MARINE INSURANCE

 TYPES OF MARINE INSURANCE

There are four types of Marine Insurance.

A. HULL INSURANCE
Covers physical damage to the ship or vessel. In addition it contains a
collision liability clause that covers the owner’s 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
cane be written to cover a single shipment. If regular shipments are made,
an open cargo policy can be used that insures the goods automatically when
a shipment is made. The open cargo policy has no expiration date and
remains in force till it is cancelled.

C. PROTECTION AND INDEMNITY(P & I) INSURANCE

Is usually written as a separate contract that provides comprehensive
liability insurance for property damage or bodily injury to third parties. P & I
insurance protects the ship owner for damage caused by ship to piers, docks
and harbour installations, damage to ship’s cargo, illness or injury to the
passenger or crew and fines and penalties.

D. FREIGHT INSURANCE
Indemnifies the ship owner from loss of earnings if the goods are damaged
or lost and are not delivered.

 INSURABLE PROPERTY
 Insurable property means any ships, goods or other movables exposed to
maritime perils.

 Insurable property must be stated in the policy with reasonable certainty.

 MARINE ADVENTURE

There is a marine adventure, when

 Any insurable property is exposed to marine perils.

 The earnings of freight, passage money, commission. Profit or other

pecuniary benefits or security for any advances, loans or disbursements is
endangered by the exposure of insurable property to maritime perils.

 The owner of or other person interested in or responsible for insurable

property by reason of maritime perils may insure any liability to the third
party.

 VOYAGE
 Voyage is the journey that the vessel undertakes.

 The ship could carry on the voyage in the specified route which is mentioned
the policy.

 Change of voyage is permitted only a few specified circumstances.

 RISK IN MARINE INSURANCE
 MARITIME PERILS/ PERILS OF THE SEA
 Maritime Perils are also called as ‘Perils of the Sea’.

 It means the perils consequents on or incidental to the 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 fortuitous accidents or casualties
of the seas and does not include the ordinary action of winds and waves.

 ‘Wilhelm GustLoff’ SINKING, the biggest Maritime disaster in the history.

About 9,400 persons were killed in this disaster in 1945.
 TYPES OF RISKS/ PERILS COVERED BY MARINE INSURANCE POLICY
a. Sinking, stranding and grounding of ship/ vessel/ boat or craft.

b. Collision or contact of vessels, ships, boats with internal and external objects.

c. Discharge of cargo at a port of distress.

d. Average general sacrifice.

e. Volcanic eruption or lightning or fire or explosion.

f. Loss of goods or packages containing good or articles, dropping of packets or

package during loading or unloading while on board or off the broad.

g. Loss caused by delay, wrongful delivery, malicious damage.

h. War, sea pirates, other perils like cyclones, typhoons, spirals.

i. Strikes, riots, lockout, civil commotions and terrorism.

j. Theft, pilferage, breakage and leakage.

k. Loss caused by heating due to the closure of ventilators to prevent the entry
of sea waters.

l. Loss caused by rat’s example, a hole made in the bottom of the ship, through
which sea water enters the ship and damages the cargo.
 Marine insurance apart from indemnifying the assured against the maritime
perils also includes liability of the third party incurred by the owner of the
ship or other person interested in the property assured on happening of the
maritime event.

 Thus marine insurance includes:

a. Insurance of vessels (Hull) of any description. (Hull insurance is concerned
with body, the machinery and technical knowhow, stores tools etc. It also
includes ships, mechanized boats etc. and consignment transported by rail
and road).

b. Insurance of cargo in vessels (Cargo insurance includes goods in transit from

the place of insured to the sea and from the sea to the exporter.

c. Freight paid or received by the assured.

d. Insurance of third party liability.

e. Insurance of transactions which are incidental to the marine adventure or

marine transport or transport of cargo from go down to the vessel.

f. Insurance also includes all perils and risks incidental to money, documents,
securities and other valuable goods in the ship.

g. Other incidental activities concerned with building, launching of ship or

transport of stores concerned.
 MARINE POLICY
 MARINE POLICY
 The document containing the contract of insurance is known as the ‘Marine
Policy’ or ‘Sea Policy’.

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

 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 payable.
6. 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.
 ESSENTIAL ELEMENTS OR PRINCIPAL OF MARINE INSURANCE
1. Fundamentals of general contract.
2. Insurable interest.
3. Utmost Good Faith.
4. Indemnity.
5. Subrogation.
6. Contribution.
7. Warranties.
8. Cause proximal.
9. Assignment and Nomination of a policy.

 FEATURE OF GENERAL CONTRACT

A marine policy must fulfil all the essentials of a valid contract namely,
1. Offer and Acceptance.
2. Consideration.
3. Capacity.
4. Legal Purpose.
 INSURABLE INTEREST
 INSURABLE INTEREST
According to Marine Insurance Act 1963, ‘every person has an insurable
interest who is interested in a marine adventure’. The following persons have
insurable interest in Marine Insurance.
1. Owner of the Ship.
2. Owner of the Cargo.
3. Creditor who has advanced money on a ship or cargo to the extent of his
interest in such ship or cargo.
4. Mortgager.
5. Mortgages.
6. Master and crew- for wages.
7. Bottom Mary bond hold
8. Persons who pays advance freight is recoverable on loss.
9. Shipper and their Agents.
10. Persons contingent interest such as the buyer, though the goods may be at
seller’s risk and though he may have right to reject the goods, but has paid.
11. Trustee.
12. Bailee.
13. Insurer-he can reinsure.
14. Assignee of bill of lading.

 UTMOST GOOD FAITH

 The insured must disclose all those relevant facts to the insurer which are
likely to affect his willingness to undertake the risk.

 If either party does not disclose full facts, the other party can avoid the
contract at any time.
 CONTRACT OF INDEMNITY
 Under the contract, the underwriter agrees to indemnity the insured against
losses by sea risk to the extent of the amount insured.
 The insured can recover only the actual loss suffered and nothing more.

 PRINCIPAL OF SUBROGATION
According to this principle after meeting the loss agreed, the insurer steps
into the shoes of the insured and becomes entitled to all rights and remedies
available to the insured against the insured properly or third persons.

 PRINCIPAL OF CONTRIBUTION / DOUBLE INSURANCE

 The doctrine of contribution applies to marine insurance.
 If the subject has been insured with more than one insurer, each insurer has
to pay only the rateable proportion of loss subject to the maximum loss.
 The principle supports the concept that the insured cannot recover amounts
on the same property for the same peril from more than one insurer.

Thus, according to Section 34, the pre-requisites of double

insurance/contribution are:
a. There must be two or more policies.
b. The policies must relate to the same adventure and interest or any part
thereof.
c. The sums insured must exceed the indemnity allowed by this Act.
 WARRANTIES AND CLAUSES
 WARRANTIES
 According to Marine Insurance Act, a warranty means a stipulation or terms,
the breach of which entitles the insurers to avoid the policy altogether and
this is so even though the breach arises through circumstances beyond the
control of the warrantor.
 Warranties can be expressed (written) or implied.

 Express Warranties
The expressly stated written warranties and may be like
1. The ship is safe on a particular day.
2. The ship and goods are neutral and continue to be so.
3. The ship will proceed to its destination without any deviation.
4. The ship will sail on or before a certain dates.

 Implied Warranties
There are certain warranties which are implied in every contract of marine
insurance unless excluded expressly. These are:
1. Warranty of sea worthiness.
2. Warranty of non-deviation from path.
3. Warranty as to the legality of the voyage.
4. Proper documentation related to the ship.

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, the ship must be sea worthy at the
commencement of each stage.
 Sea worthiness also includes cargo worthiness example must be fit to carry
the cargo
 WARRANTY OF NON DEVIATION

 In the case of voyage policy, where, a voyage is contemplated between two

given ports, there is an implied warranty of non-deviation on the part of the
insured except in cases where 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.

 What is a Deviation?
1. When the course of the voyage specially designated in the policy, is departed
from or
2. Where the course of the voyage was not specially designated by the policy,
but the usual and customary course is departed from or
3. Where several ports of discharge were specified by the policy, but the ship
did not process to them in the order designated by the policy or
4. Where the policy did not specify the ports of discharge but the ship (which
should have) did not proceed to them in geographical order.

DEVIATIONS THAT CAN BE EXCUSED

Destination or delay is excused (justified) under the following
circumstances when.
1. I t 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 necessary for the safety of the ship and subject matter insured (or)
7. It is necessary to avoid being captured or destroyed by the enemy of the
Government.
 LEGALITY OF VOYAGE
 This is an implied warranty on the part of the insured that the adventure
insures is a lawful one, and that, so far as the assured can control the matter,
the adventure shall be carried out in a lawful manner.
 This warranty implies that the ship will not be used for undertaking any illegal
voyage example smuggling, trading with enemy etc.

PROPER DOCUMENTATION OF THE SHIP

Whenever there is an express warranty that the ship shall be neutral
(especially in the case of war time adventure) there is an implied warranty that
the ship carries all the papers necessary to prove the neutrality.

6.2 PROXIMATE CLAUSE

 According to the Marine Insurance Act, the insurer is liable for any loss
proximately caused by a peril insured against.
 Insurer is not liable for any loss which is not proximately caused by a peril
insured against.

 ASSIGNMENT OF POLICY
 A marine insurance policy is assignable unless it contains terms expressly
prohibiting assignment.
 It may be assigned either before or after loss.
 A marine policy may be assigned by endorsement thereon or in any other
customary manner.

 RE-INSURANCE
 According to Marine Insurance Act, the insurer under a contract of marine
insurance has an insurable interest in his risk and may reinsure the subject
matter fully or partly as per his requirement. This is called as Reinsurance or
insurance of insurance.
 In reinsurance, unless the policy provides otherwise, the original assured has
no right or interest in respect of such reinsurance.
 CALCULATION OF RATES OF PREMIUM
Calculation of rates of premium depends on:
1. Description of goods: Full description of the goods to be insured must be
given:
 The nature of commodity is very important for rating and underwriting.

 Different types of commodities are subject to different types of risk.

Example: Commodities like cement, sugar, etc. are easily damaged by sea
water; cotton or some chemicals may easily catch fire; liquids can be leaked
and crockery and glassware are susceptible to breakage.

2. Methods and Manner of Packaging: The possibility of loss or damage

depends very much on the type of packaging.
Generally goods are required to be packed in commodity friendly bales, bags,
bundles, crates, drums, barrels, loose packing, carton, etc.

3. Voyage and Mode if Transit: The name of the place from where, transit will
commence and the name of the 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.

4. Cover Required: The risk against which cover requires should be fully
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 charge of a

higher rate of premium.

 Shipments made by first class vessels attract normal rates of premiums and
the vessels are approved by authorities like the Indian Registrar of Shipping.

 If the vessel used for the voyage is tramp vessel example a vessel which does
not follow a fixed schedule and carries cargoes whenever available. The
vessels have to be approved by GIC and if not approved, then will attract a
very high premium.

 While there is no tariff rate on premium and insurers can charge any rate
depending upon the nature of goods, the distance, the mode of trans-
shipment, type of package, the voyage route and the past claims experience.
Extended covers like SRCC (Strikes, Riots and Civil Commotion) and war risks
are governed by special regulations and the premium collected is credited to
the Central Government.

 Shipping vessels are listed according to their age and draught weight. Full
details of every shipping vessel built anywhere in the world is available in
‘LIOYDS REGISTER’ (issued by LIOYDS OF LONDON). Minimum standards are
fixed. Any vessel falling short of these standards will attract loading premium.

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

 CLAUSES INCORPORATED IN A MARINE POLICY
The following are the important clauses:
a. Assignment clause:
This clause makes it clear that the marine policy is assignable unless it
contains terms expressly prohibiting assignment.

 Marine policy may be assigned either before or after the loss.

 Assignment may be through endorsement or in other customary manner.

 Where the assured has parted with or lost his interest in the 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.

b. 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 said ship’ and for the insurance to continue until
the goods are discharged and safely landed at the port of discharge.

 Warehouse to warehouse clause helps to provide protection for the entire

period of transit. The period to cover extends from the goods leave the
exporter’s warehouse until they are delivered to the importer warehouse at
the named destination or to the any other warehouse whether prior to or at
the named destination, which the assured elect to use either for storage or
for allocation or distribution or on expiry of 60 days after discharge from the
overseas vessel at the final port of discharge whichever occurs first.
c. Change of Voyage Clause (or) Deviation Clause:

 According to Marine Insurance Act, where there is a change in voyage, unless

the policy otherwise provides, the insurer is discharged from liability as from
the time of the change.

 Through this clause, the policy does provide otherwise (that means permits
deviation) and the event is held covered.

d. Touch and Stay Clause:

 The liberty to ‘touch and stay’ at any port or place whatsoever does not
authorize the ship to depart from the course of their voyage from the port of
departure to the port of destination.

e. Running Down Clause:

 This clause provides a supplementary contract whereby the assured is given

some protection against third party damages.

 It provides that if the insured vessel collide with another vessel, the
underwriter agree to pay three quarters of the amount of damage to which
the assured becomes liable.

f. Continuation Clause:

 This clause refers that the vessel shall continue to be covered even after the
completion of voyage under the policy at a pro rate premium to their port of
destination.
g. Inch mares Clause or Negligence Clause:

 This clause extend the underwriter liability to cover risk of a kind, which are
not included within the ordinary meaning of maritime perils.

 It provides for the insurance to cover loss or damage to hull or machinery

directly caused by:
1. Bursting of boilers.
2. Negligence of master, officers.
3. Negligence of repairs provided such repairs are not assured hereunder.
4. Contact with aircraft.
5. Accident in loading or shifting cargo or fuel explosion on ship board and or
elsewhere.
6. Contact with any land conveyance, dock or harbour equipment’s or
installations.
7. Earthquake, volcanic eruption or lightning.

h. Sue and Labour Clause:

 This clause provides that liability shall not be exceeding 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 and labour charges even when there was under insurance.

i. Memorandum Clause:

 This clause is meant to provide a minimum limit to the underwriter’s liability

regarding claims for particular average by exempting him from such claims.
j. Reinsurance Clause:

 There are various reasons why an underwriter may deem it prudent to

reinsure part or all of a risk for which he has accepted liability.

 Example, He may find that his commitment on any one vessel or in any
locality have become too burdensome.

 Declarations under open covers or floating policies and acceptances by his

agents in other markets give him an accumulated liability considerably in
excess of his usual retention.

 He may have accepted a line on ‘all-risks’ terms and then desire to reinsure
in respect to total loss only.

k. Perils of the Sea Clause:

 The term ‘perils of the sea’ refers to fortuitous accidents and casualties of
the sea. It does not include ordinary action of the winds and waves.

l. All Risk Clause:

 This clause provides that the insurance is against all risks of loss or damages
to the subject matter insures and the claims are payable irrespective of
percentage of loss.

m. Foreign General Average Clause:

 This clause means that the arrangements in case of General Average Claim
which may arise under the policy, the average settlement made in foreign
country will be adopted as the basis for settlement.
n. Warrior Clause:

 This is supplementary to ‘Sue and Labour’ clause.

 In this clause, either partly to the contract may take such steps, or incur such
expenses, as are contemplated under the sue and labour clause, to minimize
a loss without prejudice in the light of the assured on the one hand and the
underwriter on the other.

o. General Average Clause:

 The general average clause refer to the losses that must be partly borne by
someone other than the owner of the goods that were damaged or lost.

 General average losses may be total or partial, whereas particular average

losses, by definition are always partial.

 Example, suppose that a certain cargo of lumber wrapped in a large bundle

is stored on deck. To lighten the ship during heavy storm that is threatening
the safety of the voyage, the captain orders the lumber worth Rupees
50000 to be jettisoned. The action of the captain is successful in saving the
ship and all other interests. Such a sacrifice is termed as general average,
and the interests that were saved would be required to share a pro-data
part of the loss. Thus is the ship and freight interests were valued at Rupees
1000000 and other cargo interests at Rupees 950000, the ship owner would
pay one half (100/200) of the value of the lumber. The other cargo interests
would share 95/200 of the loss and the owner of the lumber would bear
5/200 of the loss.

 All marine policies coverage for general average claims that may be made
against the insured.
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 overly

dishonest actions by the ship’s master or crew (barratry) are considered
burglary and robbery protection on land and are not losses from war.
Typically pilferage is not covered.

q. Free of Particular Average Clause (FPA):

 This clause restricts the liability of the insurer/ 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 no partial loss will be
paid to single cargo interest the loss is caused by certain perils such as
stranding, striking, burning or collision.
 MARINE INSURANCE POLICY AND LOSSES
 TYPES OF MARINE INSURANCE POLICY
A. BOTTOMRY BOND:

 It is a bond representing loan raised by the master of the ship so as to meet

certain urgent expenses like repairing a ship or for security of the ship or
cargo.

 It is repayable after a certain agreed number of days after the arrival of the
ship as specified in the bond.

 If the vessel is lost before the arrival at destination, the lender losses his
money.

B. RESPONDENTIA BOND:

 Like Bottomry Bond, Respondentia Bond also represent a monetary loan

borrowed by the master of a ship to meet certain urgent expenses.

 The loan is raised on the security of CARGO ONLY.

 The loan is to be repaid within a certain period after the arrival of the cargo
at the destination as specified in the Respondentia Bond.

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

 Marine policies are known by different names according to their manner of

execution and the nature of risks covered.
 Following are the various kinds of marine insurance policies as contained in
the Marine Insurance Act, 1963.

1. VOYAGE POLICY:
As the name suggest this policy covers a voyage.

 This is a policy in which the limits of the risk are determined by place of
particular voyage example Chennai to Singapore, Chennai to London.

 Such policies are always used for goods insurance, sometimes for freight
insurance but only rarely nowadays for hull insurance.

2. TIME POLICY:

 This policy is designed to give cover for some specified period of time say for
example noon of 1st January 2009 to noon of 1st January 2012.

 Time policies are usual in case of hull insurance.

3. VOYAGE AND TIME POLICY OR MIXED POLICY:

It is a combination of voyage and time policy.

 It is a policy which covers the risk during a particular voyage for a specified
period. Example A ship may be insured for voyage between Chennai to
London for a period of one year.

4. VALUED POLICY:
This policy specifies agreed value of the subject matter insured, which is
not necessarily the actual value. This agreed value is also known as insured
value.

 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 at the time of effecting insurance.

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

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

6. FLOATING POLICY:
A floating policy describes the insurance in general terms, leaving the
name of the ship or ships to be defined by subsequent declarations.
 The declaration may be made by endorsement on the policy or in another
customary manner.

 Declaration must be made in the order of shipment unless the policy provides
otherwise.

 I t 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 cover terminates when the policy is fully
declared.
7. WAGERING POLICY/ PPI POLICY:
This policy is issued without there being any insurable interest or policy
bearing evidence that the insured 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 is a Wagering or Honour Policy.

 Under Section 4 of the Marine Insurance Act, such policies are void in Law
but such policies continue to be common.

8. CONSTRUCTION OR BUILDER RISK POLICY:

This is designed to cover risks incidental to the building of a vessel, usually
giving cover from the time of laying the keel until the completion of trials and
handing over to the owners.

 In the case of very large vessel, the period may extend over several years.

9. BLANKET/ OPEN COVER POLICY:

In order to arrange their marine insurance in advance and to be assured
to be covered at all times, and also to avoid the effects of possible rapidly
fluctuating rates, it is practice of regular importers and exporters to avail
‘Blanket Insurance’.

 An open cover policy is an agreement between the assured and his

underwriter under which the former agrees to declare and the latter to
accept, all shipments coming within the scope of the open general cover
during some stipulated period of time.

10. PORT RISK POLICY:

This is to cover a ship or cargo during a period in port against the risks
peculiar to a port as distinguished from voyage risks.
11. DUTY POLICY:
In case of CIF contracts, the exporter would have arranged for insurance
only up to CIF value. Customs duty payable if any is the responsibility of the
importer and they can separately obtain custom duty policy on ‘standalone
bases’.

12. INCREASED VALUE POLICY:

If goods imported are damaged in transit and such goods can be procured
locally at prices higher than the CIF + Customs Duty, the increase value policy
covers such difference in values.

13. MARINE DELAYS:

Any loss or damage to the equipment during transit which leads to the
delay in completion of the project, commencement of production and
thereby loss in profit is covered under this policy and is also known as
‘Consequential loss due to marine delays’ or simply ‘Delay Start Up’.

14. MARINE CUM ERECTION POLICY:

In standard marine cargo policy, the cover ceases after the goods are
delivered at the site of erection. If any damage attributable to transit risk was
found at the time of erection, then marine policy and erection policy bear
50% each of the cost of damage.
 MARINE LOSSES
According to Marine Insurance Act, unless the policy provides otherwise,

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

 The insurer is not liable for any loss attributable to the wilful misconduct of
the assured but unless the policy otherwise provides, he is liable for any loss
proximately caused by a peril insured against even though the loss would not
have happened but for the misconduct or negligence of the Master or Crew
of the Ship.

 Unless the policy otherwise provides, the insurer is not liable for ordinary
wear and tear, ordinary leakage and breakage, inherent vice or nature of
subject matter insured or for any loss proximately caused by rat or vermin or
any injury to machinery not caused by maritime perils.
 TYPES OF MARINE LOSSES

MARINE
LOSSES

Total Loss Partial Loss

Actual Total Constructive Particular General

Loss Total Loss Average Loss Average Loss

A. TOTAL LOSS:
A ship having ceased to exist after a casualty, either due to being
irrecoverable (actual total loss) or due to being subsequently broken up
(constructive total loss) (LMIS, 1995). The constructive total loss occurs when
the cost of repair exceeds the insured value of the ship.

 ACTUAL TOTAL LOSS:

It is said that actual total loss has been arisen.
a. When the subject matter insured is destroyed or is so damaged that it ceases
to be a thing or a kind insured.

b. When the assured is irretrievably deprived of the subject matter.

c. When the ship concerned in the adventure is missing and after the lapse of a
reasonable time period, still no news of it is received.

d. In case of Actual Total Loss, the insurer has to pay either the insured amount
or the actual loss whichever is less but the cause of the loss must be one of
the perils insured against.
 CONSTRUCTIVE TOTAL LOSS:
Constructive total loss is said to have occurred.

a. When the assured is deprived of the possession of ship or goods by a peril

insured against and it is unlikely that he can recover the ship or goods as the
case may be or the cost of recovering the ship or goods as the case may be
or the cost of recovering the ship or goods, as the case may be, would exceed
their value when recovered.

b. In the case of damage of goods, where cost of repairing the damage and
forwarding the goods to their destination would exceed their value.

c. In case of damage of the ship, where it is so damaged by the peril insured

against that the cost of repairing the damage would exceed the value of the
ship.

d. Effect of Constructive Total Loss: When there is a constructive total loss, the
assured may either treat the loss as a particular loss or abandon the subject
matter insured to the insurer and treat the loss as if it were an Actual Total
Loss.
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 to the insurer. As per the
Section 62, the rules regarding abandonment are:

 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 as a Partial loss.

 The insurer may waive the Notice of Abandonment.

 The notice of abandonment must be unconditional and can be done by

expression, writing or both
.
 Notice of Abandonment must be given written within a reasonable time after
the receipt of reliable information of the loss. However in case of doubt,
assured is entitled to a reasonable time to make inquiry and then to notify.

 When the notice of abandonment is properly given, the rights of the assured
are not prejudiced by the fact that the insurer refuses to accept the
abandonment.

 The acceptance of abandonment may be either express or implied from the

conduct of the insurer. The mere silence of the insurer after the notice does
not amount to an acceptance.

 Once the notice of abandonment is accepted, the abandonment is

irrevocable. The acceptance of the notice conclusively admits liability for the
loss.

EFFECT OF ABANDONMENT:

Whenever there is a valid abandonment, the insured is entitled to take

over the interest of the assured in whatever may remain in the subject
matter insured, and all proprietary rights incidental thereto.
B. PARTIAL LOSS:
When the subject matter is partially damaged, it will be a case of partial
loss. It is of two types:

 PARTICULAR AVERAGE LOSS:

When the subject matter is partially lost or damaged by a peril insured

against, it is called Particular Average Loss.

A Particular Average Loss must fulfil the following conditions.

a. Only a particular subject matter is lost or damaged.

b. The loss should be accidental.

c. It should be caused by peril insured against.

d. The damage should not suffered for a general benefits.

 GENERAL AVERAGE LOSS:

Examples of General Average Loss are:

a. Loss caused to cargo due to fire.

b. Money is paid to pirates for the purpose of saving the ship and cargo.

c. Expenses incurred due to outside help taken in making vessel reach its
destination.

d. The liability of General Average extends to the owner of the ship, the cargo
and the freight.
 YORK ANTWERP RULES

 As General Average causes many difficulties particularly when adjustments

has to be made in foreign courts, an international code has been compiled
known as York Antwerp Rules.

 The association for reform and codification of the law of nature meet at
Antwerp in 1877, where code of rules were adopted and known as ‘York
Antwerp Rules’. The rules were further revised in 1890 and 1924.

 These rules deal only with certain specific method relating to General
Average Loss and further provided that in case of matters not included in
the rules, which should be dealt with according to the law and practice of
the court of destination.
 CLAIM DOCUMENTS

 Claim under the marine policy have to be supported by certain documents,

which are very according to the type of circumstances of the claim and mode
of carriage.

 Typical documents required for Particular Average claim are:

a. Original Policy: Certificate of insurance.

b. Bill of Lading: Evidence that the goods were actually shipped.

c. Invoice: Evidence for term of sale.

d. Survey Report: Show the cause and extent of the loss.

e. Debit Note: Claim bill.

f. 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.
 CONCLUSION
