locupletari (no one ought to be profited by another's loss), it is only to be expected that these decisions will leave the merchant indemnified only to the extent of this actual cost and shipping expenses of his goods. The decisions are that in an open policy the valuations attached to different interests are:

(a) Goods or merchandise: the prime cost (say invoice cost) plus shipping expenses and cost of insurance (Lewis v. Rucker, 1761).1

(6) Ship: the value at the commencement of the voyage, including the outfit, stores and provisions for crew, advances made against crew's wages and cost of insurance (Marshall, p. 633:2 Stevens on Average, 5th ed. p. 190).

(c) Freight: the gross freight due to the ship on her arrival abroad plus cost of insurance (Palmer v. Blackburn, 1822).3

(d) Other objects of insurance: the value to the assured at the commencement of the voyage plus cost of insurance.

On examination of these four classes of interests, it is evident that owners of cargo (a) and parties interested in whatever may fall under class (d) get under these decisions the very barest provision that can be termed indemnity. On the other hand, by the provisions of (b) and (c), a shipowner using open policies would be permitted by law to be in a better position through losing his ship at sea than by having her complete her voyage in safety, the difference being the cost of the outfit, stores, provisions, advances, in fact nearly all the expenses of earning the freight, and, in addition, the cost of insurance of ship and freight. state of the law is thus an inducement both to assured on

1 2 Burr. 1167.

The

2 "A ship is valued at the sum she is worth at the time she sails on the voyage insured, including the expenses of repairs, the value of the furniture, provisions and stores, the money advanced to the sailors, and, in general, every expense of the outfit, to which is added the premium of insurance."

3 I Bing. 61,

goods and to underwriters on ship and freight not to use open policies, and indeed they are now but rarely used.

2. Valued policies. The advantages and limitations of the system of valued policies were well set forth by Mr. Justice Willes in Lidgett v. Secretan, 1871:1 “Nobody has been able to improve on the practice as to valued policies, which has been recognised and adopted by shipowners and underwriters, and has, at least among honest men, the advantage of giving the assured the full value of the thing insured and of enabling the underwriter to obtain a larger amount of profit."

The most authoritative document on the English law of valuations is the memorandum on Over-Insurance, Valued Policy, and Constructive Total Loss, written by Mr. Justice Willes in 1867, and printed as Appendix lvii. in volume 2 of Report of the Unseaworthy Ships Commission of 1874. In § 2 of this memorandum we find :

In the absence of proof that the value fixed by the contract is so exaggerated as to be a mere cloak for gambling, in representing more than any possible interest which the assured could have in the ship and outfit, or that the exaggeration was fraudulent with a view to cheat the underwriter, the latter is bound in case of total loss to pay the agreed sum. It is only when the over-valuation is so exaggerated as to show to the satisfaction of a jury that it must have been designed in order to obtain more than a just and complete indemnity that the insurance is void.

That Lord Mansfield would have acted on this principle is clear from his words in Lewis v. Rucker: 2 "If it should come out in proof that a man had insured £2000 and had interest on board to the value of a cable only, there never has been, and I believe there never will be, a determination that by such an evasion the Act of Parliament may be defeated." (The Act referred to is 19 Geo. II. c. 37, prohibiting wager policies.) "There are many conveniences from allowing valued policies, but where they are used merely as a cover to a wager they would be considered as an evasion."

It must be confessed to be impossible to define à priori 2 2 Buer. 1167.

1 L. R. 6 C.P. 616.

the exact point at which excessive valuation becomes fraudulent. Indeed it is questionable whether it is ever from figures alone that one arrives at conclusions respecting fraud; but figures read in the light of the facts preceding, accompanying and succeeding the insurance, may help to establish conclusively a charge of fraud. In the case of Haigh v. De La Cour, 1812,2 it was found that goods on board the Maria were insured for £5000, invoices for that amount being shown to the underwriters. Claim was made against the underwriters. It was discovered that the goods were worth only £1400, and it was contended that up to that amount at least the underwriters were liable. But the invoices proved to be fictitious, and the bills of lading interpolated, and when something like barratrous handling of the ship was proved, the insured value became evidently fraudulent. Chief Justice Sir J. Mansfield said, "If the plaintiffs intended from the beginning to cheat the underwriters, the assignees can recover nothing. The fraud entirely vitiates the contract." Cases have occurred in the history of commerce in which the insurance of four times the amount of invoice would be quite justifiable; for instance, that of shipments of silver to Japan, made for the purpose of obtaining in exchange gold at the Japanese ratio of 4 to 1, when the prevailing ratio in the rest of the world was about 15 to 1 (H. Cernuschi, Monetary Diplomacy in 1878, p. 16). Similarly, in such insurances as those of contraband cargoes, or cargoes destined to run a blockade, one can imagine a very high valuation put on goods whose value would be enormously enhanced by their mere arrival at their intended destination.

The case of Irving v. Manning (House of Lords, 18473) referred to the policy value of the General Kidd, £17,500. The vessel was so damaged that after an expenditure of £10,500 in repairs she would be worth only £9000. This was held to constitute a total loss, and to justify a claim for

1 Mr. Justice Willes in Lidgett v. Secretan, 1870 (L. R. 6 C.P.), speaks of a value "so outrageously large as to make it plain that the assured intended a fraud on their underwriters."

2 3 Camp. 319.

31 H. of L. Cas. 287.

the full valuation insured, £17,500. In the course of the case it was brought out that the words of the policy merely stating the value do not amount to an agreement "that for all purposes connected with the voyage, at least for the purpose of ascertaining whether the ship is a total loss or not, the ship should be taken to be of that value";1 but they " mean only that, for the purpose of ascertaining the amount of compensation to be paid to the assured when the loss has happened, the value shall be taken to be the sum fixed, in order to avoid disputes as to the quantum of the assured's interest." Dealing with the point raised that by this means the assured would under a contract of mere indemnity obtain more than a compensation for his loss, the judges replied that it was so, that "a policy of insurance is not a perfect contract of indemnity. It must be taken with this qualification, that the parties may agree beforehand in estimating the value of the subject assured by way of liquidated damages.”

She was

In Barker v. Janson, 1868,2 another important judgment was given. The ship Sir William Eyre was much damaged on her outward voyage from Glasgow to New Zealand, and was sent for repairs to Calcutta. insured for £8000 at and from Calcutta for three months, commencing thirty days after her arrival there. On reaching Calcutta she was dry-docked, and found to be not worth repair, the underwriters on the outward policy paying £7000. While the vessel was still in dry dock, and before expiry of the three months, for which the second policies covered her, she was totally destroyed by a cyclone. Claim was made for the full amount insured, £8000; against this it was contended that the policy value being enormously above the true worth of the vessel should be reopened. Chief Justice Bovill held that the transaction was made in good faith; he said "an exorbitant valuation may be evidence of fraud, but when the transaction is bonâ fide the

1 "So that when a question arises whether it would be worth while to repair, it must be assumed that the vessel would be worth that sum when repaired."

2 L. R. 3 C. P. 300.

valuation agreed upon is binding." Mr. Justice Willes remarked in his judgment, "Here there was no wager, the insurance having been bonâ fide; and it having been settled by Irving v. Manning that valued policies are valid if there be no fraud or wagering, I think it would be wrong to make any doubt in this case." Earlier he remarked, "It is said that there was a mistake as to the state of the ship; but a mistake, to entitle the parties to reopen a contract of valuation, must be such as would entitle the parties to proceed in equity for relief. It must have been a mistake of both parties in respect of something which was material to the contract."

The consideration of mistake as affecting valuation came before the courts in Williams v. North China Company, 1876.1 The ship Queen of the Colonies was chartered from Batavia to the United Kingdom. The assignees in Java of the charter-party insured the estimated amount of the freight, valued £5941; and on the same day with the same office their advance against freight valued £513. Taking the terms of the charter-party into consideration, the Court of Appeal decided that the former insurance was intended for the protection of the shipowners, the charterers having protected themselves by the second insurance for the amount of the advances they had made in accordance with the charter-party. The shipowners were therefore interested in the freight less advances, not in the advances at all. In his judgment Chief Justice Cockburn said, "You cannot open the policy to inquire into the question whether or not there has been over-valuation, but you can do so to see if the claim of the assured is coextensive with the subject matter of the insurance. Here it is not." The Master of the Rolls (Jessel) added, “In a valued policy you cannot open the policy; but that does not touch the question of what it was that was valued.” It is consequently only in a very limited sense that it can be said that mistake is a ground for opening the valuation of a valued policy.

In the United States of America the law respecting

1 35 L.T. N.S. 884; 3 Asp. Mar. L. Cases 342.