The Significance Of Taking Out A Valued Policy In The Present Economic Climate

Under the Marine Insurance Act 1906, a distinction is made

between valued and unvalued policies of insurance. Pursuant to

section 27 (2) of the Act 1906, "a valued policy is a policy

which specifies the agreed value of the subject-matter

insured". Pursuant to s 27(3) of the Act, in the absence of

fraud, the value fixed by the policy will be conclusive, as between

the insurer and assured, of the insurable value of the goods or

vessel in question.

By contrast, section 28 of the Act 1906 defines an unvalued

policy as "a policy which does not specify the value of the

subject-matter insured, but, subject to the limit of the sum

insured, leaves the insurable value to be subsequently

ascertained..."

In other words, a valued policy will specify the agreed value of

the subject matter, whilst an unvalued policy will state merely the

maximum limit of the sum insured and leave the insurable value to

be ascertained subsequently.

The main difference between the two types of policy is that in

the case of a valued policy, the value fixed by the policy will, in

the absence of fraud, be conclusive of the insurable value of the

subject insured, while in the case of an unvalued policy the value

of the insured goods has to be proved by production of invoices,

vouchers, estimates and other evidence. In the case of an unvalued

policy, the insurable value of goods is the prime cost of the

goods, plus the expenses of and incidental to shipping and the

charges of insurance upon the whole.

Furthermore, under section 68 (2) Act 1906, "if the policy

be an unvalued policy, the measure of indemnity is the insurable

value of the subject matter insured". Whilst this appears at

first instance to be the logical way to measure the amount payable

under the insurance policy, it does raise the question of how

adversely ship-owners will be affected by the falling market rates

for their vessels in the event they make a claim under an unvalued

policy relating to the vessel. They may find that any recovery they

make will be only a fraction of what the vessel was worth at the

time they took out the policy and as a result they could face

significant losses.

That is why it is doubly important for those seeking to take out

cover for their vessels to ensure they obtain the appropriate cover

with the requisite wording. Whilst the distinction between valued

and unvalued policies seems to be clear, the identification of a

policy as being of one or the other type has proved far from

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