A CONTRACT OF MARINE
INSURANCE IS A CONTRACT WHEREBY THE INSURER UNDERTAKES TO INDEMNIFY THE
ASSURED, IN A MANNER AND EXTENT THEREBY AGREED, AGAINST MARINE LOSSES CAUSED BY
MARITIME ADVENTURE OR MARITIME PERIL.
MAIN FEATURES OF MARINE INSURANCE:
1. INSURABLE
INTEREST: IN ORDER TO CLAIM FOR A
LOSS OR DAMAGE, THE INSURED MUST HAVE A FINANCIAL INTEREST IN THE INSURED
PROPERTY. A PERSON CAN BE SAID TO HAVE AN INSURABLE INTEREST IN THE PROPERTY
INSURED WHEN HE SUFFERS A LOSS IF THE PROPERTY IS LOST OR DAMAGED OR WHEN HE
GAINS A PROFIT WHEN THE PROPERTY INSURED IS SAFE AND IS IN CONTINUOUS
EXISTENCE. EVERY PERSON WHO IS ENGAGED IN A MARINE ADVENTURE IS SAID TO HAVE AN
INSURABLE INTEREST. EXAMPLE: INTEREST
OF THE SHIP OWNER IN HIS SHIP, INTEREST OF MASTER AND CREW FOR THERE WAGES,
INTEREST OF THE INSURANCE COMPANY IN THE PROPERTY INSURED.
2. UTMOST GOOD
FAITH: A CONTRACT OF MARINE INSURANCE
IS A CONTRACT BASED UPON UTMOST GOOD FAITH AND IF THE UTMOST GOOD FAITH IS NOT
EXERCISED BY EITHER PARTY, THE CONTRACT MAY BE AVOIDED BY THE OTHER PARTY. THE
DUTY OF UTMOST GOOD FAITH IS REQUIRED BY BOTH THE PARTIES. THE INSURER MUST
DEAL WITH ALL CLAIMS FAIRLY AND EXPEDITIOUSLY AND MUST BE ABLE TO PAY FOR
POTENTIAL CLAIMS. THE ASSURED MUST DISCLOSE ALL MATERIAL FACTS ABOUT THE
CONDITION OF THE INSURED PROPERTY WHICH THE INSURER KNOWS OR OUGHT TO KNOW. MATERIAL
FACTS ARE THOSE FACTS WHICH COULD AFFECT THE JUDGEMENT OF A PRUDENT UNDERWRITER
IN DECIDING WHETHER TO ACCEPT THE RISK OF INSURING THE PROPERTY AND AT WHAT
RATE OF PREMIUM AND TO WHAT TERMS AND CONDITIONS.
3. INDEMNITY: THE INSURANCE CONTRACT IS A CONTRACT OF INDEMNITY.
SUCH AN INSURANCE CONTRACT WILL MAKE GOOD A LOSS OR DAMAGE IN SUCH A MANNER THAT
THE ASSURED IS NEITHER BETTER-OFF NOR WORSE-OFF AS A RESULT OF THE LOSS. IN
OTHER WORDS THE ASSURED IS PLACED IN THE SAME FINANCIAL POSITION AS HE WAS IN
IMMEDIATELY BEFORE THE LOSS. THUS THE PRINCIPLE OF INDEMNITY PREVENTS THE
INSURER FROM MAKING A PROFIT OUT OF HIS LOSS OR GAINING ANY BENEFIT OUT OF THE
INSURANCE.
4. SUBROGATION:
IT IS THE RIGHT OF THE INSURER, AFTER
HE PAYS FOR THE LOSS, TO ASSUME THE RIGHTS OF THE INSURED TO RECOVER THIS LOSS
FROM THE RESPONSIBLE PARTY. THIS PREVENTS THE INSURED FROM COLLECTING THE
CLAIMS TWICE, THUS REDUCING THE COST OF CLAIMS. THE INSURER CAN SUE A
RESPONSIBLE PARTY IN THE NAME OF THE INSURED UPTO THE AMOUNT OF THE SETTLEMENT.
MARITIME ADVENTURE: EXISTS WHERE INSURABLE PROPERTY SUCH AS SHIP, GOODS, MOVABLES OR
EARNINGS OF VESSEL i.e. FREIGHT, COMMISION ETC ARE EXPOSED TO MARITIME PERILS,
OR LIABILITY TO THIRD PARTY BY REASON OF MARITIME PERILS.
MARITIME ADVENTURE: ARE PERILS CONSEQUENT ON, OR INCIDENTAL TO, NAVIGATION OF THE SEA. SOME
EXAMPLES ARE: PERILS OF THE SEA, FIRE, WAR PERILS, PIRATES, THIEVES, BARRATORY,
RESTRAINTS, DETAINMENTS OF PRINCES AND PEOPLE ETC.
MARINE POLICY
A CONTRACT OF MARINE
INSURANCE SHALL NOT BE ADMITTED IN EVIDENCE UNLESS IT IS EMBODIED IN A MARINE
POLICY IN ACCORDANCE WITH THE MARINE INSURANCE ACT.
A MARINE POLICY MUST SPECIFY:
1. NAME OF THE INSURED,
2. SUBJECT MATTER INSURED AND THE RISK INSURED AGAINST,
3. THE VOYAGE, OR PERIOD OR BOTH, AS THE CASE MAY BE,
COVERED BY THE INSURANCE,
4. THE SUM OR SUMS INSURED,
5. THE NAME OR NAMES OF INSURER OR INSURERS,
6. A MARINE POLICY MUST BE SIGNED BY OR ON BEHALF OF THE
INSURER.
TYPES OF POLICIES:
1. ALL RISK
POLICIES: THESE TYPES OF POLICIES
COVER BOTH MARINE AND NON-MARINE PROPERTY AND GENERALLY INSURE AGAINST “ALL
RISKS”. THE WORD “ALL RISKS” IS ACTUALLY A MISNOMER AS IT HAS GOT MANY
EXCLUSIONS. IN AN “ALL RISKS” POLICY THE ONUS OF PROVING THAT THERE WAS AN
ACCIDENT IS ON THE ASSURED. ONCE THE ASSURED HAS GIVEN THIS PROOF, IT IS UP TO
THE INSURER TO PROVE THAT THE ACCIDENT OCCURRED DUE TO ONE OF THE EXCLUDED
PERILS, IF THE INSURER DOES NOT WISH TO PAY FOR THE CLAIMS. THE ONLY POLICY
WHICH IS AN ACTUAL “ALL RISK” POLICY IS THE “BUILDERS ALL RISKS POLICY” WHICH
COVERS A SHIP UNDER CONSTRUCTION. APART FROM THIS ALL OTHER POLICIES ARE
ACTUALLY “NAMED PERILS POLICY”.
2. NAMED PERILS
POLICY: THESE TYPES OF POLICIES COVER
BOTH MARINE AND NON-MARINE PROPERTIES AND GENERALLY INSURE AGAINST “NAMED
PERILS” WHICH ARE MENTIONED IN THE POLICY. IT ALSO MENTIONS SEVERAL EXCLUSIONS.
IN CASE OF A “NAMES PERILS POLICY”THE ONUS OF PROVING THAT THERE WAS AN
ACCIDENT AND IT WAS DUE TO AN ASSURED PERIL IS ON THE ASSURED. THE INSURER HAS
TO PROVE THAT THE ACCIDENT WAS DUE TO ONE OF THE PERILS EXCLUDED, IF HE DOES
NOT WANT TO PAY THE CLAIM.
3. OPEN POLICY:
GENERALLY REFER TO MARINE POLICIES ON
GOODS IN TRANSIT. INSTEAD OF TAKING OUT INDIVIDUAL POLICIES ON EACH SHIPMENT AN
OPEN POLICY IS MADE. THIS FACILITATES THE ASSURED TO DECLARE EACH SHIPMENT TO
THE INSURER WHO THEN GIVES A COVER NOTE. THE TERMS AND CODITIONS OF THE POLICY
IS AGREED IN ADVANCE AND IT IS GENERALLY FOR A PERIOD OF 1 YEAR.
4. FLOATING
POLICIES: THIS TYPE OF POLICY
DESCRIBES IN GENERAL THE TERMS AND CONDITIONS AND LEAVES THE NAME IS THE SHIP
OR GOODS OR OTHER PARTICULARS TO BE DECLARED BY THE ASSURED. THESE ARE NOT IN
USE ANY MORE, INSTEAD “FLEET POLICIES” ARE USED WHICH COVERS A WHOLE FLEET OF
SHIPS OF A SHIPOWNER. NEW SHIPS ACQUIRED MAY BE DECLARED TO THE INSURER AND
ADDED ON TO THE PREMIUM TO BE AGREED. THE OPEN POLICIES ON GOODS IN TRANSIT ARE
A FORM OF “FLOATING POLICIES” WHICH ARE SOMETIMES KNOWN AS “DECLARATION
POLICIES”.
5. VOYAGE AND
TIME POLICIES: WHEN THE CONTRACT IS
TO ENSURE THE PROPERTY AT OR FROM OR FROM ONE PLACE TO ANOTHER OR OTHER, IT IS
KNOWN AS A VOYAGE POLICY. WHEN THE CONTRACT IS TO ENSURE THE PROPERTY FOR A
GIVEN PERIOD OF TIME, THE POLICY IS TERMED AS A TIME POLICY. COMMONLY USED
PERIOD FOR A TIME POLICY IS ABOUT 12 MONTHS.
WARRANTY
A WARRANTY IS AN ASSURANCE
FROM THE INSURED THAT A SPECIFIED STATE OF AFFAIRS OR CONDITIONS WILL BE
MAINTAINED AND WHICH SHALL NOT BE DONE FOR THE DURATION OF EXISTENCE OF THE
POLICY. A WARRANTY NEED NOT BE WRITTEN IN A PARTICULAR SET OF WORDS BUT CAN BE
EXPRESS OR IMPLIED.
EXPRESS WARRANTY
IT CAN BE ANY FORM OF WORDS
FROM WHICH THE INTENTION OF WARRANTY IS CLEAR. IT MAY BE INCLUDED IN THE POLICY
ITSELF OR MUST BE CONTAINED IN SOME OTHER DOCUMENT WHOSE REFERENCE IS THERE IN
THE POLICY.
IMPLIED WARRANTY
IT IS A WARRANT Y WHICH IS
NOT WRITTEN ANYWHERE BUT IS IMPLIED UPON BY THE LAW.
EXAMPLES OF IMPLIED WARRANTY:
- THE VESSEL MUST BE SEAWORTHY AT THE COMMENCEMENT
OF THE VOYAGE AND AT THE START OF EACH STAGE, IF THE VOYAGE IS IN STAGES.
- THE VOYAGE MUST BE LAWFUL AND AS FAR AS THE
INSURED CAN CONTROL, BE CARRIED OUT IN A LAWFUL MANNER.
SEWORTHINESS OF THE VESSEL
IT IS AN IMPLID WARRANTY THAT
AT THE COMMENCEMENT OF THE VOYAGE OR AT THE START OF EACH STAGE OF THE VOYAGE,
THE VESSEL MUST BE SEAWORTHY i.e. IT MUST BE FIT FOR THE PARTICULAR ADVENTURE
AND READY TO ENCOUNTER ALL ORDINARY PERILS OF THE SEA WHICH THE VESSEL MAY
ENCOUNTER IN THE INSURED VOYAGE.
WHEN THE VESSEL ENTERS A PORT
SHE SHOULD BE REASONABLY FIT TO ENCOUNTER ALL ORDINARY PERILS OF THE PORT.
INSTITUTE WARRANTIES
INSTITUTE WARRANTY IS USED TO
FIX THE TRADING LIMITS OF THE VESSELS WHICH ARE NOT ENGAGED ON A FIXED TRADE
BUT ARE TRAMPING WORLDWIDE. THE REASON BEING, NAVIGATION IS THESE RESTRICTED
AREAS DUTING THESE TIME INCREASE THE RISK OF THE INSURER.
THERE ARE 6 INSTITUTE
WARRANTIES:
- FIRST 4 PUT A BAN IN TRADING IN CERTAIN ICE-BOUND
AREAS IN THE FAR NORTH BOUND. (FOR SOME ALL THE YEAR ROUND AND FOR SOME
ONLY IN THE WINTER SEASON).
- THE FIFTH PROHIBITS TRADING TO CERTAIN ANTARTIC
REGIONS.
- THE SIXTH PROHIBITS THE CARRIAGE OF INDIAN COAL
FROM 1ST MARCH TO 30TH SEPTEMBER EXCEPT TO CERTAIN
NEAR ASIATIC PORTS BETWEEN SOME DATES.
IF ANY WARRANTY IS BREACHED,
THEN THE INSURER WILL NOT BE LIABLE FOR ANY LOSS AFTER THE WARRANTY WAS
BREACHED.
TYPES OF LOSS
1. ACTUAL TOTAL
LOSS: IT IS A LOSS OR DAMAGE OF
ENTIRE PROPERTY (PHYSICAL TOTAL LOSS) WHICH CAN OCCUR IN 3 WAYS:
1. ALL PROPERTY IS DESTROYED,
2. ALL PROPERTY HAS BEEN SO DAMAGED THAT IT CEASES TO BE
THE THING IT WAS INITIALLY INSURED. (CEMENT BECOMING CONCRETE DUE TO DAMAGE BY
WATER).
3. THE SHIP IS IRRETREIVABLE AND UNAVAILABLE TO OWNERS
EVEN THOUGH THE PROPERTY MAY NOT BE DESTROYED.
2. CONSTRUCTIVE
TOTAL LOSS: ALSO KNOWN AS A
COMMERCIAL TOTAL LOSS. MEANS THAT THE COST OF REPAIR OR REPLACEMENT IS MORE
THAN THE POLICY LIMIT. THE PROPERTY MUST BE REASONABLY ABANDONED, THIS MEANS IT
SHOULD BE ABANDONED BECAUSE ITS ACTUAL TOTAL LOSS IS INEVITABLE OR IT WOULD
REQUIRE AN EXPENDITURE EXCEEDING THE SAVED VALUE IF ATTEMPTING TO PREVENT A
TOTAL LOSS. THE INSURED MUST ABANDON HIS INTEREST TO THE INSURER BEFORE THE
CLAIM. THE INSURER IS ENTITLED TO TAKE OVER THE PROPERTY IF DESIRED.
3. PRESUMED
TOTAL LOSS: WHEN A SHIP ENGAGED ON A
MARITIME ADVENTURE HAS BEEN MISSING FOR A REASONABLE PERIOD OF TIME, AN ACTUAL
TOTAL LOSS MAY BE PRESUMED.
4. PARTIAL
LOSS: WHEN THE LOSS IS LESS THAN THE
TOTAL AMOUNT OF INSURANCE OR WHEN LOSS / DAMAGE HAS BEEN TAKEN PLACE ONLY TO
SOME PART OF THE PROPERTY.
NOTICE OF ABANDONMENT
ACCORDING TO THE MARINE
INSURANCE ACT, WHEN THE ASSURED ELECTS TO ABANDON THE INTEREST TO THE INSURER,
HE MUST GIVE A NOTICE OF ABANDONMENT. IF HE FAILS TO DO SO, IT WILL BE TREATED
AS A PARTIAL LOSS. SUCH A NOTICE CAN BE GIVEN IN WRITING OR BY WORD OF MOUTH OR
BY BOTH. IT SHOULD BE GIVING WITH A REASONABLE DILIGENCE AFTER THE RECEIPT OF A
RELIABLE INFORMATION OF THE LOSS. THE ASSURED CAN TAKE TIME WHEN THE
INFORMATION IS OF A DOUBTFUL CHARACTER. THE ACCETANCE OF THE NOTICE MAY BE
EITHER EXPRESS OR IMPLIED FROM THE CONDUCT OF THE INSURER. A MERE SILENCE BY
THE INSURER SHALL NOT BE ACCEPTED. WHEN SUCH A NOTICE IS ACCEPTED, IT IS
IRREVOCABLE.
INSTITUTE CLAUSE
INSTITUTE OF LONDON UNDERWRITERS IS AN ASSOCIATION OF INSURERS WHO CAME TOGETHER IN
1884 TO RECOMMEND WORDING AND CLAUSES TO BE INSERTED IN VARIOUS INSURANCE
POLICIES. THESE CLAUSES HAVE BEEN WELL RECOGNISED BY THE SHIPOWNERS AND
INSURERS AS HAVING BEEN STOOD THE TEST OF TIME AND ALSO THAT THE WORDINGS OF
THE CLAUSES SERVES TO SETTLE CLAIMS SATISFACTORILY, IN FAIRNESS TO BOTH
PARTIES. THESE CLAUSES CAN BE ADOPTED BY ANY INSURANCE COMPANY TO BE INSERTED
IN THE POLICIES. THE CLAUSES ARE;
1. ITC HULLS (INSTITUTE TIME CLAUSES, MEANT FOR H & M TIME
POLICIES) – 26 CLAUSES,
2. IVC HULLS (INSTITUTE VOYAGE CLAUSES, MEANT FOR H & M VOYAGE
POLICIES) – 23 CLAUSES,
3. ICC (INSTITUTE CARGO CLAUSES, FORM A,B AND C)
SISTERSHIP CLAUSE
IF TWO VESSELS BELONGING TO
THE SAME OWNER COLLIDE, LEGALITIES MAY ARISE AS TO THE SETTLEMENT OF CLAIMS,
COMPENSATIONS ETC, CONSIDERING THAT THE OWNER OF BOTH THE VESSELS IS THE SAME.
UNDER THIS CLAUSE SUCH A CASE WILL BE TREATED AS IF BOTH THE VESSELS BELONG TO
DIFFERENT OWNERS.
3/4TH LIABILITY CLAUSE
THIS CLAUSE IS A RUNNING DOWN
CLAUSE, APPLIES ONLY IF TWO VESSELS WERE UNDER PROPULSION. IN THIS CLAUSE THE
INSURER INDEMNIFIES THE ASSURED FOR 3/4TH OF THE SUMS PAID BY THE
ASSURED AS HIS LEGAL LIABILITY TO ANOTHER VESSEL AS A RESULT OF A COLLISION.
DAMAGES GIVEN BELOW ARE AGREED TO BE INDEMNIFIED;
1. LOSS OR DAMAGE TO ANOTHER VESSEL,
2. LOSS OR DAMAGE TO PROPERTY OF ANOTHER VESSEL,
3. DELAY TO SUCH OTHER VESSEL OR PROPERTY THEREON,
4. GENERAL AVERAGE, SALVAGE, SALVAGE UNDER CONTRACT OF
ANY SUCH VESSEL.
THE ABOVE AMOUNT IS
INDEMNIFIED TO THE EXTENT OF LIABILITY OF THE ASSURED VESSEL.
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