above mentioned] owe their establishment to a job." That is, they agreed to pay George I. the sum of £600,000 for their charter. But they never did pay more than half of this; their profits, which at first were, or were supposed to be, enormous, having gradually fallen off. Since then there have been repeated efforts to take from these companies their exclusive privileges, and open the business of insurance to competition. About forty years ago a new company was established, and soon after others; some of which maintained themselves successfully, while others failed. And now there are in London more than twenty proprietary marine-insurance companies, and a number of mutual ship-insurance associations.1

It is said that the bulk of the business of marine insurance of Great Britain is always done in London; but in the other large cities of England, Scotland, and Ireland there are some insurance companies or associations which have a considerable amount of local business. These associations are conducted mainly under an arrangement by which an agent is authorized by a number of persons to insure for them, and underwrite their names on the policies as their attorney.

The term "Lloyd's," now known all over the mercantile world, was about one hundred and fifty years ago the name of a coffeehouse (so called from its proprietor), to which underwriters and merchants wishing to be insured resorted. This continued until the name became permanently attached to the house as a place of business ; and the same name went with the business when those engaged in it, in 1774, established an office for its transaction in the Royal Exchange, where it is now. The subscribers to "Lloyd's" are now over fifteen hundred in number, about four hundred of whom are underwriters.2 The amount of business done is enormous. It is said, mainly on the authority of Mr. Marryatt's speech, before referred to, that in 1810 insurance could be effected on a single ship and cargo to the amount of a million of dollars. At a later period it was stated in evidence before the House of Commons that more than three millions of dollars (£631,800) were insured at Lloyd's on specie on board the Diana frigate; £300,000 having been insured on specie on board the frigate Luline, and £400,000 on the Althea (an Indiaman) and

L

1 Manley's Manual of Marine Insurance, p. 43.

2 Ibid.

her cargo, and, both vessels being lost, this sum of three and a half millions of dollars was paid by the underwriters "with honor and promptitude." These large sums were, however, insured by a great number of underwriters; the two principal companies taking a large amount, and the residue being by individual underwriters, or "insurance circles," as they have been recently called. In 1810 it was estimated that the insurable interests, in ships, goods, and freight, of British imports and exports, amounted annually to about sixteen hundred millions of dollars, and that rather more than half of this amount was under insurance.

When we read of the very high premiums paid for insurance in early ages (ten per cent being the common rate), and find that this rate declined only slowly to the present moderate percentage, two conclusions are suggested: one, that the dangers of a commerce which could induce those engaged in it to pay such rates must have been very great; and then, that the profits of this commerce must have been very great, to encounter such risks and losses, or pay such rates of insurance, and still flourish. We may, perhaps, form a still further conclusion; it is, that without the encouragement and support of insurance, as intimated so long ago as in the statute of Elizabeth above referred to, this commerce could not have endured its reverses, and grown and expanded as it did.

We close this chapter with an illustration of the beneficial working of insurance, from Manly's Manual, to which we have repeatedly referred. "A very fitting parallel to the underwriters' office in commerce may be taken from mechanics. The underwriter is a fly-wheel, which, gathering force from small and frequent impulses, discharges the accumulated power when and as it is required, and causes the machine to which it is an adjunct to act smoothly and continuously."

CHAPTER II.

OF THE MANNER OF INSURANCE.

SECTION I. Who are Insurers.

In the beginning of the business of marine insurance in this country, it was usually effected by policies to which individuals subscribed their names, each one being responsible for the sum set against his name, and no more. It was very common for some person to establish an office as insurance broker or agent. To this office merchants resorted who wished to insure others or to be insured. If one applied to the broker, stating the ship or cargo on which he desired insurance, and the voyage, or time, these were written at the head of a sheet which was laid upon the broker's table. Between him and the assured a premium was agreed upon, and this also was designated. Then one and another of those who were willing to insure such property on such terms wrote their names upon the sheet under the heading above mentioned, stating also the amount which they were willing to insure; and this continued until names enough were subscribed to fill out the whole amount which the insured desired to cover. This method was varied in different cases, and rules and usages grew up about it which were generally regarded, and, if sufficiently established, might have to some extent the force of law.

As each insurance was effected, or perhaps when the whole proposed amount was subscribed, premium notes were given to each subscriber, or sometimes to the holder of the office. And in one case, in Massachusetts, in 1814, in which the notes were signed, not by the party insured, but by his broker or factor for him, in the broker's own name, without any words indicating agency, it was held that the insured was not liable in an action on the note.1

1 Stackpole v. Arnold, 11 Mass. 27. The notes upon which the action was brought were given for premiums upon policies of insurance procured by the factor in the office of the plaintiff, at the

request and for the use of the defendant, on property belonging to him; the firm of which the factor was a member had done business for the defendant; the policies were effected by them in pur

This method of effecting insurance was adopted from England, where it existed at the beginning of marine insurance, and is still practised to a considerable extent. From it grew the usage of the word "underwriter" (which is, of course, the same in its meaning as "subscriber," the one word being formed from Saxon roots and the other from Latin roots) in the exclusive sense of insurer, and as exactly synonymous with insurer.

But this method is now seldom practised in this country. About the beginning of this century incorporated stock companies for marine insurance were introduced, the earliest in Massachusetts being in 1799. They multiplied rapidly, more than twenty being incorporated in that State in the succeeding six years; and they gradually absorbed the business of insurance, superseding the early method of insurance by individuals. Some

66

suance of instructions from the defendant, who was advised of their having been effected, and made no objection thereto; the factor intended to bind the defendant by the premium notes, and had never charged the premium upon the policies in any account with the defendant. In giving the decision of the court, Parker, J., said: Neither is there any doubt that the letters signed by the defendant, and the policies of insurance made for his benefit, were properly admitted in evidence to show the authority of the witness to procure insurance for him; and it might have been legally inferred from this evidence, that the witness had sufficient authority to make the premium notes for the defendant, had he undertaken to charge him in the form of contract which he adopted. It is well settled, that written or parol authority is sufficient to authorize an act of this sort, without a formal letter of attorney under seal. But this written evidence proved nothing more than that the witness had authority to bind the defendant in this contract. Whether he had executed this authority or not, depended upon other facts, which were proved by

the oral testimony of the witness; and the question now is, whether the oral testimony given at the trial, tending to prove the intention of both parties to the contract, was properly received to control and alter the tenor and effect of the notes, so as to make them the notes of the defendant, instead of being the notes of the witness, as they purport to be upon the face of them. It might be sufficient for the decision of this cause to state that no person, in making a contract, is considered to be the agent of another, unless he stipulates for his principal by name, stating his agency in the instrument which he signs. This principle has been long settled, and has been frequently recognized; nor do I know an instance in the books of an attempt to charge a person as the maker of any written contract appearing to be signed by another, unless the signer professed to act by procuration or authority, and stated the name of the principal on whose behalf he gave his signature. It is also held that, whatever authority the signer may have to bind another, if he does not sign as agent or attorney, he binds himself and no other person."

of the reasons of this are obvious. The stock capital gave a considerable security to the insured. The natural desire of companies to extend their business, and the influence of competition, brought down premiums lower than individuals were willing to accept. These companies went on with varying fortunes. The element of chance, or of what is so called, entered necessarily into their business; it could never be reduced to certainty, and was brought within the reach of probability and calculation only by that other element of average, of which we have already spoken; and by skill and watchfulness in deducing, from the instances and circumstances of safe voyages on the one hand and disastrous voyages on the other, the rules and estimates to be applied in practice. And while some of these companies, whether because better conducted or more fortunate, made large dividends and accumulated large reserves, others were less successful, and some were ruined.

Through all this, that is, in the earliest method of insurance by individuals, and the later method of insurance by incorporated companies, the principle of mutuality had an indirect, but still a considerable influence. The individual underwriters were frequently, perhaps generally, merchants who were themselves insured; and while they paid on the policies by which they were insured something more than the amount which would cover the actual risk, and were willing to do this to obtain the security from disastrous loss which insurance gave them, they then insured small amounts in various policies, at the same rate, to balance by their profits a part of the cost of insurance. So the stock companies were, at first altogether, and for a considerable time mainly, owned by merchants who were themselves insured, and who thus recovered in dividends the extra prices which they paid.

It was not long, however, before the large profits and apparent security of the stock companies made their shares desirable investments for all; and the proportion of stockholders who had retired from business or had never been merchants grew large. Then a kind of opposition of interest, or at all events a decided distinction of interests, grew up between those who paid and those who received the premiums; and merchants who sought insurance were less willing to pay what seemed to them a premium beyond the actual risk, because this extra cost came back to them in no way. Out of all this grew the establishment (first in fire insurance