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NATURE OF MARINE INSURANCE CONTRACT : NATURE OF MARINE INSURANCE CONTRACT Section 2 (13) A of the Insurance Act 1938 defines marine

insurance as follows:- : Section 2 (13) A of the Insurance Act 1938 defines marine insurance as follows:“Marine insurance business” means the business of effecting contract of insurance upon vessels of any description, including cargoes, freights : “Marine insurance business” means the business of effecting contract of insurance upon vessels of any description, inc luding cargoes, freights and other interests which may be legally insured in or in relation to such vessels, cargoes and freights, goods, wares, merchandise and property of whatever : and other interests which may be legally insured in or in relation to such vessels, cargoes and freights, goods, wares, merchandise and property of whatever description insured for any transit by land or water or both, and whether or not including warehouse risks or similar risks in addition or as incidental to : description insured for any transit by land or water or both, and whether or not including warehouse risks or similar risks in addition or as incidental to such transit and includes any other risks customarily included amount the risks insured against in marine insurance policies. : such transit and includes any other risks customarily included amount the risks insured against in marine insurance policies. The above definition clearly lays down the following classification of the marine insurance. : The above definition clearly lays down the following classification of the marine insurance. HULL INSURANCE Insurance of vessel and its equipments are included under hull insurance. : HULL INSURANCE Insurance of vessel and its equipments are included under hull insurance. CARGO INSURANCEThe cargo maybe of any description, for example, wares, merchandise, property, goods and so on. : CARGO INSURANCEThe cargo maybe of any description, for example, wares, merchandise, property, goods and so on. FREIGHT INSURANCEFreight is to be payable for the carriage of cargoes or if the vessel is chartered, the money to be paid for the use of the vessel. : FREIGHT INSURANCEFreight is to be payable for the carriage of cargoes or if the vessel is chartered, the money to be paid for the use of the vessel. The carrier is unable to earn freight if the goods or property (called cargoes) are not safely transported. : The carrier is unable to earn freight if the goods or property (called cargoes) are not safely transported. LIABILITY INSURANCEThe marine insurance policy may include liability hazards such as collision or running down. : LIABILITY INSURANCEThe marine insurance policy may include liability hazards such as collision or running down. ELEMENTS OF MARINE INSURANCE CONTRACT : ELEMENTS OF MARINE INSURANCE CONTRACT The marine insurance has the following essential features which are also called fundamental principles of marine insurance. : The marine insurance has the following essential features which are also called fundamental principles of marine insurance. Features of General ContractInsurable InterestUtmost Good FaithDoctrine of Indemnity : Features of General ContractInsurable InterestUtmost Good FaithDoctrine of Indemnity SubrogationWarrantiesProximate causeAssignment and nomination of the policyReturn of premium : SubrogationWarrantiesProximate causeAssignment and nomination of the policyReturn of premium FEATURES OF GENERAL CONTRACT : FEATURES OF GENERAL CONTRACT PROPOSALThe broker will prepare a slip upon receipt of instructions to insure from ship-owner, merchant or other proposers. Proposal forms, : PROPOSALThe broker will prepare a slip upon receipt of instructions to insure from ship-owner, merchant or other proposers. Proposal forms, so common in other branches of insurance, are known in the marine insurance and only the „slip‟ so called „the original slip‟ is us ed for the proposal : so common in other branches of insurance, are known in the marine insurance and only the „slip‟ so called „the original slip‟ is used for the proposal The original slip is accompanied with other material information which the broker deems necessary for the purpose. : The original slip is accompanied with other material information which the broker deems necessary for the purpose. ACCEPTANCEUnderwriters or other insurers or to the Lead of the insures, who initial the slip and the proposal is formally accepted. : ACCEPTANCEUnderwriters or other insurers or to the Lead of the insures, who initial the slip and the proposal is formally accepted.

: . POLICIESP. i.P. : The policy terminated if anyone of the two parties was aware of the fact of loss. the requirement of the insurable interest to be present only at the time of loss makes a marine insurance policy freely assignable. ( Policy Proof of Interest). . IN CASE OF CARGOThe cargo-owner can purchase policy up to the full price of the cargo. though he should have an expectation of acquiring such an interest. the broker will now send his client a cover note advising the terms and conditions : ISSUE OF POLICYHaving effected the insurance. : to the subject matter in a such a way that may benefit by the safety or due arrival of insurable property or may be prejudiced by its loss. therefore.e. Since the ownership and other interest of the subject matter often change from hands to hands. LOST OR NOT LOSTA person can also purchase policy in the subject-matter in which it was known whether the matters were lost not lost : LOST OR NOT LOSTA person can also purchase policy in the subject-matter in which it was known whether the matters were lost not lost In such cues the assured and the under writer are ignorant about the safety or otherwise of the goods and complete reliance was placed on the principle of Good Faith. interest proof policies. : on which the insurance has been placed. : The slip is an evidence that the underwriter has accepted an insurance and that he has agreed subsequently to sign a policy. P. In this case.P. : 1. : EXCEPTIONSThere are two exceptions of the rule in marine insurance. : though he should have an expectation of acquiring such an interest. If he fails to acquire insurable interest in due course. or by damage thereto or by the detention thereof or may incur liability in respect thereof. : to which the apply are formally completed it is not essential for the assured to have an insurable interest at the time of effecting insurance. INSURABLE INTERESTAn insured person will have insurable interest in the subject matter where he stands in any legal or equitable relation : INSURABLE INTERESTAn insured person will have insurable interest in the subject matter where he stands in any legal or equitable relation to the subject matter in a such a way that may benefit by the safety or due arrival of insurable property or may be prejudiced by its loss.e.The insurable interest marine insurance can be of the following forms: 1.I.P. interest proof policies.The insurable interest marine insurance can be of the following forms: : P. Since marine insurance is frequently effected before the commercial transaction : or by damage thereto or by the detention thereof or may incur liability in respect thereof. IN CASE OF SHIPSThe ship-owner or any person who has purchased it on character-basis can insure the ship up to its full price.I. he does not become entitled to indemnification. the broker will now send his client a cover note advising the terms and conditions on which the insurance has been placed. : .P.I. he does not become entitled to indemnification.But the contract can be legally enforced until a policy is issued : But the contract can be legally enforced until a policy is issued The slip is an evidence that the underwriter has accepted an insurance and that he has agreed subsequently to sign a policy. In this case. ISSUE OF POLICYHaving effected the insurance. therefore. Since marine insurance is frequently effected before the commercial transaction to which the apply are formally completed it is not essential for the assured to have an insurable interest at the time of effecting insurance. The broker‟s cover note is merely an insurance memorandum and naturally has no value in enforcing the contract with the underwrites.ACCORDING TO OWNERSHIPThe owner has insurable interest up to the full value of the subject-matter. i. he can take the policy for the full price of the goods plus amount of freight plus expense of insurance. EXCEPTIONSThere are two exceptions of the rule in marine insurance. The owners are of different types according to the subject-matter.I. If he fails to acquire insurable interest in due course. ( Policy Proof of Interest). : IN CASE OF SHIPSThe ship-owner or any person who has purchased it on character-basis can insure the ship up to its full price. the insurable interest may not be present at the time of contract because the subject-matter would have been lost. The owners are of different types according to the subject-matter. the requirement of the insurable interest to be present only at the time of loss makes a marine insurance policy freely assignable. the insurable interest may not be present at the time of contract because the subject-matter would have been lost. POLICIESP. If he has paid the freight in advance. : In such cues the assured and the under writer are ignorant about the safety or otherwise of the goods and complete reliance was placed on the principle of Good Faith. Since the ownership and other interest of the subject matter often change from hands to hands. The broker‟s cover note is merely an i nsurance memorandum and naturally has no value in enforcing the contract with the underwrites.ACCORDING TO OWNERSHIPThe owner has insurable interest up to the full value of the subject-matter. The policy terminated if anyone of the two parties was aware of the fact of loss.

: But the duty of disclosure of material facts rests highly on the insured because he is aware of the material common in other branches of insurance are not used in the marine insurance. UTMOST GOOD FAITH : UTMOST GOOD FAITH The doctrine of caveat emptor (let the buyer beware) applies to commercial contracts. or if the voyage is carries out in stages at the commencement of each stage. LEGALITY OF VENTUREThis Warranty implies that the adventure insured shall be lawful and that so far as the assured can control the matter it shall be carried out in the lawful manager of the country : LEGALITY OF VENTUREThis Warranty implies that the adventure insured shall be lawful and that so far as the assured can control the matter it shall be carried out in the lawful manager of the country OTHER IMPLIED WARRANTIESThere are other warranties which must be complied in marine insurance. . he can take the policy for the full price of the goods plus amount of freight plus expense of insurance. : IN CASE OF FREIGHTThe receiver of the freight can insure up to the amount of freight to be received by him. : INSURED VALUEThe doctrine of indemnity is based on the insurable value whereas the marine insurance is mostly based on insured value. : PROFITS ALLOWEDActually the doctrine says that the market price of the loss should be indemnified and no profit should be permitted. : EXCEPTIONSThere are two exceptions of the doctrine of indemnity in marine insurance. : INSURABLE INTEREST IN RE-INSURANCEThe underwriter under a contract of marine insurance has an insurable interest in his risk. 3. DOCTRINE OF INDEMNITY : DOCTRINE OF INDEMNITY The contract of marine insurance is of indemnity. but insurance contracts are based upon the legal principle of uberrimae fides (utmost good faith). WARRANTIESA Warranty is that by which the assured undertakes that some particular thing shall of shall be fulfilled or whereby he affirms or negatives the existence of a particular state of facts. If he has paid the freight in advance. : The doctrine of caveat emptor (let the buyer beware) applies to commercial contracts. But the duty of disclosure of material facts rests highly on the insured because he is aware of the material common in other branches of insurance are not used in the marine insurance. Under no circumstances an insured is allowed to make a profit out of a claim. The purpose of the valuation is to predetermine the worth of insured. SEAWORTHINESS OF SHIPThe warranty implies that the ship should be seaworthy at the commencement of the voyage. PROFITS ALLOWEDActually the doctrine says that the market price of the loss should be indemnified and no profit should be permitted. or if the voyage is carries out in stages at the commencement of each stage. and may reinsure in respect of it. The lender of money on bottomry or respondentia has insurable interest in respect of the loan. Under no circumstances an insured is allowed to make a profit out of a claim. : The contract of marine insurance is of indemnity. the master or any member of the crew of a ship has insurable interest in respect of his wages. and may reinsure in respect of it. : WARRANTIESA Warranty is that by which the assured undertakes that some particular thing shall of shall be fulfilled or whereby he affirms or negatives the existence of a particular state of facts. IN CASE OF FREIGHTThe receiver of the freight can insure up to the amount of freight to be received by him. : . The purpose of the valuation is to predetermine the worth of insured. EXCEPTIONSThere are two exceptions of the doctrine of indemnity in marine insurance. but insurance contracts are based upon the legal principle of uberrimae fides (utmost good faith). but in marine insurance a certain profit margin is also permitted. INSURED VALUEThe doctrine of indemnity is based on the insurable value whereas the marine insurance is mostly based on insured value. the master or any member of the crew of a ship has insurable interest in respect of his wages. : 3. INSURABLE INTEREST IN OTHER CASESIn this case all those underwriters are included who have insurable interest in the salary and own liabilities. INSURABLE INTEREST IN RE-INSURANCEThe underwriter under a contract of marine insurance has an insurable interest in his risk. The lender of money on bottomry or respondentia has insurable interest in respect of the loan. : . : SEAWORTHINESS OF SHIPThe warranty implies that the ship should be seaworthy at the commencement of the voyage. but in marine insurance a certain profit margin is also permitted. For example. INSURABLE INTEREST IN OTHER CASESIn this case all those underwriters are included who have insurable interest in the salary and own liabilities. For example.IN CASE OF CARGOThe cargo-owner can purchase policy up to the full price of the cargo.

OTHER IMPLIED WARRANTIESThere are other warranties which must be complied in marine insurance. but it compensates someone and this saves him from a ruinous loss. : NATURE OF INSURANCE OF FIRE INSURANCEDEFINATION AND NATUREFire insurance is a device to compensate for the loss consequent upon destruction by fire. : Sometimes. or for any injury to machinery not proximately caused by maritime perils. PHYSICAL HAZARD: It refers to the inherent risk of fire in the property which may occur due to inflammable nature. moral hazard exists. when market price is going down the owner can willingly set fire on the property and gain from the payment of insurance money. : PREVENTION OF LESSInsurance is meant for indemnification of loss and not for prevention of loss although every reasonable step can be taken to eliminate it or minimize it through the agencies engaged in prevention of loss. PROXIMATE CAUSEAccording to Marine Insurance Act. „physical‟ and „moral‟. CAUSES OF FIREFire waste is the result of two types of hazard viz. Thus. this is called change in voyage. INDEMINIFICATION OR CURATIVE EFFORTS: The insurance provides protection by indemnifying the financial loss suffered by insured person which occurred beyond the control of insured and insurer. PREVENTION OF LESSInsurance is meant for indemnification of loss and not for prevention of loss although every reasonable step can be taken to eliminate it or minimize it through the agencies engaged in prevention of loss. : NO CHANGE IN VOYAGEWhen the destination of voyage is changed intentionally after the beginning of the risk. but subject to as aforesaid he is not liable for any loss which is not proximately caused by a peril insured against The insurer is not liable for any attributable to the willful misconduct of the assured. : PHYSICAL HAZARD: It refers to the inherent risk of fire in the property which may occur due to inflammable nature. PREVENTIVE EFFORTS: Fire insurers stimulate the installation of protective device and better types of construction through granting credit. „physical‟ and „moral‟. The property may be set on fire by the owner or by any person with his willingness. this is called change in voyage. at the cost of group of some others. but unless the policy otherwise provides. NATURE OF INSURANCE OF FIRE INSURANCEDEFINATION AND NATUREFire insurance is a device to compensate for the loss consequent upon destruction by fire. where the property was destroyed with the willingness of the property owner. where the property was destroyed with the willingness of the property owner. „ Subject to the provisions of the Act and unless the policy other wise provides the insurer is liable for any loss : PROXIMATE CAUSEAccording to Marine Insurance Act. The property may be set on fire by the owner or by any person with his willingness. : CAUSES OF FIREFire waste is the result of two types of hazard viz. ordinary leakage and breakage. carelessness and lack of sense of duty may also increase the fire waste : MORAL HAZARD: The moral hazard depends upon the man as physical hazard depends on the property. or for any loss proximately caused by rats or vermin. at the cost of group of some others. carelessness and lack of sense of duty may also increase the fire waste Sometimes. : FUNCTIONSThe system of fire insurance cannot save the society from the economic loss to the community to the extent of the property lost by fire. FUNCTIONSThe system of fire insurance cannot save the society from the economic loss to the community to the extent of the property lost by fire. : but it compensates someone and this saves him from a ruinous loss.. he is liable for any loss proximately caused by a peril insured against. inherent vice or nature of subject matter insured. construction. when market price is going down the owner can willingly set fire on the property and gain from the payment of insurance money. or for any injury to machinery not proximately caused by maritime perils. but unless the policy otherwise provides. : The insurer is not liable for any attributable to the willful misconduct of the assured. : The insurer is not liable for ordinary wear and tear. MORAL HAZARD: The moral hazard depends upon the man as physical hazard depends on the property. : INDEMINIFICATION OR CURATIVE EFFORTS: The insurance provides protection by indemnifying the financial loss suffered by insured person which occurred beyond the control of insured and insurer. ordinary leakage and breakage. moral hazard exists. The insurer is not liable for ordinary wear and tear. but subject to as aforesaid he is not liable for any loss which is not proximately caused by a peril insured against : proximately caused by a peril insured against. NO CHANGE IN VOYAGEWhen the destination of voyage is changed intentionally after the beginning of the risk. construction. artificial lighting and heating. lack of extinguishing apparatus use of the property etc. artificial lighting and heating. inherent vice or nature of subject matter insured. or for any loss proximately caused by rats or vermin. The insurer will not be liable for any loss caused by delay unless otherwise provided. : .. water supply and engineering services. he is liable for any loss proximately caused by a peril insured against. : The insurer will not be liable for any loss caused by delay unless otherwise provided. „ Subject to the provisions of the Act and unless the policy otherwise prov ides the insurer is liable for any loss proximately caused by a peril insured against. lack of extinguishing apparatus use of the property etc. They help in installation of fire-fighting apparatus. Thus.

reinsures a part of the risk in order to diminish his own liability. reinsures a part of the risk in order to diminish his own liability. that is to say.PREVENTIVE EFFORTS: Fire insurers stimulate the installation of protective device and better types of construction through granting credit. : REINSURANCEReinsurance is the transfer of insurance business from one insurer to another. The insurer transferring the business is called the „Principal‟ or c eding or original office and the office to which the business is transferred is called for „reinsurer or guaranteeing office‟ : The insurer transferring the business is called the „Principal‟ or ceding or original office and the office to which the busi ness is transferred is called for „reinsurer or guaranteeing office‟ ADVANTAGE OF REINSURANCEReinsurance makes it possible to accept each risk for the very amount desired by the proposer and to transfer the excess above the „retention limit‟ to another insurer. : Insurance is a contract between the insurer and the original insured. . Insurance is a contract between the insurer and the original insured. : ADVANTAGE OF REINSURANCEReinsurance makes it possible to accept each risk for the very amount desired by the proposer and to transfer the excess above the „retention limit‟ to another insurer. REINSURANCEReinsurance is the transfer of insurance business from one insurer to another. water supply and engineering services. They help in installation of fire-fighting apparatus. : REINSURANCEReinsurance is an arrangement whereby an original insurer who has insured a risk again with another insurer. REINSURANCEReinsurance is an arrangement whereby an original insurer who has insured a risk again with another insurer. Reinsurance is a contract between the reinsured (the insurer) and the reinsurer. Reinsurance is a contract between the reinsured (the insurer) and the reinsurer. that is to say.