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SHIP INSURANCES AND LOSS OF LIFE AT SEA.
THE speeches delivered by Mr. Chamberlain, and the administrative measures which he has taken as President of the Board of Trade, have once more aroused the public interest in the anxious question of the preservation of the lives of our seamen in the mercantile marine. It is a melancholy fact that the philanthropic efforts of Mr. Plimsoll, and the legislation which followed, have hitherto proved wholly ineffectual. The average annual loss among British seamen in the five years, 1877 to 1881, was 1,692 lives. That number increased in 1882 to 3,118, and it had reached 3,500 at the date of the latest returns. Much of this loss is preventible. Careless shipmasters and mates are responsible for many collisions and strandings; and hitherto the punishment awarded by the temporary suspension of certificates has erred on the side of leniency. For the reckless overloading of ships, for undermanning, in many cases to a dangerous degree, and for negligence in regard to repairs, shipowners and underwriters are mainly responsible.
The Royal Commission on Unseaworthy Ships hesitated to recommend a universal inspection of ships by the Government. They were unwilling to relieve the shipowner of responsibility; and they thought it would be more effectual to give the Board of Trade power to detain ships, and to institute criminal prosecutions. In practice, it is most difficult to bring home a direct personal responsibility to the shipowner. Even when the charge has been proved, it is said, 'The Board of Trade were authorised to detain the ship; and why did they not exercise the powers with which they have been invested?' Where, again, the Board of Trade has detained vessels on the ground that they were overladen, the shipowner has complained that he ought to have been informed beforehand of the limitations of load which the Board of Trade was determined to enforce. Undeterred by the acknowledged difficulty of the task, the Board of Trade, assisted by a most able departmental committee, with Sir Edward Reed as chairman, is engaged in the preparation of rules for the determination of load-lines; and a proposal has been made to enforce more
effectually the personal responsibility of shipowners, by the establishment in the principal seaports of courts of first instance, in the constitution of which the interests and the experience of the shipowners and the controlling and superintending authority of the Board of Trade shall be jointly represented.
As a subordinate member of the Government in the department of the Admiralty, I am precluded, even if I were disposed to do so, from offering any public criticisms on the policy of the Board of Trade; but my present official position is not incompatible with the limited purpose of the present paper. At a time when the country is full of anxiety for the lives of our seamen, and information is eagerly sought on the subject, I feel it my duty as a member of the Commission on Unseaworthy Ships, to whom the most recent inquiry on the preservation of life at sea was entrusted, to bring together in a connected form the valuable evidence presented to us, together with those portions of the Report of the Commission which deal with Marine Insurance.
The law on this subject presents problems of extreme intricacy, and it affects commercial interests of enormous magnitude. In a large trading community Marine Insurance is a necessity, and the very anomalies which a layman is disposed to criticise most severely have grown up with the express sanction of our legal tribunals, and indeed had their origin in the decisions of judges of great eminence. and authority. It would be rash and imprudent in the highest degree on the part of a private individual to press for changes in the law as it is at present laid down, without a deliberate and exhaustive examination of the whole subject. The necessity for such a revision will have been sufficiently established if it can be shown that the facility for insuring to the full, and sometimes to an exaggerated value, leads to carelessness and recklessness in the management of shipping, and is therefore a primary canse of the deplorable loss of life at sea.
The witnesses on the subject of Marine Insurance, who appeared before the Duke of Somerset's Commission, comprised barristers and solicitors largely engaged on commercial cases, and officials of Lloyd's and the Board of Trade. They were selected for their special knowledge, their high character, and freedom from bias and self-interest. The general tenour of their testimony will be appreciated from the following extracts from the Blue Book.
Mr. Harper, the Secretary of the Salvage Association of Lloyd's, was one of the ablest and most experienced witnesses who gave evidence before the Commission. 'Do you think,' he was asked, 'that this rule of law which enables the assured to recover more than the value of the property assured, has any tendency to make the shipowner or the master negligent?' 'It is,' he replied, in the very nature of things and in human nature, that it must be so. If a man
is in this position, that if he keeps his ship it is worth 8,000l. to him, but if he totally loses it, it is worth 10,000l. or 12,000l. to him, what other deduction can you possibly draw, but that he must have a bias in the direction of trying to get the 10,000l. or 12,000l?' In answer to another question Mr. Harper said, 'If you were to do away with insurance altogether I think the business of this Commission would be at an end directly.' Mr. Harper pointed out what minute and constant supervision is necessary to secure the seaworthiness of ships. 'The care of a ship,' as he truly said, 'divides itself into a hundred particulars; care in the appointment of a master, care in the selection of a crew, care in the officers of the ship, and general watchfulness; and that care is certainly likely to be relaxed in the case of an owner who knows that if his ship goes to the bottom, perhaps from the very circumstance that he has not paid sufficient attention to her, he not only gets the whole of his money invested in the ship, but a large profit in addition.'
Sir Thomas Farrer gave similar testimony. Being asked whether, in his opinion, our system of insurance had any effect upon the safety or danger of property and lives at sea, he replied that 'It was obvious that it must have the greatest possible effect. It was quite clear that even if you put the shipowner in as good a position by insurance in case of loss, as he would occupy if the voyage were successfully completed, you to that extent diminished the motives. which otherwise would actuate him in taking care that the vessel was seaworthy. If insurance went beyond that, and gave considerable profit in case of loss, which he would not have had if the voyage had been successfully completed, you gave a motive, he would not say for fraud, for he believed cases of fraud to be rare, but you gave a motive for great recklessness.'
Mr. Butt, who has since been elevated to the Bench; Mr. Hollams, the eminent commercial solicitor; Mr. Walton, another eminent London solicitor; and Mr. Squarey, solicitor to the Mersey Docks and Harbour Board, gave similar testimony.
Eminent shipowners have not hesitated to admit that a certain tendency to relax the necessary vigilance and care must result from the complete immunity from loss in the event of shipwreck.
The late Mr. Green, when asked by the Select Committee of 1860 on Merchant Shipping, whether he thought the facility for insurance induced carelessness or negligence on the part of the shipowners, replied, 'That is a very awkward question. I have heard people say they should be very glad, if their lives were saved, if they never saw the ship again.'
Mr. Lamport told the Commission on Unseaworthy Ships that he had known no instance in which he had reason to believe that the loss of a ship was caused primarily by her being over-insured; but, he continued, 'I really do believe that when a ship has accidentally
gone ashore, the efforts of her officers to get her off have occasionally been relaxed by their knowledge that the owner's purse will be benefited by her becoming a constructive total loss instead of an average loss.'
Speaking in the House of Commons in the debate on Marine Insurance in 1875, Mr. McIver said that over-insurance in regard to cargo happened to be the rule rather than the exception. It was the custom of the trade to insure a ten per cent. profit on bulky cargoes of coals, grain, or iron. Vessels so laden were those which most frequently went to the bottom. The merchant, broker, or charterer, were all insured, and their profits were secured, provided only the vessel was lost. It was not a question of only one, but frequently of two profits, because if one cargo was lost there was another to replace it. Nobody meant the vessel to be lost, but practically it was not the interest of those persons to see that the vessel was not overladen. It would certainly occur to them to do so if the loss of the vessel meant a loss of money.
The extent to which the compensation payable to the shipowner under a policy of marine insurance may exceed what should be due under a strict contract of indemnity will be most readily appreciated by a striking example brought under the notice of the Commission on Unseaworthy Ships by their colleague Mr. Cohen.
The ship Sir William Eyre, valued at 8,000l., sailed from Glasgow to Otago in 1863. She was damaged on the outward voyage, and temporary repairs were effected at Otago, at the cost of the underwriters, on the outward freight. The ship proceeded to Calcutta, where she was again surveyed, and found to be not worth repairing. She was lost shortly afterwards in the cyclone of October 1864. The damage which the vessel was found at Calcutta to have sustained having been caused by her being stranded before she reached Otago, the underwriters on the policy to Otago were held liable to pay 6,000l. The shipowner had insured in the sum of 4,000l. the chartered freight homewards from Calcutta, and as the ship had become a constructive total loss, the House of Lords held that the underwriters were bound to pay the 4,000l. Finally the shipowner, before he knew that his vessel had been seriously injured, had insured her in the sum of 8,000l. by a time policy for three months after her arrival at Calcutta ; and, although the ship when insured was a total The total sum thus recovered loss, he recovered his insurance. amounted to 18,000l. on a ship valued at only 8,000l. by the owners themselves. This is no doubt an extreme case; but other cases, in which shipowners have recovered from the underwriters sums far exceeding a fair indemnity for their loss, are not of uncommon
Having shown to what extent in certain cases the sums recoverable under a policy of insurance exceed the value of the property insured,
and having referred to the opinions expressed by competent authorities as to the effect of insurance in increasing marine disaster, we may proceed to consider the various policies of Marine Insurance.
Let us take first the case of the valued policy. In a valued policy the agreed value of the subject insured is expressed on the face of the policy. It might reasonably have been supposed that where the value expressed in the policy exceeds the real value of the property insured, the courts would have refused to sanction the overvaluation. Such, however, is not the doctrine of our law. The underwriter is not allowed to set aside the value, as stated in the valued policy, except upon plea and proof of fraud.
It may be presumed that the decisions of the courts had their origin, as explained by Mr. Justice Willes, in his memorandum written in the year 1867, first in the desire to avoid the inconvenience of protracted inquiries as to value, which, in many cases of total loss, would be difficult of proof. Secondly, it was thought expedient to allow the assured to insure to the full extent of his interest, though exceeding what he could get for the ship if put up to sale, because in certain cases expenses may have been incurred with reference to a special use of the ship, as in the case of a ship fitted like the 'Great Eastern' or the 'Faraday' for laying an electric cable.
When we turn from the commercial aspects of the question to consider the effect of these insurances in relation to the loss of life at sea, we must admit, with Mr. Justice Willes, that the system of valued policies, whatever its conveniences, does encourage fraudulently disposed people to put high values on comparatively worthless vessels, and gives them an interest in the loss of their property.
The remedy suggested by Mr. Justice Willes for the abuses incidental to valued policies was approved by Mr. Lamport, Mr. Stevenson, sometime secretary to Lloyd's, by Mr. Squarey, Mr. Farrer, and others. All these authorities agreed that where the underwriter has reason to believe that the valuation in the valued policy is excessive, he should be allowed to plead such over-valuation as a defence to a claim on the part of the shipowner. It was the opinion of Mr. Lamport that this concession to the underwriter would not lead to vexatious litigation, and that, while the value would not be disputed, unless in gross cases, shipowners would be deterred from paying premiums on their ships for larger amounts than they would be entitled to recover in the event of loss.
We may now pass on to consider the open policy, or that in which the value is not fixed either for ship, freight, or goods. According to the law as it is now laid down, the value of goods is the invoiced price, together with the charges for loading and insurance. The value of a ship is held to be the sum she is worth to her owner at the port where the voyage commences, including outfit and