MARINE INSURANCE

Marine insurance

There is no legal obligation in English Law to insure

ships, goods or freight

All marine insurance contracts agreed in the UK are

governed by the Marine insurance Act 1906
 Principles of insurance

Insurable interest

Utmost good faith

Indemnity

Doctrine of proximate cause

 Insurable interest

The subject matter must be a physical object exposed

to peril.

Assured must have some legal relationship (not

necessarily ownership) to the subject matter.

Assured must stand to benefit by its preservation.

Assured must stand to lose by its loss or damage.

 Utmost good faith

Assured must disclose to the insurer before the

contract is concluded, every material circumstance
which is known to the assured and which would
influence the insurer’s judgement in fixing the
premium or whether or not he would accept the risk.
e.g. shipowner must disclose that his ship has failed for
example a special survey.
 Indemnity

 Principle of Indemnity is that insurer will indemnify assured for loss

and will restore him to the position he was immediately before loss
occurred.

 In life insurance, purpose is to pay a known sum of money, with a

possibility that as a result, assured will be better off than before.
 Where indemnity is the purpose, assured should not be better off as a
result of the loss, fraud will be otherwise encouraged.
 Assured cannot claim more than once on the same risk with two
insurers (double insurance)
 Assured cannot recoup his loss from another party after the claim was
settled. E.g. cargo owner after claiming from his insurers cannot claim
again from his carrier.
 Doctrine of proximate cause

Insurer is not liable for any loss which is not

proximately caused by a peril insured against.

E.g. if a ship is scuttled and seawater entering the

ship sinks her, owner may claim that the peril of seas
was the cause of his loss, but the insurer would not
be liable since scuttling is a wilful misconduct of the
assured.
 Types of policies

Voyage policy: port to port, ship must be within

the ports mentioned. (cargo policies)

Time policy: for a period of time, mainly 12

months, usually expiring at noon or midnight GMT.
(H&M policy)

Policies can also be either valued or unvalued.

 Insurance market

London marine insurance market is largest in the

world.
1- Lloyd’s market
2- IUA (International Underwriting
Association) or Companies market.

P&I (Protection & Indemnity) clubs of which several

are based in UK.
 Lloyd’s of London

Is not a company but a society of individuals and

corporate members with strict rules.

Areas: marine 17%, aviation 7%, motor 16%, non

transport 59%.

Market capacity in 2004 about 18bn.

Capital provided by about 3000 individual members

and 900 corporate members.
 Lloyd’s of London

 Managing agents: supervise syndicate, employ

underwriters and provide administrative back-up.

 Syndicates: group of members who band themselves into a

joint venture. (about 110)

 Underwriters: professionals who on behalf of their

syndicates assess risk involved and charge premium. They
deal with brokers.

 Brokers: intermediaries between Lloyd’s and general

public.130 authorised as brokers.
 Hull and machinery cover

Owner gives details to broker. (utmost good faith)

Broker prepares slip and takes first to lead

underwriter, then to succession of others until the
risk is 100% covered ( some syndicates might not
be interested )

Broker prepares cover note for owners approval

If assured approves, a formal policy is drawn up

 What is covered under H&M

Actual total loss of ship’s hull, machinery and

equipment
Constructive total loss
Particular average ( accidental damage)
3/4th of collision liability.
General average- ships proportion
 Important clauses

Perils: fire, explosion, piracy, earthquake, bursting of

pressure vessels, negligence of master crew pilot,
latent defects in machinery or hull, accidents etc.

Collision liability: only 3/4th

Sister ship clause: allows to treat as if they were

having different owners.
 Clauses contd.

Navigation provisions: limited towage, no cargo

transfer at sea etc.

Classification

Exclusions: war, strikes, radioactive

contamination, chemical, biological attack etc.
Navigating limits
 Clauses contd.

Helicopter engagement

Notice of claims: underwriters to be informed

ASAP
 Shipper’s Liability

Cargo claims: short delivery, loss or damage to

cargo etc..
Crew claims: medical expenses, repatriation,
compensation for death and injury etc..
Collision liabilities: 1/4th
Fixed and floating objects: damage to dock, buoys
etc..
Third party injury and death claim: passenger,
stevedore injury/ death.
 Shipper’s Liability

Oil pollution liability

Special compensation or compensation under

Scopic clause

Expenses incurred in landing refugees, sick

persons and stowaways, fines, unrecoverable
general average contributions, wreck removal costs
etc

Freight, demurrage and defence cover

 What is not covered by P&I

 Bogus Bill of lading

 Delivery of cargo without B/L

 Clean bill issued for damaged cargo

 Deck cargo carried on terms of under deck loading

 Arrest or detention of a ship

 Failure to arrive or late arrival at loading port.

 Fines normally covered
Customs fines
Immigration fines
Fines for failure to produce proper documentation
on board.
Fines for breach of regulations relating to
construction, alteration of ship.
Fines incurred as a result of the conduct of the
crew.
Fines imposed for failure to maintain safe working
conditions.