Report No. 21

Clause 78

General.-This deals with successive losses.

Importance of the section.-This section is most important in the case of time policies, because there is greater opportunity there for repairing the damage and for again incurring loss which can be claimed from the insurer.

"Total loss".-It has been said1 that section 77(2) of the English Act is not exhaustive and that if the vessel is lost during the period of the policy, whether by a peril insured against or otherwise, and by a peril insured against has previously suffered damage which has been unrepaired and not otherwise made good, the assured can recover nothing in respect of the unrepaired damage.

Same policy.-In this connection, reference may be made to a case decided by the House of Lords2-3 where the facts were as follows: The vessel Eastlands was insured against marine risks under a time policy. There was no insurance against war risks, but during the whole period of the policy it was chartered to the Admiralty who assumed all responsibility for war risks. The ship was damaged from marine risks; the damage was repaired in part, but repairs estimated at £ 1,770 were postponed. Before these repairs could be carried out, the vessel was torpedoed by an enemy submarine and became a total loss.

The Admiralty paid the agreed "sound" value less £ 1,770. The ship-owners claimed this amount from the underwriters: It was held that as the unrepaired damage was followed by a total loss, the smaller loss merged in the larger, and the underwriters were not liable even though the liability for the total loss did not fall upon them. The judgment of the Court of Appeal (Bankes, Warrington and Scrutton, L.J.) was re versed, and that of Bailhache, J. restored.

Lord Birkenhead4 said that two aspects were to be considered:-

(i) Where the total loss is caused by a peril insured against by the policy in question, (2) where the total loss is not covered by the policy. The first is governed by section 77(2). The second is not dealt with by the Act, and it was, necessary to, examine the law established by the existing authorities, in view of section 91(2). After examining the authorities, he observed:-5

"The true rule is capable of statement in the following proposition. Where a vessel insured against perils of the sea, is damaged by one of the risks covered by the policy and before that damage is repaired she is lost, during the currency of the policy by a risk which is not covered by the policy, then the insurer is not liable for such damage". He said that the rule embodied a principle on which underwriters and merchants had based their practice for upwards of a century.

"Same policy".-The words "same policy" in the section enact a rule narrower than the decision in Livie v. Jenson, 12 East 648 where a partial loss insured under the policy in suit, was followed by a total loss during the same voyage but not insured under that policy. It was held that the partial loss could not be recovered. A s pointed out by Lord Sumner in British and Foreign Insurance Co. v. Wilson Shipping Co., (1921) 1 AC 188 (211) the word "policy" and "the policy" are, throughout the sections relating to measure of Indemnity, used to denote not merely (a) a single instrument whether subscribed (i) by one underwriter, or (ii) by many but also (b) the entire insurance on the same subject-matter.

He said that the words under the same Policy" rather meant or during the adventure" issued (whether a voyage or a period of time). He, however, did not regard the point as important, because section 91(2) of the English Act "preserves Livie v. Jenson, to its full extent according to the true construction, unless and until it is overruled." "The Act", he said, "only speaks of a sequence in time between a partial loss and a total loss, and of the partial loss not having been repaired".

1. Dover, p. 437.

2. British and Foreign Insurance Co. Ltd. v. Wilason Shipping Co. Ltd., (1921) 1 AC 188.

3. The case has been discussed in Arnould, Vol. 2, p. 951 (932), Article 115

4. (1921) 1 AC 188 (193).

5. (1921) 1 AC 188 (199).