History of merchant shipping and ancient commerce, Volume 3 (of 4)

by W. S. Lindsay

A contract of marine insurance is in its essence a contract of indemnity, and the spirit of the contract is violated if the assured can make the occurrence of a loss the means of gain. But the law has allowed a very considerable deviation from this fundamental principle. Mr. T. H. Farrer, in his evidence, happily illustrates this in the case of a ship with a chartered freight, bound from London to Calcutta and back.[307] He supposes her to be lost on her outward passage in the Bay of Biscay. Presuming that the owner only insured her prudently and not exorbitantly, he would recover in this case not merely the value of the ship at the commencement of the voyage, but also the freight of the outward and homeward voyages, while he would be exempted from paying the seamen’s wages from the date of the disaster, the expenses necessary to carry his ship to Calcutta, to remain there, and to return on her homeward passage, so that he would be, actually, a very considerable gainer by the loss.[308] Nor is the matter less flagrant in the case of valued policies, when the value of the property is fixed by agreement beforehand between the assured and the underwriter. The effect of this, as the Commissioners justly remark,[309] is, “that unless the policy is altogether void, on account of fraud, or the concealment of a material fact, the assured can, in the case of a total loss, receive the value which has been stated in the policy, however much it may exceed the actual worth of his property.” In confirmation of their opinion, they add “that, in certain decided cases, the Shipowner has been allowed to recover 50 and even 100 per cent. more than the actual value of his vessel.”

Evidence of other witnesses.

Various witnesses recommended that, in case of a total loss, the underwriter should be allowed to question a valued policy, when he considered that the value had been overstated; but many Shipowners and underwriters objected to this proposal, contending that, where a value had been agreed on between the Shipowners and underwriter, subsequent interference would be mischievous or futile, as it might induce Shipowners to insure abroad. It was contended that the value of a ship might depend on a variety of circumstances; for instance, the loss of a steamer to a Shipowner, about to start a new line of steam communication, would be inadequately replaced by the cost of the vessel, though estimated values of this sort are very problematical.

As regards insurance of freight, it was further suggested that the Shipowner should not, in case of total loss, be entitled to recover his freight, without deducting the expense saved to him by reason of the loss of the vessel. On the other hand, it was alleged that the necessity of estimating these uninsured expenses would give rise to doubt, difficulty, and litigation, and that, if the suggestion were adopted, the Shipowner would be to a great extent deprived of the legitimate advantage he now enjoys of being able to obtain with facility an advance on his freight.

Opinion of the Commissioners.

After carefully considering all these matters, the Commissioners arrived at the conclusion that they ought not to recommend any alteration of the law with regard to valued policies in cases of total loss, as there were weighty reasons against any interference on the part of the Legislature with contracts made by persons capable of taking care of their own interests, without carefully ascertaining the effect this interference was likely to produce on the entire system of law relating to such contracts. But they were of opinion that the “whole system of insurance law requires complete revision, for not only does it allow the assured, in some cases, to recover more than the amount of the loss actually sustained by him, but it also, on the other hand, deprives him of an indemnity in cases in which he ought to be protected by his insurance.”

The Commissioners, however, with great force, remark, that “a complete and thorough revision of our laws relating to marine insurance is a task of equal importance, difficulty, and delicacy, requiring evidence of an extensive character, and necessitating a very lengthy and careful investigation, and it touches directly on so many subjects unconnected with the security of life at sea, on which it has only an indirect and somewhat remote bearing, that we do not think it properly falls within the scope of our commission. We should also have been reluctant to undertake the complete revision of our system of marine insurance law, because, for many reasons, it appears to us to be important that, before such a task is undertaken, an attempt should be made to induce foreign nations to concur with us in framing and adopting a general code of insurance law. To alter the English law of marine insurance to any considerable extent, might have the effect of throwing the business of insurance into the hands of foreigners, and there is so much insurance of foreign property in England, as well as of English property abroad, that it is most desirable that the law of insurance should, as far as possible, be the same among all commercial nations. An examination of the foreign codes leads us to hope that there would be found no insuperable difficulty in the way of attaining this important object.”

Although the Commissioners do not at present recommend any alteration to be made in the law relating to valued policies, they think that the Shipowner should not be able to recover his insurance, whether under a time or voyage policy, in cases where it is shown that he or his agent had not done everything reasonably within their power to make and maintain the ship in a seaworthy condition, where that unseaworthiness occasioned the loss. They further consider that the Shipowner’s liability for damage to property or person should be unlimited in cases involving the death of the seaman or the damage to person or property. They are also of opinion that the present system by which insurance cases are tried before a judge and jury is altogether unsatisfactory, as a single judge and two assessors would constitute a far better tribunal. In conclusion, they recommend that the Marine Department of the Board should be revised and strengthened by having a legal adviser exclusively attached to it (a recommendation which has been since carried out). “It will,” they remark, “be the duty of the Board of Trade to check the negligent and to punish the culpable shipowner, but it is desirable that these functions should be performed without harassing the great body of Shipowners, who, by their ability and indefatigable energy, have contributed to the prosperity of the empire.”

I have now endeavoured to give as succinct an account of the whole course of the maritime legislation of the British Empire and its effects upon ships, seamen, and commerce as my space will permit, from the earliest period up to the close of the year 1875. Although it is not the province of an historian to enter upon controversial questions, much less to dive into the future, yet history is of little value unless we can gain knowledge from the past which can be made useful hereafter. I may therefore be permitted to close this volume with a few remarks on the subject of further maritime legislation, especially as the subject is one to which an unusual amount of public attention has been devoted during the last two or three years, and as it has been, officially, announced that it will be again dealt with by Government in the ensuing Session of Parliament.

Too much legislation already.