The premium, which is the consideration for the promise of the insurers, is equally valid for that purpose, whether it is paid in money when the policy is delivered, or by a promissory note, or remains only as the debt of the insured. In this country the usual payment is by a promissory note, which is called a premium note.
The premium is not due, or, to speak more accurately, is not earned, unless the risk is incurred for insurance against which * the premium is given. But it is wholly earned if the whole property insured is for any time, however brief, under such risk. If no part of the risk attaches for any reason whatever, no part of the premium is earned, and the whole if paid is returnable. This rule applies equally, whether the cause of the non-attachment of the risk was, that no part of the voyage took place, (a) or that no part of the goods were shipped, (b) or that the insured had no interest in the property, (c) or that the vessel was unseaworthy, (d) or that any other breach of warranty occurred, which avoided the policy before the risk attached. (e) By a common clause, insurance companies retain one-half of one per cent, on the return of the premium.
If the policy is a valued one, and the valuation is not diminished during the voyage by a withdrawal of any part of the subject insured, there is no return of premium. (f) And if the policy be entire, whether for a period of time, or for a voyage, no premium is retainable if the risk attached for any portion of the time or the voyage. (g) Hence, if the insurance be "at and from" a place, no premium is returnable, if the premium attach at and never from; (h) as would be the case if the ship were seaworthy at the place, but unseaworthy for the voyage. (i) So, it would not be returnable if the insured had an interest in the property at any moment during the time or the voyage. (j) But if the voyage were composed of severable passages, for which the risk was severable, and some of those passages were prevented, the premium for those passages may be returnable. (k) If the insurance be on two subject-matters, * as on ship and cargo, and the ship goes, but without the cargo, the premium on the ship is earned, but the premium on the cargo will be returnable. (l) The much more usual case of part return of premium, occurs when only a part of the goods insured is shipped; for then the proportion of the premium which belongs to the part not shipped is returnable. (m)
(z) Earl v. Shaw, 1 Johns. Cas. 813; Jackson v. Schoonmaker, 2 Johns. 234. See United States v. Le Baron, 19 How. 73.
(a) Forbes v. Church, 8 Johns. Cas. 160; Murray v. Col. Ins. Co. 4 Johns. 443.
(b) Martin v. Sitwell, 1 Show. 166; Graves v. Marine Ins. Co. 2 Caines, 839; Waddington v. United Ins. Co. 17 Johns. 23; Toppan v. Atkinson, 2 Mass. 365; Bermon v. Woodbridge, 2 Dong. 781; Murray v. Col. Int. Co. 4 Johns. 443.
(c) Routh v. Thompson, 11 Bast, 428. But see M'Culloch v. Royal Exch. Ass. Co. 3 Camp. 406.
(d) Porter v. Bussey, 1 Mass. 436; Penniman v. Tucker, 11 Mass. 66; Russell v. De Grand, 16 Mass. 38; Commonwealth Ins. Co. v. Whitney, 1 Met. 23.
(e) Murray v. United Ins. Co. 2 Johns. Cas. 168; Elbers v. United Ins. Co. 16 Johns. 128; Duguet v. Rhinelander, 1 Johns. Cas. 360.
(f) Mutual Ins. Co. v. Swift, 7 Gray, 266.
The rules as to proportional or pro rata return of premium may not be quite settled, in all their applications. The main difficulty in the application, springs from the difficulty of determining whether the risks, and with them the premium, are entire or separable. (n) Glauses are sometimes inserted in policies making the premium returnable, in part or in whole, on certain contingencies. (o)
(q) Tyrie v. Fletcher, 2 Cowp. 666.
(h) Col. Ins. Co. v. Lynch, 11 Johns. 233; Marine Ins. Co. of Alexandria v. Tucker, 3 Cranch, 357.
(i) Annen v. Woodman, 3 Taunt 290; Taylor v. Lowell, 3 Mass. 331; Merchants Ins. Co. v. Clapp, 11 Pick. 66.
(j) Howland v. Comm. Ins. Co. Anthon, N. P. 26.
(k) Donath v. N. A. Ins. Co. 4 Dall. 471; Waters v. Allen, 5 Hill, 421. But generally, if the premium is entire, the risk is not severable, although the voyage consists of several passages. Bermon v. Woodbridge, 2 Doug. 781; Moses v. Pratt, 4 Camp. 297; Tait v. Levi, 14 East, 481; Homer v. Dorr, 10 Mass. 26.
(l) Amery v. Rogers, 1 Esp. 207 ; Horneyer v. Lushington, 16 East, 46.
(m) Holmes v. United Ins. Co. 2 Johns. Cas. 329; Pollock v. Donaldson, 3 Dallas, 610; Forbes v. Aspinall, 13 East, 328; Foster v. U. S. Ins. Co. 11 Pick. 85; Eyre v. Glover, 16 East, 218.
(n) If the subject-matter is so erroneously described that the policy does not attach, the premium is returnable. Robertson v. United Ins. Co. 2 Johns. Cas. 260. So if the policy is issued by a person who had no authority to issue it Lynn v. Burgoyne, 13 6. Mon. 400. See also Hagedorn v. Oliverson, 2 M. & S. 486; Finney v. Fairhaven Ins. Co. 6 Met. 192; Routh v. Thompson, 13 East, 289; Steinbach v. Rhinelander, 8 Johns. Cas. 269; Foster v. United States Ins. Co. 11 Pick. 85; New York Ins. Co. v. Roberts, 4 Duer, 141; Fisk v. Masterman, 8 M. & W. 166.
(o) As if the vessel sails with convoy and arrives: in which case, although a large part of the cargo insured is lost, if the vessel sails with convoy and arrives, the underwriters are liable. Simond v. Boydell, 1 Doug. 268; Aguilar v. Rodgers, 7 T. R 421; Horncastle v. Haworth, Marsh. Ins. 674; Castelli v. Boddington.
I Ellis & B. 66, 16 Eng. L. & Eq. 127.
"If the risk ends in safety at -." Ogden v. New York Ins. Co. 12 Johns. 114;
If the insurance were illegal and therefore void, and the illegality was not known to either party when it was effected, the premium is returnable. (p) If it was known to both, it is not returnable, because both were equally in the wrong. (q) If known to the insurer only, or if he made the policy fraudulently, as if he knew when he made it, that the risk had terminated * safely, the premium is returnable. (r) If made through the fraud of the insured, the premium is not returnable; (o) but it has been held, that it would be returnable, although the policy were avoided by misrepresentation or concealment on the part of the insured, if he had committed no fraud. (t)