HL Deb 03 November 1908 vol 195 cc931-9
LORD MUSKERRY

My Lords, I rise to call the atention of the Government to the subject of what are termed "P.P.I." insurance policies on British merchant ships; to point out certain evils attaching to these policies; and to ask whether a committee representative of the different interests is to be appointed to consider the matter, or otherwise, whether any other steps are to be taken in regard to it.

It would, perhaps, be well if at the outset I explain what "P.P.I." policies are, as it is quite likely that some of your Lordships may not have heard of them. The letters "P.P.I." mean "policy proves interest," and underwriters or insurance companies settle claims upon these policies without requiring the insurer to prove that he has any interest whatever in that which he has insured. I venture to remind your Lordships that an insurance effected by any person who has no personal interest in it beyond pure speculation is, in law, invalidated. If, for instance, anybody insures a ship in which he has no interest whatever the insurance resolves itself into a gamble on her being lost or otherwise, and a very pernicious form of gambling it is.

The law is evaded by the issuing of "P.P.I." policies, otherwise they may be called "honour" policies; and in case of a ship's loss the underwriters settle the claims, even though, in law, they are not liable to do so. Recent disclosures at Board of Trade inquiries show that, amongst a certain class of the shipping community, it has become a favourite practice to pick out certain ships which, for one or several reasons, they think are likely to be lost at sea. They can get fairly big odds against it in the marine insurance market, and, consequently, take out "P.P.I." policies on these ships. Probably they know that they are old craft carrying every additional ounce of cargo permitted by the new deeper-loading Regulations. If the ships happen to meet with disaster and insurances on them of this class are subsequently re- vealed, is it not natural that grave suspicion must fall upon somebody, principally, of course, on those who command the ships? It is only human to suspect that there has been a conspiracy on the part of somebody in perpetrating a criminal act for the sake of gain.

Coming to a case in point I would bring to your Lordships' notice the recent Board of Trade inquiry into the loss of the steamer "Albion." I understand that it was through the underwriters—who appeared not to relish paying on the "P.P.I." polices they had issued on the ship—that the Board of Trade first became aware of the fact that complete outsiders had effected large insurances on her. The Board then set on foot a most searching and expensive investigation in procuring all available evidence for presentation at the formal Board of Trade inquiry. Every little point out of the common provided an additional source of suspicion, and all the necessary witnesses were retained and maintained for a far longer period than is usually the case with these inquiries.

The inquiry was of a very protracted character, taking five days, and the expense falling upon the parties to the case in the shape of lawyers' fees far heavier than usual. The captain's anxiety was not lessened by the fact that not only his professional reputation and career might be doomed, but that an adverse decision so far as he was concerned would mean his figuring in the dock on a criminal charge of a most desperate character. Fortunately, the captain was, and had been for some years, a member of the Imperial Merchant Service Guild, who spared no effort in defending his interests, with the result that there was found to be not a scintilla of evidence showing that the captain had been guilty of a criminal act or had known anything of the nefarious transactions which had been going on regarding his ship in the form of "P.P.I." policies. What is more, in acquitting the captain from blame in connection with the loss of the ship, the Court made the following important statement— The Court desires to express its strong disapprobation of 'P.P.I.' insurances by persons who have no insurable interest in the vessel insured, as such insurances tend to raise the premiums to be paid by ordinarily interested insurers, and also to throw suspicion on owners, captains, and officers on the ground of the vessel being over-insured. They are merely speculative gambles, and, in the opinion of the Court, they should be prohibited by legislation. My Lords, my contention is that we must not let the matter rest where it is. We cannot allow innocent people to be placed under grave suspicion and at the same time put the country to great additional expense in connection with Board of Trade inquiries into shipping casualties merely that a few people—known chiefly as "Cardiff wreckers"—should be permitted to indulge in a most baneful form of gambling. I might quote also the case of the loss of the "Oxus," where it has been proved in evidence at the Board of Trade inquiry that a large number of "P.P.I." policies had been effected on her by people having no interest whatever in the ship, except that she should be lost. One of the witnesses said that he took out a policy for £1,000 on the steamer at £10 10s. per cent. It appears that it was not his first transaction, for he mentioned four other steamers in connection with which he had taken out similar policies. Two were lost, one was not lost but broken up, whilst the witness stated that his policy on the remaining one expired before she was lost.

LORD HAMILTON OF DALZELL

I hope the noble Lord will pardon me for interrupting him, but I would remind him that the case to which he is alluding is now under consideration. I would, therefore, suggest that it is hardly proper to refer to it at the present moment.

LORD MUSKERRY

I am only alluding to the evidence of this particular witness, and I do so because it has a very important bearing on the point which I wish to put before your Lordships. Further cross-examination elicited the fact that the witness had had speculative insurances on five vessels, four having been lost and been subject to Board of Trade inquiries. There is one point in this witness's evidence which will, perhaps, permit me to remind your Lordships of the earnest protest I entered when the new Regulations allowing the much greater immersion of British ships were promulgated by the Board of Trade. In this case of the "Oxus" the witness whose evidence I have referred to, and who is a marine surveyor, said that he specially picked out vessels which had five or six inches less freeboard than they had before the new Regulations came into force, and mentioned the names of two steamers he had specially picked because of this fact. I hope that the Board of Trade will take this significant little bit of evidence to heart. It shows to what greater peril the lives of British mariners are exposed under the new Regulations. The case of the "Oxus," as the noble Lord opposite has pointed out, is still proceeding, but, whatever may be the decision, there can be no doubt as to the mischievous nature of these "P.P.I." policies.

Now, my Lords, it has been contended in several quarters that it is the underwriters who can very easily solve the difficulty by declining to grant these policies. But I am sorry to say that, in my humble opinion, it is hopeless to expect anything of the sort from underwriters. There is very fierce competition amongst them, and almost all of them are very closely identified with shipowning interests. Even where they are in cordial sympathy with anything which makes for the greater safety of ships—take, for example, the Light Load Line—it is almost impossible to get them publicly to take a stand in the matter. This was so in connection with the Light Load Line, where, although I knew that underwriters were in the greatest sympathy with me, it was only in one case that I could get active public support. Therefore, we must look elsewhere than to underwriters to deal with the question of "P.P.I." policies.

There is an absolute consensus of opinion amongst shipping interests that it is the Board of Trade who should take some firm action in the matter. Shortly after the case of the "Albion," Mr. Moore, the Secretary of the Imperial Merchant Service Guild, addressed a strong communication to the Press pointing out the dangerous evil of these policies as casting grave suspicion on innocent men. I heard of one shipowner who, discovering that there were a number of "P.P.I." policies effected on his ship, dismissed all the crew and laid the vessel up. This shows what serious suspicions must have been aroused in him by these policies, and it also shows what hardship the captain, officers, and crew of that vessel had to suffer through them. Mr. Moore, writing on behalf of the captains and officers of merchant ships, stated that barratry amongst shipmasters at the present day was a thing unknown, and he dwelt upon the fact that their position at a Board of Trade inquiry where these "P.P.I." policies are shown to exist, was not so much the defence of their certificates, as to save themselves from gaol and the lasting humiliation and degradation of themselves and their friends.

Then, my Lords, from the chief seat of the evil—Cardiff—we find that the Shipowners' Association of that port have passed the following resolution— That this Association strongly deprecates the gambling that is taking place in 'P.P.I.' policies, whereby insurers gamble in vessels in which they have no interest, to the detriment of shipowners and other legitimate insurers, and trusts that the Board of Trade will devise some means to counteract the evil. This resolution was strongly endorsed by the Cardiff Incorporated Chamber of Commerce. One of the members of the Chamber stated that Cardiff had been a hot-bed of these "P.P.I." policies, and it was really time the business was put a stop to.

Mr. Humphries, the President of the Bristol Chamber of Commerce and Shipping, regards it as most unsatisfactory that people without any interest, either direct or indirect, in steamships or their cargoes should be able to take out policies which are highly speculative and nothing more or less than a gamble. Mr. Humphries qualifies himself in stating that at the same time the legitimate current of insurance business should not be hampered. I quite agree with him in this. Another large shipowning organisation which supports the resolution of the Cardiff Shipowners' Association is the North of England Steamship Owners' Association, which has gone so far as to appoint a special committee of three of its members to take part in an interview with the Board of Trade and give evidence if required.

I do not think it is necessary for me to go further into my case. I think I have given your Lordships ample evidence of the fact that there exists a serious amount of gambling in connection with British ships and the lives of their crews. I hope that the Board of Trade will see that the question is thoroughly threshed out. It seems to me that a committee representing all the different shipping interests would be the best procedure to adopt in order to arrive at some satisfactory decision in the matter. If such a committee be formed I hope that, whilst shipowners will be represented, our captains and officers will not be ignored. They should have the fullest representation, as their interests are affected even more than those of the shipowners in this matter. I trust to hear from my noble friend opposite that this subject is occupying the earnest attention of the Board of Trade, and that they propose to take some practical steps to eradicate what I think your Lordships will all regard as an unquestionable evil.

*LORD ELLENBOROUGH

My Lords, I am in entire agreement with Lord Muskerry on this question. There can be no doubt that these "P.P.I." insurance policies have added to the dangers of the sea. During the last half-century we have been rapidly reducing those dangers by means of better charts and methods of navigation, by employing more light ships and by improvements in shipbuilding; but this is a new danger which ought to be checked before it attains any large dimensions. The noble Lord did not give the House the figures of the insurances effected through "P.P.I." policies in the case of the "Albion." I find, from the Board of Trade Report, that there were insurances, other than re-insurances, effected upon and in connection with the ship at the time of her loss by persons having no insurable interest in the ship, cargo, or freight, to the extent of £12,600, in amounts varying from £100 to £3,400.

In the case of the "Powis," Mr. T. W. Lewis, the Judge, stated in his Report that— The difficulty of ascertaining the truth becomes insuperable when the witnesses deliberately mislead the Court. Misrepresentations by seafaring men of the humblest class to whom the witness box is strange, who may not be quick of apprehension, may, perhaps, be ignored; but if highly intelligent astute men of business may with impunity deliberately mislead a Wreck Inquiry Court, the great public expense of such Courts is entirely wasted and the ends of justice defeated. The Court added— There are, however, other parties affected whose interests are not protected and whose lives are disregarded, viz., the officers and crew. Where a vessel is over-insured, one of the most powerful incentives for keeping her in good condition and seaworthiness is removed; and over-insurance also offers a dangerous temptation to persons, or the agents of persons, who will gain by the loss of the vessel. Whether lost through unseaworthiness or foul play the lives of the crew are imperilled. The effectual prevention of such an unnecessary peril to seafaring men is worthy of the attention of the legislature. That the evil is not a small one is shown by the fact that in this Court alone the 'Powis' is the third inquiry within two years in which each of the vessels lost has been insured for many thousands of pounds in excess of her value. The sum of £4,125 was in "P.P.I." policies, which had been effected, according to one witness's evidence, to enable the owners to pay the liabilities and debts she had incurred in trading; the insurances as a whole exceeded the genuine value by at least £9,500.

The system is nothing more nor less than gambling in human lives and should be declared illegal. When a man effects one of these insurances for a high sum all he has to do is to set about to bribe one of the crew to wreck the vessel. A scoundrelly act of that kind could be very simply done. Nothing is easier than for an engineer to lose a ship if he is a scoundrel, and these large bribes to men who are short of money should not be available. I heard of one owner who dismissed his captain and the whole of the crew because he had learned that people were playing with "P.P.I." policies on the ship, and he regarded this as the only certain way of getting rid of the person whom the "P.P.I." policy holders had got at. I have noticed that whilst there are most honourable exceptions, the ships of single ship companies are not as safe to go to sea upon as ships belonging to large companies. I have no more to say on the subject at present, but shall probably put a Question on the matter at a later period of the session.

*LORD HAMILTON OF DALZELL

My Lords, my right hon. friend the President of the Board of Trade has twice within the last few days made statements upon this subject in another place. I do not, however, for a moment complain of the action of the noble Lord opposite who has asked this Question to-day, because the subject is a deeply interesting one and the issues involved are of the greatest possible importance to the mercantile marine of this country.

I agree with almost everything which has been said by the two noble Lords who have addressed the House, and I can assure them that this matter is receiving the most earnest consideration of the Board of Trade. This practice of gambling in what are known as "P.P.I." insurance policies is, undoubtedly, carried on to a certain extent at the present moment. It is difficult to find out exactly to what extent it is done, because these matters are naturally conducted under a veil of secrecy. As the noble Lord who asked the Question has pointed out, any such insurance made by a person who has no insurable interest in the ship or cargo is void in law, but in practice these "honour" policies, as they are termed, are almost invariably paid, because the underwriters are so jealous of their reputation and so anxious to avoid gaining the character of being men who dispute claims made against them that they would sooner pay, even in doubtful cases.

We have heard lately that certain people frequent docks for the purpose of finding a ship which is likely to be wrecked in very much the same way as a man goes into the paddock on a racecourse with the object of "spotting a winner." This form of gambling is, of course, of a peculiarly ghoulish and horrible character, because of the grave risk to human lives involved in the wreck of a ship. But, if there were nothing else connected with it, I hardly think it would be a matter which would call for interference, much as we might deprecate its existence. Unfortunately, however, there are other considerations, because it is no doubt possible for collusion to exist between persons who have taken out this form of policy and some person connected with the ship, however distantly connected he might be—it might only be as a dockyard labourer, who might have the opportunity of causing the loss of the ship; and the stakes which can be played for in this terrible game are so enormous that there is no doubt they must offer a very grave temptation to unscrupulous people. Again, if it were simply a question of fraud being perpetrated at the expense of the underwriters who choose to deal in this class of policy, I think that would be a matter which we might regard with a certain amount of equanimity; but, as the noble Lord has said, the counters which are played for in this game are human lives, and therefore it must be regarded as being extremely serious.

Investigations which have so far taken place have disclosed the fact that these policies are, occasionally, used legitimately in business for the purpose of insuring properly insurable interests, because, for certain reasons, they are sometimes more convenient; and what my right hon. friend is most anxious to do, in dealing with this matter, is to find some way of putting a stop to the illegal and dangerous use of this system, while not interfering with the course of legitimate trade. With that object in view, he is very shortly to hold a conference with the different interests involved, and when that conference has taken place I have no doubt that, if the noble Lord again asks a Question on the subject, I shall be able to give him a great deal more definite information on the matter.

House adjourned at half-past Five o'clock, till To-morrow a quarter past Four o'clock.