Mr. Planet

The nature of insurance contract, in its original status, is that an insured pays an insurer a sum of the money to hold him self harmless from any loss caused by a peril of the sea while his ship is performing her voyage. In other words, "a particular voyage should be free from perils."48 As time passed, especially in the reign of Charles II,49 new forms of policies of insurance, by expressed agreements, started to spread and were discharging a merchant from having an interest in the subject matter insured. In addition, the insurer was promising to pay the insured at the occurrence of the risk regardless the presence o f any interest in the insured thing. That kind of policy incorporated such terms as "interest or no interest" or "without further proof of interest than the policy" or "without benefit of salvage to the underwriter" or Policy Proof of Interest, (p.p.i). In the time of Queen Anne,50 policies of that kind were valid and legal.51 By that time, according to Clark, "Much insurance...was indeed underwriting on purely speculative contingencies such as the outcome o f siege, the

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timing of birth, and especially the longevity of individuals." As a matter of fact, English courts were accepting wagering agreements in the guise of marine insurance as long as they did not give rise to questions regarding being against the public interest,53 but parties had to have a mutual intention of wagering when they conclude an insurance policy or include a term like "interest or no interest". Otherwise, the courts would interpret the policy as a contract of indemnity which the insurer would

48 F. Hildyard, Park, A System o f The Law o f Marine Insurance, Vol. II, 8th ed., 1987. p.551.

49 That was during the second half of the 17th century.

50 In the beginning o f the 18th century.

51 Colinvaux, Am ould's Law o f Marine Insurance and Average, Vol. I, 1981, para.331.

52 Geoffrey Clark, Betting on lives: The cultural o f life insurance in England, 1695-1775, (1999), p. 3.

53 See the argument o f Lord Mansfield in Da Costa v Jones, (1778) 2 Cowp. 729, 735, ER. 98, 1331;

Good v Elliott (1790) 3 T.R. 693, ER. 100, 808; Allen v Hearn (1785) 1 T. R. 56, ER. 99, 969; Jones v Randall (1774) 1 Cowp. 37, 39, ER. 98, 954.

indemnify the insured for a real loss, therefore, the latter has to show his interest in subject matter of insurance in order to be insured.

However, although wagering contracts were enforceable, the courts started to reject that kind o f insurance policies. For instance, in Goddart v Garrett,54 the defendant had lent money on a bottomry bond, the sum was £300. Although he insured the ship for

£450, he had no insurable interest in the ship; the plaintiffs bill was to be delivered up, by reason the defendant was not concerned in point of interest, as to the ship or cargo.

The defendant was obliged to declare his interest in the thing he had insured in order to bring a successful claim. "Per Curiam. Take it that the law is settled, that if a man has no interest, and insures, the insurance is void, although it be expressed in the policy interested or not interested."55 The court went on to explain that,

"...the reason the law goes upon, is that these insurances are made for the encouragement of trade, and not that persons unconcerned in trade, nor interested in the ship, should profit by it; and where one would have benefit of insurance, he must renounce all interest in the ship. And the reason why the law allows that a man having some interest in the ship or cargo, may insure more, o f five times as much, is that merchant cannot tell how little, his factor may have in readiness to lade on board his ship."56

Therefore, it was held that,

54 Goddart v Garrett,(\692) 2 Vem. 269, Trin. Term., ER. 23,1 1 A.

55 Ibid.

"... the policy o f insurance to be delivered up to be cancelled."57

Likewise, and in the same manner o f Goddart v Garrett, in Le Pypre v Farr,ss the defendant had insured goods at the value of £600; under the policy, he was not obliged to prove any interest. The Lord Chancellor, ordered the defendant to discover what goods he put on board; for although the defendant offered to renounce all interest to the insurer; yet referred it to the Master to examine the value of the goods saved ...., and to deduct it out of the value or sum o f £600 at which the goods were valued by the agreement.59

Thus, because of that the number o f issuing that kind of policies was in increasing and that was considered as a harmful issue to the public policy, the Legislature had taken care o f protecting the branch o f trade and the public interest.60 Therefore, that was a sufficient reason to regulate Marine insurance generally.

57 Ibid. It has to be noted that, the validity o f an insurance contract that made without an insurable interest in the Court o f Chancery, which invalidated insurance policies without an insurable interest, differs from the position in the law courts which had taken the opposite view, i.e. validate an insurance contract without an insurable interest. See, Holdsworth, supra, n. 9, p. 292; James Oldham, The Mansfield Manuscripts and the Growth o f English Law in the Eighteenth Century, Vol. I, (Chapel Hill;

London: University of North Carolina Press, 1992), p. 469.

58 Le Pypre v Farr,(1716) 2 Vem. 716, ER. 23, 1070; Assievedor v Cambridge, 10 Mod., 11, ER. 88, 634. See also, Sadler’s Co. vBadcock, (1743) 2 Atk. 554, ER. 26, 733, where the court rejected the insured’s claim, on a fire policy, on the ground that no insurable interest had been shown at the time of the risk.

59 F. Hildyard, Park, A System o f The Law o f Marine Insurance, n. 3, supra, p.554; N. Legh-Jons, J.

Birds & Others, MacGillivray on Insurance Law, (10th ed., 2003), para. 1-19.

60 See, R. S. Pinzur, "Insurable Interest: A Search for Consistency", Ins. C. J., 1979, 109, 110; R.

Merkin, "Gambling by Insurance- A Study o f The Life Assurance Act 1774", Anglo-American LR [1980], p. 331,334-5.