Marine Insurance in Nigeria - G E & P Law · PDF file to marine insurance are contained in...

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Transcript of Marine Insurance in Nigeria - G E & P Law · PDF file to marine insurance are contained in...

  • A Contract of Marine Insurance is a

    contract whereby the insurer takes to

    indemnify the assured, in the manner and

    to the extent thereby agreed, against marine losses, that

    is to say, the losses incidental to marine adventure. This

    contract of insurance is entered by way of Insurance

    Policy. Insurance Policy can be defined as a legally binding

    contract between Insurance Company and the person

    who buys the insurance policy commonly called the Policy

    holder, who also is often the person assured in exchange

    for payment of a specified sum of money called the

    premium. The Insurance company agrees to pay for

    certain types of losses or damage as specified by the

    contract when a loss occurs which meet all of the

    requirements described by the terms of insurance policy,

    the loss is said to be covered by that policy.

    A marine insurance contract is strictly a contract of

    indemnity as it involves the value agreed upon in

    advance, unlike Fire insurance, where it is limited to the

    actual loss, where the value may be greater or less than

    the value of actual risk. The contract involves an

    underwriter and the assured. The underwriter in a marine

    insurance agrees to indemnify the assured against loss or

    damage caused by certain specified perils termed

    “Maritime Perils” in consideration of the payment of a

    certain sum called the premium. Marine peril is defined to

    mean peril consequent on or incidental to, the navigation

    of the sea, that is to say; captures, seizures, restraints,

    and detainment of princes and people, jettisons,

    barratry, and any other perils, either of the like kind,

    which may be designated by the policy. The laws relating

    to marine insurance are contained in the Marine

    Insurance Act Cap. M2 LFN, 2004.

    As stated earlier a marine insurance is a contract of

    indemnity and therefore attention is required to be paid

    to a number of its distinctive features:

    1. Requirement of utmost good faith.

    2. Subrogation.

    3. Insurable Interest.

    1. The Requirement of Utmost Good Faith:

    A marine insurance contract is a contract of utmost

    good faith, thus the insurer and assured are placed

    under an obligation to disclose information that is

    likely to affect the judgment of the other. The

    burden of showing lack of good faith is on the party

    alleging it and in instances where the insurer elects


    A Monthly Publication of the George Etomi & Partners Editorial Team

    G E O R G E

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    Volume1 Issue 1


  • to avoid the contract then it must return the

    premium, unless there has been fraud.

    2. Subrogation

    Subrogation is founded on the well known principle

    of law that, where one person has agreed to

    indemnify another, he will, on making good the

    indemnity be entitled to succeed to all the ways and

    means by which the person indemnified might have

    protected himself.

    This principle is embodied in Section 80 (1) of the

    Marine Insurance Act which stipulates that:

    “Where the insurer pays for a total loss, either of the

    whole, or in the case of goods of any apportionable

    part, of the subject-matter insured, he shall

    thereupon become entitled to take over the interest

    of the assured in whatever may remain of the

    subject-matter so paid for, and shall thereby be

    subrogated to all the rights and remedies of the

    assured in and in respect of that subject-matter as

    from the time of the casualty causing the loss”

    3. Insurable Interest:

    Section 3 of the Marine Insurance Act: 'A contract of

    marine insurance is a contract whereby the insurer

    undertakes to indemnify the assured, in a manner

    and to the extent agreed, against marine losses,

    that is to say, the losses incident to a marine


    It therefore follows that in any contract of marine

    insurance the proposer or insured must have an interest

    in the subject matter of the insurance.

    Types of policy

    In addition to being able to choose the types of risk to be

    covered the insured can also choose between differing

    policy formats:

    1. Voyage Policy and Time Policy

    A voyage policy relates to one particular voyage. As

    such it is a very common format for covering cargo

    in international sale transactions. A time policy on

    the other hand relates to the subject matter being

    covered for a specified time period. As such it is

    much more suitable to haulage and machinery


    2. Valued Policy and Unvalued Policy

    A valued policy is one where the agreed value of the

    subject matter is specified. This agreed value does

    not necessarily reflect the real value of the goods in

    question. It could for example include an element of

    anticipated profit. If so this is a material fact for

    disclosure to the insurers. Mathie v The Argonaut

    Marine Insurance Co. (1925)

    Under an unvalued policy the value of the subject

    matter is calculated in accordance with s.18: In

    insurance on goods or merchandise, the insurable

    value is the prime cost of the property insured, plus

    the expenses of and incidental to shipping and the

    charges of insurance upon the whole” Berger &

    Light Diffusers Pty Ltd v Pollock (1973)

    3. Floating Policy and Open Cover

    Floating policies and open covers are used by traders

    who ship on a regular basis. A floating policy is

    intended to cover a number of consignments setting

    out the general conditions of the insurance but no

    particulars of the goods to be covered. These

    particulars are provided by the insured by way of a

    declaration to the insurer. These declarations then

    form an endorsement to the policy. The floating

    policy will cover consignments up to an aggregate

    value. As each consignment is declared the

    remaining availability of cover is incrementally

    reduced. The insured is under a statutory obligation

    to honestly declare the value.

    An Open cover is similar except that the insurer does not

    issue a policy document he merely undertakes to issue a

    policy, what is provided instead is a certificate. An open

    cover may be time specific, e.g for 12 months or be

    perpetual that is subject to termination by either party,

    with notice.

    GEPLAW FOCUS is a monthly e-publication of George Etomi and Partners. this e-publication merely features cutting edge issues in various industries, it does not proffer legal advice. For further information, comments and questions on matters discusses herein or

    other matters generally please contact [email protected]


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