INSURANCE

INSURANCE, in law and commerce, a contract, whereby one party engages to pay the losses which the other may sustain, for a stipulated premium or consideration. The most common sorts are, Insurance against the dangers of the seas, insurance against fire, insurance of debts, and insurance of lives.

I. INSURANCE against Loss at Sea, is a most beneficial institution, for promoting the security of trade, and preventing the ruin of individuals; and is now conducted by a regular system of rules, established by the interposition of the legislature, the decision of the courts of justice, and the practice of merchants.

It is carried on to the best advantage by public companies, or by a considerable number of private persons, each of whom only engages for a small sum, on the same vessel. There are two public companies established by authority of parliament, viz. the London and Royal Exchange Insurance-Companies. For procuring subscription by private persons, brokers are generally employed, who extend the policy or contract of insurance, procure subscriptions, and assist at settling losses. They are entitled to an allowance for their trouble, generally 5 per cent. on premiums, and 2 per cent. on losses.

The parties who engage to pay the damage are called the insurers or under-writers; the parties for whose security they engage are called the insured. The premium is understood to be paid when the insurance is made; but, if it be not paid, the insurers have a preferable right on the subject insured.

On this subject, we shall consider, What is necessary to render an insurance valid: — When the risk commences, and when it terminates: — What constitutes a total or a partial loss: — What proof of loss is necessary: — and, How the loss is adjusted.

First, In order to render an insurance valid, the insured must have property really at stake; the voyage must take place under the circumstances agreed on; the dangers insured against must not be contrary to law; and a candid account must be given of circumstances which enhance the danger.

1. The condition of possessing property was required by 19 Geo. II. c. 37. to prevent ships from being fraudulently destroyed when insured above their value; and to discourage a practice which had become common, of converting policies to the purpose of mere wagers. In transactions of this kind, as the insured had no property, and could claim no indemnification for partial damage; so the insurers, having lost their wager by the ship's being lost, could claim no abatement, though part was saved: accordingly, the policies contained clauses of interest or no interest, free from average, and without benefit of salvage. All such policies are declared invalid.

This restriction does not extend to privateers, nor to ships trading to the Spanish or Portuguese plantations.

Insurances are commonly made as interest shall appear; and it is incumbent on the insured to prove the value of his property. The value of the goods may be proved by the invoices; and the cocquet must be produced, if required, to instruct that the goods were actually shipped. It is admitted to value the ship at prime cost and charges, deducting the freights that have been drawn since purchased, if the proprietors choose to stand to that rule; but they are not restricted to it. Sometimes the value of the ship or goods is expressed in the policy; and this value must be admitted, although it be higher than the true one: but it is incumbent on the insured to prove that he had property

Insurance. property at stake; and, if the property be trifling in comparison of the sum insured, the insurance will be set aside, as an evasion of the statute.

Expected profits, and bounty on the whale-fishery, if specified in the policy, may be insured.

When the value is less than the sum insured, the owners may claim a return of premium for the excess.

If there be several policies on the same subject, of different dates, the earlier one is valid, and the others must be vacated. If they be of the same date, they must be vacated in equal proportions.

When a policy is vacated, in whole, or in part, the underwriters have a right to retain $\backslash frac\{1\}\{2\}$ per cent. for their trouble.

In the case of a cargo intended for A, but afterwards sent to B, both expected it, and insured, and B claimed for the value on its being lost. The underwriters answered, that it was a double insurance, and they ought only to pay their proportion. Judgment was given, finding them liable for the whole, and reserving to them any demand competent against the underwriters who insured for A.

Fraudulently to cast away or destroy a ship insured above its value, is felony.

2. If the ship does not proceed on the voyage, or if, being warranted to depart with convoy, it departs without convoy, the insurance must be vacated.

If the extent of a trading voyage be uncertain, the longest one in contemplation is described in the policy, and it is agreed that part of the premium shall be returned if the voyage be shortened. In like manner, in time of war, when insurance is made without condition of convoy, it is agreed that part of the premium be returned in case it fail with convoy.

When a ship is warranted to depart with convoy, it is understood from the usual place of convoy, (e. g. the Downs,) and it is insured till it arrive there.

The common proof of failing with convoy is the production of failing orders; but, if a ship be prevented by the weather from receiving the failing orders, other proof may be admitted.

A ship was insured from the Thames to Halifax, warranted to sail from Portsmouth with convoy. The convoy had failed before the ship arrived there, and the underwriters declined to insure it, without convoy, for the rest of the voyage. They were found liable to return part of the premium, retaining only in proportion to the accustomed rate from London to Portsmouth. This decision seems to establish the following principle, that, when the voyage performed is only part of that described in the policy, and when the risk can be proportioned, the underwriters are bound to return part of the premium, though there be no agreement for that purpose.

But, if a ship, insured only against the hazards of the sea, be taken by the enemy, the insured have no right to claim a return of premium, though the capture happen soon, under pretence that little sea-hazard was incurred.

If a ship deviates from the voyage described in the policy without necessity, it sets aside the insurance. An intention to deviate is not sufficient to set it aside; there must be an actual deviation; and, even in that case, the insurers are liable for damages sustained be-

fore deviation.

It is no deviation to go out of the way to the accustomed place of convoy, nor to the nearest place where necessary repairs may be had. Deviation, for the purpose of smuggling, if without the knowledge of the owners, does not set aside the insurance, nor when the master is forced by the crew to return.

In insurances to the East-Indies, and home, the insurers are understood to take the risk of detention in the country, and of country voyages.

3. Insurance of prohibited goods, against the risk of seizure by the government, is unlawful, and invalid. The insurers, insured, brokers, and all accessories, are liable to the fine of 500l.

4. If the insured have any information of more than common danger, they must reveal every such circumstance to the insurers, otherwise the policy is set aside.

This rule is established for the preservation of good faith; and there are several strong decisions in support of it. If a ship be spoke to leaky at sea, or if there be a report of its being lost, these circumstances must be communicated to the insurers. Even the concealment of a false report of loss vitiates the insurance; and, if the ship be afterwards lost, though in a different manner, the insured will recover nothing. In a voyage from Carolina to London, another ship had failed 10 days after that which was insured, and arrived seven days before the insurance was made; and the concealment of this circumstance, though the fact was not proved to the satisfaction of the jury, was considered as sufficient to set it aside. Also, since the commencement of the American war, a ship being insured from Portugal, by the month, without condescending on the voyage, failed for North-America, and was taken by a provincial privateer. The insurers refused to pay, because the hazardous destination was concealed; and it was only upon proof of the insured being equally ignorant of it, that they were found liable.

But the insured are not obliged to take notice of general perils, which the insurers are understood to have in contemplation; dangerous navigation, West-Indian hurricanes, enterprizes of the enemy, and the like.

Insurance is not set aside by a mistake in the name of the ship or master, or the like.

Insurance may be made on an uncertain ship; on any ship that the goods may be loaded on; on any ship that A shall sail in from Virginia. In this last case, the policy is not transferred to a ship which A goes on board during the voyage.

Secondly, If a ship be insured at and from a port, the insurance commences immediately if the ship be there, or at its arrival there. If it be damaged when preparing for a voyage, the insurers are liable; but not if the voyage be laid aside for several years, with consent of the owners. Insurance from a port commences when the ship breaks ground; and, if it set sail, and be driven back and lost in the port, the insurers are liable.

Insurance on goods generally continues till they be landed; but, if they be sold after the ship's arrival, and freight contracted to another port, the insurance is concluded. Goods sent on board another ship or

Insurance. lighter are not at the risk of the insurer; but goods sent ashore in the long-boat are.

Insurance on freight commences when the goods are put on board.

Goods from the East-Indies, insured to Gibraltar, and to be re-shipped from thence to Britain, were put on board a store-ship at Gibraltar, to wait an opportunity of re-shipping, and were lost: The custom of putting goods aboard a store-ship being proved, the insurers were found liable.

Loss of sails ashore, when the ship is repairing, is comprehended within the insurance. What is necessarily underhull, is insured, as well as what is expressed; the essential means, and intermediate steps, as well as the end. Ships performing quarantine are at the risk of the insurer.

Thirdly. The insurers are liable for a total loss when the subject perishes through any of the perils insured against. Baratry, though it properly signifies running away with the ship, extends to any kind of fraud in the master or mariners. Insurance against detention of princes does not extend to ships that are seized for transgressing the laws of foreign countries.

The insurers are also liable for a total loss, when damage is sustained, and the remaining property abandoned or vested in the insurers.

If a ship be stranded, or taken, and kept by the enemy, or detained by any foreign power, or seized for the service of the government, the proprietors have a right to abandon.

But, if a ship be taken by the enemy, and be retaken, or makes its escape, before action against the insurers; have the insured a right to abandon, or must they only claim for the damages sustained as an average loss? There are opposite decisions, according as the circumstances of the case were strong. When the ship was long detained, the goods perishable, the voyage entirely lost, or so disturbed, that the pursuit of it was not worth the freight, or when the damage exceeds half the value of the thing, they have been found intitled to abandon; (Gos against Withers, 2 Burrow, 683.). But, if the voyage be completed with little trouble or delay, they are not intitled; (Hamilton against Mendez, 2 Burrow, 1198.).

The insured cannot claim, as for a total loss, on an offer to abandon, when the loss is, in its nature, only partial; for, if this were permitted, they might devolve the loss occasioned by bad markets on the insurers.

And, in all cases, the insured have their option to abandon, or not. They may retain their property if they please, and claim for an average loss; and they must make their option before they claim.

If the goods be so much damaged, that their value is less than the freight, the insurers are accountable as for a total loss.

The insurers are liable for general average, when the property is charged with contribution; and for particular average, when the property is damaged, or part of it destroyed.

If the damage be sustained through the fault of the ship, the owners of the goods may have recourse, either against the master or insurers; and, if the insurers be charged, they stand in the place of the owners, and have recourse against the master.

Insurance. In order to prevent the insurers from being troubled with frivolous demands for average, it is generally stipulated, that none shall be charged under 5 per cent. or some other determined rate; and corn, flax, fruit, fish, and like perishable goods, are warranted free from average, unless general, or the ship be stranded.

In order to encourage every effort to save the ship, the insurers are liable for charges laid out with that design, although the subject perish. Thus, they may be charged with more than the sum insured.

In case of goods being damaged, the proportion of the sum insured, for which the underwriters are liable, is regulated by the proportion of the prices which the sound and damaged goods fetch at the port of destination. The prime cost of the goods is not considered, nor the necessity of immediate sale, in consequence of damage. Although the damaged goods sell above prime cost, the insurers are liable.

Fourthly. If a ship be lost, and the crew saved, the loss is proved by the evidence of the crew.

If damage be sustained, the extent is proved by an examination of the subject damaged, at the ship's arrival; and the cause by the evidence of the crew.

If the ship be stranded, evidence must be taken at the place where stranded.

Documents of loss must be laid before the underwriters, with all convenient speed; and, if these be sufficiently clear, the loss should be immediately settled. The underwriters generally grant their notes at a month or six weeks date for their proportions.

If a ship be not heard of for a certain time, it is presumed lost; and the underwriters are liable to pay the sums insured, the property being abandoned to them in the event of the ship's return. Six months are allowed for a voyage to any part of Europe, a year to America, and two years to the East Indies.

By the ordinance of Hamburg, if a ship be three months beyond the usual time of performing a voyage, the underwriters may be desired to pay 92 per cent. on an abandon. If they decline it, they are allowed 14 months more, and then they must pay the full value.

A ship insured against the hazards of the sea, but not against the enemy, if never heard of, is presumed lost at sea.

Fifthly. In order that the manner of settling losses may be understood, we must explain what is meant by covering property. We mentioned already, that insurances for greater sums than the insured had really at stake, were contrary to law: but some latitude is allowed in that respect; for if the owner were to insure no more than the exact value of his property, he would lose the premium of insurance, and the abatement, if any was agreed on.

For example, if he has goods on board to the value of 100 l. and insures the same at 5 per cent. to abate 2 per cent. in case of loss; then, if a total loss happen, he recovers 98 l. from the insurers, of which 5 l. being applied to re-place the premium, the nett sum saved is only 93 l.: but, if the value on board be only 93 l. and the sum insured 100 l. he would be fully indemnified for the loss; and his property, in that case, is said to be covered.

To find how much should be insured to cover any sum, subtract the amount of the premium and abatement

ment (if any), from 100l. As the remainder is to 100l. so is the value, to the sum which covers it.

In case of a total loss, if the sum insured be not greater than that which covers the property, the insurers must pay it all. If greater, they pay what covers the property, and return the premium on the overplus.

Partial losses are regulated by this principle, that whereas the owner is not fully indemnified, in case of a total loss, unless he covers his property, therefore he should only be indemnified for a partial loss in the same proportion; and, if it be not fully insured, he is considered as insurer himself, for the part not covered, and must bear a suitable proportion of the loss. Therefore the value of the property is proved, and the sum required to cover it computed. If that sum be all insured, the underwriters pay the whole damage; if only part be insured, they pay their share, which is computed by the following rule: As the sum which covers the property is to the sum insured, so is the whole damage to the part for which the insurers are liable.—For example, if the value of the property be 360l. the sum insured 300l. the premium 8 per cent. and abatement 2 per cent.; then the sum which should be insured to cover the property is 400l.; and, if damage be sustained to the extent of 200l. the owners will recover 150l.

If a voyage is insured out and home, the premium outward must be considered as part of the value on the homeward property, and the sum necessary to cover it computed accordingly. For example, to insure 100l. out and home, at 5 per cent. each voyage, abatement 2 per cent. we compute thus:

93 : 100 :: L. 100 : L. 107 : 10 : 6, to be insured outward, premium on L. 107 : 10 : 6 outwards, at 5 per cent. L. 5 : 7 : 6; 93 : 100 :: L. 105 : 7 : 6; L. 113 : 6s. to be insured home; the premium on which is L. 5 : 13 : 6; and, if the ship be lost on the homeward voyage,

Covered property L. 100 — —

II. INSURANCE against Fire. There are several offices in Britain for this purpose, of which the sun fire-office is the most considerable. Insurances are divided into common, hazardous, and doubly hazardous, according to the nature of the subject insured. When the sum insured is high, there is a higher premium per cent. demanded; and money, papers, jewels, pictures, and gun-powder, are not comprehended. If a subject be wrong described, in order that it may be insured at a lower premium, the policy is void. The benefit of a policy is transferred, by indorsement, to the representatives of the person in whose favour it was made; and it may be transferred to other houses when the insured changes his habitation. If insurance be made on the same subject in different offices, it must be specified, by indorsement, on the policy; and, in case of loss, the offices pay proportionally. The insurers

pay all expences in attempting to extinguish fire, or save goods, though not successful. If the value of a subject be insured in part, and damage be sustained, the insurers pay the whole, if it does not exceed the sum insured.

III. INSURANCE of Debts. See BOTTOMRY.

IV. In virtue of INSURANCES for Lives, when the person dies, a sum of money becomes payable to the person on whose behalf the policy of insurance was granted. The principal insurance office of this kind, is that of the amicable society for a perpetual assurance, kept in Serjeant's inn, Fleet-street, London.

In this office, after paying the charges of the policy, and 10s. entrance-money, each person pays 5l. per annum, by quarterly payments; and from these payments, the dividends, which usually amount 100l. and upwards, are to arise. All persons admitted are to be between the ages of 12 and 45, and in a good state of health. Any person is allowed to have two or three insurances or numbers on the same life, whereby such person will be intitled to a claim on each number so insured; and every claimant is empowered to put in a new life in the room of one deceased, within 12 calendar months next after the end of the current year. By becoming members of this society, clergymen, physicians, lawyers, tradesmen, and all whose income ceases at the time of their death, may, in all probability, leave to their families a claim of not less than 100l. for every 5l. annually paid in.—The value of insurances upon lives, depends upon the probability of the continuance of any proposed life or lives, during any proposed term. Any questions of this kind may be determined from Dr Halley's table, and from the principles of the doctrine of chances. But, as far as we can learn of the practice on such occasions, the premiums paid to insurers are generally higher than any computation founded on observations concerning the probabilities of human life will warrant. Thus it is not unusual to make a person pay 5 per cent. for the insurance of his life for a twelve-month; that is, in case the person dies within the year, the insurer is to pay 100l. for every 5l. received. Now it appears from Dr Halley's table, which estimates the probability of life low enough, that 5 per cent. is an adequate value only for a life of an advanced age, such as 64.

Re-INSURANCE is a second contract, made by an insurer, to transfer the risk he has engaged for to another. It is in general forbidden by 19 Geo. II. c. 37, but is permitted to the representatives of an insurer, in case of his death, or to his assignees, in case of his bankruptcy; and it must be mentioned in the policy that it is a re-insurance.