Marine Insurance

[Cites 84, Cited by 0]

Law Commission Report

Marine Insurance

 

LAW COMMISSION
OF INDIA

TWEXTY-FIRST REPORT

{MARINE INSURANCE)

GOVERNMENT OF INDIA :MINISTRY OF LAW C



no. No. F.I(3)/60-L.C;

CHAIRMAN.
LAW COMMISSION.

New Delhi-3, the Isa! September, 1961.

Shri Asoke Kumar Sen,
Minister of Law,
New Delhi.

' M'i' DEAR IVIINISTER,

I have great pleasure in forvvarding herewith the twenty-
first Report of the Law Commission on the Law of Marine
Insurance.

2. In April 1960, the Government of India referred to the
Law Commission the questions as_to whether there was need
for legislation on the Lavv of Marine Insurance, and if there

to the State Governments, High Courts, and other persons
interested ir1 the subject. The opinions received from them
were considered by the Commission at its meeting held on the
5th May, 1961. The Report has been revised in accordance

with the decisions taken at that meeting.

3. The Commission wishes to acknowledge the services
rendered by Shri P. M. Bakshi, Deputy Draftsman, in connec-
tion with the preparation of the draft and the Report.

Yours sincerely,
T. L. VENKATARAMA AIYAR.



59

REPORT ON MARINE_ INSURANCE

CONTENTS
PARAGRAPH SUBJECT-MATTER PAGE
I No Indian Statute on marine insurance . . . I
2 Need for legislation . . . . . . . 2

3 Desi:-ability of following the (English) Marine In-
siirance Act, I906 . . . . . .

2
4 Departure from English law . . . . . 3
5 Deﬁnition o " ship " included . . . . 3
6 Insurable value of ships driven by power other than
steam . . . . . . . . 4
7 Deviation for saving property . . . . 4
8--9 Abandon.rnent--Eﬂ'ect of subsequent acts of the in-
surer or change of circumstances . . . 5
IO Sale of injured ship without repair-----amount to be
paid by insurer . . . . 6
II Other points ' . . . . . . . 7
I2 Appendices . . . . . . . . 7
APPENDICES
APPENDI: I._---Pr0posals as shown in the form of a draft Bill . 13
APPENDIX II.--Notcs on Clauses . . . . . 42
APPENDIX III.--Showing the provision in the (English) Marine
Insurance Act, 1906, and the corresponding pro-
vision, if any, in Appendix I . . . 125
APPENDIX IV.--Suggestions in respect of other Acts . . I30



r. 9:5

REPORT ON MARINE INSURANCE.

1. There is no enactment of the Indian Legislature on No Indian
the law relating to marine insurance.' The Indian Stamp mt'-,It= 911
Act, 1899, prescribes the duties payable on insurance :;'a'::c_'"'
policies. The Transfer of Property Act, 1882, contains
provisions relating to the formalities to be observed in the
assignment of marine policies. The Insurance Act, 1938,
regulates generally the carrying on of the business of
_insurance (including marine insurance) by associations in-
corporated and unincorporated and by individuals, and does
not deal with the contract of insurance between the insurer
and the assured. The Merchant Shipping Act, 1958 (Cen-
tral Act 44 of 1958), deals with the law relating to shipping
such as registration of vessels, qualiﬁcations of Masters, the
rights and obligations of the crew, the construction of ships
and their equipments and the like, but not with marine
insurance. The last mentioned Act does, however, contain
provisions on such topics as sea-worthiness, collision and
salvage, which arise for consideration in the law of marine
insurance. Thus there is no statute which deals directly
with the subject of marine insurance contracts and the
rights of the parties thereto. In the absence of such a
statute, the courts were guided on the few occasions on
which questions relating to marine insurance arose for deci-
sion, by the corresponding provisions of the (English)
Marine Insurance Act, 1906, and by the principles laid down
in the decisions of English Courts in dealing with such
contracts. '

That a comprehensive enactment on the law of marine
insurance is a desideratum. was expressed in 1944, when the
Bill for amending the provisions of the Transfer of Pro-
perty Act relating to the assignment of policy of Marine
insurance was introduced. In the statement of Objects
and Reasons appended to that Bill' occur the following
observations: --

"It is recognised that while legislation on the above
lines would clarify the Law of Assignment, and sub-
rogation of marine insurance policies, the whole law
of marine insurance will not be put on a satisfactory
basis, unless comprehensive legislation on the lines of
the Marine Insurance Act, 1906, is enacted for British
India. Such a project, however,.must necessarily await
the termination of the War."

'For details of statisti touching on the subject, see Appendh: II,
i(:l'c%tecsh_;:n Clauses), topic dismissed at the beginning under 'Existing Law
:1 .

'For details see Appendix II, Notes on Clauses under clauses 52-53.



vira-

Need for
legislation.

Desirsbility
og fo 
t .2

Marine
Act.r9o6.

2

« As a first step in the codiﬁcation of the entire law relat-
ing to shipping, our Parliament has enacted the Indian
_Merchant Shipping Act, 1958. In 1959, a Bill on marine
insurance' was introduced in the Rajya Sabha by a Private
Member." In due course, the Bill was circulated for the
opinion of the State Governments, High Courts, and other
bodies and persons interested. After the receipt of their
comments, the Government of India referred to the Law
Commission the questions as to whether there was need for
legislation on this subject, and if there was, the lines on
which it should be undertaken. That is how this matter
has come before this Commission.

2. That there is need for this legislation was recognised,
as already stated," in the statement of Objects and Reasons
appended to the Bill for amendment of the provisions of
the Transfer of-Property Act. That statement was made
in 1944, and since then the need for such a legislation has
become greater. There has been, in recent years, a marked
increase in the mercantile marine owned by this country.
We have moreover entered on an era of industrial expan-
sion, and--to carry on our export and import trade effec-
tively, it is necessary that we should own our own vessels.
There is even now an appreciable volume of business in
the taking up of marine insurance policy on ships,.t.-argo
and freight, and that is bound to increase in the not distant
future. Under the circumstances, a law on marine insur-
ance would facilitate the expansion of business in exports
and imports, and in the settlement of disputes arising in
the course thereof. Such a legislation would also be in
furtherance of the policy underlying the enactment of the
Merchant Shipping Act, 1958. We are therefore of opi-
nion that there is ample need for enactment of a statute
on marine insurance.

3. We are also of opinion that the statute should, in
general, follow the (English) Marine Insurance Act, 1906.
The law as embodied therein represents the experience of a
leading maritime nation, extending over nearly three cen-
turies. Marine insurance policy as embodied in the Lloyd's
was settled in its present form in 1779, but many of its pro-
visions go back to a much earlier date. Lloyd's policy has
been criticised_ as "an absurd and incoherent instrument")
"a very strange instrument"," and its language as "crabbed
and obscure"." But it is based on usage and has been in
vogue in the commercial world for too long a period, now

1The Indian Marine Insurance Bill 1959 (Bill No. I of r959)--Raiya
Sabhn.

'Shri M. P. Bhargava.

'Para. 1:, supra.

'Per Bullet, L, in B2-ough V. Whitmare (r791) 4 T.R. at p. 2:0.

'Per Mansﬁeld, C.I., in La Cheminanr v. Pearson (1312) 4 Taunt. 33o.
'Chalmers' Marine Insurance Act, 1906, 5th edn.. p. 3.



3

to be lightly disturbed. There are numerous decisions of
courts, some of them by the House of Lords, construing its
provisions, and the rules of interpretation applicable to
them may now be taken to be fairl well-settled, and they
are embodied in the Schedule to t e English Act.

We are aware of the criticisms levelled against the
English Act, that it em_bodies only some of the legal prin-
ciples governing marine insurance, that its language is cryp-
tic, wide and indeﬁnite, with the result that to understand
its true import one has to refer to the law as it stood at the
time of the enactment, as expressed in the decided cases.'
But then it has to be remembered that the statute has stood
the test of time, having worked satisfactorily for more than
half a century, and that it has been adopted in the Corn-
monwealth countries such as Australia and Canada, so
much so it can well be said to have assumed the status of
a law of nations. As the topic is one which is 'inter-
national in character, both convenience and expediency
require that our law should, as far as possible, be in
conformity with it. A

In fact, business in maritime insurance in this country
follows closely the English pattern. Our marine insurance
policies are drawn up on the model of Lloyd's policy.
Many of our policies are re-insured in England, and these
:re--insurance policies are governed by the English law.
Moreover, when our goods are exported, they are insured,
and when those goods are transferred, the relative insur-
ance policies have to be assigned for protecting the rights
of the transferee and it will facilitate business if there is
'uniformity of law. We have therefore decided to follow, in
ggaiﬁeral, the pattern of the (English) Marine Insurance Act,

4. There are, however, certain provisions in the English Dgpartujg
Act which, in our view, require modiﬁcation, when regard from English
is had to the opinions expressed in English decisions subse-- 13"-
quent to the Act of 1906, or to the conditions in this country.

5. The English Act contains no deﬁnition of "ship".De_ﬁnition of
Rule 15 in 'Schedule I of that Act provides that certain ship III-
things forming ﬁttings and equipments of the ship are also °1"d°d'
included therein. But the Act is silent as to what vessels
should be included in the deﬁnition of "ship". The question
has accordingly been raised whether sailing vessels propell-
ed by oars should be included in it. Even in Ehigland the
view has been expressed by Arnould?' that "sh.ip" probably
includes alllbuilds of vessels. Referring next to the deﬁni-
tion of "ship" in Indian statutes, s. 3(55) of the General

'Rishards 1'. Formal Land C ., ( 9 ML 13, [and R
76__I942 All 50 (Hans: of Lmdz)' I 4213) as eports 52.

A1-could. arine Insurance 1954) Vol. 1, page 199, Articles :3¢-;35_



Insurable
value of
ships driven
by power
other than
steam.

Deviation
for . saving
property.

_ 4

Clauses Act' provides that a "ship" includes vessels not
exclusively propelled by oars. Section -48: "of the Indian
Penal Code deﬁnes vessel as "anything madefor the--convey-
ance by water of human beings or property". This would
include' vessels propelled by oars. . Section 3(45) of the
Indian Merchant Shipping Act (44 of 1958) enacts that a
ship does not include sailing vessels. But this deﬁnition is
only for the purpose of that Act, and is itself based on the
View that but for the speciﬁc provision contained in this
Act,'the word "ship" would include sailing vessels. There
has been a considerable body of opinion from South India,
where such vessels are largely in use, for their inclusion
in the deﬁnition of "ship". We have accordingly decided to
include'-' a deﬁnition of "sh.ip" as including sailing vessels
propelled by oars. .

6. Section 16 of the English Act provides that insurable
value in the case of steam ships includes also the machinery,
etc., if owned by the assured. This does not cover the case
of a ship driven by power other than steam. A provision
relating to such a ship is also necessary, and we have
accordingly provided" that in the case of a ship driven
b power other than steam, the insurable value includes
also the machinery and the fuel and engine stores if owned
by the assured, '

' 7. Another topic on which we have departed from the
English law has reference to "deviation". Where a ship
deviates from the voyage contemplated by the policy, the
insurer is discharged from liability under the policy from
the time of deviation (section 46, English Act). But the law
recognises certain lawful excuses for such deviation, one of
which under the English law is that it is for the purpose of
saving human life [section 49(1) (e), English Act]. When
the deviation is for saving property and not human life, it
is not excused, and the insurer is discharged. 'That is the
law also in America."

It should be noted that the position is diiferent when the
question arises between the cargo-owner and the ship-
owner under a contract of aifreightment. According to the
(English) Carriage of Goods by Sea Act, 1924, Schedule,
Article IV, para. 4, a deviation in saving or attempting .to
save life or property at sea or any reasonable deviation is

'The deﬁnition in the General Clause Act follows section 742, (English)
Merchant Shipping Act. _Fo_r cases on the deﬁnition in the latter Act, see
Temperlcy, Merchant Shipping Acts, 5th Edn. p. 441-443.

'See Appendix I, clause 2-" ship ".
'See Appendix I, clause 14.

'Of. also the First Schedule, rule :5 of the
proposed tharefronl. '

Wide 45 Corpus Iuris Secundum. " Insurance," p. 570, para. 653.
right hand column.

English Act and the departure



«J

-4'

5-

excused. And the Indian Carriage of Goods by Sea Act,
1925, Schedule, Article IV, para. 4, has also enacted the law
in the same terms. The question is whether two different
rules should apply as regards lawfulness of deviation, one
as between 'the insi._1rer- and the 'assured, and theeother as
between the -cargo-dormer and the ship-owner. The rule en-
acted in the (English) Marine Insurance Act, 1906, is based
on common law' and that has been departed from as regards
contracts of aifreightment in 1924. We think that there is
no good ground for applying two diiferent rules between
marine insurance contracts and contracts of affreightment,
and we have therefore adopted the law" as enacted in the
Indian_Carriage of Goods by Sea Act, as more equitable, and
accordingly substituted a provision excusing deviation for
the purpose of saving or attempting to save life or property
at sea. We, however, consider that "other reasonable clevi~
ation" (allowed in the Carriage of Goods by Sea Act), is too
wide in its terms to be adopted for purposes of insurance.

8. The law as to the rights of the assured when there is Abandon-
constructive total loss as enacted in the English Act of 1906 ment--=ﬁ'=°t
requires, in our opinion, to be clariﬁed. Under that law, ggiuggﬁﬂf
when there is a constructive total loss. the assured may sum, 0,.
abandon the subject-matter and treat the loss as if it were change of
an actual total loss. . 

Two questions arise with reference to this provision. The
ﬁrst question is, is it open to the insurer thereafter to salve
the subject-matter, and claim that the assured could recover
only on the footing of a partial loss? It is settled law that
he cannot? That is because the election of the assured to
treat the loss as total constructive loss has the effect of
transferring the title to the insurer.' The English Act is
silent on this question, obviously because the law was not

in doubt. We have considered it desirable that it should be
made explicit. - _

deprived _of possession thereof, he can elect to treat it as
constructive total loss. That might happen, for example,
when a ship is seized by enemies or pirates. But if after the

before he sues to recover the damages, the subject-matter
is got back and the insurer is able to deliver possession

'Sena-amonga v. Stamp (1880) 5 C.B.D. 295 CA. on appeal from 4 C.B.I;
3!G.(q). So: also Ha.lsbury,3rd Edn. Vol. 22, p. 73, para. 128 footnote,

'See Appendix I clause' 50.

'Vida Blairmors Sailing Skip: Co. v. Macredzit (I898) A.C. 593 607;
I-Ialab 3 Laws of: England, 3rd Edn. Vol. 22, p. :56, para. 302, and Aimcuid
(1954) o]. 2, Article 1126.

'Vida Chalmers' Marine Insurance Act. 1006. 5th Edn., p. 91.



6

thereof to the assured, can that he pleaded as a defence to
the action on the -policy by the latter? According to the
common law of England, that is a valid defence, and the
right of the assured is only to recover for partial loss. But
that is not the law in Scotland or the Continent or the
United States. The English Act of 1906 is silent on this
question, and there has been a diiference of opinion as to
whether under the Act, the common law of England as to
ademption has been changed} We think that the position
should be made clear, and in agreement with the law of
Scotland, of the Continent and of the United States, we have
provided' that the right of the insured to recover for total
loss should not be affected by events subsequent thereto.

{sale of 10. Another question on which the English Act is silent
'ﬂ'l.'"1"=". h is as to the measure of indemnity when a ship damaged by
":cp';,-,'."'_'_t °"" perils insured against is sold without repair. Section 69 of
gmoum to the English Act which prescribes the measure of indemnity
»!>¢ Piid by in case of partial loss does not deal with this matter. The
'-"'""1'- reason for this might be that the law on the subject was
still considered unsettled at the time. The question arose

- for decision in Pitmrm v. Universal Murime Insurance Co.'-'

There a ship which was valued by the owners at 4000 con-

sols ran aground. After effecting some repairs the owner

sold it for 3897 consols and then sued to recover 781 ccnsols

from the insurers on the basis of the estimated cost of

repairs, without selling the ship. The defendants contended

that they were liable to pay only the diﬁerence 'between the

sound value of the ship and the amount actually realised in

resale, and whatever was spent by the assured for the

repairs, and on this basis paid 245 console into court. Lind-

ley, J ., as he then was, held that the plaintiff was not entitl-

ed to anything more, as the contract of insurance was one of
indemnity, and that no damages beyond what the plaintiffs

had in fact suffered could be awarded.on a hypothetical

basis of repairs which were not in fact made. The plaintiifs

then appealed, and the Court of Appeal affirmed the

judgment of Lindley, J ., by a majority consisting of Jessel,

M.R., and Cotton, L.J. Brett, L.J. dissented, observing

that damages should be calculated on the basis of the esti-

mated cost of repair, less the usual deductions, and that the

principle adopted by Lindley, J. was a dangerous innova-

tion. There has been some difference of opinion as to

whether the value of the ship should, for the purpose of

-this rule, be calculated as on the date of the commencement

of the risk or as at the time of the casualty." But apart from

'Vida Halsburfs Laws of England, Vol. 22,13. :59, para. 308, and the
cases cited in foot note 8. See also Arnould, (1954) Vol. 2, pages I000-I001
Articles 1096 at seq.

'See Appendix I, clause 61(2).

K1352) 9 Q.B.D. 192.

'The matter has been discussed in detail in Appendix II in Notes on
clause 70.

lV'1'dc Chalmers' Marine Insurance Act, 1906, 5th Edn., p. 108.



p I?'

'H

7

that, the rule laid down by Lindley, J ., and afﬁrrned by the
majority of the Court of Appeal appears to he equitable and
in accordance with the character of the insurance contract
as one of indemnity. and we have accordingly -adopted it

~ and provided1 that when a ship which has been damaged is

sold in that condition, the assured is entitled to be indemni-
ﬁed for the reasonable cost of repairing the damage but not
exceeding the depreciation in valueas ascertained by the
sale. '

11. These are some of the more important points on Other points.

which we have departed from the provisions of the English
law. There are a few other points and they have been dealt
with in the notes on clauses. We have also made some modi-
ﬁcations of a formal character as regards the arrangement

of the topics and clauses.

12. In order to give a concrete shape to our proposals, we Appendices.

have in Appendix I put them in the form of a draft Bill.

Appendix II contains the notes on clauses, explaining with
reference to each clause in Appendix I any point that may
need elucidation. I .

Appendix III contains a comparative table showing the
provision in the English Act, and the corresponding provi-
sion, if any, in Appendix I.

Appendix IV contains our suggestions in respect of other

1. r. L. VENKATARAMA AIYAR,

(Chairman).

2. P. SATYANARAYANA RAO. 1

3. L. s. MISRA. I

4. G. R. RAJAGOPAUL. Lmembm.
5. s. CHAUDHURI. J

5. N. A. PALKHIVALA

D. BASU,
Joint Secretary.

NEW DELHI;
The 29th July; 1961. .

'Appendix I, clause 1o.



n-"

INDEX TO APPENDIX I

Guess Sustncr-Marta.
- CHAPTER I
_ PRELIMINARY
1. Short title, and cmnmencement.
2 Deﬁnitions.
_ CHAPTER _II
MARINE INSURANCE
Contract of Marine Insurance"

3. Marine insurance deﬁned.

4. Mixed sea and land risks. ''

5. Lawful marine -adventure.

Insurable Interest

6. Insurablc interest deﬁned. I

7. Interests which may, in particular, be insured.

8. Quantum of intereet in certain cases.

9. Avoidance of wagering contracts.
Io. When interest must attach.
It. Right of mortgagee, consignee, etc., to insure on behalf of other

persons interested. _
I2. Reinsurance.
" Insurable ruaiue
1'3. Measure of insurable Value.
CHAPTER III
DISCLOSURES AND REPRESENTATIONS

:4. Marine insurance to be a contract of utmost good faith .'
I 5. Disclosure by assured.
I6. Disclosure by agent effecting insurance.
17. Representations pending negotiation of contract.
18. When contract is deemed to be concluded.



Ctauss So3n=.c:r-mrrrmt
CHAPTER IV
THE Porto?

19. ' Contract must be embodied in a policy.
:0. What policy must specify.

21. Signature of insurer.

22.. Voyage and time policy.

23. Designation of subject-matter.

2.4. Valued policy.

25. Unvalued policy.

26. Floating policy by ship or ships.
27. Form of, and construction of terms in, policy.
28. Premium to be arranged.

29. Double insurance.

CHAPTER V
THE PREMIUM

30. 'When premium payable.

3:. Policy effected through broker.

32. Effect of receipt on policy.

CHAPTER VI
WARRANTIES

33. Nature of warranty.

34. Express warranty.

35. Warranty must be complied with.
36. When breach of warranty excused.

37. Warranty of neutrality.

38. No implied warranty of nationality.

39. Warrant of good safety.

40.. Warranty of seaworthiness of ship. _
41. No implied warranty that goods are sea-worthy.

Warranty of legality.



101

64.

CLAUSE SUBJECT-MATTER
CHAPTER VII
Tm: VOYAGE
43. Implied condition as to commencement of risk.
4.4. Alteration of port of departure.
45. Sailing for diﬁerent destination.
46. Change of voyage.
47. Deviation.
48. Several ports of discharge.
\ 49. Delay in voyage.
50. Excuses for deviation or delay.
51. Effect of transhipment, etc.
CHAPTER VIII
ASSIGNMENT or POLICY
52. Transfer of policy of marine insurance.
53. _ Assured having no interest cannot assign.
54. Assignment of rights under policy of marine insurance.
55. Assignment of interest.
56. Overriding effect of Chapter.
CHAPTER IX
Loss AND Amrznormzzrrr
57. Included and excluded losses.
58. Partial and total loss.
59. Actual total loss.
60. Missing ship.
61. Constructive total loss deﬁned.
62. Effect of constructive total loss.
63. Notice of abandonment.

Effect of abandomnent.



11

Cuuss Sunpscr'-A1A1"mt
CHAPTER X
' PARTIAL LOSSES (INCLUDING sALvAoa AND CENTRAL AVERAGE
AND PARTICULAR CHARGES)

65. Particular average loss.

66. Salvage Charges.

67. General average loss.

CHAPTER XI
MEASURE or INDEMNITY

68. Extent of liability of the insurer for loss.
69. Total loss.

70. Partial loss of ship.

7:. Partial loss of freight.

72. I Partial loss of goods, merchandise, etc.

73. Apportionment of valuation.

74. General average contributions and salvage charges.
75. Liabilities to third parties.

76. General provisions as to measure of indemnity.
77. Particular average warranties.

78. Successive losses.

79. Suing and labouring clause.

CHAPTER XII
RIGHTS or INSURER ON PAYMENT

80. Right of subrogation.

81. Right of contribution.

82. Eﬁect of under-insurance.

CHAPTER XIII
Ra'rUnN or PREMIUM

83. '_ Enforcement of return.

84. Return by agreement.

85. Return for failure of consideration.

296 Mo£L--2.



12

' Cuosa Sonyncr-Mann
CHAPTER xiv'
MUTUAL INSURANCE
86. Modiﬁcation of Act in case of mutual insurance.
CHAPTER xv '
MISCELLANEOUS
87. Ratiﬁcation by assured.
88 Implied obligations varied by agreement or usage.
39. Reasonable time, etc., a question of fact.
90 Slip as evidence.
91 Savings.

THE SCHEDULE.-w

FORM OF POLICY.



APPENDIX I
Paorosans A5 snown IN THE roam or A near-r BILL.
(This is a tentative' draft only)
TI-IE MARINE INSURANCE BILL, 1961

A
BILL
to codify the law relating to marine insurance.
B1: it enacted by Parliament in the . . . . . . . . . . . . ..Year of
the Republic of India as follows'.-
CHAPTER I
PRELIMINARY
1. (1.) This Act may be called the Marine Insurance Act. Short title
1951. and com-

- mencement.
(2) It shall come into force on such date as the Central cf. 3. 93

Government may, by notiﬁcation in the Oﬁicial Gazette. §nn"1;1i's-b9:-u.

appoint.
2. In this Act, unless the context otherwise requires,-- Deﬁnitions.

(0.) "contract of marine insurance" means a con-
tract of marine insurance as deﬁned by section 2;

(b) "freight" includes the proﬁt derivable by ac}, 3, go,

ship-owner from the employment of his ship to carry hisﬁnslish Act-

own goods or other movables, as well as freight pay-
able by a third party, but does not include passage
money; .

(c) "insurable property" means any ship, goods or cf. 5. 3(2)
other movables which are exposed to maritime perils; g'):l1i"§1l'ta

ns
- A .
(cl) "marine adventure" includes any adventure ct
where,-
' (12) any insurable property is exposed to mari- Of. 3. 3(2)
time penis, (a) part.
3- 3(2)(b).
3. 3 z)(c),

(ii) the earnings or acquisition of any freight,En8-sh Am

passage money, commission, proﬁt or other pecu-
niary beneﬁt, or the security for any advances, loans
or disbursements, is endangered by the exposure of
insurable property to maritime perils,

13



°r- =~ as.

English Act.

Cﬁ 5- 90.
English Act.

-Cf. s. 90,
English Act.

-Cf. s. 90,
English Act.

Marine in~
surance
deﬁned.

Of. 5. 1,
English Act.

Minced sea
and land
risks.

Cf. s. 2,
English Act.

marine ad-
venture.
Cf. 3: 3(1),
Engllsh Act.

14

(iii) any liability to a third party may be in-
curred by the owner of, or other person interested
in or responsible for, insurable property by reason
of maritime perils;

(e) "maritime perils" means the perils consequent
on, or incidental to, the navigation of the sea, that is to
say, perils of the seas, ﬁre, war perils, pirates, rovers,
thieves, captures, seizures, restraints and detainrnents
of princes and peoples, jettisons, barratry and any other
perils which are either of the like kind or may be
designated by the policy;

(f) "movables" means any mo-vable tangible pro-
perty, other than the ship, and includes money, valuable
securities and other documents; '

(g) "policy" means a marine policy;
(h) "ship" includes a sailing vessel; and

(i) "suit" includes counter--'c1aim and set-off.

CHAPTER II

MARINE INSURANCE

Contract of marine insurance

3 A contract of marine insurance is an agreement where-
by the insurer undertakes to indemnify the assured, in the
manner and to the extent thereby agreed, against marine
losses, that is to say, the losses incidental to marine
adventure.

4. (I) A contract of marine insurance may, by its express
terms, or by usage of trade, be extended so as to protect
the assured against losses on inland waters or on any land
risk which may be incidental to any sea voyage.

(2) Where a ship in course of building, or the launch iii'

a ship, or any adventure analogous to a marine adventure,
is covered by a policy in the form of a marine policy, the
provisions of this Act, in so far as applicable, shall apply
thereto; but, except as provided by this section, nothing in
this Act shall alter or affect any rule of law applicable to
any contract of insurance other than a contract of marine
insurance as deﬁned by this Act.

5. Subject to the provisions of this Act, every lawful
marine adventure may be the subject of a contract of marine
insurance.



Iﬁ

Insumble interest

6. ,(1) Subject to the provisions of this Act,_every person _Insurable
has an insurable interest who 15 interested in a marme 

adventure.

(2) In particular, a person is. interested in a marine CJ'- 5:. 5»
adventure where he stands in legal .......... .. relation to the Enshsh AC9
adventure, or to any insurable property at risk therein, in l
consequence of which he may beneﬁt by the safety or due
arrival of insurable property, or may be prejudlced by its
loss, or by damage thereto, or by the detention thereof, or
may incur liability in respect thereof.

Eo:planation.----Fo~r the purposes of this section, a bene-
ﬁciary under a trust shall be deemed to stand in legal
relation to the trust-property at risk in a marine adventure.

7. Without prejudice to the generality of the provisions Iriltcclifsm
contained in section 6,-- '  iaarzigsiir,

be insured.

(1) a defeasible interest is insurable, as also a con- Cf- s_- 7,
tingent interest, and, in particular, where the buyer of Enghsh 5°"
goods has insured them, he has an insurable interest,
notwithstanding that he might, at his election, have
rejected the goods, or have treated them as at the
seller's risk by reason of the latter's delay in making
delivery or otherwise;

(2) a partial -interest of any nature is insurable; Cf. s. 3,

English Act.
(3) the insurer under a contract of marine insur- Cf.-s. 9(1);
ance has an insurable interest in his risk; Ea}I;t,AFéIt1s-
5 .

(_4) the lender of money on bottomry or respo:n- cf. 3. re,
dentia has an insurable interest in respect of the loan; Enslish Act-

(5) the master or any member ('if the crew of aC- 5; 11.
ship has an insurable interest in respect of his wages; 1"hA°"

_ (6) in the case of advance freight, the person Of. 3. :2,
advancing the freight has an insurable interest,' in so E"81.i=hA¢=-
far as such freight is not repayable  case of loss;

(7) the assured has an insurable interest in the *3
charges of any insurance which he may effect. E" 3h ''t'

3. (1) Where the subject-matter insured is mortgaged,
the mortga or has an insurable interest in the full value 9 """1"*b1¢
thereof, an the mortgagee has an insurable interest in res- ',5',,$°,;',,f:;,,
pect of any sum due or to become due under the mortgage. cf, ,_ ,4(,'}'

d < >
Ennaitih.



18 --~ g'IoI-vIvr:'9I?':_!7v'7ﬁ-'p-

(2) The owner of insurable property has an insurable
interest in respect of the full value thereof, notwithstanding
that some third person may have agreed, or be jiable, to
indemnify him in case of loss.

Avoidlngem 9. (1) Every contract of marine insurance by way of

of W38: ' . . .
wmmm ............. .. wagering is void.

03'. s. 4
English hen (2) A contract of marine insurance is deemed to be a
............. .. wagering contract----

(ct) where the assured has not an insurable interest
as deﬁned by this Act, and the contract is entered into
with no expectation of acquiring such an interest; or

(b) where the policy is made "interest or no inter-
est", or "without further proof of interest than the
policy itself", or "without beneﬁt of salvage to the
insurer", or subject to any other like term:

Provided that, where there is no possibility of salvage,
a policy may be eﬁected Without beneﬁt of salvage to the
insurer.

whcn in_ 10. (1) The assured must be-'interested in the subject-
temt must matter insured at the time of the loss, though he need not
attl<=h- be interested when the insurance is effected:

. 3. 6,

girlish Act. Provided that, where the subject-matter is insured "last
or not lost", the assured may recover although he may not
have acquired his interest until after the loss, unless at the
time of effecting the contract of insurance the assured was
aware of the loss and the insurer was not.

(2) Where theassured has no interest at the time of the
loss, he cannot acquire interest by any actor election after
he is aware of the loss.

Right of 11. A mortgagee, consignee or any other person having
morgtlsee. an interest in the subject-matter insured may insure on
°°""3n°.°s behalf and for the beneﬁt of other persons interested as
:,:°,;§,(,',,'ﬁ;_ well as for his own beneﬁt.

half of other
persons
interested.

Cf. s_. 14(2),

English Act.

R°i"3m"D°°- 12. The insurer under a contract of marine insurance
Cf- 3- 9(1): may reinsure in respect of his insurable interest in his risk,
1"" '"d but, unless the policy otherwise provides, the original assur-
E£f,)'A%tn,g" ed has no right or interest in respect of such re-insurance.



17

Insa:-able value

13. Subject ..to any express provision or valuation in the ideasnrc oi
policy, the insurable value of the subject-matter insured ::i:"b1°

must be ascertained as follows:-- 3: I6

(1) In insurance on ship, the insurable value is the nslishAct-
value, at the commencement of the risk, of the ship, in-
cluding her out-ﬁt, provisions and storesfor the oﬂicers
and crew, money advanced for seamen's wages, and
other disbursements (if any) incurred to make the ship
fit for the voyage or adventure contemplated by the
policy, plus the charges of insurance upon the whole.

The insurable value, in the case of a steamship,
includes also the machinery, boilers, and coals and
engine stores, if owned by the assured; in the case of a
ship driven by power other than steam, includes also
the machine?'y., and fuels and engine stores, if owned
by the assured; and in the case of a ship engaged in a
special trade, includes also the ordinary ﬁttings requi-
site for that trade.

(2) In insurance on freight, whether id in
advance or otherwise, the insurable value is t e gross
amount of the freight at the risk of the assured, plus
the charges of insurance.

(3) In insurance on goods or merchandise, the in-
surable value is the prime cost of the property insured,
plus the expenses of and incidental to shipping and the
charges of insurance upon the whole.

(4) In insurance on any other subject-matter, the
insurable value is the amount at the risk of the assured
when the policy attaches, plus the charges of insurance.

CHAPTER III
DISCLOSURES AND Rnpnnsnnranons

14; A contract of marine insurance is a contract based Marine in-
upon the utmost good faith, and, if the utmost good faith he WW" '°

not observed by either party, the contract may be avoided 2}' "uﬁtfl

by the other party. good faith.
Cf. s. :1,
English Act.

15. (1) Subject to the provisions of this section, the Disclosure
assured must disclose to the insurer, before the contract is by ﬂsﬂlwd
concluded, every material circumstance which is known to 5 15
the assured, and the assured is deemed to know every cir- §I,',,1,',h jug,
cumstance which, in the ordinary course of business, ought
to be known to him. If the assured fails to make such

disclosure the insurer may avoid the contract.

(2) Every circumstance is Inaterial which would inﬁu
ence the judgment of a prudent insurer in ﬁxing the pre-
mium, or determining whether he will take the risk.



i8

(3) In the absence of inquiry, the following circum-
stances need not be disclosed, namely:----

(a) any circumstance which diminishes the risk;

(b) any circumstance which is known or presumed
to be known to the -insurer. The insurer is presumed
to know matters of common -notoriety or knowledge,

_ and matters which an insurer in the ordinary course of
his business, as such, ought to know;

(c) any circumstance as to which information is
waived "by the insurer;

(d) any circumstances which it is superﬂuous to dis-
close by reason of any express or implied warranty.

(4) Whether any particular circumstance, which is not
disclosed, be material or not is, in each case, a question of
fact. ' -

(5) The term "circumstance" includes an communica-
. . . . 3'
tion made to or information received b , the assured.
: Y

Disclosure - 16. Subject to the provisions of section 15 as to circum-

by ag_cnt_ stances which need not be disclosed, where an insurance is

Fig? '5' eifected for the assured by an agent, the agent must dis-
' close to the insurer-

Ciﬂ s,- :9,
E"3"5h A''-'- (a) every material circumstance which is known to

himself," and an agent to insure is deemed to know every
circumstance which in the ordinary course of business
ought to be known by, or to have been communicated
to him; and -

(12) every material circumstance which the assured
is bound to disclose, unless it comes to his knowledge
too late to communicate it to the agent._

Rcprescnta- 17. (1) Every material representation made by the
tions pendins assured or his agent to the insurer during the negotiations
 for-the contract, and before the contract is concluded, must
  .' " be true. If it be untrue the insurer may avoid the contract.

g-'£9.39: (2) A representation is material which would inﬂuence
"'hA"j the judgment of a prudent insurer in ﬁxing the premium,
or determining whether he will take the risk.

(3) A representation maybe either a representation as
to a matter of fact, or a representation as to a matter of
expectation or belief.

(4) A representation as to a matter of fact is true, if it
be substantially correct, that is to say, if the difference be-
tween what is represented and what is actually correct
would not be considered material by a prudent insurer.

__ (5) A representation as to a matter of expectation or
belief is true if it be made in good faith.



19

(6) Whether a particular representation be material or
not is, inleach case, a question of fact.

18. A contract of marine insurance is deemed to be con- When con-
cluded when the proposal of the assured is accepted by the 3:31;; to
insurer, whether the policy be then issued or not; -and for C mm__,ud__

e purpose of showing when the proposal was accepted. ed.
reference may he made to the slip or covering note or other Cﬁ s_ 2,'
customary memorandum of the contract, although it be English Act.

unstamped.
CHAPTER IV
THE Poucr
3 19. A contract of marine insurance shall not be admitted comma

as issued either at the time when the contract is concluded or }:.'."3_"';]_,_i:'5"
5 afterwards. English Act.
20. A marine policy must specify-- Whatp01i§=Y
must specify.
(1) the name of the assured, or of some person who Cf. s_. 23,
effects the insurance on his behalf; E11B1'5hA""
(2) the subject-matter insured and the risk insured
against;

(3) ' the voyage, or period of time, or 'both, as the
case may be, covered by the insurance;

(4) the sum or sums insured;
(5) the name or names of the insurer or insurers.

. 21. (1) A marine policy must be signed by or on behalf signature of
of the insurer.' - I'nsur=r-

(2) Where a policy is subscribed by or on behalf of two 
. or more insurers, each subscription, unless the contrary be
expressed, constitutes a distinct contract with the assured.

22. (1) Where the contract is to insure the subject- Voyage Ind_
_r. matter "at and from", or from one place to another or "W3 Wu'?-

contract_ is to insure the subject-matter for a deﬁnite period En.glsi'sl12§':C't.'
of time, the policy is called a "time policy". A contract for
both voyage and time may be included in the same policy.

(2) A time policy which is made for any time exceeding
twelve months is invalid."

-- 'No proviso relating to " seal " of a corporation appears to b c
in India. Cfya. 46, Companies Act, I956 (i of 1956) which willns:t?i:l.T
'_'The English Act contain: the words " Subiect tn the provisions of
section eleven of the Finance Act, 1901 ". _ The 19:31 Act deals with oonti"
nnation clause, and there Ll no such pmvision in the Indian Statute Law

(Stamp Act). Hence there is no point in mentioning the Indian Suunp
Act in the clause.



Designation
of Iubicct-
matter.

C)'. a. 26,
English Act.

Valued

hcy.
ﬁg . :7,

lish Act.

Unyalucd
pohcy.

. 3. 38,
gqliah Act.

Flo:

. 3. :9
Huh Act.

20

23. (1) The subject-matter insured must be designated
in a marine policy with reasonable certainty.

(2) The nature and extent of the interest of the assured
in the ubject-matter insured need not be speciﬁed in the

policy.

(3) Where the policy designates the subject-matter in-
sured in general terms, it shall be construed to apply to the
interest intended by the assured to be covered.

(4) In the application of this section regard shall be had
to any usage regulating the designation of the subject-
matter insured.

24. (1) A policy may be either valued or unvalued.

(2) A valued policy is a policy which speciﬁes the
agreed value of the subject-matter insured. '

(3) Subject to the provisions of this Act, and in the
absence of fraud, the value ﬁxed by the policy is, as between
the insurer and the assured, conclusive of the insurable
value of the subject intended to be insured, whether the
loss be total or partial.

(4) Unless the policy otherwise provides, the value ﬁxed
by the policy is not conclusive for the purpose of determin-
ing whether there has been a constructive total loss.

25. An unvalued policy is a policy which does not specify
the value of the subject-matter insured, but, subject to the
limit of the sum insured, leaves the insurable value to be
subsequently ascertained, in the manner hereinbefore ex-
plained.' ,

26. (1) A ﬂoatin policy is a policy which describes the
insurance in genera terms, and leaves the name or names of
the ship or ships and other particulars to be deﬁned by
subsequent declaration. .

(2) The subsequent declaration or declarations may be
made by endorsement on the policy, or in other customary
manner. ,

(3) Unless the policy otherwise provides, the declara-
tions must be made in the order ofpdespatch or shipment.
They must, in the case of goods, comprise all consignments
within the terms of the policy, and the value of the goods or
other property must be honestly stated; but an omission or
erroneous declaration may be rectiﬁed even after loss or
arrival, provided the omission or declaration was made in
good faith. '



21

(4) Unless the policy otherwise provides, _where a den-
laration of value is not made until after notice of loss or
arrival, the policy must be treated as an unvalued P011937 35
regards the subject-matter of that declaration.

27, (1) A policy may be in the form In the Schedule. 'I:':::I:tm0§ﬁI°I:=1
of terms in,
. policy.
(2) Subject to the provisions of this Act, and unless the 01'» 8,-
context of the policy otherwise requires, the terms and ex- Engmh °"
pressions mentioned in the Schedule shall be construed as
having the scope and meaning assigned to them in the
Schedule.

28. (I) Where an insurance is effected at a premiuin to Premium to

be arranged, and no arrangement is made, a reasonable pre- be ""°"3"-'L

' ' C . . ,

mium is payable. E{)gfM?fm'

(2) Where an insurance is effected on the terms that an
additional premium is to be arranged, in a given event, and
that event happens but no arrangement is made, then a
reasonable additional premium is payable.

29. (I) Where two or more policies are effected by or on Doubl:
behalf of the assured on the same adventure and interest or insurance.
any part thereof. and the sums insured exceed the i.ndem-  a_. 32,
nity allowed by this Act, the assured is said to be over-- 811811 Act-
insured by double-insurance. '

(2) Where the assured is over-insured by double-insur-
ance.-- ' '

(a) the assured, unless the policy otherwise pro-
vides, may claim payment from the insurers in such
order as he may think ﬁt, provided that he is not en-
titled to receive any sum in excess of the indemnity
allowed by this Act;

('b) where the policy under which the assured
claims is a valued policy, the assured must give credit,
as against the valuation, for any sum received by him
under any other policy, without regard to the actual
value of thesuhject-matter insured;

(c) where the policy under which the assured
claims is an unvalued policy, he must give credit, as
against the full insurable value, for any sum received
by him under any other policy;

(d) where the assured receives any sum in excess
of the indemnity allowed by this Act, he is deemed to
hold such sum in trust for the insurers, according to
their right of contribution among themselves. a



When pre-
mium pay-
able.

Cf. . 52
Enghsh riot.

Policy

sE°'£f'°"
ugh

broker.

Cf- s_- 53.
El'-1311811 Act.

22 .
CHAPTER ,V

THE Par.MrUM

30. Unless otherwise agreed, the duty oi the assured or
his agent to pay the premium, and the duty of the insurer
to 155118 thepolicy to the assured or his agent, are concurrent
opnditions, and the insurer is not bound to issue the policy
until payment or tender of the premium.

31. (1) Unless otherwise agreed, where a marine policy

is effected on behalf of the assured by a broker, the broker

is directly responsible to the insurer for the premium, and
the insurer is directly responsible to the assured for the
amount which may be payable in respect of losses, or in
respect of returnable premium. i

(2) Unless otherwise agreed, the broker has, as- against

- the assured, a lien upon the policy for the amount of the

Effect of
receipt on
policy. --

C'f- s. 54
English A .

Express
warranty.

Cf. 3. 35,

English Act. '

premium and his charges in respect of effecting the policy;
and, where he has dealt with the person who employs him
as a principal, he has also a lien on the policy in respect of
any balance on any insurance account which may be due to
him from such person, unless he had, when the debt was in-
curred, reason to believe that such person was only an agent.

32. Where a marine policy eﬂfected on behalf of the
assured by a broker acknowledges the receipt of the pre-

mium, such acknowledgment is, in the absenceof fraud,
conclusive as between the insurer and the assured. but not

as between the insurer and the broker.

CHAPTER VI
WARRANTIES

33. (1) A warranty, in sections 34 to 42, means a promis-
sory warranty, that is to say, a warranty by which the
assured undertakes that some particular thing shall or shall
not be done, or that some condition shall be fulfilled, or

' whereby he aiﬁrms or negatives the existence of a particular

state of affairs.
(2) A warranty may be express or implied.

34. . (1) An express warranty may be in any form of
words from which the intention to warrant is to be inferred.

(2) An express warranty must be included in, or written
upon the policy, or must be contained in some document in-
corporated by reference into the policy.

(3) An express warranty does not exclude an implied
warranty, unless it be inconsistent therewith.



35. A warranty, as deﬁned in section 33, is a condition wmmy
which must be exactly complied with, whether it be must in
material to the risk or not. If it be not so complied with, $f1hP'1°d
then, subject to any express proviion in the policy, the in- of ' (3)
surer is discharged from liability as from the date of the Enhﬂgictj
breach of warranty, but without prejudice to any liability
incurred by him before that date.

36. (1) Non-compliance with a warranty is excused Whcn
when, by reason of a change of circumstances, the warranty bffrﬂll °f
ceases to be applicable to the circumstnces of the contract, excuse?
or when compliance with the warranty is rendered unlawful Cf_ s_ 34,

by any subsequent law. English Act,

(2) Where a warranty is broken, the assured cannot
avail himself of the defence that the breach has been re-me-
died, and the warranty complied with. before loss.

(3) A breach of warranty may be waived by the insurer.

37. (I) Where insurable property, whether ship or Warranty of
goods, is expressly warranted neutral, there is an implied I1=utI'a1itY-
condition that the property shall have a neutral character Cf. 8; 36,
at the commencement of the risk. and that, so far as the Enghih Ac'-
assured can control the matter, its neutral character shall
be preserved during the. risk.

(2) Where a ship is expressly warranted "neutral",
there is also an implied condition that, so far as the assured
can control the matter, she shall be properly documented,
that is to say, that she shall carry the necessary papers to
establish her neutrality, and that she shall not falsify or
suppress, her papers, or use simulated papers. If any loss
occurs through breach of this condition. the insurer may
avoid the contract. -

38. There is no implied warranty as to the nationality of No implied
a ship, or that her nationality shall not be changed during Warranty Of
the risk. nationality.
 5- 37:
English Act.
39. Where the subject-matter insured is warranted Warranty of
"well" or "in good safety" on a particular day, it is sufficient good safety-

if it be safe at any time during that day. Of. s. 33,
English Act.

40. (1) In a voyage policy there is an implied warranty Warranty of
that at the commencement of the voyage the ship shall be '°'""°."h"'°"
seaworthy for the purpose of the particular adventure in- ° 'mp'
sured. Cﬁ 5: 39'

English Act.

(2) Where the policy attaches while the ship is in part,
there is also an implied warranty that she shall, at the com-
mencement of the risk, be reasonably ﬁt to encounter the
ordinary perils of the port. a

(3) Where the policy relates to a voyage which is per-
formed in different stages, during which the ship requires



No implied

Warranty
that goods
are sea-
worthy.

C)'. s. 40,
English Act.

W U
oriiitisy.

%;ﬁ's;"z:a

Implied
condition
as to com- -
mencement
of risk.
cf. 3.. 433
Ellshsh

Act.

Alteration
of port of
departure.

Cf. .
Bngfisliict.
Sailing for

different
destination.

§I'.;?n'ta.

different kinds of or -furtlier preparation or equipment.
tliereis an implied warranty-that at the commencement of
each stage the ship is seaworthy in respect of such prepara-
tion or equipment for the purposes of that stage.

(4) A ship is deemed to be seaworthy when she is
reasonably ﬁt in all respects- to encounter the ordinary perils
of the seas of the adventure insured.

(5) In a time policy there is no implied warranty that a
ship shall be seaworthy at any stage of the adventure. but
where, with the privity of the assured, the ship is sent to sea
in an unseaworthy state, the insurer is not liable for any
loss attributable to unseaworthiness.

41. (1.) In a policy on goods or other movable there is no
implied warranty that the goods or movables are seaworthy.

(2) In a voyage policy on goods or other movable there
is an implied warranty that at the commencement of the
voyage the ship is not only seaworthy as a ship, but also that
she is reasonably fit to carry the goods or other movable to
the destination contemplated by the policy.

42. There is an implied warranty that the adventure
insured is a lawful one, and that, so far as the assured can
control the matter, the adventure shall be carried out in a
lawful manner.

CHAPTER VII
TI-IE Vosmca

43. (1) Where the subject-matter is insured by a voyage
policy "at and from" or "from" a particular place, it is -not
necessary that the ship should be at that place when the con-
tract is concluded, but there is an implied condition that the
adventure shall be commenced within a reasonable time,
and that if the adventure be not so commenced the insurer
may avoid the contract.

(2) The implied condition may be negatived by showing
that the delay was caused by circumstances known to the
insurer before the contract was concluded, or by showing
that he waived the condition.

44. Where the place of departure is specified by the
policy, and the ship, instead of sailing from that" place, sails
from any other place, the risk does not attach.

45. Where the destination is speciﬁed in the policy, and
the ship, instead of sailing for that destination, sails for any
other destination, the risk does not attach.



25.

46. (1) Where after commencement of the risk, the Change of
destination of the ship is voluntarily changed from the desti- "°3"'5°'
nation contemplated by the policy, there is said to he a $5 fi-Bgﬁﬁct
change of voyage. - 'DE '

(2) Unless the policy otherwise provides, where there is
a change of voyage, the insurer is discharged from liability
as from the time of change, that is to say, as from the time
when the determination to change it is manifested; and it is
immaterial that the ship may not in fact have left the course
of voyage contemplated by the policy when the loss occurs.

47. (1) Where a ship, without lawful excuse, deviates Deviation.
from the voyage contemplated by the policy, the insurer Cf. s. 45,
is discharged from liability as from the time of deviation, English
and it is immaterial that the ship may have regained her A"-
route before any loss occurs.

(2) There is a deviation from the voyage contemplated
by the policy-

(c) where the course of the voyage is speciﬁcally
Elesignated by the policy, and the course is departed
mm; or

(b) where the course of the voyage is not s-peciﬁ~
.cal1y designated by the policy, but the usual and cue»
ternary course is departed from.

(3) The "intention to deviate is immaterial; there must
be a deviation in fact to discharge the insurer from his
liability under the contract.

48. (1) Where several ports of discharge are speciﬁed Several
by the policy, the ship may proceed to all or any of them. 59*" °f
but, in the absence of any usage or suﬁicient cause to the '5 3°'
contrary, she must proceed to them, or such of them asshc E-:1'.gfi'slj7'
goes to, in the order designated by the policy. If she does ACL
not, there is a deviation. .

(2) Where the policy is to "ports of discharge", Within
a given area, which are not named, the ship must. in the
absence of any usage or sufficient- cause to the contrary.
proceed to them, or such of them as she goes to, in their
geographical order. If she does not, there is a deviation.

49. In the case of a voyage policy, the adventure insured Delay in
sst be prosecuted throughout its course with reasonable WHEE-
despatch, and if without lawful excuse it is not so prose- Cf- s_- 43.
cuted, the -insurer is discharged from liability as from the Enghsh A"-
time when the delay becomes unreasonable. '

50. (1) Deviation or delay in prosecuting the voyage Exc_us_es for
contemplated by the policy is excused--- g:V|3t1°ﬂ 01'
(a) where authorised by any special term in the Cf. if 49,
policy; or ' - -  Ercltglisll



(b) where caused by circumstances beyond the con-
trol of the 'master and his employer; or

(c) where reasonably necessary in order to comply
with an express or implied warranty; or

(d) where reasonably necessary for the safety of
the ship or subject-matter insured; or

(e) for the purpose of saving or attempting to save
life or property at sea; or

(1') where reasonably necessary for the purpose of
obtaining medical or surgical aid for any person on
board the ship; or

(g) wh-ere caused by the barratrous conduct of the
master or crew, if barratry be one of the perils insured
against.

(2) When the cause excusing the deviation or delay
ceases to operate, the ship must resume her course, and
prosecute her voyage, with reasonable despatclh.

mm of l51..Where, by a peril insured against, the voyage is
tranship-- interrupted at an intermediate port or place, under such
mentaetc. circumstances as, apart from any special stipulation in the
C. s_. 59. contract of aﬁreightment, to justify the master inelanding
11811511 AW and re-shipping the goods or other movables, or in tranship-
ping them and sending them on to their destination the
liability of the insurer continues, notwithstanding the land-

ing or transhipment.

CHAPTER VIII

ASSIGNMENT
Tr9¢nsf=r of 52. (1) A policy of marine insurance may be transferred
§fa"r'ge°ifI1_ by assignment unless it contains terms. expressly prohibiting
aummm assignment, and may be assigned either-before or after
cﬁ s_ 50(1) loss.
and s. 50(3),
Enblish Act
and s. 13o-A
gransfcrgf
mpmy Gt' (2) A policy of marine insurance may be assigned by
endorsement thereon or in any other customary manner.
Asmmd 53. Where the assured has parted with or lost 'his interest
having no in the subject-matter insured and has not, before or at the
interest time of so doing, expressly or impliedly agreed to assign
:33' _ the policy, any subsequent assignment of the policy is in-
C1; ,_'51, operative:
English Act

and 3-13°-A Provided that nothing in this section affects the assign-
gggcaﬁ; ﬁgment of a policy after loss.



27

54. Where a policy of marine insurance has been assign--£|?51_'E1l1:l't'=;°"'
ed so as to pass the beneﬁcial interest therein, the assignee ,,,,,,g';
of the policy is entitled to sue thereon in his own name; policy of
and the defendant is entitled to make any defence arising marine In-
out of the contract which he,-would have been entitled to 5"""°°-
make if the suit had been brought in the name of the person gi-5130(2):
by or on behalf of whom the policy was effected. AcEAa(m§ 3_
35- I .
.55. (1) Where the assured assigns or otherwise parts E1"""§f°'E;
with his interest in the subject-matter insured, he does not A'°1_' my '
thereby transfer to the assignee his rights under the c:on-- ofﬂfgﬁiﬁt
tract of insurance, unless there be an express or irnpiie Cf 5 I5 
agreement with the assignee to that effect. E,,'g1;;h ,a'm_
(2) The provisions of this section do not affect a trans-
mission of interest by operation of law.

56. Nothing in clause (2) of section 6 of the Transfer of Overridins

Property Act, 1882, shall affect the provisions of this section. Eiigtgf
cf. 2:. 130-
A, Transfer
CHAPTER IX gc,Pr°P<=rW
4 oi 1882.

Loss AND ABANDONMENT

5'1. (1) Subject to-the provisions of this Act, and unless Included
the policy otherwise provides, the insurer is liable for any and 93-
loss proximately caused by a peril insured against, but, sub- °I"d°9'
ject-as aforesaid, -he is not liable for any loss which is not C-f_ ,_'55,
proximately caused by a peril insured against. English

(It.

(2) In particular,---

(Ct) the insured is not liable for any loss attributable
to the wilful misconduct of _the assured, but, unless the
policy otherwise provides, he is liable for any loss proxi-
mately caused by a peril insured against, even though
the loss would not have happened but for the miscon-
duct or negligence of the master or crew',

(b) unless the policy otherwise provides, the in-
surer on ship or goods is not liable for any loss proxi-
mately caused by delay, although the delay be caused
by a peril insured against;

(c) unles the policy otherwise provides, the insurer
is not liable for ordinary wear and tear, ordinary leak-
age and breakage, inherent vice- or nature of the sub-
ject-matter insured, or for any loss proximately caused
by rats or vermin, or for any injury to machinery not
proximately caused by maritime perils.

58. (1) A loss-may be-either total or partial. Any loss Partial and
other-. than a total loss, as- hereinafter deﬁned, is. a partial total loss.
3085- - . -- = . -. r - ' Cf. s. 55,

. , -- , , . - , English Act.
- = (2) A total loss -may be either an actual total loss, or a
constructive total 'loss. " - . . . .

296 M of Law--3.



Actual total
1039..

6'f- n_- 57.
English Act.

Constructive
total loss
deﬁned.

Cf. s. 60,
English Act.

28

(3) Unless a different intention appears from the terms
of the policy, an insurance against total loss includes a
constructive, as well as an actual, total loss.

(4) 'Where the assured brings a suit for a total loss and
the_ evidence proves only a partial loss, he may, unless the
policy otherwise provides, recover for a partial loss.

(5) Where goods reach their destination in specie, but
by reason of obliteration of marks or otherwise they are
incapable of identiﬁcation. the loss. if any, is Dartial and
not total.

59. (I) Where the subject--matter insured is destroyed,
or so damaged as to cease to be a thing of the kind insur-
ed, or where the assured is irretrievably deprived thereof.
there is an actual total loss.

(2}_ In the case of an actual total loss. no notice of aban-
donment need be given.'

60. Where the ship concerned in the adventure is miss-
ing, and after the lapse of a reasonable time no news of
her has been received, an actual total loss may be presumed.

61. (1) Subject to any express provision in the policy,
there is a constructive total loss where the subject-matter
insured is reasonably abandoned on account of its actual
total loss appearing to be unavoidable, or because it could
not be preserved from actual total loss without an expendi-
ture which would exceed its value when the expenditure
had been incurred.

(2) In particular, there is a constructive total loss-

(i) where the assured is deprived of the possession
of his ship or goods by a peril insured against, and--- -

(a) it is unlikely that he can recover the ship
or goods, as the case may be, or

' (b) the cost of recovering the ship or goods, as
the case may he, would exceed their value when
recovered; or

(ii) in the case of damage to a ship, where she is so
damaged by a peril insured against that the cost of re-
pairing the damage would exceed the value of the ship
when repaired.

In estimating the cost of repairs, no deduction is to
be made in respect of general average contributions to
those repairs payable by other interests, but account
is to be taken of the expense of future salvage opera-
tions and of any future general average contributions
to which the ship would be liable if repaired; or



29

, (-iii) in the case of damage to goods, where the cost
of repairing the damage and forwarding the goods. to
their destination would exceed their value on arrival.

62. (1) Where there is a constructive total loss, the assur- Eﬁect of_
ed may either treat the loss as a partial loss, or abandon algliuligicmc
the subject-matter insured to the insurer and treat the loss CL ,_ 5:;
as if it were an actual total loss, Engligh Am,

_ (2) Where the assured has elected to treat the loss as if
it were an actual total loss, he shall not be required to treat
it as a partial loss merely by reason of any act of the insurer
done after the exercise of such election or any event that
might happen subsequent to such exercise.

63. (1) Subject to the provisions of this section, where Notice of
the assured elects to abandon the subject-matter insured 31339505'
to the insurer, hemust give notice of abandonment. If he 62
fails to do so, the loss can only be treated as a partial loss. }3,ng1i_.,h;'m_

(2) Notice of abandonment may be given in writing, or
by word of mouth, or partly in writing and partly by word
of mouth, and may be given in any terms which indicate
the intention of the assured to abandon his insured interest
in the subject-matter insured unconditionally to the insurer.

(3) Notice of abandonment must be given with reason-
able diligence after t_he receiptof reliable information of
the loss, but where the information is of doubtful character
the assured is entitled to a reasonable time to make inquiry.

. (-1) Where notice of abandonment is properly given, the
rights of the assured are not prejudiced by the fact that the
insurer refuses to accept the abandonment.

(5) The acceptance of an abandonment may either be
express or implied from the conduct of the insurer. The
mere silence of the insurer after notice is not an acceptance.

(6) Where notice of abandonment is accepted, the aban-
doninent is irrevocable. The acceptance of the notice con-
clusively admits liability for the loss and the sufﬁciency
of the notice.

_ (7) Notice of abandonment is unnecessary where, at the
time when the assured receives information of the loss, there
would _be no possibility of beneﬁt to the insurer if notice
were given to him.

_ (8) Notice of abandonment m
insurer. '

(9) Where an insurer has re-insured his risk, no notice
of abandonment need be given by him.

_ 64. (1) Where there is a valid abandonment, the insurer E5", of
is entitled to take over the interest of the assured in what~ abandon-
9V9!' may remain of the subject-matter insured, and all gent-

ay be waived by the

proprietary rights incidental thereto. En-E181-'h 33"



Particular
average

§f..'l'tif':m.

Salvage
gin:-get.

its-.:§t..

General
average loss.
Cf. s. 66,
English Act.

. hy maritime law,

person employed

'so

'_(2} Upon-the abandonment of a ship, -the insurer there-
of is entitled to anywfreight in "course of being --_ea--r-ned, and
which 15 earned bvi her subsequent to -the. casualty_.causing
the loss, less the expenses of earning it incurred after the
casualty; and, wherethe ship is carrying the 'owners goods.
the insurer is entitled to a reasonable remunerationfor the
carriage of them subsequent to the casualty causing the

, loss.

CHAPTER X
PARTIAL LOSSES (INCLUDING SALVAGE AND GENERAL AVERAGE AND
PARTICULAR CHARGES)

65. (1) A particular average loss is a partial loss of the
subject-matter insured, caused by a peril insured against,
and which is not a general average loss.

of the assured for
the subject-matter insured.
average and salvage charges, are called

Particular charges are not included in

(2) Expenses incurred by or on behalf
the safety or preservation of
other than general
particular charges.
particular average.

66. (1) Subject to any express provision in the policy,
salvage charges incurred in -preventing a. loss by perils in-
suredeagainst may be recovered _as a loss by 'those perils.-

(2) "Salvage charges" niéané the 'charge:s "'£e'c'o.verab1e
under maritime law- by a salvor -independently-of--contract.

e='.Phey- do not include-the expenses Off: services in the nature

of salvage rendered by the assure-d~.~or his agents, or .any
for hire by them, for the purpose bf avert-
ing a peril insured against." Such expenses,' where nroperly
incurred, may be recovered as particular charges or as 'a
general average loss, according to the circumstances under
which they were incurred.

67. (1) A generaliaverage loss is a loss caused by or
directly consequential on a general average act. It includes
a general average expenditure as well as a general average
sacriﬁce. ' -

(2) There is a general average act where any extra-
ordinary sacriﬁce or expenditure is voluntarily and reason-
ably made or incurred in time of peril for the purpose of
preserving - the property imperilled in the common
adventure. - -

(3) Where there "is a general average loss, the party on
whom it,-fallsis .entitled,'subject to the conditions imposed
' to 'a rateable contribution from the. other
parties int.erest_ed, and such contribution is called a general
average contribution. -- - » i ' -



31;

(4) Subject to any express .'provision in the policy, where
the assured has incurred azgeneral-' average expenditure, he
may recover from_ the insurer in respect of the proportion
of the loss which falls upon him; and, _in thejcase of a gene-
ral" average sacriﬁce, he may recover from the insurer in
respect of the whole loss without havingenforced his right
of contribution from the other parties liable to contribute.

(5) Subject to any express provision in..the policy, where
the assured has paid, or is liable to pay, a general average
contribution in respect of the interest insured, he may
recover therefor from the insurer. .

(6) In the absence of express stipulation, the insurer is
not liable for any general average loss or contribution where
the loss was not incurred for the purpose of avoiding, or in
connection with the avoidance of, a peril" insured against.

(7) Where ship, freight and cargo, or any two of those
interests, are owned by the same assured, the liability of
the insurer in respect of general average losses or contri-
butions is to be determined as if those interests were owned
by different persons. '

CHAPTER XI
MEASURE or INDEMNITY

68. (1). The sum which the -assured can recover in res- Extent of
pact of a loss on a policy by which he is insured, in the ilﬁgwfymurgﬁ
case of an unvalued policy to the full extent ofethe insur-

loss.
able value, or, in the case of a valued policy to the full St S_ 6%

extent of the value ﬁxed by the policy, is called the measure Eﬁglish Act.

of indemnity.

(2) Where there is a loss recoverable under the policy,
the insurer, or each insurer if there be more than one, is
liable for such proportion of themeasure of indemnity as
the amount of his subscription bears to the value fixed by
the policy in the case of a valued policy, or to the insurable
value in the case of an unvalued policy.

.69.. Subject to theprovisions of this Act and to any Total loss.
express provision in the policy, where there is a total loss Cf, ., 53,
of the subject-matter in.sured,_-- * Engiish Act.

_ - (1) if theupolicjr be a valued policy, the measure of
indemni-tyis the,.sum ﬁxed by the policy-;

(2) if the policy be an unvalued policy, the measure
of indemnity is the insurable value of the subject-
matter insured.

70; -Where a ship is damaged, but is not totally lost, the Partial loss
measure of indemnity, subject to any express provision in Of Ship-
the policy, is as follows:-----  s. 69,

..l'lg'1i5l'1 Act.
(1) Where the ship has been repaired, the assured
is entitled to the reasonable cost of the repairs, less the



32

customary deductions, but not exceeding the sum in-
sured, in respect of any one casualty. i

(2) Where the ship has been only partially repair-
ed, the assured is entitled to the reasonable cost of sue
repairs, computed as above, and also to be indemniﬁed
for the reasonable depreciation, if any, arising from
the unrepaired damage, provided that the aggregate
amount shall not exceed the cost of repairing the whole
damage computed as above.

(3) Where the ship has not been repaired, and has
not been sold in her damaged state during the _ risk,
the assured is entitled to be indemniﬁed for the reason-
able depreciation arising from the unrepaired damage,
but not exceeding the reasonable cost of repairing such
damage, computed as above.

(4) Where the ship has not been repaired, and has
been sold in her damaged state during the -risk, the
assured is entitled to be indetn-niﬁed for the reasonable
cost of repairing the damage, computed as above, but
not exceeding the depreciation in value as ascertained

by the sale.

pmm 1055 _'II. Subject to any express provision in the policy, where
of freight. there is a partial loss of freight, the measure of indemnity is
G . _a_. 70, such proportion of the sum ﬁxed b the policy in the case
81"1"A°'- of a valued policy, or of the insura le value in the case of
an unvalued policy, as the proportion of freight lost by the

assured bears to the whole freight at the risk of the assur--

ed under the policy.

pm-m11os3 72. Where there is a partial loss of goods. merchandise

of Bonds. or other movables, the measure of indemnity, subject to any

"ﬂ'c°'°h°"'"3°> express provision in the policy, is as follows:---

Cﬁ ': (1) Where part of the goods, merchandise or other

3°" °'' movables insured by a valued policy is totally lost, the
measure of indemnity is such proportion of the sum ﬁx-
ed by the policy as the insurable value of the part lost
bears to the insurable value of the whole, ascertained

as in the case of an unvalued 'policy:

(2) Where part of the goods, merchandise or other
movables insured by an unvalued policy is totally lost,
the measure of indemnity is the insurable value of the
part lost, ascertained as in the case of total loss:

(3) Where the whole or any part of the goods or
merchandise insured has been delivered damaged at its
destination, the measure of indemnity is such propor-
tion of the sum fixed by the policy in the case of a
valued policy, or of the insurable value in the case of
an unvalued policy, as the difference between the gross



-re

33

sound and damaged values at the place of arrival bears
to the gross sound value;

(4) "Gross value" means the wholesale price or, if
there be no such price, the estimated value, with, in
either case, freight, landing charges and duty paid
beforehand; provided that, in the case of goods or
merchandise customarily sold in bond, the bonded
price is deemed to be the gross value. "Gross proceeds"
means the actual price obtained at a sale where all
charges on sale are paid by the sellers.

73. (1) Where different species of property are insured Apportion-
under a single valuation, the valuation must be apportioned H1511' .05
over the different species in proportion to their respective '"'"""'°"'
insurable values, as in the case of an unvalued policy. The  fisﬁicl
insured value of any part of a species is such proportion of 3 '
the total insured value of the same as the insurable value of
the part bears to the insurable value of the whole, ascer-
tained in both cases as provided by this Act.

(2) "There a valuation has to be apportioned, and parti---
culars of the prime cost of each separate species, quality or
description of goods cannot be ascertained, the division of
the valuation may be made over the net arrived sound
values of the different species, qualities or description nf
goods.

74. (1) Subject to any express provision in the policy, Gmﬂﬂl
where the assured has paid, or is liable for, any general zgﬁifsuﬁons
average contribution, the measure of indemnity is the full and salvag.
amount of such contribution, if the subject-matter liable in charges.
contribution is insured for its full contributory value: but, it cf. 3. 73,
such subject-matter be not insured for its full contributory English Act-
value, or if only part of it be insured, the indemnity payable
by the insurer must be reduced in proportion to the under-
insurance, and where there has been a particular average
loss which constitutes a deduction from the contributory
value, and for which the insurer is liable, that amount must
be deducted from the insured value in order to- ascertain
what the insurer is liable to contribute.

(2) Where the insurer is liable for salvage charges, the
extent of his liability must be determined on the like
principle.

75. Where the assured has effected an insurance in ;_;,1,;1,,;,,",,
express terms against any liability to a third party, the third panics.
measure of indemnity, subject to any express provision in Cf. s. 74,
the policy, is the amount paid or payable by him to such English Act.
third party in respect of such liability.

16. (1) Where there has been a loss in respect of any G-cncralpgo.
subject-matter not expressly provided for in the foregoing Visions asw
provisions of this Act, the measure of indemnity shall be %"'§"5"'-"-'E °f
ascertained, as nearly as may be. in accordance with those 1" °m'"'Y'

provisions, in so far as applicable to the particular case. , 'f;{',g'};sﬁ5Ac,_



Particular
average
warranties.
C . s. 76,
lish Act.

Successive
losses.

C . s_. 77.
I.1shAct.

Suing _and

clause.

as s. #18.
glish Act.

34
(2) Nothing in the provisions of this Act relating to the
measure of indemnity shall affect the rules relating to
double insurance, or prohibit the insurer from disproving in-
terst wholly or in part, or from showing that at the time of

the loss the whole or any part of the subject-matter insured
was not at risk under the policy.

77. (1) Where the subject--matter insured is warranted
free from particular average, the assured cannot recover for
a loss of part, other than a loss incurred by a general aver-
age sacriﬁce, unless the contract contained in the policy be
apportionable; but, if the contract he apportionable, _ the
assured may recover for a total loss of any apportionable
part.

(2) Where the subject-matter insured is warranted free
from particular average, either wholly or under a certain
percentage, the insurer is nevertheless liable for salvage
charges, and for particular charges and other expenses pro-
perly incurred pursuant to the provisions of the suing and
labouring clause in order to avert a loss insured against.

(3) Unless the policy otherwise provides, where the sub-
ject-matter insured is warranted free fromparticular aver-
age under a speciﬁed percentage, a general average loss can-
not be added to a particular average loss to make up the
speciﬁed percentage. . .. 1' - '

(4) For the purpose of 'ascertaining whether the speciﬁed.

percentage has been reached, regard shall be had only to the
actual loss suﬁered by the subject-matter insured. Particular

charges and the expenses of and incidental to ascertaining.

and proving the loss must be excluded.

78. (1) Unless the policy otherwise.__provide§. . and
subject to the provisions of this Act, the insurer is liable
for successive 1osses,_even though the total amount of such
losses may exceed the sum insured. _ _

which

(2) Where. under the eagle P0liccs._a nartial/iosS,i
owed

has not been re aired 01,' otherwise made,g9od.,is- f0
by a total loss, t '
total loss:

Provided that nothing in this se€tien..éi1a1l 'aflefctbb the

liability of the insurer under the suing ancilabouring clause,

. 1'9. (1)Where the po1_icy.coJ_1t§in3 8L,§1,1.iI_1 and labour-
ing clause, the engagement thereby entered in 6 is deemed
to be supplementary to the contract of insurance, and the
assured may recover from the insurer any expenses properly
incurred pursuant to the clause, notwithstanding -that the
insurer may have paid for a total loss or that the s_ubject-

-- matter may have been warranted free f1"orr_1'paIti_cular aver-
. age, either wholly or under a certain percentage. :

e assured can only recover in respect' ofithe,



35

(2) General average losses and contributions and salv-
age charges, as deﬁned by this Act, are not recoverable
under the suing and labouring clause'.

(3) Expenses incurred for the purpose of averting or
-diminishing any loss not covered by the policy are not re-
coverable under the suing and labouring clause.

(4) It is the duty of the assured and his agents, in all

-cases, to take such measures as may be reasonable for the

purpose of averting or minimising a loss.

CHAPTER XII
RIGHTS or INSURER on PAYMENT

80. (1) Where the insurer pays for a total loss, either of Right of_
the whole, or, in the case of goods, of any apportionable 3"b'°5""°"'-
part, of the subject-'matter insured. he thereupon becomes Cf- a- 79.
entitled to take over the interest of the assured in whatever Egﬂshlggh
may remain of the subject-matter so paid for, and he is Tm,,'f¢1- of
thereby subrogated to all the rights and remedies of the Property Act.
assured in and in respect of that subject-matter as from the
time of the casualty causing the loss.

(2) Subject to the foregoing provisions. where the in-
surer pays for a partial loss, he acquires no title to the
subject-matter insured. or such part of it as may remain,
but he is thereupon subrogated to all rights and remedies
of the assured in and in respect of the subject-matter in-
sured as from the time of the casualty causing the loss, in so
far as the assured has been indemniﬁed, according to this
Act, by such payment of the loss. a

(3) Nothing in clause (2) of section B of the Transfer of
Property Act, 1882, shall aﬁect the prov_z'si_ons of this section. 4 of 1332-

81. (1) Where the assured is over-insured hy doub1e- Righter
insurance, each insurer is bound, as between himself and °°11"1b"'5°'1-
the other insurers, to contribute" rateably to the loss in pro- 31:39. 80.

portion to the amount for which he is liable under his con- "'h A"-
tract.

(2) If any insurer pays more than his proportion of the
loss, he is entitled to maintain a suit for contribution against
the other insurers, and is entitled to the like remedies as a
surety" who has paid more than his proportion of the debt.

82. Where the assured is insured for an amount lea than gm," of
the insurable value, or, in the case of a valued policy, for an u.nder-in-
amount less than the policy-- valuation, he is deemed to be surmc=-
his own insurer in respect of the uninsured balance.   SIR

3 Is ct.



Enforcement

36

CHAPTER XIII
RETURN or PREMIUM

83. Where the remium, or a proportionate part thereof,

91" 1'=tu1'n- is, by this Act, de ared to be returnable,-

Qf. s. 32,
English Act.

Return by
agreement.
C-f. s. 83,

English

Return for
failure. of
considera-
tion.

C.f- 3_- 34:
English Act.

(a) if already paid, it may be recovered by the as-
sured from the insurer; and

(b) if unpaid, it may be retained by the assured or
his agent.

34. Where the policy contains a stipulation for the return
of the premium, or a proportionate part thereof, on the
happening of a certain event, and that event happens, the
premium, or, as the case may he, the proportionate part
thereof, is thereupon returnable to the assured.

85. (I) Where the consideration for the payment of the
premium totally fails, and there has been no fraud or illega-
lity on the part of the assured or his agents, the premium is
thereupon returnable to the assured.

(2) Where the consideration for the payment of the pre-
mium is apportionable and there is a total failure of any
apportionable part of the consideration, a proportionate part
of the premium is, under the like conditions, thereupon re-
turnable to the assured.

(3) In particular,-

(a) where the policy is void, or is avoided by the
insurer as from the commencement of the risk, the pre-
mium is returnable provided that there has been no
fraud or illegality on the part of the assured;___but if the
risk is not apportionable, and has once attached, the
-premium is not returnable;

(b) where the subj ect-matter insured, or part
thereof, has never been imperilled, the premium, or as
the case may be, a proportionate part thereof, is return-

'able;

Provided that, where the subject-matter has been
insured "lost or not lost" and has arrived in safety at
the time when the contract is concluded, the premium is
not returnable unless, at such time, the insurer knew of

the safe arrival;

(as) where the assured has no insurable interest.
throughout the currency of the risk, the premium is re-
turnable, provided that this rule does not apply to a
policy effected by way of . . . . . .wagering;

(cl) virhere the assured has a defeasible interest
whichis terminated during the currency of the risk, the
premium is not returnable;



37

(e) where the assured has over-insured under an
unvalued policy, a proportionate part of the premium is
returnable;

(f) subject to the foregoing provisions, where the
assured has over-insured by double insurance, a propor-
tionate part of the several premiums is returnable:

Provided that, if the policies are effected at different
times, and any earlier policy has at any time borne the
entire risk, or if a claim has been paid on the policy in
respect of the full sum insured thereby, no premium is
returnable in respect of that policy, and when the
double insurance is effected knowingly by the assured
no premium is returnable.

CHAPTER XIV
MUTUAL Insurance

86. (1) Where two or more persons mutually agree to Modmﬂmn
insure each other against marine losses, _there is said to be of Act in

a mutual insurance. "S5 01'
mutual in-

(2) The provisions of this Act relating to the premium Sum"-
do not apply to mutual insurance; but a guarantee, or such Cf- 3: 35:
other arrangement as may be agreed upon, may be substi- E"31"h M"
tuted for the premium.

(3) The provisions of this Act, in so far as they may be
modiﬁed by the agreement of the parties, may in the case of
mutual insurance be modiﬁed by the terms of the policies
issued by the association, or by the rules and regulations of
the association.

(4) Subject to the exceptions mentioned in this section,
the pI'OVlS10nS of this Actapply to a mutual insurance.

CHAPTER XV
M Us

87. Where a contract of marine insurance is in good faith Raiiﬁcuion
eﬁected by one person" on behalf of another, the person on by assured-
whose behalf it is eﬁected may ratify the contract even Of. a. :6
after he is aware of a loss. English ct.

88. (1) Where any right, duty or liability would arise Implied
under a contract of marine insurance by implication of law, °b":3a'i°"'
it may be negatived or varied by express agreement, or by "md by

usage, if the usage be such as to bind both parties to the if
contract. Cf. s_ 87,
English Act.

(2) The provisions of this section extend to any right,
duty or liability declared by this Act which may H 1 }1wfu1]y
modiﬁed by agreement.



Reasonable
time, etc.,
a question
of fact.

Qf. s. 88,
English Act

Slip as
evidence.

s._89,
xsh Act.

Savings.

Lloyd's SLG.
Policy

38-

- 89. Where by this Act any reference is made. to reason-
able tinae, reasonable premium or reasonable diligence, the
question what is reasonable is a question of fact.

90. Where there is a duly stamped policy, reference may
be made, as heretofore, to the slip or covering note in any
legal proceeding.

91. The rules of . . . . . ..law, including the law merchant,
which applied to contracts of marine insurance immediately
before the commencement of this Act, save in so far as they
are inconsistent with the express provisions of this Act,
shall continue to apply to contracts of marine insurance.

 

TI-'IE SCHEDULE
(See section 2'?)
Form or POLICY

BE 11' KNOWN THAT . . . . . . as well in . 4 . . own name as for
and in the name and names of all and every other person or
persons to whom the same cloth, may, or shall appertain, in
part or in all doth make assurance and cause . . . . . . . . . . and
them, and every of them, to be insured, lost or not lost, at
and from . . . . . . . . . . .. U on any kind of goods and mer-
chandises, and also upon t e body, tackle, apparel, ordnance,
munition, artillery, boat, and other furniture, of and in the
good ship --or vessel called the . . . . . . . . . . . . ..whereof is
master} for this present voyage, . . . . ._ or whosoever else
shall go for master in the said ship, or by whatsoever other
name or names the said ship, or the master thereof, is or
shall be named or called; beginning the adventure upon the
said goods and merchandise-s from the loading thereof
aboard the said ship, . . . . . . . . . . . . . . .. upon the said ship,
&c . . . . . . . . . . . .and so shall' continue and endure, during her
abode there, upon the said ship, &c. And further, until the
said ship, with all herordnance, tackle, apparel, &c., and
goods and xnerchandises whatsoever, shall he arrived at
. . . . . . .  upon the said ship, &c., until she hath
moored at anchor twent -tour hours in good safety"; and
upon the goods and merc andises, until the same be there
discharged and safely landed. And it shall be lawful for the
said ship, &c., in this voyage, to proceed and sail to and
touch "and stay at any ports or places whatsoever . . . . . . . . . .
without'pr'e3udice to this insurance. The said ship &c., goods
and rnerchandises, &c., for so much as concerns the assured
by agreement between the assured and assurers in this
policy, are and shall be valued at . . . . . . . . . . . . . . . Touching
the adventures and perils which we the assurers are con-
tented to bear and do take upon us in this voyage: they are
of the se_as,,me_n of war, ﬁre, enemeis, pirates, rovers, thieves,

'The words "under God" have been omitted as unnecessary.



39

jettisons, letters of mart and countermart, surprisals, talc-
ings at sea," arrests, restraints, and detainments of all kings,
princess, and people, of what nation, condition, or quality
soever, barratry of the master and mariners, and of all other
perils, losses, and misfortunes, that have or shall come to the
hurt, detriment or damage of the said goods and merchan-
dises, and ship &c., or any part thereof.

And in case of any loss or misfortune it shall be lawful
to the assured, their factors, servants and assigns, to sue,
labour, and travel for, in and about the defence, safeguards,
and recovery of the said goods 'and merchandises, and ship,
Etc., or any part thereof, without prejudice to this insurance;
to the charges whereof we, the assurers, will contribute
each one according to the rate and quantity of his sum
herein assured. '

And it is especially declared and agreed that no acts of
the insurer or insured in recovering, saving,_ or preserving
the property insured shall-be considered as a waiver, or
acceptance of abandonment.

- I: It

It *

And so we, the assurers, are contented, and do hereby
promise and bind ourselves, each one for his own part, our
heirs, executors, and goods to the assured, their executors,
administrators, and assigns, for the true performance of the
premises, confessing ourselves. paid the consideration due
unto LES forthis assurance by-the assured, at and after the
rate 0 . . . . . .

IN wrmnss whereof we, the assurers, have subscribed
our names and sums assured in . . . . . . . . . . . . '

' - N'.B.---Corn, ﬁsh, salt, fruit, 'ﬂour, and seed are warranted

free from average, unless general, or the ship be stranded--- .

sugar, tobacco, hemp, ﬂax, hides and skins are warranted
free from average, under five per cent., and all other goods,
also the ship and freight, are warranted free from average,
under three per cent., unless general, or the ship be
stranded.

RULES roa CONSTRUCTION or POLICY

The following are the rules referred to by this Act for
the construction of a policy in the above or other like form,
where the context does not otherwise requii-e:-- -

I. Where the subject-matter is insured "Lost or not lost",
and-the loss has occurred before the contract is concluded,
the risk attaches unless, at such time, the assured was aware
of the loss, and the insurer was not. .

,_ 2. Where the subject-matter is insured "from" £1 parti-
cular place, the risk does not attach until the ship starts on
the voyage insured, . - -_ . ; -_

Sue and
labour
clause.

Waiver
ausc.

Memoran
dum.

Lost or not
lost.

From.



M and from
Ship.

Freight.

Fran: the

'u'::."..f?£

Safely
landed.

Touch and
HEY.

Perils of the
IBII.

Pirates.

Restraints
of princes.

'40
3. (ii) Where a ship is insured "at and from" a particular

place, and she is'at that place in good safety when the con-
tract is concluded, the risk attaches immediately.

(In) If she be not at that place when the contract is con-
cluded, the risk attaches as soon as she arrives there in good
safety, and, unless the policy otherwise provides, it is im-
material that she is covered by another policy for a speciﬁed
time after arrival.

(c) Where chartered freight is insured "at and from" a
particular place, and the ship is at that place in good safety
when the contract is concluded, the risk attaches i.mme-
diately. If she be not there when the contract is concluded,
the risk attaches as soon as she arrives there in good safety.

(d) Where freight, other than chartered freight, is pa -
able without special conditions and is insured "at and from"
a particular place, the risk attaches pro rata. as the goods or
merchandise are shipped:

Provided that if there be cargo in readiness which be-
longs to the shipowner, or which some other person has
contracted with him to ship, the risk attaches as soon as the
ship is ready to receive such cargo.

4. Where goods or other movables are insured "from the
loading thereof", the risk does not attach until such goods or
rnovables are-actually on board, and the insurer is not liable
for them while in transit from the shore to the ship.

5. Where the risk on goods or other movables continues
until they are "safely landed", they must he landed in the
customary manner and within a reasonable time after
gﬁzltﬂlkat ts: port of discharge, and if they are not so landed

ce s s. .

_ 6. In the absence of any further license or usage, the
115911? t0 touch and stay' "at any port or place whatsoever"
does not authorise the ship to depart from the course of her
voyage from the port of departure to the port of destination.

:7. The term "perils of the seas" refers only to fortuitous
accidents or_casualties of the seas. It does not include the
ordinary action of the winds and waves,

8. _The term "pirates" includes passengers who mutiny
and rioters who attack the ship from the shore.

9. The term "thieves" does not cover clandestine theft or
theft committed by any one of the ship's company, whether
crew or passengers. --

10. The term "arrests, &c_., of kings, princes and people"
refers to political or executwe acts, and does not indude a
loss caused by not or by ordinary Judicial process.



41

11. The term "barratry" includes every wrongful act *.vil- 3'1'1W!-
fully committed by the master or crew to the prejudice of
the owner, or, as the case may be, the charterer.

12. The term "all other perils" includes only' perils A.ll_o:he:
similar in kind to the perils speciﬁcally mentioned 1n the

policy.
13. The term "average unless general" means a partial Ave:-Isa

loss of the subj ect--matter insured other than a general aver- 2%?"
age loss, and does not include "particular charges". '

14. Where the ship has stranded, the insurer is liable for Stranded.

the excepted losses, although the loss is not attributable to
the stranding, provided that when the stranding takes place
the risk has attached and, if the policy be on goods, that the
damaged goods are on board.

15. The term "ship" includes the hull, materials and out- ship_

ﬁt, stores and provisions for the officers and crew, and, in the
case of vessels engaged in a special trade, the ordinary ﬁt-
tings requisite for the trade, and also, in the case of a steam-
ship, the machinery, boilers, and coals and engine stores, if
owned by the assured, and also, in the case of a ship driven
by power other than steam, the machinery and fuels and
engine stores, 121' owned by the assured.

16. The term "freight" includes the proﬁt derivable by 9. Freight.
shipowner from the employment of his ship to carry his own
goods or movables, as well as freight payable by a third
party, but does not include passage money.

17. The term "goods" means goods in the nature of mer- Goods.
chandise, and does not include personal effects or provisions
and stores for use on board. '

In the absence of any usage to the contrary, deck cargo
and living animals must be insured speciﬁcally, and not
under the general denomination of goods.

Explanation of abbre-o:'au'ans used in Notes on Clauses:

Chalmers . . . Chalmers, Marine Insurance,
1956 edition
Dover . . . Dover, Handbook to Marine

or Insurance, Fifth edition (1957)
Dover, Handbook. l

Keats . . . . Keatc, Guide to Marine Insurance
Twelfth Edition (1958).



APPENDIX II

NOTES ON CLAUSE-S.

Existing law in India

Some provisions relevant to the law of marine insurance-

are at present contained in--

(ct) section 2 (20) ,' s.'?,1 and s.66 of the Indian Stamp-

Act, 1899 and Article 4'7. sub-divisions A and E, of the
. Schedule to the Act;

(b) the Insurance Act, 1933 (4 of 1933), which.
mainly deals with the working of insurance concerns.
and not with contracts of insurance;

(c) the Merchant Shipping Act, 1958 (44 of 1958) ,.
sections 345-352 and sections 402-404;

((1) section 130, Exception and s.130-A and s.135-A,
Transfer of Property Act, 1882;

_ (e) The Commercial Documents Evidence Act, 1939'
(30 of 1939) , entry 9 in the Schedule, Part I.

Existing law in England.
The existing law in England is contained in------

(i) the Marine Insurance Act; 1906 (6 Edw. V111,.
ch.4l);

(ii) The Marine Insurance (Gembling Policies) Act,
1909 (9 Edw. VII. Ch. 12);

(iii) The Law Reform (Contributory Negligence)
Act, 1945 (8 & 9 Geo. VI, ch. 28);

(iv) The Stamp Act, 1891 (54 & 55 Vict. ch. 39). sec--
tions 92, Q3, 94, 95 and 97;

(v) The Finance Act. 1901 (1 Edw. VII, ch. '7), sec--
tion 11; '

(vi) The Revenue Act, 1903 (3 Edw. VII, ch. 46),.
section 8; _ i . -
(vii) The Finance Act, 1912, section 8;

(viii) The Finance Act, 1920 (10 and 11, Geo. 5,
ch. 13)---section 41, for scales of stamp duties.

1 Construecl 'n Tr,-'conrirji Dambj; 8: Co. vs.V:'rji Kanji, (192.2) A.I.R.
I9z3.Bom. 142 (question being-whether the document was a " policy " or
a more letter of cover to issue a policy and Saraimai. vs. , Triton Inr=§n_-':6 C0-
1925) I.L.R. 52. Cal. 408 -- A.l.R. 1925 P.C. 83', 84 (The provisions 0
section 7 are mandatory).

42



£3

Clause 1.----LegisIative competence

The subject-matter of the Bill falls in the Union list (see
entries 25 and 4'?) . No extent clause is considered nece ,
as the nature of the subject matter is such that it has to do
more with international transactions and extra-territorial
events than with internal ones. Compare the Merchant

Clause 2.----"C'ontract of marine insurance."

This is a formal deﬁnition, inserted to make the deﬁnition Departure
clause exhaustive. 5'01" "-'1'

English Act.

Clause 2.-"freight"

Needs no comments, except that the word "other" has Departure
been inserted before "movables" though not found in sec- mm the

tion 90, English Act. Compare section 3 (2) (a) of the Eng- E"5""' A"

lish Act.

Clause 2.-----"insurabZe property"

This has been put in the deﬁnation clause, for compre-
hensiveness. '

Clause 2.----"'marine adventure" and "marine perils"
These have been put in the deﬁnition clause, to make the

~ clause exhaustive----

(2') The importance of the concept of marine ad- Maxine
venture lies in the fact that under section 5(1) of the adventure.
English Act, only a person who is interested in the
marine adventure has an insurable interest. A person

, who has no interest in the ship may still be able to in--
sure the venture under which the ship is engaged. Foi-
example, a person may be interested ﬁnancially in lay-
ing an Atlantic cable through a ship, though he has no
interest in the ship or cable as such.

(:2) There may be cases where the cargo is not F"1-'"'-|'"i°n-
damaged, but the adventure is frustrated by the opera.
tion of the insured perils. This is usually discussed in
the text-books under the doctrine of "frustration".

(iii) The adventure must be lawful. As to the
warranty of legality, see section 41 of the English Act.

_ (to) Section Q06 of the (English) Merchant Ship-
ing Act, 1894, provides that an insurance effected against
the happening, without the owner's actual fault or pri-
vity,' of those shi'p--owner's liabilities in respect of which
a statutory limit of liability is effective, that is to say,
roughly, liability for collisions etc. shall not, by reason

296MifL--4



44.

of the nature of the risk insured, be invalid. This sec-
tion has been referred to in s.'7 of the Indian Stamp Act

also.'-'--'.
go) As to "perils of the sea", see the "Inchmaree
case' .4
The I.n- Lord Herschell in the Ittchmaree Case" attempted
chmaree to put forth a number of deﬁnitions of the expression
°°"- "perils of the sea". He thought that the following deﬁ-

nition given by Lord Ellenbrough was right:--

"All cases of marine damage of the like kind
with those specially enumerated, and occasioned by
~ similar causes".

The following deﬁnition given by Lopes L.J. in
Pandorf v. Hamilton," was considered "very good":-

"In a sea~worthy ship damage to goods by the
action of the sea during transit, not attributable to
the fault of any body, is a damage from a peril of
the sea." -

Lord Herschell himself thought that the following
deﬁnition might sufﬁce:--

"All perils, losses and misfortunes of a marine
character or of a character incident to a ship as
such".

The case, of course, arose before the Act. The facts
were, that a steamer was insured by a policy in the
ordinary form on the ship and her machinery including
the donkey engine. For the purposes of navigation, the
donkey engine was being used for pumping water into
the boilers, when, owing to a valve' being closed which
ought to have been kept open, water was forced into and
split the air-chamber of the donkey pump. The closing
of the valve was either accidental or due to the negli-
gence of an engineer, and was not due to ordinary wear
and tear. It was held by the House of Lords, reversing
the decision of the Court of Appeal, that the injury was

1Construed in A Reference (1903) I.L.R. 30 Cal. 565.
'See also 9. 35;, Merchant Shipping Act, 1958.

'See note at the end entitled " Suggestion regarding s. 7 (I) of the Indian
Stamp Act " for a detailed discussion.

'The Thames and Mersey Marine Inmrance Co. v. Hamilton, Fraser
and C0,, (1887) A.C. 484, particularly Lord Halsburyr at p. 490, 491.

'Thames and Mersey Marine Insurance Ca., v. Hanu'Iton, Fraser and Co-
(zs87) A.C. 484. 492. 493-

'I6 Q.B.I). 629, 633.



45

not covered by the policy, because such a loss did not
fall under "perils of the seas", nor under the general"
words "all other perils, losses and misfortunes that have
or shall come to the detriment or damage" (of the sub-
ject-matter of the insurance). A long line of cases was
cited by the House of Lords (Lord Halsbury, Lord
Bramwell, Lord Herschell and Lord Macnaghten) to
show that the general words had to be limited to the
perils etc. similar in nature to those speciﬁcally
enumerated.

It was as a result of this decision that the "Inch- Inchmarcc
maree Clause" came to be inserted in marine policies for E]"*.5?=m'i'
adding certain perils which are not, strictly speaking, Pcrﬂﬂg-_h,m_
marine perils. The clausel specially covers loss or dam-
age caused by--- "

(i) accident in loading, discharging or shifting
cargo or fuel;
(ii) explosions on ship on board or elsewhere;

(iii) bursting of boilers, breakage of shafts or
latent defect in the machinery or hull;

193 £12) contact with aircraft (This was added in
(1)) negligence of masters, oﬁflcers, crew or
pilots:
Provided such loss or damage has not resulted from
want of due diligence by the assured, owners or
managers.

Masters, oiﬁcers, crew or pilots are not to be con-
sidered as part owners within the meaning of this
clause, even if they hold shares in the vessel.

In a recent case? the Madras High Court held, that Meaning 0
where goods are shipped on a particular ship and are"mi§,f°"'
not delivered at the destination, the insurance company mu? '
is liable under the expression "misfortune' used in the Ind" 0.3"-
policy even if the cause of the loss is not known. In
that case four drums of English sodium sulphite and
ﬁve drums of sodium hydro-sulphite were shipped
from Bombay to Madras. When the ship arrived at
Madras and the clearing agents of the plaintiff (pur-
chasers) went to clear the goods, the goods had not been
landed. The shipping company was informed and
made search -to ﬁnd out if the goods had been over-
carried to Colombo or Calcutta; but nothing tangible re-
sulted from the search. The plaintiffs claimed for the
value of the goods (about Rs. 2,000) against the shipping
company as well as against the insurers. The defence

'ad gilt': pause will be found reproduced in Dover, Handbook, page 247
'Home Insurance G p L' '::ed . R N 1;, «I A.I.R_
Mad. 602 Cﬁﬁshecr A'hmo:d aSr:1J}:Veed:":I.). V am 0' ' 1955) 1.955



Departure
from _ the

Departure
from Eng-
lish Act.-
uae of word
It  II-

45

of the shipping company, namely, that they were
exempted from a certain clause excluding liability, was
nagatived. The defence of the insurers, that the goods
were excluded by the "Free from particular average"
clause was negatived, because the clause was not rele-
vant to a case of total loss. The further defence of the
insurers, that they were not liable unless the peril, etc
was of the particular type referred to in the insurance
policy, was negatived in these words: "The term 'mis-
fortunes' after having mentioned all the other perils of
the sea, is found in the relevant clause in the insurance
policy. It is difficult to say how the loss of the total
goods on board the ship when once it is proved that
they were put on board could be excluded from the
scope and meaning of the word 'misfortune'. I do not
think the rule of ejusdem generis will apply in the
present case when almost all the kinds of the perils of
the sea have been exhaustively given in the list and
when in addition to that the word 'misfortune' is also
included ., .......... __ Merchants insure the goods with
the company to cover any risk in their being safely
landed in the port of destination, and if the goods are
not so landed, when once they were put on board and
if the loss of the goods has arisen, then certainly it is a
loss and a misfortune which is covered by the terms
of the policy".

In the absence of a statutory provision, the Court
had interpreted the word "misfortune" according to its
ordinary meaning on general principles. But under
English Law the general words come to hear a restrict-
ed connotation--see Rule 12 of the Rules of Construc-
tion in the Schedule to the English Act.' The position
under this Bill would be the same as in England.

Clause 2.------"Mo'uea'bles"

Needs no comments.
Clause 2.-"policy"
Needs no comments.
Clause 2.----"ship"
A deﬁnition of "ship" as including sailing vessels has

been added in order to cover ships propelled. by oars.'

Clause 2.-"suit"
This follows section 90 of the English Act. The deﬁni-

tion of "action" has been replaced by the deﬁnition of "suit";
the English Act .uses the word "action" in the substan-
tive sections----section 50(2), section 56(4) and section 80. In

'For .a discussion on rule 12, see Dover, page 246.
'For reasons see the body of the Report. para. 5.



47

India, however, the word "suit" is used and has, therefore,
been deﬁned here. '

Clause 3

This deﬁnes a "contract of marine insurance". The fol-
lowing points may be noted:---

I. This deﬁnition stresses three elements, viz.
(i) indemnity, (ii) marine losses, and (iii) insurance "in
the manner and to the extent agreed".

The rule that insurance is a contract of indemnitylndenmity.
can be said to he an unbroken thread which runs
through the Marine Insurance Act from the beginning
to the end. This rule has its positive as well as nega-
tive aspects. By its positive aspect, what is meant is
that the assured must be enabled to recover the full
loss (within the limits of the policy). Section 7?(l) of
the English Act, under which successive losses can be
recovered, is an illustration of the positive aspect; be-
cause, under that section, the insurer is liable for suc-
cessive losses even though the total amount of such
losses may exceed the sum insured. Section 84 of the
English Act, enabling the assured to return of the
premium, also provides illustration of the indemnity
aspect; see section 84(3)(b), (c), (cl), etc.

The negative aspect of the indemnity is amply
illustrated by section 33 (over-insurance), section 61
(effect of constructive total loss), section 6'? (measure of
indemnity), and section 77 (2) (merger of partial loss in
a subsequent total loss); and section 79 (subrogation)
and section 80 (contribution between co-insurers) em-
phasise the indemnity element beyond any doubt.

2. An elaborate deﬁnition of "marine aviation and
transit insurance" has been given in the (English)
Assurance Companies Act, 1946.1 It need not be
considered,.since it does not deﬁne marine insurance
as a concept, but merely enumerates the various
properties which can be insured. The deﬁnition of
"marine insurance business" in section 2 (13A) , (Indian)
Insurance Act, 1938 (4 of 1938) also merely enumerates
the various interests which can be insured.

3. The deﬁnition in the (English) Stamp Act,' 1891,
section 92 and the Indian Stamp Act, 1899, section 2(20)
may be compared. The deﬁnition of "policy of sea-
insurance" in section 2120) of the Indian Stamp Act is
wide enoughto cover any insurance made upon any
ship or -vessel, whether for marine or inland navigation.
The deﬁnition adopted in the clause under discussion

'9 and I0 Geo. 6 ch. 28.
'54 and 55 Vict. c. 39.

-r......



Departure
from the
English Act.

General.
" Warehouse

to ware-
house ".

Craft Clause
(for crafts.
lighters,
etc.).

48

(which follows section 1 of the English Act) stresses
the concept of "marine losses" and "marine adventures";
but, as expressly provided elsewhere} a contract of
marine insurance may by express terms or usage be
extended so as to protect the assured against losses on
inland waters or on any land risk which may be inci-
dental to any sea voyage. Since the primary concept
of marine insurance is concerned with the sea and not
with inland waters, it has been considered desirable not
to refer expressly to inland navigation in the deﬁnition.
There is nothing to prevent an insurer from utilizing the
marine insurance policy for inland navigation. In fact,
the form is capable of being used with suitable modiﬁ-
cations for insurance in respect of other modes of
transport. A statute on marine insurance, however,
must primarily conﬁne itself to marine adventures

4. The word "assured" has been used in the deﬁni-
tion, instead of "insured". The expressions do not
appear to have diﬁerent meanings.

5. "Premium" has not been mentioned in the deﬁni-
tion, because of section 85 of the English Act relating
to mutual insurance, whereby a guarantee etc. may be.
substituted for premium.

In the opening portion "the word "agreement" has
been used instead of "contract" appearing in the Eng-
lish Act. The Indian Contract Act makes a distinction
between the two. It is only an agreement which is
enforceable by law which is a contract. In consonance
with that distinction, "agreement" is preferable.

Clause 4
This deals with "mixed sea and land" risks.

The words "by its express terms" enable thecontract
to extend to non--marine risks also, what is called,----"ware-
house to warehouse" coverage, that is to say, thegoods are
covered as soon as the_ leave the warehouse even though
the journey from warehouse to the sea is on" land. ' '

In cargo policies, a craft clause is inserted to bring in
craft risk at the port of shipment. (Customary craft risk
at the port of discharge would, it has been .stated,?' he
covered by the printed form). The Institute form of the

clause is as fol1ows:--

"Including transit by craft, raft, andfor lighter. to and
from the vessel: Each craft, raft and/or lighter to be deem-
ed a separate insurance. The assured are not to be-pre-
judiced by any agreement exempting lighter-man from
liability". ' - -

'See clause 4.

'Dover, Handbook, page 224.



49

The last sentence of the clause is explained' in this
manner. Lighter"-men are common carriers. They are
however, not covered by the Carriage of Goods by Sea Act.
Hence they often. insert a clause relieving themselves from
the bulk of the common law liabilities. These clauses
reduce the eifect of the principle of subrogation,' and
consequently prejudice the rights of the insurers. Marine
underwriters, however, accept the position as it is, and
undertake not to plead against the insurer that they have
surrendered certain rights which would otherwise have
accrued to the insurers.

I

Sub-Section (2) covers construction, building, and Anomaly iﬁ
launching risks. There is one anomaly, namely, that while SW"? M'
such insurances are treated as analogous to marine insur-
ances, the policies themselves are stamped with the duty
applicable to non-marine insurances. In England, builders'
risks po-licies are under the Revenue Act, 1903 (3 Edw. VII,

Ch. 46), section 8, to- be stamped as if for a "voyage" and
not deemed to be policies for time, ever: if made for more
than a year. Other policies on adventures "analogous to
marine adventures" would presumably be liable to stamp
only as non-marine policies." In India there is no express
provision, but entry 47 of the First Schedule to the Indian
Stamp Act, sub-division A relating to "sea insurance",
would not in terms apply and a ﬁxed d1.ty under sub-dwi-
sion B would be leviable, because such policies would not

be "sea-insurance policies" as deﬁned in s. 2(20) of the
Indian Stamp Act.

The position is anomalous. It is desirable that at least
a provision requiring all _policies governed by sub-sect:ion
(2) to be stamped as voyage policies, be inserted in the
Indian Stamp Act.

Clause 5 '
Needs no comments.'

Clause 6'

[Section.5 of the English Act].

(i) The importance of the concept of insurable interest
lies in this, that under section 4(2)(a.) of the English Act.
if the assured has no insurable interest, the contract is
deemed to be a wagering contract. '

(ii) The ampliﬁcation in sub-section (2) is said to be
based on the observations of Lawrence J .5 to the eﬁect that

*Cf..I)over, page 298.

'Cf. Dover, page 2'24.

'See section 79, English Act Clause 30.

'As to " marine adventure " and " marine perils ", see notes-to chug: 3,
'Lemma v. Crawfurd, (I906) 3 £503 8: P.N.R. 269, 302.



Departure
English Act.

General.

Buyer':

interest.

50

"Interest does not necessarily imply a ri ht to the whole or
part of the thing, nor necessarily or exc usively that which
may be the subject of privation .... ..'. ...... .. To be interested
in the preservation of a thing, is to be so circumstanced
with respect to it as to have beneﬁt from its existence, pre-
judice from its destruction". '

(iii) Shareholders of a shipping company cannot be said
to have an interest, because what section 5(2) requires is,
not merely that a person may beneﬁt by the safe arrival of
the property, but also that he must stand in legal or equit-
able relation to the adventure, etc.'

Mortgagees, charterers and bailees of ships standin such
relationship. Similarly, trustees and ~ beneﬁciaries in
England.

(in) What is required is an interest in the adventure and
not in the ship. A person interested ﬁnancially in the lay-
ing of cables in the Atlantic has no interest in the ship, but
has an interest in the adventure.

( 1:) An agent to whom goods are despatched for sale or.
commission can also insure, because loss of the goods would
mean loss of the commission to him.' Similarly, a person
who is at a risk in the freight has an interest in the freight.

(vi) As to the time when the interest must exist, see
section B of the English Act. As to contingent interests,
etc.,§ee section '7 and as to partial interest, see section 8 of
the ct.

The English Act contains the words "or equitable".
These have been omitted, because it would not be accurate
to speak in India of "equitable" relations. An Explanation
has, however, been added to deal speciﬁcally with the case
of a beneﬁciary's interest in trust-property.

Clause 7(1)

This provides that "defensible" or a "contingent" inter-
est is insurable. '

It also gives a good example of a defeasible interest.
While a buyer of goods to whom the goods are shipped
acquires the property as soon as the ﬁiaods are shipped on
board,' he has still a right to reject e goods if they are
not of merchantable quality. His interest is, therefore,
"defeasible", because it is liable to beidefeated during the
currency of the agreement by the option of rejection.

'Lord Charley, Shipping Law, 3rd edition, page 275.

'Thane: and Mersey Matias Imurance Ca. V. Gurqfdrd Shippiru 0a.,
(1911) A.C. 529.

'See section 23 of the Indian Sale of Goods Act, 1930 and section 18 (5)
0; :11; (English) sale of Goods Act, 1893. , A ~



51

Nevertheless, his "defeasible" interest is insurable. The

signiﬁcance-.of section 7 of the English Act lies in making
that clear.

Another example is a buy:-.1;'s interest which is liable to
be defeated by stoppage in tiinsit. See sections $46 of
the (English) Sale of Goods Act, 1893 and sections 50-----52 of
the Indian Sale of Goods Act, 1930.

Where the buyer has a defeasible interest, the seller has Selim-'s
a' corresponding contingent interest, because, unless the interest-
buyer exercises the option to reject the goods, that is to say,
unless that "contingency" occurs, the seller's interest does
not arise.

It has been stated' that what is called "duty contingency" " Duty
or "freight contingency" are also relevant to the subject Wntmﬂmf
of section 7. Such insurances are necessary where, during .. Frfiim
the course of transit. either the freight or the duty becomes contin-
payable so that the value of the subject-matter is likely to garner".
he enhanced by the amount of such freight or duty. In
such cases. in the event of a total loss the risk is excluded.
so that if there should be no arrival of ships the duty or
freight payable at destination would not be collected.

Clause 7(2)

A Dartial interest can be insured. It has been held'
that even an undivided interest in a parcel of goods is in-
surable. so that the exact extent of the interest need not be
determinable. It has also heen held' that a shareholder in
a cable company can effect insurance on anadventure for

laying cable from Ireland to New Foundland. But this deci-
sion has been criticised."

This deals with re-insurance. Genenl.
At one time, re-insurance was illegal as a wager policy.'

Re-insurance, it is said, need not be described as such on
the face of the policy. .

There are two" kinds of re-insurance :-l-- - gigs; of
(a) where the re-insurer accepts liability to pay"-

only the amount which is lawfully payable by the ori-
ginal insurer to the assured, and

'Dover, page 308 and page 185.
'Inglis v. Sroai,.(I885) mo App. Gas. 263, 274.
'Wilson v.J'me:, (1867) L.R. 2 Ex. :39.

'Lord Charley, Shipping Law, 3 edition, page 277, and' Arnould, Marine
Insurance» 1=.m- 249- .

'Marine Insurance Act 1745 (19 G o. 2 Ch. 3 , ction fen-ed '
Shipping Law by Lord cﬁoucy, 3rd eiiition. pug: 2:5. 4) E to In



" To pay
aa_may be
pad."

" Bottomry "
or

sci."-"'-'5"

52

(b) where the re-insurer binds himself expressly to
accept any terms- between the parties to the original
insurance.

Ordinarily, the contract "to pay as may be paid there-
on", though apparently not stalling under the ﬁrst category,
has been held to be so falling.

, Clause 7(4)

This relates to insurance by a person who lends money
on what is called "bottomry"' or "respondentia". Bottomry
is an advance of money, in time of dire necessity, to a mas-
ter of a vessel for the purpose of the adventure and arrang-

. ed after all other means of obtaining funds have failed. The

Query.

money is advanced on the security of the ship or of the
ship with the freight or cargo added. Bottomry bo-nds are
taxable.' Respondentia is a similar advance, but is secur-
ed on cargo only. Such a loan is repayable even though
the ship is lost, provided the cargo is saved. Such bonds
are also taxable.'

Botto-mry bonds rank in priority in reverse, that is. the
later ones rank before the earlier ones. "Loan" pres' -
ably includes interest on the loan, also, under this section.

One query which arises is whether after the execution
of the bond, the owner of the subject-matter loses his in-
surable interest to the extent o-f the loan. In other words.
whether, after such bond, the owner's interest is limited
to the diﬁerence between the amount of the advance and
the value of the subject-matter. In modern times, because
of the development of communications the occasions for
the bottomry bonds are rare. Hence, the provision need
not be elaborated.

Clause 7(5)

This deals with insurance of wages. Prior to the Act,
sailors were not allowed to insure their wages, for reasons
of public policy. In fact, at one time, they were not entitled
to wages unless the freight was actually earned. This was
intended to secure that they would fully exert their efforts
in time of peril.' .

Clause 7(6)
This deals with advance freights.

As to the meaning of the word "freight", see the rules
of construction in the First Schedule to the English Act,
rule 16. Out of the various forms of freight,' only advance

- 'See the Indian Stamp Act, isgg; First Schedule; Entry No. 16.
'See the Indian Stamp Act, 1899, First Schcduie, Entry No. 56.
'See Dover. page 311. i '

'Sc: Dover, pages 231-133.



53

freight has been mentioned in this section. Normally,
freight does not become payable until the completion of the
voyage, and it is until then at the ship-owner's risk. But
where the advance freight is stipulated for and the
understanding is that the freight will not be refunded if the
voyage fails, the shipper of the goods is the proper person
to insure. Presumably, it is for this reason that only
advance freight has been dealt with speciﬁcally in this
section. The other kinds 'of freight would be taken care
of by the ship-owner himself and not by the owner of the
cargo. '

Clause 7(7)
The reason for allowing the assured to insure the insur- Insurance of
ance charges themselves is as follows:---- 1'13""n°°

_ charges.

Premiums of insurance in marine insurance are
high. The ship--owner, while calculating his freight,
usually includes insurance premium as an element in
costing. He expects that his vessel will be utilised
throughout the year, and assumes that the proﬁts of the
ship for the year will cover the cost of insurance. In
other Words, he takes it that the ship will earn freight
enough to cover the corresponding proportion of the
annual premium. If this expectation is not realised, he
stands to suifer, and it is that risk which is allowed to
be insured under the section.

By the "disbursement warranty", the ship-owner Disburse-
is permitted to insure upto the total amount of the 111°!"

actual annual premiums. But the amount is reduced p1.§";'f:"--

monthly by a proportionate amount of the whole. As djminishing,
to return of premium, see section 83 of the Act. Rcmm of
premium.

Where the policy is for a period of twelve months, " Fun pre-

the sum insured on account of premium usually repre~ miuI_=g1 if
sents the full twelve months' amount. Where, however, 1°" -
the policy is for a shorter period, the insurance of the
ship is often arranged on "full premium if lost" terms.'
Here, if there is a total loss by an insured peril or
otherwise, the balance of the twelve months' premium
is payable to the insurers. In these circumstances, the
total loss increases the premium liability of the ship-
owner, and he has an insurable interest in the full
"twelve months' premium, subject to pro rata diminish~
ing as above.

Non--return_of p_remium_--that is, in cases where a "On arri-
return of premium is negatived by "on arrival" provi-VII".
sions,----is also insurable.' The return clause provides

'See Dover, pages I52, 154, I58 Keate, page roz.
'Dover, page 313. .
'Cf. Section 83 of the English Act, clause 84.



. G I

Mortalcon
Query-

A 54

for a pro rota' monthly return of each commenced
month if the policy is cancelled by agreement'. The re-
turnyi, however, "on arrival", in the- sense that the
refund of premium is not claimable unless the period
covered by the policy runs on without total loss. In
such cases, the premium is not returnable-and that
risk of non-return itself can be insured.

.. Clause 8
This deals with the quantum of interest, in certain cases.

Sub-section (1) which allows insurance both by the
mortgagora and by the mortgagee, it has been said, is

, theoretically open to objection. The interests of the two

are distinct and, therefore, contribution on the basis of

'double insurance (section 32 of the English Act) may not

Subrogation.

Indemnity

apply. Both can recover simultaneously. Further, the
mortgagee (if the vessel is lost) can still realise his debt as
an unsecured debt. .

That is, however, only in theory, because in practice it
is the mortgagor who effects insurance both on his own
account and on behalf of the mortgagee, and then charges
the policy in favour of the mortgagee.

Where both the interests are insured by separate policies,
subrogation would apply (section 79 of the English Act).
Presumably, the mortgagor also would have the beneﬁt of
subrogation. As regards sub-section (3), an illustration of
a case where it could apply would be where the ship-owner
has accepted a certain liability in respect of the cargo, but
the owner of the cargo can nevertheless eﬁect insurance

. against the very loss for which he can hold the ship-owner

Generll.

liable. [Of course, in such cases, the principle of subroga-
tion (section 79 of the English Act) will apply]. What the
section stresses is, that the fact that the owner of the cargo
has a- right of action "against a thirdparty (shipowner)
does not prevent the cargo-'owner from insuring the cargo.

_ Clause. 9

(i) This section makes wagering agreements void for
the purposes of civil law. Compare section 30 of the
Indian Contract Act. See also the recommendation made
in the report on the Contract Act' to extend ection 30 to
collateral agreements. In England, the Marine Insurance
(Gambling Policies?' Act, 1909 imposes criminal liabilities
in certain cases, wit the result that even collateral transac-
tions would be avoided and the broker eﬁecting such policies
cannot claim commission.

113th Report of the Law Commission (Contract Act); page 2.8,.-paragraph



55

For an example of a wager, see the case of Gedge v.
Royal Exchange Assurance.'

'(ii) The result of this section is that what is called the "Policy
"policy of interest" clause or "full interest admitted" clause §:?e°r£B':f
cannot -create any rights.' '

(iii) For a deﬁnition of "insurable interest" see section
5 of the English Act.

(iv) The provisions of the Marine insurance (Gamb- E53153}; Ac;
ling Policies) Act, 1909 of England, relating to insurable of :9o9.
interest are worded slightly differently. Section 1(1) (:1)
speaks of "bone ﬁde interest direct or indirect, either in the
safe arrival of the ship . . . . . . . .or in the safety or preserva-
tion of the subject-matter insured 'or a bona ﬁde expectation
of acquiring such interest." '

(2)) Section 1(1) (1)) of the 1909 Act provides that an "No in,-
employee of the ship owner effecting a- contract of marine tert=_=s'§"
insurance in the terms "interest or no interest" or "without P°1'°'°3-
further proof of interest than the policy itself" or "without
beneﬁt of the salyage to the insurers" or similar terms is
deemed to have entered into a gambling contract and is
punishable. Similarly, section 1(5) of the 1909 Act raises a
rebuttable presumption that contracts in such terms enter-
ed into by non-employees are deemed to be gambling con-
tracts unless the contrary is proved.

(It appears that so f-ar no prosecution has been instituted
under this Act.)

The word "gaming" has been omitted, as the practice in Departure
India is to speak of wagering agreements only. ggglljstrlliict

[Section 4, Proviso, English Act].

The proviso says that if there is no possibility of salvage, Without

a policy may be effected without beneﬁt of salvage. An bentﬂt Of
example of such a contract would be an insurance on in- ""5°'
creased value of cargo. Where cargo is the subject of
increase in value (because of rise in market values during

the transit), the original policy no longer affords sufﬁcient

cover, and it becomes necessary to take out an increased

value policy. Under such a policy, the insured amount will
increase if the prices rise, that is to say, as soon as the
further insurance to cover the increase in value is taken by

the owner of the goods, the owner of the goods can recover

under the increased value policy the same percentage of

loss as he may recover under the original insurance. The

policy would be without beneﬁt of salvage to the "increased

'(r9oo) 2 QB. 214 (Arrival of ship at Yokohama was the subject-matter
of the insurance, but assured had no interest in such arrival and hence could
not recover).

'Sc: discussion below, under s. 4, proviso, English Act.



Increase i
value
policies.
P.P.I.
Policy prool
of interest
or F.I.A.

Interest at
the time of
lean.

" as interest
may appear".

58

value" underwriter; the increased value underwriters
would not be allowed to participate in the salvage, and the
original insurers, on payment of the amount undertaken by
them, would be entitled to the whole salvage. See the
undermentioned case', where general average contribu--
tions recovered by the original insurer were held to be
exclusively theirs. The topic is linked up with that of sub-
rogation (see section 79 of the English Act). [i there is a
possibility of salvage, such policies would be wagering
policies and void at law though honoured in practice.

These have been already discussed." It has been the
practice for the insurer and the assured to bargain on the-
basis that the assured shall not be required to produce proof
of his interest in the subject-matter beyond production of
the policy. These are called P.P.I. (policy proof of interest).
Similar are F.I.A. policies ("Full interest in the assured")
Underwriters are bound on such policies only in honour;
in the eye of the law, they are wagers. It has been pointed
out3, that in section 4(2) (b) of the English Act, the-"word
"deemed" raises a conclusive presumption. "Deemed does.
not mean that the contract is prime fccie deemed to be a
gambling and wagering contract, or that the inference may
be rebutted by showing that the insurer had, or expected
to acquire, an insurable interest.

Clause 10

_ (i) The effect of section 6(1) is that an expectancy is
insurable. The reason for this relaxation can be found in
the exigencies of business. Modern business practice it is
stated, necessitates the taking out of insurance long before
the goods become the property of the assured, and hence
Section 5(1) 15 '3°mP1i9d With if the assured has an interest
at the time of the loss. This concession saves the time
which would otherwise lapse between the acquisition of
interest and the taking out of the policy. For example,
carriers of goods _may take out policies "as interest may
appear . At the time of the insurance they may be carry-
mg. no goods,_but the moment the goods are loaded, the-
policy comes into play. Similarly, a purchaser of a cargo
of wheat may, under the agreement to sell, undertake the
risk when the wheat is loaded on board. Now, the loading
may take some days. As soon as such parcel of wheat is
loaded, the risk passes to him, but not before. The law,
however, enables him to insure the whole cargo so that he
need not take insurance every time when a parcel is loaded.

'Bong v. Standard Marine Insurance Co. Ltd.-, (1936) 2 KB. 121, I27
aﬂirmed in (1937) 2 KB, 113 = (1937) I A.E.R. 714 C.A.

'See above without beneﬁt of salvage".

I 'Cheshire and Co. v. Vaughan Brothers, (1920) 3 KB. 240, 254, Scrutton



5?

(it) It must, however, be noted that he' cannot acquire Intcrcst
an interest after a loss has occurred.' "R" '°"'

(iii) The proviso to section 6(1) makes a special provi- Lost or
sion whereby interest can be acquired even after theloss, '10' 1°"-
provided that the assured had, at the time of effecting the
insurance, no knowledge of the loss. See also rule 1 of the
First Schedule to the English Act, as to "lost or not lost''.

(iv) One result of the rule that there must be interest
at the time of loss is, that if the ship--owner insures a ship
for a certain period and sells the ship before that period
expires, he cannot recover.

Clause 11
Needs no comments,

Clause 12

Needs no comments. The subject of re-insurance has
been dealt with separately.'

Clause 13

This deals with the measure of insurable value. As: to General.
valuations, see also sections 2'7------29 of the English Act.

The words "subject to any express provision or valua-
tion" imply that the rules given in section may be applied
(generally) only in respect of unvalued policies.

Policies of marine insurance are usually "valued", Valued
because after the destruction of ship proof of value will be Policies-
difficult and expensive. Usually, therefore, an agreed
ﬁgure is inserted in the contract and the policy is called a
"valued policy"?

In the case of goods or freight, it is not so diﬂicult to UHYE-'_111°d
prove the value, and both valued and unvalued policies are P°1'°"'S'
common.

In a sense, a "valued policy" is not strictly one of in-

_ demnity, because the value of the ship is fixed artiﬁcially

and the ﬁgures put by the parties may sometimes be above
the market value. Gross over-valuation may be evidence: of
bad faith,' but otherwise the valuation is conclusive
between the insurer and the assured, and enables the total
loss to be speedily settled and partial loss to be easily
adjusted. (The valuation is, of course, conclusive, even

1Except as provided by section 6 (I), proviso, English Act,=Claus:: Io
(1) proviso. '

'See notes to clause 7(3).

'See also notes on section 27 (2) of the English Act,---clause 24(2).

'Thames and Mersey Marine Insurance Co., v. Gunfard Shipping Ca.,
(I911) A.C. 529.



if  M
polides.

Floating
policies.

Departure
from the

English Act.

General.

Duty of
assured.

Time of
' sure.

What should
be dis-
closed.

58

between the parties, for the purpose of the insurance only
and not for any other purpo . Moreover, under section
37(4) ofythe English Act, the valuation can be re--opened
in the case of a constructive total loss.

Unvalued policies were previously called "open" policies,
because the assured had the opportunity of proving the
value. The expression "unvalued", policy is, however, the
correct expression (see section 28 of the English Act), and
the expression "open policy" should really be used for what
are called "ﬂoating policies." Large shippers of small
parcels of goods do not ﬁnd it c°onvenient to take out a policy
on each shipment, but insure all their shipments during a
certain period. The policy is for a round sum and every
shipment reduces the insurer's liability. These are called
"ﬂoating policies".1

The English Act provides that insurable value in the
case of a steamship includes also the machinery etc. if
ownedby the assured. The case of a ship driven by power
other than steam is not covered, Since ships are some-
times propelled by other power also, it is desirable to cover
their gases, and the necessary change has accordingly been
made. -3 . A

Clause 14

This provides that a contract of marine insurance is one
of utmost good faith. In fact, all insurance contracts are
contracts of utmost good faith. Bad faith does not render
the contract void, but only voidable. A person about to
make out a policy must therefore-

(i) make no active misrepresentation, and

(ii) _disclose every material circumstance as deﬁned in
s. 13(2) of the English Act.

Clause 15

The disclosure must be made before -the contract is
made, under s. 18(1); as to the time when the contract is
deemed to be effected, see s. 21 of the English Act.

- S. 18(1) imposes a duty to disclose not only facts actually
known, but also facts which, the section says, "ought to be
known" by the 'assured. S. 13(3) gives a list of circum-
stances which need- not be disclosed. Thus, if petrol is a
usual cargo from America to France, that fact need not be
disclosed '

' 'Set. also section 29 of the English Act, clause 26, and notes thereto.
'Cf. The First Schedule, rule 15 of the English Act, and the change

proposed therein.
'For a detailed discussion see the body of the Report, para. 6.

'Man, are. 5: Co. v. Gmeral Marine Ur.d'n'wr:'t¢r5 Ltd.-, (1922) 2 I<.B.
goo.



59

Clause 15

It may be mentioned here" that the fact that another
insurer had refused to insure the cargo or ship previously
is not a material fact in marine insurance.' Further,
opinions need not be disclosed. Thus, the original insurer
coming to the conclusion that he has insured a bad risk and

getting it re--insured at a higher premium is not guilty of
bad faith."

It has been suggested" that in s. 18 (2), to make it more Suggestion
complete, the words "or in ﬁxing the line which he 'will t° add
accept" should be added, because it is a well-established referfnce
principle of underwriting to accept a smaller line on specu-
lative business than on risks the past experience with which Reiected.
has been relatively favourable. It appears, however, un-
necessary to make any such change. The section is compre-
hensive for all practical purposes. -

Lastly, as regards s. 18(3) (d), relating to circumstances Warranties.
covered by a Warranty, it may be noted that if a Warranty
is broken, the insurance is nevertheless valid upto the time
of the breach of the Warranty, while in case of departure
from good faith it is not so.

Clause 16

This deals with disclosures by an agent effecting insur-
ance. The importance of this clause lies in the fact t.hat
most of the contracts of' marine insurance are placed
through brokers. The broker is the agent of the assured and
not of the insurer. If the broker himself is guilty of non-
disclosure or misrepresentation and the assured is innocent,
the contract is still voidable. (Of course, in such cases, the
assured can sue the broker for negligence).

Clause 17

This deals with representations made pending negotia- G¢n¢,,1_
tion of the contract.

As regards sub-section (2), the comments on another Suggestion.
section4 of the English Act may also be seen for adding the
words "the line he will accept".

Representations as to future may cause some diﬁiculty. Representa-
For example, a representation that a ship is to sail on a tioﬂﬁ 93 '°
particular date is representation on a matter of fact, and f""'''''
if the ship is lost on some other date the insurer may avoid

'Glasgow Assurance Corporation v. Symtmdon (1911), I6 Cotnmercin
Cases, 109, I19 = I04 L.T. _254 = 27 T.L.R. 245, quoted in Shipping
Law by Lord Chorlcy, 3rd edition, page :88.

'Glasgow Asmrance Ca1'p0raﬂ'on'5 Can, already cited.
'Dover, page 322.
'See notes to section 18 of the English Act---clause I5.
296 M of L--5



General.

Slip.

Unenforce-

able
contracts.

Open slip.

Fleet slips.

Open cover.

00

the contract.' But a representation in the form that "it is
intended that the shi will saﬂ 'on a certain date' would not
aﬂect the contract i it is a mere matter of expectation".

Clause 18

This deals with the time when the contract is deemed
to be concluded.

Virtually, this section deﬁnes the meaning of "accept-
ance". The contract is concluded when the 'slip' is signed,
whether the policy be then issued or not.

A slip (according to the English practice) is a piece of
paper on which the broker writes down the name of the
ship, the proposed voyage, the sum assured, etc. The slip
is taken to the underwriting room of Lloyd's. There he
approaches the underwriters and tries to "place" portions
of the sum with them. The ﬁrst underwriter may under-
write for say, one thousand pounds and the next for ten
thousand pounds and so on. Each underwriter initials the
slip, and writes down the amount to which he will be
liable. Until, however, the policy is issued, the slip binds
the underwriter only in honour, because of section 95 of
the English Stamp Act, 1891 and section 22 of the (English)
Marine Insurance Act.

Until the policy is issued, the contract is, presumably,
"unenforceable".

Sometimes a merchant has knowledge in general of
shipments but does not know the precise details. In such
cases, the risk is submitted to the "insurer by 'open slip'.
It is made out to cover the amount adequate to meet the
circumstances, and expressed by the words "steamer... .
and/or the steamer approved or held covered". When the
details become known, these will be incorporated in the
"closing instructions"?

"Fleet" slips are those by which the whole of the vessels
of one ﬂeet are covered by means of one slip.

In modern times, instead of insuring individual ship-
ments as isolated transactions, "open covers" are used.
These may be in respect of a limited period or a perma-
nent "open" cover,--"open" until terminated by cancella-
tion. The open cover would effect insurance on "convey-
ances and parcel post and air and steamer" or in other
suitable terms.

1Ander.1'on v. Thornton, (1853) 8 Exch. 425=2o L.T.O.S. 250, cited in
Dover, page 328.

'For "closing instructions", sec below.



61 '=.».,;%';_

Though they serve similar purpose as "ﬂoating

- o1icies"1 open covers are not the same as ﬂoating policies,

' ecause---

(11) the open cover is merely an honourable under-
taking to issue policies within its terms and has no
greater signiﬁcance than that of a slip?

"A ﬂoating policy is an enforceable contract of
marine insurance; an open cover 15 not ;3

(ii) the amount for which cover is made is generally
the maximum amount contemplated by any one sailing.
and that amount is always open during the currency
of the cover irrespective' of how many "declarations"

are made;

(iii) premiums are paid as policies are issued and
not in one lump sum.

When the broker has completed the risk, he forwards Cover note.

tr: his client (the assured) a cover note giving the details
of the insurance. Most brokers use printed forms with
spaces in which the details are inserted. The cover note
can, therefore, be described as a communication by the
broker to the assured informing the latter that in accord-
ance with his instructions "cover" against the speciﬁed risk
has been effected with a speciﬁed insurer, and also inti-
mating that the policy is in preparation and would be
forwarded in due course. '

Where the original instructions of the assured to l'1iSC1osing

broker were provisional, the broker by his cover note in3"'"'="'°di-

requests the assured to forward closing instructions as
soon as possible.

A "closing" slip or "forward" slip is prepared by the Closing slip
broker, who enters therein _at len th the deﬁnite particulars 0? F°1'"""d
of the insurance and attaching t ereto any special clauses 'P'
to be inserted in the policy. It is from this sli that the
marine insurance company prepares the po icy. The
system is not much in vogue now.

Clause 19

This embodies the general principle that a contract of Gtneral.
marine insurance must be embodied in a marine policy.

It _may be noted that section 93 of the Stamp Act, 3.891 Stamp Act.
(English) and section 7 of the Indian Stamp Act, 1899, are
also relevant on the subject. Both of them provide that

'As to "ﬂoating policies ", see 3. 29, English Act---clause 26.

'Keats, page 18.
"Dover, analysis of Marine Insurance Clauses 1960 Erin. page 163.



62

a contract of sea insurance (with a minor exception)i shall
not be ''valid'' unless the same is "expressed" In a policy
of sea insurance. While section 22 of the Marine Insurance
Act speaks of the contract being "inadmissible in evidence",
the Stamp Act speaks of its not being valid. Thus the
nrovisions of the Stamp Act are more stringent. '

Suggestion It may also be added here that there are certain provi-

Iegﬁtclirlg sions in the English Stamp Law, namely, section 11 of the

mm?' Finance Act, 1901. (regarding policies with a continuat.1'on
clause). section 8 of the Revenue Act, 1903 (for builders'
etc. risks) and section 8 of the Finance Act, 1912 (for
increase in premium}. which are relevant and important
on the subject to stamp in marine insurance. The neces-
sity of making similar provisions in the Indian Stamp 1 aw
may have to be considered."

Departure from the English Act

gggarglrﬁish 'The signiﬁcance of the words "subject to" in the English
Act_==3ib_ Act is that the provisions regarding stamping are also to
ject to" the be complied with.3 It appears, however, unnecessary to

Provisions Of make this clariﬁcation. The result would be the same even

ﬁ"g'm'*i:f;3t3_ without those words. Hence they have not been used.
gag: 153:' These words refer to detailed provisions in sections 23,
this Act_-- 24, 25, 26, 27, 28 and 29 in the English Act.
"M3Y&3f; Execution of policy simultaneously with the conclusion
execute ' of the contract is not frequent, because usually the contract
is concluded by the "slip" (see section 21' of the English
Act) while the policy takes some time. The word "may"
is permissive only.
Egtfgg See, on this subject, discussion in the usual textbooks.'
policy and
si1P- Clause 20

This requires that the marine policy must specifv
certain particulars. The name of the ship or the losses
covered (precise speciﬁcations) are not, required to be
entered. .

Stamp Act. It may be noted that section 93 (3) of U116 (English)
Stamp Act, 1891 and section 7(3) of the Indian Stamp
Act, 1899, provide that no sea policy shall be valid unless
it speciﬁed the particular risk or venture or the time for

'As to the exception, see note at the end entitled, " Suggestion regarding
section 7 of the Indian Stamp Act" etc.

'See also notes on section 25, English Act--«-clause 22. The provisions
are discussed in Dover, Handbook, pp. 133--135, and Keate, pp. 99-101.

'Cf. Chalmers, p. 34, footnote.5.

'See, for example, Dover, Handbook, p. 332.



63

which it is made. the names of the subscribers or under-
writers and the amount o-r amounts insured. Thus, the
provisions of the Stamp Law and_ the section under _dis-'
cussion overlap. Section 7(3) of the Indian Stamp Act
should therefore be deleted, after this Bill is passed.

Clause 21

This lays down who should sign a -marine policy. Exe- General.
cution by the assured is not necessary.

Sub-section (2) is intended to deal with the cases
where more than one company subscribe to policies on
the same form. In England, the policies of Lloyd and
those issued by the Institute of London Underwriters'
Policy Signing Oflice (on "Companies Combined Form")
would be covered by this sub-section. The liability would
ordinarily, under the sub-section, be several and not joint.

It appears, however, that in England for stamp purposes
the whole policy is treated as one contract}

Clause 22

This deals with the topic of "voyage" and "time" General.
policies. Time policies cover the subject-matter of the
insurance for a period of time. Voyage policies insure the
subject-matter from one place to another or others.

The section requires that a deﬁnite period of time Time
should be mentioned. . Policies-

Under section 7(2) of the Indian Stamp Act, 1899. and Stamp Act----
section 93(2) of the (English) Stamp Act, 1891, a policy of 5"3.3°§t°d
marine insurance cannot be made for any time exceeding
twelve months. The object behind this stringent provi- (2),
sion was to ensure a regular revenue from the marine
insurance business. Section 25(2) of the (English) Marine
Insurance Act also makes the same provision in substance,
and says that a time policy for more than twelve months
is invalid. Section 7(2) of the Stamp Act should be
omitted on the passing of this Bill to prevent overlapping
with the clause under discussion.

In actual practice, in England, this restriction regarding Continuation
time was found to cause diﬁicult , particularly in cases °:a':f:'5"3'
where the vessel had some casualty or encountered heavy §._.§.,,'5
weather. In such cases, it was difﬁcult to arrive at the addition in
actual date of the loss, that is, whether the date fell Within Stamp Act-
the time or outside it. To meet such difﬁculties, a "conti-
nuation clause" was usually attached to a policy as an
honour agreement. Section 11 of the (English) Finance
Act, 1901 afforded statutory recognition to the practice of
attaching the continuation clause. That section provides
that a marine insurance policy for a time may contain at

'Dover, page 334.



Varese
policies.

Combined
mlicics.

64

continuation clause and shall not be invalid merely on the
ground that by the continuation clause it becomes avail-
able for a period of more than twelve months. The
standard form taken by the continuation clause is as
follows':-

"should the vessel at the expiration of this poli

he at sea _or in distress at a port of refujge or of c ,
the interest hereby insured shall, provi ed previous
notice be given to the underwriters be held covered
at a pro-rota monthly premium to her port of desti-
"nation."

(There are minor provisions in this section regarding
continuation clause, which need not be considered here).

Theinecessity of making a similar provision in our
Stamp Law may be considered," if section 7(2) is retained.

"Voyage" policies expressly describe the voyage
covered. One of several voyages may be covered in such
policies. Questions of deviation from the voyage, change
of voyage and different voya e arise in such policies; but
they need not be considered ere."

'Very often, voyagepolicies also contain an element of
time. Section 7(4) of the (Indian) Stamp Act, 1899, and
section 94 of the (En lish) Stamp Act, 1891, contain pro-
visions regarding the c arging of stamp duties on combined
policies. So long as the voyage policy merely provides
that the insurance continues to attach until the expiry of
24 hours after the ship has arrived in good safety at the
destination, it is still a voyage policy, since this is the
usual form of the clause. Even 'if the period after arrival
at the destination is extended up to 30 days, the stamp
duty is single. Sometimes a combined voyage and time
policy may cause diiﬁculty. For example in an English
case' a ship was insured "at and from the port of_ Pomaron
to New Castle and for 15 days whilst there aft.er arrival".
The vessel arrived at the destination and discharged the
cargo. But before the 15 days expired, a new cargo was
being loaded for a new outward voyage. Then the ship
was damaged. The contention of the insurers; was, that
the 15 days mentioned in the policy were intended only
ns a maximum period for the discharge of the cargo
(meaning, in effect, that the policy was a voyage policy,
and once the voyage was over, the policy ceased). The

'See Dover, page I33.

'See also notes to section 22, English Act----c1ause 19.

'For deviations etc. sec sections 43 to 45 of the English Act,--c1auses
44 to 46.
-Gamble: v. Ocean Marine Insurance Co. of Bombay, (1876) 1 K.B.
:41. »



65

Court, however, held that even after the expiry of the first
voyage, the policy continued as a time policy for the
15 days in question, and the insurers were liable for any
loss or damage occurring during those 15 days. In eifect,
therefore, the policy was held not to be a time policy with
reference to a voyage, but a voyage policy initially with
an independent time policy. -

Clause 23

This provides that the subject-matter must be designat-
ed with reasonable certainty. The "subject-matter" is not
the same thing as the "interest of the assured", as is made
clear by sub-section (2). Further, regard must be had to
usage as is made clear by sub-section (4). Thus, "cargo"
would not include live animals and "goods" would not
include passengers' luggage.

Clause 24

This deals with the topic of valued and unvalued Gene,a1_
policies.

Valued policies are invariably used on insurance of
ships because, after destruction, it is diﬁicult to prove the
value of the ships. In the case of goods or freight, both
valued and unvalued policies are used.'

Sub-section (3) provides that "subject to the provisions Statement of
of the Act" and in the absence of fraud, the value ﬁxed by valuation I0
the policies as between the insurer and the assured is bf' °°"°]"'
conclusive. 'Reference may be made to section 27(4), 51"'
section 29(4) and similar provisions which have a bearing
on the subject.

The assured is at liberty to fix his values as he chooses, Arbitrary
if they are acceptable to the underwriter. Once the value Va1I-1at10=|-
is ﬁxed, it governs the measure of indemnity." Even if
there is a decline in the actual value after the policy is
effected and before the risk arises, the assured can claim
on the basis of the value. Conversely even if there is a
rise in the actual value, the assured cannot claim any
thing more than the value. In this respect, the strict
doctrine of indemnity has been departed from, to meet
practical necessities.

The assured is estopped from saying that the value is Esloppcl.
more than that stated in the policy. Thus, in an English
-case," where a ship worth £9,000 was valued at £6,000

'See also notes to section 16, English Act--cIausc 13.
'See section 67 of the English Act--clause 63.

'-'North of England Iron Smunsb p AssocI'¢m'an v. Armstrong (1876) LR. 5
-(LB. 244. '



66

and after £ 6,000 had been paid for a' total loss, -the ship-
owner recovered £ 5,000 from the guilty vessel (which had
caused the collision that led to the loss)? it was held that
the ship-owner could claim no part of this £ 5,000 and the
whole sum should go to the insurer} The reason was, that
the owner was by his under-valuation estopped from deny-
ing the real value. ,1 . .

Incrcasccl "Increased value policies", that is to say, policies taken

".'1"° 3°11' out to cover an increase in the market value of the subject-

§'°'"'-" °' matter insured," sometimes present difﬁculties, particularly

use, when the original amount is insured with one insurer and

only the increased value is insured with another insurer.

The diﬁiculties arise when both the insurers claim
"subrogation".3

Very often, in -such cases a clause is inserted in the
original policies to the effect that the agreed value of the
subject-matter is to be re-opened if policies are effected on
the increased value. In other words, if the assured places
an additional insurance on the cargo insured, the value of
the cargo shall (in the event of loss or claim) be deemed
to be increased to the total amount insured at the time of
loss or accident. It is unnecessary to consider the effect
of such clauses.'-5

$:;==;1fiﬂ°;n_ Ifl deterininiirgg whethgg (Ehere l}11asEbee1i;i S1? construct(iive
- tota loss or no , section ) of t e ng' Act provi es
 that the value ﬁxed by the policy is not conclusive. As
was observed in an English case,' the question of total

loss is to be determined just as if there was no policy at

all. It is section 60(1) of the English Act which section

27 (4) has in mind. Taking the facts in Irving v". Manning,'

if a ship is valued at £ 17,500 and insured for £ 3,000, and

if the ship _is damaged and repairs are estimated to cost

£ 10,500 but the value of the ship when repaired would

he only £ 9,000, the question is, whether the expenditure

is such as would exceed its value" within the meaning of

section 60(1) of the English Act if the expenditure is

'Under the doctrine of subrogatioi-i,--see section 79 of the English Act--
clause So.

'See notes under section 4, English Acteclause 9.

'See Lord Chorley, Shipping Law, 3rd edition, page 284, for a full dis-
cussion.

'For a fuller treatment, see Dover, pages 303 and 338.

'See also, as to the effect of such clause, observations in Bong v. Standard

Jmifaﬁf-RF Insurance Co., (1937), I All. ER. 714, 719, C.A., per Lord Wright,

"For the meaning of ' constructive total loss', see section 60 of the
English Act clause 61.

'Irving v. Mamring, (I347), i H.L.C 237.



V:

'I

67

incurred. In this case, the expenditure--£ 10,500~--would
not exceed its "value"---if the value of £ 17,500 stated in
the policy is taken as the real value. But if 'the' value of
the ship when repaired--'--£ 9,D00--is to be taken' into
account, the expenditure would obviously exceed the value
and the case is one of constructive total loss. The effect
of section 27(4) is that in such case the value stated in' the
policy----£ 17,5OO----1's not taken asconclusive, and the case

can be regarded as one of constructive total loss.

Where the ship is insured under more than one policy, Several
some diﬂiculties arise as follows:-- ' P°11°'°3-

(2') If the values in all the policies tally, it is
obvious that the assured cannot recover more than the
agreed value, because the contract is one of indemnity.

(ii) Where the values do not tally, but the total of
the sums assured under each policy does not exceed
the agreed value, there are no serious diﬁiculties
because the case is not one of over-insurance} The
only point to be noted in such cases is, that it would
be in the interest of the assured to claim ﬁrst under
that policy in which a lower value has been agreed.
If, for example, a ship is insured for £ 500 and valued
at £ 700 under one policy and insured for £ 600 and
valued at £ 1,200 on another policy, and the insured
chooses to recover ﬁrst under the £ 1,200 policy, and
recovers £ 600, if again he claims from the insurer for
the policy of £ 700, all that he can recover is 33 100
(700 minus 600) on the principle that insurance is
indemnity onl . In other words, the assured is entitled
upto the di erence between the amount already
obtained and the value inserted in the policy."

(iii) Where, however, the assured takes out several
policies and their combined value exceeds the value
of the subject-matter insured, it is a clear case of
over-insurance by double-insurance? In such case
(provided the policies are claimed in the correct order),

the assured------can recover upto the higher value, but
no more.

(iv) As regards contribution between the insurers
themselves, section 80 of the English Act will govern
the matter in all such cases.

There can'be two values ﬁxed-in the policy----e._g. Dual Valua-
one for total loss purposes and other for other purposes. t1'°11'.C1""3°-'
An example of this is the "Dual Valuation Clause".

This is not, however, much in vogue now.'

'As to double-insurance, see section 32 of the English Act-----clausc 90.

'Bruce v. forms, (1863) 32 LJ. Ex. 132-1 H.L.C. 769 ; 7 LT. 148.

'See section 32 of the English Act--clause 29 and notes thereto.
'See Keate, page 103, and Dover, pagc----16o-161.



68

Clause 25

General. This deals with unvalued policies and leaves the
insurable value to be subsequently  The words
"in the manner hereinbefore speciﬁed" refer obviously to
section 16 of the English Act. If the sum so ascertained
exceeds the sum insured, there is under-insurance. If it
is less than the sum insured, there is over--insurance which
leads to a rateable return of the premium in respect of the
amount of the over-insurance [see section 84(3) (e) of the
English Act]. Even in the case of unvalued policies, the
assured has to give credit for sums received under any
gther policy, as provided by section 32(2)(c) of the English

ct.

Clause 26

'Floating This deals with the topic of ﬂoating policy. A ﬂoating

9°59' - policy is sometimes also called an "open" mlicy. It is
usually employed by large shippers of sin 1 parcels of
goods. The inconvenience felt in taking out a policy on
each shipment is avoided by this policy, under which all
shipments during a certain period are insured. The policy
is for a round sum, and every shipment reduces the under-
writer's liability under the policy- Usually, the insured is
supplied with a book of "declaration forms" on which he
can "declare" the shipments as and when they are made.
The declarations are "taken out" in the office of the
insurer after being endorsed on the policy. One more
advantage of a ﬂoating policy is, that the merchant is
"automatically covered immediately each shipment becomes
at his risk", that is, even if an accident (of which he is
unaware) has happened, he is covered, because it is not
necessary that the declaration should precede the loss}

A disadvantage of the ﬂoating policy is the v' ccessity of
stamping and the payment of the basic premium at the
outset.

Some pr_acti-- It is a question whether a breach of the duty of the

'°1'l"°9t'°n9-assured to declare the destination simply discharges the
insurer from liability in respect of the shipment in ques-
tion, or whether it avoids the whole policy.

Another question is whether the name of the ship by
which the cargo will be carried must be disclosed. An
opinion has been expressed" that there is no such duty, as
the insurer must be taken to agree to shipment on any
seaworthy ship. The case is different where the owner of
the goods knew, for example, that the ship was to be cast

away.

'Kcatc, page 19, second pan.
'Lord Chorley, shipping Law, 3rd edition. page 302-



69

The declaration must be made within the agreed time. D°¢1'ﬂ"°"-
The policy, however, attaches immediately on loading,' so
that if the goods are destroyed by ﬁre before sailing (Le.

Ilzéeiolre the time fixed for declaration) the insurers are
a e. '

There is a distinction between "open cover" and "float- 09°" °''''"-
ing policy", though the two apparently resembles each
other. An open cover is an agreement binding the parties in
honour only. It is not a policy and does not express the
sum or sums insured. It is really an intimation by the
broker to the owner of the goods that an open cover has
been effected. It would appear that the usual practice is

to eﬂect a 12 month open cover and take out ﬂoating policies
as required.'-3

Floating policies are often issued one after the other in "T0 f°"°"'

succession. The necessity for this can be illustrated thus :--- ::'fj§'.f°'

Supposing a ﬂoating policy for £ 10,000 is issued, and the
"dec1arations".made thereunder are for goods of the value
of £ 3,000 and £5,000 respectively, then, by the time a third
shipment of goods of the value of, say, 5;' 5,000 is to be made,
the amount covered--1'..e. the balance of 2,000 (sum insured
_minus value of the two shipments) would be inadequate.
Therefore, as regards the third shipment (of £ 5,000) £ 2,000
would be covered by the ﬁrst ﬂoating policy and a second
ﬂoating policy will be obtained to cover (2') a part of the
third shipment and (it) also future shipments. This second
policy, thus, "follows and succeeds" the ﬁrst policy. That

fact is usually mentioned in the second policy.

Clause 2'?

This is a formal section merely saying that the rules of General-
construction contained in the Schedule will apply and that
a policy "may be" in the form given in the Schedule.

Clause 28

Sub-section (1) provides that where insurance is effected Sub-sectiun

at a premium "to be arranged" and no arrangement is (I)
made, a reasonable premium is payable. At ﬁrst sight, it "To be "
may appear strange that such an essential factor as the WW" '
amount of premium is not entered in the policy. The expla-

.nation, however, is that very often the assured may desire

to obtain immediate cover but may-not be in a position to

give all the particulars to the insurance company. In such

cases, the premium is left to he agreed subsequently. It

may be noted that section 23 of the English Act, which gives

a list of the particulars to be speciﬁed in a policy, does not

require that the premium must be noted.

'Union Imurancc Society of Canton v. Willi, (1916) I A.C. 281, 287..
5' 'Dover, Handbook page 342.
'See also notes under Section 21, English AcI~---clause rs.



Sub-section
(2)

" Held
covered ".

Meaning of
double
Insurance.

Contribution
and return
of premium.

Double
insurance---
cssentiala of.

70 "

Sub-section (2)- deals with a case where an additional
premium "is to be arranged in a certain event and the event
happens but no arrangement is made. Usually, "held
covered" provisions are there in many policies. A specimen
of such a clause is--"Held covered in case of any breach of
Warren as to cargo, trade, locality . . . . . .date of sailing,
provid notice be given immediately after receipt of advice
and any-additional premium required be-agreed' .

Another example is the Deviation Clausel included in
grcﬁfage policy, the material part of which is often as
o ows:--

"Held covered at a premium to be arranged in case
of deviation or change of voyage."

Clause 29
This deals with the important topic of double insurance.

Where the assured takes out several policies on the same
subject-matter, the combined value of the several policies
may or may not exceed the value of the subject-matter. If
it does not exceed the value of the subject-matter, there is
not much difficulty as there is no over-insurance and the
section does not come into play." Where it exceeds the value
of the subject-matter, there is "over--insu1'ance" by double
insurance. In such a case, the section provides that the
assured cannot receive more than the indemnity allowed
by the Act. Thus, if cargo worth £ 5,000 is insured on two
policies, one for £3,000 and the other for £2,500, not more
than £ 5,000 is recoverable under both the policies together.
The assured may---

(1'.) claim lﬁrst under the higher policy and then
under the lower policy; or a

(ti) claimﬁrst under the lower policy and then
under the higher policy; or

(iii) claim simultaneously under both the policies-

In the situation at Nos. (11) and (ii) above, he has to
give credit for what he has received from the first insurance.
In the situation at No. (iii) above, he cannot recover more
than the value of the subject-matter.

As to contribution, see section 80 of the English Act.
As to return of premium, see section 84 of the English Act.

Over-insurance by dodble insurance requires that the
policies "must have been effected--
(i) on the same adventure;
(ii) against the same risk;

1As to deviation, see section 46 of the English Act,---<:lause 47.
'See also section 27 of the English Act,--clause 24 and notes thereto.



'71

(iii) in respect of the same interest in the same
subject-matter; and

(iv) for sums exceeding the indemnity allowed by
the law. '

Therefore, there is no double insurance where diﬁere.-nt
subject-matters or diﬁerent interests in the same subject-
matter are recovered by the policies. For example, as
pointed out by Dover} where the buyer of goods insures
them and so does the seller, their interests are distinct,
because the policy effected by one will not protect the
interest of the other (unless so expressly provided), and
there is no question of double-insurance.

Double insurance is effected advertently Where, for Double-
"example, the assured has some doubt as to the ﬁnancial insurance-
standing of the first insurer. It can arise inadvertently, for ﬁdveffent
example, where the consignor of goods insures them on gijgcilggnt
behalf of the consignee but the consignee is already covered '

by a ﬂoating policy.

Clause 30

This deals with the time when premium is payable. The General.
Words "unless otherwise agreed" are important, because in
practice policiesare usually issued prior to the tender of
the premium.

Clause 31
This deals with policies effected through brokers. G°"°1'°1-

According to the general principles of the law of ImP°ﬁ5n°e
contracts, the insurer can directly claim his premium from °f bmkc"
the assured. But, in practice, the broker not only
makes this contract with the insurer but "does so regularly
for various assured who are often not even known to the
underwriter"? and that is how the usage developed of
making the broker directly responsible for the premium--

a usage which has become law now. This system has the
advantage of-

(i) avoiding cash payments between the insurer
and the broker; and

(ii) enabling the broker to bring pressure to bear
on the assured if he fails to pay the premium."

'Dover, page 345.
'Lord Charley, Shipping Law, 3rd edition, page 337.
'See the lien under section 53 (2) of the English Act,---Clausc 31 (21.



72

1ﬁ':b"1'¥°1' It would be seen, that the insurer, the assured and the
:,u_u3;_"°'" broker--the three persons concerned------have their liabilities
deﬁned as follows in the Act:--

('2) As between the insurer and the assured-

As regards payment of the premium, though
the assured is, speaking in the abstract, liable to the
insurer (section 52), the acknowledgment of the
receipt of the premium contained in the policy
effected through a broker is conclusive as between
the insurer" and the assured (Section. 54). It has
been stated' that even where the policy does not
acknowledge such payment, by custom every policy
is regarded as a receipt for the premium and the
assured cannot be sued by the insurer for the pre-
mium if the policy is effected through a broker.

As regards liability under the policy, the
insurer is directly responsible to the assured for the
amount payable in respect of losses. As regards
return of premium also, he is directly responsible
to the assured--[section 53 (l)].2

(it) As between the broker and the assured-

_ In the event of the non-payment of the pre-
mium by the assured, the broker can recover it as
a commercial debt}

As regards liability under the policy, the
question does not arise. The broker does riotbear
the losses.

As regards return of the premium also, he is not
liable.

(iii) As between the insurer and the broker-

As regards payment of premium, the broker is
directly responsible to the insurer under section
53(1).

As regards liabﬂity under the policy, the ques-
tion does not arise. The insurer is not liable to the
broker.

As regards return of premium also the insurer
is not liable to the broker. '

'Dover, page 377.

'As to return of premium, see sections 83 and 84 read with section 82 of_
the English Act,--C1auses S5 and 84 read with clause 83;.



78

Clause 32

This deals with the effect of receipt on the policy. Notes Gm'-"L
to an earlier section may also be seen.'

The usual form of acknowledgement is: "Paid the con- Form of
sideration due unto him (the underwriter) for this insur- acknow-
ance by the assured at and after the rate . . . . . . . . . .." The 1°dg"='"°"-'-
reason why it is not conclusive between the assured and
the broker is, that it is the broker who has an action against
the assured, and hence an estoppel between the insurer and
the assured cannot operate between the assured and the
broker."

Clause 33
This deals" with the topic of warranties. G"""-"'1-

In marine insurance, it has been said, the so-cal].ed Nature of
warranties correspond to "conditions" in the Sale of Goods WWW
Act. In the Sale of Goods Act, breach of a warranty may iﬂsmﬂmc
give rise to damages and breach of a condition may give
rise to a right to avoid the contract. In marine insurance,
the breach of warranties discharges the insurer from liabi-
lity, as provided by section 33(3) of the English Act, from
the date of the breach. To that extent, it is more akin to a

condition.

1.] l'ﬂIlC€ .

A representation as to fact may or may not be embod:ied P.*°P"'3°"""
as a warranty. If it is not embodied, the insurer can avoid 
the policy only if the misrepresentation is material. But if Wm-amy_
it is so embodied, and turns out to be false, then whether or
not the fact is material to the risk, the insurer is discharged,

as section 33(3), first sentence, last 9 words, make it clear.

No particular form of words is necessary. The word Words used
"warranty" is not necessary, and a policy expressed to be To i1_1d1'¢3l=
on the "American Ship Mount Vernon" was held to embody warrant?'

a warranty as to nationality of a vessel?

It is usual to have a clause to the effect that in case of a Hem
breach of warranty, the assured shall be held covered (in covered.
spite of the breach) at a premium to be arranged.'

Where the assured fails to comply with the warranty, T_iInt= of
the insurer is discharged only from the date of the breach, d'5°h"3°-
if the Warranty is as to a future event. If, however, the
warranty is as to the existence of a particular state of fact,
for instance, where the special equipment of ship is
warranted and the facts differ from the warranty, then the
policy never attaches."

'See notes under section 53 of the English Act,----C1ause 31.
'Lord Charley, Law of Shipping, 3rd edition, page 338.
'Baring V. Ciaggett, (1802), cited in Dover, page 348.

'As to premium " to be arranged ", see section 31 of the English Ac.*t,----
clause 28 and-notes thereto.

'See Lord Chorlcy, Shipping Law, 3rd edition page 309.



74

tréltgﬁréliﬂ at Mere intention to break the Warranty is not sufficient,
mm"-mt: because intention is revocabl . This principle leads to
djﬁel-egg; different results when applied to' a -voyage policy and when
between applied to a time policy. In the -case of a time policy, _ the
;'§nY:3" "Pd mere intention to proceed to a port in violation of a war-
p° ' rarity on the subject does not amount to a breach so long
as the ship has no-t proceeded to that port. In the case of a
voyage policy, however, if from the very beginning the
voyage 1S different from the voyage insured, the policy
never attaches and no liability arises. This is so even if the
goods are lost at a place which Would, at all events, have

been travelled through even on the authorised voyage.

;'d"K*-'1'1'a"" It must be noted, however, that the mere use of the

' expression "warranted" does not give rise to a Warranty.

Sometimes these Words are used merely to exclude a parti-

cular period or a particular place from theloperation of the

policy. For example, the use of the word "warranted not

in the Bay of St. Lawrence during the month of April"

merely means that the ship is not insured While it is in the
prohibited area during April.'

Clause 34

This deals with express warranties. No detailed com-
ments are needed,
1mP1iEd The proposition embodied in section 35(3) of the English
:";'cf,,a§':§_n°t Act, that an express warranty does not exclude an implied
Warranty (unless inconsistent therewith) is accepted in the
United States of America also."

Clause 35

Needs no comments. The effect of warranties is already
discussed?

Clause 36
G=n¢'-'r81- This deals with the cases where breach of a warranty is
excused. The excuse may arise from the following:--

mwgffe (a) change of circumstances;

Warrant? (b) subsequent law;

excused.

(a) waiver by the insurer;

(d) provision in the policy itself to the effect that
the right to avoid the policy will not be exercised by
the insurer.

'Sec Lord Charley, Shipping Law, 3rd edition page 314.

' ee 45 Corpus Iuris Sccundum, Insurance, page 561, para. 652, right-
hand column.

'Scc notes to clause 33.-



-":5

t_. 5.53 to kit'), the  example is the warranty "warranted
armed" inserted during the war, which becomes obsolete
if peace is declared. . .

I to. (:51);-iit   the general rinciple that
if the performance of the contract becomes il egal, it need

not 'be perionned. 
As is (c), Wsea_;::3e'c=tion 34(3) of the English Act.

, As to (d), it is usual to insert a clause in the Disburse-
ment warranty which ordinarily provides that "a breach
of this warranty shall not afford underwriters any defence
to a claim by owners, mortgagees or other parties who may
have accepted this policy without notice of such breach and -
are not parties or privy thereto."1 "

Clause 37

This deals with the warranty of neutrality. No detailed
comments are needed.

V p p _ Clause 33
, i is provides that there is no implied warranty of
nationality. .There- 32:, however, be an express warranty
of nationality, whic may be-

(_a}- positive, for example, when the ship is describ-
ed as of a particular nation;

(b) negative, for example, "Warranted no Ameri-
can war time built vessel"?
Clause 39
_ This deals with the warranty of "good safety", and no
detailed comments are needed. -
Clause 40

This deals with the warranty of seaworthinesa. The "General.
section deals separately with voyage policies and time
policies.

So far'as voyage policies are concerned, sub-section (1) Voyage
to (4) prescribe _an implied warranty. The warranty is P°11°"'-'5-
absolute, that is to say, irrespective of any fault of negli-
gence of the assured." - -

'For an explanation of the Disbursements Warranty, sec Dover. page
:52, bottom and succeeding pages. See also notes under section I3, English
Act,_---clause 7(7). .

'6)'. Dover, page 353.

'For the  of "'scaworthiness", sec Lord Chorlcy,_ Shipping
Law, 3rd edition, page my, and Carver, Carriage by Sea, 9th edn., p. So
at seq.

296 M of L--45



, 3
tor the
warranty.

"' senwm-t.hi--

.' C-II
admit: "'.

'"'I'i1:ne
._,selicies".

Suggestion
:.r_ega _

-risk in t e
-case of time
P".h°Y"'
.re1ected.

'of cargo would particularly

76

The warranty can be abrogated, or modiﬁed by agree-
ment, as is usually done when the clause "seaworthiness
admitted" is used. The effect of this is that the under-
writer promises to pay in spite of unseaworthiness. Owners
beneﬁt by such a clause, because
they have no hand in the management of the ship.'

In a time polic , there is no implied warranty of sea-
worthiness; but if e ship is sent out with the prtvity of the
assured in an unseaworthy state the insurer is not liable
for any loss attributable to the unseaworthiness. There is
no total discharge of the insurer. The reason why there is
no implied warranty is? that the ship may be at sea and
tlﬁe assured may not know about the seaworthiness of the-
5 1p.

1 .

It has been suggested that section 39(2) of the English
Act, (which provides that where a policy attaches While the
ship is in port, there is an implied warranty that the ship
is able to encounter the perils of that port) should be em-
bodied also in section 39(5). In other words, when a time
policy attaches while a ship is in port, the ship should
(according to the suggestion) be ﬁt to encounter the perils
of that port. After careful consideration, the suggestion
has not been accepted. A time policy 'is a policy for a parti-
cular period, and has no connection with a voyage as such
(unless it is a combined policy). 'Its- commencing-point is
not_ necessarily- linked up with the ship's starting from a
particular port. For this reason, section 39 (2)----port-
worthiness---wou1d not have much signiﬁcance for a time
policy. Secondly, in the few cases in which the commence-
ment of a time policy synchronises with the ship's being in
a particular port, the parties can provide by an express
warranty for the perils of the port.

In the United States of America, authorities differ as to
whether a warranty of seaworthiness is implied in a time
policy. But the weight of authority is to the effect that if
the vessel is in port at the time 'of the commencement of the
risk, there is an implied warranty.that.the vessel is sea-
worthy for the risk and will, before sailing, be made sea-

worthy for the voyage?
Clauses 41 to 43

No detailed comments are needed.'

'Sec Halsbury, 3rd edn. Vol. 22., p. 26, para. 37.
'Cf. Lord Charley, Shipping Law. 4111 edition,_ page 317.

'45 Corpus luris lsccundum, Insurance, page 5&3, para. 652, sub-purl

<1).

_ 'For a discussion of the various kinds of alterations into. voyage, see notes
under section 43. English Act,---clause 4.2; - - r



'E1

'7?

Clause 44

Th1's deals with the suhiect of alteration of the port of 
departure:-r :  m N-_ ' -

"It anti 5.; lcohitenient here(to."c1easiIy'  a1ter--":' "I  Various

ations in the voyage, dealt with in the Act. An alteration in kinds _of
. _ ._ _ , ultrntnons -

the -voyagemey ocour»b:y---

I Diﬁerent  : "I - . . . (1') change of the poilttv-
. . - - (sect1on43);,°r e_ .
(ii) change or the destination
before commencement of the
risk--(séction'4'4) ; or

Change of voyage ._ . . (iii) " change of voyage " Le.
change of the destination
after commencement of the
risk---(section-45) 5

Deviation . . . . . (iv) deviation from the voyage---.--
  ' A (section 46)_--that is to" say,
from the contemp-

lated course of the voyage 5

i Delay .1 . M '. .  '. (u) :3e)1ay in the voyag-e'--(section

. In (t) and (it); above, the policy never attaches.- In (iii)
above, the policy attaches but the insurer is discharged
when a breach occurs. In (in) above, the insurer is dis-
charged from the time oi deviation, unless the deviation is
excused under section 49. In (12) above, the insurer is dis-
charged from the "time when the delayhecomes unreason-
able, unless the delay' is excused under section 49.

As to delay in_'the commencement of the voyage, see an
earlier section.' .,

A clause in a -policy covering a change of voyage cannot
operate to protect a different voyage. Sections 43 and 44 of

_ the English Act deal with "diiferent voyage". The substitu-

tion of a new voyage prevents the risk from attaching and
"held covered" clause would be of no use.

Clause 45

This deals with change of destination before con:_unence- Genenl.
ment of the risk. The distinction between this section and
section 45 is, that while this section contemplates a decision
to alter the destination before the commencement of the
voyage, section 45 seems" to contemplate such change after
commencement of the voyage! .

l 'Section 4: of'the3Engli:h !.Lct,--Clause 41., w,-
useeﬁtlao ndteailﬁider nec'tion:'43,'English Act,--chute 44. i



Genelals I

When ex-
cused. .

78
 J  Clausesili .
This deals with "chan e of voyage". (As to the classifi-

cation of the various kin s of changes in voyages, see the
notes-"to an earlier section) .1

' 'a

It may be that in very exceptional. 'ciifcurnstances, a
change of voyage may be excused. For example, if a British
ship is bound for 'a port which becomes during the voyage
an enemyport, "the" continuance of the voyage would be

_. illegal and as change of voyage is justified.' In fact, any

Intention to
change _
destination.

-"Lawful

CICIJBB.

Change of
voyage '
and devia-
tion.

General-

Essentials
of deviation.

Deviation
distinguished

other course would be out of harmony with the warranty of
legality,' vide the word--"1awful manner" there.

up It would' appear that a mere intention to abandon the

a original destination and substitute a new one would suffice

to bring the section into. operation. Thus, if while loading
operations are going on it is decided to change the destina-
tion, the risk ceases to attach even though the loss occurs
while the loading is not completed.'

The words "lawful excuse" occur in section 46 but not

in this sectio .

 distinction between '_'change of voyagef' under this
géegtion and "deviation" under section 46. is explained else-
'er-'es

Clause 47

I__4fIll'1is,deals_withdev:iation. (As to classiﬁcatitin of various
kinds of voyage, see notes under an earlier section) .1

Deviation is _a departure from the contemplated course
of the voyage. Deviation, in order that it may discharge the
insurer from liability, should be without lawful excuse. As
to the excuses for deviation, see section 49 of the English
Act. _p'I'l1"e dleviationmust be from the "voyage contemplated
by_the p'oli'cy" as explained in section 46 (2). Further, there
must be a deviation in fact and not a mere intention.

In deviation, the ship does proceed to the agreed destina-

from change tion, whereas "change of voyage" implies complete abandon-

of voyage.

ment of the contemplated voyage. It must be noted that in
the former case, mere intention is immaterial, while in the
latter case it is material as already pointed out."

'Notes _uudcr section 43 of the English Act,--~CIause 44.
__  _Form'g.n  Iruurancc Co. v. Sanday (Samuel) and Co.
(1916) r "Ritz. 650'. ' ' * _ T
'Section 4; of the English Ac't§--Clause 4.2.

"TcisI¢Er v'.'C7r§§:'$i§ Hcﬁic, (1319) I Bli H.L. 87, cited in Dover, page
354, and Chalmers, page' 0!. - -
Iscc notes under scctio1_:iW4.6,-_English Act,---C1nusc 47.

'See notes under section 45 of the English Act,---Clause 45.



79
There is an Institute clause to the effect  he ship will 

l b.e.."=he1.d.cov.ere_d .... .. in case of de\ria;t:"t1t'r'or change of ""°

voyage" provided notice be given . . . . .. "and an additional
premium required be agreed"!

It would appear that so farvas time policies are concerned, Till]:
the provisions regarding deviation would not ordinarily Policies-
apply, since the. voyage, isnot speciﬁed in the policy. Usual-
ly. however, there are express provisions in the policy re-
garding "trading a limits", departure from which is not
allowed unless permitted by "held covered" clause.

Clause 4:8
This relates to change in the port of discharge. Genmh
A change in the port of discharge may arise from---- - Classiﬁcation
(i) omission to visit a.port of discharge; on  ﬁ:1§"I§::',

(ii) visiting an additional port of discharge not 0' di5°h3I8'-
mentioned in the policy; or

(iii) change in the order in which the ports of dis-
charge are to be visited.

As .to (1') above, it would seem that there is no deviation
in, such a case.' -- '

As to (it) above, it will amount to deviation undersec-
tions' 46 and 4'? of the English Act, because the voyage con»
templated by the policy did not envisage the additional
port. . ' '

As to (iii) above, the section provides that-----

{c:.} if several ports of discharge are speciﬁed by the
policy, the order designated by the policy must be
ollowed;

(b) where ports are. not named but are given with-

in a givenarea, the ship must go to them in their
"geographical" order.

Where ports A, B and C are to be touched and cargo for Over-car.
port B is not discharged at ort B, but is taken to port C and ﬁasc-
again brought back to port and then discharged, the policy
would be void from the time of sailing from the interme-
diate port. on the outward voyage (unless the Deviation
Clause protects it) .3 '

Qlause 49
Thisdeals with  invoyage. General.

It is only hnreasonable delay.' that brings the section into Um-momma
operation; further, the policy is not avoided ab initio but the delay-
insurer is d1'.s.Cha.1'ged.from liability as from the time the
delay becomes unreasonab1e._

'Cited in Dover, page 368.
'See Dover, plges 369, 37c.
'Dover. pace 370.



When delay
excused.

' General.

Sub-section

(1).

Departure
from the
English Act.

General.

Analysis of
the position.

30

M Where _sst;="§*' t'o._a port is delayedhecause of weather con-
ditions (for 'exaiﬁple', cyclonic storms) ,. the delay would not
be "unreasonable". See also, section 49 of the English Act for
other excuses for delay. V

. ' Clause 50 _
C This deals with excuses for -deviation and delay.

Clause (a)--excuses deviation etc. authorised by any
special terms in the policy. _

Clause (b)--deals with circumstances beyond the con-
trol of the master and the employer. This includes a vessel
being forced out of its course by heavy weather-.1

Clause (c) ----applies where delay is reasonably necessary
for complying with a warranty. An exampleof this would
be delay occasioned by action taken to make the ship sea-
worthy.'

Clause (d)--excuses delay for the safety of the ship
(whether the policy is on ship or on cargo) or for the

-safety of the subject-matter insured. The result is, that

where cargo A is insured, deviation for the safety of
cargo B would not be protected. Similarly, where the

ship is "insured, deviation for the safety of any cargo would

not ' be protected.

Clause (e)--deals with deviation etc. for saving human
life etc. - .

It would be noted that deviation for saving property is
not excused in the English Act.

For reasons already given this rule of the English Act has
beeyndeparted from, so as to cover deviation to save property
at sea." '

Clause 51
- This deals with the eﬁect of transhipment.

~ Transhipment may arise either by operation of a peril
insured against or by other causes. The section is conﬁned

'to the former. The latter is not covered unless the policy

otherwise provides. The rule embodied in the section is,
that if the circumstances are such as to justify the losses in
lending and re-shipping the goods or transhipping them, the
insurer continues to be liable, notwithstanding the landing
or transhipment. . T *

1LleZany v. 'Stoddarr (1776) I Term Rep. 22 cited in Dover page 372
and Chalmers, pp. 66367. ' ' '

'As to warranty of seaworthiness, see section 39 of the English Act
Clause 40.

'See the body of the Report, para. 1.



31

It has been stated' that in practice, in cargo policies, the
'policy provides for other transhipment also,' (1) without
additional premium, 11)' customary;--- or .01) with additional
premium if theltranshipment is not customary. Further,
"extended cover clause'? may cover all transhipments with-
out notice and .without additional premium.

" Clause (f) needs no comments.

Clause (g)__d'eals with deviation caused by barratry if
barratry is a peril insured against. The term "barratry" in-
cludes every wrongful act committed by the master or crew
to the prejudice of the owner of chartererﬁ'

This provides that when the cause excusing the deviation sul-,_5ect§on
has ceased to operate, the ship must resumeher course, etc. (2)
That is to say, it has to take the normal course of the desti-
nation from the point to which it has deviated.

The placing of this section in the Eng1ish,.Act is not very Departure
happy. Logically, it comes after deviation---(sections 46 and mm '51"

49) . Hence it has been placed here. gﬁfgihgfm
Clauses 52 and 53
This deals with the assignment of a marine policy. Genera]

Theisubject-matter of assignment of marine policy has Correspond-
been dealtwith to some extent in the Transfer of Property i138 P_1'0Vi-
Act, 1332.--"-Section 130, Exception, in that Act ﬁrst provides §'°§i "'Law
that the general provision regarding formalities of assign- [1 an '
ment of actionable claims does not apply to transfer of
marine policies. The next section, section 130A, then" pro-
ceeds to lay down certain special rules for assignment of
Inarine policies; Section 135A deals with assignment of
rights under marine policies. The following comparative
table will show the provisions in the English Act and the
corresponding provisions in the Transfer of _Property Act:-- -

(English) Marine (Indian) Transfer
Insurance Act. of Property Act.
Section 50 (I) - . . . Section 130A (1)
S=€ti0n S0 (2) . . ."' . Section 135A (I)
Scction 'SO (3) - - . - - - Section 130A (2)
'Section. 5: . - . ._ . . Section 13oA (3)'
..'....Section 13DA'(4) which "provides that the provi.

sions- of section 6(e) of the Transfer of Property Act do not

'Dover, page 400. - - . - -
'Of. the First Schedule to the English Act, rule II.



82

apply to assignment of marine policies. The result is, that
the general rule that a mere right to sue cannot be trans-
ferred, does not apply to marine policies.

By the combined effect of sections 15, 50 and 51 of the
ﬁtnglish Act, the position regarding the stage at which a
policy of marine insurance can be assigned (With reference
to the assignment of the interest) isas fo]1ows::---

(i) the mere assignment of the interest of the
owner does not transfer the policy--- (section 15) ;

(ii) the owner of the goods may, however, assign
the policy if there is no prohibition against assignment
in the policy~-- (section 50) ;

(iii) such assignment may be made---

(a) before or at the time of parting with the
subject-matter (section 51, main paragraph)
whether or not loss has occurred----[section 50(1)]
or

(b) after the loss has occurred (section 51, pro-
viso); ~

(c) but not in between his parting with the
subject-matter and the date of the loss--- (section 51
main paragraph).

The principle appears to be, that to make a valid assign-
ment, the assured must still be entitled to the insurance.
When he loses the subject-matter, that is, the insurable
interest, his title to insurance is also gone, and therefore
he cannot subsequently assign it. But it must be noted
that where the goods have been lost, what remains is mere-
ly the right oi.' i-ndemnity----which can always be assigned.
Thus, in an English case' goods insured under a marine
policy were lost and after the loss the policy was assigned.
It was held that the assignee could maintain an action
against the insurer. The reason for prohibiting assignment
without the subject-matteris that the person must be pre-
judiced by the loss 'before he can recover on the policy.
But, as Blackburn J. 'observed: "after the loss has happen-
ed .......... ..the risk ceases at once .......... ..the right to indem-
nity no longer depends on the right to property in the
subject-matter .......... ..but on the right of property in the
thing ........ .. . lost".

In a C.I.F. contract (cost, insurance and freight), it is
the seller's duty to effect insurance, because the price in-
cludes the items of cost, insurance, and freight. In a F.O.B.
(free on board.) contract, it is for the buyer to insure the
goods.' Section 39 of the Indian Sale of Goods Act [corres-
ponding to section 33 of the (English) Sale of Goods Act]
provides that unless otherwiselagreed, where goods are sent

.--_.._.u

=r.xayd'v. Fxaumg (r872) LE. 7 on 299, 302-41 L.]'. (1.3. 9;.



83

n

by a seller to a bu er by a route involving sea transit in
circumstances in w ieh it is usual to insure, the seller
"should give notice to the buyer to enable him to insure,
failing which the goods are deemed to be at the seller's risk
during the transit.

The assignee can sue the insurer in his own name, i;rres- Eﬂfect of
pective ofthe fact that he was not interested in the subject- "'5'3"""""'
matter when the damage occurred.

The insurer is entitled to make any defence "arising out Defences
of the contract" which he would have had against the per-- ﬁV8113b1¢-
son by whom the policy was effected. Thus, an insurer may
avoid the policy on the ground of non--disclos-are of a fact
by the assignor even though the assignee is innocent. But
the defence must arise out of the "contract"~--out of the
very contract on which the assignee sues. As has been
pointed out,' if an insurer is liable under two policies, A
and B, to the same assured, and he pays on policy A under
a mistake of fact, he can claim a refund. If the assured
sues him under policy B, he can set off (against the claim
for the policy B) the claim for refund under polic_v"A. But
if policy B has been assigned in the meantime, the refund
under policy A cannot thus be set off. The reason is, that
the claim for refund does not arise out of the policy sued
upon. '

Sections 130A and 135A(1) of the Transfer of Property Deletion of
Act, 1882, should be deleted, since their substance is being 5°';'A"':1d
incorporated in the clause under discussion. I3

It appears that the need for passing the Transfer of Trmsh' '5'
Property (Amendment) Act, 1944, which inserted the" pro~PJ{','I1,°:;§:
-visions regarding marine policies arose in this way. Section mam) Act,
135 of the Transfe of Property Act, as it stood then, ran 1944-
as follows:-- ' ' '- Hi9T°'Y °f-

"135. Every assignee, by endorsement or other writ-
ing, of a policy of marine insurance or of a policy of
insurance against ﬁre, in whom the pro erty in the
subject insured, shall be absolutely vesteld at the date
of the assignment, shall have transferred and vested
in him all rights of suit as it the contract contained in
the policy had been made with himself." '

The words "property... ....... ..shall be absolutely vested"
implied that at the time of the assignment the assignee
must have become the owner of the goods. It was realised,
however, that while_ this 1- uirement would be all right for
ﬁre insurance, it was diﬁltfL?lt'to comply with it'in marine
insurance. Frequently, it is diﬁicult to determine whether
at 'a given time the property in the goods which are the
subject-matter of a contract of_ sale has passed. Loss is very

'Lord Choi-Icy'. Shipping' Law. 3rd edition, page 301. '



84

often unknown either to the shipper or to the consignee.
and it is: possible that after the policy is assigned it is dis-
covered that "goods had been lost and the property had not
yet passed to the consignee. Further, often the assignee
would be a personwho has only a limited interest in. the
subject: insured (e.g_ a pledges). Section 50 of the (Eng-
lish) Marine Insurance Act, which is much wider should,
it was felt, be adopted. To make the matter complete, sec-
tion 51 of the English Act was also adopted. -(Section 15

' of the English Act, however, was regarded as standingaon a

different footing and as not proper for inclusion in the
framework of the Transfer of Property Act).

It had also been pointed out by commercial bodies that
section 79 of the (English) Marine Insurance Act did not ( at
that time) ﬁnd a place in the Transfer of Property Act, with
the result that grave doubts were felt as to whether the
doctrine of subrogation applied in India and whether an
insurer could, availing of this doctrine, sue in his own name
without making the assured a party. It was, therefore, felt
that section 79 of the Marine Insurance Act should also ﬁnd
a place in the Transfer of Propert Act. As a consequen-

tial change, it was decided to exc ude section 6(a) of the

Transfer of Property Act from its application to any right
to sue under the proposed provisions. An amendment Bill
on these lines was therefore, introduced at the instance of
commercial bodies. The Statement of Objects and Reasons

. appended to that Bill is given below:--i

"The rules and principlesggoverning a marine insurance
policy being materially different from those governing a ﬁre
insurance policy, it is very unsatisfactory to accord the
same treatment in the matter of assignment-to both cate-

, gories of policies. To take but one instance, a ﬁre insur-

ance PDliCy is not assignable after loss, but _the nature of
a marine insurance contract is such as to require that
marine insurance policies should he assignable even after
loss. In the United Kingdom, assignability of marine in-
surance policies after loss is placed beyond doubt by section
50 of the Marine Insurance Act. But in the absence of a
similar provision here, it is doubtful .if Courts in British
India ,would hold thatthey are so assignable. It is propos-
ed," therefore, to amendathe Transfer of Pro-pe1ty.Act by-

"(Dlomitting from section 135 thereof the reference to
marine insurance policy; and
, (ii) inserting -a new section reproducing the provisions
of section 50 of the Marine Insurance Act". 1

"Provincial Governments, High Courts, ._and commercial
bodies in the Provinces have been consulted and they are
almost unanimously in favour of legislation on these lines.
As assignability of marine insurance policies is dealt with
in the United Kingdom in sections 50 and 51 of the Marine



as
suggested by the Calcutta High
the sakeof completeness, to Je-

Insurance Act, it is, as.
Court, ,also..ne_cess,a,ry,_ or
produce the provisions of
clude assignments where
at in-the property -insured.

_ ' "The need for the 'enactment of provisions corresponding
to section 79 of the Marine Insurance Act and for amending
section 6(e)- of the Transfer of_Property Act has, also been
represented to Govemment; consideration of the opi-'

' ' High
'.now

"It is recognised that, while legislation on the above lines
would clarify the law. of assignment and subrogation, of
marine insurance policies, the whole law of marine insur-
ance will not be put on a satisfactory basis, unless compre-
hensive legislation -on the lines of the Marine Insurance Act,
1906 isenactedvfor British India. Such a project, however,
must necessarily await the termination of the war". .

Clause 54
See noteson earlier clauses.'

Clause 55

h assignment of the "interest", and
assignment of the property insured
an assignment of the policy thereon.
As to assignment of the policy, see sections 50 and 51 of the
English Act. The effect of the section is that in the absence
of an agreement to the country, where the interest of the
assured is transferred to another person, 'the protection

given bythe policy. would end on the determination of the
interest of the assured. .

This section deals Wit
provides that the mere
does not carry with it

have the

eneﬁt of the policy on behalf of
those who are beneﬁcially

entitled to the property insured."

, , Clause 56
Needs no comments.

Clause 57

This deals with the topic of "included" and "excluded"

losses. .

The section enacts
deﬁning the liability of th

.'See notes to clauses 52 and 53.
'Dover, page 316. 'I

two propositions---one positive,
e insurer, and the other negative,

1;', ,

General.

" Included "
and " Ex-
cluded "
losses.

Analysis of
the section.



36

excluding the liability of the insurer. Its provisions are
"subject to" other provisions. Further, the positive propo-
sition about liability operates "unless the 'policy otherwise
provides".

Sub-section (1) states the general proposition, while sub-
section (2) deals particularly with certain kinds of losses.
In sub-section'(2), clause (a) again contains both a negative
and a positive proposition, while clauses (b) and (c) contain
-negative propositions only, that is to say, "non-liability".

:P1-inciple of _ The main principle behind the section is, that if the loss

"W5 9°€Ti°n- is caused by a peril insured against and the peril is the
proximate cause of the loss, the insurer is liable, but not
otherwise. As to "proximate cause", it has been said that
"the terminology of causation in English law is by no means
ideal. It would be better for a little plain English.

"Direct cause" would be better expression than cause
prom-ima. Logically, the antithesis of proximate cause is

111

not "real cause", but "remote cause .

The object behind the rule is to draw a line of demarca-
tion at some stage. The rule is based on the maxim:
cause proxima non remote. spectator (regard the proximate
and not the remote cause).

The connection between a cause and the resulting loss

Analysis of
causes. can be analysed as fo11ows:---
CAUSE
Single cause. Multiple causes
(I)
Concurrent Consecutive,
(2.) i._e., occurring
in sequence.
Continuous. Interrupted by
_ :'.e., not " new intervening
interru ted. cause "_
(3 (4)

call-

'Buhr Gray {it Co. Ltd. v. London Amerance Ca oration, (1918)
A.C. 101, I14-----n7 L.T. 609 per, Lord Iusticc Sumner. he iiidgxrient of
'Lord Sumner makes some candid observations on "p_roxi:rintc_c_Iu|c".



ti':
Situation No. (1) above----single cause--does not call for

the application of the section. If the loss is caused by a
peril insured against, the insurer is liable.

Situation at (2) above---a number of causes acting toge---
ther---sornetimes calls for the application of the section.

Situations at (3) and (4) are the main situatio-ns where'
the doctrine of proximate cause has always got to be

applied.

It is not always possible to p-ut a cause under situation
No.. (2), (3) or (4) exclusively. As has been observed by
Lord Shaw,' "Causes are spoken of as if they were as dis-
tinct from one another as beads in a row or links in a cl_1a1_n
but--if this metaphysical topic has to be referred to------1t 15
not wholly so ........... .. Causation is not a chain but a net.
At each po-int inﬂuences, forces, events----precedent and
simultaneous----meet; and the radiation from each point ex-
tends indeﬁnitely. At the point where these various influ-
ences meet it is for the judgment as upon a matter of fact
to declare which of the causes thus joined at the point of
effect was the proximate and which was the remote cause".

"To treat proximate cause as if it was the cause which  0f
is proximate in time is ......... ..out of the question. The c§:';'e'}f"""'
cause which is truly proximate is that which is proximate '
in eﬁiciency. The efficiency may have been preserved
although other causes meantime have sprung up which have
not yet destroyed it or truly impaired -it, and it may culmi-
nate in a result of which it still remains the real eiﬁcient
cause to which the event can be ascribed."

The fact in that case were that a ship insured against
perils of the sea was torpedoed by enemy submarine 25
miles from Havre. (There was a warranty against all con-
sequences of hostilities). The torpedo struck her well for-
ward, and she began to settle down by the head but with
the aid of tugs she reached Havre and was taken alongside
a quay in the outer-harbour. A gale sprung up: after 2
days her bulkhead gave way and she sank and became a
total loss. It was held, that the torpedoing was the proxi-
mate cause of the loss, and the grounding was not a 'l'10'U?.tS
actus interoeniens. The underwriters were therefore not
liable because the loss was a consequence of hostilities.

The doctrine of proximate cause merely gives eﬁ'ect to Doctrine
intention of the parties. "Cause and effect are the same based on
for underwriters as for other people. Proximate cause is1'I1"='_1ti°n 0'
not a device to avoid the trouble of discovering the real Pa"'°"'

'Leyland Slu"ping Ca. V. Norwich Union Fire Imurance Society (1918)
A.C. 350, 369, per Lord Shaw of Dunfermlane.



cause or the common sense. Indemnity involves it apart
from -decisions."-1 4
Clause 58

General. This deals with partial and total losses.

'0; Th 'follow' g 1 'ii t' f1 '11 1' th
Annlygu Schem: of theiictﬁ assi ca ion 0 osses W1 exp am e

LOSSES
Total [Ss. 56(2), 56(3) Partial s. 56(1)
and 68.] (1') Particular average loss.---s. 64 (I).

(if) General average loss ---s. 66.
-------------- (Excludes "particular charges--s. 64(2),

I I unless covered by "sue and labour "--
A I. 78).

Actual Constructive

(Se. 57: 53 (Ss. «So-61)

and-;2).

iliglfportanoe I The classiﬁcation of losses into total and partial is
dmgﬁiom unportant _£or_this reason, that only a loss which has been

insured can be recovered; and each policy provides how
far a total loss will be recoverable and how far a partial

' loss will be recoverable. Further, the amount to be re-
covered= would dilfer in each case; contrast section 68 on the
one hand with sections 69 to 71 on the other.

.N1C3nil:l,.,g of Total loss 'as such has not been deﬁned in the Act. Its
"t°"='1 1°55 species, namely actual loss and constructive 105:; have, how-

'§'_'x?';'ll.."1'(',::_' ever, been explained.

So far as partial loss is concerned, section 56(1) provides
that any loss other than a total loss is a partial loss. In
addition to this general provision, section 56(4), section
56(5), etc. deal with partial losses in some aspects thereof.
Where a partial loss is followed by a total. loss before the
partial loss is made good, the assured can recover only in
respect of total loss.'

Clause 59
G¢n¢,a1_ This deals with actual total loss.
Analysis. Actual total loss arises in the following cases-

(t) where the subject-matter is destroyed; or

(ii) where the subject-matter is damaged so as to
cease to be of the kind insured; or

'Becker Oroy- «E: Co. v. London Assurance Corporation (1 918) A.C
lax, 113,'pcr Lord Sumner. '
'See also notes under section 64, English Act,---Clause 65.

'Section 71 (3) of the English Act,---Claus: 78 (2).



89

(iii) where the assured is irretﬁevably deprived oi
the subject-matter. ' . a

An example of the first would be--physical destruction
of_ the ship or cargo.

An example of the second would be a consignment of
dates which remains sunk for a number of days and is found
to be contaminated by sewage} The dates in this case had
a certain value for distilling purposes, but no longer answer-
ed the description of dates. (This was a case of insurance
of freight; the charterer having chartered the ship for a
lump sum, issued bills of lading to shippers. As a result
of the damage, he lost his freight on the cargo in question,
and was therefore entitled to recover the proﬁt which he
would have made from the transaction.)

As an example of the third may be cited the case where
.a ship deserted in a sinking condition is towed into port by
salvors and sold under an order of the Admiralty Court
for less than the salvage' charges."

The distinction between the first two and the third is
that in the third the subject-matter may be in existence,
but the assured does not get it.

' Clause 60

This deals with the case of. a missing ship. What the G¢nefal_
sectioncernbodies isga presumption that where the ship is
missing and after reasonable-time?' no news is received, an
actual total loss may be presumed.

The section does not raise any presumption as to- the cause ,,f1,,,,.
cause of the total loss. This depends on the balance of pro-
babilities. The question may become important, because
it is only if the ship is lost by a peril insured against that
the ship-owner can recover from the insurer.

As has been pointed out,' the question how the loss was " Fret of
caused becomes important in war time because of the F.C. ;':5:1"r':'..""d
and S. clause (free of capture and seizure), usually inserted '
in the policy to exclude risk from "capture, seizure, arrest,
"restraint or detainment . . . . ..consequences of hostilities or
warlike operations" etc. When the ship is lost, the question
naturally arises whether the ship was not lost by a war risk
(in war-time, war risks are usually insured by the Govern-
ment). The decision in such case depends on collateral
circumstances, for example, the weather, the amount of
enemy activity, the experience of other vessels, etc.

1Asfm- 8: Company v. Bluruicll, (1895) 2 QB. :98, approved (2896)
I Q.B. 123--73 L.T.»64S C.A.

'Comm: v. West, (1887) :3 App. Gas. 160, P.C. _
'As to "reasonable time", see 5. 88 of the English Act,---Cl.ause 89.
'Lord Charley, Shipping Law, 3rd edition, page 327.



90
CUIWOM The wide form of the old F.C. 82 '3. clausecreated un-
"' expected consequences. ,Casua1ties such as_ stranding were
held to be due to war risks in a case before the House of
Lords.' There, the ship was engaged in warlike opera-
tions at the time of loss, but the loss was actually due to
stranding." The House of Lords held that the stranding was
a consequence of the operations on which the ship was
engaged, and therefore the ship Was lost by a war peril,
stressing the words "_consequences of warlike operations".
The new F.C. 8: "S. clause provides that the 'Warranty (i.e.
the exclusion from risk of warlike operations) does not ex-
clude "collision, contact with any ﬁxed or ﬂoating object,
stranding, heavy weather or fireunless . . . . . .caused directly

by a hostile act . . . . . . .."

Clause 61

General. This deﬁnes constructive total loss. The concept of con-
structive total loss is peculiar to marine insurance. For a
discussion of its origin, see the undermentioned case.'

Analysis.' Constructive total loss arises where the subject-matter
is---

(i) reasonably abandoned on account of its actual
total loss appearing to be unavoidable; or

(it) where the abandonment is due to the fact that
it could not be preserved from actual total loss without
an expenditure which would exceed its value when the
expenditure has been incurred.

._1.,-gm cm, As regards the first class of cases, it must be noted that

ofcaacs. recovery of the goods must be "unlikely" and not merely
"uncertain"?-*,under section 60 (2) (i).

--un.,,mi,,v- The distinction between "uncertain" and "unlikely" has
a_nd "un- been clearly explained in a judgment of Lord Wright." He
1|k°1Y"- observes:

"There is a real difference in logic between saying
that a future happening is uncertain and saying that it
is unlikely. In the former, the balance is even. No one
can say oneway or the other. In the latter, there is
some balance against the event. It is true that there

'Yorkshire Dale S. S. Co. v. Minister of War Transport (T he Coxwold)
I942 A.C. 69r----(:942) 2 All. E.R. 6.

'Moore v. Evans, (1915) A.C. 185, I94 H.L.

'See the illustration in Lord Choi-ley's Shipping Law, 3rd edition, page

33:. Sec also Polurrian S. 3. Co. v. Young, (1915) 1 K.B. 992, GA.

'The word. "unlikely " was substituted at the suggestion of_the Lord
Chancellor': Comrnittcc. 'Sc: Chalmers, page 83,' foot-note 7.

'Rich-ward v. Farestal Lana' Co., (1941) 3 A.E.R. 62, SI.



91

is nothing in the Act to show what degree of unlil-reli-
hood is required. If, on the test of uncertainty, the
scales are at level, any degree of unlikelihood would
seem to shift the balance, however slightly. It is not
Eequired that the scale should spring up and kick the
earn."

The word "unlikely" used in the Act marks a departure
from the common law. Before the Act, the ship-owner was
entitled to recover as for a total loss if it was uncertain that
he could recover the goods (or ship, as the case may be).
This is not so after the Act. The point came into promi-
nence in a case before the Court of Appeal.' There, a ship
carrying a cargo of coal and insured against the conse-
quences oi war-like operations was captured by a bellige-
rent, deprived of her cargo and detained for about six
weeks, after which the ship was released. The owners of
the steamship claimed from the insurer for a constructive
total loss, on the ground that they had given notice of aban-
donment and that it was at that time "uncertain" that the
ship would be recovered. The insurers admitted that the
'ship was detained, but denied that she was captured, and
contended that at no material time was it unlikely that the
plaintiff could recover. It was held by the Court of Appeal
that the Marine Insurance Act had substituted the test of
unlikelihood for the test of uncertainty, and that the assur-
ed had failed to show that there was more likelihood that
they would not recover than that they would recover. The
claim was, accordingly, dismissed.

As was pointed out by Lord Porter? s. 60 is intended to Rg13;1on,1..'p
be a complete deﬁnition of total loss (because of the words of s. 60(1)
"as hereinafter deﬁned" appearing in s. 56); but it does not and 5450(2)-
follow that the ﬁrst sub-section lays down the general rule
and the second lays down merely the instances already
covered by sub-section (1). Sub-section (2) which gives
particular instances does not merely illustrate; it adds to
the terms of the deﬁnition given as a general rule in sub-
section (1).

As to the relationship between section 60(1) and section Section 60(2)
60(2), it has been pointed out that sub-section (2) gives an is additional-
objective criterion which is more precise than, and subs1:an-
tially diﬁerent from, the criterion in section 60(1); and
therefore sub-section (2), as compared with sub-section (1)
is "additional and not merely illustrative".3

As to the second class of cases, the well-known case of Second am
Irving V. Manning' illustrates its application. In such cases, of casts.

'Potlurrian Steanuhip Co., Ltd. v. Young, (1915) 1 KB. 922 C.A.

'Robertson v. Nontikos Lat, (1939) 2 All. E.R. 723, 734, H.L.

'Richard V. Forestal Land C9,, (1941) 3 A.E.F. 62, 79.

'(I847) I H.L.C. 287, discussed under section 27 of the English Act,-
Clause 29.

296 M of L-----'?



Valuation
Clause.

92

the cost of recovery or reconditioning of the property is
prohibitive, in the sense that the expenditure on the ship
would exceed the post-repair value of the ship. For
example, if a ship is damaged and the repairs are estimated
to cost £ 10,000 and after repair the value of the ship would
be £9,000 while the actual value of the ship when insured
is, say, £8,000, there is a constructive total loss}

The repaired value is usually estimated by a ship's
surveyor in the case of ships. Sometimes however, a
Valuation Clause? is inserted as fol1ows:--

"In ascertaining whether the vessel is a constructive
total loss, the insured value in the policies on hull and
machinery shall be taken as the repaired value . . . . .."

The signiﬁcance of this clause lies in this, that by a
ﬁction agreed to by the parties, the insured value is always
taken as the repaired value. To put it in other form, the
assured will never be able to claim a constructive total
loss (where such a clause is inserted) except where the cost
of the repair exceeds the insured value. The clause comes
in handy where the vessel is insured on a higher value than
its actual value. To take a hypothetical case, if a ship is
insured on £10,000 and the damage caused will cost, say,

£ 7,000 to repair and after repair its value (actual) will be
£ 6,000 then-

(ct) if the Valuation Clause is not there, then the ship
would be a total loss. The insurer would be liable to pay
the full amount of the policy;

(1)) if the Valuation Clause is there, then, by the ﬁction
agreed to by the parties, its value on repair will be taken
as £10,000 (insured value) and not £6,000 (actual post-
repair value).

(In actual practice, when this clause is there, settlement
is made by compromise, so that the ship-own-er may not
be compelled to spend more in repairs than the ship would
be actually worth to him when repaired. The reason is,
that after all, the Valuation Clause provides a legal ﬁction
which may not be in conformity with realities in some
cases)?-4

'The value ﬁxed by the policy is not conclusive for determining whether
there is a constructive total loss ; see section 27 (4) English Act,--Cl-ausc 29
(4)-

'This is not the same thing as "Dual Valuation C1ause"--discus:ed
under clause 24.

'Such compromises would fall under " Comprornised total loss ".

'Cf. Dover, page 401.



93.

How the absence of a Valuation Clause may lead to an Anomaly in

anomaly can be illustrated by the following example:-- g}°v';t1"::fi';';
(Valuation Clause absent in both cases) CI""5°'
Case A Case B
Insured Value £ 5,000 £ 5,000
Cost of repair 1-'. 4,700 £4,590
Value after repair £4,600 £4,600

In the Case A mentioned above, the insurer will be liable
to pay the full amount of £5,000, (because there will be a
total loss) while in the Case B mentioned above there will
be no total loss as the cost of repair is less than the value
after repair and the insurer will pay only the actual cost of
the repair. Thus, a slight difference in the amount of the
cost of repair affects considerably the insurer's liability--
a position which is certainly anomalous. (If the Valuation
Clause were there, neither of the cases would be a total loss
and in both cases the insurer will pay only the actual cost
of repairs.)

Sometimes, to avoid disputes, the insurer may C0mpI'0- Af1'a11E°d,°f
mise the total loss. This will be a "compromised total loss". f§$f{§:;'5°d
Sometimes the parties may agree that a total loss has occur- '
red. This would be an "arranged total loss". The impor-
tance of these two concepts -arises in re-insurance, where '
the original insurer, having paid a compromised total loss
or arranged total loss, claims the amount which he has paid
from the re-insurer. Often, re-insurance against total loss
of ship is effected against "constructive andfor compromised
and/or arranged total loss only", to make the matter clear.

An explanation of the words "compromised" and "arrang-
ed" has been given by Lawrence L.J.1 as follows:------

"Compromised assumes that a mutual concession
has been made by both parties and that each party has
got something less than he claimed".

As to "arranged", His Lordship said:4---

"The Word arranged to my mind is a wider word
altogether than compromised. In certain cases, and in
my judgment in this case, it is equivalent to agreed".

In the United States, there is a constructive total loss if AII'1<=1'i¢ﬂn
the damage to a ship or cargo exceeds 50% of the value? "'1"
But even in the U.S.A. the rule is subject to any express
agreement to the contrary. The English rule is well estab-
lished, and has been adopted; parties can, where they so
choose, adopt a different rule.

'Gurney v. Grimmer, (I932) 38 Comm. Cases 7 cited in Dover, page
472. See also Lord Charley, Shipping Law, page 296.

'45 Corpus Iuris Secundum, Insurance, page H50, para. 956, right-
hand column. .



" Future
SE1

94
Section 60(2) (ii), second paragraph, which provides that

 s|I account is to be taken (in estimating the cost of repairs) of

Opera
and " Fu-

ture General

Average
Contribu-
tions ".

General.

Right to
treat total
loss as
partial.

Departure
from_ the

E11311
Act--Event

subsequent
to election.

the expenses of future salvage operations and future
general average contributions to which the ship would be
liable if repaired, is to be applied from the date of the
casualty. The word "future" would include all post~casualty
salvage operations or general average contributions.
(Contributions or operations_ prior to the casualty are not
relevant for the purpose of the section).

Clause 62
This deals with the effect of constructive total loss

Option to treat the loss as partial has been given to the
assured. The question will naturally arise, how, treating
the loss as a partial one would beneﬁt the assured. The
answer is this-

{i) Even a partial loss can be claimed upto 100 per
cent of- the insured value.' The amount clairnable
under a total loss cannot, obviously, also exceed 100 per
cent of the insured value. Thus, the assured is not in a
worse position in all cases by treating it as a partial
loss only.

(ii) As a matter of fact, in a partial loss, the in-
surer may, in addition, be liable for "sue and labour" or
"salvage charges". In the case of total loss, however,
the doctrine of "abandonment" transfers: to the insurer
the rights of the assured in what remained of the
subject-matter?

(iii) Further, a partial loss does not terminate the
policy as such, and, therefore, if the policy is a time
policy, the assured continues to enjoy the beneﬁt of the
policy after the partial loss, "until the expiry of the
Speciﬁed period.

(to) Lastly, where the subject-matter is greatly
under-insured, claiming for constructive total loss
would not, obviously, beneﬁt the assured, because all
that he would get is the amount insured (which would
be lower than the value of the subject-matter).

Two questions have arisen in connection with abandon-
ment. The ﬁrst is, whether, after the assured has elected
to treat a loss as a total loss, can the insurer by his act affect
prejudicially the right of the assured? The second is, whe-
ther after the assured exercises his election, can events
happening subsequently affect his rights so as to enable
the insurer to insist on the assured taking back the ship
and claiming only for a partial loss?

t

'On the principle of indemnity.

'See sections 65 and 78, respectively of the English Act,--C1auses 66
and 79.

'See section 63 of the English Act,--Clausc 64.



95

As regards the ﬁrst question, the law in England is well--
settled that the insurer cannot require the assured to take
possession of the ship merely on the ground that the suit
has not yet been ﬁled and the ship has been salved in the
meantime. See in this connection the following case' and
the discussion in the text books.'

As regards the second question, the rule in England.
would appear to be that the circumstances as they existed
on the date of the action have to be looked at. On this
view, a total loss is said to be "adeemed" if the loss did not
continue to be total at the commencement of the action.
Thus, if a ship is captured and due notice of abandonment
given, still if the property is re-captured the assured can
recover only for a partial loss See the decision cited below"
and the discussion in the text-book.' This rule is peculiar to
England and is not recognised in Scotland, United States,
or the Continental systems.

It is considered that such subsequent events should not
aﬁect the right of the assured. The validity of the election
made by the assured should be judged with reference to the
state of aﬁairs existing on the date of election; the doctrine
of "ademption" should not be adopted and the View recog-
nised in Scotland, United States, and the Continents should
be followed here also. Necessary provision has been made.

Thus, the clause under discussion---- aoourtscd
a pc .
(i) embodies the English rule on the ﬁrst point and

(ii) departs from the English law, on the second
point.' .

[It will be of some interest to note that an attempt was
made to codify the English rule at the time when the Marine
Insurance Act was on the anvil. The following sub-clause
was there in the original Bill:

"Where the assured has given a notice of abandonment
which has not been accepted, the validity of the abandon-
ment must be determined with reference to the state of
affairs at the time of action brought"..

'Bias':-more Sailing Ship Ca. V. Macredie (1898) 191.0 593: 607.

-- 'I-Ialsbury, 3rd Edn. Vol. 22, page :56, para. 301. and Arnould, Vol. 2,
.1954 Edn. Art. 1126.

'Ba1'nbrx'dge v. Ntﬂson, (I808) 10 East 329.

'I-Ialsbury, 3.1-d Edn. Vol. 22, page 159, paragraph 308 ; and fimoultl
'Vol. 2, pages I0OO--IOO!, Arts. 1096 et seq ; and Kestc, p. 93: dnscussmi
"i|.Il'ldC1' " Waiver Clause ".

'See also the body of the Report paras. 8 and 9.



General.
Object.

Abandonment
and subro~

gation.

" Is entitl-
cd.l!

96

_The clause was, however, struck out in consequence of
objections taken to it by Scottish Members.'

. It will also be interesting to note that some controversy
did prevail as to whether the Act has altered the English
Common Law rule; but the decision- of the Court of Appeal"
laid down that in deciding upon the validity of claims
of this nature the matter must he considered "as they stood
on the date of the commencement of the action".

This View was approved by Lord Wright in--Rickward
V. Forestal etc. (30.3 observing that "The old rule is, I think,
still the law".

Clause 63 p
This deals with notice of abandonment.

The object behind the provisions as to giving notice of
abandonment immediately is "to preclude the assured from
waiting on developments to decide in what form to present
his c1aim".'= As has been observed? the assured "is not
allowed to await events to see how things turn out or to
decide what may best suit his interests".

_ -Clause 64'
This deals with the eﬁect of abandonment.

On abandonment, the interest of the assured in whatever
remains of the subject--mat-ter is transferred to the insurer,
including all proprietary rights incidental thereto. Further,
he is entitled to anyireight in the course of being earned
(less certain expenses). Lastly, he is entitled to a reason-
able remuneration for the carriage of the goods subsequent
to the. casualty causing the loss.

The distinction between abandonment and subrogation
can be understood by a reference to the provisions of the
section relating to subrogation."

Where there is valid abandonment, then under the-
English Act, the insurer "is entitled" to take over the inte-
rest of the assured. He is, however, not bound to do so.
The question has. arisen in England whether the ship 'or
other subject--matter insured becomes resmullius on aban-
donment if the insurer does not take over the property.'*' It

'See Arnould, Vol. 2, page 1001, Art. I0973. and Chalmers 5th edn.
P33" 94-95- ' -

'Polurrian Steamship Co. Ltd. v. Yozmg, (1915) I I-{.13. 922.

3(:942) A.C. 5o, 85. -

'Dover, page 411:. *

"Richards v. Forestal etc. Cm, (1942) A.C. 5o, 34, per Lord Wright. "

'See section 79 of the English Act_,--Clause So and notes thereto.

'See Chalmers, p. 97.



97

is considered that the insurer should have an option to take
over; he should not be placed 'under a legal obligation to
do so. Hence no departure from the English Act is neces-
sary. The_ change proposed will make the position clear.

[ It appears that in the United States of America,' if the
underwriter after the abandonment takes possession of the
vessel and repairs her and returns her to the insured. it
constitutes an acceptance of abandonment; but it has also
been held that the underwriter may, without accepting an
abandonment. take and repair a vessel and return her to the
insured if the expenses of the repair are not suﬂicient to
constitute a constructive total loss. But if the expenses
exceed such amount, the insured cannot be required to re-
take the property. If the insured does not accept the return
of the vessel and thereafter ﬁnds the repairs insufficient, he
can recover the cost of additional repairs. The insured may
impose reasonable conditions to be complied with before he
can be required to accept the vessel.

It has been held in the U S.A.2 that abandonment when passing of
made relates back to the time of the loss and the under- title.
writers become vested as from that date.]

Clause 65
This deals with particular average loss. General.
A particular average loss must be---- ' Analysis.

(i) a partial loss,
(it) caused' by peril insured against, and
(iii) not a general average loss?

The distinction between a particular average and a gene-
ral average is that-----

(cz) general average is voluntary, while particular
average is accidental;

(b) general average is undertaken to save property
imperilled in a common adventure. Particular average
is a loss pure and simple.

Damage by sea water when not amounting to total loss,
or damage by ﬁre or collision, are examples of particular
averages.

Charges incurred by the assured for the safety or pre- pangwm
servation of the subject-matter insured are called particular charges.
charges and are not included in particular average. This
is provided by subsection (2). Examples of particular

145 Corpus Iuria Secundum, Insurance, page II5, para. 965, 1Cft"k;;i
column.

'45 Corpus juris Secondurn, Insurance, page 1:6, para. 965, left-hand
column,--"Relat1on back."

'As to general average loss, see section 66 of the English Act,---Cl:L1.1s<:
47- -



98

charges would be as stated by Dover} the cost of picking
sound cotton from damaged cotton, the cost of "skimming"
cocoa, and other re-conditioning charges.' These are parti-
culars in the sense that they are applicable to a particular
interest.

Classiﬁcation Particular average may be classiﬁed as-

(a.) damage to ship, for example, by forcible
impact; '

(1)) loss of freight, for example, by reason of partial
loss of cargo by particular average; and

(c) damage to cargo.

Particular The following chart may be of some help in under-
averasc and standing the relationship between particular average and

allied - - .
ocpm °°" allied concepts.---
Partial loss by
peril insured against
S. 56 (1)
Particular Gencral

avg}-agc EVCIEBC

S_ 54 S. 66

[Docs not.
include
par
charges]
partiazlar marge:
sug and Other particular
labour chargcs_, _ mg'. ,
s_ 73 reconditioning
charges at
destination.

1Dovcr, page 417-

-58 for 0:11;; provisions as to particular charges, see section 65 (2), 76
and Sch. I, rule 14 of the English Act, " Sue and 1abou.r_" Ch31'E¢=H1!'¢ 6331119165
of " pm-[icular charges ". See section 78 of the English Act.--Clause 79.



99'
Clause 66

This deals with salvage charges. General.

Even apart from marine insurance, salvage is a concept 5'1"'?-
of importance in maritime law. As provided by sectionﬁ of
the (English) Maritime Conventions Act} 1911 (1 and. 2
Geo. 5, c. 57) , the master of a vessel shall, so far as he can do
so without serious danger to his own vessel etc. render
assistance to every person, even if such a person be a sub-
ject of a foreign State at war with His Majesty, who is found
at sea in danger of being lost and if he fails to do so, he shall
be guilty of misdemeanour. When such assistance is given,
the right to reward for the rescue of the maritime property"
has been recognised since the time of Rome. Colliding ves-
sels are also bound to stand by each other under section 422
of the (English) Merchant Shipping Act, 1894. Further,
ships receiving a wireless distress call are bound to render
assistance under section 22 of the (English) Merchant Ship-
ping (Safety Conventions) Act, 1949. For corresponding
provisions in India, see sections 402 and 348 of the Merchant
Shipping Act, 1958 (44 of 1958) and also section 355 of that
Act regarding signals of distress.

The signiﬁcance of the section lies in providing that Signiﬁcance

salvage charges incurred in preventing a loss by perils "f t?"
insured against will be recovered as a loss. This is, of °°m°n'
course, subject t-o any contrary provisions in the policy.
The section makes an express reference to "Maritime Law",
meaning thereby the Common Law rules relating to
salvage, now partly embodied in the statutory provisions
quoted above?' As the measure of liability for salvage
charges, see a separate provision.'

Clause 6'1'
This deals with general average loss. General.

Some amount of confusion results from the fact that the Explanation
expression "general average" is used in several senses, 0"-h¢""'i°"'
which though related to each other, are not the same. First, °°"°:§'1t' °f
there is a general average act; next, there is a general aver- 53,2533; (5)
age loss; lastly, there isia general average contribution.' The agt. (If) laps:
expression "general average" is used to cover all these ("37. °°"'"'
three, which are explained below:-- b""°"'

In the topic of "general average", a general average act
comes ﬁrst. In time of peril, for the purpose of preserving

'Sc: Tempcrlcy Merchant Shipping Acts, 5th cdn., page 565.
'As to saving of life, scc s. 544 (English), Merchant Shipping Act, 1394_
'For a full discussion of the subject of salvage see-

(1) Dover, page 671-630;

(:':'} Kennedy, Law of Civil salvage.
'Clause 74(2).



Recovery
from insur

Loss that

has occurred

to the as-
aurod.

' 100

property imperilled in common adventure, where extra-
ordinary sacriﬁce or expenditure is incurred voluntarily
and reasonably, there arises a general average act. The act
thus denotes such--

(i) sacriﬁce," or

(ii) eizpenditure.

When such an act is done, naturally, a loss is caused as a
result thereof. It the loss is caused by or directly conse-
quential on a general average act, the loss is called a general
average loss. '

Where such a loss arises, the question that naturally
comes to mind is, who will pay for it? Sectiont66(3) of the
English Act provides that the party on whom such loss
fails is entitled to rateable contribution from the other
parties interested; this contribution, is called a general
average contribution. '

The chronological order of the various steps can be
shown in the form of a chart as follows:--
CHART (General Average)

(2') sacriﬁce
or
(ii) expenditure.

General average ac:
General average loss

Gene

So far, we have been dealing with the assured and his
rights to contribution from others. Marine insurance, how-
ever, also steps in by providing that if the general average
loss was incurred in connection with a peril insured against,
the. assured can recover from the insurer the loss caused to
him, subject to any express provision in the policy. Now,
Ear: the right to recovery can be dealt with under two

ea s:

average contribution.

(11) where the loss has itself occurred to the as-
sured; and
(it) where the loss has occurred to others and the
assured has contributed as a contributory.
Further, in the ﬁrst case there is some distinction if the loss
is caused by "expenditure" as distinct from a loss caused by
"sacriﬁce". -

The following chart will illustrate the topic of recovery
from the insurer:---
CHART--- (Recovery for general average from the
insurer)

(on) General average expenditu're.--]?roportion of

the loss which falls upon the assured can be recovered
from the insL1rer--s. 66 (4), earlier part.



llll.

(b) General average sacriﬁce.-Whole loss may be
recovered from insurer, without enforcing contribution
from others--s. 66 (4), latter part.

May be recovered from the insurerms. 66 (5).

A general average loss is voluntary and is "deliberately
designed to prevent greater losses".1 That is how it differs
from other losses, which are caused purely by accident. A

Contribution
paid or pay-
able by the
assured to
others.

HOW general
average loss
iﬁers from

other losses-

loss caused by accident lies where it falls, that is to say, it reason, he.

is borne by the owner whose cargo is lost. But a general
average loss is effected purposely for the beneﬁt of all
persons interested, and hence other interests which have
been saved must contribute to make good the loss. The
doctrine "springs from a rule of law applicable to all who
chance to have interests on board a ship at sea exposed to
some common danger threatening the whole; it is founded
upon justice, public policy and convenience"?

Since the working out of contribution under general
average---what is called "average adjustment"--may have to
be eﬁectecl between persons belonging to different countries,
and may give rise to problems of conflict 'of laws, ship-
owners have evolved a standard set of rules relatin to
general average, known as York-Antwerp Rules. The ules
are incorporated in charter-parties and bills of lading, and
differ on some points from the provisions in the Marine In-
surance Act. It is not, however, necessary here to discuss
the Rules in detail?

Section 66 (2) of the English Act gives a deﬁnition of a
general average act, and on analysis the deﬁnition will be
found to yield the following ingredients:-----

(12) 'Existence of actual danger, expressed by the
words "in time of peril". Thus, a sacriﬁce made at a
time when the master of the ship believes that there was
ﬁre on the hold while actually there was no danger,
would not be a general average act.'-5

It has been said that a mistaken belief in the exist-
ence of the danger, if reasonable, may turn the act into
a general average act under the York-Antwerp Rules."

1Lord Chorlcy, Law of Shipping, 3rd edition, page 173.

"Fire v. Middle Dock Co., (1881) 44 L.T. 426 cited in Dover Hand-
book to Marine Insuranc, 1957 edition, page 419.

'For the text of the rules, see-
{:') Dover, page 743 et set].
(if) Keate, page 171 et seq.

'Watson (Joseph) & Co. v. Fireman's Fund Insurance
KB. 355~92 L.J.K. B. 31.

"See Halsbury, 3rd edition, Vol. 22, page 122 and page 125.

'The relevant rule is Rule A, Yorl-'.-Antwerp Rules, 1950 reproduced in
Chalmers page 214, and Dover, page 750.

Co., (1922) 2

hind the
rule.

York-
Antwerp
Rules.

Ingredients
of general
average Act.

Departure
from the
English
At:t--i11
York-

Discussed.



Quay.

Success of
the adven-
ture.

102

The position, however, is by no means clear and conflict-
ing opinions have been expressed. In the U.S.A. a
reasonable apprehension of danger is sufficient.' In
view of the doubt existing on the subject even in Eng-
land as to whether the York-Antwerp Rules strike a
departure from the English Act, it is considered unnec-
sary to depart from the language of the section on this
point. .

(it) There must be some extraordinary sacriﬁce or
expenditure. The sacriﬁce or expenditure must not fall
"within the compass of the ordinary duties of the ship-
owner". If, for example, a sailing ship having an auxi-
liary engine loses her sailing power and has to use
steam, thereby increasing the expenses, the increased
expenditure is not extraordinary."

The "sacriﬁce" may consist of "jettison", that is,
throwing away of the cargo to lighten the ship, or it
may consist of burning the cargo and spars as additional
fuel for pumping water by the donkey engine Where
the coal runs short and the ship has sprung a leak.

(iii) The act must be voluntary. It must not be-

(a) an act of God, for example, a storm which
washes out the cargo but preserves the other pro-

party;

(b) an act of other person, for example, that of
a mob which takes away the cargo of corn where
the vessel is stranded.-3

The York--Antwerp Rules, Rule A, speaks of a sacri-
ﬁce or expenditure which is "Intentionally" made or in-
curred. The question has been raised whether this
means a departure from the statutory expression
"voluntary". The expression "intentionally" is also used
in Rule V of those Rules, though the marginal note to
those rules is, curiously, "voluntary stranding".

(iv) The act must be reasonable in the circumstances
of the case.

(v) The act must have been done for the purpose of
preserving the property imperilled in the adventure. In
Rule A of the York-Antwerp Rules, the words "for the
common safety for the purpose of preserving from peril
the property involved in a common maritime adven-
ture" are used.

It has been said, that both at Common L.aw and
under the York--Antwerp Rules, contribution can be de-
manded only if the general average act is successful,

'Sec Lord Chorley, Law of Shipping, 4th edition, page 132.
'Wilson v. Bank of Victoria (1867), LR. 2 QB. 203.
'Lord Charley, Law of Shipping, 3rd edition, page I82.



103

that is to say, if the adventure as a whole has been
saved.' If no property escapes the dangers from which
the sacriﬁce was intended to save it, there is no general
average.

It has been suggested that in section 66(5), ('of_ the Dcpaxture
English Act) the word "subject" should be "sub]ect-- mm the

matter" or "interest" and in section 66 (7), it should be English Act'

"interest"? The suggestion appears to be reasonable
and has been adopted.

Clause 68

This deals with the extent of liability of the insurer for General.
the loss.

The sum which the assured can recover is restricted----

(a) in the case of a valued policy;''' to the full extent Distinction

of the value ﬁxed by the policy; 1;:J'l'1':';=';nd

unlxlfalucd
po CIES.
(b) in the case of an unvalued policy, to the full

extent of the insurable value.

Clause 69

This section, which at ﬁrst sight appears to be a repetition Genemi,
of section 67 of the English Act, is not actually so. Section 67
deals generally with the measure of indemnity, while 'sec-

cases, section 68 has the effect of enabling the_ assured to re-
cover that from the insurer in the case of a total loss.

Clause 70
1. This deals with partial loss of ship. General.

2. All partial losses, including general and particular-Application
averages, are recovered. But the section is subject to any Of the 50C-
Other express provision in the policy. "°"'

3. The section uses the expression "reasonable cost" and " R",'}5°"'
"reasonable depreciation". Section 88 of the English Act abk '
dealing with "reasonable time", etc. does not _ speciﬁcally
mention reasonable "cost" and reasonable "depreciation".

But obviously the question will be decided by the court in
each case.

4. Where it is intended to repair the ship, the insurer has Tender
right to exercise control over the cost of repairs under what <=13uS¢-
is known as the "Tender clause"!

'Lord Chorlcy, Law of Shipping, 3rd edition, page 185.
'See Chalmers, page 102, foot--notes I and 3.

'See section 27 of the English Act,----Clause 24.

'The clause is cited in Dover, page 424.



104

".D¢,I31'=¢i8* Sub-sections {2} and (3) speak of "depreciation". The
"°n ' following questions, namely,----

(12) whether depreciation should be taken to mean
the estimated cost of repairs, and, if so,

(it) what is the date with reference to which the
repairs are to be estimated---is it the date of arrival at
destination--are matters which need not be discussed.
because in practice. most cases are settled by compro-
misc}

" Custpmary For deductions under "New for old", see rule XIII of the
9§§1::.t'f°£._ York-Antwerp Rules, 1950.2
old! II.

Suggestion 5. It has been suggested that when the damage is only
to substitute partly repaired or not repaired at all. the measure of indem-
Cgfﬁs  nity of the assured (for the unrepaired damage) should be
Eidel-e;}_ gth of the reas:-nable cost of the unrepaired damage, to be
ascertained at the ship's home port on the last date of the
expiry of the policy. This test differs from the test adopted

in the English Act. The English Act puts it as the reason-

able depreciation arising from the unrcpaired damage {sub- '

ject to certain maximum with which we are not czncerned
in this connection). After giving careful consideration to
the question, it appears that the test adopted in the English
Act is the logical and the correct one. The contract of insur-
ance is one of indemnity only, and the thi_ng'for which the
insurer promises to indemnify the assured is the loss caused
by the casualty. Reasonable depreciation reﬂects this "loss"
aspect correctly.

6. It is true that it is not always easy to evaluate depre-
ciation?' But that difﬁculty applies even to the test sug-
gested; because the process of ﬁxing the hypothetical cost
of repairing damage which has not been actually repaired
cannot yield very accurate and precise results.'

7. In fact, the suggested test can give rise to over-pay-
ment occasionally. For example, if the original value of the
subject-matter insured is Rs. 10,000 and the value at the

' home port is Rs. 8,000. but the surveyor estimates the cost of
repair at more than Rs. 2,000, the assured will be over-paid.
(The value at the home port will be a hypothetical ﬁgure;
but so also will be the estimate of the cost of repairs.)

'Cf. Dover, pp. 423-424.
'Reproduced in Keats, p. 175, Dover, page 760.
'See Dover, page 423, last para.

'In practice, claims for such damage are usually compromised ; see
Dover, page 424, second para.



105

8. For these suggestion

accepted}

reasons the has not been

9. Where a ship is injured by perils insured against but
is sold without repair, what is the amount which the in-
surer has to pay? Section 69 of the English Act does not
deal with this situation, presumably because the law on the
subject was in an unsettled condition at the time when the
proposal to enact legislation on marine insurance was ﬁrst
taken up in England."

1{). Before the 1906 Act, thislpoint arose directly in a case
before the Court of Appeal? The rival contentions advanced
in that case were:--

(i) the diminution in the value of the ship (depre-
ciation) as shown by the difference between the original
value of the ship and the price realised on sale, should
be the measure of indemnity;

(ii) the estimated cost of repairs is the sole measure
of indemnity, and no regard is to be had to the depreci-
ation in value. It was contended that if the owner
actually repairs the ship, he would certainly get the
reasonable cost of repairs, and the fact that he chooses
to sell it instead of repair it should not make a diﬁe:t'-
ence.

The first test was upheld by a majority of the Court of
Appeal (Jessel M. R. and Cotton L. J. conﬁrming on this
point the judgment of Lindley J .), while the second was
favoured in the dissenting judgment of Brett L.J.

11. The question as to which of the two tests mentioned
above is to be applied, was of great importance in the case
cited above? as will be seen from the facts. A ship valued
at 3,700 consols was insured in that case. She sailed from
Singapore to Moulmein, and in passing up the river to the
port of Moulmein took the ground and remained aground

or four days until shewas got off and towed up to Moul-
mein. The plaintiffs (the owners) determined to abandon
the vessel and gave notice of abandonment, but the under-
writers declined to accept it. The plaintiﬁs, thereupon,
having made some slight repairs, sold the ship and stores
for 3,897 consols. In the statement of claim, the plaintiffs

'As to the possible tests of depreciation, sec also Halsbury, Volume XXIL
page 138, para. 266, foot--note (a), where two tests have been mentioned. :--
(a:') difference between conventional value and damaged value,

(if) proportion _of the actual depreciation to be ascertained and applied
to conventional value.

The point was left open in Irvin v. Hyna,
'Cf. Chalmers, page 108.
'P:'tman V. The Universal Marine Imurance Co. (1332) 9 Q.l3.D.

(1949) 2 All E.R. r089.

. 192.

Sale _ without

repair.

Decision
before the
Act--
Pitman's
case.

Importance
of rule be
applied.



106

had stated the value of the ship at the commencement of the
risk as 4,000 consols. The plaintiffs claimed T81 consols and
odd as a partial average loss, apparently on the basis that
the loss to be made good is to be measured by the amount
which it would have cost to repair the ship (deducting one-
third as the customary allowance for new material). On
this basis, the plaintiffs argued that the cost of repairing the
ship so as to make her as good as she was before she took the
ground, would have been about 5,300 console, and, there-
fore, the difference between that 5,300 and the value of the
ship minus 4,000, that is 1,300, less one-third, was the
measure of indemnity. It was on this basis that the plain-
tiffs claimed 781 and odd consols. The defendants, on the
other hand, took the stand that since the plaintiffs had
actually sold the ship, all that they could recover was the
difference between the "sound" value of the sh:ip--4,000 con-
so1s--and the sale price realised, 3,897 consols. The differ-
ence would have come to about 113 consols, and adding to
this certain amounts actually spent by the plaintiffs on
slight repairs, the defendants paid 245 console; into court.
Thus the adoption of the one or the other rule made a con-
siderable difference in the amount to be borne by the in-
surer. .

12. In the court of the first instance, Lindley J ., adopted
the ﬁrst test, viz., rule of depreciation. He held_. that the
cases were conclusive to show that events which had hap-
pened and not those which might have happened are to be
regarded. He stressed the indemnity aspect of insurance,
and repelled the contention that there was authority for
the rules suggested by the plaintiffs. Analysing the plain-
tiffs contention, he said, that it was based upon three-
assumptions,-

(i) that the plaintiﬁs might have repaired if they
had chosen;

(ii) that if they had repaired, the cost of repairs-
would be the measure of their loss;

(iii) that it is immaterial to the insurers whether
the repairs were actually effected or not.

As to the first, Lindley .I., took it to be well-founded,
because a shipowner could always repair if he chose and
thus refrain from insisting on a total loss. ' As to the second
assumption, he thought that it was well-founded if the
repairs are made bomi ﬁde and with reasonable discretion.
But he pointed out that if the repairs are so extensive and
so out of proportion to the Value Of the ship when repaired,
as to show want of bona fides or a total disregard of -what is
reasonable, then, it is by no means clear that their cost
could be thrown on the underwriter. As to the third as-
sumption, namely, that the plaintiffs had the right to repair
and to recover the cost, whether the 'right is exercised or
not, he regarded it as entirely erroneous. "Against what



l 107

do the underwriters agree to indemnify the assured'? Sure- _

13; against such loss as he may in fact sustain by reason of
the perils insured. against'? "Apart from all authority I
should have-thought it plain that a loss actually sustai_ned
under. the circumstances which did happen, is to be pre-
ferred as a measure of indemnity to a loss which would
have been sustained under circumstances which did not
happen." He found 'no authority to the contrary. A.ccorcl--'
ingly, he held that the depreciation in the value of the ship
was the real criterion, and was to be measured by the
difference between the value of the ship when sound a.nd
what she is sold for when damaged. (The detailed calcula-
tion need not be considered at this stage).

13. (a) The Plaintiffs appealed, and a majority of the Judgment 0l'_
Court of Appeal affirmed the judgment on the main point, file g',''-'''' '*1
namely, which of the two rival tests mentioned above was pp '
to be adopted. Jessel M. R. observed:2 "The contract of
insurance is, as I understand, a contract of indemnity to 1;he

insured against the loss incurred by him through the ship

'being injured by the perils -of the sea. It follows from this,

that as a general rule in no case can the insured -become
richer by reason of these perils, orin other Words, that the
insured are not to be entitled to receive from the insurer a
larger sum for a single partial loss than if the ship was

'wholly lost." He further observed, that the rights of the

shipowner who actually repaired the vessel to recover the
amount expended' in repairs are not the same in alltcases as
those of a shipowner who declines to repair because the
ship is not worth repairing and who, therefore, sells the
ship during the risk. - '

(13) Cotton L, J., alsoitook the view that where the ship-
owner elects to ta_ke the course of selling the ship, he "as
against himself, ﬁxes his loss", Le. he cannot, as against
the underwriters, say that the depreciation of the vessel
exceeds that which is ascertained by the result of the sale.

-"'I_'o hold that in -the present case the insured is entitled to

recover two-thirds of the estimated cost of repairs would
be_ contrary to what_is one ofthe principles applicable to
all insurancecases, that the policy is a contract of indem-
nity".3 While he took note of the fact that as a_ general
rule the estimated" cost of the repairs is_ the measure of
deterioration, he pointed out, adopting the language of
Maule J. in an earlier case,' "that the insured must recover

the expenses not co-nomine as expenses but as the measure

92 lfgtman v. . The Universal Marine Insurance 09., (I383)_9 Q.B.D.
' .' 7: .e . . _ - . , . .
O4 '.Pt'tman v. Tkc Universal Marine' Insurance 02., (I331) 9 Q.B.D. , I92,
I _ ..

K1832.) 9 Q.B.D. 192, 2'i8.'" ' ' I '

'Stewart 1;. Smile, 5 Scott. N. R. 921, 948. '
296MofL----8



108

of the loss". Probably, he observed,' the most accurate way
of stating the measure of what, under such circumstances,
the ship-owner is to recover, is, that it will be the estimated
cost of repairs less the usual deduction, not exceeding the
deipreciatiqn in value of the vessel as ascertained by the
so e.

(c) Brett L. J ., however, in a dissenting judgment, held

- that a contract of marine insurance has nothing to do with

gains or losses which are outside the contract. He observed
that it was the cost of repairs against which the owner was
indemniﬁed and not the diminution in the value. He cited

' A.rnou1d's statement' to the effect that if the damage done

Modeqf

depreciation.

to the ship has not been repaired, the only mode of ascer-
taining'its amount is by the estimate of surveyors. He
cited certain cases also where the actual sale price .was
never considered as relevant. He further pointed out that
the underwriters had for years paid for repairs. A policy
on marine insurance is mainly construed according to long
settled and admitted usage of merchants and underwriters.
and the startling facts of the case in question which were
wholly abnormal, should not, he said, justif any tampering
with a settled rule of adjustment of liability. He Has,
therefore, of the opinion that the plaintiffs' claim ought to
be allowed.

14. While the judgment of Lindley J., was thus approved
on the main question as to the test to be 'applied, the sub-
ordinate question, namely, how depreciation is to be calcu-
lated was not discussed at length by the Court of Appeal.
The formula suggested in this connection by Lindley .T. can
be put as follows:3 The sound value of the ship in the
port of distress (Moulmein in this case) is to be- ascertained.
Her damaged value, i.e. the value for which she was sold.
less the amount spent on repairs before sale, should be

next ascertained. The difference between the sound value '

as so calculated and the damaged value as so calculated,
represents the proportion of loss sustained by the ship-
owner. (To this may be added whatever other sums are
properly chargeable against the underwriters, and the ﬁnal
proportion of loss thus arrived at). The proportion of loss
so arrived at is to be applied to the ship on its declared
value (or, if the policy is an unvalued one, then on its real
value) at the commencement of the risk. The proportion
of the loss so calculated will be what the insurers have to
pay. In the Court of Appeal' J éssel M. R. stated:

"As to' the value, I think, the value _to be regarded
is the value of the ship at the port of departure, but in this

'(1882) 9 Q.B.D. 192, 2:8, 219.
- 'A-mould, Fifth edition, Vol. 2, page 90:.

Now see Fourteenth edition,

. Vol. 2, vase 954-

30882) 9 Q.B.D., I92, 203 ; first 13 linen. .
9(t88z) 9iQ.B.D. 192, 2.05.



109

case it is not material because, I think, the value at Moul-
mein before the-injury was about the same." Cotton L.I.T..
does not appear to have touched this point (beyond stating
that the measure of indemnity should not exceed the depre-
ciation as ascertained by the sale.) ,

15. It would seem that therelis no reason why the case Depﬁlgffe
of the ship being sold without repair in damaged state E'[':'g"1j8h°
should not be covered. The amount to be recovered by Am
assured should not exceed the depreciation as ascertained
by the sale. Subject to this restriction, the reasonable cost
of repairing damage can be allowed.'

Necessary departure has been made accordingly from
the English Act.'

The effect of this decision has been thus stated in
Arnoulds:

. "If the ship after sustaining an average loss is sold
by her owner unrepaired, the measure of what he is
entitled to recover against the insurer is the estimated

, cost of repairs less'the usual deduction, not exceeding
the deglareciatipn in value of the vessel as ascertained by
the sa e.'

[Arnou1d, of course, observes that it is impossible not
to feel the force of the powerful dissenting judgment in
view of which the law can hardly bestated to be settled.]

Clause 71

This deals with partial loss of freight. The proportion c,¢n¢m1_
of the freight lost with reference to the whole freight at
the risk of the assured has to be ascertained. That propor-

_ tion of the sum fixed by the policy (if valued) or of the

insurable value (if unvalued) is the measure of indemnity.
Clause 72
This deals with partial loss of goods, etc. General.

The measure of indemnity is ﬁxed with reference to
"insurable value". Now, insurable value as deﬁned' is the
prime cost of the property insured plus the expenditure

'etc. Insurable value is thus artiﬁcially frozen with refer-

ence to the value before the shipping of the goods. The re-
sult is that, if the market prices of the goods fa1l,pthe assur-
ed can nevertheless claim indemnity on the basis of the old
value. Hence, "cargo claims have a tendency to be more

'Of. the judgment of "Cotton L.I., discussed nbove--para. Io(b).
'See also the body of Report, para; 10.

'Arnould, 1954 Edition, Vol. 2, page 954. Article 1034.
'section is ca). F-nslish'Act--e-Clause 13 (3).



General.

Application_
of the
section.

' tion, "apportionment".

110

frequent inptimes of commercial depression than when there
is a heavy consumer demand."

Clause 73

_ This deals with apportionment of valuation. The sec-
tion obviously is conﬁned to valued policies.

The necessity for a section like this arises in the follow-
ing cases:------

Supposing different species of property are insured under
a Valued policy; but the value of each species is not men-
tioned separately; then how is the value of each species to
be taken in case of loss'? If the policy is taken as unvalued,
then there is no point in having entered a valuation. But,
on the other hand, the valuation is a single one. What the
section provides in eﬁect is--the splitting up of the valua-
The single value is apportioned
over the different species, that is, .split up, "as in the case
of an unvalued policy''.'3

The process is as follows:----

I I (i) First  out the insurable value of the species
(see section 16 of the English Act); _

(ii) then find out the insurable value of" the whole
(s. 16, English Act); '

(iii) then ﬁnd out the proportion between (i) and
(it) above. That proportion of the total -insured value
(which is already entered in the policy, the policy be--
ing' a valued one) is taken as the insured value of the
species. -

M . This principle applies to species as well as to a part of.

a species.

"Nc,tarrived Where it is not possible to ascertain the value of the

sound
value ". .

v General.

T various species.

species by the test given above (because the various ingre-
dients mentioned in section 16 of the English Act cannot be
ascertained), a division of the valuation is made with refer-
enceto the "net arrived sound value" of the goods and their
"Arrived" values means" the value of the
goods when they arrive at the destination.

Clause 74'
"This deals vvith measure of liability for-
(i) 'general average contribution{ and
(ii) salvage charges. - A

 

'Dover, page 427.

'For unvalued policies, see section 16 of the English' Act----Cla-use 13.



.ll_}_.

- The section [sub-section (1)) _is intended to indicate the AfP§111°3"°"
rules governing measure of liability of the insurer for gmigm
amounts which the assured has paid or is liable to pay as
general average contribution. Loss caused directly by 1;he
act of assured himself is not the subject-matter of the
section. -

The measure of indemnity is governed by "Cont_rib_u- Contributory
tory value''. The contributory value of an interest is its Value-
arrived value less any expenses or charges incurred after

the general average act which would not have been incur-
red had this proved.abortive.1-2

If the contributory value is less than the insured value,
the insurer pays in full. Otherwise his liability is irateably
reduced-

_The rules actually adopted in business practice as to
contributory values provide that contribution shall be made,
"upon the actual net values of the property at the termina-
tion of the adventure, to which values shall be added the
amount 'made good as general average for property sacri-
ﬁced if not already included." (with certain deductions) .3

The following illustration' may be useful:--

Cargo insured on valuationof 5000
Particular loss amounting to 10%

Illustration -

Deductionnfrom the insured value [vicie last 20 words
of sub-section (1)] 500 (i.e. 5000 divided by 10).

-Basis of insurer's liability thus reduced' to [4500
(5000-----500).

On the above data-

_ (i)' if the contributoryvalue is less than 4500, the
insurers are liable in full for general average contribu-
tion [section 73 (1), earlier part].

(ii) if the contributory value is more than'4500,
the insurer's liability is proportionately reduced. For
example, if the contributory value is 6000, the insurers

pay only three-fourths (4500/6000) of the general
average contribution. [section .73-(1), middle pa_rt]'..

"Dover, page 430. ' M

I29.

'Cf. Dover, pages 430-431.



Snlvase.

.

salvage charges.

Gaieral. _ Examples. ' 112 Sub-section (2) provides that liability for salvage. charges1---i.e. extent of liability--wi1l be determined on the like principles.

Two criticisms have been made against this provision (relating to salvage charges)-

(11) The subject-matter must contribute to salvage charges on the basis of its saved value and not its arrived value as in general average.

(ii) Where a portion has been actually sacriﬁced in general average and the general average act necessi- tates salvage, one difficulty arises. The salvors can collect pro rata on the saved values, while the contri- bution in general average must be based on arrived values. The sacriﬁced portion does not, however, actually "arrive"_but should be charged with its share "of the general average (on equitable principles). But since it was not saved, the salvors cannot expect it to meet any proportion of the salvage remuneration. This difficulty was formerly solved' by introducing (in statements of general average) a ﬁgure called "hypo- thetical salvage", representing the value on which the . sacriﬁced goods would have contributed to the salvage if they had not been sacriﬁced. This ensures equitable distribution of' the burden_ by placing the sacriﬁced goods in no better position than if some other interests had been sacriﬁced. (The assured contributing on the basis of this hypothetical value can of course recover from the insurer under section 66(5)].

However, in modern times, Rule 44A of the Rules of Practice of the Association of Average Adjusters' provides that "expenses of salvage services rendered by or accepted under agreement shall in practice he treated as a general average provided that such ex- penses were incurred for the common safety . . . . . . .." It is, therefore, unnecessary to pursue the matter further. ' --

. Clause '15 This deals with third party liabilities.

- The following examples may be given:¥--

(i) Ship-owner's liability arising out of negligent navigation.

(ii) Ship-owner's liability under the'_contract of affreightment. .

'See clause 66.

'Dover, page 432.

'Reproduced in Dover, page 739 and in Keate, page zoo.

113

The section does not apply unless there is any express HEM! term for insurance against liability to a third party. The_'°'m"

common law rule' was that a marine insurance policy in an ordinary form does not cover payments made by the assur- ed to a third party in consequence of collision for which the assured ship was to blame.

The Running Down Clause'-' is usually added to insure Running the ship-against third-party liability. It is also known as D°"'"C"""° the Collision Clause. It provides that "if the vessel thereby '§3_~'1,,$',""°"

insured shall come into collision with any other vessel and the assured shall in consequence thereof become liable to pay and shall pay by way of damages to any other person...

any sum in respect of such co1lision,...the underwriters will pay the assured", such portions of three-fourths of such sum or sums so paid as their respective subscriptions thereto bear to the value of the vessel", etc. The Running Down Clause covers liability only in tort and not in contract. ' ' The reason why the ship-owners do not accept liability for the one-fourth is, that3--

"the ship--owner is a member of one of the Mutual Insurance Clubs which are established to take over the liability of the ship-owner for this 1/4th. . . .or that the ship-"owners have an insurance fund of their own, estab- lished for this purpose."

As has been stated, "Protection" associations cover the one-fourth collision liability for damage done.' ' Clause 76 This deals With" the general provisions as to measure of General- indemnity and is in a sense residuary provision.

Insurances on commissions and on securities sent by A'P1=li<-'a_ti§=n registered post insured in marine policy form are covered ;'c'::'-E-';'"°' by this section. Pm.

Clause 77 This deals with "particular average". As to "particular Gcn¢ra|- average", see section 64 of the English Act.

Where the subject-matter insured is warranted "free F-P-A ifrom particular average" (F.P.A), the assured cannot

--' muse).

'D¢ Vase: v. Salvador, (1336) 4 Ad. 8: E. 420. 'Discussed-inldetnil-in-

' (3') Kcate, pages no--x 32 ;

(ii) Dover, page 52.4, at seq.

'Kate, page 111.

'See Dover, page 494. under " Protection"

Percentage-

franchise and excess-

General.

Importance of the sec-

Total loss"

Sam: policy.

114, recover for loss of apart except in certain cases provided by this section, Salvage charges (section 65 of the English A'ct)' and general average expenditure '(section 66 of the ' English Act) are, however, recoverable, as expreésly pro- Vid.ed.i.nthi.s'sectio_n-. , i ' ' For a discussion of "percentage"'and mode of a' plication of the rules relating thereto, see the discussion in t e under-- _ mentioned book} ' . Clause,' 78 This deals 'with successive losses.

This section is most important in the case of time policies, because there is greater opportunity there for re airing the damage and for again incurring loss which can e claimed from the insurer. - ' It has been said' that section '77 (2) of the English Act is not exhaustive and that if the vessel is lost during the period of the policy, whether by c peril insured against or otherwise, and by a peril insured against has previously suffered damage which has been unrepaired and not other- wise made good, the assured can recover nothing in respect of the unrepaired damage.

In this connection, reference may be made to a case decided by" the House of Lords-"-4 where the facts were as follows : The vessel Eastlands was insured against marine risks under a, time policy-. There was no insurance against war risks, but during the whole period of the policy it was chartered to the Admiralty who assumed all" responsibility for war risks. The ship was damaged from marine risks; the damage was repaired in part, but repairs estimated at ' '£ 1,'7'?0 were postponed. Before these repairs could be car-

ried out, the vessel was torpedoediby an enemy submarine and became a total loss. The Admiralty paid the agreed ""sound" value less £1,770. The ship-owners' claimed this I . amount from the" underwriters-.

It was held thatfas the ~; ;.unrepaired damage was followed by a total loss, the smaller loss merged in the larger, and the underwriters were not liable even though the liability for the total loss did not

-»'fal1,upon~_them. ,The judgment of the Court of Appeal I that of Bailhache, J. restored.

(Bankes, Warrington and Scrutton, L.J.). was reversed, and 'Dover, page 280.

"DOV": P389 437- 'Br:'t:'sh and Foreign Inmrance Cm, (1921) I A.C. 188.

|The case has been discussed mArnould, Vol. 2, page 951, 952, Article 10123 - ' ' Ltd., v. Wilson Shipping Co., Ltd., 115 _Lord Birkenheadi said that two aspects were to be considered:_--_ . " ' ' ' (1-) Where the total loss is caused by a peril insured against by the oli in question, (2) where the -total loss is not covered by t e policy. The ﬁrst is governed by section 77(2). The second is not dealt with by the Act, and it was. necessary-to. examine the law established by the existing authorities, in View oi.' section 91 (2). After examin-

ing the authorities, he observed:p---'-W "The true rule is capable of statement in the following proposition._ Where a vessel insured against perils of the sea, is dama ed by one of the risks covered by the policy and before t at damage is repaired she is lost, during the currency of the plolicy by a risk which is not covered by the policy, then t e insurer is not liable for suchdamage". He said that the rule embodied a principle on which under- writers and merchants had based their practice for upwards of a century.

The words "same policy" in the section enact a rule "5h§'mE, narrower than the decision in Licie v. Jonson' where a 9° "V ' partial loss insured under the policy in suit, was followed by a total loss during the same voyage but not insured under that policy. It was held that the artial loss could not_ be recovered. As pointed out by Lord umner in British and Foreign Insurance Co. v. Wilson Shipping Co.,* the word "policy" and "the policy" are, throughout the sections relating to Measure of Indemnity, used to denote not merely ' (a) a single instrument whether subscribed (i) by one "' ' underwriter, or (ii) by many, but also (la) the entire insur~ ance on the same subject-matter. He said that the words "under the same policy" rather meant "during the adven- ture" insured (whether a voyage or a period of time). He, however, did not regard the point as important, because section 91(2) of the English Act "preserves Livie v. Jonson to its full extent according to the true construction, unless and until it is overruled." "The Act", he said, "u. . . .- .only speaksof a sequence in time between a partial loss and a total loss, and of the partial loss not having been repaired".

Clause 79 This deal_s with "suing and labouring" charges; "Suing" General. is perhaps an abbreviation. of "pursuing". ' The so--called sue and labour clause in a policy reads as Meaning of follows :-- e ~ the section-

"And in case of any loss or misfortune it shall be lawful to _the assured, their factors, servants and assignees to sue, '(I92-.1) I A.C. I83, I93.

'_§I92'1) I A.C. I88, I99.

'12 East 643.

40921) 1 A.C. I88, 21:.

Relation to particular charges.

Examples.

Sue and Labour Charges, Salvage Charges and General Average E_.Kp_enditul'c, distinguished.

116

in and above the defence, safeguard, and recovery of the said goods and merchandise and ship etc., or any part there- of without prejudice to this insurance. To the charges whereof; we, the insurers, will contribute each one according to the rate and quantity of the sum herein assured".

The object «behind this clause' is to enable the assured to recover costs incurred for preservation of the subject- matter insured. Actually it beneﬁts the insurer because his Liability is reduced -if the assured etc, take prompt action for preservation.' Sue andlabour charges are a species charges} of particular ' Examples of charges "Which fall under this section are- (ii charges under a salvage agreement, (ii) costs incurred to recondition goods by another ship to save freight.

.The following chart will show the distinction between the various classes of charges:--- -

Salvage s. 65 Arising by Maritime Law Incurred by others -

Is governed by the policy Measure of indemnity is limited by general pro-

visions.

S. 65 expressly excludes from salvage charges ex-

penses rendered by the assured or his agents for averting peril insured against.

is incurred for preventing :loss and consists of positive expenditure.

General Average S._66 Arising by Maritime Law.

May be incurred by the assured or by others.

Is governed by the policy.

Measure of indemnity is ﬁrnited by general provisions.

is incurred for preser-

ving the property un- pcrilled in common adventure and consists either of sacriﬁce or positive expenditure.

Incurred for the beneﬁt of the whole adventure.

damaged goods, (iii) expenses of forwarding Sue and Labour S._ 78 Incurred under an ex-

press clausc. .

Incurred by the assured or his agents.

Is regarded as an inde-

pendent agreement.

is payable notwith-

standing that the in-

surer may have paid for a total loss.

S. 78 (2) expressly ex-

cludes general average losses and contribu-

tion and salvage char-

ges from the Sue and _' Labour Clause.

Consists of positive charges for the defence, safe-guard and re-

covery of the goods, etc. Incurred for the benefit of a particular subject matter.' mom charm. S_hi.Ppin8 Law. 3rd cditionmase 3:9.

'For a full discussion, see Keats, pages 72-73 and Dover, pages 270-372.

'See notes to clause 65.

'See Keats. page 73 and Dover, page 270.

117

. _ 81! This deals with subrogation. Genera], Section 79Q1) of the English Act corresponds to section Correspond- 135A(2), Transfer of Property Act, 1882. Section 79(3) cor-ins P1'_°'"' responds to section 135A(3) of the Transfer of Property Act. §';'§m'"Law Section I35A(2) and (3) should be deleted since their sub- ' stance is being incorporated in the clause under discussion.' Subrogation has been deﬁned as "the right of the insurer Doctrine on payment of loss to stand in the shoes of the assured and ex1=1aIn=d- to avail himself of his rights and remedies". The object behind the rule is to prevent the assured from being in- demniﬁed for his losses from two or more sources and thus obtaining proﬁt from the loss." .

Compare the right of subrogation given to persons inter- A11"'?8.°"" . ested in immovable property who redeem a mortgage (sec- P'°"""°"3' tion 92 of the Transfer of Property Act, 1882). That section says that the person concerned shall "have, so far as regards redemption, foreclosure or sale of such property, the same rights as the mortgagee" etc. Compare section 146 of the Indian Contract Act, 1872, under which a surety (by the payment of his liability) is invested with all the rights which the creditor had against' the principal debtor.

Where the insurer pays for the whole loss, he takes over Distinction the interest of the assured in what remains, and thus isin subro 3- entitled to the proprietary rights. In the case of partial "$33? 10:?"

loss. however, title in the subject--matter does not pass to P ' the insurer but he gets all rights and remedies of the assured in and in respect of the subject-matter insured.

In practice, "letters of subrogation" are executed by Lettera_9f_ the assured, laying out the rights of the insurer and bind- 8ub1'°8"*1°n- ing the assured to lend his name to any proceedings which the insurer might take against third parties liable for the loss. - i Sometimes a clause "without beneﬁt of salvage to the Wifhﬁi-it f insurer" is inserted. Under such clause, proprietary rights ° of the assured are not transferred to the insurer.' ' Section 61 of the English Act provides that in the caSe_Abandor:l- of a constructive total loss the assured may treat the loss ;':g'$;:iou as a partial loss, or, a-t his option, abandon the subject- ' matter insured to the insurer and treat the loss as if it were an actual total loss. The following points of difference be- tween the two can he noted:--'-' 'For a discussion of the circumstances under which section 135A was ntrocluccd, see notes under clauses 52-53.

'Dover, page 441. ~ 'See also notes under section 4., proviso, oi: the English Act--C|nusc 9. 'R6. Hogg, cited in Dover, page 447. _ 'See also Kcate, p. 93.

118

(i) In abandonment, the insurer has the property vested in him including proprietary rights and liens.

In subrogation, he is entitled to the rights of action arising out of the loss; "Abandonment is the transfer- ring of ownership in the thing insured from the assured

-to the ' underwriter ....... ..Subrogation involves no' "change of ownership but is a right (which) the under~ writer has to stand in the shoes of the assured. ......."

(ii) In abandonment, the rights follows on a valid abandonment, while insubrogation they arise on pay- ment of the loss;. a ,.

(iii) Abandonment applies only in cases of total loss, while subrogation applies both to total and to partial losses;

(iv) Subrogatien entitles the insurer to transfer of rights and remedies only in respect of the losses, while abandonment implies complete giving up of the sub- ject--matter itself, leaving it to the insurers to. decide whether they would take it over or not.

The position as to whether an insurer, having paid the M pmﬁt out of loss can. by virtue of subrogation, claim more than what anbrogation

--Qu~'-rsn Increased value policy.

he has paid, is not very clear. See the under--inentioned cases.'-'-' -.Lord Wright, M.R., has in a case before the Court of Appeal' agreed with the observations of Swinfen Early, L.J.,' to the. effect that the insurers can, by subroga-- tion, recover upto the amount of the insurance. The point was, however,'not material in either, case because in both cases the sum claimed" by the insurers was less than the amount insured. ' When the assured, after taking out one policy, takes out an 'increased value policy", Fand the original policy does not .contain a clause expressly or impliedly permitting addi- tional-insurance, then the increased value insurer cannot claim any share in the salvage (if the original insurer re-

1Narth of England Iron Steanuhip Insurance Assodation v. Armstrong, (1870) L.R.'5 Q.B.D. 244 (valued policy--ship worth £9,900 but_' valued and insured at £6,000-'-{,'6,ooo paid--owner recovers £5,000 from guilty vessel--_-- held, insurers could claim the whole sum as the owne_r was estopped by his under-valuation _,f1-'om 'denying the real value .)_ _ 'Goals and Hull Steam Towing Ca., Ltd. v.' Ocean Marina: Insurance Co.

Ltd}, cited in Dover, Handbook to Marine Insurance, 1957 ﬁiiﬁons Page '445-' '.'.x..

"Case of Glen L:'ne,_,Ltd., cited in Dover Handbook, page_4¢_;7. _ suhrogation will only g1ve.the insurer r1ghts'upto twenty shillings 1n the Pound on what he has paid." per Lord Atkm.

7" 'Baag v. Standard Marine Insurance Co'., (1937) 1 All E.R. 714, 719,

720. Ifhgmgs and Marley Marine Insurance Co. v. British and Chilian Steamship 00-, (1915) 1' K-K 30- ' ' 'See notes under s. 4, proviso; E11-81i31'l4A¢ta-Clallﬁﬁﬁ 9.-I 5' -'119 _..£&.i_E9_d_ 3I1,Y_§3.l¥a.ge)."' This was laid down by the Court of Appeal} In 'that case, a cargo carried on a certain steamer was insured -under an ordinary policy and also under an increased value policy. (But the ordinary policy did not contain any clause for increased valuation or permitting additional insurance). Thesteamer was stranded, and both insurers paid for a total loss and took letters hf subrogation "from the owners. The insurers under the ordinary policy paid a sum of £ 685. On a general average adjustment be- ing made, £ 532 and odd was agreed as the sum arising as salvage to be received by the owners. This sum was claim- ed by the insurers under the ordinary policy, but the insur- ers under the increased value policy claimed to share rateably in the salvage. It was held, that the insurers under the ordinary policy were entitled to the whole sum of .£ 532 and odd. As was pointed out by Lord Wright M.R.,3 the first insurance was for the whole of the subject- matter for its full value, and the insurers were entitled to the full rights of-subrogation; and any attempt by the own- er of the goods to dispose of the value of those rights would be futile. If the original policy had contained a clause to the effect that in the event of any additional insurance be- ing placed by the insurer the'va1ue of the cargo would, in the event of loss or claim, be deemed to be increased to the total amount insured at the time of the loss or accident, then the subsequent insurer would rank in part pussy. with the main policy; but there was no such clause here. (Curiously enough, in this case, it was the increased value policy that_ contained such a clause--which beneﬁtted no body). It was further observed by Romer L.J.,3 and Scott L.J.,'* that at the time when the increased value policy was effected, the ﬁrst insurer had already become entitled to a contingent right to receive any sum which might be recovered as salvage. Of this right, the insurer could not be deprived by the assured. Scott L.J., further pointed out, that since there was no increased valuation clause in the ﬁrst policy,

-the assured was esto-pped from alleging that the subject- matter of the insurance ever had any increased value; and if the assured was estopped, the subsequent insurer was also similarly estopped.

Clause 81 ' This deals with the right of contribution. General.

. _ Sub-section (-1) provides that where the assured is over- Appngﬁon . insured by doub1e--insurance,5 each insurer is_ bound as b_e- 0_fT-he 806-"- tween. hirnselﬁ and other insurers to contribute rateably to mu' CA'Boag v.'S:}mdard Marine Insurance Co. L:d., (1937) I All 'ER.' "714 '(r9373 1 All ER. 714, no, 721."

am page 722.

'-'Atpasem-i . , _,_ 'As to double-insurance, see section 32, English Acr.--C1uuse 2.9 izo the amount for which he is liable: .',I_'l_1e important word.

is "contribute". The following points eniérg'e':"-"Jr W _ (i) the section does not apply unless there is over- insurance by double-insurance;

(ii) the section applies as between one insurer and the other insurers. It does not apply-as between insur- er and the assured, for which section 32(2)(d) applies;

(iii) contribution is proportionate. to the amount undertaken by each insurer.

Position of As provided by section 32 (2) (oi), the assured can claim """'°d- payment from the insurer "in such order as he thinks ﬁt". so long as the total sum recovered by him does not exceed the indemnity allowed by the Act.' Marine and The Marine Insurance Act is obviously conﬁned to rights other pol1c- and duties under ﬂmrine insurance. In the case of competi-

"35- l tion or conﬂict between a marine policy on the one hand and a non-marine policy on the other, the Act as such does not apply; but on general principles, it has been stated,'~' contri- bution would be applied. In practice, standard ﬁre policies contain a clause limiting the insurer's liability to the rate- able contribution of loss based on all subsisting assurances.

Clause 82 G,'m,.,,,_ - This deals with under-insurance. Am"-ed his In the case of under-insurance, the assured is deemed to own in- be his own insurer regarding the uninsured balance. 8ll.I.'CI'.

Clause 83 General. This deals with enforcement of return of premium, and

- provides that Where_the premium is wholly or in part "de- clared to be returnable" then it may be recovered or re- tained by the assured. As to the liability for the return of premium where the policy is effected through a broker, see section 53(1) of the English Act. -

_ Clause 84 General' This deals with the return of premium. nemm; The "Returns Clause" in a policy provides for a pro rata Clause. monthly return for each uncommenced month if the policy is cancelled by agreement. Further, where the vessel is "laid-up" in a port for a period of 30 consecutive days, the 'See also notes under section 27 of the English Act--CInusc 24.

'Dover, page 449.

'As to cases where premium is returnable, see section: 83 and 84, English Act,--Chusca 84 and B5.

121

clause allows return ofpremium on a certain basis. (When the ship is in port, it is at less risk of loss than when_ at sea, and this accounts for the provision for return of premium).

There may be provision for return of preI_niu1n, in cargo insurance, if the journey proceeds me a particular route or the goods are packed in a particular kind of cases.

Clause 85 This deals with return of premium for failure of con- Gencral. sideration.

Sub-section (2) provides that where the consideration for Appurrion. the payment of premium is apportionable, and an apportion- ment of able part of the consideration totally fails, then a proportion '°"""' of the premium is returnable. Time policies, it is stated} would not come underthis provision because the period. of time is non-apportionable and if the risk does not continue ftlnr the whole of the period of the Policy, no return can be c "aimed. -

Sub-section (3) deals with particular cases where re- Particular turn for failure of consideration would apply: Cases-

" Paw-a._(a)--dea1s with the policy being void or being avoided by the insurer. As to avoiding the policy, see sec- tion 18(1) (non-disclosure by the assured), section 2llfIl (untrue representation by the assured) etc. Para. (b}--deals with the cases where the subject-matter has never been imperilled.

-The proviso deals with "lost or not lost" clause.' If the " Lost 0}; insurer knew of the safe arrival of the ship, then, notwith-- 'mt 1°" * standing "lost or not lost" clause, he must return the pre- mium, because so far as he was concerned there was no risk.

Para. (c) -----deals with the case where the assured had no insurable interest. As to insurable interest, see section 5 and the succeeding sections of the English Act. There is, how- ever, no return of premium if the policy is eﬁected by way of gaming or wagering. As to gaming or wagering policies, see section 4(2) of the English Act. The important words are "no insurable interest throughout the currency of the risk", so_ that where, though the assured had no interest in the beginning, still he acquires it later, and had an expecta- tion of acquiring it when the policy was effected,'.he can e aim return of premium. .

'Dover, past 455.

.'Cf. section 6 (1), proviso and First Schedule, Rule I, of the English Act, Clause to and Schedule. Rule I. 'See section 4(z)(a), English Act.

General.

Modiﬁca-

i22 e Para. (cl) --deals with a-case" where an assured had a de- feasible interest which is terminated during the currency of the risk; the premium is not returnable in such case. As to "defeasible" interest, see section 7 (1) of the English Act.

Paras. (e) and (1') ------deal with over-insurance. The dis- tinction between (e) and'(f) is, that while (e) deals with over--insurance simply, (f) deals with over"-insurance by p double-insurance. Further, (e) is conﬁned to unvalued poli-

cies, while (3') applies to all policies. Next, (e) contem- plates a single policy (contrast the singular word "premium" used there with the plural word "premiums"

used in (f). Under para.

the subject-matter is insured exceeds the insurable value, there is over-insurance and a proportion of the premium is returnable if the policy is unvalued. Para. (f) de.als With cases where more than one policy is taken out, resulting in over-insurance by double-insurance. The topic of "such over- insurance is dealt with in section 32 (as between the insurer and the assured) and section 80 (contribution as between co-insurers). Where there is such over--insurance, :1 propor- tion of the several premium is returnable, subject to the proviso given below the section.

_ V M _ _Clause 86 This deals with mutual insurance. The section allows the following modiﬁcations in the case 5°11" ""°"""-'L of mutual insurance:---

- Utility of mutual in-

surancc.

General.

(a) The provisions of the Act relating to premium do not apply to mutual insurance, but a guarantee or other suitable agreed arrangement may be substituted forthe pre1'niu.m. '

(b) Any provision of the Act which can be modiﬁed by the agreement of the parties can, in the case of mutual insurance, be modiﬁed by the policies of the 'association or rules of the association.

It has been stated' that the utility of.Inutual insurance lies in-- ' ' T (11) reserving to the members any underwriting proﬁts; _ _ (13) extending protection to members not obtain-

able in the ordinary insurance market-----for example. claims against third parties. ' ' Clause 87 This deals with ratiﬁcation of a contract of marine insur- ance effected in good faith by one person on. behalf of an; other. The signiﬁcance of the section lies in the last 8 words 'Dover, page 4.55.

(e), where the sum for which .

123

"even after he is aware of a loss". As to ratiﬁcation general- ly, see sections 196--200 of the Indian Contract Act, 1872.

Clause 88 This deals with the variation of the implied obligations Genera'- by agreement or usage.

Clause 89 This deals with "reasonable time". "reasonable premium" General. and "reasonable diligence".

Clause 90 This provides that for interpreting a policy, reference General. may be made to the "slip" or "covering note",1 for certain purposes. Section 21 expressly provides that. for showing when the proposal was accepted the slip etc. may be referred to. In the case of mutual mistake also, presum- ably, the slip can be referred to for ratification.' Clause 91 This saves the provisions of the common law. For an in- teresting application of this section, see Lord Sumner's judgment in British and Foreign Insurance Co. v. Wilson Shipping Co. 5-'.

There are provisions in----

(a) the Indian Stamp Act, 1899;

(b) the Companies Act,5 1956;

(c) the Insurance Act, 1938, which also have a bearing on marine insurance, but as they would remain unaifected for the proposed Bill, it is con- sidered unnecessary to insert any savings for them. ' THE SCHEDULE .

Rule 15 of the Rules of Construction The English Act does not cover speciﬁcally the case of a Departure ship driven by power other than steam. To cover such ships, EFOTD the a change has been made by adding appropriate words." Egﬁlish {As to the meaning of these expressions, see notes under section 21 of the English Act,----C1ause I8.

"Cf. Dover, page 460.

°(r921) I A.C. 188, 211.

'The case has been discussed in the notes to section 77 of the English Act--~Clause 78.

"Clause 36 of this Bill deals with associations, and such associations must, it need not be said, comply with the Companies Act.

°C_f. Section 16 of the English Act and the departure proposed there- fr0m,~Clause 13.

296 M. of L.---9.

Insurances

- of certain risksnot invalid.

Suggestion.

124

Suggestion regarding section 7 (1) of the Indian Stamp Act, ' 1899 Section 506, Merchant Shipping Act, 1894 (57 and 58 Vict. c. 60) runs as follows:----

"506. An insurance effected against the happening, with- out the owner's actual fault. or privity, of any or all of the events in respect of which the liability of the owner is limited under this Part of the Act shall not be invalid by reason of the nature of the risk".

Chalmersl explains this as follows:--

"Part VIII limits the liability of the owner of British ships. The object of this section is to make it clear that although the liability of a ship~owner is limited, he is still at liberty to insure". In other words, the "want of interest"

objection is avoided?

So far, there is no diiﬁculty. But, curiously, section 7 of the Indian Stamp Act {following section 93, (English) Stamp Act, 1891] excepts contracts governed by section 506, Merchant Shipping Act from its operation. As pointed out by Chalmers," the saving effected by this section (the Eng- lish section) is curious. The object of the Merchant Ship-

; ping Act was to make it clear that although the ship--owners' common law liability was limited by the Act, he was never- theless entitled to insure against this limited liability---but the apparent effect of the saving is to dispense with the necessity of a policy in those cases.

In View of this criticism, which applies equally to section 7', Indian Stamp Act, the mention of section 506, Merchant Shipping Act in that section should be deleted. Further, there is no provision in the (Indian) Merchant Shipping Act, L958 (44 of 1958), corresponding to section 506, English Mer- chant Shipping Act (though provisions limiting the liability occur in section 352 of the Indian Act) .4 Hence the mention of section 506, Merchant Shipping Act,~has become obsolete in the Indian Stamp Act.

'Chalrncrs, page 164, foot-note 1.

"See the following note in 5th Edn., page 341- "This section appears to have been inserted in the Act of 1862 ex abzmdanre cautela to allay any apprehension there rright be that such insurances could be impugned on the ground of want of interest or illegality. It seems, however, clear that they are valid apart from this section. See Hansard, Par]. Deb., Vol. 166, page 2227." ' "Chalmers, page I60, foot-note 2.

'Section 352 of the (Indian) Merchant Shipping Act, _ ' _ I958 corresponds to section 503, Merchant Shipping Act, 1894.

APPENDIX III SHOWING THE PROVISION IN THE (ENGLISH) NIARINE INSURANCE ACT, I905, AND THE CORRESPONDING PROVISION, IF ANY, IN APPENDIX Section of the English Ac: Clause in Appendix 'I I . . . . . 3

2 . . . . . 4 3 (I) - - - - - - 5 .

3 (2) (a): Part - - - - 2 (C) 3 (2)(a), part and 3 (2)(b) (c) . 2 (d) 3 (2), Expl. . . . . . 2 (e) 4 . . . . . 9 5 . . _ . . 5 5 . . . . . I0 7 . . _ . , 7 (I) 3 . . . . . 7 (2) 9(1), part - - - - - 7 (3) 9 (I), part and 9 (2) . 9 . I2 10 - - - - - - 7 (4) 11 . . . . . 7 (5) I2 - - - - - 7 (5) I3 - P - P - 7 (7) I4 (I) and 14(3) « » P 8 14 (3) . . A . . , II 15 _ . _ . 55 125 126 Section of the English Act CIa.u5e in Appendix I 16 . . . . . I3 17 . . . . . 14 18 . . . . . 15 I9 . . . . . 16 2o . . . . . I7 21 . . . . . I8 22 . . . . . 19 23 . . . . . 20 24 . . . . . 21 25 . . . . . 22 26 . . . . . 23 27 . . . . . 24 28 . . . . . 25 29 . . -. . . 26 30 ' . . . . . 27 31 . . . . . 28 32 . . . . . 29 33 (I) (2) - - - - - 33 33 (3) » - - - - 35 34 . . . . . 36 35 - ~ - - ' 34 36 ~ . . . . 37 37 . . . . . 38 33 . . . . . 39 39 . . . . . 40 40 . - 5 . . .

127

Section of the Engl1'sH Ac: Clause in Appendix I 41 . . I . . . 42 42 . . . . . 43 43 . . . . . 44 44 - - « - ' - 45 45 . . . . . 46 46 . . . . . 47 .17 . . . . . 48 48 . . . . . 49 49 . . . . . 50 go (I) . . . . . 52 (I) 50 (2) . . . . . 54 so (3) . - - - - 52 (2) 51 . . . . . 53 52 . . . . . 3o 53 . . . . . 31 54 . . . . . 32 55 57' 56 . . . . . 59, 57 . . . . . 59 58 . . . . . 60 59 . . . . . 51 60 . . . ' . . 61 61 . . . . . _ 62 62 . . . . . 63 61 . . . . . 64 54 _ . _. . . . 65 123 Section of the _EngI:':h Ac: . Clause in Appehdzx I 65 . . . . . 66 66 . . . . . 67 67 . . . . . 68 68 . . . . . 69 69 . . . . . 70 70 . . . . _. 71 71 . . . . . 72 72 . . . . . 73 73 - - - - - 74 74 - - - - - 75 75 . . . . . 76 76 . . . . . 77 77 . . . . . 78 78 . . . . . 79 79 . . . . . 80 So . . . . . 81 81 . . . . . 82 82 . . . . . 83 83 . . . . . 84 84 . . . . . 85 35 . . . . . 86 86 . . . . . 87 87 . . . . . . 88 88 . . . . . 89 89 . . . . . go 90 - - - - - 2 (5) 0') (3) (1') 129 Scene» of the English Ac: Clause in Appendix I 91 . . . . . 91 92 (Repeal clause) .

93 . . . . . 1, part 94 .- . . M . . 1, part First Schedule ._ _ . . . Schedule Second Schedule (Enactmcnts re- pealed).

GMGIPND __

- APPENDIX IV Suggestions in respect of other Acts

1. Indian Stamp Act, 1899-- (ct) Policies governed by s. 2(2) of the English Act----building risk, launching risk etc. policies and policies for adventures analogous to a marine adventu.re--should be subject to stamp duty as on sea- policies for insurance for voyages.'

(b) Certain provisions of the Stamp Law of England, which are of importance in the law of marine insurance, should be embodied in the Indian Stamp Act."

(e) A provision similar to 5.11 of the (English) Finance Act, 1901, providing that a marine insurance policy for time shall not be invalid merely on the ground that by the "conti- nuation clause" it becomes available for a period of more than twelve months, should be inserted in the Indian Stamp Act, if s.7 (2) of that Act is retained?

((1) Section 7(1) of the Indian Stamp Act should be amended by deleting the mention of section 506 of the Mer- chant Shipping Act.'

(e) Sections 7(2) and 7(3) of the Indian Stamp Act should be omitted after the Bill on Marine Insurance is passedf'

2. The Transfer of Property Act, 1882--(a) Sections 130A and 135A(1) of the Transfer of Property Act sh;u1d be deleted."

(in) Sections l35A(2) and (3) of that Act should be deleted?

139:: notes to 9.. 2. of the English Act-Clause 4 {notes on clauses). 'See notes to s. 22 of the English Act---Clause 19 {notes on clauses). 'See notes to s. 25 of the English Act---Clause 22 (notes c-n clauses)-

'See note entitled "Suggestion regarding section '7 (1) of the Indian Stamp Act, 1899 ", at the end of the notes on clauses.

'See notes to clauses 22 and 20, respectively.

"See notes to s. so of the English Act--C1auses 52-53 (notes on clauses}. "Size notes to section 79 of the English Act--Clause 80 (notes. on clauses )-

130

Ts\v1ng--296 M. of I aw--I5-I-6;-.-- 2250

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