In the recently published Research Handbook on International Commercial Contracts (Andrew Hutchison and Franziska Myburgh (eds), Edward Elgar 2020), my chapter makes an immodest attempt to sketch a concise history of the law of marine and commercial insurance contracts in England, from its earliest days in the fifteenth century to the legislative reforms of the twenty-first.
The adoption of this long-term view was facilitated by the collection’s broad connecting themes, described by the editors in their introductory chapter, “International commercial contracts: autonomy and regulation in a dynamic system of merchant law”. I took the first of these themes, the contested notion of the lex mercatoria, as an invitation to touch on the role of foreign influences in shaping insurance law and practice in England. The contract of premium insurance was first introduced to England by Italian merchants, and in insurance practices in sixteenth-century London were heavily influenced by foreign practices. My chapter goes on to outline how, in the seventeenth and eighteenth centuries, as the central courts of common law and equity began more frequently to hear insurance disputes they would seek guidance from continental treatises and ordinances on insurance. By contrast, in the early nineteenth century the English courts declared confidently that the answers to all insurance-law questions could be found in English precedents. Nevertheless, under pressure from foreign competition (amongst other forces), the last forty years have witnessed dramatic reforms to both the London market’s standard marine insurance contracts, and to domestic legislation relating to commercial insurance (especially as a result of the Insurance Act 2015 and the Enterprise Act 2016).
The Research Handbook’s second theme is that of private ordering in commercial or merchant affairs: an examination of the extent to which London’s merchant-insurers have created, adjudicated upon and enforced their own rules provided a convenient central focus to my chapter. The main tendency revealed in relation to private ordering is of its decline, and of the increasing legalisation of commercial insurance contract rules. In exploring this theme, I consider examples relating to policy interpretation (eg, regarding ‘perils of the seas’, convoy warranties, and policies ‘on account’), illustrating the role of merchant-witnesses and special merchant juries in informing early modern courts as to how the merchants themselves understood their contracts, and noting how these understandings became matters of judicial precedent. Consideration is also given to the reception (or rejection) and evolution of substantive insurance-law rules derived from merchant practice, including those relating to the assignment of policies, presumptions of loss in the absence of news, and pre-contractual disclosure and misrepresentations.
The decline in the private ordering of insurance-contract rules is explored further in relation to marine-insurance dispute resolution. In this regard, I narrate the changes in the preferred tribunals to which such disputes were submitted. In London, an initial preference for ad hoc arbitration and for the City’s courts gave way, in the late sixteenth century, to the establishment of a registrar of insurances and of a standing panel of arbitral commissioners to hear insurance disputes. This panel of commissioners was supplanted by the court of assurances established by the Merchants’ Assurances Act 1601 (43 Eliz c 12). In parallel, the sixteenth-century Admiralty court also heard insurance disputes; and, more importantly for what was the follow, the central common-law courts did as well. Despite attempts to bolster the court of assurances in the seventeenth century, by the early eighteenth century the common-law courts had become the main forum for the resolution of insurance disputes, and construction of a common law of commercial insurance was well under way.
The final topic that I address is that of increasing, and increasingly extensive, legislative interventions in the matter of insurance contract rules. The earliest English legislation, beginning with the 1601 Act, was intended to support the existing, largely privately ordered system. Subsequent interventions, from the late sixteenth century to the nineteenth century, were aimed at suppressing particular insurance-related mischiefs: fraudulent schemes; the insurance of contraband, foreign competitors or enemies of the realm; wagering; and the avoidance of stamp duty. Other legislation, from 1788 to the early 1820s, evidences the legislature’s increasing disapproval of the practice of insuring carried-away African slaves. The Marine Insurance Act 1906 differed from the preceding legislative interventions in the wide and direct manner in which it sought to describe, and prescribe, the rules and practices applicable to insurance contracts. The rules of commercial insurance contracts were profoundly legalised by the 1906 Act, and necessarily separated to an extent from the merchant practices from whence they had sprung. Subsequent, fundamental reforms, like those effected in 2015 and 2016, would take place at the state’s initiative and require further legislation.
None of this should lead one to conclude that private ordering is now irrelevant to commercial insurance contract practice. On the contrary, self-organisation remains a central feature of the London insurance market, as exemplified by its ability, via organisations like the International Underwriting Association of London and the Lloyd’s Market Association, continually to maintain an ever-expanding, widely used library of model contract wordings. London’s insurers have shown, time and again, that they will respond rapidly to current events in a consciously coordinated way, as illustrated by the issuance over the course of 2020 of a half-dozen model endorsements relating to ‘communicable disease’ in response to the Covid-19 pandemic. But the business of insuring business is of such importance for the public good that a degree of state direction is inescapable, as shown by recent initiatives of the domestic regulator (the PRA) to manage the market’s exposure to cyber risks by, inter alia, encouraging underwriters to include clearly worded cyber exclusions and coverage limits in their policies.
Other contributors to the Research Handbook also explore the volume’s connecting themes of the lex mercatoria and private ordering, addressing a wide variety of topics relating to international commercial contracts. The latter range from more general subjects (eg the notion of good faith and long-term contracts, contractual remedies, the UNIDROIT Principles of International Commercial Contracts, choice of law, etc) to more specific topics (eg electronic and blockchain-based bills of lading, negotiable instruments, online contracting and smart contracts, etc). For those seeking commentary on such matters with historical perspective, the Research Handbook should be of particular interest.
Jeffrey Thomson, City Law School
Jeffrey Thomson, ‘A history of English marine insurance law: merchants, their practices, the courts and the law’, in Andrew Hutchison and Franziska Myburgh (eds), Research Handbook on International Commercial Contracts (Edward Elgar 2020). E-book. GooglePlay