There are two distinct branches of marine insurance:
1. Hull – i.e. Insurance of ships
2. Cargo – i.e. Insurance of goods in transit.
I Marine Hull Insurance:
This pertains to insurance of ocean going steamers and other vessels. “Hull” refers to the body or frame of the ship. Hull insurance provides the cover for the hull and machinery as well as in respect of materials and outfit and stores and provisions for the officers and crew. In addition cover for liabilities is included. Hull policy consists of basic policy attached to INSTITUTE CLAUSES which are drafted by the Institute of London Underwriters, an association representing the marine insurance companies and Lloyd’s underwriters operating in London.
I (1) The Institute Time Clause (Hull) Cover embraces:
• The coverage of maritime perils namely fire, collision, stranding etc.
• The coverage of additional perils such as latent defect in machinery, accidents in loading / discharging cargo.
• The Running Down Clause embodied in the hull insurance provide cover for damage caused to another ship in collision as a consequence of negligent navigation.
• May also cover vessels in course of construction, which are taken by the ship builders. Coverage starts from keel laying and until delivery of the ship to the owners.
II Marine Cargo Insurance:
This being cargo insurance, it provides cover for various transit perils in respect of goods and or merchandise in transit from one place to another by sea, air, road or registered post. Transit or Marine risks or perils are covered under Marine Insurance. Marine insurance plays a pivotal role in Import, Export and internal trade. Trade involves movement of goods from one place to another place. Goods while in transit are liable to be lost or damaged through one or other of various perils from the time it leaves the warehouse of the supplier till it is received at the final warehouse of the consignee. Goods while in transit are generally exposed to any one of the following perils leading to total loss or damage. The loss or damage suffered due to these perils is to be transferred to the Insurer in lieu of the premium, as these are included in the Marine cover.
II (1) SHIPMENTS BY SEA
The imports or exports as well as coastal shipments are governed by three separate clauses. Viz. Institute Cargo Clauses (ICC) namely, ICC -A, ICC –B and ICC –C attached to the policy. The risks / perils covered under the various clauses are:
• ICC - C: Fire, Explosion, Straining, Sinking, Derailment of land conveyance, Collision, Discharge of cargo at Port of Distress, Jettison, Grounding or capsizing, General Average, Sacrifice, General and Salvage Charges.
• ICC – B: All risks covered under ICC –C plus Earthquake, Lightning, Washing, Overboard Damage due to sea, Lake, River Water, Total loss of package while loading or unloading.
• ICC – A: All risks / perils or damage plus Malicious Damage & Piracy except those which are separately excluded.
II (2) AIR TRANSIT
Airfreight consignments are covered under three sets of clauses. The risks / perils covered are ALL risks or damages to the Cargo insured subject to specific exclusions.
• Institute Cargo Clauses (Air) excluding sending by post.
• Institute War Clauses (Air Cargo) excluding sending by post.
• Institute Strike Clauses. (Air Cargo)
II (3) REGISTERED POSTAL through AIR
• These are insured as per Institute Cargo Clauses A (ICC – A). Hence the risks covered shall remain same as applicable under ICC – A.
III. INLAND TRANSIT BY RAIL / ROAD:
There are two types of covers namely Rail / Road Clause B and Clause C are normally given by the Insurers for the goods transportation by Rail /Road.
III (1) CLAUSE B COVER include physical loss or damage suffered due
to such risks / perils as
• Shortage due to tearing and bursting of bags / cans, over turning, derailment.
• Short delivery / Non-delivery, Leakage/Breakage
• Theft/Pilferage, Contamination.
• Denting/Bending/Chipping, Rusting.
• Rain water damage / Fresh water damage.
• Damage by extraneous substances.
• Breakage of bridges/Culverts.
• Damage due to jerks and jolts during transit , Collision with or by carrying vehicle.
• Damage while handling at Port of Entry or at Exit Port.
• Damage while handling during loading / unloading at warehouses / intermediate stores / trans-shipment and at site etc.
• Loss while unloading process at site due to failure of crane, slings or negligence of labour etc.
III (2) CLAUSE C COVER: This cover includes physical loss or damage suffered due to risks / perils such as
• Loss or damage due to Fire risk.
• Loss or damage due to Lightning.
IV TRANSIT RISKS/PERILS TO BE RETAINED BY INSURED
Following are some of the perils which are to be retained by the Insured as these risks / perils are excluded in the marine cover. Additional covers against certain risks / perils such as Strikes, Riots, civil commotion, Terrorism or person acting from political motive etc may be covered on payment of extra premium. War risk on Rail / Road transport is not granted.
IV (1) IMPORTS / EXPORTS AND COASTAL SHIPMENTS BY SEA , AIR & CONSIGNMENTS ARE SENT BY REGISTERED POST
These are common to all the three separate clauses namely ICC –C, ICC-B and ICC-A except that the risks of Piracy and Malicious Damage are covered in ICC – A, but not in ICC – B and ICC – C.
• Loss damage or expense attributable to willful misconduct of the Insured.
• Ordinary leakage, Ordinary loss in weight or volume, Ordinary wear and tear of the subject matter insured, Loss damage or expense caused by inherent vice or nature of the subject matter insured
• Loss damage or expense caused by insufficient or unsuitable packing of the subject matter insured.
• Loss damage or expense proximately caused by delay, even though the delay caused by a risk insured against.
• Loss damage or expense arising from insolvency / financial defaults of the owners Managers / Charters / Operators of the vessel.
• Loss damage or expenses arising from the use of any weapon of war employing atomic or nuclear fission / fusion / other like reaction or radioactive force or matter.
• Loss damage or expenses arising from un-seaworthiness/ unfitness of vessel or craft / conveyance container or lift-van for the safe carriage of the subject matter insured, where the Insured or their Agents are privy to such un-seaworthiness.
• Loss damage or expense caused by war, civil war revolution, rebellion, insurrection or civil strike arising there-from or any hostile act by or against belligerent power.
• Loss damage or expense caused by capture, seizure, arrest, restraint or detainment (except piracy) and the consequences thereof or any attempt of threat.
• Loss damage or expense caused by derelict mines, torpedoes, bombs or other derelict weapons of war.
• Loss damage or expense caused by strikers, locked-out workmen, or persons taking part in labour disturbances, riots or civil commotion.
• Loss damage or expense caused by any terrorist or any person acting a political motive.
• Loss or damage due to Piracy (Included in ICC – A only.)
• Loss or expenses caused due to Malicious Damage. (Included in ICC – A only.)
IV (2) INLAND TRANSIT BY RAIL / ROAD: The following are the additional risks / perils to be retained by the Insured are common to the Rail / Road Clauses B and C (over & above the said earlier in IV (1).
• Loss damage or expense caused by war, civil war revolution, rebellion, insurrection or civil strike arising there-from or any hostile act by or against belligerent power.
• Loss damage or expense caused by derelict mines, torpedoes, bombs or other derelict weapons of war.
V. PRINCIPLE OF INDEMNITY IN MARINE INSURANCE
Both Marine Cargo & Marine Hull policies are issued as ‘Valued’ Policies. A valued policy is one which specifies the agreed value of the subject matter insured value. This value is the insured value. Goods which are covered under marine policies will be in the course of transit from one county to another the price of which are subject to fluctuations from time to time. The value will be the maximum at the time when the cargo reaches the destination. It is difficult to arrive at the value when the goods are in transit. Therefore agreed value policies are issued on cargoes. The agreed value includes purchase cost, freight, internal & inland transport, expenses on loading & unloading, cost of insurance, port trust charges, local agency commission, Taxes & duties. Marine hull insurance policies are also issued as valued policies. The market value of ship also fluctuates widely. The market value of a ship may not reflect its true value to the owner. A vessel may be3 old but to a ship owner it is as valuable as a new vessel from the point of freight earning capacity. The sum insured is fixed be agreement between the insurer and the insured which is arrived as a fair value.
VI METHOD OF INDEMNIFICATION:
There are four methods of providing the indemnity to the ` insured viz.
• Settlement by Cash payment
• By Repairing of the damaged goods ( based on the detailed submitted by the insured )
• Replacement of the property. This is rarely met with.
• Reinstatement.. The responsibility rests with the insurers and as such and because of obvious reasons this is not implemented.
The company may at its option reinstate or replace the property damaged or destroyed or part thereof instead of paying the amount of the loss or damage.
Reinstatement of the sum insured after a loss is paid does not arise. The sum insured under a hull policy is the maximum limit of the liability not for the period of insurance but for any one casualty. There may number of repair claims under a hull policy and when these are paid the sum insured does not get reduced and the question of restoration of the sum insured does not arise. Unless the policy otherwise provides the insurer is liable for successive losses even though the total amount of such losses may exceed the Sum Insured.
VII. PRINCIPLE OF SUBROGATION AND CONTIBUTIION:
In the marine policy the insurer must have paid the claim before they are entitled to rights of subrogation. Whether the loss paid is total or partial insurers subrogated to all the rights and remedies of the insured. Such rights and remedies include right of recovery from third parties. In the event of loss of goods at the destination, the sum insured which is the agreed value will be paid. In case the goods are damaged during transit, the amount payable is arrived as a proportion of the sum insured according to the % of depreciation, suffered by the goods as certified by surveyors.
The understanding the difference between abandonment and subrogation is necessary. Where the ship is so damaged that, if the insured considers it not worth while to repair it because the cost of repairs would exceed the value of the ship after repair, he abandons the ship to the insurers and claims the sum insured on the basis of ‘Constructive Loss’. If the insurers accept the abandoned ship, they acquire proprietary rights in the ship. If it is possible to sell the damaged ship, with or without repairs, for more than the insured value the insurers can make and retain the profit. But under subrogation they can retain only up to the amount they have indemnified the insured.
It is the duty of the assured and their servants / agents to take such measure as may be reasonable for the purpose of averting o minimizing a loss and ensure that all rights against carriers, bailees or other third parties are propoe5ly preserved and exercised.
Contribution may be defined as the right of an insurer who has paid a loss under a policy to recover a proportionate amount from other insurers who are liable for the loss. An insured may effect two or more insurances n the same subject-matter of insurance. If in the event of a loss he recovers under each and every policy the amount recovered would be more than his actual loss. This would result in a profit to him and thereby the fundamental principle of indemnity will be infringed. The principle of contribution therefore supports the principe of indemnity. ,
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