VIII. Growth of the Law of Marine Insurance
THE codification of laws and statutes of any kind not being in the genius of the English people, the nation, unlike other seafaring races preceding it as masters of the ocean, not only never possessed a code of marine insurance, but it was long before even the simplest rules concerning the subject were admitted as law-giving in judicial decisions. There is no record of any trial affecting questions of marine insurance earlier than the end of the sixteenth century, and the report of this first action, which occurred in the 31st year of the reign of Queen Elizabeth, shows that at this period the judges were unacquainted with even the nature of insurance contracts. Whether it was owing to this judicial ignorance, or to other causes, actions continued very rare for more than half a century afterwards, the total number from the reign of Queen Elizabeth till the year 1756, when the Earl of Mansfield became Lord Chief Justice, not exceeding three score, as far as reported. It was mainly the eminent judge here named who, after devoting himself assiduously and earnestly to the study of the principles of the subject, and their application in other countries, laid, in numerous decisions, the basis of what came to serve, in default of an actual code, as a law system of marine insurance.
Referring to the labours of Lord Mansfield, Mr. Justice Blackstone remarks, in his celebrated Commentaries: “The learning relating to marine insurances has of late years been greatly improved by a series of judicial decisions, which have now established the law in such a variety of cases, that, if well and judiciously collected, they would form a very complete title in a code of commercial jurisprudence.” Acting on this recommendation, Mr. James Allan Park, an eminent barrister of Lincoln’s Inn, undertook, in 1780, the collection of the whole “series of judicial decisions” up to this date, and published them in 1786, with a dedication to Lord Mansfield, who revised the work, under the title of “A System of the Law of Marine Insurances.” Notwithstanding many later publications, some by distinguished authors, Mr. Park’s “System” is to this day admitted the standard book on the law of marine insurance.
In Mr. Park’s great work the law of marine insurance is explained under various headings, each one exhausting a definite division forming part of the whole; and this arrangement is so comprehensive as not to be easily liable of improvement, and will therefore be followed here in treating of the subject. The first division naturally offering itself is regarding the policy of insurance. “Policy,” as laid down by Mr. Park, “is the name given to the instrument by which the contract of indemnity is effected between the insurer and insured, and it is not, like most contracts, signed by both parties, but only by the insurer, who on that account, it is supposed, is denominated an underwriter. Notwithstanding this there are certain conditions to be performed as well by the person not subscribing as by the underwriter, otherwise the policy will be void.”
“Of policies,” says Mr. Park, “there seem to be two kinds, ‘valued’ and ‘open’ policies, and the only difference between them is this, that in the former goods or property insured are valued at prime cost, at the time of effecting the policy, while in the latter the value is not mentioned. Thus in the case of an open policy the value must be proved; in a valued policy it is agreed, and is just as if the parties had admitted it at the trial. Although policies of assurance are not to be ranked with special contracts, not being under seal, yet they have always been held as sacred agreements, and of the first credit; so much so that when once they are underwritten they can never be altered by any authority whatever, because this would open a door to an infinite variety of frauds, and introduce uncertainty into a species of contract of which certainty and precision are the most essential requisites.” Mr. Park adds, further on, “It is material to observe that policies of insurance, though called ‘written’ instruments, are, for the convenience of trade and the despatch of business, generally printed, leaving blanks for the insertion of names and all other requisites. This being the case, it is frequently necessary to insert written clauses, in order to express the meaning of the parties to the contract, which, from some particular circumstances the printed form may not sufficiently explain. These written clauses and conditions, thus inserted, are to be considered as the real contract; the court will look to them to find out the intention of the parties, and will consequently suffer such conditions to control the printed words in policies of insurance.”
As marine insurance came to develop itself in the course of the seventeenth century, the main question that offered itself for judicial decision as regards policies, was one regarding the construction of these documents. Differences of opinion occurred at the outset among the judges; but after a while the principle of the subject was laid down in two celebrated trials which have remained leading cases to this day. The first of these trials, presided over by Lord Chief Justice Lee, known as “Tiernay v. Etherington,” occurred in 1743. It was an action against some London underwriters, upon a policy of insurance “on goods, in a Dutch ship, from Malaga to Gibraltar, and at and from thence to England and Holland, both or either; on goods as hereunder agreed, beginning the adventure from the loading, and to continue till the ship and goods be arrived at England, or Holland, and there safely landed.” The agreement referred to was “that upon the arrival of the ship at Gibraltar, the goods might be unloaded, and re-shipped in one or more British ship or ships for England and Holland, and to return one per cent, if discharged in England.” It appeared in evidence that when the vessel arrived at Gibraltar, the goods were unloaded and placed, instead of into a warehouse on shore, into a so-called store-ship, used as a warehouse, and that at that time there was no “British ship” into which, as stipulated in the policy, the goods could be at once “re-shipped.” Two days after the transfer into the store-ship had taken place, the whole cargo was lost in a violent storm, and the question to be decided by the Court of King’s Bench was, whether this was a loss within the construction of the policy. In delivering the decision, which was on all points for the plaintiff, and against the underwriters, Lord Chief Justice Lee uttered observations subsequently adopted as guiding in law.
“It is certain,” ruled his lordship, “that in the construction of policies the strictum jus, or apex juris, is not to be laid hold of; but they are to be construed largely, for the benefit of trade and for the insured. Now it seems to be a strict construction to confine this insurance only to the unloading and re-shipping and the accidents attending that act. The construction should be according to the course of trade in this place, and this appears to be the usual mode of unloading and re-shipping in that place, viz. that when there is no British ship there, then the goods are kept in store-ships. Where there is an insurance on goods on board such a ship, that insurance extends to the carrying the goods to shore in a boat. So if an assurance be of goods to such a city, and the goods are brought in safety to such a port, though distant from the city, that is a compliance with the policy, if that be the usual place to which the ships come. Therefore, as here is a liberty given of unloading and re-shipping, it must be taken to be an insuring under such methods as are proper for unloading and re-shipping. There is no neglect on the part of the insured, for the goods were brought into port the nineteenth, and were lost the twenty-second of November. This manner of unloading and re-shipping is to be considered as the necessary means of attaining that which was intended by the policy, and seems to be the same as if it had happened in the act of unshipping from one vessel into another. And as this is the known course of the trade, it seems extraordinary if it was not intended. This is therefore not to be considered as an extension of the policy; for as the policy would extend to a loss, happening in the unloading and re-shipping from one vessel to another, so any means to attain that end come within the meaning of the policy.” Not content with this verdict, and thoroughly aware of its far-bearing influence, the defendant underwriters moved for a new trial, but had it refused by the united opinion of the judges, all adhering to the principle, henceforth ruling in law, of a liberal construction of the policy.
The second of the two leading trials referred to took place in 1759, before Lord Mansfield. It was an action brought against the Royal Exchange Assurance Corporation by one Mr. Pelly, part owner of the ship “Onslow,” an East India trader, upon a policy insuring the vessel “at and from London, to any port or place beyond the Cape of Good Hope, and back to London, free from average, under ten per cent, upon the body, tackle, apparel, ordnance, munition, artillery, boat, and other furniture of and in the said ship; beginning the adventure upon the said ship from and immediately following the date of the policy, and so to continue and endure until the ship shall be arrived as above, and there anchored twenty-four hours in good safety.” The perils mentioned in the policy were the common perils, namely “of the seas, men of war, fire,” &c. It was put in evidence that the “Onslow” left London, and safely arrived in the river Canton, China, where she was to clean and refit, and for other purposes. Immediately upon her arrival, the sails, yards, tackle, cables, rigging, and other furniture, were, by the captain’s orders, taken out for repair, and put into a warehouse, or ship-store, locally known as a “bank-saul,” situated on a small island in the river. A short time after this had been done, a fire broke out on board a Swedish ship anchored at the island, and, communicating itself to the “bank-saul,” the whole of the property belonging to the “Onslow” was destroyed. There were witnesses to prove that it had been the custom and usage, during a great number of years, for all European ships, except Dutch, to unrig after arrival in the river Canton, and to place their sails and other furniture in warehouses similar to that of the “Onslow;” and it was argued on the plaintiff’s side that the act was not only a prudent course, but for the common benefit of the insurers as well as the insured. This was strongly denied by the defendants, many arguments being adduced. These, however, did not convince the jury, which delivered a verdict in favour of the plaintiffs. A case was reserved for the whole court, which took time to consider the intricate questions involved, and in the end unanimously confirmed the verdict of the jury, declaring the Royal Exchange Assurance Corporation liable within the intent and meaning of the policy.
In delivering the judgment of the Court, one of admirable lucidity, the Lord Chief Justice made many important remarks, often afterwards quoted in trials affecting questions of marine insurance. “By the express words of the policy,” Lord Mansfield laid down the rule, “the defendants have insured the tackle, apparel, and other furniture of the ‘Onslow,’ from fire, during the whole time of her voyage, until her return in safety to London, without any restriction. Her tackle, apparel, and furniture were inevitably burnt in China, during the voyage, before her return to London. The event, then, which has happened, is a loss within the general words of the policy, and it is incumbent upon the defendants to show, from the manner in which this misfortune happened, or from other circumstances, that it ought to be construed a peril which they did not undertake to bear. If the chance be varied, or the voyage altered, by the fault of the owner or master of the ship, the insurer ceases to be liable, because he is only understood to engage that the thing shall be done safe from fortuitous dangers, provided due means are used by the trader to attain that end. But the master is not in fault if what he did was done in the usual course, and for just reasons. The insurer, in estimating the price at which he is willing to indemnify the trader against all risks, must have under his consideration the nature of the voyage to be performed, and the usual course and manner of doing it. Everything done in the usual course must have been foreseen, and in contemplation at the time he engaged; he took the risk upon a supposition that what was usual or necessary should be done. In general, what is usually done by such a ship, with such a cargo, in such a voyage, is understood to be referred to by every policy, and to make a part of it as much as if it were expressed.”