Marine Insurance

Meaning of Marine Insurance:

Marine insurance has been defined as a contract between insurers and insured whereby the
insurer undertakes to indemnify the insured in a manner and to the interest thereby agreed,
against marine losses incident to marine adventure.
Section 2(13)A of the Insurance Act 1938 defines marine insurance as follows: "Marine
insurance business" means the business of effecting contracts of insurance upon vessels of
any description, including 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 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 among the risks insured against in
marine insurance policies.
Marine is the oldest form of insurance and came first in the list. This type of insurance
probably began in Northern Italy sometime during the 12th & 13th Century and gradually
the concept was rather transferred to or taken over by the United Kingdom. During the
13th/14th century the Italian merchants went to U. K. and along with the merchandise
carried with them the trading customs including, the concept of marine insurance. Marine
insurance as such was not being practiced as a separate specialized entity during that time
since it were the merchants who used to transact marine insurance business side by side
with their general trading activities.

Gradually the Lombard street of England ( named after the merchants of Lombardy of Italy )
started becoming the nerve centre of marine insurance activities as it was here where the
merchants used to assemble for the purpose of trade and insurance protection. However,
problems used to arise as there were no set rules or regulations for settling disputes arising
out of marine policies and it was the Lombard street customs that used to influence
settlement of such disputes. Practices were there to refer disputes to Admiralty Court but it
had the drawback of not having special knowledge of the Law Merchants or of Lombard
Street customs. Subsequently in 1575 Chamber of Assurances was established for the
registration of insurance policies and the advantage it has had in it was this that the
disputes were minimum because such registration was the evidence of the contract and
various terms and conditions under it. In 1601, Court of Arbitration was established-through
enactment for settling disputes on marine policies. The Bubble Act, 1720 saw the granting of
Charter to two insurance companies, viz., Royal Exchange and London Assurance, for
transacting marine insurance business side by side with the individuals.
The coffee houses of London have indeed played a very vital role in the development of
trade and commerce of the U.K. It is in such houses that the merchants and traders used to
congregate for their business transactions. One such coffee house was opened by Edward
LLOYD in 1680 where the merchants used to frequent their visits. Auctions of ships,
insurance coverage etc. used to take place here and gradually it became a place of shipping
intelligence. Since later part of the 17th century and early 18th century this coffee house
virtually turned into the most famous LLOYD'S which can boast of being the strongest and
soundest insurance organization all over the world.
The monopolies granted to two insurance companies previously by the Bubble Act 1720
were subsequently repealed and now numbers of insurance companies and individual
insurers are operating as marine insurers in the U. K. The present Act regulating the marine
insurance business is The Marine Insurance Act, 1906 and this Act is followed in our country
also.
SUBJECT MATTER OF MARINE INSURANCE:
Hull insurance, Cargo Insurance, Freights Insurance and liability Insurance are the subject
matter of marine Insurance:

A. HULL INSURANCE
Insurance of vessel and its equipment’s are included under hull insurance. There are a
number of classifications of vessels such as ocean steamers, sailing vessels, builders, risks
fleet policies and so on. It is concerned with the insurance of hull and machinery of ocean-
going and other vessels like barges, tankers, fishing and sailing vessels.
Insurance of construction risks or builder's risks deal with hull insurance for vessels when
they are under construction. A recent development in hull insurance has been the growth of
insurance of offshore oil/gas exploration and production units as well as connected-
construction risks.
It is covered with specialised class of business particularly for Fishing Vessels, Trawler's,
Dredgers, Inland and Sailing Vessels are available.
The subject matter of hull insurance is the vessel or ship. There are many types of designs of
ships. Most of them are constructed of steel and welded and are capable of sailing on the
sea in ballast or with cargo.
The ship is to be measured with GRT (Gross Register Tonnage) and NRT (Net Register
Tonnage). GRT is calculated by dividing the volume in cubic feet of the ship's hull below the
tonnage dock, plus all spaces above the deck with permanent means of closing. NRT is the
gross tonnage less certain spaces for machinery, crew accommodation ballast spaces and is
intended to encompass only those spaces used for carriage of cargo. DWT (Dead Weight
Tonnage) means the capacity in tons of the cargo required to load a ship to her load line
level.
Subdivision of Hull Insurance:
The Hull Insurance is further Subdivision into -
(a) General Cargo vessels
(b) Dry Bulk Carriers
(c) Liquid Bulk Carriers
(d) Passenger Vessels
(e) Other Vessels.
These can be further divided into ocean going and coastal tonnage. Ocean going gene
vessels is usually in the 5000 to 15000 GRT range, coasters are smaller in size and one
engaged carriage of bulk cargoes. Coastal tonnage does not withstand the same strains as
ocean going vessels.
1. General Cargo Vessel:
The general cargo vessels may be container ships, large carriers (LASH-Lighter Abroad Ship)
Ro-Ro (Roll on Roll off) vessels, Refers (Refrigerated Vessels General Cargo) Many g cargo
vessels are built for specific purpose Vessels may be subdivided into Liners and Tramp.
Liners loads at an advertised berth and runs to an advertised schedule calling can route at a
varying number of ports according to the particular service, it tries to maintain Time
schedule although there are heavy risk of seas. It requires huge capital investment. Liners
are always fit and maintained at all times. Liners have high standard of officers and crew.
Tramp carries cargo whenever and wherever it is available. Mostly bulk cargo very often an
seasonal in character for which she is usually chartered. Vessels are built to comply with the
particles needs the owner's trade.
2. Dry Bulk Carriers:
Dry Bulk Carriers are specially constructed vessels in the size range of thousands GRT for
coaster and 70,000 GRT for ocean going tonnage. The main bulk cargoes carried are iron
ore, coal, bauxite and phosphate. The main features of these vessels are the single weather
deck and large hold with wide hatches to facilitate loading and discharge by mechanical
means. Most bulk carriers have sloping upper wing tanks to assist in trimming the cargo and
thus produce a safer slow.
Nature of cargo, routs conversation into bulk cargoes and stability are the main
considerations underwriting.
3. Liquid Bulk Carriers:
Tankers are strongly constructed to carry bulk liquid. The tankers have using tanks which do
not extend across the breadth of the tanker. Due to the live nature of the liquids cargo,
tankers sustain heavier damage than other cargo ships. Tanker has shorter life due to
corrosive effect. There considerable danger of fire and explosion. Before a tanker is allowed
to enter a dry dock for repairs a gas free certificate is required. The risk of pollution
following a casualty makes salvage operation more difficult and expensive.
The tankers may be VLCC (Very Large Crude Carrier) and ULCC (Ultra Large Crude Carrier)
LASH and Sea Bee vessels are mother ships which carry floating containers in the form of
barges up to 1000 tonnes displacement. A RO-RO (Roll on Roll off) vessel is one having
facility for shipping Lorries, trailers, etc. without need for cranes.
4. Passenger Vessels:
There are cruise vessels or passenger liners which sail on voyages to distant areas of
scenically beautiful but rocky or shallow coasts or near the icy waters of the Arctic and
Antarctic. They possess modern navigational systems.
5. Other Vessels:
There are other types of vessels such as fishing vessels, offshore oil vessels and others.
Fishing Vessels:
Fishing vessels bulk of steel and fiberglass (GRP) are much more prevalent Geographical
physical features of the area of operations vary from comparatively sheltered waters of
inshore fishing to the full rigors of the open seas with exposure to gales, heavy seas fog ice
and snow The vessels may be classed or un-classed. Classed vessels are recognised by
Classification Society, and may possess class granted by it. Un-classed vessels are surveyed
out of water and all machineries’’ are thoroughly examined There are special tariff for
fishing vessel in India. The nature, type, age, geographical limits, etc. are examined for
insurance cover and rating.
Offshore Oil Vessels:
The offshore oil vessels are used for explanation or for commercial production of oil from
the ocean Beds. The comprehensive cover given covers not only the operations at site but
also the transporter of plant and equipment to the drilling sales which may be hundreds of
kilometres away in mid sea. These vessels are veritable artificial islands where the risks are
present in one form or another The jack up units are self-elevating platform which can float
freely with legs retracted by a jacking system for movements in tow. Casualties may occur
during tows or whilst jacking up or down. The semi-submersible or column established
drilling platform can be bottom supported and or free floating. They can operate is deeper
water and usually have multi anchoring system employing up to 10 separate lines. Another
ship shape unit is basically a modified conventional ship, with a slot for drilling through,
located in the centre. It is capable of much deeper water drilling. Again another fined
structure is usually a platform construction on four or more piled legs. The platforms are
stationary.
Hall and Machinery Insurance:
The policy covers the hull, machinery and equipment and stores etc. on board but does not
cover cargo. The insurance cover the requirements of the individual ship owner and protects
him against partially loss, total loss, and ship’s proportion of general average and salvage
charges, sue and labour expenses and ship owner's liability towards other vessels arising
from collisions.
Hell Underwriting:
Hall underwriting requires the following information to assure the risk Type, construction,
builders, age, tonnage, dimension, equipment, propulsion machines, engine, fire
extinguisher, classification society, merchant shipping act, warranties, navigation physical
and moral hazard.
B. CARGO INSURANCE
Cargo insurance is covered under risk policy or floating policies. The cargo may be of any
description, for example wares, merchandise, property, goods and so on. Transit clause of
ICC (A), (B), and (C) describes the duration of the risk as attaching from the time the goods
leave the warehouse or other place of storage at the placement in the policy for
commencement of transit. The risk then continues during the ordinary course of transit to
terminate on delivery.
Cargo insurance has coverage of loss or damage caused by war civil war, revolution,
rebellion, insurrection or civil strife or any hostile act, capture, seizure, arrest, restraint
detainment, general average and salvage charges, strikes, riots, etc.
Trade coverage covers the insurance needs of various types of cargoes of general nature. A
number of commodities and foodstuff provide for particular hazards. Institute of London
Under writers (ILU) have adopted uniform trade practices. Which are followed by other
insurers for insurance of cocoa, coffee, cotton, fats oil knots, hides, skins, leather, metal, oil
seeds, sugar, tea and so on are assured under standard policy. There are separate insurance
of coal Jute, Rubber, tanker, bulk oil, from products.
Risks Covered:
All risks clause covers inland Transit risks also for the cargo insurance Loss or damage are if
the risks occurred due to:
Fire
Lightning
Explosion
Riot, strikes, malicious damage
Impact by any rail /road vehicle
Storm, cyclone flood, inundation
Earth-quake, burglary
Accidental physical loss or damage.
A special declaration policy (SDP) is a form of floating policy issued to insured who s large
turnover with many and frequent despatches of goods anywhere within the country by rail
road or in water warp.
C. FREIGHT INSURANCE
Freight is to be payable for the carriage of cargoes or if the vessel, is chartered, the money
to be p for the use of the vessel. The carriage is unable to earn freight if the goods or
properties (cargoes) are not safely transported.
Pre-paid freight payable in advance is at the risks of the cargo owner who includes it in the
value of the goods insured under a cargo policy But freight payable only on delivery of the
goods the destination is at the risk of the ship-owner who has insurable interest in it and
therefore can insure it .The disbursement warranty of the ITC (Hulls) allows the ship owner
to effect in conjugation with 12 months insurance on the ship's hulls and machinery etc.
Time insurance on freight and/or charters freight and/or anticipated freight . When the ship
is lost, it also results in loss of her profit earring capacity and the termination of freight
contracts already entered into. A certain amount of freight is insured by a ship owner for a
period of 12 months under the Institute Time Clauses (freight). Additional policies are
insured on a voyage basis. The freight at risk on any voyage exceeds the amount of insured
for time. The Institute Voyage Clauses (freight) are then used.
Time charter hire is payable to the ship owner for the use of his ship for carriage of goods
for a specific period of time. If any events occur, such as breakdown of machinery damage
to the vessel etc. which prevents the operation of the vessel for more than 24 consecutive
hours, of the payment hire shall cease until the ship become operational. This freight is at
the risk of the ship-owner.
Freight Standard Clauses
The standard clauses in use are Institute Time Clauses-Freight (1.10.83) and Institute Voyage
Clause Freight (1 10.83). Freight is insurable on a time basis. Ship-owners usually insure
certain amount freight for a power of 12 months; Additional policies on voyage basis are
issued if the freight at risk on any one voyage exceeds the amount insured for time.
A loss of freight to the carrier who may be a ship-owner or a character can only arise when
the freight is payable at destination and the carrier runs the risks of not receiving it by
reason of loss of ship and/or loss or damage to cargo.
No such loss can arise to the ship-owner where freight in advanced of prepaid and is not
repayable if the ship and/or cargo is lost because in such cases the freight is usually merged
with the value of the cargo and any claim would be made under the policy covering cargo
The freight may be prep freight payable on ship or cargo lost or not lost, freight payable on
delivery, lump freight, time charter hire. Prepaid freight is not refundable in case of non-
delivery of the goods a hence it is not at risk of ship-owner.
MARINE INSURANCE POLICIES
CLASSES OF POLICIES
Different classes of policies are used in marine insurance
A. Time Policies
Under this policy the subject matter is insured for a definite period of time, e.g., from 6 am
of g January, 1976 to 6am of 1st January, 1977. The policy is generally taken for one year
although may be for less than one year. This policy is commonly more used for hull
insurance than for the care insurance The policy may cover, while was seating the vessel or
while under construction Risk covered under construction are for more than 12 months
There are standard clauses in relation freight , premium, interests, etc., which are added to
this policy. The time policy may be taken in case of goods and other movable vessels
B. Voyage Policies
The policy is issued to cover a particular voyage from one port to another and from one
place to her. The policy mentions the port of departure and the port of destination,
between which the risks are generally underwritten. This policy is not suitable for hull
insurance as a ship usually does not operate over a particular route only. However, this
policy may include time factor also as from Say to London for one year. In this case the risk
may be covered from one place to another covering period of one year. The policy is used
mostly in case of cargo insurance. The goods remain covered even when the ship halts at
intermediate ports. The risks at the port of departure and at the port of destination may be
d by incorporating suitable, clauses in the policy. The liability of the insurer continues during
continues landing and re-shipping of the goods.
C. Voyage and Time Policy or mixed Policies
To this policy, the elements of voyage policy and of time policy are combined in under this
policy. The reference is made certain period after completion of voyage For example; 24
hours after arrival.it may be beneficial to hall as well as to cargo insurance.
D. Floating Policies
This policy describes the general terms and leaves the amount of each shipment and other
particulars to be declared later on. The declaration is made in order of despatch of
shipment. The policy is taken for a round large sum which is specified at each declaration
and is attached to each shipment. With each declaration the amount will be reduced till it is
exhausted when the insured sum is said to be closed and the policy is fully declared or, 'run
off The most popular form of contract is 'Open Cover It is an agreement between the
insured and the insurer by which the assured on his part agrees to declare, and the insurer
on his part agrees to accept all the shipments falling within the scope of the open cover'
which is merely an original shop It is not a legal contract of marine insurance and suffers
from the same legal disability as the original ship' However the insured and the insurers are
honour bound. To give 'Open Cover' a legal form, a policy is issued for the purpose Separate
policies are not issued in case of each shipment but only one policy is issued at the time of
entering into contract All declarations are written on the back of the policy. A classification
clause is usually inverted in open cover to provide the agreed rates of premium, valuation
clauses are also inserted to provide the basis for valuation in the event of loss taking place.
This policy is suitable for a cargo-owner who makes regular shipments of cargoes All his
shipments are automatically covered as soon as the declarations are made The floating
policies are mostly used in the age of gigantic trade.
D. Open Cover Policy:
Issuance of open covers is also practiced in the insurance market more or less for the same
purpose as explained under floating policy. Under the open cover system a cover, usually for
twelve months, is given to the insured indicating that the insurers shall insure each and
every shipment to be declared by the insured, as per terms and conditions of the cover
note. It should be remembered by the students that this is not a policy like floating policy
and therefore, specific policies are required to be issued against each and every shipment.
E. Building risk policy:
These types of policies are issued in respect of ships whilst in the process of erection or
building at dockyards.
DESCRIPTION OF THE CLAUSES
The usual clauses which are or may be incorporated in a marine policy are:
(1) Assignment clause,
(2) Lost or not lost,
(3) At and from clause,
(4) Warehouse to warehouse clause,
(5) Deviation, touch and stay clause,
(6) Inchmaree clause,
(7) Running down clause,
(8) Sue and Labour clause,
(9) Reinsurance clause,
(10) Memorandum clause
(11) Continuation clause.
L Assignment Clause
The clause of assignment is as below as well as in his/their own name as for and in the name
and names of all and every other person or persons to whom the same doth may or shall
appertain, in part in all doth make assurance and cause... and them and every of them, to be
insured. This clause makes it clear that the marine policy is freely assignable unless this is
expressly prohibited. The policy can be assigned to anyone who may acquire an insurable
interest in the subject hatter as soon as the assured parts with his interest. Cargo policy is
freely assignable and no notice thereof is essential to be given to the underwriter. But, in
case of hull insurance the policy cannot be geed freely and the consent of underwriter is
essential because the degree of risk of the subject matter is materially changed when the
management and ownership of the vessel is changed. Since the owner of cargo has no
control over the cargo in transit, blank endorsement may be permitted. But in hull
insurance, specific endorsement of an assignment is essential. It is interesting to note that
marine policy can be assigned even after it takes place, but the interest in the subject,
matter insured and has not, before or at time of so doing, expressly or impliedly e does not
get a better title than the assignor. However, where the assured has parted with his interest
in the subject, matter insured and has not, before or at time of so doing, expressly or
impliedly agreed to assign the policy and subsequent assignment of the policy is inoperative.
2. Last or Not Last Clause
The clause is as to be insured, lost or not lost. The policy was taken good faith. The meaning
of the clause is that the insurer insures the subject-matter irrespective of the fact that has
food or not last before the issue of the policy. It is taken in such a case where a mod
information of the shipment of his cargo very late after the sailing of the steamer and, he
submits the risk to the underwriter and effects insurance it was not known whether the
matter to be insured was lost or was not lost. So, to provide full protection to shipment, the
"Lost or not lost' are inserted. It means that the insurer undertakes to indemnify the insured
whether the subject matter before the date of issue of the policy was already lost or not. In
this case, it is assumed that the assured and the underwriters are ignorant about the safety
or otherwise of the subject matter. The policy terminates if it is proved later on that one of
the two parties was aware of the subject-matter at the time of loss. The introduction of this
clause has a retrospective effect for any loss which has occurred during the period from the
date of shipment to the date of issue policy This clause was mostly prevalent in olden times
when the media of communication developed so much. Now, the clause has lost much of its
importance.
3. at and From Clause
This clause is applicable in voyage policies insuring hull, and freight. It determines the time
actual risk commences. As soon as the ship will arrive at the port, the risk will commence
that the policy covers the subject-matters while it is lying at the port the ship sails when the
policy contains From only instead of 'At and Form From means commences from the time of
departure of the ship and not previous to that. IN case of cargo policy this clause is
amended as the risk may commence boom the ne cargo is loaded on the vessel in voyage
policy, if the ship is not at that place when the contract is concluded, the risk commences as
soon as the ship arrives there in good safety. If the place of department is specified by the
policy, and the ship sails from other place than the specified one, the risk does not attach.
Termination of Risk
The wordings of policy in this case are as follows "And upon the goods and merchandises
until the same be there discharged and safely.
When the ship arrives the port of destination, the goods must be landed within a re time
and if they are not landed the risk ceases. The risk of landing within the reasonable
permitted in most of the cases. But, where it is allowed with standard policy, clauses such as
lighters, etc., are inserted to the policy.
4. Warehouse to Warehouse Clause
Generally, underwriters are responsible for the risk commencing from the time of loading to
the time of unloading the cargo. But, in certain cases the risks are beyond these two limits,
departing & destination. So, in order to cover the inland risks from the original place of
departure to the port of sailing and from the port of discharge to the place of final
destination are insured under Ward to warehouse clause'. Under this policy, the risk
commences from the specified place and c to the specified place of destination named in
the policy. Thus, the risk of land, craft transport transhipment are also covered under a
single marine insurance policy Sometimes, time-limits inserted in the policy and extra cost is
required from the insured to cover the remaining voyage where goods are wilfully detained,
the underwriter shall cease his liability. The clause as appeared in the Institute Cargo clause
is as follows "The risks covered by this policy attach from the time the goods leave the
Warehouse Store at the place named in the policy for the commencement of the transit and
continue during the ordinary course of transit, including customary transhipment, if any
until the goods are discharged over side from the overseas vessel at the final port.
Thereafter the risks covered are continued while transhipment, if any, until the goods are
disharpel pods are in transit and or awaiting transit until delivered to final warehouse at the
destination named in the policy or until the expiry of 15 days (30 days if the destination to
which the goods are is outside the limits of the port) whichever shall first occur The time
limit referred to above home midnight of the day on which the discharge over side of the
goods hereby insured from the mas vessel is completed Transhipment, if any other than as
above, and/or delay in excess of the e time limits arising from circumstances beyond the
control of the assured, held covered a un to be a arranged.
5. Deviation Touch and Clauses
The ship should not deviate from the course of the voyage described in the policy or where
the course is not a specifically designated one, from the customary course. Any departure
from the specified course or a customary course amounts to deviation. A deviation is
different from change of voyage In the latter case, the destination agreed upon is changed,
while in the former case the destination is the same as agreed, but the course thereto is
deviated from. In the change of voyage the underwriter's liability comes to an end from the
time the intention or decision to change the voyage is taken, but in deviation mere intention
to deviation is not material; there should be an actual deviation to avoid the policy. Once
deviation has taken place the risk ceases to attach for the rest of the voyage even though
loss has occurred after the vessel had reverted to the proper course. Where the ship
deviates without lawful excuse the underwriters are relieved of the liability as from the time
of deviation. The fact that deviation did not increase the risk or that the ship regained her
route before any loss occurred, would not amount to non-deviation This clause applies only
to voyage policies. In time policies, this clause does not apply. Deviation is excused under
certain circumstances but it should be noted that the ship must resume her course and
prosecute the voyage with reasonable despatch. Deviation or delay is excused in the
following cases:
1. Where authorised by any special term in the policy. The special term must be
incorporated in the policy. Underwriters are usually willing to extend the protection of the
policies after charging additional premium.
2. Where deviation is caused by circumstances beyond the control of the master and his
employer.
3. Where deviation or delay is necessary to comply with an express or implied warranty.
4. The deviation or delay is necessary for the safety of the ship or subject-matter insured.
5. For the purpose of saving human life or aiding a ship in distress where human life may be
in danger. For, and for obtaining medical or surgical aid, deviation or delay is required.
6. Where deviation is caused by the barratrous conduct of the master or crew, if the
barratry be one of the perils insured against.
6. Inchmaree Clause
The clause protects the ship-owners against losses to be included in claims by the assured.
This clause is taken from an illustration of a steamer called 'Inchmarce. The donkey pump of
the steamer was damaged due to sail. Claim was covered under the "and all other penis,
losses, and misfortunes clause". The court decided that due to negligent such losses were
outside the scope of the insurance and should not be covered by it. So, now to provide
indemnity for the insured for damage to the hull or machinery resulting from the negligence
of the master or crew, as well as from explosion or latent defects, a clause was introduced
into hull policies which are commonly known as "Inchmaree clause" This clause is also
incorporated in cargo policies.
Hague Rules
A Maritime Law Committee of the International Law Association sat at The Hague in 1921
and framed a set of rules regarding the rights and liabilities of cargo-owners and ship-
owners in connection with Bills of Lading so that no complication may arise in settlement of
claims.
7. Running down Clauses (R.D.C.)
This clause is also called collision clause and is included in hull policies. It provides that the
underwriter agrees to take upon the liability of the owner of the ship for damage done by
his vessel to another vessel on collision to the extent of three-fourths of such liability. The
underwriter will be responsible only when this clause is added in the policy. The assured
himself has to bear one-fourth of the loss so that he may exercise greater care in the
navigation of the vessel. The full protection can be given by deleting the words Three-
fourths' from the clause. In case the ship sinks in a collision and is held liable for the damage
done to the other vessel, the underwriter may have to pay a total loss and a heavy claim
under the R.D.C. The amount of damage extends to include damage done to other ship. Her
cargo and compensation for loss of employment in consequence of the collision.
8. Sue and Labour Clause
This clause reads as follows: "And in case of loss of misfortune it shall be lawful to the
assured, their factors, servants and assigns to sue, labour and travel for in and about
defence, safeguards, and recovery of the said goods and merchandises and ship, etc., or
part thereof, without prejudice to this insurance, to the charges whereof we, the assurers,
will contribute each one according to the rate and quantity of his sum herein assured. Thus,
it is the duty of the assured and his agents to act in such a way that they are uninsured and
to take such measures as may be reasonable for the purpose of averting or minimising loss
or damage. This clause requires underwriters to pay any expenses properly incurred by the
assured or his agents in preventing or minimising loss or damage to the subject-matter. The
reasonable expenditure is payable even though it may be, in addition, to total loss The
essential features of Sue and Labour Charges are:
(1) The expenses must be incurred for the benefit of the subject-matter insured. If occurred
for the common benefit they may become a part of general average which is not
recoverable under this clause
(2) They must be reasonable
(3) They may be incurred by the assured, his factors, his servants or assigns'. The clause
excludes salvage charges
(4) The expenses are incurred to avert or minimise a loss from a peril covered by the policy.
Expenses incurred for purpose of averting or diminishing any loss not covered by the policy
is not recoverable under this clause.
9. Reinsurance Clause:
The reinsurance clause "being a reinsurance and subject to the same clauses and conditions
as the original policy, and to pay as may be paid thereon. is generally added to the original
policies the reinsurer is liable only for claims for which the original underwriter is liable. If
the reassured has paid a claim for which he is not legally liable under his policy, the
reinsurer is under no obligation to reimburse him. The cost incurred by the original insurer
in contesting ability under the original policy, need not be paid by the reinsurer. The
reinsurance policy is closely linked with the original insurance and any alteration in the
original policy must be agreed with the reinsurer.
10. Memorandum Clause
The memorandum clause reads as under “Corn, fish, salt, fruit, flour and seed are warranted
free from average, unless general, or the ship be stranded sugar, tobacco, are warranted
free from average. And all other goods, also the ship and freight, are warranted free from
average. This clause is meant to provide a minimum limit to be underwriter's liability
regarding claims for particular average by exempting him from such claims.
11. Continuation Clause
This clause refers that the vessel shall continue to be covered even after completion of
voyage under the policy at a pro rate premium to her port of destination provided previous
notice was not given.
 MARINE LOSSES
Losses in marine insurance business are result of the various perils. Marine insurance policy
does not necessarily cover all the risks. All insurers is liable to indemnify an insured in
respect of only losses which result from perils insured against. When the loss occurred is
beyond the insured peril, the insured himself shall have to bear. The onus of proof under a
policy of marine insurance is upon the insured to establish that the loss was proximately,
caused by an insured peril. When goods are insured against 'All Risks', the onus of proof of
loss is transferred to the insurer.

Marine Perils
The perils insured against are mentioned in the policy and the underwriter shall be liable for
damages caused by the insured perils.
"Marine Perils means the perils consequent on", or incidental to the navigation of the sea,
that is to say, perils of the seas, fire, war perils (enemies), pirates, rovers, thieves, captures,
seizures, restraints and detainment of princes and peoples, jettisons, barratry and other
perils, either of the like kind or which may be designated by the policy."
1. Perils of Sea
Under perils of sea, ordinary action of the winds and waves, ordinary wear and tear to the
vessel, inherent risk of the cargo is not included. The underwriter may be liable for losses
caused by Perils of the sea; he is not necessarily liable for perils on sea. A peril of the sea
refers to fortuitous accidents or casualties of the sea. If the loss arising out of any of the
perils of the sea insured is attributable to the fraud or wilful misconduct of the assured, the
underwriter is acquitted from the liability under the policy.
2. Fire
In olden times fire was the biggest maritime perils, but recently it has been under control to
a greater extent. Damage resulting from fire and smoke is included under fire-peril. The
water used for extinguishing fire may cause damage to the insured goods. So, this peril is
also insurable. The damages due to spontaneous combustion may be maritime peril and be
insured against. Damage done due to lightning, explosion and fire originating from
negligence of the crew is recoverable from underwriters. The losses which are not included
in the standard policy can be covered by having special clauses and paying extra-premium,
3. Man-of-War
This is the vessel which is authorised by nations for the purpose of defence or attack in the
event of hostilities. Any damage to the goods or ships arising out of collision against a man-
of-war is insurable.'
4. Enemies
The ships belonging to the foe (enemy) may cause loss to the insured and is re-underwritten
by the marine policy. This policy extends to all the persons of the enemy country and to
their hostile acts provided such acts form part of the enemy actions.
5. Pirates, Rovers, Thieves
The perils on account of pirates, rovers and thieves were common in olden times, but it has
been reduced considerably these days. These acts are generally committed for the pursuit of
individual gain by the persons beyond the jurisdiction of a state. The term "thieves' does not
mean clandestine then or a theft committed by anyone of the crew or officers or
passengers. Jettison means voluntary throwing away of the cargo or part of a vessel's
equipment for the lightening or relieving the ship for common safety. The aim of the
intentional throwing away of the goods or property is to relieve the vessel from some
imminent peril. Accidental falling of things does not constitute jettison. The own inherent-
vice of cargo is also not included in the jettison.
6. Barratry
Barratry includes every wrongful act wilfully committed by the master or crew the prejudice
of the owner. The act of barratry must be committed without the knowledge of the owner.
The theft, the setting fire to ship, fraudulent selling of vessel and cargo without the
connivance of the ship-owner are the various examples of the barratry. The insurer, if
barratry insured, is liable for losses arising out of barratry.
7. Restraints and Detainments
The prevention to free use of a port by the government of the country is called restraints. It
may cause interruption and possible loss of voyages involving such ports and sacrifice of
cargo. The term 'detainments' covers losses resulting from the detention of a vessel and its
cargo by blockage or possibly quarantine regulation or other interference by the police
power of a nation while a vessel is in port. It does not cover losses which are the result
merely of delay or interruption of the voyage, or loss of market or some other remote
result.
8. The Free of Capture and Seizure Clause (F.C. & S. Clause)
The policy generally covers war perils. But, to include perils of sudden declaration of war,
the war clause or free of capture and seizure clause is added to relieve war perils. By
deletion of this clause, the policy is automatically restored to its original condition and
adequate premiums are charged for the purpose.
9. Explosion
The risk of explosion has greatly increased. The explosion on board of a vessel damaging hull
or cargo or both could be constructed as a peril on the sea. An explosion on shore might
damage a ship or its cargo. Marine cargo policies were amended to include the risk of
explosions not clearly caused by war perils. The explosion, in case of hull policies, 'on
shipboard or elsewhere' is covered in the amended "Inchmaree or Negligence clause".
10. Strikes, Riots and Civil Commotion Clause
The marine insurance on cargo is extended to cover from warehouse to warehouse or
otherwise insures the goods on shore prior to shipment and after discharge, the danger of
underwriters being held liable for losses, resulting from the unlawful acts of strikers from
riots or civil commotions is materially enhanced. The insurers are unwilling to assume
liability for losses due to unlawful acts.
11. All Other Perils
Loss occurred by salt water of the sea, action of worms on timber, cattle dying due to want
of fodder as a result of lengthy voyage constitute sea perils. There may be other damages
due to oil, sweat, heat, which are insured under other perils.
RATE MAKING IN MARINE INSURANCE
Hull Insurance
1. Management
One management may be efficient in the upkeep of the vessel and the appointment of
officers and crew. Other management, through negligence, indifference and undue
economy, may show a bad record. To treat these managements alike would be an injustice
to the better managed concerns. It would penalize efficiency and carefulness and put a
premium on inefficiency and carelessness.
2. Natural Forces and Topography
The underwriters consider the character of the route, the construction, type and the
nationality of the vessel and conditions of the contract. Some natural hazards are
permanent while others are of seasonal dangers. References are made to storms,
submerged shoals, shifting sand bars, shallow water, narrow channels, ice, currents, tides
and seaquakes while calculating the premiums to a particular route. Dangers from an
underwriting point of view are associated with the ports of departure, call or destination.
Some ports are known for insufficient depth, absence of good anchorage ground, lack of
protection against tides or tidal waves.
3. Construction, Type and Nationality of the Vessel
The quality and fitness of the vessel to serve as a carrier on the particular route is naturally
of the utmost importance. The underwriter wants to know the vessel with respect to its
builder and owner, structural plan, material used in construction, type of propulsion,
structural strength to resist stresses and strains, adaptability to carry various kinds of cargo
and its age and physical condition. In foreign countries, certain societies are formulated to
promulgate rules for the construction of vessels, supervising such construction and assigning
a class to each vessel. The Lloyd's Register contains information to numerous vessels of
other countries, name and nationality of the vessel, materials of construction, details of the
decks. The engine and boiler equipment of the vessel. Periodical changes are noted down
there. Nationality of the vessel is important to insurer because it discloses the dependence
of the nations upon the ocean trade. The nationality reveals the acumanship or skilfulness of
the masters and crew. The rates may vary greatly as to the standard or commercial honour
in trade, high standard and commercial ethics. Premium rates are based on age of the
vessel, propelling method body-structure, risks covered, distance for transit and nature of
the vessel, tonnage capacities, port classification and season of sailing.
4. Policy Conditions
Innumerable clauses are used to limit or increase the underwriter's liability. Some policies
may cover against total loss. Some may cover partial losses. Others may relate only to
general average or particular average.

Cargo Rates
The premium on cargo depends upon the following factors:
1. Ownership
It may happen that two separate ownerships of the same kind of cargo, carried on the same
ship and to the same place will command different rates. Proper packing, profitable
accounts and previous refusal of insurance may determine the rate.
2. Character of the Cargo
The difference in hazard between various kinds of commodities, different forms of the same
commodity, different shipments. Different types of packing and durability of the commodity
may influence the premium rates.
3. Hazards and Customs
The natural forces and topography considered in the case of ship are also considered in the
case of cargo. The effect of seasons has important bearing upon commodities that are
seriously affected by cold or heat. The season or climate at the port of destination may
influence the risk. In certain season the port is busy with a particular cargo. Varying trade
customs associated with the different commercial routes will influence cargo rates
materially. The moral hazard is greater on certain routes.
4. Quality and Suitability of the Vessel used as Carrier
The underwriters take into account the fitness of the vessel to carry the particular cargo.
The premiums are higher in the case of ship of slower speed due to longer exposure of the
cargo. In case of highly perishable goods, moving in large quantities, special types of vessels
have been designed to carry such commodities.
5. Duration of Voyage and Policy Conditions
Insurers take into account the length of time. Sometimes, loading of the goods aboard the
vessels and protection of the goods while on the dock are considered in calculation of
premium.
6. Miscellaneous Factors
The operating efficiency or proved experience of ship may affect the risk on cargo. The
methods of handling and stowing cargo, the regularity of the service, etc., are the various
factors to influence the premium rate.