Unit 5 Insurance

INSURANCE LAW
UNIT-5, MARINE INSURANCE
SYNOPSIS
 Introduction
 Meaning of marine insurance
 Essential features of marine insurance
 Types of marine insurance
 Warranties
 Principle of marine insurance

INTRODUCTION
 Marine insurance coverage is important since it allows ship owners and
carriers to be sure of claiming losses, especially when considering the
form of transportation used.
 Marine insurance was the earliest form of insurance, with origins in the
Greek and Roman marine loan.
 Marine Insurance is a type of insurance that covers cargo losses or
damage caused to ships, cargo vessels, terminals, and any transport in
which goods are transferred or acquired between different points of origin
and their final destination.
MEANING OF MARINE INSURANCE

 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.
 In simple words the marine insurance includes
A. Cargo insurance which provides insurance cover in respect of loss of or
damage to goods during transit by rail, road, sea or air. Thus cargo
insurance concerns the following :
(i) export and import shipments by ocean-going vessels of all types,
(ii) coastal shipments by steamers, sailing vessels, mechanized boats,
etc.,
(iii) shipments by inland vessels or country craft, and
(iv) Consignments by rail, road, or air and articles sent by post
B. Hull insurance which is concerned with the insurance of ships (hull,
machinery, etc.). This is a highly technical subject and is not dealt in this
module.
ESSENTIAL FEATURES OF MARINE INSURANCE

1) 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.
2) 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 isdishonored then the coverage of risk will not
exist.
3) 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.
4) 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.
5) 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.
6) 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.
7) 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.
8) 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.
9) 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.
TYPES OF MARINE INSURANCE CONTRACTS

In maritime insurance law, there are primarily three types of insurance contracts
which cover different aspects of the loss incurred. These are:
A. Hull Insurance: Such insurance generally covers the loss caused by
damage and destruction of water borne ship vessel belonging to the
owner. The insurance covers the articles of the ship including but not
limited to the furniture and other mechanized parts of the ship. It is
similar to the property insurance & covers the actual damage to the vessel
and its related machinery in the event of any mishappening during the
voyage. The owner gets indemnified for the losses and mishaps occurring
during the normal course of the trading business.
B. Cargo Insurance: As the name suggests, cargo insurance covers the goods
from any physical damage or loss to the goods during the transit by sea. It
is taken by the owners of the goods which are to be shipped through sea.
If the cargo gets damages, the owner gets the indemnity from the
insurance company.
C. Freight Insurance: The transfer of goods from one port to another, the
amount paid to the owner of the ship is called freight. Freight insurance
offers protection against potential losses caused to the shipment during
the transit. This type of marine insurance even covers the cargo loss due
to the ship meeting any accident.
D. Liability insurance: When an insurer undertakes to indemnify against the
loss which may be suffered by an insured on account of liability to a third
party such as those caused by collision of a ship and other similar
hazards, it is called a Liability insurance.
WARRANTIES
Warranties are the statement according to which insured person promises to do
or not to do a particular thing or to fulfill or not to fulfill a certain condition, and
it is not merely a condition but statement of fact.
They are more vigorously insisted upon than the conditions because the contract
comes to an end if a warranty is broken whether the warranty was material or
not.
Warranties are of two types; Express Warranties, and Implied Warranties.
Express warranties are those warranties which are expressly included or
incorporated in the policy by reference.
Implied Warranties are not mentioned in the policy at all but are tacitly
understood by the parties to the contract and are fully binding In marine
insurance, implied warranties are very important. They are:
1.Seaworthiness of Ship: The warranty implies that the ship should be
seaworthy at the commencement of the voyage. A ship is seaworthy when the
ship is suitably constructed, properly equipped, officered and manned,
sufficiently fueled and provisioned, documented and capable of withstanding
the ordinary strain and stress of the voyage.
2.Legality of Venture: This warranty implies that the adventure insured shall be
lawful and that so far as the assured can control the matter, it shall he earned out
in the lawful manner of the country. Marine policies cannot be applied to protect
illegal voyages or adventure.
3.No Change in Voyage: When the destination of the voyage is changed
intentionally after the beginning of the risk, this is called a change in the
voyage. In the absence of any warranty contrary to this the insurer quits his
responsibility at the time of change in the voyage.
4.No Delay in Voyage: This warranty applies only to voyage policies. There
should not be a delay in the starting of voyage and laziness or delay during the
journey.
5.No deviation: The liability of the insurer ends in deviation of a journey. When
the ship deviates from the fixed passage without any legal reason, the insurer
quits his responsibility
Exceptions to warranties in marine insurance:
There are following exceptions to delay and deviation warranties:
1.Deviation or delay is authorized according to a particular warranty of the
policy.
2.When the delay or deviation was beyond the reasonable approach of the
master or crew.
3.The deviation or delay is exempted for the safety of the ship or insured matter
or human lives.
4.Deviation or delay was due to barratry
PRINCIPLES OF MARINE INSURANCE

There are certain important principles, which govern marine insurance. Let us
have an understanding of each of the principle below:
1. Principle of Good Faith: The marine insurance policy strictly reckon upon the
principle of good faith wherein while filing the marine insurance policy
document every information given by the applicant must be correct. In case, if
the applicant gives false information or hides any information, then the marine
insurance providers have all the rights to reject the marine insurance policy
application.
2. Principle of Insurable Interest: Based on this principle, while buying marine
insurance policy the insured must have some insurable interest for whom the
insurance is bought in the subject. This helps the insured to get an advantage
when the goods are arrived securely likewise suffer a loss in the case of
hampered goods. it is essential to have an insurable interest or else the insured
will not be able for a claim settlement from the insurance provider.
3. Principle of Indemnity: This should clearly be understood even before buying
the marine insurance policy that the insured will only be able to receive
compensation depending upon the loss. The compensation to be received by the
insured in any case would not be more than the incurred actual loss. So, buy
marine insurance when required and not to earn profits.
4. Principle of Proximate Cause: When a loss incurs, the insured will
contemplate the proximate cause to understand the actual fount of the loss as
there is a possibility of series of causes, which could be attributed for the
incurred loss. To be precise, to determine the liability the remote cause for the
loss is not required. Therefore, when the proximate cause is insured, the
insurance provider needs to settle the claim.
5. Principle of Subrogation: In simplest words, the principle of subrogation
follows the principle of indemnity wherein the insured is not allowed to make
any profits out of the incurred loss. It is precisely the shift of the rights and
remedies of an insured to an insurer who has recompensated the insured in
terms of the loss.
6. Principle of Contribution: There are chances that certain goods might be
insured with more than two insurers against the same perils. Under such
circumstances, the insurance provider needs to split the weight of payment in
proportion to the insured amount by each.

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INSURANCE LAW

UNIT-5, MARINE INSURANCE

MEANING OF MARINE INSURANCE

ESSENTIAL FEATURES OF MARINE INSURANCE

2) Payment of premium: An owner must ensure that the premium is paid

3) Contract of Indemnity: Marine insurance is contract of indemnity and the

4) Utmost good faith: The owner of goods to be transported must disclose

5) Insurable Interest: The marine insurance will be valid if the person is

6) Contribution: If a person insures his goods with two insurance

7) Period of marine Insurance: The period of insurance in the policy is for

TYPES OF MARINE INSURANCE CONTRACTS

PRINCIPLES OF MARINE INSURANCE

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