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As compared with the above rules, the practice in the United States is different. Instead of permitting the insured to collect from any policy he may choose, the liability of the underwriters depends upon the date of the policy. If its policy is the first one taken, and covers the value of the interest, then it alone must bear the loss. Only when the amount insured by the first policy fails to cover the value of the interest lost, do the later policies become contributors. In accordance with this principle, practically all American policies provide that “it is hereby agreed that if the said insured shall have made any other insurance upon the property aforesaid, prior in date to this policy, then the said insurance company shall be answerable only for so much as the amount of such prior insurance may be deficient toward fully covering the property hereby insured, and the said insurance company shall return the premium upon so much of the sum by them insured as they shall be by such prior insurance exonerated from; provided no return premium shall be made for any passage whereon the risks have once commenced. And in case of any insurance upon the said property subsequent in date to this policy the said insurance company shall nevertheless be answerable for the full extent of the sum by them subscribed hereto, without right to claim contribution from such subsequent insurers, and shall accordingly be entitled to retain the premium by them received, in the same manner as if no such subsequent insurance had been made.” Most American policies also stipulate that “other insurance upon the premises aforesaid, of date the same day as this policy, shall be deemed simultaneous herewith, and the company shall not be liable for more than a ratable contribution in the proportion that the sum by them insured bears to the aggregate of such simultaneous insurance.”
2. The “Sue and Labor” and ‘‘ Waiver” Clauses.—The universal employment of these clauses in marine policies justifies their reproduction in full, namely: “And in case of any loss or misfortune, it shall be lawful and necessary for the insured, his or their factors, servants, or assigns, to sue, labor, and travel for, in, and about the defence, safeguard, and recovery of the said property or any part thereof, without prejudice to this insurance; to the charges whereof the said insurance company will contribute in proportion as the sum insured is to the whole sum at risk; and the acts of the insured or insurers in recovering, saving, and preserving the property insured in case of disaster, shall not be considered a waiver or acceptance of an abandonment.” The insured, in other words, agrees to exert himself in preventing or minimizing the loss of the insured property in the same manner that he would if uninsured. The company, in turn, promises to bear all expenses thus honestly and prudently incurred by the insured in a proportion such that if the policy covers the full value of the interest it will pay all “sue and labor” charges. Both insured and underwriter then agree that no act of theirs coming under the “sue and labor clause” shall constitute a waiver or an acceptance of an abandonment. 3. The “Memorandum.”—This clause may be defined as consisting of an enumeration of articles arranged in groups, concerning which there is a limitation of the underwriter’s liability for particular average. In its original form Lloyd’s policy placed no limit upon the liability of the insurer. The development of the marine-insurance business, however, and the growing complexity of commerce soon demonstrated that some limitation was essential. Hence, in 1749, a clause called the “memorandum” was inserted, according to which the most important articles of trade were classified into three groups, and each group subjected to a definite limitation as regards the liability of the underwriter. A similar limitation was introduced in American policies in 1840, and today the Memorandum is a conspicuous feature in every cargo policy. Indeed, so detailed has the “memorandum” become in some cases that in the policy of one important American company it limits the liability of the insurer with respect to one hundred and twenty specified articles or classes of articles. Changes have been made from time to time in the memorandum to meet the needs of commerce in different places, so that no uniformity can be claimed with respect to the articles enumerated in different policies. As illustrative of the classes into which commodities are grouped, the following is given as a general form:
Memorandum.—It is agreed that bar, bundle, rod, etc., etc., - - - - - - - - - - - - are warranted by the assured from average, unless general; cassia, matting, etc............ free from average under 20 per cent unless general; East India hemp, etc. . . . . . . . . . . . free from average under 10 per cent unless general; bread, flax, etc. - - - - - - - - - - - - free from average under 7 per cent unless general. Agricultural implements, etc. . . . . . . . . . . . . warranted free from claim or for any breakage, but liable for a total loss of a part if amounting to 5 per cent.
In ascertaining whether the memorandum percentages have been reached, no consideration can be given to general average; nor can extra charges for proving the claim or making the survey be included in the loss in order to obtain the percentage. Regard can be had only to particular average, and if the claim here exceeds or equals the percentage mentioned, then the whole damage (not merely the excess), plus the extra charges, must be borne by the underwriter. If, however, the actual value exceeds the insured value, the underwriter pays only a proportionate part of the charges, otherwise he pays all; while all charges incurred for saving and preserving the property are recoverable, as we have seen, under the sue and labor clause.
In voyage policies it is permissible to make the insurer liable by combining successive losses, each of which is less than the stipulated percentage. On the other hand, in time policies only the losses of one round voyage can be combined to determine the percentage, and not all losses incurred during the whole period covered by the policy. Moreover, in view of the increasing size in vessels and cargoes, it soon became apparent that although the percentage mentioned might be small, the absolute loss represented thereby might be unduly large ($5,000, for example, on a cargo of $50,000 under the 10-per-cent limitation). Consequently it has become common to subdivide risks as regards the application of percentages. Thus a cargo may be subdivided into “series,” each “series” depending on the nature of the subject matter (as a certain number of bales for cotton, or chests for tea, etc.), and the underwriter made liable where the loss in respect to one of these series reaches a proper percentage. Likewise, in the case of a vessel, separate valuations are often introduced for the hull, machinery, etc., with provision that the percentage rule should apply to each valuation separately. 4. Closely resembling the agreement in the “memorandum” are the provisions (some of which are at times included in the memorandum) usually found in policies which grant exemption: (1) From loss to goods “by dampness, rust, change of flavor, or by being spotted, discolored, musty, or moldy,” unless caused by contact with sea water and occasioned by sea perils. (2) From loss by wet or exposure of goods shipped on deck; or for leakage of certain liquids like oils, molasses, etc., unless caused by stranding or collision: (3) From loss of freight on articles like ice and lime, unless the entire quantity be destroyed because of stranding, sinking, or fire; nor for loss of the articles themselves, unless occasioned by jettison, stranding, sinking, or fire. (4) From loss of specie, bullion, jewels, bank notes, deeds, and the like, by providing that they “are not deemed to be included in any insurance unless specially mentioned in the policy and scheduled.”
(5) From partial loss or particular average on a vessel unless amounting to a certain percentage, usually 5 per cent net of the value declared, exclusive of expenses in adjusting and proving the loss. (6) From loss of freight or interest on the vessel unless amounting to 5 per cent net, exclusive of expenses. (7) From loss on account of wages or provisions, except in general average when customary. (8) From loss occasioned by jettison of deck cargo. (9) From loss by breakage or derangement of machinery, or bursting of boilers, unless caused by stranding, collision, or fire. 5. Subrogation.—This is the right by which an underwriter becomes entitled to all rights and remedies which the insured himself could have exercised in respect to any loss. This right is always granted in marine policies, and the usual wording of the clause is as follows: “In case of loss under this policy it is expressly stipulated that the insurers shall be subrogated to all rights of the insured against any persons or corporations whose acts, negligence, or default may have caused or contributed to the loss. 6. Provisions Facilitating the Adjustment of Claims.Among such provisions most frequently used in American policies are those which stipulate: (1) That in case of loss the company’s agent must be represented on the survey, if there be one at or near the place; and, if not, then an agent of the National Board of Marine Underwriters, which agent must approve all bills for repairs or expenses. (2) That in case of any dispute arising with reference to a loss on the policy the matter may be submitted to arbitrators mutually chosen, whose award shall be final. (3) That the insured shall give immediate notice of loss, together with an account of all known particulars and attending circumstances.