Charles Edward Pollock Frederic Philip Maude.

Compendium of the law of merchant shipping online

. (page 47 of 101)
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rica. See 3 Kent Comm. 336 ; Phillips \h) Per Lord Tenterden in Wimter ▼.

on Ins. c. 16, s. 3. And in France, see Haldimand, 2 B. & Ad. 659.
Emerigon, vol. i. p. 262 ; " En fait de (•) Winter v. Haldimand, 2 B. & Ad.

pr£t d la grosse et d'assurance on ne 64>9.

fait point attention d la yaleur des effets {k) See Usher v. Noble, 12 East, 639;

au temps de leur perte, mais seulement Waldron ▼. Cwmhe, 3 Taunt 162 ; and

a ce qu'ils valoieut au temps de leur Stevens on Average, 118, 131.
chargement." See also the Code de (/) Johnson y. Sheddon, 2 East, 6Sl t



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INSURANCE. P73

as for a total loss, beyond the amount for which he has subscribed
the policy, it has been held that he may be liable for money
expended in necessary repairs to the ship, or about her defence
and recovery before the total loss, notwithstanding it may ex-
ceed his subscription (m).

Freight is seldom insured by an open policy; when it is, the
loss is adjusted according to the custom at Lloyd's by paying -
the amount of the gross freight; and although the assured
thereby recovers more than an indemnity, the usage has been
upheld by a Court of law (n).

It was formerly considered that the assured could not recover
interest upon the sum insured (o), unless indeed he had made a
demand of the money, and informed the underwriter that interest
would be required (jp). But now the jury may, in actions on
policies of assurance, give damages in the nature of interest, over
and above the sum recoverable on the policy (9).

The adjustment on policies is usually settled on behalf of the How and by
assured by their agents or brokers. The agent or broker who " *•
had authority to subscribe the policy has also power to adjust
it (r) ; and where it was shown that an agent had been in the
habit of underwriting policies and settling losses, it was held
that he might refer the dispute respecting the adjustment to
arbitration (#). It has been said that if a broker keeps the
poUcy in his hands, it will be presumed that he promised to
collect the sums due from the underwriters upon the happening
of a loss(0.

Where a broker has received credit in account with the
underwriter for a loss, he is liable to his principal for money
had and received; and if the underwriter's name has been erased
fix)m the poUcy, the broker, having deprived his principal of all
remedy against the underwriter, can dispute neither the under-

Hwrry T. Thg Royal Exchange Jtturance mode of proving a loss by average,

Company^ 8 B. & P. 308 ; and nee per Drake v. Marryatt, 1 B. & C. 473.
BoUer, J., in Dick ▼. JUen, 1 Park on (n) Palmer v. Blackburn, 1 Bing. 61.

Ins. 167. {o) Kingston v. Atlntosh, 1 Camp.

(st) LeCkemhumiv. Pearson, ^T&unt, 518.
367. It appears that propexly these (p) Bain v. Case, M. & M. 262.

snms are recoverable as money paid un- (q) 3 & 4 WilL 4, c. 42, s. 29.

der the clause of the policy which au- (r) Richardson v. Anderson, 1 Camp,

tfionxes the assured to labour for the 45, note.

recovery of the property insured. Ih., («) Ooodson v. Brooke^ 4 Camp. 163.

waiLioUy.Janson,\2Y»9Mt,^bS\SUwart (t) See per Lord EUenborough in

V. SteeUt 5 S. N. R. 927. See as to the Bousjield v. Creswell, 2 Camp. 545.



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374 INSURANCE.

writer's liability for the loss, nor his own receipt of the sum
insured (m). Where a broker took a bill from the underwriter
for the balance of account due to the broker, including the
amount of the loss, and the bill was made payable at a later
date than that at which the loss would have been payable in
cash, it was held that the assured might recover for money had
and received against the broker, although the bill was dis-
honoured (x\

Whether, however, the underwriter is discharged, as against
the assured, by a settlement in account with his broker, is a
question which has been frequently discussed. In one of the
earliest cases on the subject, the underwriter credited the broker
with the sum due on the policy, but, instead of paying it, set it
off against the account of premiums due by the broker to him
on other policies to which the assured was not a party. It was
proved that it had been the practice at Lloyd's for many years
thus to settle losses ; but the Court held that the broker was
only entitled to receive payment in money, and that no usage
could sanction a course of business which they thought amoudited
to a practice of paying the debt of one person vath the money
of another (y). Upon another occasion, the broker, after the
adjustment, credited himself in account with the underwriter for
the loss, and in an account which he transmitted to the assured,
debited himself for the same amount. The assured drew on the
broker for the balance due to him on that account ; the broker
accepted the bill, but becoming afterwards bankrupt, it was
dishonoured. The policy remained in the broker's hands on-
cancelled. The Court held that the underwriter was not dis-
charged (z).

In two subsequent cases, attempts were made to establish the
usage in question, but the underwriters failed to make out that
the assured knew of the custom, or had assented to such a mode
of settling (a). In one of these cases the name of the under-

(tf) Andrew y.RoUnton, 8 Camp. 199. 760; ScDtt v. Irving, 1 B. & Ad. 605.

(x) Wilkinson v. Ciayt 6 Taunt 110 ; See Bayl\ffe v. Buttenoortk, 1 Ex. 425, in

S. C, 4 Camp. 171. which a question arose as to the usage

(y) Todd y. Reid^ 4 B. & A. 210; see amongst Liverpool share brokers, and

the obseryation on this case by Parke, it was doubted by Parke, B., and Rolfe,

B., in Stewart v. Aherdein, 4 M. & W. B., whether a principal employing a

224. The report is incorrect in stating broker to contract for him was not

that there was any settlement in account bound by a contract made in the usual

between the broker and underwriter. way, although he was not cognizant of

(s) Ruttell V. Bangley, 4 B. & A. the usage. See also Bayley v. mikuu,

395. 7 C. B. 886, and mttropp v. Soimmi, 8

(a) BartUtt v. PentUmd, 10 B. & C. C. B. 345.



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INSURANCE.

writer had actaaUy been erased from the policy, but afi that had
not been done with the assent of the assured, the Court held
that the underwriter's liability was not afiPected by it (&).

In all the above cases, except one (e), the right of the under-
writers to settle with the assured by an allowance in account
with the broker was daimed irrespectively of the state of ac-
counts between the assured and his broker. In the single
instance where this was not so, the £aict that the name of the
underwriter remained on the policy had great weight with the
Court In the latest case on this subject (cf ), which appears to
have shaken the strict rule laid down in the earlier cases, the
underwriter pleaded that a settlement by allowance in account
between him and the brokers had been made according to the
usage, and with the assent of the assured. It appeared that the
loss had been settled between the brokers and the underwriter,
according to the practice above described, and that the sub-
scription of the underwriter had been struck out, and that the
brokers had advised the assured that the loss was about to be
settled, and credited him with the amount on account, and that
he had drawn bills on them for the amount. The usage at
Lloyd's was proved, as weU as the assured's knowledge of it.
The Court held that there was evidence to support the substance
of the plea, and that the underwriter was discharged ; and they
said that where a mer ca ntile agent is employe d toreceive money \
for_another in the genera l course of his business, and thetiiown )
general course is for the g^ent to keep a running account wiA (
tl ^ principal, and to credit him with sums which he may have \
received by credits in account with the debtors, with whom he j
also keeps running accounts, and not merely with monies j
actually received, the rule that an agent has no authority to pay {
a demand of his own upon the debtor by a set-off in account J
with him, cannot properly be applied; but that it must be under- j
stood, that wEere^n^account is bond fde settled according to ^
t ^t kno wn usage, the original debtor is discharged, and the \
agent becomes the debtor, according to the meaning and inten- )
tion, and with the authority of the principal (e).

If the policy is under seal, and is effected in the name of the

(6) BartUU v. Peniland, ID B. & C. 211.

760. (e) See the judgment ia Siewart v.

(c) RutteU ▼. BaagUy, 4 B. & A. 395. Jberdein^ 4 M. & W. 228.

(d) Stewart v. Jberdein, 4 M. & W.



376



5



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376 INSURANCE.

broker, it is clear that the underwriter is discharged by setting
off his debt against premiums due from the broker to him ; for
the contract is in law made, not with the assured, but with the
broker, who alone can sue upon it as trustee for the assured ;
and if there is a defence against the trustee, there is also, at law,
a defence against the person for whom he is suing (/).

Effect o£ An adjustment made and assented to by the underwriter is

prima facie evidence of his liability on the policy and of the
amount due (g). But as it does not alter the position of the
parties, or form a substantive contract on a new consideration,
it produces no further eflTect than shifting the onus of proof (A).
It may, therefore, be rebutted by showing that the adjustment

i was obtained through fraud, or was ma de under a mistake of
fectj^reven of law (i), or tSrough an unfair suppression of any
material circumstance^(A). If, however, the amount due upon a
loss has been actually paid, with a full knowledge of the facts,
it cannot be recovered back upon the ground that it was paid
under a mistake of law (/).

When a policy is adjusted it is a common practice for the
broker of the underwriter to give to the assured or his agent his
own note, called a credit note, for the amount of the loss, pay-
able in a month. This does not, however, affect the liability of
the underwriter, who, should the broker become insolvent during
the month; must pay the loss to the assured (m).

Remedies on The mode of enforcing payment of a loss is by an action at

POLICY. j^^ ^^ ^^ policy (n). This remedy may be resorted to, not-

witlistanding an express provision in the policy that all disputes

(/) Gibson v. Winter, 5 B. & Ad. v. HaU, 4 Taunt. 725.
96. There is no right either at law or (Ar) Shepherd y. Chewter, ubi supra.

in equity to deduct a loss on a policy (/) Bilbie v. Lumley,2 East, 469. See

underwritten by a testator with a broker, also Kelly v. Solari, 9 M. d: W. 54; Higgs

from the amount due from the broker to v. Scott^ 7 C. B. 6S.
the executors for premiums, Beckwith (m) Macfarline ▼. Giaunocopulo, 9 H.

▼. BulUn, 8 £. & B. 683. & N. 860.

(^) 1 Park on Ins. 193 ; and see per (n) The action is in assumpsit if the

Lord Ellenborough in Shepherd v. Chew- policy is not under seal ; if it is, the

ter, 1 Camp. 275, and Luckie v. Bushby, action is in debt or covenant By the

13 C. B. 864. Common Law Procedure Act, 1852 (15

(A) See the note to Shepherd y. Chew- 8c 16 Vict. c. 76, s. 3), no form of ac

tert ubi supra, and Herbert v. Champion, tion need be mentioned in the writ of

1 Camp. 134. summons. As to the mode in which

(t) Christian v. Coombe, 2 Esp. 489; the interest of the assured may be

Sheriff v. Potts, 5 Esp. 96 ; and see the averred in the declaration, see Rule 9

observation of Sir J. Mansfield, C. J., of the Pleading Rules of Hilary Term,

in Steel v. Lacy, 3 Taunt. 286 ; Reyner 1853.



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INSURANCE. 377

shall be referred to arbitration (o). But it has been recently
decided in the House of Lords, that, although where a right of
action has accrued, the parties cannot by contract provide that
the Courts shall not have jurisdiction to award and enforce
damages in respect of it, yet, that there is no objection to a con-
dition in a policy of insurance stipulating that if any difference
shall arise it shall be referred to arbitration to settle the amount
payable, and that the obtaining the decision of the arbitrators
shall be a condition precedent to the maintaining an action ; for
this is in fact only a qualified contract of insurance, and such a
provision operates to prevent any cause of action whatever from
arising until the amount to be paid has been ascertained by the
arbitrators (p).

If the policy is under seal, and distinctly shows on the face of
it who are the parties to it (as between A. of the one part, and
B. of the other part), no person not a party to it can sue on it,
although it appear to have been made for his benefit (9); if,
however, the policy is by deedpoUy and is effected with one of
several owners who is named in it, the other parties really inte-
rested in the subject-matter of the insurance may sue on it
jointly with him, although they are not named in the deed, pro-
vided they are sufficiently designated in it, that is to say, if the
policy shows that there are other parties interested, and the
covenants are made with the "assured" (r). If the policy is
not under seal, the action may be brought in the name either of
the principal or of the agent who effected it {s). It is hardly
necessary to observe, that the several underwriters are not
jointly, but severally, liable on their subscriptions.

Where two or more actions are brought against different Consolidation
defendants on the same policy {t), or if the same question is "^®*
involved in several actions on different poUcies(K), the Court

(0) Kill Y.HoUister, 1 Wils. 129. See tice for policies by deed poll to be ef-

alto Thompson y. Chamock, 8 T. R. 139; fected by agents or brokers, " for and in

Harris y.Retfnolds, 7 Q. B. 71 ; Scott v. the names of all persons to whom the

Jpenff 8 Ex. 487 ; Horton v. Sayer, 4 H. same doth appertain," &c. There ap-

& N. 643. pears to be no doubt that on such po-

(p) Scott V. Avery^ 5 H. of L. Cases, licies the principals may sue the under-

811 ; S. C, Cam. Scacc. 8 Ex. 497. writers.

See also Com. Law Proc. Act, 1854, s. 1 1. (s) 1 Chit Plead. 8 ; ante^ p. 222.

(q) 2 Inst. 673 ; and see ante, p. 223. (t) HoUingsworth y. Brodrick, 4 A. &

Policies are rarely by deed inter partes, E. 646 ; Arch. Pract. (1856), 1275.

(r) The Sunderland Marine Insurance (u) McGregor v. Horsfall, 3 M. & W.

Company y. Kearney , 16 Q. B. 925. See 320 ; Ohrly y. Dunbar^ 5 A. & E. 824 ;

also Green ▼. Home, 1 Salk. 197 ; and 1 see also Sharp v. Lethbridge, 4:M» & Gr.

Chit Plead. 4. It is a common prac- 37;



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378 INSURANCE.

willy on the application of the defendants at any time after
appearance, grant a consolidation rule staying the proceedings
in all the actions but one, upon the defendants undertaking to
be bound in the others by the result of that one. This rule is
considered as a favour to the defendants ; the Courts have not,
therefore, usually granted it except with the consent of the
plaintiflF(y). The defendant is bound, under the terms of the
ordinary rule, by the verdict in the first action, if it is satis-
factory to the judge. But the Court will not, without consent,
bind the plaintiff by the result of the first action {z) ; nor will
he, after the ordinary rule, be restrained fi*om bringing a second
action, although he has not paid the costs of the first (a).

A claim against the assured for premiums due firom them,
cannot be set off in an action on the policy for a partial loss,
even if it have been adjusted ; for in either case the action is
only for unliquidated damages (b).

Eflfcctofpro- Policies underwritten by joint stock co-partnerships and by

of Company" * Corporations, often contain stipulations that the funds of the

shall be alone body shall alone be subject to make good the loss, and that no

members shall shareholder shall be liable to be charged by reason of the policy,

be liable only bevond the amount of his shares in the public stock.

to extent of :; . i i •

their shares. Where an action was brought agamst a corporation on a

policy which contained a provision to this effect, and also a
covenant that the fimds should be liable and should be applied
to make good the loss, it was held that this amounted to an
absolute covenant by the corporation to pay the sum insured if
a loss was incurred, and that it was not necessary to aver in
the declaration that the funds were su£Scient to meet the de-
mand (c). It is very doubtful whether the deficiency of funds,
if pleaded, is any defence in such a case to an action against a
corporate body. The indication of the source out of which the
claim is to be paid, seems rather to impose a duty on the in-

(y) Doyle y. Anderson, 1 A. & E. 635 ; 864. See also Beckwith v. BuUen, 8

McGregor v. Horsfalh 3 M. & W. 320. 8 E. & B. 683.

In Hollingsworth v. Brodrick,^ A. & E. (c) The Sunderland Marine Tnturamee

646, the Court granted the rule, although Company y, Kearney ^ 16 Q. B. 925, It

the plaintiff objected, but it was after- is to be observed, that this was not the

war^ drawn up by consent. case of a company completely registered

(z) Doyle v. Anderson, ubi supra, under the 7 & 8 Vict, c 110, but of a

(a) Doyle v. Douglas, 4 B. & Ad. corporate body the individual members

544. of which could not be charged person-

(6) Castelli v. Boddington, 1 E. £^ B. ally, the corporate fiind alone being

66, 879; Luckh v. Bushby, 13 C. B. liable.



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INSURANCE.

surers to raise the fund, than to make its existence a condition
precedent to their liability (rf). Where such a policy was
granted by a joint stock company not registered, and the action
was brought against the subscribing directoi^s, it was held, on a
declaration which averred the sufficiency of the funds (an aver-
ment which appears to have been necessary), that the defendants
were personally and jointly liable (e). If the members of such
a co-partnership who sign the policy have power to bind their
co-partners, it is not necessary to sue the members who signed;
the other shareholders may be sued, and are liable to the extent
of their shares (/). It was held, indeed, where a judgment was
recovered against a company completely registered under the
7 & 8 Vict. c. 110, upon a policy containing a stipulation that
the proprietors should not be liable beyond the amount of
their shares, but that the company's capital stock alone should
be liable, that the plaintiff was not entitled to issue execution
against an individual shareholder who had not signed the
policy ig).

Where such a policy was granted by a joint stock company,
which was not registered under the Joint Stock Companies'
Act, it was held, that, although the funds of the company were
sufficient to pay the amount of the loss, shareholders who had
not signed the policy were not liable to be sued jointly on it.
It would seem, however, that if the directors who sign the policy
have authority to do so, the shareholders who do not sign are
liable to be sued severally, each to the amount of his unpaid up
capital in the company; and that the liability of the directors, and
in particular of those who sign the policy, may be more exten-
sive, since they have the funds of the company in their hands,
and therefore they may be considered to promise jointly to

(J) Tk* Sunderland Marine Insurance liability is to the extent of their unpaid

Company ▼. Kearney^ 16 Q. B. 925 ; PiU up $hare9. See the allegations in the

hrow ▼. PUbrowi's Mmotpheric Railway declaration in this case, and Halleti v.

Coutpany, 5 C. B. 440. Dowdall, ubi supra.

{e) Dawson v. Wrench^ 3 Ex. 359. (g) Halkett v. The Merchant Traders*

The question arose in this case on de- Ship Loan and Insurance Jssocialionf 8

murrer, and the declaration alleged in Q. B. 960 ; Hassell v. The Merchant

substance that the defendants contracted Traders* Ship Loan and Insurance As-

jointly. Unless, however, a distinction sociationf 4 Ex. 525. It is difficult to

can be supported between the liability reconcile these cases with the rule laid

of the directors who actually sign the down in Dawson v. Wrench, and HalUtt

policy, and that of the other share- v. Dowdall, ^hi supra, unless a distinction

holders, it would appear that the con- can be made as to the meaning of these

tract was not, tn /act, joint. See Hallett con.tract8 when entered into by re-

▼. Dowdtdl, 18 Q. B. 2. gistered and unregistered joint stock

(/) lUtd V. Allan, 4 Ex. 326. The companies.



379



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380



INSURANCE.



apply them towards the payment of the losses. It is, however,
difficult to see how the contract of the directors, or of those who
sign the policy, can be diflFerent from that of the other share-
holders, if the policy has been issued under the authority of all
the shareholders (A).



Return op

PREMIUM.

Where risk
never com-
mences, or is
apportionable.



As the premium is the consideration paid to the underwriter
for assuring a risk, where th at risk is n ot incurred it must be
ret umedj^ Thus, if the policy be on goods, and none are
shipped, the premium must be returned, for the risk never com-
menced (i). So, if a ship be insured for a particular voyage,
and she sails on that voyage in an unseaworthy state, but with-
out fraud on the part of the assured (k), or if a policy be effected
on an enemy's goods before the commencement of hostilities is
known (/), or if at the time of insuring a ship on her voyage she
has arrived, and the underwriter knows it(m), in all these
cases, as the policy never attaches, and no risk is incurred, the
premium must be returned. So where, before the risk com-
mences, there is a breach of warranty by the assured which
prevents the liability of the underwriters from attaching, as
where the ship is warranted to sail with convoy, and does
not(w), or the policy is avoided by a misrepresentation made
by the assured without fraud, and the risk never attaches, the
premium is returnable (o).

Although the premium paid be entire , the assured will still
be entitled to receive back a portion of it, if the risk for which



(h) Halleti v. Dowdall, 18 Q. B. 2.
There was in this case considerable dif-
ference of opinion among the Judges as
to the construction and effect of the
contract. As far as the decisions have
gone in cases of this description, the
Courts appear to have decided, ( 1 ), that
in contracts by corporations these re-
stricting clauses have no effect ;/2),
that in contracts by joint stock com-
panies not registered they limit the con-
tract, so that shareholders who have not
executed the policy cannot be sued
jointly on it; and (3), that where they
occur in contracts by joint stock com-
panies completely registered, they limit
the execution, by depriving the assured
of the rights of issuing execution against
individual shareholders, which he other-
wise would have had under the 7 & 8
Vict. c. 110. The difficulties which
have arisen in these cases appear to have
resulted from an attempt to create a



partnership contract with a limited and
varying liability in the different mem-
bers.

(i) Martin v. Sitwell, Show. 156.

(k) Penson v. Lee, 2 B. & P. 830 ; and
see the judgment of Buller, J., in Lowry
V. Bourdieu, 2 Doug. 471.

(/) Oom V. Bruce, 12 East, 225.

(m) Seethe judgment of Lord Mani-
ffeld in Carter v. Boehm, 3 Burr. 1909.
This amounts to a fraud on the part of
the underwriter. It has been doubted
whether, if both parties are ignorant of
the ship's arrival, and the policy is
** lost or not lost,*' the premium could
be recovered. See 2 Park on Ins. 562.

(n) Stevenson v. Snow, 3 Butt. 1237;
Long V. Allan, 4 Doug. 276. See also the
judgment of Lawrence, J., in Ckriitie v.
Secretan, 8 T. R. 198 ; Colby y. Hunter,
Moo. & M. 81.

(o) Feite v. Parkinson, 4 Taunt. 640 ;
Anderson v. Thornton, 8 Ex. 425.



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INSURANCE. 381

it is paid can be apportioned. Thus, where a ship insured from
London to Halifax^ to depart with convoy from Portsmouth,
was unable to proceed beyond the latter place, as when she
reached it the convoy had sailed, and an usage was proved to
return part of the premium in such a case, the Court held that
the premium might be divided into two distinct parts, relatively,
as it were, to two voyages, and that that proportion of it which
covered the risk not run, ought to be returned (p). If, however,



Online LibraryCharles Edward Pollock Frederic Philip MaudeCompendium of the law of merchant shipping → online text (page 47 of 101)