Marine Losses

and insurance
Capt. Amin Al Qawasmeh

Jordan Academy for maritime studies

 Overview
Introduction
classification of marine losses
General Average

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 Types of Marine Losses

If the loss takes place on account of any of the perils insured against with the
insurer, the insurer will be liable for it and shall have to make good the losses to
the assured. If the peril is insured, the insurer will indemnify the assured,
otherwise not.

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 Total loss
Total loss
There is an actual total loss where the subject matter insured is destroyed or so
damaged as to cease to be a thing of the kind insured or where the assured is
irretrievably deprived thereof.
Losses are deemed to be total or complete when the subject- matter is fully
destroyed or lost or ceases to be a thing of its kind.

It should be distinguished from a partial loss where only part of the property
insured is lost or destroyed.
In case of a total loss, the insured stands to lose to the extent of the value of the
property provided the policy amount was to that limit.

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 1- Actual total loss

Actual total loss

The actual total loss is a material and physical loss of the subject-matter insured.
Where the subject-matter insured is destroyed or so damaged as to cease to be a thing of the kind insured, or
where the insured is irretrievably deprived thereof, there is an actual total loss.
When a vessel is foundered or when merchandise is so damaged as to be valueless or when the ship is
missing, it will be an actual total loss

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 The actual total loss occurs in the following cases:
1.The subject matter is destroyed, e.g., a ship is entirely destroyed by fire.
2.The subject matter is so damaged as to cease to be a thing of the kind insured. Here, the subject-
matter is not totally destroyed but damaged to such an extent as the result of the mishap; it is no longer
of the same species as originally insured. Examples of such losses are—foodstuff badly damaged by
seawater became unfit for human consumption, and hides became valueless as hides due to the
admission of water. These damaged foodstuffs or hides may be used as manure. Since the characters of
the subject matters are changed and have lost their shapes, they are all actual total loss.
3.The insured is irretrievably deprived of the ownership of goods even if they are in physical existence
as in the case of capture by the enemy, stealth by a thief, or fraudulent disposal by the captain or crew.
4.The subject matter is lost. For example, where a ship is missing for a very long time and no news of
her is received after the lapse of a reasonable time. An actual total loss is presumed unless there is some
other proof to show against it.

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 2-Constructive total loss
The subject matter is not lost in the above manner but is reasonably abandoned when its
actual total joss is unavoidable or when it cannot be preserved from total loss without
involving expenditure that would exceed the value of the subject matter.
For example,
The cost of repair and replacement was estimated to be $50,000, whereas the ship was
estimated to be $40,000, the ship may be abandoned and will be taken as a constructive total
loss.
But if the value of the ship were more than $50,000, it would not be a constructive total
loss. Here it is assumed that retention of the subject matter would involve financial loss to
the insured.

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 The constructive total loss will be
where
The constructive total loss will be where;
1.The subject-matter insured is reasonably abandoned on account of its actual total loss
appearing to be unavoidable;
2.The subject matter could not be preserved from actual total loss without an
expenditure that would exceed its repaired and recovered value.
The insured is not compelled to abandon his interest; the insurer will have to pay the
full insured value where the goods are abandoned.

Where awe is a constructive total loss, the assured may either treat the loss as a partial
loss or abandon the subject-matter insured to the insurer and treat the loss as if it was an
actual total loss.

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 Difference between actual and
constructive total loss
The substantial total loss is related to physical impossibility, and the constructive total loss is related to
commercial impossibility.
For example,
If the hides are so damaged that it is impossible to prevent the hides from destruction, and they may become a
mass of putrefied matter, the case is of an actual total loss.
But suppose it was possible to restore the hides to their original condition, though the cost of so doing would
exceed their value at the destination. In that case, the damaged hides can be claimed as a constructive total loss
because the completion of the adventure has become commercially impossible.

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 Presumed Total Loss
When the ship concerned in the adventure is missing her total loss may, after the lapse of a
reasonable time, be presumed. Ordinarily, it will be presumed that the loss arose from
"peril the sea" which is an ordinary marine risk. But if the ship was last known to have
been. In war-infested areas then, in the absence of other evidence, the presumption will be
that she was lost through war risk

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 Partial losses
Partial average
General average loss

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 PARTICULAR AVERAGE LOSS
The particular average loss is ‘a partial loss’ of the subject-matter insured caused by a peril insured and is
not a general average loss.
The general average loss or expense is voluntarily made for the standard safety of all the parties insured.
But, the particular average loss is fortuitous or accidental, and it cannot be partially shifted to others but
will be borne by the persons directly affected. The particular average loss must fulfill the following
conditions:
1.The particular average loss is a partial loss or damage to any particular interest caused to (hat interest
only by a peril insured against.

2.The loss should be accidental and not intentional.

3.The loss should be of the particular subject matter only.

4.It should be the loss of a part of the subject matter or damage to that or both.

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 The distinguishing feature in this matter is that the properties insured are all of the same description,
kind, and quality. They are valued as a whole in the policy; the total loss of a part of this whole is a
particular loss, but where the properties insured are not all of the same description, kind, and quality.
They are separately valued in the policy, the loss of an apportionable part of the interest is a total
loss.
In case of total loss of a part of recoverable either as a total loss or as a particular average loss, the
basis of the settlement will be on the total loss of the whole lot or the insurer will be liable to pay in
proportion according to the insured or insurable value of the whole interest.

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 General Average
The law of general average is a principle of maritime law whereby all stakeholders in a sea venture
proportionally share any losses resulting from a voluntary sacrifice of part of the ship or cargo to save the
whole in an emergency.
The rules on general average are founded on the common venture of the ship, cargo, and freight during a
voyage. Their purpose venture of the commonality is exposed to a common danger during the voyage – for
instance, the ship springs a leak and is in danger of sinking- then the extraordinary sacrifices and
expenditures resulting from rescue efforts shall be divided among the community in relation to the value of
each respective interest in this form.

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 From the simple core- which is generally referred to as the principle of common safety-
the rules of general average expenses may include extraordinary expenses incurred for the
benefit of the venture, even where this was not strictly necessary to avoid a common
danger.

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 When the General Average Loss can
arise?
As per (A) of York- Antwerp Rules GA is defined as follows: "there is a general average act when,
and only when, any extraordinary sacrifice or expenditure is international and reasonably made
incurred for the common safety the purpose of preserving from peril the property involved in a
common maritime adventure"

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 It is important to bear in mind that before any question
of general average can arise:
1. The sacrifice or expenditure must be of an extraordinary nature. Damage to a ship, her
machinery, or equipment whilst being used for the purpose for which they are indented
would not amount to general average. On the other hand, using a ship's engines in an
effort to refloat when stranded would, if the engines were damaged as a result, is an
extraordinary sacrifice.

2. There must be a common adventure. That is to say, the ship, freight and cargo must all
be involved. In any case, there must be more than one interest.
3. The common adventure must be in peril. That is, all interests must be imperiled.

4. There must be a sacrifice (of property) or an expenditure (of money).

5. The sacrifice or expenditure must be made or incurred reasonably and intentionally for
the sole purpose of preserving the adventure from the immediate peril.

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 Examples of General Average:
GA acts include such things as:

1. Putting into a port of refuge to effect necessary repairs.

2. Voluntary stranding to avoid sinking

3. Working of ship’s engines when a ship is ashore in a position of peril.

4. The jettison of cargo to float a grounded ship or to prevent the ship from capsizing.

5. Extinguishing fire on board ship.

6. Expenses for salvage remuneration.

Damage to machinery and boilers including expenses in connection with bringing afloat a ground ship

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 5-Even expenses that were not necessary to bring the ship and cargo out of danger will be
compensated. These expenses could, for example, include expenses for unloading
handling storage, and reloading cargo while the ship is repaired, or wages incurred during
the ship's stay in a port of refuge. The reason for the admission of such expenses in
general average is that they have been incurred for the advantage of the ship, cargo, and
freight- they make the continuation and completion of the voyage possible.

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Thank you
Capt. Amin Al Qawasmeh