Some authorities say that illegality avoids the contract because of its concealment rather than because it involves any violation of an implied warranty. Smuggling voyages, trading adventures to an enemy's port, and all other enterprises prohibited by the law of the land or by the law of nations, being illegal, no policy of insurance will be upheld if effected with the intent to cover them; but this prohibition has been held in England not to apply to trading adventures undertaken in violation of the revenue laws of other nations.1 Smuggling or other illegal conduct by the master or crew, without connivance of the ship-owner, would not suffice to vitiate the contract; for such acts would amount to barratry, which the policy expressly covers. Policies upon risks which contravene either the statutes enacted to regulate trade and navigation, or the commercial treaties entered into with other countries, are void equally with those which run counter to the revenue laws, subject however to the exception, that, if the adventure can be carried on without violating the law, an illegal act performed in the prosecution of it will not invalidate the policy unless committed by or with the concurrence of the assured.2 Thus in a case where the master of a vessel in the timber trade stowed a portion of the cargo on deck during the winter season, and, contrary to statute, sailed without a clearance certificate that the cargo was below deck, it was held that the illegality did not vitiate the policy, it having been committed without the knowledge or privity of the owner.3 Again, where a ship not licensed by the board of trade to carry passengers did carry them, it was held, that, inasmuch as such carriage was the unauthorized act of the master alone, without the knowledge of the owners, and contrary to their intentions, the policy was not vitiated by it. There are risks which it is illegal to insure not because they are at variance with the permanent law of the land, but because they are opposed to public policy, especially in times of war. Wilson v. Rankin, L. R., 1 Q. B. 237. Lever v. Fletcher, Park on Ins., p. 2 Waugh v. Morris, L. R., 8 Q. B. 202. 162. 'Dudgeon v. Pembroke, 2 Asp. Mar. L. C. 323. Such, for example, are insurances effected on behalf of alien enemies, or to cover trading adventures to an enemy's port, which in both cases are wholly void and inoperative. The case is different with respect to insurances effected upon the property of neutrals against war risks which are not invalid in the neutral country, though the adventure to which they attach may be liable to capture by a belligerent. For instance, in the event of a port being blockaded, a trading adventure by neutrals to run the blockade, though liable to confiscation under the laws of war, is not illegal, and may therefore be made the subject of a valid insurance in the neutral country.1 As, however, the ordinary risk is much enhanced by such an enterprise, the intention of the assured must be disclosed to the underwriter at the time when the insurance is effected; otherwise the policy will be void on the ground of concealment. § 105. Actual Total Loss.-An actual total loss occurs when the subject insured wholly perishes, or its recovery is rendered irretrievably hopeless.2 Thus, for instance, when a vessel founders in a gale, or is captured by an enemy and is condemned as a prize. Whenever the thing insured is by the operation of a peril insured against reduced to such a state as to be incapable of use under its original denomination, there is an actual total loss. For example, if a ship is so injured by the perils of the sea as to be incapable of repair, the loss is actual, though her materials survive either in fragments or bound together in the original form. And again, if goods are so badly damaged as to become incapable of use for the purpose intended, there is an actual total loss.4 If a ship is sold and so lost to the owner under a decree of a court of competent jurisdiction in favor of salvors and in consequence of a peril insured against, it is an actual total loss, and therefore the person insured is entitled to payment without notice of abandonment.5 loss An insurance confined in terms to a total loss covers which deprives the insured of the possession at the port of destination of the entire thing insured, or which renders it entirely worthless, and also covers a general average loss.1 106. Constructive Total Loss.-A constructive total loss occurs when the subject insured, though still existing in specie, is justifiably abandoned on account of its destruction being highly probable, or because it cannot be preserved from actual total loss unless at a cost greater than its value would be if such expenditure were incurred.2 The right to an abandonment is to be determined by the situation at the time of abandonment.3 To exist in specie is to be capable of utilization as the thing insured. The difference between an actual and a constructive total loss is that in the former case the loss of the thing insured to the owner thereof is ascertained and permanent, while ⚫ in the latter case it is inferential or temporary. For instance, where a ship is so damaged as to be incapable of repair, the loss, as we have already seen, is actual; but, where the damage is susceptible of repair only at a cost exceeding the value of the ship when repaired, the loss is constructive. Again, where the vessel founders in deep water, so as to leave no reasonable hope of recovery, the loss is actual; but where the vessel sinks in shallow water, so as to admit of a reasonable hope of raising and restoring her only at a cost exceeding her value when raised or restored, the loss is constructive. Upon the same principle, where goods are so damaged by sea perils that they cannot be brought to their destination in specie, the loss is actual; but where, though damaged, it is possible to bring them to their destination in specie only at a cost exceeding their value when so brought, the loss is constructive. 1 Mayo v. India Mut. Ins. Co., 152 'Maggrath v. Church, 1 Caines, 196; Mass. 172 (1890). Benson v. Chap- s. c., 2 Am. Dec. 173. Irving v. Manning, 1 H. L. Cas. 304. Rodocanochi v. Elliott, 2 Asp. Hugg v. Augusta Ins. & Banking Mar. L. C. 399. Aranzamendi v. La. Co., 7 How. (U. S.), 595. Ins. Co. v. Ins. Co., 2 La. 432; s. c., 22 Am. Dec. Fogarty, 19 Wall. 640. 136. Rosetto v. Gurney, 11 C. B. 'Orient Ins. Co. v. Adams, 123 U. 196. S. 67. § 107. Constructive Total Loss: United States.— In the United States a somewhat arbitrary rule has been adopted in order to make it easier to determine whether the insured is entitled to claim a constructive total loss. It is here held that a person insured by a contract of marine insurance may abandon the thing insured, or any particular portion thereof separately valued by the policy or separately insured, and recover for a total loss thereof in the following cases: (1) If more than half thereof in value is actually lost or would have to be expended to recover it from the peril: (2) if it is injured to such an extent as to reduce its value more than one-half; (3) if the thing insured being a ship, the contemplated voyage cannot be lawfully performed without incurring an expense to the insured of more than half the value of the thing abandoned or without incurring a risk which a prudent man would not take under the circumstances; or (4) if the thing insured being cargo or freight, the voyage cannot be performed nor another ship procured by the master within a reasonable time and with reasonable diligence to forward the cargo without incurring the like expense or risk. Subdivisions (3) and (4) would cover, for example, the case of interruption by embargo.' With respect to freight, in case it is impossible to earn that subject owing to a total loss of ship or cargo, the loss is actual and can be recovered without notice of abandonment. Where, however, the loss though probable is not ascertained, but depends upon chances of recovery or estimated expenditure, the claim. falls within the category of constructive total loss, and requires the same kind of proof as in the case of similar claims upon ship or cargo.2 Thus if the ship be damaged so far as not to be worth repairing, but cargo which was on board be saved under circumstances which leave it doubtful whether such cargo might or might not be forwarded in a substituted ship, or if the cargo be lost and the ship may or may not earn some freight by carrying other goods on the voyage insured, in order to make certain of his right to recover as for a total loss on the policy on freight McConochie v. Sun Mut. Ins. Co., 26 N. Y. 477. Bradlie v. Md. Ins. Co., 12 Pet. 378. Peele v. Merchants Ins. Co., 3 Mason, 27-85. Orient Ins. Co. v. Adams, 123 U. S. 67. De Peyster v. Sun Mut. Ins. Co., 19 N. Y. 272. 2 Hubbell v. Great West. Ins. Co., 74 N. Y. 246. the assured should give notice of abandonment of the chance of earning such substituted freight.1 The same rule will apply in case the contract of affreightment is justifiably terminated by a delay resulting from the operation of the perils insured against. Thus a ship which was bound from Liverpool to Newport, where she was to load a cargo of iron rails for San Francisco, got ashore in Carnarvon Bay, and although ultimately floated and repaired was detained for so great a length of time in consequence of the accident that the charterers threw up the charter and hired another vessel to carry the rails which were wanted for the construction of a railway to their destination. In an action by the assured on the policy of insurance to recover for a loss of the chartered freight, the jury found that the time necessary for getting the ship off and repairing her was so long as to put an end, in a commercial sense, to the speculation entered into by the ship-owners and the charterers; and upon this finding it was held by the Exchequer Chamber, affirming the decision of the court below, that, the adventure having been frustrated by perils of the seas, there was a constructive total loss within the policy for which the assured was entitled to recover.2 § 108. Notice of Abandonment.-Whenever a claim is made for a constructive total loss, a timely notice of abandonment by the assured to the underwriters is a condition precedent to the right to recover, unless the assured is excused from the obligation to give notice of abandonment by the circumstances of the case.3 The only occasion in which notice of abandonment is not necessary is where, at the time the assured elects to treat the claim as one of constructive total loss, there is no possibility of the underwriter deriving any advantage from such notice, either because there is nothing to abandon or because the 1 Rankin v. Potter, 2 Asp. Mar. L. C. 67. 2 Jackson v. Union Marine Ins. Co., L. R., 10 C. P. 125. Allen v. The Mercantile Mutual Ins. Co., 44 N. Y. 437; s. c., 4 Am. Rep. 700. Clark v. Mass. Fire & Marine Ins. Co., 2 Pick. 104; s.c., 20 Am. Dec. 400. Kaltenbach v. Mackenzie, 4 Asp. Mar. L. C. 39. McConochie v. Sun Mut. Ins. Co., 26 N. Y. 477. |