Exercise:

Ship: insurance amount: 1.600.000 USD

Wheat flour: 5000MT (100.000 packages), insurance amount: 800.000 USD
Fabric: insurance amount: 100.000 USD
On the next itinerary, due to bad weather, the ship crashed into the reef,
perforating the hull of the ship. Captain ordered to use 5,000 bags of wheat
flour to seal the holes temporarily. Due to the impact of the collision causing
the ship engine to fail, the captain signaled the rescue to another vessel to
reach the port of refuge.
At the port of refuge, the captain decided to repair the damaged machine
and then continue the journey to the port of destination.
Cost for repairing machine (due to excess capacity): 2000 USD
Cost for perforating holes: 1000USD
Wheat flour: 85.000USD (wet)
Salvage cost: 17600 USD
Contaminated fabric: 2000USD
Wheat flour with insect- 60% reduce in quality: 200 packages
Define insurer’s liability? (B clause- ICC 1982)

Case 1: The wet flour is wet after GA

Determine GA
- Step1: Determine total GA value
5000 bags of wheat flour sacrificed = 800.000/100.000 x 5.000
= 40.000 USD
Salvage cost = 17.600 USD
=> Total GA value = 40.000 + 17.600 = 57.600
- Step 2: Determine total value of contributing interest
Cost for repairing machine (due to excess capacity): 2000 USD
Cost for perforating holes: 1000 USD
● For ship’s owner = 1.600.000 - 2.000 - 1.000 = 1.597.000 USD
● For wheat flour’s owner = 800.000 USD
● For fabric’s owner = 100.000 USD
=> Total value of contributing interest = 1.597.000 + 800.000 + 100.000 =
2.497.000 USD
- Step 3: Determine contributing rate
Contributing rate = Total GA value/ Total value of contributing interest =
57.600/ 2.497.000 = 2.31%
- Step 4: Contributing value of each interest
● For ship’s owner = 1.597.000 x 2,31% = 36.890.7 USD
● For wheat flour’s owner = 800.000 x 2,31% = 18.480 USD
● For fabric’s owner = 100.000 x 2,31% = 2.309,54 USD

Case 1.a. The wheat flour is wet due to seawater

Determine PA
Because B Clause insurance is applied:
- Wet wheat flour is covered
- Contaminated fabric is not covered
- Perforating holes due to collision is covered
- Wheat flour with insects
=> Insurer has to reimburse
+ For Wheat flour’s owner = 85.000 USD
+ For ship’s owner= 1.000 USD

Determine insurer’s liability:

● For ship’s owner = 2.000 + 36.890.7+ 1.000 = 39.890.7 USD
● For Wheat flour’s owner = 40.000 + 18.480 + 85.000 = 143.480 USD
● For fabric’s owner = 2.309,54 USD

Case 1.b. The wheat flour is wet due to rainwater

Determine PA
Because B Clause insurance is applied:
- Wet wheat flour is not covered
- Contaminated fabric is not covered
- Perforating holes due to collision is covered
- Wheat flour with insects is not covered
=> Insurer has to reimburse
+ For ship’s owner= 1.000 USD
Determine insurer’s liability:
● For ship’s owner = 2.000 + 36.890.7 + 1.000 = 39.890.7 USD
● For Wheat flour’s owner = 40.000 + 18.480 = 58.480 USD
● For fabric’s owner = 2.309,54 USD

Case 2: The wet flour is wet before GA

Determine GA
- Step1: Determine total GA value
5000 bags of wheat flour sacrificed = 800.000/100.000 x 5.000
= 40.000 USD
Salvage cost = 17.600 USD
=> Total GA value = 40.000 + 17.600 = 57.600
- Step 2: Determine total value of contributing interest
Cost for repairing machine (due to excess capacity): 2000 USD
Cost for perforating holes: 1000 USD
Wheat flour: 85.000USD (wet)
● For ship’s owner = 1.600.000 - 2.000 - 1.000 = 1.597.000 USD
● For wheat flour’s owner = 800.000 - 85.000 = 715.000 USD
● For fabric’s owner = 100.000 USD
=> Total value of contributing interest = 1.597.000 + 715.000 + 100.000 =
2.412.000 USD
- Step 3: Determine contributing rate
Contributing rate = Total GA value/ Total value of contributing interest =
57.600/ 2.412.000 = 2.39%
- Step 4: Contributing value of each interest
● For ship’s owner = 1.597.000 x 2,39% = 38.168,3 USD
● For wheat flour’s owner = 715.000 x 2,39% = 17.088,5 USD
● For fabric’s owner = 100.000 x 2,39% = 2.390 USD

Case 2.a. The wheat flour is wet due to seawater

Determine PA
Because B Clause insurance is applied:
 - Wet wheat flour is covered
- Contaminated fabric is not covered
- Perforating holes due to collision is covered
- Wheat flour with insects
=> Insurer has to reimburse
+ For Wheat flour’s owner = 85.000 USD
+ For ship’s owner= 1.000 USD

Determine insurer’s liability:

● For ship’s owner = 2.000 + 38.168,3 + 1.000 = 41.168,3 USD
● For Wheat flour’s owner = 40.000 + 17.088,5 + 85.000 = 142.088,5 USD
● For fabric’s owner = 2.390 USD

Case 2.b. The wheat flour is wet due to rainwater

Determine PA
Because B Clause insurance is applied:
- Wet wheat flour is not covered
- Contaminated fabric is not covered
- Perforating holes due to collision is covered
- Wheat flour with insects
=> Insurer has to reimburse
+ For ship’s owner= 1.000 USD

Determine insurer’s liability:

● For ship’s owner = 2.000 + 38.168,3 + 1.000 = 41.168,3 USD
● For Wheat flour’s owner = 40.000 + 17.088,5 = 57.088,5 USD
● For fabric’s owner = 2.390 USD