Measure of Indemnity.—According to the Act, the sum which the assured can recover in respect of a loss is, in the case of an unvalued policy, the full extent of the insurable value, or in the case of a valued policy, the full extent of the value fixed by the policy; this, however, is subject to any express provisions of the policy. In the event of total loss the measure of indemnity is the sum fixed by the policy, in the case of a valued policy, or in an unvalued policy, the insurable value of the subject matter insured. In the case of partial loss of a ship, the measure of in demnity is the reasonable cost of repairs, less the customary de ductions, but not exceeding the sum insured in respect of any one casualty. The customary deductions are for depreciation, i.e., since new material is substituted for old when repairs are effected, but in the case of steamships it is generally expressly agreed that no deductions shall be made. In the case of freight, the measure of indemnity is such proportion of the sum fixed by the policy, in the case of a valued policy, or the insurable value in the case of an unvalued policy, as the proportion of the freight lost by the assured bears to the whole freight at the risk of the assured under the policy.
In the case of partial loss of goods, the measure of indemnity, in the case of a valued policy, is such proportion of the sum fixed by the policy as the insurable value of the part lost bears to the insurable value of the whole, ascertained as in the case of an unvalued policy. In the case of an unvalued policy, the measure of indemnity for partial loss is ascertained as in the case of total loss, i.e., the insurable value of the subject matter insured. In the case of goods arriving damaged by a peril insured against, the measure of indemnity is such proportion of the sum fixed by the policy in the case of a valued policy, or of the insurable value in the case of an unvalued policy, as the difference between the gross sound and damaged values at the place of arrival, bears to the gross sound value. In the case of general average and sal vage charges, the measure of indemnity (subject to the pro visions of the policy) is the full amount of the contribution, if the subject matter liable for contribution is insured for its full contributory value, but if it is not so insured, or if only part be insured, the indemnity payable by the insurer must be reduced in proportion to the under-insurance, and where there has been a particular average loss which constitutes a deduction from the contributory value and for which the insurer is liable, the amount must be deducted from the insured value in order to ascertain what the insurer is liable to contribute. Where the assured has
effected an insurance in express terms against any liability to a third party the measure of indemnity, subject to any express pro vision in the policy, is the amount paid or payable by him to such third party in respect of such liability. An instance of this is insurance against collision liability, where it is customary for the insurer to cover only three-fourths of the risk, leaving one-fourth to be borne by the assured. The practice has arisen, however, of covering the assured's one-fourth mutually in associations of ship owners foimed for that purpose.
In cases not specifically provided for in the Act, the principle enunciated in the provisions of the Act is to be applied.
Warranties.—In marine insurance a "warranty" is some par ticular thing that the assured undertakes shall, or shall not be done—an undertaking that some condition shall be fulfilled ; or the affirmation or negation of the existence of a particular state of fact. Warranties must be complied with exactly, whether they be material to the risk or not ; or the insurer is discharged from liability as from the date of the breach of warranty.
Examples of warranties are where the assured warrants that a vessel is in good safety on a certain date; where he warrants that a vessel shall not proceed on certain voyages; or where he warrants that he is uninsured for a specified proportion of the amount at risk.
These are "express warranties," and must be included in, or written upon, the policy, or must be contained in some document incorporated by reference into the policy.
There are also "implied warranties" as, for instance, that the vessel shall be seaworthy at the commencement of the voyage, but there is no implied warranty of seaworthiness in a policy for a period of time ; nor, in the case of goods, that the goods are seaworthy. Breach of warranty is excused, under the Marine Insurance Act, when, by change of circumstance, the warranty ceases to be applicable to the circumstances of the contract, or where compliance with the warranty is rendered unlawful by any subsequent law. A breach of warranty may be waived by the insurer; and in practice it is customary, in the case of some warranties, to make provision in the policy to the effect that in the event of breach, the risk is "held covered" either at a specific premium, or at a premium "to be arranged." According to the Act, when an additional premium is to be arranged in a given event, but no arrangement is made, then a reasonable additional premium is payable.