AN EVALUATION OF THE LEGAL STATUS OF A SLIP VIS-À-VIS THE ENGLISH

MARINE INSURANCE ACT 1906

Elijah C. Briggs LLB (1st Class) BL, LLM (UK)

Introduction

The extant wordings of the Marine Insurance Act1 presuppose that a contract of Marine insurance
is inadmissible in Evidence unless embodied in a marine policy. This raises a myriad of issues –
what is the role of a slip in the formation of a contract? Is there an underlying relationship
between the slip and a formal policy? What Evidential value is accorded the slip by the Courts?
And what is the contemporary relevance of this statutory provision in the light of applicable Case
Law? This paper makes a furtive attempt to clarify the pending issues raised through the
instrumentality of Case Law, Statutory provisions and available Literature.

Unveiling “The Slip”

As the practice in the London market suggests, business is offered to the insurer/reinsurer in the
form of a slip, tendered by the broker to the underwriter. If the underwriter decides to accept the
whole or part of the risk, he signifies this by placing his initials 2 on the slip, against a statement
of the amount which he is prepared to accept. 3 Arnould4 infers that the slip may be sometimes
called a memorandum. This is then issued in anticipation of a formal policy 5, which is to be
executed and issued contemporaneously or afterwards.

It is my submission that the slip, when scratched creates a ‘quasi-contractual relationship’

between the parties involved, pending the completion and execution of a policy. It is noteworthy
that although a slip is the usual method of placing marine risks in the London Market, it is not
essential, provided the parties can be shown to have reached agreement on all material terms. 6
Thus, it is germane to determine the relationship existent between the slip and the policy.

1
Marine Insurance Act 1906,(Hereinafter referred to as the Act), Section 22
2
This is usually referred to as Scratching the slip
3
Per Lord Justice Mustill in General Accident Life and Fire Assurance Corporation and ors v
Peter William Tanter and ors (‘the Zephyr’) (1985) 2 Lloyd’s Rep 531
4
Arnould Law of Marine Insurance and General Average (16th edn, 1981) p 10
5
Sections 23-26 elaborately provides for the statutory requisites of a policy
6
Merkin Marine Insurance Legislation (4th edn, 2010) p 81
Slip vs Policy?

In the ordinary course of business, the Slip precedes the issuance of a formal Policy. This in turn
raises legal dust as to which takes preeminence? The nexus was articulated brilliantly in HIH
Casualty & General Insurance Ltd v New Hampshire Insurance7 when the issue arose as to
which superseded the other, the Court Held inter alia,
“…The importance of the question for present purposes is that if
the policy wording did not supersede the original slip policy, then
the two documents would have to be read together, and in such a
case there would be no reason to regard the term of the original
slip policy considered under question (i) above as having been
excised by anything said in the policy wording. On the contrary,
the original slip policy might even have to be regarded as the
primary document, and the policy wording as wording which was
to be incorporated in it and which, where inconsistent, had to make
way for the text of the incorporating document. Even if, on the
contrary, the original slip policy was the document which had to
give way in the face of anything inconsistent in the policy wording,
there would be no reason why the general principle, that one tries
to read both documents together, if possible, should not be given
effect…”8
Merkin9 opines that although a contract of insurance may exist independently of a policy, e.g.
where a slip has been scratched, the contract is unenforceable until a policy has been issued, as
only the policy itself may be sued upon in the court. 10 The Court in Youell v Bland Welch & Co
ltd11 elucidated the point way back when it said inter alia;

“Although the slip initialed by the underwriters records the original

agreement between the parties, if it contains words showing an

7
(2001) CAEW Civ 735
8
Emphasis mine
9
Merkin Marine Insurance Legislation (4th edn, 2010) p 82
10
See Fisher v Liverpool Marine Insurance (1874) QB 418, Genforsikrings & Co v Da Costa
(1911) 1 KB 137
11
(1990) 2 Lloyd’s Rep 423
 intention that the terms will subsequently be incorporated into a
policy form, when the policy has been issued it is the policy and
not the slip which constitutes the contract or agreement between
the parties…”

But one is not unmindful of the fact that the instant case predates the HIH decision and so must
be taken with a pinch of salt, as in my view, is too restrictive in construction of the issue. I dare
ask – what if a loss occurs before a policy is issued? What happens where the Slip is more
detailed on particular facts than the eventual Policy? The modern approach of the House of
Lords as can be gleaned from recent cases is a look at the ‘positive side’12 - evidence should be
admitted of the background, surrounding circumstances, factual matrix and genesis to the
contract.13 As it is substantially arguable that a binding contract is existent in a Slip14

Can a Slip be tendered in Evidence?

The question becomes of utter necessity when one reads the wordings of the Act in Sections 22
and 89 jointly and severally. While the former vociferously canvasses the inadmissibility of the
slip in Evidence until a Policy is made,15 the latter is indicative that where a duly stamped Policy
is made, reference may be made to the Slip or covering note, in any legal proceeding. Where
then is the distinctive dichotomy between both sections?

It is trite that a Slip is binding contract once scratched 16 yet Merkin17 opines that it is unclear
whether a Slip can be used in Evidence to clarify an ambiguity in the Policy itself. 18 Suffice it be
said that since the decision in the HIH case, the stance is that each case would be treated
subjectively, thus a string of recent cases like Mopani Copper Mines Plc v Millenium

12
Baris Soyer Drafting problems and Legal Difficulties in Reinsurance Contracts – HIH
Casualty & General Isurance Ltd v New Hampshire Insurance, NLJ Vol 11(1) p 58
13
For further facts see Investors Compensation Scheme v West Bromwich Building Society
(No. 1) [1998] 1 All E.R. 98
14
Sirius International Insurance Corp v Oriental Assurance Corp [1999] Lloyd’s Rep. I.R. 343
15
Although the word ‘slip’ is not expressly mentioned, it is implied. The rationale is given
gusto on the premise that the usual practice of the insurance market presupposes the
scratching of a Slip first, before a Policy is concluded.
16
General Reinsurance Corporation v Forskringsaktiebolaget Fennie Patria [1983] 2 Lloyd’s
Rep 287
17
Op. cit. 122
18
This is because it was admitted in Evidence in Sedgwick case (1899) 1 QB 179, and
rejected in cases like Youell (supra)
Underwriting Ltd19 point towards its admissibility than otherwise, which to my view is largely
commendable.

Semble, it is noteworthy that in the event of an inconsistency between the Slip and the Policy,
the Policy may be Rectified to conform with the Slip.20 However Rectification is availed where
the Slip represents the actual agreement between the parties and the policy has incorrectly
recorded that agreement21, subject to other requirements.22 Hence one can at this juncture lean
heavily on the words of Lord Justice Rix23 that where the Policy was unlikely to be regarded as
the final record of the parties’ contract, the wording of the Slip may be admissible to assist in the
construction of the Policy and in the absence of a plea of Rectification a Slip would not be used
to alter or contradict the construction of a Policy which has superceded a Slip.

The Contemporary relevance of Section 22

A critical evaluation of the post-HIH judgment era evinces a greater propensity for the courts to
admit a Slip in evidence more liberally than before. But more importantly, taking into due
consideration the robust improvements in Law reform, science and technology; E-Commerce and
the like underpins the need for speedy and less stressful conclusion of marine insurance
contracts. In 2007 the ‘Market Reform Contract’24 replaced the previous ‘Market Reform Slip’.25

Consequently this innovation is as a standard form contract for insurers and brokers in manifest
compliance with the Contract Certainty Code of Prctice.26 With this emerging trend, the MRC

19
[2009] Lloyd’s Rep IR 158; and also Standard Life Assurance Ltd v Oak Dedicated Ltd
[2008] Lloyd’s Rep IR 552
20
Kiriacoulis Lines SA v Campagnie d’Assurances Maritime Ariennes et Terrestres, The
Demetra K [2002] Lloyd’s Rep IR 795
21
Pindos Shipping Corporation v Raven, The Mata Hari [1983] 2 Lloyd’s Rep 449
22
For a full exposition of the requirements see dunlop Heywards (DHL) Ltd v Erinaceous
Insurances Services Ltd [2009] EWCA Civ 354
23
In the HIH case (Supra)
24
Culled from http://www.londonmarketgroup.co.uk/index.php?option=com_content&view=category&id=4
1&Itemid=144.
25
This was introduced in 2006 to replace the hitherto Slip and ensure a common format for
business operations
26
It is a necessity borne out of the yearning to improve the way contracts are agreed so that
insureds have greater certainty over what they have bought and the insurers have greater
certainty over the risks taken. This is gotten from the Scottish Law Commission, ‘Reforming
Insurance Contract Law, Issues paper 9, The Requirement for a Formal Marine Policy: Should
Section 22 be Repealed?’ p 22
will serve virtually as a Policy as it enshrines the requirements of a policy as enshrined the Act. 27
So one may not be wrong to question the continued relevance of section 22.

Looking back at the HIH case, Rix L.J. was deeply persuaded and thus inferred that both the Slip
and Policy be intended to live together - though in the instant case, the policy wording being
incomplete, had a profound effect on the judgment. That the word “slip policy” was used
indicated a strong intention to be so bound, and rightly so. Thus the judgment gives a robust
fillip to the argument that a Slip should have a wider relevance as a source of evidence.

Conclusion

As can be gleaned from the analyses of the above issues, it is my humble submission that the
Slip is a quasi-contract, that becomes full fledged, upon the completion of a Policy. To argue
against its admissibility would be “throwing away the baby with the bath water”. The underlying
issue should go to the weight or probative value to be attached by the Court when admitting
such evidence.

The HIH decision gives a leeway where it nudges judges to look at the circumstances of each
case before making conclusions. However its binding force is largely in doubt. Also, Section 89
to my mind, is another pigeon hole from where the Slip can be admitted in Evidence.
Indubitably, the question of the relevance of section 22 in the light of contemporary
developments can only be answered thus; the world is changing, and so too must the Law.

27
See sections 23-26 respectively
 LIST OF AUTHORITIES
CASES

Dunlop Heywards (DHL) Ltd v Erinaceous Insurances Services Ltd [2009] EWCA Civ 354

Fisher v Liverpool Marine Insurance (1874) QB 418

General Accident Life and Fire Assurance Corporation and ors v Peter William Tanter and ors
(‘the Zephyr’) (1985) 2 Lloyd’s Rep 531

General Reinsurance Corporation v Forskringsaktiebolaget Fennie Patria [1983] 2 Lloyd’s Rep

287

Genforsikrings & Co v Da Costa (1911) 1 KB 137

HIH Casualty & General Insurance Ltd v New Hampshire Insurance (2001) CAEW Civ 735

Investors Compensation Scheme v West Bromwich Building Society (No. 1) [1998] 1 All E.R.
98

Kiriacoulis Lines SA v Campagnie d’Assurances Maritime Ariennes et Terrestres, The Demetra

K [2002] Lloyd’s Rep IR 795

Mopani Copper Mines Plc v Millenium Underwriting Ltd [2009] Lloyd’s Rep IR 158;

Pindos Shipping Corporation v Raven, The Mata Hari [1983] 2 Lloyd’s Rep 449

Sirius International Insurance Corp v Oriental Assurance Corp [1999] Lloyd’s Rep. I.R. 343

Standard Life Assurance Ltd v Oak Dedicated Ltd [2008] Lloyd’s Rep IR 552

Youell v Bland Welch & Co ltd (1990) 2 Lloyd’s Rep 423

STATUTE

Marine Insurance Act 1906

BOOKS

Arnould, Law of Marine Insurance and General Average (16th edn Stevens & Sons, London
1981) p 10

Merkin, Marine Insurance Legislation (4th edn, London 2010) p 81

JOURNAL

Nottingham Law Journal (2002) Vol11(1)