Report No. 21

Clause 13

General.-This deals with the measure of insurable value. As to valuations, see also sections 27-29 of the English Act.

The words "subject to any express provision or valuation" imply that the rules given in section may be applied (generally) only in respect of unvalued policies.

Valued policies.-Policies of marine insurance are usually "valued", because after the destruction of ship proof of value will be difficult and expensive. Usually, therefore, an agreed figure is inserted in the contract and the policy is called a "valued policy".1

Unvalued policies.-In the case of goods or freight, it is not so difficult to prove the value, and both valued and unvalued policies are common.

In a sense, a "valued policy" is not strictly one of indemnity, because the value of the ship is fixed artificially and the figures put by the parties may sometimes be above the market value. Gross over-valuation may be evidence of bad faith,2 but otherwise the valuation is conclusive between the insurer and the assured, and enables the total loss to be speedily settled and partial loss to be easily adjusted. (The valuation is, of course, conclusive, even between the parties, for the purpose of the insurance only and not for any other purpose). Moreover, under section 27(4) of the English Act, the valuation can be re-opened in the case of a constructive total loss.

"Open" policies (Floating policies).-Unvalued policies were previously called "open" policies, because the assured had the opportunity of proving the value. The expression "unvalued", policy is, however, the correct expression (see section 28 of the English Act), and the expression "open policy" should really be used for what are called "floating policies." Large shippers of small parcels of goods do not find it convenient to take out a policy on each shipment, but insure all their shipments during a certain period. The policy is for a round sum and every shipment reduces the insurer's liability. These are called "floating policies".3

Departure from the English Act.-The English Act provides that insurable value in the case of a steamship includes also the machinery etc. if owned by the assured. The case of a ship driven by power other than steam is not covered. Since ships are sometimes propelled by other power also, it is desirable to cover their cases, and the necessary change has accordingly been made.4-5

1. See also notes on section 27(2) of the English Act-clause 24(2).

2. 'Thames and Mersey Marine Insurance Co. v. Gunford Shipping Co., 1911 AC 529.

3. See also section 29 of the English Act-clause 26, and notes thereto.

4. Cf. The First Schedule, rule 15 of the English Act, and the change proposed therein.

5. For a detailed discussion see the body of the Report, para. 6.