Marine & Cargo Insurance

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Transcript of Marine & Cargo Insurance

Topic: Marine & Cargo Insurance

BY:Mahak Goreja

Insurance in broad terms may be described as a method of sharing financial losses of few from a common fund who are equally exposed to the same loss. The main principle underlying insurance is the pooling of risks. It is thus a co-operative devise to spread the loss caused by a risk ( which is covered by insurance) over a large number of persons who are also exposed to the same risk and themselves against that risk.

Say 1000 motor cars valued @ 300000/are observed over a period of five years. On an average say per year two are total loss by accident. Then the total annual loss would be Rs.600000. If the loss is to shared by all the thousand owners then they have to contribute Rs.600/-

Rate of contribution or premium The degree of hazard it is exposed to. Classification of various types of properties.

Important Elements Involved In the concept of InsuranceSubject matter of insurance:(Subject matter is property, human life, machinery, goods etc.) The PERIL (risk):(Peril is fire, storm, burglary, earth quake, injury, explosion etc.or we can say uncertain events or casualties) The financial loss: Financial loss is normally defined before the contract is signed.

A contract of insurance is a contract by which a person, in consideration of a sum of money , undertakes to make good the loss of another against a specific risk, e.g., fire, or to compensate him or his estate on happening of a specified event, e.g., accident or Contract: INSURER & INSURED Parties to death.The person undertakes the risk is called the insurer , assuror or underwriter. The person whose loss is to be made good is called the insured or assured.

PREMIUM: The consideration for which

the insurer undertakes to indemnify the assured against the risk is called the premium. POLICY: The instrument in which

the contract of insurance is generally embodied is called the policy. The policy is not the contract; is the evidence of the contract.

1.UTMOST GOOD FAITH: The assured must disclose to the insurerall material facts known to him. A mis-statement or withholding of any material information is fatal to the contract of insurance. Both the parties are under obligation for the full disclosure of material information. The rule caveat emptor does not apply to them. Where the assured does not make a complete disclosure of everything which it was material for the insurer to know in order to judge, (a) whether he should accept the risk, and (b) what premium he should charge, the insurer can avoid the contract. Any fact is material if it has a bearing on the risk and would materially affect the insurer in deciding to make the contract or not.

personal accident and sickness insurances) is a contract of indemnity.In case of loss the assured is paid the actual amount of loss not exceeding the amount of the policy. Indemnity is the controlling principle in contracts of fire, marine, and burglary insurances. The object of every contract of insurance is to place the assured in the same financial position, as nearly as possible, after the loss as if the loss had not taken place at all. It would be against he public policy to allow an assured to make a profit out of the happening of the loss or damage insured against. This is because, if that were so, the assured might be tempted to bring about the event insured against in order to get the money. Moreover, in the absence of principle of indemnity, there might be a tendency in the direction of over insurance.

2.INDEMNITY:A contract of insurance (except life,

3.INSURABLE INTEREST: It means that the assuredmust be so situated with regard to the thing insured that he would benefit from its existence and suffer loss from its destruction. It means that, the assured must be in a legally recognized to relationship so that he will suffer a direct financial loss on the happening of the event insured. It is the existence of insurable interest in a contract of insurance which distinguishes it from a wagering agreement. In life insurance, insurable interest must be present at the time when the insurance is effected. In fire insurance, it must be present at the time of insurance and at the time of loss. In marine insurance, it must be present at the time of loss of the subject matter.

4.Causa Proxima: The assured can recover the loss only if it is proximately caused by any of the perils insured against. This is called the rule of causa proxima. The rule is causa proxima non remota spectatur, i.e., the proximate or immediate and not the remote cause is to looked to and if the proximate cause of the loss from the insurer.Every loss that clearly and proximately results, whether directly or indirectly, from the event insured against is within the policy. 5.Risk must attach: The insurer receives the premium in a contract of insurance for running a certain risk. If for any reason the risk is not run, the consideration fails, and the insurer must return the premium. 6.Mitigation of loss: In the event of some mishap to the insured property , if the assured does not take all necessary steps to mitigate the loss , the insurer can avoid the payment of loss which is attributable to the assured s negligence. He must act as an uninsured prudent person would act under similar circumstances in his own case.

7.Contribution:Where there are two or more insurances on one risk, the principle of contribution applies as between different insurers. The aim of contribution is to distribute the actual amount of loss among the different insurers who are liable under different policies in respect of the same subject-matter. EXAMPLE: A insures his house against fire for Rs.10,000 with insurer X, & for Rs.20,000 with insurer Y .A loss of Rs 12,000 occurs. X is liable for Rs.4,000 and Y for Rs.8,000. If the whole amount of the loss is paid by Y, he can recover Rs.4,000 from X. 8.Subrogation: The doctrine of subrogation is a corollary to the principle of indemnity. According to it, the insurer who has agreed to indemnify the assured on making good the loss, is entitled to succeed to all the ways and means by which the assured might have protected himself against the loss. Example: A insures his goods with B for Rs 1,000. The goods are damaged by fire caused by C , a miscreant . A recovers the loss from B and subsequently he succeeds in recovering this loss from C also. He must hold the amount recovered from C in trust for B.

A ship insured against marine losses is sunk.The insurer pays the value in full.The ship is subsequently salvaged. Who is entitled to the sale proceeds of the salvaged ship.?

The insurer is entitled to the sale proceeds of the salvaged ship.[Subrogation]

A house is insured against fire for Rs.50,000.It is burnt down but it is estimated that Rs.30,000 will restore it to the original condition. How much is the insurer is liable to pay ?

Insurer is liable to pay Rs.30,000 only.(Indemnity)

A insures his house against fire for Rs.40,000 with B and for Rs.60,000 with C.A fire occurs and a loss is estimated at Rs. 14,000.A recovers Rs.14,000 from B. What are the rights of B against C ?

B can claim Rs. 8,400 from C as the loss of Rs.14,000 will be borne by B and C in the ratio of 40,000: 60,000 [Contribution].

A, to meet the claims of his creditors, borrows Rs.10,000 from B.To protect his interest, B takes out an insurance policy on the life of A.A pays the entire amount to B and then dies. Can B recover on the policy ?

B can recover on the policy. [Insurable interest].

A contracted to build a house for B for which he was to be paid Rs.2,00,000.All the materials were to be supplied by B. Can A insure the materials for the period during which the building is being constructed.?

A can insure the materials . (Insurable interest).

As goods in a warehouse are insured.B is the insurer.The goods are burnt.A recovers their full value of Rs.1,000 from B.Then A sues the warehouse keeper and recovers Rs.1,000 from him.B claims this amount from A but A refuses to make over the amount to B. How would you decide the dispute between A and B ?

A is bound to pay Rs.1,000 to B. (Castellain vs.Preston)

A firm of contractors assured a lorry against fire.In reply to a question in the proposal form, state the address at which the lorry will be usually garaged a wrong address was given.The policy contained a clause that answers to the queries in the proposal form were the basis of the contract.The risk of fire was the same as the address given and at the correct address.

If the lorry is damaged by fire, are the insurers liable ?

The insurers are not liable. [ Dawsons Ltd. Vs.Bonnin (1922) ]

1.Life Insurance: In this case certain fixed amount becomes payable on the death of the assured or on the expiry of a certain fixed period, whichever is earlier. 2.Fire Insurance: It covers the losses caused by fire.

3.Marine Insurance: It covers all marine losses, that is to say, the losses incidental to marine adventure. 4.Personal Accident Insurance: In this case, the amount payable is a compensation for any personal injury caused to the assured.

5.Health Insurance: Health insurance is becoming an important form of insurance. It provides benefit for medical expenses. 6.Property Insurance: Property insurance takes various forms like theft or burglary insurance, fire insurance, liability insurance etc.

The mistakes of doctors and nurses are covered by the earth and the mistakes of shipmasters and crew are covered by the insurance

ORIGINATED IN ENGLAND owing to frequent movement of ships over high seas for trade. PROVIDES COVER FROM LOSS suffered due to

marine perils loss incurred during shipment of cargo over water bodies