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.
According to Beckmann, the oldest laws and regulations respecting insurance, are the following.
On the 28th of January 1523, five persons who had received an appointment for that purpose, drew up some articles at Florence, which continue to be employed on the exchange at Leghorn. These interesting regulations, and the prescribed form of policies, which are deemed the oldest, were inserted by Magens, in his treatise on insurance, published at Hamburg in Italian and German, in the year 1753.
A short regulation of the 25th May 1537, by the emperor Charles V. respecting bills of exchange and insurance, is still preserved, in which even the fulfilling of an agreement is strictly commanded.
In the year 1556, Philip II. of Spain gave the Spanish merchants certain regulations respecting insurance, which Magens has inserted in the fore-mentioned work. They contain some forms of policies on ships going to the Indies.
The chamber of insurance was established at Amsterdam in 1598, an account of the first regulations of which office was published by Pontanus, in his history of that city.
Regulations respecting insurance were formed by the city of Middleburg in Zealand, in the year 1600; and it appears that the first regulations respecting insurances in England, were made in the following year. We find from them, that insurers, prior to this period, had secured the confidence of the public so completely, by the honesty and rectitude of their conduct, that few occasions for disputes had arisen.
1. 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, 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 underwriters: the parties for whose security they engage are called the insured; and the premium is understood to be paid when the insurance is made.
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 wages. 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 coquet 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 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 earliest 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 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
Insurance. 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 sail 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 sailing with convoy is the production of sailing orders; but, if a ship be prevented by the weather from receiving the sailing 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 sailed 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 before 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 insurance 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 Insurance. 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 insurer will recover nothing. In a voyage from Carolina to London, another ship had sailed ten 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, during the continuance of the American war, a ship being insured from Portugal, by the month, without condescending on the voyage, sailed 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, enterprises 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 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 reshipped from thence to Britain, were put on board a store-ship at Gibraltar, to wait an opportunity of reshipping, 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 understood, 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. Barratry, though it properly signifies running away with the ship, extends to any kind of fraud in the