Introduction

This is the oldest branch of Insurance and is closely linked to the practice of
Bottomry which has been referred to in the ancient records of Babylonians and the
code of Hammurabi way back in B.C.2250. Manufacturers of goods advanced their
material to traders who gave them receipts for the materials and a rate of interest
was agreed upon. If the trader was robbed during the journey, he would be freed
from the debt but if he came back, he would pay both the value of the materials and
the interest. The first known Marine Insurance agreement was executed in Genoa on
13/10/1347 and marine Insurance was legally regulated in 1369 there.

Marine insurance
CARGO

HULL

Marine insurance plays a very important role in the field of overseas commerce and
internal trade of a country. It is closely linked with Banking and Shipping. Banks
generally finance the goods which are transported by ships or by other means of
transport in the case of internal trade and Marine Insurance protect such goods
against loss or damage. Without such protection the entire trade structure is bound
to suffer.
Objectives

Know the meaning of Marine insurance

Buy the Marine insurance
Settle the claim under Marine Insurance
Know the inland transit/overseas transit.
Know what is not covered under Marine insurance

Maritime law is one of the most established and oldest types of law. It generally
covers laws or rules that govern tort, contract, marine commerce, ships, shipping,
and worker compensation claims that arise on the worlds navigable waters.
In India, insurance has a deep-rooted history. It finds mention in the writings of Manu
( Manusmrithi ), Yagnavalkya ( Dharmasastra ) and Kautilya ( Arthasastra ). The
writings talk in terms of pooling of resources that could be re-distributed in times of
calamities such as fire, floods, epidemics and famine. This was probably a pre-

cursor to modern day insurance. Ancient Indian history has preserved the earliest
traces of insurance in the form of marine trade loans and carriers contracts.
Insurance in India has evolved over time heavily drawing from other countries,
England in particular.
1818 saw the advent of life insurance business in India with the establishment of the
Oriental Life Insurance Company in Calcutta. This Company however failed in 1834.
In 1829, the Madras Equitable had begun transacting life insurance business in the
Madras Presidency. 1870 saw the enactment of the British Insurance Act. In 1907,
the Indian Mercantile Insurance Ltd, was set up. This was the first company to
transact all classes of general insurance business. In 1914 The government of India
established publishing returns of Insurance Companies in India. Specifically in
shipping India has undergone wide changes and a considerable expansion and it
became mandatory to legislate it for smooth working and development of Indian
Marine Insurance. In India the law of marine insurance has been put in a statutory
from since 1963. Marine Insurance Act, 1963. The preamble to the Indian Act states
that it is an Act to codify the law relating to marine insurance. The canon of
construction generally applicable to a codifying statute is well known: the language of
the statute must be given its natural meaning, regard being had to the previous state
of the law only in cases of doubt or ambiguity. [Bank of England v Vagliano Brothers,
(1891) A.C. 107, 144 H.L. (per Lord Herschell)]

Meaning
A contract of marine insurance is an agreement whereby the insurer undertakes to
indemnify the insured, in the manner and to the extent thereby agreed, against
transit losses, that is to say losses incidental to transit. A contract of marine
insurance may by its express terms or by usage of trade be extended so as to
protect the insured against losses on inland waters or any land risk which may be
incidental to any sea voyage.
A contract of marine insurance is uberrimae fidie or, as enumerated in Section 19 of
the Indian Marine Insurance Act, a contract based upon the utmost good faith.[49]
The notion of utmost good faith, the cardinal principle governing the marine
insurance contract, is a well-established doctrine derived from the celebrated case of
Cater v. Boehm[50], decided long before the inception of the Act. With the
codification of the law, the principle found expression in Sections 19-22: In section 19
is presented the general duty to observe the utmost good faith, with the following

sections introducing particular aspects of the doctrine, namely, the duty of the
assured (section 20) and the broker (section 21) to disclosed material
circumstances, and to provide making representations (section 22).
In simple words the marine insurance includes
Cargo insurance provides insurance cover in respect of loss of or damage to
goods during transit by rail, road, sea or air. Thus cargo insurance concerns
(i)
(ii)
(iii)
(iv)

the following:
export and import shipments by ocean-going vessels of all types,
coastal shipments by steamers, sailing vessels, mechanized boats, etc.,
shipments by inland vessels or country craft, and
Consignments by rail, road, or air and articles sent by post.

Cargo Insurance is that where the owners of cargo, which is to be transported by

sea, usually cover their financial exposure against loss of, or damage to cargo for
declared value. Cargo insurance is provided byte Syndicates at Lloyds but more
commonly by professional insurance companies around the world. They keep
records of their losses and use this information to help them calculate premiums for
insurance of certain types of cargo in varying kinds of marine transportation, i.e. in
bulk, packaged, containerized, refrigerated, chilled, in tanks etc. The cargo insurer
will compensate the owner of the cargo for any loss or damage to the cargo
Thereafter they may claim compensation for their loss from the carriers of the cargo.

Hull insurance is concerned with the insurance of ships (hull, machinery,

etc.). Hull and machinery insurance is to protect the ship owners investment
in the ship. It is basically a property insurance which covers the ship itself, the
machinery and equipment. The owner will be protected for losses caused by
loss of or damage to the ship and its equipment. Furthermore, the insurance
covers some liabilities, normally collision liability with another ship (known as
RDC Running Down Clause)and sometimes also liability for colliding with
other objects than another ship (known as FFO - Fixed and Floating Objects).
Since the conditions vary, it is recommended that the Master finds out how the
insurance is placed for the ship. Very often these liabilities are handled by the
owners P&I club. The third part of the insurance is cover for salvage and
general average contributions. Typical hull and machinery claims include:
Total loss of the ship, Damage to the ship, engines and equipment,
Explosions and fires, Groundings damage to the ship, salvage of the ship

and possible contribution in general average, Collisions damage sustained

to the ship and sometimes also liability towards the other ship (RDC) and
Striking other objects damage inflicted to own ship and sometimes also
liability towards the owners of the other object (FFO). The hull and machinery
cover will include a Trading Warranty, clause stipulating where the vessel
may trade.

FEATURES OF MARINE INSURANCE

Offer & Acceptance: It is a prerequisite to any contract. Similarly the goods
under marine (transit) insurance will be insured after the offer is accepted by
the insurance company. Example: A proposal submitted to the insurance
company along with premium on 1/4/2011 but the insurance company
accepted the proposal on 15/4/2011. The risk is covered from 15/4/2011 and
any loss prior to this date will not be covered under marine insurance.
Payment of premium: An owner must ensure that the premium is paid well in
advance so that the risk can be covered. If the payment is made through
cheque and it is dishonored then the coverage of risk will not exist. It is as per
section 64VB of Insurance Act 1938- Payment of premium in advance.(Details

under insurance legislation Module).

Contract of Indemnity: Marine insurance is contract of indemnity and the
insurance company is liable only to the extent of actual loss suffered. If there
is no loss there is no liability even if there is operation of insured peril.
Example: If the property under marine (transit) insurance is insured for Rs 20
lakhs and during transit it is damaged to the extent of Rs 10 lakhs then the

insurance company will not pay more than Rs 10 lakhs.

Utmost good faith: The owner of goods to be transported must disclose all
the relevant information to the insurance company while insuring their goods.
The marine policy shall be voidable at the option of the insurer in the event of
misrepresentation,

mis-description

or

non-disclosure

of

any

material

information. Example: The nature of goods must be disclosed i.e whether the
goods are hazardous in nature or not, as premium rate will be higher for
hazardous goods.
Insurable Interest: The marine insurance will be valid if the person is having
insurable interest at the time of loss. The insurable interest will depend upon

the nature of sales contract. Example: Mr A sends the goods to Mr B on FOB (

Free on Board) basis which means the insurance is to be arranged by Mr B.
And if any loss arises during transit then Mr B is entitled to get the
compensation from the insurance company. Example: Mr A sends the goods
to Mr B on CIF (Cost, Insurance and Freight) basis which means the
insurance is to be arranged by Mr A. And if any loss arises during transit then
Mr A is entitled to get the compensation from the insurance company.
Contribution: If a person insures his goods with two insurance companies,
then in case of marine loss both the insurance companies will pay the loss to
the owner proportionately. Example; Goods worth Rs. 50 lakhs were insured
for marine insurance with Insurance Company A and B. In case of loss, both
the insurance companies will contribute equally.
Period of marine Insurance: The period of insurance in the policy is for the
normal time taken for a particular transit. Generally the period of open marine
insurance will not exceed one year. It can also be issued for the single transit
and for specific period but not for more than a year.
Deliberate Act: If goods are damaged or loss occurs during transit because
of deliberate act of an owner then that damage or loss will not be covered
under the policy.
Claims: To get the compensation under marine insurance the owner must
inform the insurance company immediately so that the insurance company
can take necessary steps to determine the loss.
Operation of Marine Insurance
Marine insurance plays an important role in domestic trade as well as in international
trade. Most contracts of sale require that the goods must be covered, either by the
seller or the buyer, against loss or damage. Who is responsible for affecting
insurance on the goods, which are the subject of sale? It depends on the terms of
the sale contract. A contract of sale involves mainly a seller and a buyer, apart from
other associated parties like carriers, banks, clearing agents, etc.
F.O.B. (Free on Board) In this case, the seller is responsible for loss of or
damage to the goods until they are placed on board the steamer for on
carriage. Thereafter the buyer becomes responsible and he has, therefore,
the option to insure where he likes.

 C.I.F. (Cost, Insurance and Freight) In this case the seller assumes
responsibility for the insurance and the insurance charges are indicated in the
invoice along with the other charges.
C & F (Cost and Freight) In this case, normally the buyers responsibility
attaches from the time the goods are placed on board the vessel and he has
therefore to take care of the insurance.
F.O.R. (Free on Rail) This is same as F.O.B. but it concerns mainly the
internal trade transactions

Types of Marine Insurance Policies

Voyage policy:- is a policy in which the subject matter is insured for a

particular voyage irrespective of the time involved in it. In this case the risk
attaches only when the ship starts on the voyage.

Time policy:- is a policy in which the subject matter is insured for a definite
period of time. The ship may pursue any course it likes, the policy would cover
all the risks from perils of the sea for the stated period of time. A time policy
cannot be for a period exceeding one year, but it may contain a 'continuation
clause'. The 'continuation clause' means that if the voyage is not completed
within the specified period, the risk shall be covered until the voyage is
completed, or till the arrival of the ship at the port of call.

Mixed policy:- is a combination of voyage and time policies and covers the
risk during particular voyage for a specified period of time.

Valued policy:- is a policy in which the value of the subject matter insured is
agreed upon between the insurer and the insured and it is specified in the
policy itself.

Open or Un-valued policy:- is the policy in which the value of the subject
matter insured is not specified. Subject to the limit of the sum assured, it
leaves the value of the loss to be subsequently ascertained.

Floating policy:- is a policy which only mentions the amount for which the
insurance is taken out and leaves the name of the ship(s) and other
particulars to be defined by subsequent declarations. Such policies are very
useful to merchants who regularly despatch goods through ships.

Wagering or Honour policy:- is a policy in which the assured has no

insurable interest and the underwriter is prepared to dispense with the
insurable interest. Such policies are also known as 'Policy Proof of Interest
(P.P.I).

CONCLUSION
The marine insurance has also certain risk involved which is covered to some
extent by insurance like Barratry of Master Officers or Crew it means that the
master, officers or crew of a vessel may commit an unlawful act that results in a
loss to the owner of the vessel. Smuggling would be an example of barratry,
Collision a risk for vessels at sea is that two or more vessels may collide. This
can happen in adverse weather conditions, such as fog, and in busy shipping
lanes, Deliberate Damage by Government Agency in the event of an
environmental hazard at sea, such as an oil spill.
P&I is a special type of marine insurance. It is a liability insurance that a prudent
ship owner, manager or charterer needs, particularly if the ship is employed in

international trade. P&I insurance cover a ship-owner or charterer for liabilities and
losses in direct connection with the operation of the ship.
The purpose of marine insurance has been to enable the ship owner and the buyer
and seller of goods to operate their respective business while relieving themselves,
at least partly, of the burdensome financial consequences of their propertys being
lost or damaged as a result of the various risks of the high seas. Marine insurance is
quite an old insurance term which is meant to cover the loss pertaining to shipment;
ship etc. Marine insurance typically fulfils all your overseas transportation
requirements and give you complete peace of mind.
Marine insurance deals with goods when these are being moved from one place to
another by approved mode of transportation. The goods can be moved within the
country and outside the country. The risks are involved in any type of transportation
and to cover these risks marine (transit) insurance is developed. The risk coverage
depends upon the nature of goods and packing and to cover the risks the price is to
be paid which is known as premium. The consignment can be single or multiple and
accordingly the marine insurance policy i.e single transit or open cover or open
policy is issued by the insurance company.