The development and purposes of marine insurance can be best understood if we give an account of how business is done at Lloyd's.
4. a long time Lloyd's was an unin corporated society.. In 1871 it was incorporated by an act of Parliament. The act of incorporation de fines the objects of the organization as follows : (a) The carrying on of the business of marine in surance by members of the Society.
(b) The protection of the interests of members of the Society in respect to shipping, cargoes and freights.
(c) The collection, publication and diffusion of intelligence and information with respect to shipping.
As a corporation Lloyd's does not transact the busi ness of marine or any other kind of insurance. It performs for its members the functions which the vari ous stock and other exchanges do for their members. It affords certain facilities for the transaction of busi ness between the members, establishes rules for their guidance, and acts as a general source of information.
Any person who wishes to become a member of Lloyd's and engage in marine insurance must deposit £5,000 "caution money," as it is termed. These de posits amount to $17,000,000 at the present time. Marine insurance is the leading business that is trans acted by the members, and it is the business over which Lloyd's probably exercises the greatest super vision; the members, however, are permitted to engage in other forms of insurance. It is stated that almost any kind of a risk may be insured at Lloyd's.
5. Policy of insurance.—The earliest known policy written in the English language dates from 1613; we owe its preservation to a lawsuit. This policy shows that in substance and in form the principles of the contract had been worked out very well at that time. There have been alterations in the policy since, but they are comparatively slight.
6. Definitions of commercial terms.—When the owner of a ship wishes to employ it in transporting freight for hire, the contract he makes is called a "contract of affreightment." "Freight" is the money earned means of this contract. Now the owner may not carry the goods himself—that is, take charge of the ship during the voyage--but he may hire the ship out to somebody else. The person who
hires the ship is called the "charterer," and the con tract which is entered into between the owner of the ship and the charterer is called the "charter party." The "bill of lading" is the form of contract used when goods which do not require the entire vessel are shipped generally for different persons. It is the re ceipt of the shipowner and the contract of carriage for the goods placed on his ship. This bill of lading can be indorsed; the indorsement transfers the ownership of the goods to the indorsee.
" Demurrage" is a payment made by the consignee to the transportation company, for delay in unload ing the vessel. It is customary for a company to permit the person to whom goods are consigned a cer tain number of days in which to unload after the ves sel's arrival is reported to him. Should the unload ing be delayed beyond these days the consignee pays the company for each twenty-four hours' delay, the amount being specified in the contract.
A "bottomry bond" is a bond given when money is borrowed upon the vessel. This represents one of the oldest forms of investment known. Correspond ing to the bottomry bond, which in a sense may be said to represent a mortgage on real estate, is the "re spondentia bond." This covers a loan on the cargo and corresponds to a chattel mortgage on personal property.
"Salvage" designates everything that is saved. The loss may, of course, be total when a vessel is lost. But such a case is very rare. Even in the famous case of the Titanic, which sank in mid-ocean there was a slight salvage in the form of lifeboats and some other small bits of property that were picked up.
7. Insurable insurer must have some pecuniary interest in the property which will involve • him in actual loss in case it is damaged or destroyed. Otherwise he would merely wager on the outcome. In earlier days an insurable interest was not required. However, the practice was outlawed thru the pas sage of an act affecting subjects of Great Britain, as early as 1746.