Valuation and the measure of indemnity in marine insurance contracts

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References

  1. 1.
    Marine Insurance Act 1906 S. 67(1).Google Scholar
  2. 2.
    Bennett, H (1986) The Law of Marine Insurance, Clarendon Press, Oxford, pp 344–362; Basically, the term “measure of indemnity” means “the extent of the liability of the insurer for loss”, i.e. the maximum amount which the insurer must pay in event of a claim under the policy. Within the Marine Insurance Act 1906, the term “measure of indemnity” is to be found in s. 67–78 thereof. S. 67(1), mostly defines the term, while s. 67(2) of the MIA 1906 precisely states the recoverable proportion of the measure of indemnity and the remaining sections give the basis on which the measure of indemnity is to be calculated each time, according to the case involved. The measure of indemnity laid down in these sections is exhaustive. Losses falling outside these sections are irrecoverable. S. 75(1) of the Marine Insurance Act 1906 extends the principles of indemnity set out in the Act to forms of cover that are marine in nature but, nevertheless, are not dealt with by the Act, i.e. double insurance, want of insurable interest or the fact that the subject-matter was not at risk due to any factual or legal reason when the loss occurred. Equally if part of the matter was not at risk, the insurer’s liability is reduced proportionately, as in the case of share certificates-which are not within the definition of cargo-dispatched by sea (Baring Brothers & Co v Marine Insurance Co (1894)10 TLR 276; Forbes v Aspinall (1811)13 East 323; Rickman v Carstairs (1833)5 B&Ad 651; Tobin v Harford (1864)34 LJCP 37). S. 75(2) of the Marine Insurance Act 1906, draws the obvious point that the measure of indemnity may be subject to other provisions of the Act which may operate to reduce the insurer’s liability (Forbes v Aspinall (1811)13 East 323; Rickman v Carstairs (1833)5 B&Ad 651; Tobin v Harford (1864)34 LJCP 37).Google Scholar
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    Merkin R (ed) (1997) Colinvaux’s Law of Insurance, 7th edn, S&M, London 1997, pp 169–172.Google Scholar
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    It is upon that value that the premium is calculated (Merkin R (2000) Marine insurance Legislation, LLP, London, annotated s. 27–30 of the Marine Insurance Act 1906; Bousfield v Barnes (1815)4 Camp 228).Google Scholar
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    Although the presumption, that this is the appropriate date, is rebuttable, where the evidence demonstrates that the assured’s loss is properly felt at the time and place of the casualty (The Captain Panagos [1985] 1 Lloyd’s Rep 625).Google Scholar
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    No allowance is made for market appreciation, expected profit on cargoes at the destination, or replacement cost of a capital asset (Grime R (1991) Shipping Law, S&M, London, pp 370–371; Irving v Manning (1847)1 HL Cas 287, Woodside v Globe Marine Insurance Co (1896)1 QB 105, Helmville Ltd v Yorkshire Insurance Co Ltd (The Medina Princess) [1965] 1 Lloyd’s Rep 361; Merkin R (2000) Marine insurance Legislation, LLP, London, annotated s. 27–30 of the Marine Insurance Act 1906).Google Scholar
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    See Lewis v Rucker (1761)2 Burr 1167, Haig v De la Cour (1812)3 Camp 319, despite the fact that over valuation is not enough to prove that, as also shown in General Shipping & Forwarding Co v British General Insurance Co Ltd [1923] 15 Ll LR 175, Papadimitriou v Henderson [1939]64 L1LR 345.Google Scholar
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    In Denoon v Home & Colonial Assurance Co (1872) LR CP 341 a ship carrying both passengers and rice was wrecked, resulting in a total loss of the rice and its freight. Nearly all the passengers survived and their passage money was paid. The assured claimed for a total loss on a policy on chartered freight valued at £2,000 and insured for £1,000. Although freight in the policy in question did not include passage money, it was held that a valuation of freight in a valued policy refers, in the absence of contrary intention, to a full cargo which there had never been. Consequently, in calculating the measure of indemnity, the policy was to be treated as unvalued insurance of half the lost freight, not exceeding £1,000 (Bennett H (1986) The Law of Marine Insurance, Clarendon Press, Oxford, pp 344–362).Google Scholar
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    To the extent of such a discrepancy between an agreed valuation and the true loss, marine insurance law departs from a perfect indemnity principle (Irving v Manning (1847)1 H.L.C. 287) and such a departure is sanctioned on the ground of commercial convenience (Lidgett v Secretan (1871) LR 6 CP 616) and is not viewed as infringing prohibitions on wagering. The significance of the agreed valuation is not, however, confined to the measure of indemnity. In determining whether the assured has broken a warranty to maintain uninsured a specified proportion of the value of the property, the court will have regard to the agreed rather than the real value.Google Scholar
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    An assured failing to disclose to the insurer that the agreed valuation in a single policy or the total sum of the agreed valuations of more than one policy is excessive, is guilty of a breach of a duty of disclosure. The case of Ionides v Fender (1874)LR 9 QB 531 was the first to consider non-disclosure of an excessive over-valuation as a ground for avoidance of a policy, and was followed by the cases of Gooding v White [1913]29 TLR 312, Piper v Royal Exchange [1932]44 Lloyd’s Rep 103 and Berger and Light Diffusers Pty Ltd v Pollock [1973]2 Lloyd’s Rep 442.Google Scholar
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    A valuation considerably exceeding the selling value of a ship is not necessarily fraudulent or so excessive as to require disclosure. If a policy is tainted with fraud, however, then the agreed valuation and the whole policy are at risk. The question of fraud was initially considered in the Haig v de la Cour [(1812)3 Camp 319] and later on in Loders and Nucoline Ltd v the Bank of New Zealand [1929]33 Ll L Rep 70] and The Gunford (Thames & Mersey Marine Insurance Co v The Gunford Ship Co) [1911]AC 529]. Gross over-valuation could also be evidence of a gaming or wagering policy, thus a void one as per s. 4 of the Marine Insurance Act 1906 (Ionides v Fender (1874)LR 9 QB 531).Google Scholar
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    Article 269(2) of the CPML (KINΔ) provides that the insurer is not obliged to indemnify the assured owner of the vessel for collision damages paid to third parties relating to harm in body or health. However, an expressed opposite agreement is permitted. (Skouloudis Z (1995) The Law of Private Insurance, 2nd edn, P Sakkoulas Publications, Santaroza 1d, Athens, p 384.) The reason for this exclusion is that the insurance of the vessel cannot include life insurance which is the object of general, private insurance (Kiantos DV (1998) Insurance Law, 6th edn, Sakkoulas Publications, Thessaloniki, p 108). Life insurance is compulsory to passengers of vessels operating between Greek ports and the price of the ticket embraces the respective premium(Art. 1–3, Presidential Decree 91/1979).Google Scholar
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