Insurance on the High Seas

Common-Place just published an article about eighteenth-century marine insurance that, because it comes from Hannah Farber, author of the new Underwriters of the United States, is actually quite interesting.

“Insurance for (and against) the Empire” discusses a legal case involving John Brown of Providence and a voyage in 1760.

That was, of course, during the Seven Years’ War. Despite the dangers of sea travel, Brown (and his uncle) sent a ship to the French colony of Saint Domingue under an official flag of truce in order to exchange prisoners.

Brown also took out insurance from the Philadelphia brokers David and William McMurterie, opting for their more expensive comprehensive coverage.

The Brown ship was captured by a privateer—a British privateer rather than a French or Spanish one. Which in a way made sense because the ship was sailing back to Providence full of French molasses and sugar. And as for the prisoner exchange, the ship hadn’t carried any French prisoners to Saint Domingue at all (though it was bringing two British prisoners home).

The McMurteries argued in court that they weren’t obligated to pay for the lost cargo because Brown had clearly lied about the purpose of the voyage, which was really “illicit and contraband Trade” with the enemy.

Brown responded by arguing that:

• Whatever their ship was carrying, it did sail under an official flag of truce from Rhode Island governor Stephen Hopkins.
• The expensive insurance policy explicitly said the insurers couldn’t ask questions about what happened.

The supreme court of Pennsylvania decided in favor of Brown, saying the McMurteries had to pay out.

That dispute then went to the Privy Council in London. That body had to balance competing goals: discouraging smuggling, encouraging privateers in wartime, supporting the insurance industry, maintaining the rules of war, honoring the precise wording of contracts.

What did the Privy Council decide? Read Hannah Farber’s article.