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

GEPLAWM A R I T I M E L A W

A Monthly Publication of the George Etomi & Partners Editorial Team

G E O R G E

E T O M I &

PA R T N E R SLEGAL PRACTITIONERS

MARINE INSURANCE IN NIGERIA (A BRIEF OVERVIEW)

Volume1 Issue 1

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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

adventure.'

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

cover.

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 invarious industries, it does not proffer legal advice. For further information, comments and questions on matters discusses herein or

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