Partial Loss (Particular Average)

1.2m. The sound replacement value of the ship was 675,000. The Court held that section 69(3) applied. Rabin J, sitting at the New York Supreme Court, stated that while the Act is otherwise a model of brevity and lucidity, and elsewhere sets forth an explicit formula for the partial loss of cargo (Section 71), the intended formula to define ‘reasonable depreciation’ in the case of valued hull insurance is not clear. The judge referred to Elcock v Thomson, where the formula of recovery used was a percentage of the insured value equal to the percentage of actual depreciation. In The Armar this formula was applied as follows: the value of the vessel in her present condition was 218,000. Her sound value undamaged was 675,000. The difference was 457,000. An equal percentage of the insured value would be 812,400, which would be the maximum that the assured could recover for repairs. The cost of repairs was 736,315, which was within the bounds of the limitation imposed by the formula and thus recoverable.

Partial loss of the freight

Section 70 of the MIA 1906 provides ‘Subject to any express provision in the policy, where there is a partial loss of freight, the measure of indemnity is such proportion 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 proportion of freight lost by the assured bears to the whole freight at the risk of the assured under the policy.’

There is a partial loss of freight under a general policy on freight, if there is a general average loss caused by a peril insured against giving rise to a general average contribution; or under certain circumstances if there is a total loss of part of a cargo; or if in case of total loss of the ship the cargo is sent on in a substituted ship; or if in case of a total loss of the cargo the ship earns some freight in respect of other goods carried on the voyage insured.³⁷

Successive losses

Section 77 of the Marine Insurance Act 1906 provides that the insurer is liable for successive losses, even though the total amount of such losses may exceed the sum insured (s.77(1)). Under the same policy, if a partial loss, which has not been repaired or otherwise made good, is followed by a total loss, the assured can only recover in respect of the total loss (s.77(2)).

Although no one partial loss could give rise to a right of indemnity in excess of the insured value, the aggregate of more than one such partial loss could do so.³⁸ If a ship is damaged and repaired and becomes a total loss subsequently, the assured may recover for both the cost of repair and the total loss of the vessel. In Le Cheminant v Pearson the ship sailed and was damaged by perils of the sea, and sue and labour expenses were incurred to save the ship. Following this the ship was captured and became a total loss. The action was brought to recover the sue and labour expenses as well as the total loss of the ship. It was held that in addition to the total loss of the ship the assured can recover the expenses for sue and labour ‘without making any distinction whether it was recoverable as an average loss from damage repaired, or within the words of the permission to “sue, labour, and travail, &c.”’³⁹ This rule applies when the subject matter insured was actually repaired.

If no repairs have been made, as stated above, under s.77(2), no previous partial loss can be recovered in addition to the total loss of the subject matter insured. Willes J explained in Lidgett v Secretan:⁴⁰

A partial loss is not paid for if there is a total loss of the vessel during the period covered by the policy; because, when the underwriter pays the total loss, he actually discharges all partial losses occurring during the voyage – except such as fall within the suing and labouring clause, which are apart from the sum insured.

In Livie v Janson⁴¹ during the currency of the insurance the ship was damaged by ice driving the ship ashore. The master and crew endeavoured without success to get the ship off and the next morning she was discovered and seized by the American authorities. The question was, does the total loss by subsequent seizure and condemnation denude the assured of the right to recover in respect to the previous partial loss by sea-damage? The court held that it does: the substantive loss was the total loss of the vessel which was attributable to the seizure only.

Livie v Janson was applied in British & Foreign Insurance Co Ltd v Wilson Shipping Co Ltd⁴² in which case during the currency of the policy the vessel sustained damage by marine risks, but, to the extent of £1,770, this damage was not repaired. On a subsequent voyage, but during the currency of the policy, the vessel became a total loss by war perils. The question was whether under a policy of marine insurance the assured can recover in respect of damage sustained by the ship insured during the currency of the policy when the ship is totally lost before the damage is in fact repaired. The issue is to be considered under two different headings separately. First, where the total loss is caused by a peril insured against by the policy in question and therefore the insurer is liable and second, where the loss is not covered by the policy and thus the insurer is not liable. The first case is governed by s.77(2) of the MIA 1906. The second case is not dealt with by the Act. In Livie v Janson