BUBBLE INSURANCE COMPANIES.

Marlborough Express, Volume III, Issue 122, 20 June 1868, Page 5

BUBBLE INSURANCE COMPANIES.

To the Editor of the Marlborough Express. S IK> Mr. Crawford at the public meeting in Wellington, made it a ground of complaint against the present Insurance Companies,'that they would not peimit over-valuation. “ They have red need.’’ said Mr. Crawford. “ the values £si)o on one block, and £IOOO on another ; they not only charge high premiums. hut will not allow our own valuations.” Tim object of insurance is to give an indemnity from actual loss; not to allow people to make a piofit out of the destruction ol property. 1 Im system of unremunerative premiums, coupled with over-valuation, has been the ruin of both insurers and insured in England years ago It is now exploded, anti if it he introduced into this Colony, t he Colony rou»t .'veiituttliy p.ty for its lolly. It is the hound'eo duty of-the Insurance Companies to prevent over-valuation, not to encourage it Nothing can bo better settled than that an underwriter must in case of loss pay the sum insured. Ho c <*llllol he allowed to plead that the value in the policy is excessive; he has fixed it himself. In the reign of George the Second a statute, yet un-i-ppcaled, was passed to prevent gambling in insurances. It was enacted that policies specifying interest, or no interest, or without further proof of interest than the production of the policy, should he absolutely null and void. The insurer can call oh the insured to proven substantial interest m the matter insured. . in the time of Lord Mansfield, the question was decided as to whether a valuation could be reduced after a loss had occurred. The defendant, hi an action on a Marine Policy, proved the valuation to be excessive, and endeavoured to Show that the case came within the statute. Lord, Mansfield, in delivoriiiii the judgment of the full bourt, said- If the plaintiff had insured the whole ship, having interest only to the value of one of her cables, the Court might have deemed it an evasion of the atatute, but such is not the case. Here a substantial interest has been proved ; the defendant lias himself admitted the- value by accepting the premium, and cannot now,.'be allowed to dispute it.” Tina doctrine has been affirmed in a very recent case in Fire Insurance. 'About four years ago an eccentric gentleman in England had invested nearly his whole property in a costly house, luxuriously furnished, and containing a. great many pictures and marble statues. A tire occurred, of which the cause could not he ascertained,'and in a few hours all was destroyed. The property was insured for £30,000. The Insurance Company refused payment, and on the trial their counsel cross-examined the servants and other witnesses with a view to prove fraud; nothing, however, could be : proved. The presiding Judge, in summing up, commented strongly on the conduct of the Company, who utter subscribing a policy for a large amount, and accepting the premium, now attempted to ibvade payment by insinuting that the conduct of th • insured had been fraudulent, simply because the property had been highly valued, and a verdict was returned, for the full amount. Indeed the rule of law adopted in England for the settlement of average or partial losses on goods is based on the principle of the value ju the policy being fixed. The original decision was also by Lord s ' Mansfield, and to the present time; forms the rule of' adjustment. The case was sugar insured —Jamaica- to London—at value £26 per hogshead. The market rose, and this cargo arrived, part damaged—-the sound selling at £3O per hhd., aud the damaged at .£27. The insured 1 claimed the difference—£3 per hhd Lord Mansfield, in delivering judgment, said:—“ Had thoso sugars been totally lost, the insured would have recovered the value in the policy, whether the market value was £2O or £3O. These goods have sold—sound, at £>3o; damaged, £27- The depreciation is 10 per cent on £2 JOs. per hhd. on £-25,’the value stated iu the policy. Had the goods come to a falling market end sound, sold at £2O, and damaged at £lB, the plaintiff would have recovered 10 percent, on the valuation in the policy. The broad principle .is, the underwriter lias nothing to do with the market. U is uot a risk which he has taken; be is

dimply bound by vim Value in the policy ” This rule bin* never been disputed, and it is* the recognised Oasis of average adjustments at Lloyd's. House property is of fluctuating value What may be woith £lOOll to-day, may tie worth for saleable value, either £-‘BOO or 1200 this day six months. There would be no end of litigation could the principle of allowing underwriters to evade payment id’ full, on the plea ofover-valuation, once he allowed In the same way the English Courts will not allow the plea of negligence. In Dixon v Sadler, a ship -had cast all-her ballast at sea previous to entering pint; capsized and sunk. At tb : trial at tile Newcastle As.-izes in 1838, the Judge merely asked the special jury to answer, the question. Was this negligence !—They .found it was. His Lordship then sauli “ That in his opinion the plea of negligence was- inadmissible.” and. .directed a verdict to-be entered for the plaintiff, with-leave for the defendant to move the full Court to have the verdict entered for himself. The next time the defendant moved, and the live Judges unanimously decided. The plea of negligence cannot be admitted, it it were, there would he no end of litigation, as the question would continually arise,—What amount of precaution would have prevented the loss? In a subsequent case, when a carpenter’s shop had been fired by a lighted match thrown amongst shavings, the presiding Judge quoted “Dixon t> Sadler,” adding that a policy covered the risk of negligence of the. insureu himself or his servants. There was no fraud on til- 1 part of the insured, and the verdict must be for the plaintiff

It is plain, therefore, that it is the duty of the Insurance Companies to guard against over-valua-The Courts will not permit them to repudiate 1 1 111- policies on this ground, while at t lie same time the Mstem is holding out temptation to necessitous men. A company who should systematically encourage over-valuation would he a public nuisance.. Where rhe liability of the shareholders is unlimited ns with ilo* New Zedaod Insurance Company, there ran be no urea-ion :or a large nominal capital. Tin* Government returns min lli it the capital oftliis Coilipan n I* 2.0 00 shares ot i (10 each on £250,000. Mr, <'ihnn ford sit's, and Mr. < twon confirms the statement, that only £6 per share is paid-up on £15.000 ’The hatchiy of the shareholders is unlimited. and tins is ilie onh t- at security. It does not matter one mi aw w he.her you call the nominal rapiial £2-5.000. or £250,t) >O, or £ ; 2.5()0,000, The first sum might look 100 small to print in an advertisement. and the second too largo. The principle of allowing nominal unpaid capital in the case of Banking and insurance Companies is unsound. All the Hank* ol Issue in the Colonies, with the exception of |wo of these with Colonial proprietary in Melbourne, have their full subscribed capital paid up. The Imperial Government insists ou this when an Act of Incorporation is sent home for tile Royal Assent, and also that when the liability i« limited, that it shall not be less than double the amount of the subscribing capital. For iiiotancr, the Hank of New Zealand is £lO shares paid-up, and each shareholder liable for double that amount .per share by the Act of Incorporation. This is very different from an Insurance, with only-£’6 per cent, paid-up, oven if the liability is unlimited. A Colonial Company with a large paid-up capital, and either unlimited liability, which is best, or limited to two, three, or four times th» amount of the suh»eript)"ii. would oo a public benefit to this Colonv. Hut there must be no deception as to the amount of the paid-up capital, nor yet if limited liability UPi be used as to the limits. This heading of every policy should express this, and it. will be the boundon duty of the Legislature it they, during the next session, sanction' the establishment of Local Insurance Companies in Canterbury and Wellington, to seo that the public is tally secured. The share lists and transfers ought, also to be filed in some Government office (s iy :he Stamp Office, as in London), and not let! to the officers of the companies ; or perhaps they may when wanted be like the poll book for tlie Irish election, which the Returning Officer told u Bribery Committee, “ Had fallen into a pot ot broth and the dog had ate It.” Yours. &.C., IiENHY COOKJL. Blenheim June !Bib, 1863.