MARINE INSURANCE

1. The ships and cargo that are insured for commercial purpose. Insurance of Hull, furniture, cargo, etc. is insured under marine insurance. 2. Section 3 marine insurance is a contract of indemnity undertaken for the loss due marine adventure. 3. THE ADVENTURE OF THE SHIP when the ship is exposed to maritime/marine perils. (Section 2(d)). 4. FREIGHT the charge for carrying cargo from place to another. A. SECTION 14 in case of advance of goods 5. PERIL The losses that may occur during the adventure of the ship. A. FOUNDERING AT SEA the ship is missing for a reasonable period of time, and no contact or no whereabouts is found of the location of the ship. B. SHIPWRECK it is loss caused by the perils of the sea, when it happens by the ship striking against the rock or driven to the shore, by the violence of the wind. C. COLLISION the ship is destroyed by the collision but not caused by wind. D. STRANDING the ship gets out of the ordinary course of journey and stuck in shallow water. E. WAR RISK if there is war broken out in the course of the sea, and the vessel is suffered a loss. F. LOSS BY PIRATES G. BARRATRY H. JETTISON 6. JUSTICE BLACKBURN in the case of Lloyd v Fleming. a policy of marine insurance a contract of indemnity against all losses occurring to the subject matter of the policy from certain perils during the adventure. 7. EXCEPTIONS/ LOSSES A. WEAR
AND

TEAR natural decay and deterioration of the ship during the normal

course of the voyage. In case of Wadsworth Lighterage and Coaling Co. v. Sea Insurance Co., an old steam barge was insured under a policy for total and construct loss by fire, lightning, stranding, or sinking. The ship sank on its own in the port. The

sinking was due to her age and natural wear and tear. The insured was not liable to pay. B. SPRING A LEAK IN THE SHIP it is generally not included when it is caused in due course of wear and tear. But in case of accident a leak is developed then it is included. C. BREAKAGE OF GOODS if the good are broken due to normal course of the travel. D. INHERENT VICE if the goods has an inherent vice, there is natural perish of the goods, and an animal caused but to natural causes. In case of F Berk & Co. v. Style, the packing was faulty and in inadequate bags which leaked because they were insufficient to bear ordinarily contemplated handling and carriage. The loss was caused by the package. The loss was due to inherent vice of the good. E. LOSS BY RATS this is not covered by the insurance company. F. LOSS BY FIRE both ship and cargo are not covered if it is by fire. G. LOSS BY DELAY 8. TYPES OF MARINE INSURANCE A. HULL all the fixtures of the ship, the furniture of the ship and the structure of ship itself. B. CARGO/GOODS the goods are covered in the insurance. C. LIABILITY the owner of ship is liable to pay to third party due to the damaged caused by the first ship. D. FREIGHT the insurance company shall pay if the freight is not received from the cargo owner, due to loss of cargo. 9. TYPES OF POLICY A. VOYAGE POLICY the insurance policy for the entire course of journey from Port A to Port B/ designated ports. B. TIME POLICY the insurance policy covering for a particular period of time. It should not exceed 12 months. C. MIXED POLICY the insurance policy which covers both the entire course of a journey between designated ports for a specified time period. D. VALUED POLICY the valuation of the subject matter of insurance is done prior to the marine adventure, if there is any damage then value shall be paid off.

E. UNVALUED POLICY the valuation of the subject matter is taken up by the insured to decide the value of the policy to be undertaken, and the insured upon the happening of the event shall value the quantum of damage and indemnify the loss incurred. 10. VOYAGE A. Conditions - The ship should be in a workable condition; it should be in the possession of the ship. B. In Palmer v. Marshall it was held that if a vessel or a ship at her home port is insured at and from that port, the insurance attaches immediately and it is affected and continues to protect her even while she is making preparation for the described voyage. C. Note If in the policy, the place of departure is stated, but, the owner later changes the actual port of departure then the insurance company is not liable for any damage thereof. D. Note If in the policy, the place of arrival is stated, but, the owner later changes the actual port of arrival then the insurance company is not liable for any damage thereof. E. CHANGE
OF

VOYAGE (Section 47) when after the commencement of the risk, the

destination of the ship is changed from the contemplated destination this is change of voyage. F. If there is change of voyage without any lawful reasons then the insurer is discharged of this liability/obligation. G. When there is Deviation (Section 48) for the route of Voyage (when it is mentioned) without any lawful purpose then the insurer is discharged from its liability. The intention to deviate is immaterial; there must be a deviation in fact. H. When there is no route of Voyagse is stated in the policy then the usual route of voyage shall be considered in the course of conduct of business, then the insured is liable under the policy. I. DELAY
IN

DELIVERY the owner of ship is delaying in the delivery of the good.

(Section 50). Middle wood v. Blake, there were two routes to travel and the south route is safer, and the master had the discretion to choose, the ship ply without this consent, but the ship was capsized, and masters consent was not sought. Therefore the deviation was not considered, and the insurer is liable to pay.

11. INSURABLE INTEREST A. CHARACTERISTICS i. The subject matter should have a definite monetary value; ii. The insured should have legally recognised interest on the subject matter; iii. The insured should have B. BOTTOMRY It is a system of insurance in which a ship or vessel is used as security against a loan to finance a voyage. C. RESPONDENTIA It is a loan where the cargo of the ship is the security on similar terms to Bottomry. D. SECTION 7 every person has an insurable interest who is interested in the marine adventure (ship is exposed to marine perils) where he stands in any legal or equitable relation to the adventure or to any insurable property at risk therein, in consequence of which he may benefit by the safety or due arrival of insurable property or may be prejudiced by its loss, or by damage thereto or by the detention thereof, or may incur liability. E. WHO HAVE INSURABLE INTEREST? i. The cargo owner; ii. The ship owner; and iii. The person who has a right to lien over the ship/cargo (loan providers). F. Moran Galloway & Co. v. Uziellai ((1905)2 KB 555) The court held that the persons who have advanced money for the repair of the loan do not have the interest in the ship, all that the person loses by the loss of the ship by the ship owner is a mere expectation. On the other hand, if the person advances the money and this is secured by a lien on the ship then person has an insurable interest in the subject-matter of insurance. G. Circumstances where insurable interest is continued: i. The seller of a good who has not yet received the price of the good; or ii. The buyer of the goods who has not received the possession of the goods iii. In Piper v. Royal Exchange Assurance it was held that where the vessel is bought the property in her has not yet passed has no insurance in the vessel; or

iv. the person having partial interest in the property is insurable; or v. Defeasible Interest means an insurable interest that ceases during the transit of goods (Section 9); or vi. Contingent interest is an interest either as to the person, who will enjoy it in possession or as to the event it will arrive (Section 9); or vii. The insurer under a contract of marine insurance has a insurable interest in the risk, which he may reinsure (Section 11(1)); or viii. The lender of money on Bottomry or Respodentia has an insurable interest in respect of the loan (Section 12); or ix. The master and crew members of a ship insurable interest in their wages; or 12. DISCLOSURE UNDER MARINE INSURANCE It is based on the principle of utmost good faith; either party have the right to avoid the contract. The onus to disclose is greatly titled towards the insured because they have r most knowledge about the subject-matter and perils it is associated to. The insured should make under misrepresentation of facts, before the contract is concluded. A. SECTION 19, Marine Insurance Act marine insurance is based on principle of utmost good faith, that is to observed by either parties, if not the contract may be avoided. B. SECTION 20 - Material circumstance know the insured must be disclosed to the insured before the contract is concluded. The assured must disclose every material circumstance deemed to be known, or known to him in ordinary course of business. C. SECTION 20 (2) Every circumstance is material if it influence the judgment of a prudent insurer in fixing of the premium or determining whether he will take the risk. D. WHAT NEED NOT BE DISCLOSED (Section 20(3)) a. The circumstances that presumed to be known b. the circumstances that diminish the risk c. any circumstance which it is superfluous to disclose by reason of any express or implied warranty d. any information is waived by the insurer

North British Fishing Boat Insurance co. v. Starr, the insurer had taken a reinsurance from motor fishing vessel, and claimed for loss by fire. The co. refused to pay, the insurer failed to disclose that increased cases of fire losses amongst vessels insured by the insurer. The court held that there was no duty to disclose about the fact, as the reinsurer in the ordinary course business ought to know such particulars of losses occurring in motor fishing vessels. Hemmings v. Sceptre fire, it is an option of the insurer to repudiate or affirm the contract in cases of misrepresentation of the insured. It is upon the insurer to waive the breach of good faith committed by the insured. The insurer must take such choice within a reasonable time, after such breach comes to the knowledge. Otherwise it may be presumed that he has waived his right. Allurial Mine Machinery Co. v. Stones, a ship carrying 68 barrels of kerosene bearing 2000 gallons of the same from England to a mine in Nigeria. But only 200 gallons of kerosene reached its destination. Most of the barrels had fallen into the sea. The insurer company was discharged from the liability as the insured did not disclose a material fact that barrels wasbeing carried on the deck of the ship which eventually lead to the loss. Demetrindes & Co. v. Northern Assurance Co., the owner of the ship was a Greek lady, but she represented herself to be from England. Her ship sank in the coast of Portugal. It was not the policy of the co. to give insurance to a person other than of British nationality. Thus the insurer was not held liable to pay damages. Ionides v. Pender, the valuation of a particular subject matter was valued 2800, but the actual value was 970, the insured did not disclose the actual value, therefore, the contract was avoided. E. MASTER-SERVANT RELATION the agent must disclose every material circumstances which is known to himself; and every material circumstances the insured is bound to disclosed. (Section 21) this does not include the information / knowledge has come to be known to the insured too late to reasonable told to the agent. F. SECTION 22(1) every material representation made by the assured of his agent to the insurer before the contract is concluded, must be true. G. SECTION 22(2) it is immaterial if the insured and his agent discloses innocently. H. WHAT HAS TO BE DISCLOSED

a. Section 20(2) and Section 22(2) all facts that would influence a prudent insurer. Associated Carrier Oil Ltd. v. Union Insurance Society of Canton (1907)2 KB 184, it was held that a prudent insurance is one who has degree of knowledge and foresight that is reasonably possessed by the more experienced and intelligent insurer carrying on business in the market at that time. b. Section 20(4) Section 22(7) A material fact varies case-to-case basis I. The insurer company has to prove that disclosure of a fact is material that the disclosure would real and reasonable change in the perception of the risk. 13. WARRANTIES A. Defined in Section 35 warranty is what assured undertakes a particular thing shall or shall not be done, or that some condition shall be fulfil, or he affirms or negates the existence of a fact. If any warranty is breached, then the contract can be avoided and the liability can be repudiated by the insurer B. Breach can be excused in the following cases : 1) On account of change of circumstance, warranty ceases to exist. 2) When compliance with the warranty is rendered unlawful by a subsequent law. 3) The breach may be waived by the insurer, it may be expressed or implied, but must be intentional. C. Warranty may be express or implied. D. EXPRESSED WARRANTY may be in words which bring out the intention of the parties. This should be in the written form; they should be incorporated in documents of the policy by reference. An expressed warranty does not include implied warranty, unless it be inconsistent therewith. (Section37) E. IMPLIED WARRANTY warranties that are not expressly incorporated in the policy, but, these are implied by law or from the circumstances. These can be negated through a expressed provision/clause in the policy. This recognised only in marine insurance. F. When warranties can be implied from expressed warranty 1) WARRANTY OF NEUTRALITY assured tells that the ship shall not be a part of a war, as far as under the control over the matter. (Section 38)

2) WARRANTY OF GOOD SAFETY (Section 40 & 20(1), Marine Insurance Act) insured gives a warranty that the goods in a condition on a particular day, and insured needs to disclose the same at the time of entering into an insurance contract. G. There are two types of implied warranties 1) Seaworthiness of ship under section 41, in case of voyage policy there is implied warranty that a ship shall be in a seaworthy state for the particular adventure insured. 2) Legality (Section 43) the adventured insured is a lawful one, and should be carried out in a lawful manner. There should be no breach of national or foreign law. In Giesmar v. Sun Allian of London Insurance, the goods were imported illegally without declaration and paying excise duty; the insured was not liable pay as it is against public policy to derive profit from deliberate breach of law. This warranty cannot be waived. Doesnt apply on third party conduct barratry, theft, priracy, rovers. 3) No change in voyage 4) No delay in voyage 5) No deviation H. The warranties that not implied 1) Seaworthiness of goods (Section 42) the goods need be reasonably fit to carry goods till the destination port. 2) Nationality of Ship (Section 39) there is no implied warrant as to the nationality of ship or the nationality shall be changed when exposed to risk. But if the assured voluntarily changes the nationality of ship and exposes it to the risk of hostile capture, or the loss attributable to such change, the insured may avoid his liability. 14. LOSS A.
LOSS, DETRIMENT AND ACTUAL LOSS ITSELF

B. KINDS a) total loss actual and constructive; and b) partial loss general average, particular average, and salvage. C. ACTUAL TOTAL LOSS In Section 57 - Where the subject-matter insured is destroyed, or so damaged as to cease to be a thing of the kind insured, or where the assured is irretrievably deprived thereof, there is an actual total loss.

The insured is total/permanently deprived of the possession of the property insured then it is actual insured. (Foundering in the Sea) If a property cease to be the kind of property at original time of insurance. D. CONSTRUCTIVE LOSS (Section 60) this is circumstance is when there is actual total loss, and the insured is compelled to abandon the property it is constructive total loss. This is In particular, there is a constructive total loss i. Where the assured is deprived of the possession of his ship or goods by a peril insured against, and a) it is unlikely that he can recover the ship or goods, as the case may be, or b) the cost of recovering the ship or goods, as the case may be, would exceed their value when recovered; ii. In the case of damage to a ship, where she is so damaged by a peril insured against that the cost of repairing the damage would exceed the value of the ship when repaired. iii. In the case of damage to goods, where the cost of repairing the damage and forwarding the goods to their destination would exceed their value on arrival. E. PARTIAL LOSS Any loss other than total loss is partial loss (Section 56). i. GENERAL AVERAGE LOSS A general average loss is caused by or directly consequential on a general average act (Section 66). There is an extraordinary sacrifice or expenditure is voluntarily and reasonably made or incurred in time of peril for the purpose of preserving the property imperilled in the common adventure. (Section 66(2)). This loss is shared by persons interested. Sacrifice can be of cargo, ship or freight (Jettison). The insurance company is generally not liable for general average loss unless expressly agreed upon. Ex. (1) Scuttling or cutting away of bulk heads of ship to reach and extinguish fires; (2) damage to cargo not on fire by water or chemicals used in extinguish fires; (3) cargo or ship burnt as fuel; (4) jettisoning of cargo or ships gear, etc.; (5) damage to ships engine or machinery in attempting to rise a stranded ship; (6) cutting away mast of ship in stormy weather.

In Birkeley v. Presgraves, Justice Lawrence opined that All losses which arises in consequence of extraordinary ESSENTIALS a) It must be an extraordinary loss, eg. Damage to ships engine or machinery caused while forcing the ship off a strand, but not in ordinary voyage; b) c) d) It must be voluntarily incurred, prudently incurred; Common adventure must be imperilled; The loss must be for preserving the common adventure and any of any individual interest only, e) The loss must be a direct consequence of the act, not indirect or remote like loss of market profit. ii. PARTICULAR AVERAGE LOSS a partial loss of subject matter insured, caused by a peril insured against and which is not a general average loss (Section 64). This describes a loss on anyone interest which is not total loss, and towards which there is no liability upon other interests to contribute. iii. SALVAGE CHARGE (Section 65) A salvage charge is the amount recoverable to a salvor independent of the contract. They do not include the expenses of services in the nature of salvage rendered by the assured or his agents, or any person employed for hire by them, for the purpose of averting a peril insured against. Such expenses, where properly incurred, may be recovered as particular charges or as a general average loss, according to the circumstances under which they were incurred. The salvage charge incurred in the course of prevent al loss by peril insured, the same is recoverable as against the loss by the peril (Subject to insurance contract). F. ABANDONMENT The insured has the option to treat the damage to a ship as partial loss or total loss, but when he elects to treat it as constructive total loss through abandonment, and then the insured has to give notice of abandonment to the insurer

to treat the loss as total loss. The notice may be written or oral which has to be given in a reasonable period of time. It has to be unconditional, or else the notice is invalid. The notice is not necessary for the following cases:a) At the time when the assured receives the information of the loss there would be no possibility of benefit to the insured if the notice was given to him. (Section 67(7)). b) The notice of abandonment is waived by the insured. (Sec. 62(5)) c) Where the insurer has reinsured his risk. (Sec. 62(2)). Effect of Abandonment (Section 63) the insurer is entitled to take over all the interest of the assured in whatever may remain of the subject-matter insured and the proprietary rights incidental thereto. The insurer thereof is entitled to any freight in course of being earned, and which is earned by her subsequent to the casualty causing the loss, less the expenses of earning it incurred after the casualty; and, where the ship is carrying the owners goods. 15. SUE AND LABOUR CLAUSE The insured may sue the insurer for any extra-efforts undertaken to protect the insured property from the peril. Under Section 78 of the Indian Marine Insurance Act, insured is covered with the right that he shall be covered by the insured for any expense undertaken to diminish any loss or peril covered under the contract. It is the duty of the assured to undertake all measures to avert or diminish the loss. General average losses and contributions, salvage charges are not recoverable under sue and labour clause.