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Assignment of interest.
NOTE.-In Small v. U. K. Mar. Assn. (1897), 2 Q. B. 311, C.A., a policy was effected by ships-husbands for the mortgagee, at the instance of the mortgagor, who was part owner and master. The mortgagee was held entitled to recover, although the loss was occasioned by the barratry of the mortgagor.
Subsect. (4) adopts the judgment of Bovill, C. J., and Denman, J., in Ebsworth v. Alliance Mar. Ins. Co., L. R. 8 C. P. 596. The correctness of the rule in the text is assumed by Bowen, L.J.,1 who, in a later case, says: "A person having a limited interest may insure either for himself, and to cover his own interest only, or he may insure, so as to cover not only his own limited interest, but the interest of all others who are interested in the property," and then proceeds to discuss various instances.2
Subsect. (5) generalises a case where the charterer had agreed to indemnify the shipowner. Obviously a cargo owner may insure his cargo, though if it is lost through the negligence of the shipowner, he may have his remedy by damages.3
Lloyd's policy in terms expresses that it is effected by J. S. as well in his own name as for, and in the name and names of, all and every other person to whom the same doth, may, or shall appertain."4 The provision, of course, is confined to interests bonâ fide intended to be covered.
Where different interests are concerned, says Blackburn, J., it is common practice for the broker to enter into the policy in his own name, "but on behalf of and to protect the interest of different constituents." 995 A policy is often effected by J. S. " and [or] as agent;" see post, p. 118.
§ 15. Where the assured assigns or otherwise parts with his interest in the subject-matter insured, he does
1 Castellain v. Preston (1883), 11 Q. B. D. at p. 398, C. A.
"As to the complications which might arise in the case of double insurance, see McArthur, Ed. 2, p. 63, n.; but see a solution suggested by Mellish, L.J., in North British Ins. Co. v. London Ins. Co. (1877), 5 Ch. D. at p. 583. 3 Cf. Dufourcet v. Bishop (1886), 18 Q. B. D. 373, and Yates v. White (1838), 4 Bing. N. C. 272. As to the insurer's right of subrogation consequent on payment, see § 80, post.
Perhaps some light is thrown on this ancient formula by the statement that a trustee may insure in his own name, as the law does not regard the use or trust of a chattel” (Lucena v. Crauford (1806), 2 B. & P. at p. 290; 6 R. R. 676 in H. L.).
Ionides v. Pacific Ins. Co. (1871), L. R. 6 Q. B. at p. 678; cf. Leslie's Case (1889), 22 Q. B. D. 724.
not thereby transfer to the assignee his rights under the SECT. 15. contract of insurance, unless there be an express or implied agreement with the assignee to that effect.1
But the provisions of this section do not apply to a transmission of interest by operation of law.
NOTE. As to the converse case of an assignee insuring for his assignor, see § 14.
In Rayner v. Preston, cited below, Lord Esher says: the subject-matter of the insurance is sold during the running of the policy, no interest under the policy passes unless it is made part of the contract of sale, so that it will be considered in a court of equity as an assignment." Where there is such an agreement, it may be given effect to either by an assignment of the policy, or by the assignor holding the policy as trustee for the assignee.
The ordinary cases of transmission of interest by act of law are death and bankruptcy, but the subrogation of the insurer to the rights of the assured on payment of the claim may perhaps be regarded as coming under this category.
As to assignment of policy, see § 51, post, and as to assignment of interest, see § 52, post.
§ 16. Subject to any express provision or valuation Measure of in the policy, the insurable value of the subject-matters value. insured must be ascertained as follows:
(1.) In insurance on ship, the insurable value is the value, at the commencement of the risk, of the ship, including her outfit, provisions and stores for the officers and crew, money advanced for seamen's wages, and other disbursements (if any) incurred to make the ship fit for the
voyage or period of time covered by the policy,
1 Arnould, Ed. 6, p. 115; Lowndes, Ed. 2, p. 8; Powles v. Innes (1841), 11 M. & W. 10 (sale of shares in a ship); North of England Oil Cake Co. v. Archangel Mar. Ins. Co. (1875), L. R. 10 Q. B. 249 (sale of cargo); Rayner v. Preston (1881), 18 Ch. D. at p. 12, C. A.
plus the charges of insurance upon the whole; 1
The insurable value, in the case of a steamship, includes also the machinery, boilers, coals, and engine stores, and in the case of a ship engaged in a special trade, the ordinary fittings requisite for the trade:
(2) In insurance on freight, whether paid in advance
or otherwise, the insurable value is the gross
amount of the freight at the risk of the assured, plus the charges of insurance: (3.) In insurance on goods or merchandise, the insurable value is the prime cost of the property
insured, plus the expenses of shipping and the charges of insurance upon the whole : 4
(4.) In insurance on any other subject-matter or interest, the insurable value is the amount at the risk of the assured when the policy attaches, plus the charges of insurance.5
NOTE.-A clear delimitation of insurable value is necessary, (a) to fix the measure of indemnity in the case of an unvalued policy, (b) to fix the measure of indemnity in the few cases in which a valued policy can be opened up, and (c) to furnish an approximate standard for fixing the value in a valued policy.
Though marine insurance is universally admitted to be a contract of indemnity (see note to § 1), there are two opposing theories as to what is the nature of the indemnity to be aimed at. According to some, the assured ought to be put in the same position as if he had
1 McArthur, Ed. 2, p. 67; Lowndes, Ed. 2, p. 56; Brough v. Whitmore (1791), 4 T. R. 206 (stores and provisions for crew).
2 See McArthur, Ed. 2, p. 67, and as to fittings, see Hogarth v. Walker (1900), 2 Q. B. 283, C. A.
3 McArthur, Ed. 2, p. 68; Palmer v. Blackburn (1822), 1 Bing. 61;. Report of Commission on Unseaworthy Ships, 1874, vol. 2, p. xvi.
▲ McArthur, Ed. 2, p. 68; Usher v. Ncble (1810), 12 East, 639, as to charges of insurance, see at p. 616.
5 McArthur, Ed. 2, p. 69.
not undertaken the adventure. According to others, he ought to be SECT. 16. put in the same position as if the adventure had been carried to a successful issue.1 English law steers a halting course between these two theories, but with a strong leaning towards the former.
According to modern practice, unvalued policies are practically confined to goods and to freight payable on arrival. Other interests are almost invariably insured by valued policies. When the amount to be insured on goods cannot be fixed till the receipt of what are known as "closing particulars," provision is usually made that, in the event of loss before declaration, the declaration shall be on the basis of invoice cost and charges, plus a certain agreed percentage for anticipated profits. See Owen's Notes and Clauses, Ed. 3, p. 79.
As regards "ship," it is to be noted that Lloyd's policy expresses the insurance to be upon "the body, tackle, apparel, ordnance, munition, artillery, boat and other furniture of and in the good ship." In a recent case 2 it was held that in the case of a ship employed in the grain trade, separation cloths and dunnage mats were part of the furniture of the ship.
It appears that a policy on "hull and machinery "covers less than a policy on "ship; " e.g., it may not cover coals and stores.3
As to measure of indemnity, see further, §§ 68-79.
Disclosure and Representations.
§ 17. A contract of marine insurance is a contract Insurance based upon the utmost good faith, and, if the utmost is uberrigood faith be not observed by either party, the contract may be avoided by the other party.*
NOTE. The general principle is stated in this section because the special sections which follow are not exhaustive.
Insurance is a contract uberrimæ fidei, and the obligation is binding upon both parties alike, though necessarily the question usually arises with reference to the conduct of the assured. "Good faith,"
1 McArthur, Ed. 2, p. 67, citing Benecke, Principles of Indemnity.
2 Hogarth v. Walker (1900), 2 Q. B. 283, C. A.; but cf. Hill v. Patten (1807), 8 East, 373, as to whaling outfit.
Roddick v. Indemnity Mutual Mar. Ins. Co. (1895), 2 Q. B. at p. 386, C. A.
▲ Arnould, Ed. 6, pp. 5, 513, 548; Pothier, Traité d'Assurance, §§ 280 to 290; cf. Seaton v. Heath (1899), 1 Q. B. at p. 792, C. A.
SECT. 17. says Lord Mansfield, "forbids either party, by concealing what he privately knows, to draw the other into a bargain from his ignorance of that fact, and from his believing the contrary. . . . The policy would be equally [void] against the underwriter if he concealed; as if he insured a ship on her voyage which he privately knew to be arrived, an action would lie to recover the premium.” 1
Disclosure by assured.
The contract is often said to be rendered void by concealment or misrepresentation, but it is clear that it is only voidable at the option of the party prejudiced, and that the ordinary rules of law as to voidable contracts apply to insurance.2
§ 18.-(1.) Subject to the provisions of this section, the assured must disclose to the insurer, before the contract is concluded, every material circumstance which is known to the assured, and the assured is deemed to know every circumstance which, in the ordinary course of business, ought to be known by him. If the assured fails to make such disclosure the insurer may avoid the contract,8
(2.) Every circumstance is material which would influence the judgment of a prudent insurer in fixing the premium, or determining whether he will take the risk.4
(3.) In the absence of inquiry the following circumstances need not be disclosed, namely:
(a.) Any circumstance which diminishes the risk: 5
1 Carter v. Boehm (1765), 3 Burr. 1905.
2 Morrison v. Universal Ins. Co. (1873), L. R. 8 Ex. 187, Ex. Ch. 3 Arnould, Ed. 6, p. 548; Parsons on Insurance, vol. i. p. 467; Ionides v. Pender (1874), L. R. 9 Q. B. at p. 537, per Blackburn, J. As to facts which assured ought to know, see Proudfoot v. Montefiore (1867), L. R. 2 Q. B. 511, 519; Blackburn v. Vigors (1887), 12 App. Cas. at pp. 537, 541.
Rivaz v. Gerussi (1880), 6 Q. B. D. at p. 229, per Lord Esher; Tate v. Hyslop (1885), 15 Q. B. D. at p. 379, per Lord Bowen.
Arnould, Ed. 6, pp. 579, 591; Carter v. Boehm (1766), 3 Burr, at p. 1910, per Lord Mansfield.