14. Valuation of property policy may be written in the form known as a "valued policy," which fixes the amount to be paid in case the property is lost. The amount is not subject to a reconsidera tion unless it is evident that either there has been a mis take, or that so outrageous a valuation has been given as to show fraud upon the face of the transaction.
If the value is not mentioned, it must be proved. The following information is a guide in this matter: (a) Goods or merchandise—the prime cost (as it is called), to which the shipping expense and the cost of insurance is added.
(b) the ship—the value at the commencement of the voyage, to which there may be added the outfit, the stores and provisions necessary for the voyage, ad vances which are made to the crew for wages, and the cost of insurance.
(c) The freight—the gross amount of freight due the ship on her arrival at the designated port, plus the cost of insurance.
(d) Any other objects of insurance not embraced in these three divisions, at their value to the insured at the beginning of the voyage, to which there may be added the cost of insurance.
The specific provision for adding the cost of insur ance is peculiar to marine insurance.
15. Risks insured against.—The following list classifies the risks insured against: (a) Those embraced in the phrase "perils of the sea," and fire.
(b) Those which result from the actions of those in charge of the voyage, as the master or the crew.
(c) Those which arise from enemies from without, as men-of-war.
(d) "All other perils." The first group embraces losses due to winds, waves, collision arid fire. Such misfortunes arise un der unusual circumstances, and the policy does not under any circumstances cover wear and tear due to the ordinary prosecution of the business.
The second group includes jettison and barratry. Jettison relates to circumstances under which portions of the cargo, or all of it for that matter, may be thrown overboard on account of a storm; while bar ratry has been thus defined: Every species of fraud and knavery committed by the mas ter with the intention of benefiting himself at the expense of the owners, and every wilful act on his part of known illegality, gross malversation, or criminal negligence, by whatever motive induced, whereby the owners or the char terers of the ship are damnified.
An illustration of this form of loss is the scuttling of the ship by the master or crew, or some other wil ful infliction of loss.
16. marine insurance losses fall into four groups : 1. Total loss 2. General average 3. Particular average 4. Salvage Total losses may be actual or constructive. Actual total loss includes cases in which there is a complete destruction of the property. This may be illustrated by the case of a ship's sailing on a voyage and never being heard of again.
A constructive total loss occurs when the ship is actually in existence and her position known, but the cost of floating her may be so large as to absorb and more than absorb the value of the ship. This may happen when a vessel runs ashore during an extremely high tide and it is impossible to float her without an expenditure greater than the value of the vessel. The actual physical injury to the vessel in such a case may be very slight, but from a marine insurance point of view the vessel is as much of a total loss as if she were never heard from again after sailing. When there is a constructive total loss, the insured may give to the underwriter notice of abandonment which turns the vessel over to the underwriters and calls on them for full payment of the loss.
There is a constructive total loss whenever the cost of restoring the vessel, plus the cost of repairing the damages, will exceed her value when she is restored. Practically the same rule holds in regard to the cargo and the freight. If the cost of saving either of these is greater than their value, there is a constructive total loss, and the insured has the same right to indem nity as if he had an actual total loss.
17. General average.—In marine insurance the damage that may be sustained by the ship, cargo or freight is subject to the application of the principle of average. This principle is not peculiar to marine insurance; it is a method in vogue for distributing the losses of a venture among the different parties inter ested, whether there is insurance or not. It is cen turies older than insurance.