INSURANCE.

Insurance is a contract of indemnity, by which one party engages, for a stipulated sum, to insure another a∏∙ainst a risk to which he is exposed. It is of three kinds, viz. Fire, Life, and Marine; all of them producing similar results by very different means. The party who undertakes the risk is called the insurer, assurer, or underwriter, and the party protected by the insurance is called the insured or assured; the sum paid is called the premium, and the instrument containing the contract is termed the policy.

I.—FIRE INSURANCE.

This species of insurance has been practised in Great Britain for nearly a century and a half, and is now, notwithstanding the heavy duty imposed upon it, of almost universal use, particularly in our cities and large country towns. Though practised in France, Holland, Austria, and other countries on the Continent, it is not general anywhere except in Great Britain; and in this country fire insurance is not confined to subjects within the realm, or even to our colonies, but is extended to risks of all descriptions, and in every quarter of the world. Indeed, of late years foreign fire insurance has become a most important addition to the extensive transactions of some of the principal London establishments, a very considerable portion of their premiums being derived from insurances effected in other countries.

Insurance against fire is that contract by which the insurer, in consideration of a certain premium received by him, undertakes to indemnify the insured against all losses o-damage which he may sustain by fire, within a limited period, in his houses, warehouses, merchandise, or other property. Insurances of this description are generally made by joint-stock companies, of which the principal are in London, though there are now several in almost all the large towns throughout the kingdom; and there is scarcely a village in which there arc not some of their branches and agents. Most of these insure at their own risk, and for their own profit; in a few of them, however, called contribution societies, every person insured becomes a proprietor, and participates in the profit or loss of the concern.

The only society of this description in Scotland is the Friendly Insurance Incorporation, which was also the first established company in this part of the island for insurance against loss by fire. In 1720 there had been some disastrous fires in Edinburgh, by which many individuals sustained great loss of property; and in the same year a meeting of inhabitants took place, for the purpose of founding a society for their mutual protection from loss in cases of fire. A certain per-centage of premium upon the sum insured by each proprietor or contributor was paid for a perpetual insurance on their properties, and these premiums formed the capital stock of the concern. The corporation, however, much more than answered the purpose which those interested in its formation had in view; for, after the payment of all claims for loss, the capital, by judicious management, had accumulated to such an extent, that in 1760 it was resolved no longer to limit the business to Edinburgh and Leith, but to extend it over Scotland, and upon every description of property, on the principles now followed by other insurance companies.

The rules by which these establishments are governed, and the conditions on which they insure, are made by their own directors; and as a copy of these conditions is printed upon the policy, and forms a part of the contract therein contained, the insured is understood, by his acquiescence, to submit to their proposals, and is fully apprized of those rules, upon the compliance or non-compliance with which, he will or will not be entitled to an indemnity.

The construction to be put upon the regulations of the various offices has but seldom become the subject of judicial inquiry; and the law of the case, in as far as it has been ascertained by precedent, is of course embraced by all of them.

1. The insurers must be made fully acquainted with the nature of the risk they arc required to cover. Any misrepresentation in describing the building or goods, or the process of manufacture carried on, whereby the same may be charged at a lower rate of premium than they would otherwise be, invalidates the policy; and if any alteration be made in the state of the building or process of manufacture after the insurance is effected, the insured is required to give due notice thereof to the insurers, as, in default, he will be unable to recover under his policy. Concealment, too, is not less fatal to the contract than positive misrepresentation. A policy was effected at the Phoenix Fire Office on the 25th of July 1814, “on a warehouse in the lower town of Heligoland, for three months, as by letter of 11 th July 1814.” It appeared that the person applying for insurance had two warehouses in Heligoland, one of them separated by another building from a boat-builder’s workshop, in which a fire broke out at seven in the evening of the 11th July, but apparently was almost immediately extinguished. The same evening after this had occurred, the insured wrote to London for a three months’ insurance of L.400 on the warehouse near the boat-builder’s, and L.3500 on coffee therein. The mail was shut; but the master of the packet took the letter to Cuxhaven, and there put it into the post-office. The insurance was effected without any disclosure of what had happened. Early in the morning of the 13th a fire again broke out in the boat-builder’s, and destroyed the adjoining warehouse, with its contents. The jury, though they acquitted the plaintiff of any fraudulent intention, thought that the fire of the 11th ought to have been communicated, and therefore found for the defendant. Bufe v. Turner, 1814.

2. Nothing can be ιecovered from the insurers in the event of loss, unless the party insuring had an interest or property in the thing insured at the time when the insurance was effected, and when the loss happened. Any trustee, mortgagee, reversioner, factor, or agent, however, has sufficient interest in the goods under his custody to effect a policy of insurance, provided the nature of such interest be distinctly specified at the time of executing such policy. In the same manner, it is customary for hotel and inn-keepers to insure the property of their lodgers; of the masters of boarding-houses to insure that of their scholars; of salesmen and auctioneers to insure merchandise, furniture, &c. whilst about to be disposed of in their premises; and so forth.

There is reason to believe that frequent frauds are perpetrated by individuals insuring to a large amount property of trifling value; and it is an undoubted fact that fraudulent and excessive claims are of constant occurrence. These have been very much increased by the competition and keenness for business which have existed amongst the offices for some years past. But parties are not always aware, that in tendering such a claim, they are running the risk of forfeiting all right under their policy. This was decided in 1832 in the case of Friedlander v. the London Assurance Company, where, although it was not denied that [7:12:308]loss and damage had been occasioned by fire, and that not arising from improper means, still, from the extravagance of the claim made by the pursuer, it was held to be a fraudulent valuation, and a verdict was consequently given against him. No reliance can be placed on the oath of a suspected claimant; if a man make out a fraudulent claim, he will not be very scrupulous in swearing to its correctness.

On the other hand, where a loss has occurred, and there is no suspicion of any unfair practice on the part of the insured, it is the duty of the insurers to be generous and liberal. The insured is always put to much inconvenience, and frequently to serious loss beyond what he can claim for under his policy; and therefore a fair sufferer ought to be promptly and cheerfully settled with.

3. In general there is an exception in favour of the insurers in cases of fire occasioned by “invasion, foreign enemy, civil commotion, riot, or any military or usurped power whatever.” The terms “civil commotion and riot” were introduced in consequence of its having been found that the term “usurped power” means an invasion from abroad, or an internal rebellion, not the power of a common mob. The offices likewise, with propriety, decline paying losses on hay or corn occasioned by spontaneous combustion, though they make good the loss of any other property in consequence of such fire; it being the interest of the community at large to put down all such occasions of loss as are contained in the former, and negligence generally being the cause that damage is sustained in the latter. The offices, however, pay all loss by fire occasioned by lightning, as well as, primo loco, all losses caused by incendiarism, though in this last case they have a claim on the county for indemnification.

4. “Books of accounts, written securities, bills, bonds, tallies, and ready money,” are naturally not the proper subjects of insurance, and are therefore excepted by all the offices; many adding to this list “gunpowder.”

5. China, glass, crockery, and mirrors, are usually made the subject of a distinct item in a policy of insurance; and, from their fragile nature, are always charged as doubly hazardous. The rate for “curiosities” is the same. Pictures and prints are generally taken at single hazardous; but when a very valuable collection is insured, the offices usually require a catalogue, with a distinct value attached to each. Jewels, trinkets, mathematical and musical instruments, are by some offices also required to be valued separately, and in that case are charged single hazardous. Generally, however, these are considered as common risks, and are included along with printed books, linen, and liquors, in one item with “household furniture.”

6. It often occurs that no one office will insure to the full amount required by an individual who has large property; and in such cases the party, to cover his whole interest, is obliged to insure at different offices. But in order to prevent the frauds that might be practised by insuring the full value in various offices, there is, in the proposals issued by all the companies, an article which declares that persons insuring must give notice of any other insurance made on their behalf elsewhere upon the same houses or goods, that the same may be specified and allowed by indorsement on the policy, in order that each office may bear its rateable proportion of any loss that may happen; and unless such notice be given of each insurance to the office where another insurance is made on the same effects, the insurance made without such notice will be void. Different people, however, may have different interests in the same property, and each may insure his own interest without communication with the others.

7. An important condition in the proposals is that referring to the proof of loss. Most offices make it a condition that the individual claiming shall procure a certificate under the hands of some reputable householders, and minister of the parish, to the satisfaction of the company, importing that they are acquainted with the character and circumstances of the person insured, and do know, or verily believe that he really, and by misfortune, without any kind of fraud or evil practice, has sustained, by such fire, loss and damage to the amount therein mentioned. This condition has given rise to a great deal of discussion in the courts; but it has been finally settled, that the procuring of the certificate is a condition precedent to the payment of any loss, and that its being wrongfully refused will not excuse the want of it.

8. On bespeaking policies, the insured are required either to pay the premium, or make a deposit for the same; the Phoenix and most other offices conditioning, that unless an interim-receipt for such payment has been issued, either by the office or one of its agents, no order for insurance shall be held as in force. Fifteen days are allowed at the expiration of each year for the payment of the premium for the next year in succession, upon all annual policies, and others for a longer period; and, provided the premium be paid within that time, the insured is considered as under the protection of the office. But the Phoenix and other offices always expressly declare, in all policies for a shorter period than a year, that the insurance ceases at six o’clock in the evening of the day mentioned therein. If, however, either the insurers or the insured intimate, during the continuance of a policy, their intention of dropping the contract at the expiration of the year, it has been decided, that a loss happening within the fifteen days after the end of the year does not in such a case fall under the contract.

9. A policy of insurance is not in its nature assignable, nor can it in England be transferred without the express consent of the office. In Scotland every pecuniary obligation is assignable; but there being something of the nature of a delectus personae in this contract, the power of assignment is, by the terms of the policy, put under particular restraints. When, however, any person dies, his interest remains in his executors or administrators respectively, who succeed or become entitled to the property, provided such representatives procure their right to be indorsed on the policy. In the same way, no one who sustains a loss on stock or merchandise in premises to which he has removed since his policy was extended, has a valid claim, if such change be not indorsed on the policy in question. On bankruptcy the creditors are entitled to the full benefit of the policy, provided the premium has been duly paid up.

10. The insurers are liable, not only for loss by burning, but for all damage or injury caused by the accident, as well as for all reasonable charges attending the removal of articles which may never have been touched by the fire; as, for instance, in the case of the gable of a house falling across a street, and damaging the property on the opposite side, or in the case of destruction done to fine goods by the smoke of a conflagration in the vicinity, or from the water which may have been thrown about in endeavouring to extinguish it. In such cases the insurers are distinctly liable; but as their contract is one of indemnification only “for loss or damage by fire,” there must have been actual ignition to entitle the insured to recover, it not being sufficient that there has been a great and injurious increase of heat, whilst nothing has taken fire which ought not to be on fire. For example, in one case of a sugar-house, in which, for the purposes of the manufacture, heat was communicated to each of the separate stories by a chimney, forming nearly one side of the house, at the top of which there was a register; the neglect to open this register on one occasion caused an excessive heat, which blackened the walls, and injured the sugar in different states of preparation; but the damage thus sustained was held not to come under the spirit of the contract.

II. The loss by fire is scarcely ever a total loss, and the valuation in the policy is only the fixing of a maximum, bevond[7:12:309] which the underwriters are not to be liable, and not the conclusive ascertainment of the value to be replaced. There is no such thing in this contract as the “average” in marine insurance; the amount insured is payable to its full extent, without (unless otherwise stipulated) any reference to the value of the subject insured, either in itself, or in comparison with such parts of it as have been saved; at least such is the practice in Great Britam, but on the Continent all policies are subject to average. The loss is generally settled by arbitration, and a clause of reference is consequently inserted in most policies. The company, however, generally retain the right of either reinstating the subject lost or damaged, or of paying its value.

Insurances are generally divided into common, hazardous, double hazardous, and special. The charge for insuring property of the first description is now usually Is. 6d. per cent., the second 2s. 6d., the third 4s. 6d., whilst the fourth, as its name denotes, comprehends those extra risks which are made the subject of special agreement between the parties.

It is almost impossible to form a correct classification of the risks comprehended under these heads, as the higher risks not only vary most materially in themselves, but in one large town it is well known that losses are constantly occurring upon a species of risk which in another is rarely or never the cause of a fire. But as the law of average is a fundamental principle in insurance, and can only be derived from observations made on a very large scale, the tables published by most offices are formed principally from experience.

The table of minimum premiums agreed to by several of the Scotch offices in 1830 is as follows:
[table]
[table]

The statute 55 Geo. III. c. 184, imposes on every policy a duty of one shilling, and also the annual sum of three shillings for every L.100 insured for a year, and according to that rate for any fractional part of L.100 insured, and for any fractional part of a year.

.All property excepting farm stock and public hospitals is liable to this duty. It is collected by the offices along with their premiums, and they are allowed a drawback of five per cent, upon it for their trouble and expense in so doing. From the last returns, it appears that this duty amounts to nearly L.900,000 per annum, which shows that British property to the extent of at least six hundred millions sterling must be covered by our insurance offices.
[7:12:310]
[table]
[table]
[table]

This, however, affords no criterion of the actual amount of risk undertaken by these offices. In the first place, because the duty on farm-stock having been repealed in 1833, that very extensive description of risk is not included in this calculation; and, secondly, because some of the offices underwrite foreign risks to a very large amount, and these are equally, by act of parliament, exempt from duty. Perhaps, therefore, the enormous sum of one thousand millions sterling does not greatly exceed the amount of property insured by our British fire establishments.

The advantages of fire insurance are too prominent to require any description here. It affords great comfort to individuals, and often preserves whole families from poverty and ruin. The destruction of a mansion-house, or the conflagration of a cotton-mill, is a calamity that would press heavily on even the richest. But when distributed amongst several individuals, each feels it proportionally less; and provided the number of those amongst whom it is distributed be very considerable, it occasions no sensible inconvenience to any one in particular. Hence the advantage of combining to lessen the injury arising from the accidental destruction of property; and it is the diffusion of the risk of loss over a wide surface, and its valuation, that forms the employment of those engaged in the business.

II. LIFE ASSURANCE.

The insurance, or assurance on lives, as it is now most generally termed, is the insurance of a certain sum of money to be paid in the event of a person named being alive at a certain time, or dying within a certain time, or to be paid within a certain time after the death of a person named, whenever that may happen.

Life assurance is comparatively of recent date in this country; for, although the Amicable Society was incorporated by charter as early as the reign of Queen Anne, it was not till the commencement of the present century that its beneficial effects came to be felt, and that as a business it was carried to so great an extent. The precarious dependence of a numerous family upon the life of a single person naturally induces the desire of seeking some protection against a calamity which, sooner or later, must befall them; and this, probably, suggested the first idea of insurances upon lives, as an expedient by which [7:12:311] a pecuniary indemnity, at least, might be secured to the sufferers, sufficient to rescue them from the poverty and distress which otherwise awaited them. All professional persons, or those living on salaries or wages, such as lawyers, physicians, military and naval officers, clerks in public or private offices, &c., whose incomes must of course terminate with their lives, and many others who are either not possessed of capital, or cannot dispose of their capital at pleasure, must naturally be desirous of providing, as far as they may be able, for the comfortable subsistence of their families in the event of their death. Take, for example, a physician or lawyer, without fortune, but making perhaps L.1'000 or L.2000 a year by his business, and suppose that he marries and has a family. If this individual attain to the average duration of human life, he may accumulate such a fortune as will provide for the adequate support of his family at his death. But who can presume to say that such will be the case; that he will not form one of the many exceptions to the general rule? And suppose that he were hurried into an untimely grave, his family would necessarily be destitute. Now it is against such calamitous contingencies that life assurance is intended to provide. An individual possessed of an income terminating at his death, agrees to pay a certain sum annually to an insurance office; and this office binds itself to pay to his family, at his death, a sum equivalent (under deduction of the expenses of management and the profits of the insurers) to what these annual contributions, accumulated at compound interest, would amount to, supposing the insured to reach the common and average term of human life. Though he were to die the day after the insurance was effected, his family would be as amply provided for, as it is likely they would be by his accumulations, were his life of the ordinary duration. In all cases, indeed, in which those insured die before attaining an average age, their gain is obvious. But even in those cases in which their lives are prolonged beyond the ordinary term, they are not losers; they then merely pay for security which they could not otherwise have possessed. During the whole period from the time τvhen they effect their insurances, down to the time when they arrive at the mean duration of human life, they are protected against the risk of dying without leaving their families sufficiently provided for; and the sum which they pay after having passed this mean term, is nothing more than a fair compensation for the security they previously enjoyed.^[1. See M‘CuUoch’s Commercial Dictionary, art. Dtsurance. ] To heirs of entail, clergymen, professional men, men in trade and business, and generally to all liferenters, life insurance is therefore peculiarly suited. By the same means also facilities are afforded for raising money on loan, creditors may in many cases obtain ultimate payment of their debts, and provisions in marriage settlements are secured

Policies of this kind are most frequently granted by companies, on account of the greater security there is in large bodies of men, than it is easily possible to be attained by an individual when the policy maybe oflong continuance.

The premium of assurance is either a gross sum paid at once, or a sum paid down on the day that the contract is made, with an obligation to pay the same sum annually during the existence of the policy. The latter is the more general mode of assurance.

V hen a party is desirous of effecting an assurance, he receives from the office of the company a printed paper called a declaration, which he fills up with the name of the party to be assured, his age, the place and time of his birth, and place of his present residence, with certain particulars as to his health. To corroborate the statement, references are given to two or more persons well acquainted with the party, one of whom must be a medical man. The reasons for these precautions are obvious.

When the declaration has been thus completed, the person by whom the assurance is made makes his appearance at the office of the company, where he is interrogated as to the general state of his health, and a minute is entered in their books accordingly. The letter of the referees, with the declaration, are subsequently laid before the directors, who, from these documents, and information frequently derived from other sources, form their decision. Ön the payment of the premium a receipt is given, containing the number of the policy, which is then made out according to the declaration, signed by a certain number of directors, and delivered to the other party interested in it. If the person on whose life the assurance is made cannot appear before the directors, or any one appointed by them for that purpose, an additional sum is frequently charged for non-appearance. There is also a duty to be paid to government on each policy, in addition to the first year’s premium; but the premium only is named in the policy, as on the future payment of this sum its existence depends.

A policy is assignable, and frequently forms a security for sums advanced, and not unfrequently becomes an object of sale. In these cases the holder of the policy pays the future premiums, and the advantage of a purchaser consists in holding a policy at a less premium than he must have paid at the present age of the party on whose life the assurance was made. Thus, supposing a policy to have been granted for the payment of L.1000 at the death of a party aged between tliirty and thirty-one when the policy was made; if sold when the party is between fifty and fifty-one, the purchaser will have to pay L.26. 2s. 6d. annually during the existence of the policy; whereas, if he had taken out a policy at the present age of the party, his premium would be L.45. Ils. 8d.; and for the difference between these two sums, namely, L.19. 9s. 2d., a price is fixed on. The public sale of a policy, however, possesses this disadvantage, that the bidders are frequently unacquainted with the person on whose life the assurance is made; and, being liable to trouble and expense, toascertain that he is alive at each payment of the premium, must require a deduction on this account, from what they might otherwise presume to be a compensation for the difference between the two premiums. Policies are in consequence sold at very disproportionate prices; and it is evident, that a policy must be most valuable to the party insured, and less so to others, according to their convenience of paying the premiums, and receiving proper information respecting the party in whose life and death they are interested.

On the death of the party on whom the claim depends, certain documents are required, such as the register of the burial of the deceased, and references to the medical persons or others who attended him in his last illness; and, if he effected the policy himself, the probate of his will, or, if it has been assigned to another, a copy of the assignment. The nature of his death must also be ascertained; as, in ease of any contravention of the conditions of assurance, the policy is vitiated. In the interval between the notice of the party’s death, and the time assigned for the payment of the claim, which by most of the offices is fixed at three months, due investigation is made, and, every thing being found satisfactory, the claimant brings with him the policy, and a receipt for the sum claimed, which is immediately paid.

When a claim is payable in the event of a person being alive at a certain time, his appearance before the directors is requisite, or sufficient proof must be given that he was alive at the time defined by the policy. Policies depending[7:12:312] on a person being alive at a certain time are very rare, and chiefly confined to endowments for children, in which case the paymentof a gross sum down, or of an annual payment till the child attains the age of 14 or 21, secures to that child, at that age, the sum named in the policy.

For adjusting the premium to be paid according to the age of the party on whom the assurance is made, tables of rates have been formed, and those derived from the registers of mortality at Northampton and Carlisle are in general adopted. Tables of the duration of human life have also been made from observations in various other places; amongst which the most distinguished are those of De Parcieux, Kerseboom, Aikin, the registers of Sweden, Finland, and London; and one published within these few years by the Equitable Society, founded on the experience of that well-known establishment.

In the formation of these tables, a vulgar error is entertained, that they are dependent on chance; for life being uncertain, every attempt to regulate premiums is of no avail. It is true that life cannot be reduced to a certain scale, that is, if a thousand persons are named, it is impossible to state how many will die in each year, till the whole cease to exist. But if the observations are extended over a very large surface, and very numerous data are collected, the most accurate calculations may be made of the probable duration of any one life.

After a scale of life has been adopted, a table of premiums is derived from it by strict mathematical calculation, and in a very ingenious manner. Suppose the premium for a person of a certain age to be known, then the premium for a person of one year younger, being compounded of the premium for one year and the present value of the above premium, is easily calculated from the table of lives. The rule is this: Multiply the premium on the oldest life into the number of persons alive in the tables of that age, and divide by the number of persons of the younger age alive in the tables. This sum discounted for a year gives the premium for assuring the desired sum at the end of the year. Then multiply the sum to be assured into the number of persons of the younger age that die according to the tables in a year, and divide by the number of persons alive at that age, and this sum discounted for a year is the assurance of the sum for the first year, and, consequently, the two sums added together give the desired premium. Now, as the oldest person in the scale of life dies in the ensuing year, the premium on him is evidently the sum to be paid discounted for one year, and thence the premium for the age below is ascertained by the above rule; and so of every age in succession. No errors can be committed without detection, as every step is checked by a similar table drawn out for the value of an annuity at each age.

In a similar manner, tables are formed for the assurance of a sum payable at the death of one out of two persons, or at the death of the survivor of two persons, or at the death of one on the contingency of his surviving another, and so on.

The above rules give tables of rates for the payment of a gross premium; but as it is generally more convenient to pay an annual sum equivalent to it, a table of rates is made for this case, and it is formed by dividing the gross premium by the value of an annuity upon each age added to unity. If the annual premium were paid at the end of the year, the addition of unity would be unnecessary; but a policy is not granted till one premium is paid, and hence the necessity of the addition is obvious.

As premiums are settled from a fixed table of observations on life, it is evident that, as deaths never happen exactly in the order prescribed in the tables, there must arise either a surplus or deficiency of capital for the payment of the sums assured. From the care which has hitherto been taken in the choice of lives, and the high premium which the offices have been enabled to demand all the old establishments have accumulated very large capitals; consequently, we believe it has never occurred that the proprietors have been called upon to make up a deficiency. It is in the management of this capital, or surplus, that life assurance companies differ. One of them, termed Proprietary Companies, undertake to pay fixed sums upon the death of the individual assuring with them; the profits made by such companies being wholly divided amongst th e proprietors, their premiums are generally, or at least ought to be, lower than those of others. Of this class are the Pelican, Sun, and others, principally of old standing. The second class of life assurance companies are the Participating, which, instead of undertaking, like the former, to pay certain specified sums upon the death of the assured, allow the latter to participate, to a certain degree, alorw with the proprietors, in the profits made by the business. The mode in which this class allot their profits is not the same in all, as we shall immediately see; but in general their premiums are somewhat higher than those of the preceding, and are made to depend in a considerable degree on the amount of the profits set apart for the insurers. The Alliance, Guardian, and Rock, as well as a large portion of the new companies, are of this description; and latterly a considerable number of them have united their participating with their proprietary business, by publishing different scales of premiums to suit the wishes and intentions of individuals assuring. The third class are Mutual Assurance Companies, of which the Equitable of London is the groundwork and model. In this sort of company there is no proprietary body distinct from the assured. The latter, after deducting the expense of management, share amongst themselves the whole profits of the concern; and therefore, as all the surplus returns to themselves, their scales of premiums are naturally higher than that of either of the foregoing.

In the two last classes, where the surplus is made advantageous to the assured, either a sum is at certain periods added to each policy, or the premium is diminished. In both cases, a valuation is made of all the annual premiums, with the past and future expected accumulations, and also of the claims upon every policy. It is requisite, however, that the utmost care should be taken to secure to each policy the sum named in it, with every addition made to it; and hence a certain portion, generally a third or a fifth, of the surplus is constantly retained to guard against possible contingencies. This reservation occasions a singular anomaly in mutual assurance companies. In these all are partners, being guarantees to one another for the payment of their respective claims. The surplus arising from the excess of premiums, with their accumulations above the claims, evidently belongs to the whole of the company, and consequently each partner is entitled to a portion of it. But of this surplus, a third or fifth being constantly reserved, and each person at his death ceasing to be a partner, every person leaves behind him a portion for his successors. The third or fifth is therefore, we may say, without an owner; for a partner has not a right to it during his life, and his heirs or assignees have not a claim to it after his death.

Policies of life assurance must be on stamped paper, the duty being as follows:
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[7:12:313]
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[7:12:314]
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[7:12:315]

Many of the offices have tables calculated for special , purposes; so that, in one or other of them, any individual wishing to effect an assurance is certain of having it done in the way he desires. For instance, the Pelican, amongst others, has a table of “Limited Payments,” by which persons desirous of paying an annual premium for a limited number of years, instead of one to continue annually during life, may do so on the following terms.
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The following are the premiums required by the Pelican for assurances on joint lives and survivorships.
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[table]
[7:12:316]

Endowments for children attaining the age of fourteen or twenty-one, may also be made by the payment of a specific sum, or by an annual rate, as follows.
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The advantage to a person assuring in any one office as compared with another, must plainly depend on a comparison between the premiums demanded, the conditions of the policy, and, above all, the security which it holds out. Where it is wished to assure on a certain life for a limited period, the party having no interest in procuring a larger sum, in case of death, than the amount assured, makes his application to that office where he can get it effected at the lowest premium. Such an office will be a Proprietary one. The principal advantage of such companies is, that individuals dealing with them know exactly what they are about. They know the precise premium they will have to pay, and the exact amount of the sums that will accrue to their assignees at their decease. The subscribed capital of such associations as the Pelican, Sun, Royal Exchange, &c. and the wealth of their partners, afford unquestionable security; and, unless some very unprecedented and unlooked-for change in the , condition of the country take place, they may reckon with certainty on the terms of the policy being fulfilled to the letter. If, on the other hand, the individual be desirous of leaving as large an amount as he can afford to assure to his family, and more especially if be happen to be a young and a healthy life, he will generally prefer the conditions of a Participating or a Mutual Assurance society. The subscribed capital and fortunes of the former of these afford a guarantee on which the public may depend, in dealing with any respectable society of this sort; whilst, by receiving a share of the profits, the assured gain by the flourishing condition of the association, and it is of less consequence to them though the premium should be too high.

The whole profits of Mutual Assurance societies being divided amongst the assured, render such establishments of very great value, particularly to young lives; instances having frequently occurred of more than double the amount assured on one life being paid at the termination of a long standing policy in one of these societies. It has been objected to them, that every one being a partner of the concern, has not only his own life assured, but is part assurer of the lives of all the other members, and may, in this capacity, incur some serious responsibilities; but in this there is a material mistake, since it is a stipulation in the contract of copartnery of every such society, that the funds of the society alone shall be liable for their losses; and thus, though there may be a distant possibility of the sums assured not being paid in full, it is directly undertaken by every individual entering the society, that no claim shall be made on his account upon any of the other members. Moreover, when it is considered that the premiums required by all the assurance companies are very much higher than the risk demands, and that those of Mutual Assurance societies are among the highest, there is little danger, when due precaution is taken in accepting lives, of any loss being incurred by partaking of the benefits of this description of society. This will be placed in a still clearer view by the perusal of the following table from Mr Babbage’s work on life assurance, exhibiting the profit per cent, on the premiums of several English offices, on an assurance on a life aged forty-six, which is about one year less than the average age of persons assuring.
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The most important points to be attended to in this description of insurance are the following.

1. No life assurance can be effected without an interest in the life. This was enacted to prevent gambling transactions, by stat. 14 Geo. III. c. 48, sect. 1, which declares that “no insurance shall be made by any person or persons, bodies politic or corporate, on the life or lives of any person or persons, or any other event or events whatsoever, where the person or persons for whose use or benefit, or on whose account, such policy or policies shall be made, shall have no interest, or by way of gaining or wagering; and that every insurance made contrary to the true intent and meaning of this act shall be null and void to all intents and purposes whatsoever.” Under this act it has been found, that though a bona fide creditor has a sufficient interest in the life of his debtor to enable him to effect a valid assurance on such life; still, that in the case of money won at play, the creditor has not an assurable interest in the life of the individual who lost the money to him.

2. Life assurances are always assignable; indeed were they otherwise, assurance on lives would lose much of its utility. It is an every-day occurrence for a debtor to open a policy on his own life, and to assign it in security; and there can be no ground for pleading the extinction of the policy on his payment of the debt; for the benefit of the assurance still belongs to him, and he may make it the means of credit on another occasion, or dispose of it by settlement or otherwise. Assignment in sequestration carries a policy of life assurance; and if the debtor has secretly disposed of it after his bankruptcy, the person to whom it has been assigned will be bound to return any money drawn under it as For the use of the creditors. In the case of Schondler v. Wace, the bankrupt held a policy upon his own life, which, after bankruptcy, he sold to Wace for a lottery ticket. He died, and Wace received the sum assured. The assignees under the commission brought an action for recovery, and it was found that this [7:12:317]was a possibility of benefit to which they were entitled, as part of the bankrupt’s effects; the defendant having a right, however, to deduct his outlay.

3. As the conditions in fire insurance form part of the contract; so, in life assurance, the declaration made previously to the policy being extended, is considered as part and parcel thereof. In this declaration it is stated that he whose life is to be assured “has no disorder tending to the shortening of life ;” but this does not imply that he is free from all complaints, provided he be in a reasonably good state of health. Nor does it appear to be sufficient evidence of the tendency of the disorder to shorten life, that the person had it at a former period, and afterwards died of it, if free from disease at the time of assuring.

4. The death must happen within a limited time, otherwise the assurers are not liable; and there is no doubt, if an individual whose life is assured for one year be fatally wounded during the existence of that policy, but linger till after the term limited in the contract, that his executors have no claim. When, however, an assurance of this description exists on a man’s life who goes to sea, and the vessel in which he sailed is never afterwards heard of, a question arises for a jury to decide from the circumstances produced in evidence.

5. In almost every life policy there are several exceptions in limitation of the risk. These generally are, death abroad or at sea; entering into naval or military service without the previous consent of the company; death by suicide; death by the hand of justice; and, in some offices, also death by duelling. The three last, however, do not apply where the assurance is effected on the life of another.

6. The premium on life assurance is not returnable. If a person whose life was assured should commit suicide or be put to death by the hand of the executioner the next day after the risk commenced, there would be no return of premium.

7. Life assurances, when a loss happens upon them, must be paid according to the tenor of the agreement, in the full sum assured, as this sort of policy, from its nature, being on the life or death of man, does not admit of the distinction between total and partial losses.

HI.—MARINE INSURANCE.

Most persons are in some degree acquainted with fire and life insurances; the security which they afford to individuals and families is a comfort which no one is willing to dispense withal. Hence the great increase in modern times of companies professing to afford this security; and hence the knowledge on the part of the public generally, of the nature and principles of the engagements into which these companies enter. But marine insurance is a subject of immediate interest only to merchants and shipowners; and in times of peace it is, even to them, of a much less engrossing nature than during the bustle and excitement of a Continental or an American war.

It is used as a means of indemnification for loss or damage to ships or goods whilst at sea, and that arising either from the elements or the enemy. From its nature there is no doubt of its being of a much more ancient date than either of the preceding, its introduction having generally been attributed to the Lombards and Venetians, the great carrying traders of Europe during the thirteenth, fourteenth, and fifteenth centuries. On the Continent it has consequently been longer practised, and is there much better understood than either fire or life insurance. The famous Ordonnance de la Marine of Louis XIV. was published in 1681, and has ever since been a standard work on this subject. In England there are few positive enactments to regulate marine insurance, its practice having been conformed to general principles and the usage of trade. The endless variety of circumstances connected with it naturally render it a much more abstruse and difficult subject than any other kind of insurance; and the numerous points, as sea-worthiness, deviation, capture, and others, which must be attended to, have from time to time created a vast variety of most complex and difficult cases in our law courts. Upon these the laws of British marine insurance are founded.

The nature of this contract is similar to those of the other descriptions of insurance. Suppose it has been remarked, that of fifty ships of the ordinary degree of seaworthiness, employed in a given trade, one is on an average annually cast away; the probability of loss will plainly be equal to one fiftieth: and if an individual wish to insure a ship, or the cargo on board a ship, engaged in this trade, he ought to pay a premium equal to the one fiftieth part of the sum he insures, exclusively of such an additional sum as may be required to indemnify the insurer for his trouble, and to leave him a fair profit. If the premium exceed this sum, the insurer is overpaid; if it fall below it, he is underpaid. In this country marine insurance has always been for the most part effected with individuals; and of these the subscribers to Lloyd’s have, from the extent of their transactions, been long the most distinguished. When a merchant or ship-owner desires to effect an insurance, he fills up a blank policy, so as to meet the particular object in view; he then hands it to one of the members of the room, who either rejects it, or underwrites for a certain limited sum; from him it goes to another; and thus it is handed about until the amount required is complete. Agents are appointed in all the principal parts of the world, who forward regularly*to Lloyd’s, accounts of all the arrivals at, and departures from, their ports, as well as of losses and other casualties, and, in general, all such information as may be supposed of importance towards guiding the judgments of the underwriters. In addition to this, there are annually published certain register books for shipping, which give an account of the tonnage, build, age, repairs, and quality of almost all the vessels that frequent our ports; and which, though in many respects defective, are material assistants to the insurers. Besides the subscribers to Lloyd’s, there are many wealthy individuals, both in London and in all the considerable sea-ports of the kingdom, who underwrite policies of marine insurance. As these cannot be personally known to many of the ship-owners, a set of middle-men, or brokers, have arisen, whose business it is to receive orders for insurance, who apply to the persons they suppose most likely to cover the risks; and also become responsible for them being effected with accuracy and celerity.

Many of the inconveniences attending this mode of effecting insurance, particularly in the saving of time, are obviated when the business is transacted with a company. In such a case, the party having property to insure goes directly to the manager of the company, and states the particulars of the risk to be insured; when the premium is agreed on, the manager writes out a memorandum of the policy, which the party signs, and he is thus effectually insured before he leaves the office. The security afforded by such companies is also of infinite importance to the insured; severe and heavy losses having frequently occurred, from the bankruptcy or inability of individual underwriters. The Royal Exchange, Alliance Marine, Indemnity Mutual Marine, and London Assurance, are the principal companies for marine insurance in the metropolis; and, as well as the private underwriters mentioned above, there are similar establishments, though on a smaller scale, in most of the large sea-ports of the empire.

With respect to the rates of premium charged for marine insurance, it is self-evident that these will vary ac [7:12:318]cording to the seasons, the quality of the vessel, the known character of the captain, the nature of the commodity, and the state of our political relations. Of these no comprehensive table could be constructed, and therefore they come naturally to be regulated very much by general experience and particular information. All policies of marine insurance must be on stamped paper, the duties on which are as follows, viz.
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When reckoned by time, two shillings and sixpence per cent, is charged when under three months, and five shillings when the voyage exceeds that period.

It would be quite foreign to the purpose of the present work were we to enter upon the legal details of marine insurance. On this point the standard English authors, Park and Marshall, and the work of the learned professor of Scotch Law, Mr Bell, afford every possible information. We shall merely take notice of the following circumstances to be attended to in the contract.

1. The name of the insured or his agent is required by statute. By 28 Geo. III. c. 65, it is enacted, that it shall not be lawful for any person or persons to make or effect, or cause to be made or effected, any policy of insurance upon any ship, without first inserting, or causing to be inserted, in such policy or policies of insurance, the name or names, or the usual style and firm of dealing, of one or more of the persons interested in each insurance. This was required to remedy the evil of policies being issued in which the name of the insured was purposely left blank.

2. The names of the ship and master are necessary to identify the subject-matter of the policy; for whether it be ship, or freight, or goods, the risk attaches itself to a particular bottom. The place and time at which the risk is to commence and terminate are obviously requisite particulars; but the subject of the insurance is the essential part or sine qua non of the contract, for there must be no room to question what property is really put in risk.

3. The policy must be subscribed or underwritten with the names of the several insurers, each adding to his name the sum for which he is liable; and this may be done by a procurator acting under either express or tacit delegation. No witnesses are required.

4. The insured are under certain obligations in respect to representation and warranty of the facts whereon the undertaking of indemnity is grounded. Insurance being a contract of faith, in which the insurer is to rely for the most part on the statement of the insured, his representation of the facts must be fair and open; there must be no misrepresentation, no false insinuation, no concealment of circumstances material to the risk. Warranty, again, is an absolute condition expressed or implied, relative to the state or circumstances of the subject insured, which, if not true, or not complied with, defeats the insurance, whether material to the risk or not. A warranty may be affirmative, as that a ship was safe on a particular day; or promissory, that the ship will proceed with the convoy, or sail on a day certain; express, as that the ship is to sail on a day certain, or that she was on a certain day safe in harbour; or implied, including all those conditions relative to the risk which necessarily enter into the conception of the contract, as that the ship is seaworthy, that the voyage is lawful, that there shall be no deviation, and so on.

5. Policies are of two kinds, valued and open. By the former, the value of the subject insured is fixed by agreement of the parties, so that when a loss occurs, the value stated in the policy regulates the settlement, without regard to the original cost or invoice of the subject insured. By the latter the value is left open, and in case of loss the assured must adduce evidence of his interest, and he recovers indemnification only to the actual extent of his loss. In the settlement of a loss under an open policy, the ship is valued at what she was worth at the time of sailing, including her stores; the freight, at the amount which she would have earned according to the charter-party; and the cargo, at the invoice price, including the premium of insurance, and all charges.

6. Losses may be said to be of three kinds; total, general average, and partial loss. The former consists not solely in the entire destruction of the subject insured, but in such damage as to render it of little or no value to the owner, or at least to frustrate the adventure the securing of which was the object of the insurance.

When the total loss is manifest and undoubted, as where a ship is lost and is never heard of again, it falls directly upon the underwriter; but where any thing remains, the claim for loss must be accompanied by abandonment, which is a renunciation to the underwriter of all right, title, and claim to what may be saved, leaving it to him to make the most of it for his own benefit. In abandoning, the insured must make up his mind tempestive ; but he is not bound to do so till he has an opportunity of receiving correct information. The common custom now-a-days, in paying such losses, is for the underwriter to settle for a certain per-centage, retaining a sum equivalent to the probable proceeds, leaving the insured to recover the savings, and settling the balance of the loss when these are ascertained.

General average is constituted by the voluntary sacrifice of the ship’s materials, or part of the cargo, or when charges are incurred for the general benefit, such as the cutting from anchors and cables to avoid a lee shore, jetson of part of the cargo to lighten the vessel, expenses of taking the ship off the strand, &c.; in which, and all similar cases, the loss and expenses are borne by ship, cargo, and freight, in proportion to their respective values saved.

Partial loss, or, as it is in general termed, particular average, means a loss or damage by unavoidable accidents, not amounting to a total loss. Under it is included damage to the ship by stranding, by unavoidable collision with another vessel, damage to the hull, boats, masts, or other parts, by a stroke of the sea, by lightning, accidental fire, &c. These, and such like, are of the nature of particular average on the ship; but the springing of a leak at sea, or the splitting of sails, or the parting of a cable, and similar damages, are held to be the ordinary wear and tear of the ship, and which the owner cannot recover from the underwriter.

Particular average on the cargo means damage by seawater, fire, or any accident which the care of the master and crew could not prevent. (See article Average.)

7. The mode of settlement after the damage is ascertained is likewise an important subject.

In adjusting a partial loss on a ship, it is usual to deductone third from the new materials and labour, except on certain articles, unless the ship or the materials injured were perfectly [7:12:319]new. When the loss is on cargo, it is settled either by taking the invoice price and deducting the nett proceeds of sale of the damaged goods, or by comparing the amount of sales of the damaged goods with a pro forma account of sales of the same articles if they had arrived in a sound state. The former of these, termed a salvage loss, is the mode of adjustment where the goods required to be sold short of the port of destination, and where it was consequently impossible to refer to the market price of that port, as in the second instance. The latter method avoids involving the underwriters in a falling or rising market; the market price of the sound and of the damaged commodities being said to be the scales in which to weigh the depreciation.