22713501 Marine Insurance

7/29/2019 22713501 Marine Insurance

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Marine Insurance

Prof Mahesh Kumar

Amity Business School

[email protected]


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History

Historically marine insurance were of twotypes:

a) Bottomary loan which was a transactionprotecting an owner from financial loss if his

ship was destroyed. Premiums were calculatedon the basis of intuition instead ofmathematical estimates.

b) Respondentia loans were comparable tobottomary loans. The difference being amerchant would take a loan using cargo as acollateral. The money lender for a premium inaddition to the regular interest charged, agreedto forgive the loan if the cargo was lost.


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History

The Indian Marine Insurance Act came intooperation on August 1, 1963 and is acomprehensive document containing allregulations of marine insurance business in India.

Prior to this Act, the insurance business wasconducted on the basis of the principles ofGeneral Contract Act and English MarineInsurance Law.

Marine insurance includes two types of insurancei.e. Cargo insurance and hull insurance.


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History

The cargo insurance includes the goods intransit from the place insured to the sea andfrom sea to the exporter.

The hull insurance is concerned with body, the

machinery and technical know-how, stores toolsetc of the ship. Marine Insurance covers the loss or damage of

ships, cargo, terminals and any transport orproperty by which cargo is transferred, acquiredor held between the points of origin and finaldestination.

Marine Insurance has been made mandatory inexport-import business.


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Advantage to Business

Marine insurance also provides liquidity to theexporter as he can discount his bills with localbanker without waiting for the bills being bythe overseas importer which is usually after

they receive the goods which may takemonths in ocean transit.


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Definition of Marine Insurance Business

A contract of marine insurance is defined by theMarine Insurance Act 1963 as an agreementwhereby the insurer undertakes to indemnify theassured, in the manner and to the extent therebyagreed losses incidental to marine adventure. Itmay cover loss or damage to vessels, cargo orfreight.

Sec 2 (C & F) of the Marine Insurance Act, 1963

defines marine insurance and includes themovables exposed to maritime perils. Movablesmean movable tangible property, which includesmoney, valuable securities and documents etc.


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Types of Marine Insurance

There are four types / classes of marine insurance:

a) Hull Insurance: covers physical damage to the shipor vessel. In addition it contains a collision liabilityclause that covers the owners liability if the ship

collides with another vessel or damages its cargo.b) Cargo Insurance: covers the shipper of goods if

the goods are damaged or lost. The policy can bewritten to cover a single shipment. If regularshipments are made, an open cargo policy can be

used that insures the goods automatically when ashipment is made. The open cargo policy has noexpiration date and remains in force till it iscancelled.


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Types of Marine Insurance

c) Protection and Indemnity (P&I) insurance: isusually written as a separate contract thatprovides comprehensive liability insurance forproperty damage or bodily injury to third

parties. P&I insurance protects the ship ownerfor damage caused by ship to piers, docks andharbor installations, damage to ships cargo,illness or injury to the passenger or crew andfines and penalties.

d) Freight Insurance: indemnifies the ship ownerfrom the loss of earnings if the goods aredamaged or lost and are not delivered.


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Insurable Property

Insurable property means any ship, goods orother movables exposed to maritime perils.

Insurable property must be stated in the policy

with reasonable certainty.


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Marine Adventure

There is a marine adventure, when-

1. Any insurable property is exposed to marine perils.

2. The earning of freight, passage money, commission,

profit or other pecuniary benefit or security for anyadvances, loans or disbursements is endangered bythe exposure of insurable property to maritimeperils.

3. The owner of or other person interested in orresponsible for insurable property by reason ofmaritime perils may insure any liability to the thirdparty.


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Voyage

Voyage is the journey that the vessel undertakes.

The ship could carry on the voyage in the specifiedroute which is mentioned in the policy.

Change of voyage is permitted only in a fewspecified circumstances.


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Maritime Perils / Perils of the Sea

Maritime Perils are also called Perils of the Sea.

It means the perils consequent on or incidental tothe navigation through the sea for example- fire,

war perils, rovers, thieves, captures, seizures,jettisons, barratry and other perils.

The term Perils of the Sea refers only to fortuitousaccidents or casualties of the seas and does notinclude the ordinary action of winds and waves.


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Types of Risks/ Perils covered by theMarine Insurance Policy

1) Sinking, stranding and grounding of ship/vessel/boator craft.

2) Collision or contact of vessels, ships, boats with

internal and external objects.3) Discharge of cargo at a port of distress.

4) Average general sacrifice.

5) Volcanic eruption or lightning or fire or explosion.

6) Loss of goods or packages containing goods orarticles, dropping of packets or package duringloading or unloading while on board or off the broad.


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7) Loss caused by delay, wrongful delivery, malicious damage.8) War, sea pirates, other perils like cyclones, typhoons,

spirals.9) Strikes, riots, lockout, civil commotions & terrorism.10) Theft, pilferage, breakage & leakage.11) Loss caused by heating due to the closure of ventilators to

prevent the entry of sea waters.12) Loss caused by rats i.e. a hole made in the bottom of the

ship, through which sea water enters the ship and damagesthe cargo.

Marine insurance apart from indemnifying the assuredagainst the maritime perils also includes liability of the thirdparty incurred by the owner of the ship or other personinterested in the property assured on happening of themaritime event.


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Thus marine insurance includes:

1) Insurance of vessels (hull) of any description. (Hullinsurance is concerned with body, the machinery &technical know how, stores tools etc. It also includes

ships, mechanized boats etc and consignmentstransported by rail and road.)

2) Insurance of cargo in vessels ( Cargo insuranceincludes goods in transit from the place of insuredto the sea and from the sea to the exporter.

3) Freight paid or received by the assured.

4) Insurance of third party liability


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4) Insurance of transactions which are incidental tothe marine adventure or marine transport ortransport of cargo from go down to the vessel.

5) Insurance also includes all perils and risksincidental to money, documents, securities &other valuable goods in the ship.

6) Other incidental activities concerned with building,

launching of ship or transport of stores concerned.


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Summary

Marine insurance is a contract: The contract is made to indemnify the assured for

the marine losses and other losses incidental tomarine adventure.

The parties to the contract agree about the mannerand the extent of indemnification in the event ofloss.

The subject matter of the agreement or the

contract of marine insurance includes: cargoes,vessels of any description, freights and otherinterest in relation to such vessels, cargoes.


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Summary

Property of whatever description can be assuredfor any transit by land or water or by both.

May exclude or include warehouse risks or similar

risks in addition or as incidental to transit. Any other risks customarily included among the

risks assured against marine insurance policies.


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Marine Policy

The document containing the contract ofinsurance is known as the Marine Policy or SeaPolicy.

The clauses are framed in relation to risk covered,risk excluded and other terms and conditions ofthe insurance.


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Contents of Marine Policy

1. Name of the insured.

2. Policy Number

3. Sum Assured

4. The subject matter insured and the perils covered

5. Place where claims were payable6. Streamer (or) other conveyance.

7. Stamp duty (as per the provisions of the Indian Stamp Act 1879)

8. Voyage or Journey

9. Number or date of bill of lading or Registered Port or Air freight

receipt. (as the case may be)10. Place of issue of policy and date.

11. Signature of authorized person signing on behalf of the insurers.


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Essentials Elements or Principles of MarineInsurance

1. Fundamentals of general contract

2. Insurable interest

3. Utmost Good Faith

4. Indemnity

5. Subrogation

6. Contribution

7. Warranties

8. Causa proxima

9. Assignment & Nomination of a policy


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Features of A General Contract

A marine policy must fulfill all the essentials ofa valid contract namely

1. Offer and Acceptance

2. Consideration3. Capacity

4. Legal Purpose


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Insurable Interest

According to Marine Insurance Act 1963, every personhas an insurable interest who is interested in a marineadventure. The following persons have insurableinterest in Marine Insurance.

1. Owner of the Ship

2. Owner of the Cargo

3. Creditor who has advanced money on a ship or cargo tothe extent of his interest in such ship or cargo

4. Mortgager

5.

Mortgagee6. Master and crew for wages

7. Bottomry bond hold

8. Person who pays advance freight is recoverable on loss


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Insurable Interest

9. Shipper and their Agents

10. Persons contingent interest such as the buyer,though the goods may be at sellers risk and

though he may have right to reject the goods,but has paid.

11. Trustee

12. Bailee

13. Insurer- he can reinsure14. Assignee of bill of lading


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Utmost Good Faith

The insured must disclose all those relevantfacts to the insurer which are likely to affecthis willingness to undertake the risk.

If either party does not disclose full facts, theother party can avoid the contract at any time.


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Contract of Indemnity

Under this contract, the underwriter agrees toindemnify the insured against losses by searisk to the extent of the amount insured.

The insured can recover only the actual losssuffered and nothing more.


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Principle of Subrogation

According to this principle after meeting theloss agreed, the insurer steps into the shoes ofthe insured and becomes entitled to all rights

and remedies available to the insured againstthe insured property or third persons.


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Principle of Contribution/Double Insurance

The doctrine of contribution applies to marineinsurance.

If the subject has been insured with more than oneinsurer, each insurer has to pay only the ratableproportion of loss subject to the maximum loss.

The principle supports the concept that the insuredcannot recover amounts on the same property for thesame peril from more than one insurer.Thus, according to Sc 34, the pre requisites of doubleinsurance/contribution are:

a) There must be two or more policies.

b) The policies must relate to the same adventure andinterest or any part thereof.

c) The sums insured must exceed the indemnity allowedby this Act


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Warranties

According to Marine Insurance Act, a warrantymeans a stipulation or term, the breach ofwhich entitles the insurers to avoid the policy

altogether and this is so even though thebreach arises through circumstances beyondthe control of the warrantor.

Warranties can be expressed (written) orimplied.


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Express Warranties

The expressly stated written warranties andmay be like

1. The ship is safe on a particular day

2. The ship & goods are neutral and continue tobe so

3. The ship will proceed to its destination withoutany deviation

4. The ship will sail on or before a certain date


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Implied Warranties

There are certain warranties which are impliedin every contract of marine insurance unlessexcluded expressly. These are:

1. Warranty of sea worthiness2. Warranty of non deviation from path

3. Warranty as to the legality of the voyage

4. Proper documentation related to the ship


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Implied Warranties

Warranty of Sea Worthiness

The ship must be sound as regards her hull.

The gear must be sufficient and must be fully

equipped, officered and manned Ship must not be overloaded

If the voyage is to be performed in stages, theship must be sea worthy at the

commencement of each stage. Sea worthiness also includes cargo worthiness

i.e. must be fit to carry the cargo


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Implied Warranties

Warranty of Non Deviation

In the case of voyage policy, where, a voyageis contemplated between two given ports,

there is an implied warranty of non deviationon the part of the insured except in caseswhere it is excusable by the law.

The insurer is discharged from the liability as

from the time of deviation. The intention to deviate is immaterial.


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Implied Warranties

Warranty of Non Deviation

What is a Deviation?

1. When the course of the voyage specially designated inthe policy, is departed from or

2. Where the course of the voyage was not speciallydesignated by the policy, but the usual & customarycourse is departed from or

3. Where several ports of discharge were specified by thepolicy, but the ship did not process to them in the order

designated by the policy or4. Where the policy did not specify the ports of discharge

but the ship (which should have) did not proceed to themin geographical order.


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Implied Warranties

Warranty of Non Deviation- Deviations that can be excused Destination or delay is excused (justified) under the following

circumstances when1. It is authorized by the contract (or)2. It is caused by circumstances beyond the control of the master

and his employer (or)3. It is caused by the barratrously conduct of the master or crew if

barratry were one of the perils insured against (or)4. It is necessary in order to comply with an express or implied

warranty (or)5. It is necessary to arrange medical or surgical aid for any person

on board the ship (or)

6. It is very necessary for the safety of the ship and subjectmatter insured (or)7. It is necessary to avoid being captured or destroyed by the

enemy of the Government.


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Implied Warranties

Legality of Voyage

This is an implied warranty on the part of theinsured that the adventure insures is a lawful

one, and that, so far as the assured cancontrol the matter, the adventure shall becarried out in a lawful manner.

This warranty implies that the ship will not beused for undertaking any illegal voyage e.g.smuggling, trading with enemy etc.


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Implied Warranties

Proper Documentation of the Ship

Whenever there is an express warranty thatthe ship shall be neutral (especially in the case

of war time adventure) there is an impliedwarranty that the ship carries all the papersnecessary to prove the neutrality.


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Proximate Cause

According to the Marine Insurance Act, theinsurer is liable for any loss proximatelycaused by a peril insured against.

Insurer is not liable for any loss which is notproximately caused by a peril insured against.


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Assignment Of Policy

A marine insurance policy is assignable unlessit contains terms expressly prohibitingassignment.

It may be assigned either before or after loss. A marine policy may be assigned by

endorsement thereon or in any othercustomary manner.


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Reinsurance

According to Marine Insurance Act, the insurerunder a contract of marine insurance has aninsurable interest in his risk and may reinsurethe subject matter fully or partly as per hisrequirement. This is called Reinsurance orInsurance of Insurance.

In reinsurance, unless the policy providesotherwise, the original assured has no right or

interest in respect of such reinsurance.


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Calculation of Rates of Premium

Calculation of rates of premium depends on:

1. Description of goods: Full description of thegoods to be insured must be given.

The nature of commodity is very important for ratingand underwriting.

Different types of commodities are subject todifferent types of risk.

Ex: Commodities like cement sugar, etc are easily

damaged by sea water; cotton or some chemicalsmay easily catch fire; liquids can get leaked andcrockery and glassware are susceptible to breakage.


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2. Method and Manner of Packaging: Thepossibility of loss or damage depends verymuch on the type of packing.

Generally goods are required to be packed incommodity friendly bales, bags, bundles,crates, drums, barrels, loose packing, cartonetc.


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3. Voyage and Mode of Transit: The name of the placefrom where, transit will commence and the name ofthe place where it will terminate has to be stated.

Mode of conveyance to be used in transporting

goods by rail, lorry or by air etc. should be given. The name of the vessel is to be given in case if

overseas travel.

Postal receipt number and date thereof is required in

case of goods sent by registered post. If the voyage is to involve trans-shipment, it must

be clearly stated.


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4. Cover Required: The risk against which cover requires should befully described.

5. Name of the vessel: The correct name of the vessel is necessary,to know the details of the age, tonnage classification (tanker,bulk carrier, container ships, fishing fleet, war vessels)ownership etc.

Shipments through old vessels or smaller vessels will lead to chargeof a higher rate of premium.

Shipments made by first class vessels attract normal rates ofpremiums and the vessels are approved by authorities like the IndianRegistrar of Shipping.

If the vessel used for the voyage is tramp vesseltramp vesseli.e. a vessel whichdoes not follow a fixed schedule and carries cargoes wheneveravailable. The vessels have to be approved by GIC and if notapproved, then will attract a very high premium.


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While there is no tariff rate on premium and insurers cancharge any rate depending upon the nature of goods , thedistance, the mode of trans-shipment, type of package, thevoyage route and the past claims experience. Extendedcovers like SRCC ( Strikes, Riots and Civil Commotion) and

war risks are governed by special regulations and thepremium collected is credited to the Central Government. Shipping vessels are listed according to their age and

draught weight. Full details of every shipping vessel builtanywhere in the world is available in Lloyds Register (issuedby Lloyds of London). Minimum standards are fixed. Anyvessel falling short of these standards will attract loadingpremium.

Premiums can be paid on monthly, quarterly, half yearly oryearly basis.


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Clauses Incorporated In A Marine Policy

The following are the important clauses:

a. Assignment Clause: This clause makes it clear that themarine policy is assignable unless it contains termsexpressly prohibiting assignment.

Marine policy may be assigned either before or after theloss.

Assignment my be through endorsement or in othercustomary manner.

Where the assured has parted with or lost his interest inthe subject matter insured, any subsequent assignment

is inoperative. The assignee who has acquired the beneficial interest in

the policy is entitled to see thereon in his own name.


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d. Transit Clause or Warehouse to Warehouse Clause: Transit clause provides with respect to goods, for the

risk to attach from the loading thereof aboard the saidship and for the insurance to continue until the goodsare discharged and safely landed at the port of

discharge. Warehouse to Warehouse clause helps to provideprotection for the entire period of transit. The period ofcover extends from the time the goods leave theexporters warehouse until they are delivered to theimporter warehouse at the named destination or to anyother warehouse whether prior to or at the nameddestination, which the assured elect to use either forstorage or for allocation or distribution or on expiry of60 days after discharge from the overseas vessel at thefinal port of discharge whichever occurs first.


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e. Change of Voyage Clause (or) DeviationClause

According to Marine Insurance Act, where

there is a change in voyage, unless the policyotherwise provides, the insurer is dischargedfrom liability as from the time of the change.

Through this clause, the policy does provideotherwise (that means permits deviation) andthe event is held covered.


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e. Touch and Stay Clause

The liberty to touch and stay at any port orplace whatsoever does not authorize the ship

to depart from the course of her voyage fromthe port of departure to the port ofdestination.


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f. Inchmaree Clause or Negligence Clause This clause extend the underwriter liability to cover risks of a

kind, which are not included within the ordinary meaning ofmaritime perils.

It provides for the insurance to cover loss or damage to hullor machinery directly caused by:

i. Accident in loading or shifting cargo or fuel explosion on shipboard and or elsewhere

ii. Bursting of boilersiii. Negligence of master, officersiv. Negligence of repairs provided such repairs are not assured

hereunder

v. Contact with aircraftvi. Contact with any land conveyance, dock or harbor

equipments or installationsvii. Earthquake, volcanic eruption or lightning


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g. Running Down Clause:

This clause provides a supplementary contractwhereby the assured is given some protection

against third party damages. It provides that if the insured vessel collide

with another vessel, the underwriter agree topay three quarters of the amount of damageto which the assured becomes liable.


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h. Sue and Labor Clause:

This clause provides that liability shall not beexceeding the proportion that the amount

insured bears to the value of the vessels. In absence of this provision, underwriters

would be liable for the full amount of sue andlabor charges even when there was underinsurance.


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i. Reinsurance Clause: There are various reasons why an underwriter

may deem it prudent to reinsure part or all ofa risk for which he has accepted liability.

E.g. He may find that his commitment on any onevessel or in any locality have become tooburdensome.

Declarations under open covers or floating policiesand acceptances by his agents in other markets give

him an accumulated liability considerably in excessof his usual retention He may have accepted a line on all risks terms and

then desire to reinsure in respect to total loss only.


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i. Memorandum Clause:

This clause is meant to provide a minimum limit to theunderwriters liability regarding claims for particularaverage by exempting him from such claims.

j) Continuation Clause: This clause refers that the vessel shall continue to be

covered even after the completion of voyage under thepolicy at a pro rata premium to her port of destination.

k) Perils of the Sea Clause:

The term perils of the sea refers to fortuitous accidentsand casualties of the sea. It does not include ordinaryaction of the winds and waves.


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l. Warrior Clause:

This is supplementary to Sue and Labor clause.

In this clause, either party to the contract may take suchsteps, or incur such expenses, as are contemplated under

the sue and labor clause, to minimize a loss withoutprejudice in the light of the assured on the one hand andthe underwriter on the other

m) All Risk Clause:

This clause provides that the insurance is against all risks

of loss or damage to the subject matter insures and theclaims are payable irrespective of percentage of loss.


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n. General Average Clause:

The general average clause refer to the lossesthat must be partly borne by someone other

than the owner of the goods that weredamaged or lost.

General average losses may be total or partial,whereas particular average losses, bydefinition are always partial.


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n. General Average Clause:Ex: Suppose that a certain cargo of lumber wrapped in alarge bundle is stored on deck. To lighten the ship duringheavy storm that is threatening the safety of the voyage,the captain orders the limber worth Rs.50000 to be

jettisoned. The action of the captain is successful in saving

the ship and all other interests. Such a sacrifice is termedas general average, and the interests that were savedwould be required to share a pro-rata part of the loss. Thusis the ship and freight interests were valued at Rs.1000000and other cargo interests at Rs.950000, the ship ownerwould pay one half (100/200) of the value of the lumber.The other cargo interests would share 95/200 of the lossand the owner of the lumber would bear 5/200 of the loss

All marine policies provide coverage for general averageclaims that may be made against the insured.


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o. Foreign General Average Clause: This clause means that the arrangement in case of General

Average Claim which may arise under the policy, the averagesettlement made in foreign country will be adopted as thebasis for settlement.

p. Free of Capture and Seizure (FCS): This clause is generally inserted in times of war. It means that insurer/ underwriter will not be liable for loss or

claim arising from seizure of ship as a price of war. In times of war, this clause is inserted unless the insured pays

the underwriters additional premium for war risks. In ocean marine policy, losses from pirates, assailing thieves

or overtly dishonest actions by the ships master or crew(barratry) are considered burglary and robbery protection onland and are not losses from war. Typically pilferage is notcovered.


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q. Free of Particular Average Clause (FPA):

This clause restricts the liability of theinsurer/underwriter.

Insurer is liable only for total loss and not for particular

average or partial loss Particular average means partial loss to an interest that

must be borne entirely by that interest.

The free-of-particular average clause provides that nopartial loss will be paid to single cargo interest unless

the loss is caused by certain perils such as stranding,sinking, burning or collision.


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b. Lost or Not Loss Clause:

c. At or From Clause


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Types of Marine Insurance Policies

1. Bottomry Bond

It is a bond representing loan raised by themaster of the ship so as to meet certain

urgent expenses like repairing a ship or forsecurity of ship or cargo.

It is repayable after a certain agreed numberof days after the arrival of the ship as specifiedin the bond.

If the vessel is lost before the arrival atdestination, the lender losses his money.


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2. Respondentia Bond:

Like Bottomry Bond, Respondentia Bond also representsa monetary loan borrowed by the master of a ship tomeet certain urgent expenses.

The loan is raised on the security ofCARGO ONLY. The loan is to be repaid within a certain period after the

arrival of the cargo at the destination as specified in theRespondentia Bond.

If the cargo is lost on its way, the lender losses his

money.


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Marine policies are known by different namesaccording to their manner of execution and thenature of risks covered.

Following are the various kinds of marine

insurance policies as contained in the MarineInsurance Act, 1963.1. Voyage Policy: As the name suggests this

policy covers a voyage. This is a policy in which the limits of the risk are

determined by place of particular voyage e.g.

Chennai to Singapore , Chennai to London Such policies are always used for goods insurance,

sometimes for freight insurance but only rarelynowadays for hull insurance.


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2. Time Policy: This policy is designed to givecover for some specified period of time say forexample noon of 1st January 2009 to noon of 1stJanuary 2012 Time policies are usual in case of hull insurance.

2. Voyage & Time Policy or Mixed Policy: It is acombination of voyage and time policy. It is a policy which covers the risk during a particular

voyage for a specified period. Example A ship maybe insured for voyages between Chennai to Londonfor a period of one year


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4. Valued Policy: This policy specifies agreed value of thesubject matter insured, which is not necessarily theactual value. This agreed value is also known as insuredvalue.

Once agreed these values cannot be changed and

remains binding on the parties.5. Unvalued Policy/ Open Policy: In case of unvalued policy,

the value of the subject matter insured is not specified atthe time of effecting insurance.

It is taken for a specified amount and the insurable value isascertained at the time of loss.

The insurer is liable to pay only up to actual loss incurredto the policy amount.


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6. Floating Policy: A floating policy describes the insurance ingeneral terms, leaving the name of the ship or ships to bedefined by subsequent declarations.

The declaration may be made by endorsement on the policy orin another customary manner.

Declaration must be made in the order of shipment unless the

policy provides otherwise. It must comprise all the consignments within the terms of the

policy and the values must be stated honestly. Errors and omissions however, may be rectified even after the

loss has occurred, if made in good faith. When the total amount declared exhausts for which the policy

has been issued, it is said to be run off or fully declared. The assured may then arrange for a new policy to be issued to

succeed the one about to lapse, otherwise the coverterminates when the policy is fully declared.


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7. Wagering Policy/ PPI Policy: This policy isissued without there being any insurableinterest or policy bearing evidence that theinsured is willing to dispense with any proof of

interest If policy contains such words as Policy Proof of

Interest (PPI) or Interest or No Interest it isa Wagering or Honour Policy.

Under Sc 4 of the Marine Insurance Act, suchpolicies are void in Law but such policiescontinue to be common.


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8. Construction or Builder Risk Policy: This is designed tocover risks incidental to the building of a vessel, usuallygiving cover from the time of laying the keel until thecompletion of trials and handing over to the owners.

In the case of very large vessel, the period may extendover several years.

9. Blanket/ Open Cover Policy: In order to arrange theirmarine insurance in advance and to be assured to becovered at all times, and also to avoid the effects ofpossible rapidly fluctuating rates, it is practice of regularimporters and exporters to avail Blanket Insurance.

An open cover policy is an agreement between the assured

and his underwriter under which the former agrees todeclare and the latter to accept, all shipments comingwithin the scope of the open general cover during somestipulated period of time.


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10. Duty Policy : In case of CIF contracts, theexporter would have arranged for insuranceonly up to CIF value. Customs duty payable ifany is the responsibility of the importer and

they can separately obtain custom duty policyon standalone basis.

11. Increased Value Policy: If goods imported aredamaged in transit and such goods can beprocured locally at prices higher than the CIF+

Customs duty, the increase value policy coverssuch difference in values.

V i t M i I


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Variants: Marine InsuranceProducts

12. Marine Delays: Any loss or damage to theequipment during transit which leads to the delayin completion of the project , commencement ofproduction and thereby loss in profit is coveredunder this policy and is also known as

Consequential loss due to marine delays orsimply Delay Start Up.13. Marine Cum Erection Policy: In standard marine

cargo policy, the cover ceases after the goods aredelivered at the site of erection. If any damage

attributable to transit risk was found at the timeof erection, then marine policy and erection policybear 50% each of the cost of damage.


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14. Port Risk Policy: This is to cover a ship orcargo during a period in port against the riskspeculiar to a port as distinguished from voyagerisks.


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Marine Losses

According to Marine Insurance Act, unless the policyprovides otherwise,

a. The insurer is liable for any loss proximately caused bya peril insured against

b. The insurer is not liable for any loss attributable to the

willful misconduct of the assured but unless the policyotherwise provides, he is liable for any loss proximatelycaused by a peril insured against even though the losswould not have happened but for the misconduct ornegligence of the Master or Crew of the Ship.

c. Unless the policy otherwise provides, the insurer is notliable for ordinary wear and tear, ordinary leakage andbreakage, inherent vice or nature of subject matterinsured or for any loss proximately caused by rat orvermin or any injury to machinery not caused bymaritime perils.


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Types of Marine Losses

Marine Losses

Total Loss Partial Loss

Actual LossConstructive Total

LossParticular

Average LossGeneral Average

Loss


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It is said that actual total loss has arisen :

1. When the subject matter insured is destroyed or is sodamaged that it ceases to be a thing or a kind insured.

2. When the assured is irretrievably deprived of thesubject matter.

3. When the ship concerned in the adventure is missing,and after the lapse of a reasonable time period, still nonews of it is received.

In the case of Actual Total Loss, the insurer has to payeither the insured amount or the actual loss whichever

is less but the cause of the loss must be one of theperils insured against.


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Constructive total loss is said to have occurred :1. When the assured is deprived of the possession of ship or

goods by a peril insured against and it is unlikely that he canrecover the ship or goods as the case may be or the cost ofrecovering the ship or goods, as the case may be, wouldexceed their value when recovered

2. In the case of damage of goods, where cost of repairing thedamage and forwarding the goods to their destination wouldexceed their value.

3. In case of damage of the ship, where it is so damaged by theperil insured against that the cost of repairing the damagewould exceed the value of the ship.

Effect of Constructive Total Loss:Effect of Constructive Total Loss: When there is a constructive

total loss, the assured may either treat the loss as a particularloss or abandon the subject matter insured to the insurer andtreat the loss as if it were an Actual Total Loss.


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Notice of Abandonment : It is a notice by the assured to the insurer that he abandons

all interests in the subject matter of insurer unconditionally tothe insurer. As per the Sc 62, the rules regardingabandonment are:

1. A notice of abandonment should be given by the insured to

the insurer. If he fails to do so, the loss can only be treated asa Partial Loss.2. The insurer may waive the Notice Of Abandonment.3. The notice of abandonment must be unconditional and can be

done by expression, writing or both.4. Notice of Abandonment must be given written within a

reasonable time after the receipt of reliable information of theloss. However in case of doubt, assured is entitled to areasonable time to make inquiry and then to notify.


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5. When the notice of abandonment is properly given, therights of the assured are not prejudiced by the fact thatthe insurer refuses to accept the abandonment.

6. The acceptance of abandonment may be either expressor implied from the conduct of the insurer. The meresilence of the insurer after the notice does not amountto an acceptance.

7. Once the notice of abandonment is accepted, theabandonment is irrevocable. The acceptance of thenotice conclusively admits liability for the loss.

Effect of Abandonment: Whenever there is a validabandonment, the insured is entitled to take over theinterest of the assured in whatever may remain in thesubject matter insured, and all proprietary rightsincidental thereto.


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Partial Loss

Any loss other than total loss is Partial Lossand may be classified into:

a) Particular Average Loss

b) General Average Loss


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Particular Average Loss

When the subject matter is partially lost ordamaged by a peril insured against, it is calledParticular Average Loss.

A Particular Average Loss must fulfill the

following conditions:1. Only a particular subject matter is lost or

damaged.

2. The loss should be accidental.

3. It should be caused by peril insured against.4. The damage should not have suffered for a

general benefit.


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General Average Loss

Examples of General Average Loss are:

a) Loss caused to cargo due to fire.

b) Money paid to pirates for the purpose of

saving the ship and cargo.c) Expenses incurred due to outside help taken in

making the vessel reach its destination.

The liability of General Average extends to the

owner of the ship, the cargo and the freight.


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York Antwerp Rules

As General Average causes many difficulties particularlywhen adjustments has to be made in foreign courts, aninternational code has been compiled known as York-Antwerp Rules.

The association for reform and codification of the law ofnature meet at Antwerp in 1877, where code of ruleswere adapted and known as York Antwerp Rules. Therules were further revised in 1890 and 1924.

These rules deal only with certain specific method

relating to General Average Loss and further providedthat in case of matters not included in the rules, thatshould be dealt with according to the law and practiceof the court of destination.

Difference Between General Average


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Difference Between General AverageLoss and Particular Average Loss

General Average Loss

1. It is incurred for thebenefits of all parties.

2. It is always donevoluntarily and is

reasonably incurred.3. General Average is

shared by all those whoare benefited by theAverage Act.

4. It includes expenditureand sacrifice along withloss.

Particular Average Loss

1. It is in connection withany of the parties.

2. It is accidental andfortuitous.

3. It is paid by the insurers.

4.

It results from anaccident or normal perilsof the sea.


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Claim Documents

Claim under the marine policy have to be supported bycertain documents, which vary according to the type ofcircumstances of the claim and mode of carriage.

Typical documents required for Particular Average claimare:

a)

Original Policy: Certificate of insurance.b) Bill of lading: Evidence that the goods were actuallyshipped

c) Invoice: Evidence for term of sale.d) Survey Report: Show the cause and extent of the loss.e) Debit Note: Claim billf) Copy of Protest: Protest on arrival at destination before

public notary.g) Letter of Subrogation: Legal documents which transfer

the right of claimant against third party to the insurer.

22713501 Marine Insurance

Documents

Transcript of 22713501 Marine Insurance