cargo, freight, profits or commissions. Such adjustments also involve the application of many technical rules which are of primary interest to expert average adjusters and which it is not the purpose of this volume to discuss.

Where a vessel is damaged by a marine peril covered by the policy, the insured is entitled to the "reasonable cost of the repairs, less customary deductions, but not exceeding the sum insured in respect to any one casualty." If the vessel remains unrepaired and also unsold in the damaged state, the indemnification should equal "the reasonable depreciation arising from the unrepaired damage, but not exceeding the reasonable cost of repairing such damage." Again, if the vessel is only partially repaired, the indemnification should equal "the reasonable cost of such repairs" plus "the reasonable depreciation arising from the unrepaired damage," the total, however, "not exceeding the cost of repairing the whole damage. "5 Since particular average losses are usually paid by underwriters in the proportion that the amount of insurance bears to the valuation stated in the policy, it is essential that the declared value of the vessel be a fair one. Low valuations unfairly benefit the insured, since the proportion of the loss assumed by the underwriter increases as the declared valuation of the vessel is lowered.

In the case of damaged goods the adjustment may also involve very complex problems which it is not the purpose of this chapter to discuss. The customary procedure has been described as follows: "

6

The gross sound value of the goods at the port of destination is compared with their market value in the

For a detailed statement of this and the foregoing rules, see Richards: "A Treatise on the Law of Insurance," p. 254. S. S. Huebner: "Marine Insurance," p. 95.

damaged state, and the term value is meant to include freight, duty, and other expenses necessary to place the goods upon the market in question. The percentage thus obtained is then applied to the amount of insurance under the policy. In addition the underwriter must also assume all expenses involved in the settlement of the loss. The sum thus ascertained will be paid by the underwriter on the coinsurance principle, i.e., in the proportion that the amount of insurance carried by the insured bears to the value of the goods. But should the insurance exceed the value of the goods, the underwriter is proportionately liable for more than the loss actually incurred.

Salvage. Salvage charges, according to the British Marine Insurance Act, refer to the "charges recoverable under maritime law by a salvor independently of contract," and "do not include the expenses for services in the nature of salvage rendered by the assured or his agents, or any person in employ for hire by them, for the purpose of averting a peril insured against." Salvage does not come under the "sue and labor clause" for the reason that the salvors were not in the service of the insured.

If the amount of remuneration cannot be determined by agreement between owner and salvor, it becomes necessary to have an admiralty court fix the same. In doing so the court will take into account the value of the property saved and the extent of the labor, risk, and expense involved. Until such salvage award is paid the salvor has either a "possessory lien" or a "maritime lien" on the property, depending upon whether or not it is in his possession. Salvage awards are usually apportioned over the values of the various interests saved, just as in the case of general average, and are recovered from underwriters in exactly the same manner, providing the contributing interests are insured.

CHAPTER XXVI

POLICY ENDORSEMENTS IN MARINE INSURANCE

Multitudinous Character of Such Endorsements.— There is an almost endless variety of endorsements attaching to marine policies in order to express special agreements entered into by the contracting parties with a view to changing or supplementing the provisions contained in the printed form of the policy. Possessing so many phases as does marine insurance, it is only natural that the needs of both merchants and underwriters should require numerous modifications of ordinary policy provisions which were designed to apply only to a general situation. If fire insurance, with its single peril, requires the use of special endorsements, how much greater must be the need for such endorsements in marine insurance with its numerous perils affected by different conditions, its many types of vessels and hundreds of kinds of commodities varying greatly in their inherent characteristics, and its several types of losses and many methods of coverage.

How large the number of special endorsements in marine insurance is may be judged from the fact that each of a number of available collections makes a volume of several hundred pages. To reproduce or describe them all is quite impracticable, so an attempt will be made

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1

Previous chapters refer extensively to a number of very impor tant clauses, such as the "Sue, Labor and Travel Clause," the "Memorandum," "Collision Clause," "War Clause," "Disbursements Warranty," and "Inchmaree Clause." These and other clauses at one time took the form of endorsements, but their use became so general in recent years that they are now, as a rule, incorporated within the printed portion of the policy and are no longer regarded as constituting special agreements.

merely to indicate their nature by giving the principal groups under which they may be classified. These groups are nine in number, and with comparatively few exceptions comprise all of the endorsements now in use. The groups of endorsements referred to are those:

Varying the Memorandum.-The nature and importance of the customary memorandum clause in cargo insurance has already been noted. But numerous modifications of this arrangement, in the form of "average clauses," are used with respect to cargo and hull risks, and all have an important bearing upon the underwriter's liability, and consequently upon the rate of premium. Sometimes policies are endorsed "F. P. A." or "F. G. A.," meaning that the policy is "Free from Particular Average" or "Free from General Average," and that the underwriter's liability does not extend to one or the other of these types of losses. When particular average is covered the policy may provide that liability will only be assumed if the loss is due to certain specific perils like stranding, sinking, burning or collision. Or, the severity of the application of the memorandum percentages may be modified in the interest of the insured by sub-dividing the cargo or vessel into "series," so that the percentage of loss necessary to make the underwriter liable will apply to much smaller values, whereas under the ordinary memorandum the absolute loss represented by the franchise might be unduly large before the underwriter assumes liability, as for example, $20,000 on a $200,000 cargo under a 10 per cent limitation. Again, policies may be endorsed "free of particular average under per cent, which is deductible," thus greatly reducing the underwriter's liability, since it extends only to the excess portion of any loss over and above the stated percentage, whereas under the ordinary memorandum the underwriter becomes liable for the entire loss as soon as the stated percentage is reached.

Among the remaining average clauses, two have assumed great importance, namely, the "F. P. A. A. C. Clause" (Free of Particular Average American Conditions) and the "F. P. A. E. C. Clause" (Free of Particular Average English Conditions). Translated, the first of these clauses reads "free of particular average unless caused by stranding, sinking, burning or collision with another vessel," and the second "free of particular average unless the vessel or craft be stranded, sunk, burnt or in collision." The distinction between the two clauses lies in the difference between the words "unless caused by" and "unless the craft be stranded, etc.," and the legal construction placed by the courts upon these words. The difference has been explained as follows: 2

Under the American form the underwriter is not liable for partial losses unless one of the four enumerated casualties has been the proximate cause. The English form, however, renders the underwriter responsible for partial losses which may be caused, previously or subsequently to the occurrence of one of the four stipulated hazards, by some casualty not at all related to stranding, sinking, burning or collision. In other words, should any one of the four casualties happen, even though in a technical sense, the underwriter stands to lose all protection under the clause for the balance of the voyage and will be responsible for partial losses occasioned by any of the numerous perils covered by the policy. A temporary stranding of only a few hours without the slightest injury to the cargo will nullify the clause for the remainder of the voyage and subject the underwriter to the ordinary provisions of the policy. Or it may happen that a heavy water damage is occasioned by stress of weather. If none of the four casualties occurs no portion of this loss is collectible. But assuming that subsequently there be a slight stranding or collision, automatically the clause will be changed into a "sub

2 S. S. Huebner: "Marine Insurance," pp. 108–109.