Marine Cargo Insurance



Valued and unvalued policies

Valued policies

15.1 The Marine Insurance Act 1906 section 67(1) calls the sum which the assured can recover in respect of a loss the “measure of indemnity”. In the case of a valued policy the measure of indemnity is the value fixed by the policy, which, in broad terms, is the amount agreed with the insurers,1 whilst in the case of an unvalued policy, the measure of indemnity is the insurable value (e.g., the c.i.f. invoice value).2 It has been held that section 67 of the 1906 Act is “conclusively definitive of the extent of the liability of the insurer for loss”3 and the assured cannot therefore recover sums beyond the statutory amounts by way of damages from the insurers. The claim under the insurance is analysed legally as a claim for unliquidated (unascertained) damages arising immediately on the occurrence of the loss or damage to the cargo.4 It follows that under English law, by contrast to the position in the United States,5 there is currently no secondary obligation of performance arising from failure to pay on demand which entitles the assured to damages at large for delayed payment or unfair claims handling.6 In the circumstances, where, for example, the assured has a valid claim under a cargo insurance in respect of the loss of a valuable piece of income-earning machinery, and the insurers delay payment alleging wilful misconduct, the assured has no claim for damages for loss of the income that would have been earned by the lost or damaged machine, nor for any loss in capital value, or for any hardship or distress caused by the insurers’ allegations.7 In addition to the indemnity under the insurance contract, the assured can recover interest and costs,8 but these are matters of procedural law and fall outside the contractual indemnity itself.

15.2 Cargo may be insured on a valued or unvalued basis, though the usual practice in marine cargo insurance is to insure on a valued policy basis, typically with the agreed value being the c.i.f. value of the cargo plus 10% for notional profit.9 Where the policy is a valued policy the assured recovers, as the measure of indemnity, the value fixed by the policy. In the absence of fraud,10 this agreed value is conclusive between assured and insurer whatever the true value of the cargo. The question of what amounts to a valued policy is considered in the next section.11

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