CHAPTER XXII TYPES OF MARINE INSURANCE POLICIES Definition of Marine Insurance.1-The purpose of marine insurance is to indemnify interested parties against loss, damage, or expense occasioned accidentally in connection with vessels, cargoes, and freight charges through any of the numerous perils incident to transportation by water. As will be explained in later chapters the modern marine insurance policy affords a very broad protection. Competition, in fact, has been responsible for the assumption by underwriters of nearly every conceivable hazard that may cause fortuitous loss to those engaged in commerce. Vessel owners are enabled through marine insurance to protect themselves against loss of hull, freight earnings, and every type of legal liability. The modern "warehouse to warehouse clause" enables goods to be covered from the time they leave the shipper's warehouse in the interior, For a detailed discussion of marine insurance, the reader is referred to William Gow: "Marine Insurance": A Handbook, 1913; S. S. Huebner: "Marine Insurance," 1920; "Status of Marine Insurance in the United States," 1920; "Legal Obstacles to the Development of Marine Insurance in the United States,' 1920; Frederick Templeman: "Marine Insurance; Its Principles and Practice," 1918; and William D. Winter: "Marine Insurance; Its Principles and Practice," 1919. Previous chapters of this volume have contained a discussion of the extent of marine insurance in the United States, its services, the personal character of the contract, the types of marine underwriters, reinsurance arrangements, and underwriters associations. The following six chapters, therefore, will be confined to those phases of the subject not yet discussed, namely, the types of policies, the perils covered, an analysis of the contract, types of losses, special endorsements, and rate making. through all the various stages of the journey, either by water or land carriers, until they are safely delivered to the warehouse of the consignee. In fact, marine insurance has so extended its sphere of influence in order to meet the needs of modern commerce as to justify its being called "transportation insurance." Absence of a Standard Policy.-Unlike the practice in fire insurance, no standard form of marine insurance policy is recognized by law in the United States. Most of the companies, it is true, use policies and endorsements which are substantially similar in character. Yet, the differences are sufficiently important to require a thorough familiarity with the contracts of different underwriters on the part of brokers and other buyers of insurance. In the interest of uniformity much more has been accomplished in Great Britain than in the United States. Although not requiring any particular form of policy, Great Britain has codified its marine insurance law in the famous Marine Insurance Act of 1906. All the essential rules governing the writing of marine insurance in Great Britain are carefully defined by this act. Moreover, the act sets forth the Lloyd's form of policy and presents in connection therewith the rules to be observed in interpreting its provisions. (For copy of Lloyd's form of policy see p. 344.) Introduced several centuries ago, Lloyd's policy still contains the quaint language of earlier days, and in many respects seems poorly adapted to the needs of modern commerce. But whatever may be said against the policy on this score is largely counterbalanced by the advantage of the certainty in meaning and the stability in marine insurance transactions which become possible through the use of a policy which has back of it several centuries of legal decisions, and which has acquired a more and more definite meaning until, to-day, nearly every word it contains has been interpreted by the courts. It is this desire to have a definitely interpreted contract as the basis of marine insurance transactions that has largely been responsible for the fact that numerous features of Lloyd's policy have been incorporated into American contracts. While a comparison of the different types of policies used in the United States shows that the phraseology varies considerably, a closer examination, whether with regard to vessel or cargo policies, will show that they all have been adapted to the particular risk from a common form-the Lloyd's form-and that despite variations the basic portion of the contract is approximately the same. The only real difference exists in the adaptation of the contract to certain particular conditions, and not in the essential form or content of the document itself. "Valued" and "Unvalued" Policies.-Marine insurance policies may conveniently be classified into at least fifteen groups or kinds, depending upon the nature of the risk assumed, or the basis upon which the policy is written. Our first classification relates to the presence or absence in the policy of an agreed valuation of the subject-matter of the insurance. When the commodity or vessel is definitely valued for insurance purposes, such as $50,000 of textiles or a vessel valued at $500,000, the policy is called "valued" in order to distinguish it from an "unvalued" one where the actual determination of the value of the insured property is deferred to the time of the occurrence of loss or damage. The real difference between the two becomes apparent upon the occurrence of a total loss. In that event, and assuming no deliberate fraud on the part of the insured, the valuation under the valued policy is accepted as the true value, although this may not actually be the case. Under an unvalued policy, on the contrary, the value must be ascertained by the usual methods of adjusting losses. In the case of partial losses, however, there must be, as regards either type of policy, an actual adjustment of the loss or damage sustained. Fire insurance, as previously noted, rarely presents cases of valued policies, unless so-called valued policy laws in certain states compel their use. In marine insurance, however, the use of valued policies is very general, and probably 90 per cent of all marine insurance is written under that form of contract. "Voyage" and "Time" Policies.-Voyage policies cover a definitely described voyage (either one way or return), as from New York to Liverpool. Time policies, on the contrary, grant insurance for a stated period of time, usually from noon of a given date to noon of the same date one year hence, and without reference to the number or character of voyages that may take place during the term of the insurance. Voyage policies are most usually written in connection with individual cargo shipments, whereas time policies find their greatest employment in the field of hull insurance, especially where vessels are employed in a regular trade. Under time policies the insured obtains the advantage of permanent protection over a considerable period of time, and is thus relieved of the inconvenience of renewing his insurance for each successive voyage. "Interest" and "Policy Proof of Interest" Policies.To be valid, a marine insurance policy must be supported by a legal insurable interest of the insured. In marine insurance, however, it often happens that the insured's interest, although real, is not susceptible of proof in a court of law. Thus, the insured may desire to be protected against the possibility of duty-free articles being placed on the dutiable list, or of existing duties being increased. Or he may desire to have insurance against loss arising out of the possible declaration of war, or out of his failure through marine disaster to earn anticipated freight. Such indefinite contingencies may well constitute the basis of insurance, and yet be incapable of sufficient proof to obtain legal support in a court of law. Accordingly, it is common, under many circumstances, for underwriters to issue policies that bear definite evidence of the underwriter's willingness to dispense with all proof of interest. Usually such words as "policy proof of interest" (the first letters furnishing the key to the so-called "P. P. I." policies), "interest or no interest," "all interest admitted," "without further proof of interest than the policy itself," etc., are endorsed on the policy. Any such special endorsement is in the nature of an honor agreement and signifies that by common consent the insured is entitled to the payment provided in the policy upon loss of or damage to the subjectmatter insured, irrespective of the fact that he has no strictly insurable interest in the same, or is incapable of proving his interest in a court of law. "Interest policies," on the contrary, clearly show that the insured possesses a true and defined interest in the subject-matter of the in surance. Classification of Hull Policies.-Policies adapted to the type of vessel.-Vessels are customarily grouped into four main types, namely, sail, auxiliary sail, steam, and power boats. Each of these particular classes presents its peculiar problems to the underwriter and these must be met with the use of especially adapted policies and endorsements. A further classification depends on the nature of the waters navigated or the particular use served by the vessel in question. Thus there are policies labeled as "steam boat only," "tug," "yacht," "whaling and fishing," "canal hull," "schooner," "barge," "lighterage," "lakehull," "river hull," "Great Lakes and river traffic, etc. While these various policies resemble each other in their general form and essential features, there are, nevertheless, important differences, especially by way of additional clauses designed to adapt the insurance to the vary |