When the insured has overinsured on an unvalued policy, a proportionate part of the premium is returnable. But where double insurance has been knowingly effected by the insured or any earlier policy has at any time borne the entire risk or a claim has been paid on a policy in respect of its full value, no premium is returnable.
The policy issued by the underwriter to the insured makes mention of certain perils against which the insurance is granted, and unless the policy otherwise provides, the underwriter is liable for any loss proximately caused by any of these perils, but is not liable for any loss not proximately caused by a peril insured against. He is not responsible for any loss due to the wilful misconduct of the insured but, unless the policy otherwise provides, he is liable for any loss proximately caused by a peril insured against even though it would not have happened but for the misconduct or negligence of master or crew. Nor is he responsible for any loss caused by delay, although the delay be caused by a peril insured against; nor for ordinary wear and tear, ordinary leakage or breakage, inherent vice or character of objects insured, loss from rats or vermin, or injury to machinery not proximately caused by sea-perils.
Losses are divided into “total” and “partial.” A “total” loss may be (1) actual, or (2) constructive; and an insurance against total loss covers the insured against both, unless a different intention appears from the terms of the policy. It is an Total loss. “actual” total loss when the object insured is destroyed or damaged so as to cease to be of the denomination of goods to which it belonged when insured, or when the insured is irretrievably deprived of the property insured. In the case of an actual total loss no notice of abandonment need be given. In the case of a missing ship after the lapse of a reasonable time without news, an “actual” total loss may be presumed. There is a “constructive” total loss when the interest insured has been abandoned on account of what appears inevitable actual total loss, or because the cost of preventing such loss would exceed the value after such expenditure. E.g. if ship or merchandise is in such a position that recovery is unlikely or the cost of recovery would exceed the value recovered, there is constructive total loss; likewise in the case of a damaged ship, if the cost of repair would exceed the repaired value of the ship. (In making the estimate of cost of repairs no deduction is to be made for the share of them payable in general average by other interests, but account is to be taken of the cost of later salvage operations and of the ship’s proportion of any later general averages.) Similarly for damaged goods, there is constructive total loss if the cost of repair and of forwarding to destination exceeds the arrived value. The insured may either treat constructive total loss as a partial loss Abandonment. or as an actual total loss, in which latter case he abandons his insured interest to the underwriter. If he decides to abandon he must give notice of abandonment, else he will recover only for a partial loss. This notice may be wholly or partly written or oral, and in any terms if only they indicate the intention to transfer unconditionally all interest to the underwriter. The refusal of abandonment by the underwriter does not prejudice the assured’s rights. Abandonment may either be expressly accepted by the underwriter or may be implied from his conduct, but his mere silence does not imply acceptance. When notice is accepted, abandonment is irrevocable. Notice may be waived by the underwriter. Notice is unnecessary where, when the news reaches the insured, there would be no benefit to the underwriter if notice were given to him. On valid abandonment the underwriter adopts the interest of the insured in the subject insured, or what remains of it, and all incidental proprietary rights, e.g. in the case of a ship he is entitled to any freight in the course of being earned and which is earned by her subsequent to the accident causing the loss, less the expenses incurred after the accident; and if the cargo is on owner’s account, the underwriter is entitled to reasonable freight from the place of casualty to destination.
Any loss other than a total loss, as defined and described above, is a “partial” loss. As such are classed general average, salvage charges, particular average, particular charges. “General average” is really an outlying branch of the law of Partial loss.
General average. affreightment (see [Average] and [Affreightment]): its connexion with insurance is merely secondary, arising out of the underwriter’s contract to pay losses generally and this special liability in accordance with definite provisions of the policy. Any extraordinary sacrifice or expenditure voluntarily and reasonably made in a moment of peril in order to preserve all the property in the venture, is a general average act and the loss arising therefrom is a general average loss. The party on whom it falls is entitled to a rateable contribution from the others. These rateable contributions are repayable by the respective underwriters subject to the special provisions of their policies, unless the sacrifice or expenditure was made to avert a peril not covered by the policies, when there is no liability. The party originally incurring a general average sacrifice may recover from his underwriter the whole loss without having enforced his right of contribution from the others concerned in the venture. When ship, freight and cargo, or any two of them, belong to one person, the underwriter’s liability is determined as if these interests were each owned by separate Salvage charges.
Particular average. persons. “Salvage charges” are the charges recoverable under maritime law by a salvor independently of contract: if incurred in averting perils insured against, and if not otherwise provided in the policy, they are recovered as a loss from these perils. The cost of similar services of the insured or his agents or hired employees are recovered as a general average loss when the cost fulfils the character of general average expenditure, or in all other cases as “particular charges.” Thus all expenses by or on behalf of the insured to save or preserve the interest insured are either general average, salvage charges or particular charges. Particular charges are not included in “particular average,” which may now be defined as a partial loss of the subject insured, caused by a peril insured against, and not being a general average loss.
The nature of the liability for loss of the underwriter having been determined, it remains to fix its extent, or in other words the “measure of indemnity”; each underwriter bears that proportion of the loss which his subscription bears in the Measure of indemnity. case of a valued policy to the insured value, and in the case of an unvalued policy to the insurable value. In the case of a total loss, the measure of indemnity is the sum fixed by the policy if valued, or the insurable value of the object insured if the policy be unvalued. When the insured fails in an action for total loss, he is not precluded from recovering a partial loss if the policy insures him against partial loss. In the case of damage to a ship not amounting to a total loss the insured is, subject to the terms of his policy, entitled to recover the reasonable cost of repairs less customary deductions, but not exceeding for any one casualty the sum insured. If the repairs are only partial he is in addition entitled to an allowance for unrepaired damage, but the aggregate must not exceed the cost of complete repairs, less customary deductions. If the damaged ship has neither been repaired nor sold during the risk, the insured is entitled to reasonable depreciation but not exceeding the reasonable cost of repairs, less customary deductions. As regards freight, the underwriter’s liability for partial loss is, subject to the terms of the policy, the proportion of the policy value, or (in case of an unvalued policy) of the insurable value, which the freight lost bears to the whole freight at risk of the insured under the policy. When there is liability under a policy for total loss of part of the goods insured its amount is determined as follows: on an unvalued policy, it is the insurable value of the portion lost, ascertained as in case of total loss; on a valued policy, it is the proportion of the sum insured which the insurable value of the portion lost bears to that of the whole. Subject to any express provision of the policy, when goods are delivered at destination damaged throughout or in part, the liability is for the same proportion of the sum insured (or, in an unvalued policy, of the insurable value) that the difference between gross sound and gross damaged values at destination bears to the gross sound value there. Gross sound value means the wholesale price including freight, landing charges and duty; gross damaged value means the actual price obtained at a sale when all charges on sale are paid by the sellers. In case of goods customarily sold in bond, the bonded price is taken to be the gross value. When different kinds of property are insured under a single valuation, that valuation is apportioned over them in proportion to the respective insurable values they would have on an unvalued policy, but when the prime cost cannot be ascertained the division is made over the net arrived sound values of the different kinds of property. The liability for general average contribution and salvage charges is, for anything insured for its full contributing value, the full amount of the contribution; but in case of insurance not attaining the full contributing value there is a reduction in proportion to the under insurance; and where a particular average is payable on the contributing goods, its amount must be deducted from the insured value when the underwriter’s liability is being ascertained. On policies covering liabilities to third parties, the measure of indemnity, subject to the condition of the policy, is the amount paid or payable to the third party. When property is insured “free of particular average” (f.p.a.), then unless the policy is apportionable, as above, there is no liability for loss of part with exception of loss of part occasioned by a general average sacrifice, but there is liability for total loss of an apportionable part. The underwriter on f.p.a. F.P.A. liabilities. terms is liable for salvage charges, particular charges and charges incurred under the “sue and labour” clause of the policy to avert a loss insured against. Unless otherwise provided in the policy when goods are insured f.p.a. under a certain named percentage, a general average loss cannot be added to a particular average loss to make up the specified percentage; nor may particular charges nor the expenses of ascertaining and proving the loss; in fact only the actual loss suffered by the object insured may be taken into account. The engagement evidenced by the “sue and labour” clause of a policy is regarded as supplementary to the contract of insurance, and the expenses incurred under it are recoverable from the underwriter, even if he has paid a total loss or has insured the goods f.p.a. with or without any franchise being specified. General average losses and contributions are not “sue and labour” expenses, nor are salvage charges, as defined above. The expenses of averting a loss not covered by the policy cannot be recovered under the “sue and labour” clause. The Marine Insurance Act specially declares that “It is the duty of the insured and his agents, in all cases, to take such measures as may be reasonable for the purpose of averting or minimizing a loss.”
Unless otherwise provided, and subject to the provisions of the law, the underwriter is liable for successive losses, even though their aggregate amount exceeds the sum insured. But where, under one policy, an unrepaired or uncompensated partial loss is followed by a total loss, the insured can only recover the total loss. These provisions do not affect the underwriter’s liability under the “sue and labour” clause, for, as explained above, the “sue and labour” clause is a contract supplementary to the insurance contract contained in the policy.
The payment of a total loss of the whole or of an apportionable portion of the object insured entitles the underwriter to take over the insured’s interest in all that remains of the Subrogation. same, the underwriter becoming subrogated to all the rights and remedies of the insured in and regarding the interest insured as from the time of the accident occasioning the loss. The payment of a partial loss gives the underwriter a similar subrogation but only in so far as the insured has been indemnified in accordance with law by such payment for the loss.
In case of double (or multiple) insurance each underwriter is bound to contribute, as between himself and the other underwriters, rateably to loss in proportion to the amount for which Coinsurance. his policy makes him liable; for any excess of this amount he may maintain action against the coinsurers and may obtain the same remedy as a surety who has paid more than his proportion of a debt.
Where the object is insured for less than the insurable value, as defined above, the insured is deemed to be his own underwriter for the balance.
Recent extensions of marine insurance in England have mostly been in the direction of giving to shipowners protection against liabilities to third parties. The first addition was the running down clause (r.d.c.) by which underwriters take Liabilities. burden of a proportion, usually three-quarters, of the damage inflicted on other vessels by collision for which the insured vessel is held to blame. The rapid increase in the use and size of steamships was accompanied by an equally rapid increase in the frequency of collisions at sea, tending to make the shipowner desirous of insuring himself against the balance of his collision liability, and against whatever other liabilities to third parties might be imposed upon him. There was a hesitation on the part of underwriters to meet these wants and the result is that in Great Britain most liability insurances are effected in mutual insurance societies. The insurance of such liabilities is perhaps simpler in Great Britain than in other countries, as the amount for which a shipowner can be liable is limited by law, although, of course, none but English tribunals are bound by that law. A new and extensive set of liabilities has been thrown on shipowners by the Workmen’s Compensation Act of 1906; the liabilities in this case vary with the wages of the workmen concerned. Another interesting class of insurances has received much attention, namely, those against the risks of capture, seizure and detention by a hostile power, generally described briefly as war risks. But the difficulties connected with such risks probably lie more in determining the legal position of the owners of the property, and the obligations under which they lie, than in settling those of their underwriters. Such questions concern blockade, contraband, domicile, nationality, neutrality, &c.