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Marine Insurance and Risk Distribution in Scotland Before 1800

Published online by Cambridge University Press:  28 October 2011

A. D. M. Forte
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Extract

This paper is an account of the development of marine insurance in Scotland. The topic has not been previously investigated by either legal or economic historians. While providing a general history of the development of insurance, this paper will also undertake three more specific tasks, (1) to increase knowledge about the use of marine insurance during this time, particularly during the period 1700–1750; (2) to explain why insurance was not commonly used by merchants during the seventeenth century; and (3) to correct one very serious and misleading error relating to the chronology of development.

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Articles
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Law and History Review , Volume 5 , Issue 2 , Fall 1987 , pp. 393 - 412
Copyright
Copyright © the American Society for Legal History, Inc. 1987

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References

1. I.e., Roman law.

2. Campbell, G.Paton, H., ed., Baron David Hume's Lectures, 15 Stair Society, (Edinburgh, 1952) 310–402Google Scholar.

3. (Edinburgh, 2nd ed., 1810); (Edinburgh, 5th ed., 1826)598–631 [hereinafter cited as Bell's Commentaries].

4. Park, James Alan, A System of the Law of Marine Insurance (London, 1787)Google Scholar; Marshall, Samuel, A Treatise on the Law of Insurance (London, 1802)Google Scholar.

5. Millar, John, Elements of the Law Relating to Insurances (Edinburgh, 1787)Google Scholar.

6. Ibid. at v–ix.

7. Ibid. at v–vi.

8. Millar regarded the following as being important in the context of the development of the law: D.22.2., de nautico fenore (to which the modern scholar would add C.4.33); the Laws of Wisby (see Estienne Cleirac, ‘Us et Coutumes de la Mer’, in Le Guidon de la Mer (1647), Art. 66); and note also Sir Twiss, Travers, The Black Book of the Admiralty (London, 1871–1876) ivGoogle Scholar; the ‘insurance laws of Barcelona' (i.e., Ordonnances des Prudhommes de Barcelonne); ‘a considerable compilation at Antwerp… under Phillip II' (A Scottish version of this, ‘Ane Placca or Ordinance concerning the Fitting Out off Ships. Concerning Sea Lawes. Concerning Assurances. Made by Phillip King of Spain and published Anno. dom. 1563’., MSS Adv. 6.2.2., f .62, is to be found bound up in Robert Mylne's Sea Laws (Edinburgh). This work was probably completed shortly after 1706. Millar dismisses any Greek influence on insurance, in the sense that they did not develop a specific contract. Though technically correct, the modern law certainly has its roots in the practices of Greek and Roman traders: for Greek law of the late Classical and early Hellenistic phases, see Demosthenes, , Private Orations, 35.10–13Google Scholar, discussed in MacDowell, Douglas, The Law in Classical Athens (London, 1978) 233Google Scholar. Greek traders made use of the loan plus interest which was generally not repayable in the event of shipwreck. Repayment was, therefore, contingent upon the successful conclusion of a venture. In other words, the lender assumed the risk of loss.

9. Campbell, R. H., Scotland Since 1707: The Rise of an Industrial Society (Oxford, 1965)Google Scholar.

10. Covering the period 1540–1808, it is a comprehensive but not exhaustive collection of decisions of the Court of Session. Cases found in Morison's Dictionary are cited by year and page as follows: (1779) M. 7080.

11. Supra note 5 at 17–18.

12. (1779) M. 7080.

13. Ibid. at 7081.

14. I.e., of the utmost good faith.

15. (1766) 3 Burr. 1905, at 1909.

16. (1793) M. 7077.

17. (1808) M. Appendix No. 10.

18. (1774) M. 7096.

19. John Millar, supra note 5 at 465. The case in question was Wilson & Co. v. Elliott (1766) M. 7096; Fac. Dec. No. 228.

20. Wilson v. Wordie (1783) Fac. Dec. No. 132; Buchanans v. Hunter Blair, Fac. Coll. 20th November 1783.

21. Strachan v. McDougle (1835) 13 Shaw 954 at 959.

22. Supra note 20.

23. Published in Leyden, 1744.

24. See Archibald and James Robertson v. Laird (1790) M. 7099 and compare John Millar, supra note 5 at 437.

25. Campbell, G.Paton, H., ‘The Eighteenth Century and Later’, in 20 Stair Society (Edinburgh, 1958) 52–53Google Scholar.

26. See the Preface to Bell's Commentaries, supra note 3, passim.

27. Strachan v. McDougle, supra note 21 at 958–59 (emphasis added).

28. The manuscript notes found in Glasgow University library which contain references to insurance are: MS Gen. 178 by an unknown student and dated 1783, 273–75; MS Gen. 181/1–3 by William Rae and dated 1790, in particular MS Gen. 181/2, 447–49; MS Gen. 1078 by James Millar and dated 1792, 100–101. My colleague Dr. John Cairns has identified the third manuscript as possibly being Professor Millar's own copy.

29. MS Gen. 1078, at 100.

30. D.22.2; C.4.33. sub nom. de nautico fenore.

31. de Roover, Edler, ‘Early Examples of Maritime Insurance’, Journal of Economic History v. (1945) 172CrossRefGoogle Scholar, points out (at 175) that even when the loan stipulated that it was made ‘free and from affection’ the lender, by retaining part of the sum named, obtained interest and compensation for the risk run. Maritime loans may have been the principal target of the decretal of Gregory IX (c. 1145–1241) De Naviganti of 1236 Decretales, Book v, De Usuris, tit. xix, ch. xix which condemned them as being usurious. On this last point see Noonan, John, The Scholastic Analysis of Usury (Cambridge, Mass., 1957) 175Google Scholar and Passamaneck, Stephen, Insurance in Rabbinic Law (Edinburgh, 1974) 22–23Google Scholar.

32. Sir Holdsworth, William, A History of English Law (London, 3rd ed., 1922) viii: 261–63Google Scholar; Bensa, Enrico, Histoire du Contrat d'Assurance au Moyen Age (Paris, 1897) 28Google Scholar (published originally as Il Contrato di Assicurazione nel Medio Evo (Rome, 1894)Google Scholar).

33. Tit. 14. The order of the work corresponds in both the Scottish and English versions which are given in Wade, T. Callander, ed., The Sea Law of Scotland, Scottish Text Society, 3rd ser. iv, Miscellany Volume (Edinburgh, 1933)Google Scholar.

34. The ‘outredder’ was the person who equipped and fitted out a vessel for a trading venture.

35. Tit. 8 ‘Of the Outredder of ane ship and actioun baith for him and against him’.

36. Ane Litle Styll Book, Edinburgh University Library, Special Collections, Dc.8.108; Style Book of David Wilson, MS Adv. 25.7.11; Style Book of James Dewar, MS Adv. 32.4.13.

37. Erskine, John, The Principles of the Law of Scotland. In the Order of Sir George Mackenzie's Institutions of that Law (Edinburgh, 1754, 1757, 1764)Google Scholar [hereinafter cited as Erskine, Principles]. Insurance is mentioned in the second edition of Erskine's, Institute of the Law of Scotland (Edinburgh, 1785), 3.3.17Google Scholar. I have drawn attention to the Principles because this work was based on the author's lectures to his students who must have received no instruction on insurance.

38. As to which, see Hume's Lectures, supra note 2 at iv: 33–34.

39. Erskine, Principles, supra note 37 at 4.4.37 (1754 ed.). See also Hume, David, Commentaries on the Law of Scotland Respecting Crimes (Edinburgh, 1844) 501Google Scholar.

40. Lutwidge v. Gray (1734) 1 Pat. 119. It is interesting to note that William Murray, later Lord Mansfield, was counsel for the appellants in this case. As Lord Mansfield, he subsequently founded on this case in Luke v. Lyde (1759) 2 Burr. 882.

41. His trading ventures, which typified Scottish trade at this time, included the export of oatmeal to the West Coast of Scotland; of herring and cod to Hamburg, Königsberg, the Netherlands, and Stockholm; and of salmon to London and the continent.

42. McKay, W., ed., The Letter Book of Baillie John Stewart of Inverness, 1715–1752, Scottish History Society, 2nd ser., ix (Edinburgh, 1915)Google Scholar.

43. John Millar, Elements of the Law Relating to Insurances, supra note 5 at 30–34 gives an example of a form of policy ‘peculiar to policies used at Glasgow’ in which the insurers were a group of Glasgow merchants. An early nineteenth century form of ‘Policy of Insurance upon a Ship and Goods’ is to be found in Bell, Robert, A System of the Forms of Deeds used in Scotland, 6 vols. (Edinburgh, 1811) iv: 508–11Google Scholar.

44. It appears that during the period covered by the Letter Book most risks were underwritten in London. Cover was arranged on the Baillie's behalf by Scottish merchants based there who, like the Baillie himself, were of Gaelic stock.

45. Letter dated 28 March 1718.

46. Baillie Stewart's ships and cargoes traded to Bordeaux, Haverdegrace, and St. Martin in France, and to Livorno in Italy.

47. In a letter of 11th April 1772 from James Robinson, ‘superintending factor’ of the Glasgow tobacco firm of William Cunninghame and Co., to one of the company's factors in Virginia, the premium quoted is two and a half per cent of the value of the cargo and/or the vessel. See Devine, T. M., ed., A Scottish Firm in Virginia 1767–1777, W. Cunninghame and Co., Scottish History Society (Edinburgh, 1984) 55Google Scholar. The premiums paid by the Baillie ranged from one and a half per cent, in times of peace, to ten per cent in wartime.

48. Letter dated 21 September 1715.

49. Letter dated 23 March 1716. This request appears to have been prompted by the safe arrival of the John in Holland ‘and Insurance prevented’.

50. Letter dated 24 April 1716. Emphasis added.

51. Letter dated 1 January 1776.

52. Merchant of Venice, I, i: 42–43.

53. This digest practick was probably completed in 1583. It covers the period 1469–1579 but was not published until 1754. See McNeill, Peter, ed., The Practicks of Sir James Balfour of Pittendreich, Stair Society, 21, 22 (1962)Google Scholar [hereinafter cited as Sir James Balfour].

54. One of the two vice-admirals of Scotland during the mid-sixteenth century.

55. See Sir James Balfour, supra note 53 at 619.

56. Ibid. See the ‘Laws of Oleron’, art. 11, from the translation given in the Rutter of the Sea (1536) and reproduced in The Black Book of the Admiralty, i (London, 1871)Google Scholar.

57. See note 33, supra.

58. William Welwood, supra note 33, Tit. 2, ‘Of fraughting of Schips’.

59. Ibid. Tit. 4, ‘Of the duetie of the Master to the Marchant and Passinger’. Note the comment in Davidson, John and Gray, Alexander, The Scottish Staple at Veere (London, 1909) 58–59Google Scholar: ‘The question of the responsibility of the owner of the vessel for loss incurred was not wholly lost sight of, and in the case of a ship called the Jhone sailing from Edinburgh to France, it was laid down that the ‘said ship be weill furneist with ankers and cabills’, and in case any loss should arise from default of these, the master was to refund the freight paid’.

60. William Welwood, supra note 33, Tit. 9.

61. Convention Records, i.45; ii.494. This was modified in 1580 to exclude, inter alia, ‘uther gudes imput in the schip at ony uther port’. Ibid. at i.99–100. These references are to manuscript records of the Convention. See generally, Sir Marwick, J. D., Records of the Convention of the Royal Burghs of Scotland, 1295–1597 (Edinburgh, 1866)Google Scholar.

62. For a description of the manner in which merchants typically conducted overseas trade in the sixteenth century, see Sanderson, Margaret, ‘The Edinburgh Merchants in Society, 1570–1603: The Evidence of their Testaments’, in Cowan, Ian and Shaw, Duncan, eds., The Renaissance and Reformation in Scotland: Essays in Honour of Gordon Donaldson (Edinburgh, 1983)Google Scholar. For the seventeenth century, see, generally, Smout, Christopher, Scottish Trade on the Eve of Union 1660–1707 (Edinburgh, 1963)Google Scholar. Note also, Cullen, Louis M. and Smout, Christopher, Comparative Aspects of Scottish Economic and Social History, 1600–1900 (Edinburgh, 1977)Google Scholar; Donaldson, Gordon, Scotland: James V-James VII (Edinburgh, 1978)Google Scholar; Smout, Christopher, A History of the Scottish People, 1560–1830 (London, 1969)Google Scholar.

63. Reproduced in John Davidson and Alexander Gray, supra note 59 at 417 (Appendix I). In 1540, the sea between La Vere or Flushing and Antwerp was guaranteed by that city. Ibid. at 59. Thomas Cuningham, Conservator of the Scottish Staple at Campvere makes two references in 1645 to convoys sailing under the protection of the ‘Admiralty of Zeland’. See Courthope, Elinor J., ed., The Journal of Thomas Cuningham of Campvere, 1640–54, Scottish History Society, 3rd. ser. (Edinburgh, 1928) 59, 130Google Scholar. Note also, a letter, in triplicate, to the Prince of Orange, the magistrates of Campvere, and the ‘Admiraltie of Zeland’ ‘for convoyis to our shipps in our voyages to and fra our staple port at Campheir’. See letter dated 10 August 1649 in Wood, M., ed., Extracts from the Records of the Burgh of Edinburgh, 1642–1655 (Edinburgh, 1939) 207Google Scholar.

64. E.g., Broke c. Maynard (1547); Ridolphye c. Nunez (1562). These and other early marine insurance contracts are to be found in Select Pleas of the Admiralty, Selden Society, 2 vols. (London, 1888) ii: 47Google Scholaret seq. and are discussed in Sir William Holdsworth, supra note 32 at viii: 283–84.

65. Ridolphye c. Nunez, in Select Pleas of Admiralty, supra note 64 at 52–53.

66. McMillan, Arthur R. G., ‘Admiralty and Maritime Law’, in Sources and Literature of Scots Law, 1 Stair Society, (Edinburgh, 1936)Google Scholar.

67. Innes, Cosmo, ed., The Ledger of Andrew Halyburton Conservator of the Privileges of the Scotch Nation in the Netherlands, 1492–1503. Together with the Book of Customs and Valuation of Merchandises in Scotland 1612 (Edinburgh, 1867)Google Scholar. Guicciardini, Lodovico, Deiscrittione di tutti i Paesi Bassi (Antwerp, 1581)Google Scholar.

68. One should bear in mind Molloy's words: ‘Common prudence will never suffer a Merchant to venture 2. parts of 3. parts of his Estate in one bottom without assuring’. Molloy, Charles, De Jure Maritimo et Navalie (London, 1676) 286Google Scholar. The reference is to the practice of dividing a cargo between several ships.

69. The texts of both the ordinance of 1563 and of the Amsterdam keur were translated into Scots by Robert Mylne, supra note 8.

70. Violet Barbour, ‘Marine Risks and Insurance in the Seventeenth Century’ [1929] Journal of Economic and Business History, 561.

71. In England's Treasure by Forraign Trade, or the Ballance of our Forraign Trade is the Rule of our Treasure at 3, reproduced in McCulloch, John R., ed., Early English Tracts on Commerce (Cambridge, 1954) 123Google Scholar. Note also in the same volume at 85, Lewes Roberts, The Treasure of Traffike or a Discourse of Forraigne Trade (1641). On the Office of Assurances, see Sir William Holdsworth, supra note 32 at viii, 285–86.

72. Pufendorf, De Jure Naturae et Gentium (1672) 5.22.10; 9.8. Grotius, De Jure Belli ac Pacis (1625) 2.12.5; Inleidinge tot de Hollandische Rechtsgeleerheid (1631) 3.24.1–23.

73. On the question of this Southern bias in insurance, see Cornelius van Bynkershoek, Quaestionum Juris Publici (1737) ch. XXI, discussing the problem of whether insurance of an enemy's property is lawful. He refers to an edict of the States General of 1 April 1622 and another of 31 December 1657, declaring void all insurances made by Dutch subjects on Spanish and Portuguese property respectively when Holland was at war with these countries.

74. Christiansen, Aksel, Dutch Trade to the Baltic About 1600: Studies in Sound Toll Register and Dutch Shipping Records (Copenhagen, 1941) 172–73Google Scholar. See Boxer, Charles, The Dutch Seaborne Empire 1600–1800 (London, 1973) 20Google Scholar, which paints a less depressing picture of Dutch insurance during the seventeenth-century. P. J. Blok, ‘Koopmansadviezen aangaande het Plan tot Oprichting eener Compagnie van Assurantie (1629–35)’, Bijdr, en Mededeel. v.h. historisch Genootschap xxi (1900) presents a detailed account which agrees with Christiansen's interpretation. This is discussed more fully in Violet Barbour, supra note 70 at 587–88.

75. ‘So… assurance is not in use among merchants, except of necessity, when there is no opportunity to divide the goods and ship them separately, or to come to agreement among themselves. And assurance of vessels is not done save by the very few persons who send out ships of which they are substantially the proprietors, or [at least] own a considerable share in them.’ See P. J. Blok, supra note 74 at 46–47. The translation is that of Violet Barbour, supra note 70 at 588.

76. Aksel Christiansen, supra note 74 at 173.

77. S. R. O. Russell MSS 259/2, A letter from Robert Turnbull, Edinburgh, 9 March 1686. See Smout, Christopher, Scottish Trade on the Eve of Union, 1660–1707 (Edinburgh, 1963) 60Google Scholar.

78. Inst., 1.10.12. Stair's location of insurance in the context of exchange is interesting because Grotius, too, treats it as a species of exchange, ‘formerly scarcely known but… now very common’, in De Jure Belli ac Pacis 2.12.5.

79. Dean of Guild Court Records, Edinburgh City Archives, vol. 3. I am grateful to Mr. James Brown of the Department of Scottish History in Edinburgh University for discussing with me the lack of evidence for insurance which his study of merchant traders of this period has confirmed and for drawing this case to my attention.

80. On protocols and notaries in Scotland, see John Durkan, ‘The Early Scottish Notary’, in Ian Cowan and Duncan Shaw, eds., supra note 62 at 22–40. See also, William Angus, ‘Notarial Protocol Books 1469–1700’, in 1 Stair Society 289–300.

81. Letter dated 22 August 1720.

82. Letter dated 9 January 1719: ‘This night I have forwarded Afidavits from the Master, Captine Dunbar, and one of his men arived here, and the bill of loadning and my own Afidavid befor two Justicess of peace, to Mr. Alexr. Andrew of Rotterdam; I say my Afidavid in ye Quantity of Herines Shipt for your accot. and mine, in order to Recover what Insurance is made, and I heartily wish it may serve you that way. Alexr. Dunbar assures he gave the Pass [see other letter of same date to Alexander Andrew] to Mr. Dopson at Stockholm, and made Afidavits yre., which was to be transmitted to Rotterdam to Mr Andrews to Recover our bond.’

83. Letter dated 13 December 1725.

84. Templeman, Frederick, Marine Insurance: Its Principles and Practice (London, 4th ed., reprinted 1974) 145Google Scholar: ‘In order to substantiate a claim for total loss it is usual to submit for the underwriter's inspection what is termed the “Protest”, a document signed by the master and one or more of the officers, and executed before and attested by a Notary, giving a detailed narrative of the circumstances of the casualty’.

85. Murray, David, Legal Practice in Ayr and the West Coast of Scotland in the Fifteenth and Sixteenth Centuries (Glasgow, 1910) 61Google Scholar. See also Anderson, J. and Grant, F. J., eds., The Protocol Book of Gavin Ros, N.P., 1512–1532, Scottish Record Society (Edinburgh 1908)Google Scholar.

86. William Angus, ed., Scottish Record Society (Edinburgh, 1914). See Instruments 135 and 319.

87. M. Wood, ed., Extracts from the Records of the Burgh of Edinburgh 1626–1641 (1936). See also the extract dated 6 May 1635.

88. The quotation is taken from the English version found in the Rutter of the Sea (1536) and given in Sir Twiss, Travers, The Black Book of the Admiralty (London, 1871) i: 89–131Google Scholar.

89. Ibid. at i, 99 n. 2. Note also, Articles 11 and 15; The Gotland Sea Laws, Articles 22, 25, and 29; The Danzig Ship Laws, Articles 41, 42.

90. The Sea Law of Scotland, supra note 33 at Tit. ix.

91. Infra note 94.

92. The importance of style books as a source of substantive law is attested by Sir Mackenzie, George, Pleadings (Edinburgh, 1673) 151Google Scholar: ‘Arguments brought from Styles are a great part of our fundamental law. They, to Lawyers, are what the Chart is to Geographers, or the Compass to Seamen.”

93. Those containing such styles are: George Dallas of Saint Martins, System of Styles as now Practicable within the Kingdom of Scotland: And Reduced to a clear Method not heretofore (1697); Style Book of James Dewar in 1687, MS Adv. 32.4.13; Style Book of 1680, MS Adv. 6.2.21.; Style Book of Alexander Duncan, MS Adv. 25.7.4., (17th century); Style Book of David Wilson, MS Adv. 25.7.11. (17th century). John Spotiswood, An Introduction to the knowledge of the Stile of Writs Simple and Compound Made use of in Scotland containing Directions for drawing Securities in cases which most commonly occur: with Examples According to the best Modern Practice (1708), is silent on insurance contracts. Note also, in Edinburgh University Library, Ane Litle Styll Book, Dc. 8.108, (17th century). The foregoing may be contrasted with Robert Bell's System of Forms, supra note 43, which contains forms for marine and life contracts in the early nineteenth century. Their inclusion reflects not only growth in the practice of insurance but also the lawyer's involvement in drafting such contracts.

94. E. M. Wedderburn and R. B. Laurie, ‘Style Books’, in Sources and Literature of Scots Law, supra note 66 at 309.

95. See note 93 supra.

96. Circa 1580–89; in Edinburgh University Library, La. II. 389, ff. 21–30.