§ 2. Insurance is used as the means not only of security against the dangers to which vessels and their cargoes are constantly exposed during their voyage and transportation; but as an expedient also against the danger of fire, to which commodities or houses are continually subject on the land; and against also the chance of sudden death, and the loss which the person insured against may sustain by the death of others, in whose existence he has a pecuniary interest; or that which his creditors or his family may sustain by his own.1 It is, as Lord Mansfield has denominated it, "a contract upon speculation," and one which is generally called a contract of indemnity against loss or damage arising from an uncertain event. Insurance upon life, it has been said, is independent of the value of the subject-matter of the insurance; but, on the other hand, it has been laid down, that this, as well as the cognate contracts of marine and fire insurance, is a contract of indemnity requiring an interest in the assured.*

§ 3. "Look," says Lord Hardwicke, "into the books which treat of insuring, and you will find the term is 'aversio periculi, the intention of all insurances being to cover any damages or loss the insured might sustain."5 Thus, when a contract of this sort has relation to naviga

1 See 1 Bell, Comm. 509.

2 Carter v. Boehm, 3 Burr. R. 1905.

3 Emerigon on Ins. by Meridith, 157.

4 Godsall v. Boldero, 9 East, R. 72; and see post, ch. xxiv. § 305.

5 Sadlers Company v. Badcock, ubi sup.; Emerigon on Ins. ch. 1. This work on maritime insurance is considered to be the most didactic, learned, and finished production upon that subject. 3 Kent, Comm. 348.

tion and water transportation, or, in other words, when it is what is understood by the contract of marine insurance, (upon the law respecting which, that respecting the contracts of fire and of life insurance is grafted,) it is an obligation whereby one party, for a stipulated sum of money to be paid, undertakes to indemnify the other against certain perils or sea risks to which his ship, freight, or cargo, or some of them, may be exposed during a certain voyage, or fixed period of time. A more general definition is, a contract by which one of the parties binds himself to the other, to pay him a sum of money, or otherwise indemnify him, in the case of the happening of a fortuitous event provided for in a general or special manner in the contract, in consideration of the sum of money which the latter pays, or binds himself to pay him. It is a contract to protect men against uncertain events which in any wise may be a disadvantage to them.3

§ 4. The form in which a contract of this peculiar nature, is effected, is called a POLICY, from the Italian, polizza di assecurazione, or di securta, which signifies a memorandum in writing, or note or bill of security. "What," said Lord Mansfield, "is a policy? It is derived from a French word which means a promise.' 994 Although an instrument in its form extremely ancient, and in its language very ungrammatical, it has acquired

1 See the most approved works on Marine Insurance, such as Park, Marshall, Hughes, Phillips, Duer, &c.; and 3 Kent, Comm. Lect. xlviii. 2 Pardess, part 3, t. 8, 588.

3 Per Lawrence, J., in Lucena v. Crawford, 3 B. & Pull. R. 301. 4 Cited by Buller, J., in Good v. Elliot, 3 T. R. 702.

2

a fixed meaning by the usage of trade.1 Lord Kenyon, C. J., has said, that he remembered many years ago, that if Lombard Street had not given a construction to the contract of insurance, a declaration on a policy would have been bad on a general demurrer; but that the uniform practice of merchants and underwriters had rendered them intelligible. The fact that insurance was introduced into England by the Lombards, (a colony of whom was settled in London in the thirteenth century,) is universally allowed, and one evidence is a clause said to be retained in the English policies of the present day, which is, "It is agreed by us, the insurers, that this policy of assurance shall be of as much force and effect as the surest writing or policy of assurance heretofore made in Lombard Street." As all the positive stipulations of the policy that may be enforced by law, are on the part of the insurer, it is not necessary that it should be signed by both parties; and this mode of executing the instrument, though sanctioned by usage, is derived from the peculiar nature of the contract. The obligations implied on the part of the person obtaining the insurance, are merely conditions, on the performance of which his right to indemnity depends.*

§ 5. In marine insurance, there are what are called "open" and what are called "valued" policies of insurance-a distinction that relates to obtaining the insurance in the event of a loss. The former is one in which

1 Smith, Mer. Law, 202.

2 Brough v. Wetmore, 4 T. R. 208.

3 See Duer on Ins. § 11, p. 33.

4 Ibid. p. 65, § 8.

the amount of interest is not fixed by the policy, but is left to be ascertained in case a loss should happen. The latter is one in which a value has been set upon the property or interest insured and inserted in the policy; the value thus agreed upon being in nature of liquidated damages, and so saves any further proof of damages.1

§ 6. The consideration for this obligation to secure or indemnify (the policy) is called the PREMIUM, a word signifying price, and is from the word primo, because formerly it was paid in advance or at the time of signing the policy. The contract of Insurance has been defined by Chief Justice Tindal to be that in which a sum of money "as a premium is paid in consideration of the insurers incurring the risk of paying a larger sum upon a given contingency." It has been called by French writers3 primeur premie, or agio d'assurance*

1 Park on Ins. 1; 3 Kent, Comm. 272; Irving v. Manning, 8 B. & Cress. R. 561.

2 Paterson v. Powell, 9 Bing. R. 329.

3 Emerigon, ch. iii. § 1; Pothier, no. 81; Cleirac, p. 343.

4 The insurance ought to be so made as that the assured, upon the balance of the account, may obtain his clear capital; for he will thus recover his whole right, and will have no temptation to fraud. Thus, suppose A. has a cargo coming from the West Indies, which, if it arrive safe, will be worth £100 in England, and that the premium for insurance upon the ship is ten per cent. It is then plain that A.'s clear capital is £90; and that A. has acted justly in insuring his whole capital, that is, the clear capital and the premium together or the whole £100; for if the voyage succeeds, A. receives £100 from the cargo, and has paid £10 for the premium, which leaves A. his clear capital of £90. If the voyage fails, A. receives £100 from the insurer, and has paid £10 for the premium. So that, in either case, of the success or failure of the voyage, by insuring his whole capital, A. exactly recovers his clear capital, and has no advantage from the loss of the vessel. Morris's Essay on Ins. 22.

§ 7. The party who takes upon himself the risk is called the INSURER, and sometimes the UNDERWRITER, from the party's subscribing his name at the foot of the policy; the party protected by the insurance is called the INSURED or ASSURED. The premium paid by the lat ter, and the peril assumed by the former, are two correlatives,1 inseparable from each other; and the union constitutes the essence of the contract.2

§ 8. The property itself insured is called the SUBJECT OF THE INSURANCE. The title or interest which the assured has, is called his INSURABLE INTEREST.

1 In practice, however, the premium is not always paid, (as is shown by Mr. Bouvier, in his valuable Law Dict., tit. Premium,) when the policy is underwritten; for insurances are frequently effected by brokers, and open accounts are kept between them and the underwriters, in which they make themselves debtors for all premiums; and sometimes notes or bills are given for the amount of the premium. The French writers, when they speak of the consideration given for maritime loans, employ a variety of words in order to distinguish it according to the nature of the case. Thus, they call it interest when it is stipulated to be paid by the month or at other stated periods. It is a premium when a gross sum is to be paid at the end of the voyage, and here the risk is the principal object they have in view. When the sum is a percentage on the money lent, they denominate it exchange, considering it in the light of money lent in one place to be returned in another, with a difference in amount between the sum borrowed and that which is paid, arising from the difference of time and place. When they intend to combine these various shades, into one general denomination, they make use of the term maritime profit, to convey their meaning. See Park on Ins.; 15 East, 309, Day's note, and cases there cited; Jennings v. Chenango County Mutual Ins. Co. 2 Denio, (N. Y.) R. 75.

2 Mr. Babbage uses "assure" and "insure" as having distinct meanings. (See his work on Assurance for Lives.) It appears, however, says Mr. Beaumont, that the two words only differ as "enfeeble" and "affaiblir," which have both the same meanings; the one having the Saxon prefix, and the other the French or Latin. See "sweeten” and “adoucir,” “shorten” and "accourcir," "enfranchise" and "affranchir." Pref. to Beaum. on Ins.