granted to the assured, the clause providing for it is not permitted to work to his detriment (see sup. Principles of Interpretation, p. 136; cf. Hagedorn v. Whitmore, 1816).1 In many average clauses this is definitely expressed by the addition of the words "or on the whole."

Formation of Series.—In series which consist of more than one package, case, or bale, it was originally stipulated that the series should be made up of a certain number of packages taken as they were landed on the quay. This stipulation has been pared down to the minimum of importance. The damaged packages are either not landed in the order in which they would have come out of the ship if sound, or if so landed they are entered in the landing books all together at the end of the cargo. The result is, as a rule, almost all the seriously damaged packages in a cargo of produce are found entered in the last few pages of the landing books. This procedure practically secures to the assured the recovery of all damage of any moment; but it is not what was contemplated when the wording was devised. Lowndes (Law M. I. p. 200) speaks of this as a practice prevailing in some ports; unfortunately it has become so usual that exceptions only rarely present themselves.

Tail Series. When on the formation of the cargo into series it is found that some packages remain over, these, however few in number they be, are taken to constitute what is called a tail series, and average is payable by the underwriter on them if it reaches the stipulated proportion of their insured value (as distinguished from the insured value of a full series). For instance, in shipment of fiftythree bales of cotton, in whatever way the bales grouped, there must always be five series of ten bales and three bales over. The three odd bales form a tail series, and if damage is found in them exceeding 3 per cent on the value of the three bales, it is recoverable from the underwriter.

are

Franchise how Applied.—It was observed (p. 188) that

the underwriters in "Old" Lloyd's understood that the percentages named in the memorandum were always to be deducted from any claim for average made in terms of the memorandum. In all probability the same held true of the franchises mentioned in average policies. But nowadays in England when the franchise is once reached, the whole amount of average including the franchise is paid by the underwriter, unless the contrary is expressed. For instance, if the franchise on any class of goods is 5 per cent, and a shipment of these goods is damaged to the extent of 7 per cent, then it is not 2 per cent (the difference between the damages and the franchise) that is paid, but the full 7 per cent. If it is intended by the underwriter that he shall be liable only for the excess of any definite percentage, that ought to be clearly expressed in the policy. In French policies this difference is expressed with the most scrupulous exactness; “claim for material particular average to be paid in full if the franchise is reached" (remboursement intégral, franchise une fois atteinte), as distinguished from "franchise always deducted" (franchise toujours déduite). The distinction can be perfectly well expressed in English: "to pay particular average if amounting to per cent or over" as distinguished from "to pay the excess of . . . per cent particular average."

Adjustment of Particular Average.—Suppose that a parcel of goods or produce insured against particular average has arrived damaged by sea water, and that particulars have been obtained of the amount of damage and the series over which it is spread. Suppose it to be a case of such serious damage that the franchise is indubitably attained, how is the amount due by the underwriter to be determined? As was said above (p. 190), in a claim made under a contract of indemnity one naturally expects to find the quantities involved to be the value of the goods when sound, their value in their damaged condition (the difference being the merchant's loss), their valuation in the policy, and the share of that valuation insured by each separate underwriter or insurance company.

The first great English case on this subject is Lewis v

Rucker, 1761.1 It was on a policy covering sugars, valued at £30 per hogshead, from the West Indies to Hamburg. When the sound value at destination was compared with the damaged value it was found that the merchant's loss by sea perils amounted to about 17 per cent. Lord Mansfield and his associates on the bench decided that the underwriters must pay 17 per cent of the amount at which the sugars were valued in the policy. Lord Mansfield stated the rule thus: "The underwriter takes the proportion of the difference between sound and damaged at the port of delivery, and pays that proportion upon the value of the goods specified in the policy." To illustrate the rule he gave the following example: "Suppose sea-damaged goods valued at £30 in the policy to arrive at a market where, had they arrived sound, they would have sold for £50, but arriving damaged, they only sell for £40—here is a depreciation of £10, or a fifth of their sound value; the underwriter must pay a fifth of the value in the policy, that is £6." The reason for this procedure is not difficult to understand. The underwriter contracts to give indemnity for losses arising immediately from sea perils, consequently he is to be exempt from all losses arising from fall of market, and is equally to be deprived of all gains arising from rise of market. The valuation given on valued policy and that determined by law in the case of an open policy are both independent of market fluctuation. If the amount claimed from an underwriter in case of goods arriving damaged was simply the difference between the policy valuation and the arrived damaged value, the rise or fall of the market would be an element in the latter item, and so would come into the claim against the underwriter. It would, consequently, be to the underwriter's advantage to have damaged goods arrive in a rising market, and to his disadvantage to have them arrive in a falling market. But he will be rendered independent

of rise or fall of market if the measure of his loss is taken to be the proportion which the difference between the sound and damaged arrived values bears to the sound arrived

1 2 Burr. 1167.

value, and if this proportion is applied to the insured value declared in the policy or to the legally determined value in the case of an open policy.1

It turned out that in this admirable judgment Lord Mansfield assumed one point of importance, namely, that there could be no doubt about the amounts therein described by the words "sound arrived value” and “damaged arrived value." That their meaning was not free from doubt appeared in the case of Johnson v. Sheddon, 1802,2 long known as the Brimstone case. The policy in this case covered a shipment of brimstone and shumac on board the Caroline, from Sicily to Hamburg. Upon a calculation by Mr. Oliphant, to whom the loss was referred by the parties for adjustment, the loss was found to amount to £76:7:4 per cent. The matter came before the court, and after decision in first instance, a new trial was moved for, on the ground that the adjuster had made a mistake in his method of calculation, inasmuch as in estimating the loss he had taken for his basis the difference between the net proceeds of the damaged goods and their net sound value, instead of taking the difference between the gross damaged proceeds and the gross sound arrived value. Three points were

agreed to by both parties :

(1) The loss to be estimated by the rule laid down in Lewis v. Rucker,3 that the underwriter is not to be subjected to the fluctuation of the market.

(2) The loss for which the underwriter is liable is that which arises from the deterioration of the commodity by sea damage.

(3) The underwriter is not liable for any loss which may be the consequence of duties or charges to be paid after the arrival of the commodity at the place of destination.

The matter came before the Court of King's Bench, and Mr. Justice Lawrence (in what Arnould, p. 985, describes as "one of the ablest judgments ever delivered in West

1 As a matter of fact damaged goods never have a market value in the same sense that sound goods have, so that the underwriter can never be quite independent of considerations of market.

minster Hall") held the true rule of adjustment to be "that the percentage or aliquot part, which the underwriter has to pay of the prime cost or value in the policy, must be ascertained by comparing the gross produce of the sound with the gross produce of the damaged sales." By "gross produce" Mr. Justice Lawrence meant the price including freight, duty, and landing charges. His reason for adopting this price was that he desired to get at the intrinsic value of the goods in their sound and damaged conditions at destination; for it must be borne in mind that the essence of particular average is that it is a settlement on goods which have reached destination. He said: "When a commodity has been offered for sale to one who has nothing further to pay than the sum the seller is to receive, it is the quality of the goods which, in forming a fair and rational judgment, can alone influence him in determining what he shall pay. He has nothing to do with what it may have cost the seller, and the goodness of the thing is the criterion which must regulate the price; for, being liable to no other charges, he has only to consider its intrinsic value; and therefore if a sound commodity will go as far again as a damaged commodity by having twice its strength, or by being in any other respect twice as useful, he will give twice the money for the sound that he will for the damaged; and so in proportion."

"1

Freight involved in Particular Average on Goods.It is evident that in all cases in which the insured value is not below the gross sound arrived value, the assured is, by the principle established in Lewis v. Rucker 2 and Johnson v. Sheddon,3 secured in the payment in full by the underwriter of any particular average sustained by his goods. On the other hand, for any amount by which the gross sound arrived value exceeds the insured value the assured has to bear the loss himself. As has been already explained, the gross sound arrived value includes freight, landing charges,

1 By custom of Lloyd's particular average is adjusted on a comparison of bonded instead of duty-paid prices in claims for damage to tea, tobacco, coffee, wine, and spirits imported into this country. 2 Burr. 1167. 3 2 East 581.

2