Extra First Class COC Courses (Part “A”)

Subject: A2- Risk Management & Marine Insurance

Student Name and Number: Praveen Kumar, TMI/EFCE/2019/01

ASSESSOR: Mr. S. K. Srivastava

Date of Submission: 09.04.2019

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1) Introduction:
H & M insurance covers loss and damage to the ship by various perils incorporated in the
policy. The policy document contains a set of clauses attached to it with terms and
conditions of the insurance, including rights and responsibilities of the underwriter and
assured. Some of the H & M clauses are namely ITC Hull 83 (Institute Time Clauses Hulls
1.10.83), ITC Hull 95 & IHC 03 (International Hull Clauses 01/11/03)

Main body:
Two of the above H & M clauses namely ITC Hull 83 and IHC 03 are being compared on the
basis of their covers and salient features.

IHC 03 ITC Hull 83

1. General - Subject to English law and practice.

- Subject to English law and practice. - Subject to the exclusive jurisdiction
- Subject to the exclusive jurisdiction of the English High Court of Justice.
of the English High Court of Justice.

2. Leased equipment - No standard cover

- Cover for loss of or damage to
leased equipment not owned by the
assured, but for which he is
responsible.
3. Parts taken off - No standard cover
- Cover for loss of or damage to parts
taken off the vessel.
4. 3/4th Collision liability (Running - As IHC 03
Down Clause, RDC)
- Cover for ¾ths of insured value of the
insured vessel in respect of collision
liability for
(i) Loss of or damage to another
vessel or property thereon.
(ii) Delay to or loss of use of any
such vessel or property thereon.
(iii) General average, salvage or
salvage under contract of any
such vessel or property thereon.
Cover for legal costs is limited to 25% of
insured value of the insured vessel
(save where agreed).
5. Fixed and Floating objects (FFO - No additional FFO clause
clause)
- Optional clause which amends ¾th
collision liability to cover another
vessel or fixed or floating object or
property thereon.

6. 4/4ths Collision liability - No additional RDC

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- Optional clause which amends ¾ths

collision liability cover in respect of
another vessel to 4/4ths of insured
value of the insured vessel.
7. Bottom treatment - Bottom treatment excludes cover for
- Cover for scraping, grit blasting, anti-fouling coating
surface preparation or painting is
extended to anti-fouling coatings.
8. Constructive total loss - CTL payable where cost of recovery
- CTL payable where cost of recovery and/or repair exceeds insured value
and/or repair exceeds 80% of the of the vessel.
insured value of the vessel.
9. General average absorption - No such provision
- Claims for GA, salvage and special
charges shall be payable without
applying deductibles.

IHC 03 is the latest version and it incorporates additional clauses, provisions and optional
covers. Both IHC 03 and ITC Hulls 83 versions are based on English laws and practice and
subject to exclusive English jurisdiction. But ITC Hull 83 remains the most widely used H &
M clauses. The reason is that the underwriters agree to extend ITC Hull 83 clauses to
incorporate tailor made covers or IHC 03 optional covers in order to suit the shipowner’s
specific needs at agreed terms and additional premiums. Another reason is that any H & M
insurance does not cover all risks such as personal injury or death of the person, 1/4ths
collision liability, FFO damage, general average unrecoverable sum, pollution damage to the
marine environment. ISM makes P&I insurance mandatory for the ships. So P&I insurance
policy must be on the ship. Where ITC Hull 83 leaves off risks, as mentioned before, P & I
insurance picks up these risks and provides those covers to ship owners.
Considering the above aspects, it is recommended to buy ITC Hull 83 version. However, the
final choice of a suitable H & M insurance shall depend on important factors such as fleet
type, size and age, cargo to be carried, trading areas, premium charges, claim handling and
payment rating of the policy etc.

Conclusion:
The foregoing sections presents comparisons between the two Time H & M clauses from
ITC Hull 83 & IHC 03. It is also said that Hull and Machinery and P&I are often
complementary to each other when it comes to collision and FFO.

2) Introduction:
For quite some years, piracy has thrown the biggest threat and menace to the safety and
security of the shipping industry as a whole and ships, cargo and crew in particular. Piracy is
an insured peril in ITC Hull 83. It is exclusively covered in a Marine Kidnap and Ransom

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insurance policy. For example, Swedish club. In the following sections, piracy shall be
described in the purview of ITC Hull 83.

Main body:
ITC Hull 83, clause 6 Perils- The insurance covers loss of or damage to the ship insured
caused by piracy.
Piracy is a suitable case of general average where there is a provision in the contract of
affreightment that general average shall be adjusted in accordance with York-Antwerp rules.
Court cases have also recognized piracy as a case of general average.
Rule A of the York-Antwerp rules defines general average as follows.
“There is a general average act when and only when an extraordinary sacrifice or
expenditure is intentionally and reasonably made or incurred for the common safety for the
purpose of preserving from peril the property involved in a common maritime adventure.”
There are five essential features necessary to constitute a general average act.
1. There must be a common maritime adventure
2. The act must be for the common safety of property to preserve from peril (successful
act)
3. The sacrifice or expenditure must be extraordinary in kind
4. The sacrifice or expenditure must be voluntarily (intentionally) made or incurred
5. The sacrifice or expenditure must be reasonably made or incurred
In return for the release of the ship, her cargo and crew from the custody of pirates, payment
of ransom is the most common. In addition to the ransom, there are other considerable
ancillary costs incurred in respect of securing the release of the ship and her cargo, such as
initial search expenses, payments to a negotiating party, transporting expenses of the
ransom, insurance of ransom amount etc. These all expenses can be admitted as general
average if all five essential features are present.
- There is clearly a common maritime adventure of the ship, her cargo.
- The ship and her cargo being in the control of pirates are in a condition of common
peril who may damage or misappropriate either or both the ship and cargo. By
threatening the crew, the operation of the ship is compromised putting safety of the
ship and cargo at risk. Accordingly, payment of a ransom including necessary
ancillary costs are incurred in order to secure the ship and cargo for the common
safety.
- The expenses are obviously extraordinary in nature.
- The expenses are incurred voluntarily and intentionally in order to secure the safe
release of the ship and cargo from common peril.

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- The shipowner is required to act reasonably making efforts to re-take possession of

the ship. Charges shall be properly and reasonably incurred as expected from a
prudent competent shipowner who might do in the light of all circumstances taking
into account the risk of damage to the ship, her cargo and the risk of personal injury
or death of the crew.
In case of apportionment of ransom amount specified separately for safe release of the
crew. The cargo interest may refuse these expenses in general average adjustment.
Then this amount can be obtained from P& I insurance on the argument that it is to avoid
the risk of injury or death of the crew from the physical and mental torture in the custody
of pirates. It is, therefore very important that the shipowner informs all concerned
interests such as charterers, cargo owners, underwriters’ agent (Lloyd’s) and P&I club
correspondent and obtain their agreement in every stage of negotiation and payments
wherever possible, pending the release of the ship.

Conclusion:
It is therefore stated that piracy is covered in insurance and also it is a recognized case
of general average.

3) Introduction:
Performance of marine insurance by the underwriters is subject to fulfillment of warranties by
the assured on policy covers’ terms and conditions. Breach of warranty discharges the
underwriters from liability of compensation to loss or damage to the subject matter insured,
occurring during the period of breach, save underwriters are notified of such breach and
have expressly agreed to it. Seaworthiness of ship is one such warranty undertaken by the
assured.

Main body:
A ship is deemed to be seaworthy when she is reasonably fit in all respect to encounter the
ordinary perils of the seas of the adventure insured. This means any material defect
substantial in nature as to her structure, equipment, installation and arrangement shall
render the ship unseaworthy.

According to Marine Insurance Act 1963 (India),

Warranty of seaworthiness of ship-
1. In a voyage policy, there is an implied warranty that at the commencement of the
voyage the ship shall be seaworthy for the particular adventure insured.

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2. There is an implied warranty that the ship shall be seaworthy in port and in different
stages of the voyage in respect of preparation or equipment for the purposes of that
stage.
3. In a time policy when the ship is sent to sea in an unseaworthy state, the underwriter
is not liable for any loss attributable to unseaworthiness.

Conclusion:
The preceding sections describe seaworthiness of the ship and its connection with Marine
Insurance.

References:
1. B. K. Saxena & S. G. Deshpande, A2- Risk Management & Marine Insurance Notes, January
2018, Tolani Maritime Institute.
2. www.gard.no>web>updates>content
3. www.fortunes-de-mcr.com>Divers
4. India Marine Insurance Act 1963.