appointed experts; in the latter the policy is rendered null and void, the underwriter retaining the premium, "without prejudice to the consequent criminal action" (§ 752).

Closely connected with these questions of valuations is the theory of the true value of a ship put forward by Lowndes (Law of M. I. p. 13), namely that a ship being merely a freight-earning machine, her true worth is the present value of all her freights plus what she will fetch for breaking up, that is as old metal and timber. If this is taken to be the proper basis for the valuation of ships, then, when a vessel is fully insured up to this valuation, there evidently ought to be no separate insurance of freight. No doubt the market values of ships tend more and more, as they approach the end of their career, to fix themselves on this basis; but in the early years of a vessel's life it is much more the rule to value a ship at what she cost less what she has earned net for her owners, and to correct that value up or down in accordance with the variation in the cost of building vessels of similar size and equipment. It may even be doubted whether a policy valuation based on such a calculation as that suggested by Lowndes (supposing it to be possible) would be unimpeachable from a legal point of view. For in the discussion of insurable interest it will be found that a mere expectation of possession of property or profit is not substantial enough to justify an insurance; there must be actual pecuniary interest in the insured object or some firm engagement providing for such interest. Consequently the only freight engagements that could be reduced to a present value for the purpose of valuing a ship in a policy would be firm freight contracts that could be enforced by the courts. As a matter of fact it is clear that the firm freight engagements of any named ship are in amount far inferior to what is usually called her selling or commercial value.

Valuation Clause. The validity of the valuation given for a ship in a policy is sometimes made of greater strength and effect by the addition of such a clause as the following:

The valuation stated herein shall by mutual consent in all questions under this policy be taken to be the value of the vessel.

This form of the clause has now been almost universally abandoned, but clauses of a similar character are in frequent use, and will be discussed below under the heading of Constructive Total Loss (p. 152).

CHAPTER V

INSURABLE INTEREST-SUBJECTS OF INSURANCE—

MULTIPLE INSURANCE

BEFORE proceeding further in the discussion of the policy it seems better to consider at this point two subjects closely connected with Valuation, namely Insurable Interest, and Subjects of Insurance.

(1) Insurable Interest.—As the contract of insurance is essentially a contract of indemnity, it follows that before this contract can take any effect there must first have been exposure to loss; in other words, without a previously existing chance of loss or exposure to loss, no merchant would think of becoming party to a contract the object of which is to indemnify him for loss and so protect him from loss. It is this element in insurance that differentiates it from all quasi-contracts such as wagering or betting. The assured and the underwriter do not say about a venture in which neither is concerned "we make an agreement that if this vessel or cargo (or whatever it may be) arrives you pay me so much, and if it is lost I pay you so much.” That would be a simple wager. They do not even agree that in the case of loss of a vessel or cargo in which the assured is actually interested, the underwriter shall pay an arbitrarily fixed sum, having previously received as the consideration for the agreement a certain proportion of this sum, to be retained by him whether the venture is lost or arrives in safety. That would merely be a more limited and defined wager. An appreciation of the fundamental difference between such wagers and insurance joined to considerations

of public policy and a desire to repress the wild speculation that accompanied and survived the South Sea Company, resulted in the passing of an Act of Parliament on the subject in 1746 (19 Geo. II. c. 37). The preamble of the Act points out that the intention was to put an end to the clandestine export of prohibited articles, such as wool, and to engaging in prohibited or suspected trades, parties concerned in these securing themselves "under pretence of insuring against the risk on shipping and fair trade against loss and producing a diminution of the public revenue." The Act enacted "That no insurance shall be made on any ship or ships belonging to His Majesty or any of his subjects, or 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." In spite of this illegality such policies continue to be executed; they are in themselves valueless in a court of law, being without any legally obliging effect on the underwriter, and perhaps on that account are respected with the most studious care. They are simply deliberately drawn memoranda of an obligation of honour between the two parties.

The difference between such "pretended" insurances and the genuine insurances which Parliament meant to encourage is most clearly explained in the words of Mr. Justice Lawrence in Lucena v. Crawfurd, 1802.1 Arnould (p. 282) reports them as follows: "A man is interested in a thing to whom advantage may arise or prejudice happen from the circumstances which may attend it, and whom it importeth that its condition as to safety or other quality should continue. Interest does not necessarily imply a right to the whole or part of the thing, nor necessarily and exclusively that which may be the subject of privation, but the having some relation to, or concern in, the subject of the insurance, which relation or concern by the happening of the perils insured against may be so affected as to produce the

1 2 B. & P. N. R. 269; 1 Taunt. 324.

damage, detriment, or prejudice to the person insuring. To be interested in the preservation of a thing is to be so circumstanced with respect to it as to have benefit from its existence, prejudice from its destruction. The property of the thing and the interest derived from it may be very different. Of the first, the price is generally the measure; but by interest in a thing every benefit and advantage arising out of or depending on such thing may be considered as being comprehended." The words "benefit from its existence, prejudice from its destruction," taken in connection with a marine venture may be paraphrased "benefit from the safe arrival of the venture in question, prejudice from loss or damage suffered by it." But that benefit or prejudice must not consist solely of the good or bad result of the insurance itself; it must pre-exist and be the precedent cause of the effecting of the insurance.

The ideal of insurable interest is absolute ownership, and the nearer one comes to that the clearer is the right to effect an insurance. But short of property there are many relations in which people may stand to goods, vessels; advances, profits, and freights that fairly and equitably entitle one to the protection of an insurance policy. These may be divided into relations of responsibility and relations of risk of profit and of loss as in the following cases :A. Goods. (a) Relations of responsibility. If goods.

are put in charge of a lighterman for conveyance from shore to ship, or vice versa, or for transit across a river, the lighterman, being a common carrier, is liable for all and every loss and damage to these goods unless proceeding from the Act of God (vis major, force majeure) or of the Queen's enemies. The goods may or may not be insured by their owners, but that is a matter in which the lighterman has no concern, he cannot claim the protection of their policy even if such a policy exists. He is therefore "so circumstanced in respect of these goods as to have benefit from their existence, prejudice from their destruction" (to use Mr. Justice Lawrence's words), and if he is not willing to bear