valuation is substantially the same as in England. Phillips (§ 1183) gives the following: "If the valuation is neither intended as a cover for a wager by both parties, nor fraudulently made, it is binding on the parties, in case it can be carried into effect, and will as between them determine the value of the property. And the circumstance of the property being valued very high has not in itself been held to be a sufficient proof of a wager, or of a fraudulent intention on the part of the assured." Mr. Justice Willes, in the memorandum already quoted, says: "Upon the general subject of valued policies the laws of the United States thus appear to be identical with those of England."

The French Code de Commerce is very meagre on the subject of valuation; § 339 provides that, “If the value of the goods is not fixed by the contract, it may be established by the invoices or by the books, in default (of these) the valuation of them is made in accordance with the price current at the time and place of loading, inclusive of all duties paid and expenses incurred until on board." The French policy on merchandise contains a special clause providing that in case of goods insured with a certain valuation, underwriters in case of loss or average demand proof of the real values, and in case the valuation is found to be excessive they may reduce it to cost price plus 10 per cent, unless they have expressly agreed to a higher increase and fixed its amount. This in effect forces merchants who desire to insure more than invoice and 10 per cent to declare the percentage they want added to invoiced prices.

The General German Commercial Code is very full in its provisions on the subject. For open policies the provisions of § 786 hold:

§ 786. The full value of the insured object is the insurable value, The sum insured shall not exceed the insurable value.

The sum insured has no validity so far as it exceeds the insurable value.1

In SS 795, 797, and 799 provision is made for the

1 Arnold's translation.

valuation of ship, freight, and cargo when no special contract exists respecting the values:

Ship.

Its actual value when the underwriter's risk began. Freight. The amount of freight as per the vessel's freight contracts, or if none exist or the cargo is on shipowner's account then the customary freight.

Goods.

Their value at time and place of shipment, plus all costs till on board and including insurance.

By S 793 it is provided that in case of valued policies when the parties have agreed on a value for insurance, that value is taken as binding between the parties. But the underwriter is entitled to demand a reduction of the valuation if he can prove that it is seriously excessive, and the words in § 795 and 799, "This rule applies also when the insurable value of the vessel (goods) has been inserted," 1 seem to indicate that anything much exceeding the values named in these sections would be considered excessive. As regards freight, § 798 provides that when an insurance is done on freight without specifying whether gross or net freight is intended, it is taken to be done on gross freight.

The Dutch and Portuguese codes and the Belgian law are said by Victor Jacobs (Etude sur les assurances maritimes et les avaries, Brussels, 1885) to permit the underwriter in every case to reopen the valuation in the policy, unless it be fixed by arbitrators appointed by the two parties. The Italian code (§ 612) regards a valuation as exclusively the work of the assured, unless it has been preceded by a survey accepted by the underwriter. In that case the underwriters cannot impugn the valuation, unless for fraud, dissimulation, or falsification (§ 435, pt. ii.). The new Spanish code of 1885 limits (§ 747) insurances on freight to the amount appearing in the contract of affreightment; and on ship (§ 751) to four-fifths of the vessel's value. In cases of evident over-valuation a distinction is drawn between over-valuation in error and by fraud; in the former the insurance is reduced to the genuine worth of the article insured, as fixed by common accord of the parties or by 1 Arnold's translation.

appointed experts; in the latter the policy is rendered null and void, the underwriter retaining the premium, "without prejudice to the suitable criminal proceedings" (§ 752, Raikes's translation).

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,