These clauses are, so far as Great Britain is concerned, mostly those issued by the "Institute of London Underwriters," a body composed of representatives of the marine insurance companies.
Insurable Interest.—The Act, after stating that every con tract of marine insurance by way of gaming or wagering, is void, proceeds to define what an insurable interest is. A person has an insurable interest when he stands in any legal or equitable rela tion to the adventure, or to any insurable property at risk therein in consequence of which he may benefit by the safety or due arrival of the insurable property, or may be prejudiced by its loss, or by damage thereto, or by the detention thereof, or may incur liability in respect thereof. He must, however, be interested in the subject matter insured at the time of loss, though he need not be when the insurance is effected. An example of the appli cation of this is when goods are sold in transit, and the insurance is transferred to the purchaser. An assured cannot, however, acquire interest subsequent to a loss by any act or election after he is aware of the loss.
Insurable Value.—Subject to the express provisions or valua tion of the policy, the insurable value of ship, freight goods, and other subject matter is laid down by the Act. Broadly speaking, this is the value of the interest at the inception of the risk plus incidental charges, including insurance. It is now the almost invariable practice to insert the value in the policy, in which case that value becomes the basis of all claims and adjustments.
Disclosure and Representation.—The Marine Insurance Act states that "a contract of marine insurance is a contract based upon the utmost good faith, and, if the utmost good faith be not observed by either party, the contract may be avoided by the other party." This is the basis of the whole of the business of marine insurance, which, in Great Britain, is largely transacted by means of verbal representations by the assured or his broker to the underwriter, and this being so, the importance of the ob servance of the principle of good faith is apparent. According to
the Act, the assured must disclose to the insurer, before the con tract is concluded, every material circumstance which is known to the assured, who is deemed to know every circumstance which, in the ordinary course of business, ought to be known by him. Failure to make such disclosure voids the contract. The Act also states that every circumstance which would influence the judg ment of a prudent insurer in fixing the premium, or determining whether he will take the risk, is material, but no circumstance need be disclosed which is known or presumed to be known to the insurer. Every material representation made by the assured or his agent to the insurer during the negotiations for the contract, and before the contract is concluded, must be true, or the insurer may void the contract. Representations as to matters of expec tation or belief must be made in good faith, but representations may be corrected or withdrawn before the contract is concluded. The contract of marine insurance is deemed to be concluded when the proposal of the assured is accepted by the insurer, whether the policy be then issued or not : and for the purpose of showing when the proposal was accepted, reference may be made to the slip, or covering note, or other customary memorandum of the contract, although it be unstamped. To appreciate the meaning of this provision it is necessary to explain that in Great Britain marine insurance is generally transacted by making a brief memo randum of the essential details of a risk on a slip, upon which the insurer writes the amount he will accept on that risk, appending his initials. The contract thus expressed cannot be legally en forced, but when a stamped policy is prepared embodying its terms, the slip may be produced as evidence of the intentions of the parties to the contract. A covering note is a memorandum issued by the insurer, or by a broker, to the assured, stating that the risk is covered, the terms on which the insurance has been effected, and the premium to be paid.