CHAPTER IX

TOTAL LOSS OF SHIP AND OF CARGO

THE policy speaks of the underwriter taking upon himself the "burden of this insurance," and binding himself "for the true performance and fulfilment of the contract" therein contained. But the form which the underwriter's liability may assume, and the extent which it may reach, are left without special definition. All that can be gathered from the wording of the policy alone is that the assured is protected by the underwriter from certain named adventures, perils, losses, and misfortunes, and from all others (of the same kind) occurring to the hurt, detriment, or damage of the property insured or any part thereof.

There is nothing to be gained by attempting a theoretical deduction of the forms which this liability must take. The policy has been so modified by additions made to it from time to time that any such deduction would probably be most misleading. It will therefore be more suitable to take up the different forms of liability that have been found in practice. There is one form which must from the first have presented itself as indubitable, namely, total loss arising from any of the perils named in the policy.

Suppose a

Total Loss, Actual and Absolute. vessel leaves port on a voyage to San Francisco; some weeks after, the crew of this vessel are landed from another ship, and make a declaration that their vessel took fire in a particular position on a named day, that after being compelled to leave her in their boats they saw her explode and go down, that they were picked up by the rescuing ship so

many days after. If this declaration agrees with what else is known of the picking up of the crew, and is otherwise credible and trustworthy, there can be no doubt that “the burden" of an insurance covering fire will properly include losses of this class.

Similarly, suppose that a vessel leaves port properly equipped for a voyage, which on the average lasts three months; at the end of six months there is no news of her arrival at destination, nor any report of her passing islands or other stations on the track she was intended to take, nor any "speaking" with other vessels following or crossing that track or any in its neighbourhood. Time goes on, inquiry is made for news respecting the vessel; in absence of news of her safety she is formally "posted" as a missing ship. From the circumstances there can be no actual proof of the cause of loss; but as she left port a stout, strong, and staunch vessel fit for her intended voyage, the presumption is that she has perished by some of the perils named in the policy (whether they be of the elements or of man). This, therefore, also constitutes a loss, "the burden" of which should fall on the underwriter issuing his policy against perils of the sea.

Next, a vessel runs against a rocky headland, knocks in her bow, smashes her keel, and breaks up into pieces of iron and timber. What is left of her is no longer a ship, it is not a vessel that can be employed in the transport of goods from one place to another; should the fact of her materials remaining in a kind of existence in mass prevent the disaster from being considered a total loss?

Akin to these "losses and misfortunes are those that occur when the action of earthquake raising dry ground under ships, or of tidal waves sweeping ships inland, results in their being left high and dry up a mountain side or hundreds of yards from sea-board. They are in these positions quite unavailable for the performance of the work they were intended for; as far as the owner's intended employment is concerned they are as much taken out of his possession and control as if they had been seized by pirates or run off with by a barratrous captain or mutinous crew.

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The few instances given above will illustrate the very full definition given by Phillips.1

"S 1485. A total loss of a subject is when by the perils insured against it is destroyed or so injured as to be of trifling or no value to the assured for the purposes and uses for which it was intended, or is taken out of the possession and control of the assured, whereby he is deprived of it; or where the voyage or adventure for which the insurance is made is otherwise broken up by the perils insured against.” The last paragraph of this definition will be the subject of closer consideration when losses of cargo and of hire for carrying cargo are discussed.

The instances of total loss given above are so evident and uncompromising that they are properly described as actual total losses, or actual and absolute total losses. There is either nothing left of the ship at all, or nothing left in the possession and control of her owners, or only something that is of no value to the assured for the purposes and uses for which it was intended.

Constructive Total Loss.-But although a ship is not totally lost in any of these evidently uncompromising ways, she may still be a total loss. It has often occurred that a ship having run on rocks has sustained damage to her bottom, but sits upright in the water so that at a little distance she seems to a landsman's eye uninjured, or not seriously damaged. But the owner sees that in all probability she will never come off as a ship; that she may pound and grind herself over the rocks, but likely only to sink in deep water a mass of iron and timber; and that even if she is taken off as she is, the cost of repair will be so great as to render the taking of the vessel off a failure in a commercial sense.

In such a case the owner usually proceeds to give notice of abandonment (or to tender abandonment) to his underwriters. He in effect says: "My vessel is totally lost; pay me the amount for which you have insured her for me and I will transfer to you what remains of the property you have 1 See Cossmann v. West, 1887, Privy Council, 6 Asp. Mar. L. C. 233.

insured." If the underwriters accept the view propounded by the shipowner, or if after further progress and examination the owner turns out to be correct in his view, the total loss thus occurring is termed a "technical or constructive total loss,” that is, a loss not materially and actually, but only so regarded technically and by construction of law. There is no compulsion upon the owner to take the step of tendering abandonment; if he prefers he may await the result of efforts made to save the vessel, or even wait to see what the vessel's condition is when she comes to be examined for repairs. But by so doing he may completely alter his legal position; he may deprive himself of the possibility of claiming as a matter of legal right from his underwriters the payment of a total loss. If he awaits an examination of the ship with a view to repairs, he has to abide by its result, and take his indemnity in accordance therewith (Roux v. Salvador, 1836, per Lord Abinger).1

Abandonment and Notice of Abandonment. -In the consideration of constructive total loss it thus becomes necessary to discuss abandonment and notice of abandonment. These are two wholly distinct things 2; abandonment is a positive transfer of property, notice of abandonment is a declaration of intention to make such a transfer. It is not by English law put into the power of the assured to say, “Here, take my property, give me the amount for which you have assured it for me." All he can say is, "I give you notice that in consequence of such and such circumstances I now make my election and declare my intention to transfer my interest in what I have insured with you, demanding in return the sum insured, and here and now I make you the offer of this transfer." The implied meaning of the tender of abandonment is that the venture is in effect totally lost. Consequently the owner ought to tender abandonment as soon as he has such definite intelligence as will enable him to make up his mind that it is reasonably certain that the venture will in effect be totally lost. If he 1 3 Bing. N. C. 266.

2 Blackburn, J., in Rankin v. Potter, L. R. 6 H.L. 83 at 118, quoted by Lowndes, M. I. 153, note q.

delays past that time, then all that he does may be reckoned up against him as testimony of his unwillingness to tender abandonment at the proper time, and he may in consequence have to be satisfied with some form of indemnity that does not confer on him the payment of a total loss against the transfer of the property, but leaves him with that property repaired, so as only to be as good as it was before the accident causing the damage.

If the underwriter on receiving the notice or tender of abandonment accepts it, the abandonment takes effect and the property passes to him from the moment of tender, the consideration for the transfer being the payment of the sum insured. If the underwriter desires to accept abandonment he should notify this at once on receipt of the tender. If he returns no answer he must be taken to have declined to accept; this was settled in the case of Provincial Insurance Company of Canada v. Leduc, 1874.1

If the notice of abandonment to the underwriter has not been accepted, there is a possibility of neither assured nor underwriter taking steps to save the imperilled property; neither may be inclined to act in such a way as may be held to indicate an assumption of ownership which each wishes to disclaim. This is the reason of the existence of the "waiver clause" already mentioned (p. 120), by which it is "expressly declared and agreed that the acts of the assured or assurer in recovering, saving, and preserving the property assured shall not be considered as a waiver or acceptance of abandonment.” That is, the commencement or continuation by the assured of operations intended to preserve the insured property shall not be deemed to indicate a withdrawal of any notice of abandonment which he may have tendered; nor shall the commencement or continuation of operations by the underwriter be deemed to indicate that he regards the insured object as his property, and that therefore he must have accepted the abandonment.

If, on the other hand, the assured's tender of abandonment has been accepted, the abandonment is definitely 1 L. R. 6 P.C. 224.