CHAPTER I. GENERAL PRINCIPLES OF MARINE INSURANCE. MARINE INSURANCE, although perplexed with questions of The contract. great refinement and difficulty arising out of the intricate details of business and the intervention of fortuitous events, is yet of all the contracts known to the commercial law the simplest perhaps in respect of principle and the most philosophical in point of juridical development. The salutary nature of its object is pointed out by the same word which determines its principle and defines the whole course of legal decision. In its essential nature and in all its incidents it is a contract of indemnity. With this for its object, it seems to have originated with the early necessities and advantages of modern commerce. By this it is rigorously construed in our courts of justice, whatever be the use and purpose to which it happens to be bent. And from this the British Legislature have vigilantly provided that it shall not be diverted in order to serve the ends of the gambler. interest. Hence an insurable interest, of appreciable commercial Insurable value, in the subject of insurance is of the very essence of the right to recover upon this contract. In the absence of this the plaintiff is not damnified, although there has been a total loss, and notwithstanding he may have had at the time of effecting the policy such an interest as enabled him then to make a valid contract. If A. has a cargo of seed on its way by the ship Pomona from Taganrog to London, covered by an insurance to the full value, and sells it before arrival to B., the policy from the moment of the sale ceases to be of any value to A. But to B., in virtue of his acquired interest in 1 Lucena v. Craufurd, 2 B. & P. N. R. 269. Wager policies. the cargo, it becomes of value in case A. agrees to hold the policy on his behalf or assigns it over to him.' If B. before the arrival of the ship resells the cargo to C. to be delivered at London, C. is incapable of an assignment of the policy because the entire risk remains upon B.,2 and therefore B. retains his insurable interest notwithstanding his sale of the cargo, and is entitled to recover on the policy in case of loss. Any damnification of C. following upon a loss of the cargo by perils insured against, cannot arise except from a breach of B.'s contract to deliver, and therefore that is the basis and form of his action. But if C. were nevertheless allowed to recover on a policy upon the cargo, this right to recover could not arise upon a contract of indemnity, that is of marine insurance, since by supposition he has no interest in the cargo at the time of its loss through hich he could. be damnified by its destruction. A policy such as could be underwritten der the circumstances in this hypothesis would be a couaci not of indemnity but by way of wager on the event of the voyage. Policies of this nature appear to have come much into vogue in this country at a time when the romantic nature of British adventure in the Eastern Seas had the effect of introducing extravagant speculation into the business of the merchant, and of at length inducing all classes to run riot in this species of lottery, eager to brave ruin for the uncertain chance of instantly realizing a fortune. These contracts were decided to be lawful, and continued to be so held in our courts of justice until the Legislature interfered in 1746, having in 1720 passed the Bubble Act and in 1734 the Act against Stockjobbing. On less doubtful principles than in the two other instances the 19 Geo. 2, c. 37, declared all policies by 1 Powles v. Innes, 11 M. & W. 10. 2 See North of England Pure Oilcake Co. v. Archangel Maritime Bk. & Ins. Co., L. R., 10 Q. B. 249. 3 Differing therefore entirely from life insurance, which is merely a contract to pay a sum of money on the falling-in of the life; Dalby v. The Indian and London Life Assurance Co., 15 C. B. 365; a perfectly legal contract, though not of indemnity, provided it be within the limits prescribed by the 14 Geo. 3, c. 48. way of gaming or wagering to be illegal in respect of British ships and cargoes, with some few and these now almost obsolete exceptions. It is surprising to find an English lawyer so late as the time of Mr. Christian's edition of the Commentaries disputing the existence of any difference between these and contracts of marine insurance properly so called. It is unnecessary to appeal against this opinion, as does Mr. Phillips to the authority of Emerigon and Valin; the distinction rests on the essential nature and objects of Marine Insurance as being a contract of indemnity; a distinction held in view by the jurisprudence of all commercial countries, and so strictly observed now by the spirit of English law that a policy not expressly dispensing with proof of interest implies an insurable interest, which he that puts the contract in suit may be put to prove in the Courts of this country. Out of this essential character of the contract arises the Good faith. necessity for that good faith which is required to a greater degree in this than in any other contract not made between persons in confidential relations.1 On questions of pur chase and sale, provided there is neither fraud nor misrepresentation on either side, the prevailing maxim of the law is Caveat emptor. In contracts of guarantie, the guarantor voluntarily assumes the position of friend to him whose credit is in doubt, thereby impliedly waiving all information beyond that which his questions provoke, so that the only obligation on the other side in respect of prior information is not to conceal when inquiry is made. An entire change of obligations takes place in respect of the parties when strangers come together to negotiate a contract of indemnity. This probably never happens upon view of the subject of insurance: most probably that is at an unapproachable distance, and in the midst of the very perils against which an indemnity is sought. The nature of these 1 Carter v. Boehm, 3 Burr. 1906. 2 Parkinson v. Lee, 2 East, 314; and see Jones v. Just, L. R., 3 Q. B. 197, and Mody v. Gregson, L. R., 3 4 Exch. 49. 3 Lee v. Jones, 14 C. B., N. S. 386; 17 C. B., N. S. 482; 34 L. J. (C. P.) 131. Conditions of the contract. perils, be it of harbours, rivers, or seas, is matter of common knowledge between them. That the ship, whether she be the proposed subject of insurance or the actual means only of carriage, is tight, staunch, strong, and in every way fitted for the voyage, is the most favourable assumption from which the negotiations can start. That then being assumed as a fixed condition of their stipulations, the existence meanwhile of any state of facts which has the effect of removing entirely or somewhat aggravating the necessity for insurance, if a matter peculiarly within the knowledge of that party whose interest lies in misrepresenting or concealing it, goes to the essence of the contract, and if covered by the terms of the policy without the consent, in consequence of the ignorance, of the other contracting party, renders the contract a nullity. The underwriter, e. g., privately knows that the ship has arrived all safe, or the merchant that she is wrecked, or has taken the ground, or has necessarily sought a port of distress for repairs; the contract made in ignorance of this is of no binding force on the other party. On the contrary, if made in ignorance by both, and the subject of insurance is existing, or the words lost or not lost be introduced,1 the contract is binding.? It hence appears that marine insurance is a contract uberrima fidei, not because it appeals specially to the popular sentiment of fairness, or the stricter notion of equity, but because being a contract of indemnity it supposes disclosures frequently adverse to the interests of the man required to make them, simply however in order to that consent and agreement ad idem between the parties without which any contract whatever is altogether impossible. An indemnity however against the consequences of a person's own negligence or wrong would be a contract, if persons were found inconsiderate enough to enter into it, inimical to sound public policy and the general interests of mankind. I am aware that I am here in- 2 Accordingly, Stone v. Marine Ins. Co. Ocean, |