Report No. 21
General.-This deals with the time when the contract is deemed to be concluded.
Virtually, this section defines the meaning of "acceptance". The contract is concluded when the 'slip' is signed, whether the policy be then issued or not.
Slip.-A slip (according to the English practice) is a piece of paper on which the broker writes down the name of the ship, the proposed voyage, the sum assured, etc. The slip is taken to the underwriting room of Lloyd's. There he approaches the underwriters and tries to "place" portions of the sum with them. The first underwriter may underwrite for say, one thousand pounds and the next for ten thousand pounds and so on. Each underwriter initials the slip, and writes down the amount to which he will be liable. Until, however, the policy is issued, the slip binds the underwriter only in honour, because of section 95 of the English Stamp Act, 1891 and section 22 of the (English) Marine Insurance Act.
Unenforceable contracts.-Until the policy is issued, the contract is, presumably, "unenforceable".
Open slip.-Sometimes a merchant has knowledge in general of shipments but does not know the precise details. In such cases, the risk is submitted to the insurer by 'open slip'. It is made out to cover the amount adequate to meet the circumstances, and expressed by the words "steamer and/or the steamer approved or held covered". When the details become known, these will be incorporated in the "closing instructions".1
Fleet slips.-"Fleet" slips are those by which the whole of the vessels of one fleet are covered by means of one slip.
Open cover.-In modern times, instead of insuring individual shipments as isolated transactions, "open covers" are used. These may be in respect of a limited period or a permanent "open" cover,-"open" until terminated by cancellation. The open cover would effect insurance on "conveyances and parcel post and air and steamer" or in other suitable terms.
Though they serve similar purpose as "floating policies"2 open covers are not the same as floating policies, because
(i) the open cover is merely an honourable undertaking to issue policies within its terms and has no greater significance than that of a slip;3
"A floating policy is an enforceable contract of marine insurance; an open cover is not";4
(ii) the amount for which cover is made is generally the maximum amount contemplated by any one sailing, and that amount is always open during the currency of the cover irrespective of how many "declarations" are made;
(iii) premiums are paid as policies are issued and not in one lump sum.
Cover note.-When the broker has completed the risk, he forwards to his client (the assured) a cover note giving the details of the insurance. Most brokers use printed forms with spaces in which the details are inserted. The cover note can, therefore, be described as a communication by the broker to the assured informing the latter that in accordance with his instructions "cover" against the specified risk has been effected with a specified insurer, and also intimating that the policy is in preparation and would be forwarded in due course.
Closing instructions.-Where the original instructions of the assured to his broker were provisional, the broker by his cover note requests the assured to forward closing instructions as soon as possible.
Closing slip or Forward slip.-A "closing" slip or "forward" slip is prepared by the broker, who enters therein at length the definite particulars of the insurance and attaching thereto any special clauses to be inserted in the policy. It is from this slip that the marine insurance company prepares the policy. The system is not much in vogue now.
1. For "closing instructions", see below.
2. As to "floating policies", see section 29, English Act-clause 26.
3. Keate, p. 18.
4. Dover Analysis of Marine Insurance Clauses, 1960 Edn., p. 163.