the destination of the venture the goods are sold because they cannot (physically or commercially) be carried on to destination, and being consequently a constructive total loss are surrendered to the underwriter (or sold on his account) in return for his payment of the insured value.

CHAPTER XI

THE MEMORANDUM-F.P.A. CLAUSE

THE form of policy discussed above leaves, as has already been pointed out, some uncertainty about the extent of underwriters' responsibility for total losses. The same indefiniteness prevails in the case of losses other than total. The underwriter merely undertakes "the true performance" of the contract in which he is described as being content to bear and as actually taking on himself liability for all "hurt, detriment, or damage” inflicted on the property insured by certain named perils or others ejusdem generis. contains no words restricting the underwriter's liability to cases of total loss only there appears, therefore, to be no doubt that unless excluded by commercial custom or by special agreement, loss of a portion of the property insured, or damage to the whole or any part of the property insured, proximately caused by perils insured against, forms a liability of the underwriter.

The policy

The correctness of this view appears established from the fact that the earliest addition to the form of policy discussed above was a paragraph in which special exceptions are made from the liabilities of underwriters. The form in which this was and still is effected is peculiar and will require examination; the effect is to free underwriters from all claims for damage or partial loss unless they reach a specified percentage. This addition to the policy is known as the Memorandum: it was first inserted in Lloyd's policies in May 1749, in the following form :—