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Published by Enhelion, 2020-06-14 08:02:57

Module_5

Module_5

MODULE 5

INSURANCE POLICIES AND PRACTICES IN MARITIME LAW

5.1. INTRODUCTION

In the era of globalization, maritime transportation has been the spine of universal exchange
having more than 80 cents for every penny of the stock transportation done by the ocean. But
marine transport includes a considerable measure of hazard to the products being conveyed
and furthermore the ship conveying them. Subsequently, to encourage exchange and trade
and to moderate the danger of money related misfortune to property, they ought to be
guaranteed as it gives security and assurance to people, groups and organizations. It
accommodates mutual sharing and facilitates agents participate in more unsafe and unsecured
organizations which guarantee a larger amount of financial activity in the states. In these
circumstances, Marine insurance covers an essential segment of universal exchange and
trade.

This insurance has its roots settled even before 1906 when the English Marine Insurance Act
was passed with the view to systematize the law. Contrary to popular belief, Lloyd's was not
the primary gathering of individuals to offer insurance for Maritime trade. The main type of
marine insurance was traced back to the year 3000 BC when Chinese merchants scattered
their shipments among a few vessels to compress the likelihood of harms.

The law identifying with marine insurance was systematized in England by the Maritime
Insurance Act of 1906, and this demonstration came into constraining on 1 January 1907.
This order implied to elucidate only essential principles of the law which related solely to
marine insurance and explicitly sanctioned that the standards of the customary law such as
the law merchant except in so far as they were conflicting with the express arrangements of
the Acts were to keep on applying to contracts of marine insurance.

Since Independence, Indian shipment regime has resulted plainly as obligatory to sanction an
Indian enactment for the smooth improvement of Marine insurance law which would be
reliable with the conditions in India. Before enactment, questions identifying with marine law

relied on the general law of agreement and the English choices which depended on the
customary law tenets of an agreement. The Indian lawon marine insurance , historically, was
simply an understanding of the tenets contained in the basic type of marine strategy.
In principle, Marine insurance is a contract of indemnity, however, in practice it by no means
results always in a complete indemnity.1

In Richards .v. Forest Land, timber and Railways Co. Ltd.,2 it was observed,

“The act is merely dealing with a particular branch of the law of contracts- namely, those of
marine insurance. Subject to various imperative provisions or prohibitions and general rules
of the common law, the parties are free to make their own contracts and tot exclude or vary
the statutory terms. The object both of the legislature and of the courts has been to give effect
to the idea of indemnity, which is a basic principle of insurance, and to apply it to the diverse
complications of fact and law in respect of which it has to operate. In this way, the law
merchant has solved or sought to solve, the manifold problems which have been presented by
insurances of maritime adventures.”

Venkatesh correctly terms that "in India, insurance has a profound established history. It
discovers say in the works of Manu (Manusmrithi), Yagnavalkya (Dharmasastra) and
Kautilya (Arthasastra). The compositions talk as far as the pooling of assets that could be re-
circulated in the midst of catastrophes, for example, fire, surges, pandemics and starvation.
This was presumably a precursor to advanced insurance. Antiquated Indian history has
safeguarded the soonest hints of insurance as marine exchange advances and bearers'
agreements. Insurance in India has advanced after some time vigorously drawing from
different nations, England in particular."3

In this manner, while the overruling principles of insurance is that of repayment for
misfortunes managed, the courts acknowledge the need to instil a component of flexibility for
the insurance to contract on whatever terms concerned parties esteem fit.

In India, the Marine insurance law was legislated as Marine Insurance Act, 1963. The
preamble to the Act states that it is “an Act to codify the law relating to marine insurance.”


1 British & Foreign Marine Insurance Co., (1921) 1 A.C. 188,214 H.L (per Lord Summer); Maurice .v.
Goldsbourgh, (1939) A.C. 452, 466-7 P.C. (per Lord Wright).
2 [1941]3 All ER 62, HL, (per Lord Wright).
3 M.Venkatesh, A Study of “Trend Analysis in Insurance Sector in India”, 2, IJES, 1, 1 (2013).

In the case of Bank of England v Vagliano Brothers,4 Lord Herschel said that “The canon of
construction generally applicable to a codifying statute is well known: the language of the
statute must be given its natural meaning, regard being had to the previous state of the law
only in cases of doubt or ambiguity”.

5.2. REQUIREMENTS OF TAKING AN INSURANCE POLICY

Besides the foremost requirement of entering into a contract of insurance, it is essential that
the contract contains an insurable interest in the subject matter or any form of consideration
which has a value and is not a contract by way of wagering.5 Moreover, the policy must be in
compliance with the provisions mentioned under 24 to 34 of the Indian Act,6 and the rules
mentioned in the supplementary schedule.

5.3. ESSENTIALS OF MARINE INSURANCE

Despite Marine insurance contracts featuring basic principles of a legitimate contract, yet the
contract law is not explicitly applicable to them. The foundation of such contracts thrives on
contract of ‘indemnity’. Under the contract of indemnity, this is recoverable in the form of a
pecuniary loss from the insurer by the insured. Section 3 of Indian Marine Insurance Act
foresees a contract of marine insurance as “a contract whereby the insurer undertakes to
indemnify the assured, in a manner and to the extent thereby agreed, against marine losses,
that is to say, the losses incident to marine adventure”.

During the eighteenth century, when Marine insurance was contended with various
uncertainties and complex situation which in turn created various problems in the agency of
the insurer and the insured. Some major agency problems faced by them were as follows:

Firstly, where there was a probability of a ship or the cargo getting lost or damaged,
which would depend on various factors including the route, distance, and quality of
the crew and in times of war, the threat of the ship getting caught by the enemy


4 Bank of England v Vagliano Brothers, (1891) A.C. 107, 144 H.L.
5 Indian Marine Act, 1963, Section 6; Section 4, English Act of 1906.
6 Section 22 to 32, English Act of 1906.

vessels. Such kinds of risk are taken into consideration by the underwriter while
determining the premium.
Secondly, certain situations where the hazard was on the part of the insured, which
may range from taking excessive risks to deliberately sinking the ship or cargo or
misrepresenting the value of the goods or even ensuring a ship which is already lost.
Thirdly, a major concern for insurance buyers was the financial stability of the
underwriter. Underwriters may fail to incur the loss when any major hazard happens.
Due to such exposure of risk to the insured and the agency problems arising between
the insured and the insured, merchants focused on choosing more reliable
underwriters and were willing to pay high amounts of premium making the insurance
financially secured.

Despite these complexities, Marine insurance was successfully systematized by Indian
legislators that imbibes important components, namely:

The formal instrument embodying the contract of marine insurance is called “the
policy”.
“The slip” or “covering note” is the informal memorandum that is drawn up when the
contract is entered into.
The subject- matter insured and the consideration for the insurance are respectively
known as “the interest insured” and “the premium”.
The person who is indemnified is “the assured” and the other party is styled “the
insurer” or “the underwriter” so called because he subscribes or underwrites the
policy.
“Loss” includes damage or detriment as well as actual loss of property arising from
maritime perils.”7

Section 25 of the Act specifies the essential matters that should a part of a Marine policy,
namely:

The name of the insured or any other person on his behalf.
The voyage or time period or if both covered under the insurance.


7 Gaurangi Patil, Reeling Back In History To Understanding Marine Insurance/ Protection & Indemnity Clubs
(P&I), BRUS (Aug. 17, 2014, 11:08 AM), http://www.brus.in/publications/shipping/MI.pdf.

The subject matter and the risk against which it is insured.
The name of the insurers.
And the amount or the sum insured. “A contract of marine insurance is uberrimae
fidie or, as enumerated in Section 19 of the Indian Marine Insurance Act, ‘a contract
based upon the utmost good faith.”

The notion of utmost good faith, the cardinal principle governing the marine insurance
contract, is a well-established doctrine derived from the celebrated case of Cater v. Boehm8,
decided long before the inception of the Act. With the codification of the law, the principle
found its expression driven in Sections 19-22.”9

In general, Marine insurance is governed by certain fundamental principles which are listed
below:

Principle of indemnity: The contract of marine insurance is a contract of indemnity.
And the insured is entitled to claim the actual loss incurred from the insurer.
Principle of utmost good faith: A contract of marine insurance is a contract of
utmost good faith. The insured, as well as the insurer, must disclose each and every
information in their best interest and which is essential to the contract. Any non-
disclosure will give the choice to the other party to make the contract void any time.
Principle of Subrogation: According to the principle of subrogation, when the loss is
already met, the insurer steps into the shoes of the assured person, and is entitled to all
the remedies and rights which are available to the insured against either the third party
or the insured party itself.
Principle of Proximate Cause: This particular principle is based on the Latin maxim
of ‘in jure non remota causa sed proxima spectator’ which means that any law which
is an immediate and not a remote cause should be considered while measuring the
damages. And where any loss is caused due to series in succession, the nearest cause
of loss must be taken into consideration.


8 (1766) 3 Burr 1905.
9 Ibid.

5.4. FEATURES OF MARINE INSURANCE

Offer & Acceptance: It is a prerequisite to any contract. Similarly, the goods under
marine (transit) insurance will be insured after the offer is accepted by the insurance
company.
Illustration: A proposal submitted to the insurance organization alongside premium on
1-8-2018 yet the insurance organization acknowledged the proposition on 15-8-2018.
The hazard is secured from 15-8-2018 and any misfortune before this date won't be
secured under marine insurance.
Payment of premium: A proprietor must guarantee that the premium is paid well
ahead of time so the hazard can be secured. On the off chance that the instalment is
made through check and if it is disrespected then the scope of hazard won't exist in
consonance with Section 64 (V) (B) of Insurance Act, 1938.
Contract of Indemnity: Marine insurance is a contract of repayment and the
insurance organization is subject just to the degree of real misfortune endured. In the
event that there is no misfortune there is no obligation regardless of the possibility
that there is an operation of protected hazard.
Illustration: If the property under marine (travel) insurance is safeguarded for Rs 25
lakhs and amid travel, it is harmed to the degree of Rs 10 lakhs then the insurance
organization won't pay more than Rs 10 lakhs.
Utmost good faith: The proprietor of goods to be transported must unveil all the
significant data to the insurance organization while safeguarding their goods. The
marine approach should be voidable at the alternative of the safety net provider in
case of distortion, miss-depiction or non-divulgence of any material data.
Illustration: The nature of goods must be unveiled i.e. regardless of whether the goods
are risky in nature or not, as the premium rate will be higher for perilous goods.
Insurable Interest: The marine insurance will be substantial if the individual is
having an insurable interest at the season of misfortune. The insurable interest will
rely on the idea of offers contract.
Illustration 1: Mr. J sends the goods to Mr. K on FOB (Free on Board) premise which
implies the insurance is to be organized by Mr. K. furthermore if any misfortune

emerges amid travel then Mr. K is qualified for getting the remuneration from the
insurance organization.
Illustration 2: Mr. J sends the goods to Mr. K on CIF (Cost, Insurance and Freight)
premise which implies the insurance is to be orchestrated by Mr. J. also if any
misfortune emerges amid travel then Mr. J is qualified for getting the remuneration
from the insurance organization.
Contribution: If a man guarantees his goods with two insurance organizations, at that
point in the event of marine misfortune both the insurance organizations will pay the
misfortune to the proprietor proportionately.
Illustration: Goods worth Rs. 50 lakhs were protected for marine insurance with
Insurance Company A and B. If there should be an occurrence of misfortune, both the
insurance organizations will contribute similarly.
Period of marine Insurance: The time of insurance in the arrangement is for the
ordinary time taken for a specific journey. For the most part, the time of open marine
insurance won't surpass one year. It can likewise be issued for the single travel and for
a particular period yet not for over a year.
Deliberate Act: If goods are harmed or misfortune happens amid travel as a result of
think demonstration of a proprietor then that harm or misfortune won't be secured
under the arrangement.
Claims: To get the remuneration under marine insurance the proprietor must
illuminate the insurance organization quickly so the insurance organization can find a
way to decide the misfortune.

5.5. INSURABLE INTEREST

Marine Insurance Act declares void all marine insurance policies where insurable interest is
rendered inapplicable at the time of loss. It is a prerequisite for the one claiming insurance.
However, it is not necessary that one must have insurable interest from the beginning. It is
only at the time of loss the insurable interest must be present.

Illustration: When a person obtains an insurance policy now and after two-three months lose
interest in that policy even though s/he actually paid the premium for the three months, they
are not going to receive any reimbursement back for the sole reason that when s/he procured

the insurance policy they have the interest to get the benefits of the policy later on. If in any
case of a change of interest or opinion due to any circumstance, the company is not going to
refund any part of premium so that’s what is referred as insurable interest that is when one
takes up the policy having any kind of interest or intention to get the benefit of the insurance
contract.

Though the Indian laws do not profess to give an exhaustive definition of “insurable interest”
or define the expression “insurable interest” exhaustively but the customary general rule
stands that to constitute “interest” insurable against a peril, there must be an interest such that
the peril would, by its proximate effect, cause damage to the assured.

5.6. FUNDAMENTALS OF MARINE INSURANCE CONTRACT

Marine insurance business implies the matter of affecting contracts of heaps of any depiction,
including cargoes, cargo and different interests which might be lawfully safeguarded in or
connection to such vessels, cargoes and cargo, divine beings, products stock and property of
at all portrayal protected for any travel via land or water or air or all the three. The same may
incorporate distribution centre dangers or comparable dangers moreover or as accidental to
such travel and incorporates whatever other dangers which are generally included among the
dangers safeguarded against in marine insurance strategies.

Consequently, insurance is a business of assuming control over others' dangers that requires
contingent back up plans to embrace as and when primary safety process falls due. Safety net
providers deal with their hazard to mediocre levels by receiving such measures as a pooling
of autonomous dangers, spreading and reinsuring huge dangers, practising control over fake
claims, outlining reasonable resource risk administration and so on. All together those safety
net providers are equipped for satisfying the guarantees under the agreements, they charge
'premium' from the guaranteed, contingent on their estimation of the level of the hazard, and
are ordered to keep up an adequate level of capital.

At the end of the day, the reason for any type of insurance is to supplant what has been lost.
To not propose that guaranteed should make a benefit from his misfortune however that he
ought to just be in more awful circumstance than he was before the misfortune happened.
Further, it isn't practical to anticipate that the safety net provider will supplant a protest which

is lost, nor it is sensible to anticipate that he will expel the harm in this way re-establishing
the harmed question the entire sound question. As a trade-off, any reward must be of a
money-related nature and this arrangement of repayment is called “reimbursing”.

Insured Risks: Perils of the Sea

An insurer underwrites or subscribes to risk in return for the payment of ‘premium’ by the
assured.10 The premium is considered compensation for running risks of the insured property
and is normally retained whether or not the insured property is lost or not. The size of the
premium is reliant upon the insurer’s estimation of the degree of the risk that the insured
property will incur a loss and on an amount of indemnity he will have to pay. Generally, the
insurers spread their potential liabilities in a relatively small amount over a number of risks in
order to benefit from the probability that only a limited percentage will experience losses by
law of averages.

The word “risk” is referred to loss occurring in connection with insured property and the risk
of loss can include not only actual property in return for the payment of premium by the
assured losses but also financial losses, such as those resulting from the loss of freight,
passage money, commission or profit as well as certain types of liabilities incurred to third
parties.11

The specification of the insurance contract usually stipulates certain limitations as to the type
of occurrences that may cause losses for which the insurer will pay indemnity. Such
occurrences are termed as “insured risks” or “insured perils”. The term “perils of the sea”
specially covers accidents or causalities of the sea but does not include the ordinary action of
the winds and waves. Besides, maritime perils include fire, war perils, pirates, seizures and
jettison, etc. A marine insurance policy may pre-determine that only certain maritime risks, or
“perils of the sea", are covered.

5.7. TYPES OF MARINE INSURANCE

Some of the important types of marine insurance are as follows:

5.7.1. Marine Hull Insurance


10 Indian Marine Insurance Act, 1963, sections 23, 33, 54 and 86.
11 Ibid., sections 2[d]{ii}.

Hull insurance is concerned with the insurance of ships (hull, machinery, etc.). This is a
highly technical subject and also includes insurance of ocean-going steamers and other
vessels. ‘Hull’ refers to the body or frame of the ship. It provides the cover for the hull and
machinery as well as in respect of materials and outfit and stores and provisions for the
officers and crew. In addition cover for liabilities is included. It is effected generally by the
owner of the ship.

Hull policy consists of basic policy attached to Institute Clauses which are drafted by the
Institute of London Underwriters to embrace:

Coverage of maritime perils namely fire, collision, stranding etc.;
Coverage of additional perils such as a latent defect in machinery, accidents in
loading / discharging cargo,
Running Down Clause embodied in the hull insurance provides coverage for damage
caused to another ship in the collision as a consequence of negligent navigation;
Coverage of vessels in course of construction, which are taken by the shipbuilders.
Coverage starts from keel laying and until delivery of the ship to the owners.

5.7.2. Marine Cargo Insurance

Cargo insurance provides insurance cover in respect of loss or damage to goods during transit
by rail, road, sea or air. This insurance essentially concerns the following:

Export and import shipments by ocean-going vessels of all types
Coastal shipments by steamers, sailing vessels, merchandised ports etc.
Shipments by inland vessels or country craft, and
Consignments by rail, road, or air and articles sent by post.

5.7.3. Freight Insurance

Freight insurance provides protection against the loss of freight. In many cases, the owner of
goods is bound to pay the freight, under the terms of the contract, only when the goods are
safely delivered at the port of destination. If the ship is lost on the way or the cargo is
damaged or stolen, the shipping company loses the freight. Freight insurance is taken to
guard against such risk.

5.7.4. Liability Insurance

Liability insurance is one in which the insurer undertakes to indemnify against the loss which
the insured may suffer on account of liability to a third party caused by the collision of the
ship and other similar hazards.

5.8. TYPES OF MARINE POLICIES

Voyage Policy

A Voyage policy epitomizes an agreement to guarantee the topic at and from, or starting with
one place then onto the next or others. The subject-matter is protected for a specific voyage
independent of the time engaged with it. For this situation, the hazard connects at the point
when the ship begins on the voyage.

Time Policy

A Time policy epitomizes an agreement in which the subject-matter is safeguarded for a
positive timeframe. The ship may seek after any course it loves, the policy would cover every
one of the dangers from hazards of the ocean for the expressed timeframe. A time policy
cannot be for a period surpassing one year since it will be invalid, however, it might contain a
'continuation statement’. A 'continuation statement' implies that if the voyage isn't finished
inside the predefined period, the hazard should be secured until the voyage is finished, or till
the landing of the ship at the port of call.

Mixed Policy
A Mixed policy is typically a blend of voyage and time strategies that spreads the hazard
amid a specific voyage for a predetermined timeframe. An agreement for both voyage and
time might be incorporated into a similar policy.

Valued Policy

A marine insurance policy might be either valued or unvalued. A Valued policy determines
the concurred estimation of the topic guaranteed between the back-up plan and the
safeguarded and it is indicated in the policy itself. The esteem settled by the policy remains
between the back-up plan and guaranteed and is deemed decisive of the insurable estimation
of the subject proposed to be protected regardless of whether the misfortune is aggregate or

fractional. Nonetheless, unless explicitly expressed, the esteem settled by the policy is not
indisputable for the motivation behind deciding if there has been a helpful aggregate
misfortune.

Open or Un-Valued Policy

An Un-valued policy epitomizes a strategy for determining the estimation of the misfortune
to be settled upon between the safeguarded and safety net provider beforehand if there should
arise an occurrence of an unvalued policy. Subject to the furthest reaches of the whole
guaranteed, it leaves the estimation of the misfortune to be along these lines discovered in the
way clarified in the policy itself.

Floating Policy

A Floating policy depicts the insurance contract by and large terms and leaves the name or
names of the ship or dispatches and different particulars to be characterized by the ensuing
presentation. The ensuing revelation or announcements might be made by endorsement on
the policy, or in another standard way (in the order of dispatch or shipment) unless the policy
generally provides for. They should, on account of goods, contain all transfers inside the
terms of the policy, and the estimation of the goods or other property must be sincerely
expressed.
An exclusion or incorrect affirmation might be corrected even after misfortune or entry, given
the oversight or statement was made in good faith. On the off chance that a revelation of
significant worth isn't made until after notice of misfortune or entry, the policy is by and large
regarded as an unvalued policy as respects the topic of that announcement. Such approaches
are exceptionally helpful to dealers who routinely despatch goods through boats.

5.9. DUTIES OF THE PARTIES
An invariable and righteous duty of all interested parties to a Marine insurance
contarct is to act in good faith. An agreement of marine insurance is uberrimae fidei
or as counted in Section 19 of the Indian Marine Insurance Act “an agreement in light
the very pinnacle of good faith”. The thought of most extreme good faith, the cardinal
principle overseeing the marine insurance contract is an entrenched tenet got from the

praised instance of Cater v. Boehm12 chose some time before the origin of the Act.
This principle finds its essence in Section 19 to exhibit the general obligation to watch
the most extreme good faith with the accompanying areas presenting specific parts of
the regulation, Section 20 as the obligation of the guaranteed, Section 21 for the
intermediary to uncovered material conditions and Section 22 to give influencing
portrayal.
In this manner, the commitments to unveil and to go without deceptions constitute the
most noteworthy indications of the obligation to watch most extreme good faith.
Section 19 uses the word ‘either’ to amply clarify that the duty to observe utmost
good faith operates on a bilateral basis. There is no doubt that the obligation to
disclose material facts is a mutual one imposing reciprocal duties on the insurer and
insured. Additionally, Section 17 (of the English Act) in effect provides full
disclosure requirements of Marine insurance contracts,.13
Moreover, the duty of good faith is an independent and an overriding duty, with the
ensuing sections on disclosure and representations providing mere illustrations of that
duty. Also, section 19 has been construed as having imposed on the parties a
continuing duty to observe utmost good-faith.14

5.10. RIGHTS OF INSURER ON PAYMENT
The Marine Insurance Act provides for three rights to an insurer, namely:

Right of subrogation
Right of contribution
Right of under insurance.
The right of subrogation is a necessary incident of a contract of indemnity, and,
speaking broadly, the insurer in the absence of special contract must exercise all
remedies arising from subrogation in the name of the assured15. An underwriter is


12 Ibid.
13 Banque financiere de la cite SA .v. Westgate Insurance Co. Ltd. [1987].
14 Container Transport International Inc. and Reliance Gourp Inc. v. Oceanus Mutual Underwriting Association
(Bermuda) Ltd. [1984].
15 Simpson .v. Thomson, (1877) 3 App. Cas. 279, 293 (per Lord Blackburn); “The general rule of law is that
where there is a contract of indemnity, and a loss happens, anything which reduces or diminishes that loss
reduces or diminishes the amount which the indemnifier is bound to pay; and if the indemnifier has already paid
it, then, if anything which diminishes the loss comes into the hands of the person to whom he has paid it, it

entitled only to the rights of the assured in respect of the subject matter insured, in so
far as he has indemnified the assured.

As a contribution among insurers, Section 80 of the Act enacts:

Where the assured is over-insured by double insurance, each insurer is bound, as
between himself and the other insurers, to contribute rateably to the loss in proportion
to the amount for which he is liable under his contract.
If any insurer pays more than his proportion of the loss, he is entitled to maintain an
action for contribution against the other insurers and is entitled to the like remedies as
a surety who has paid more than his proportion of the debt.

As per Halsbury’s Laws of England, a condition must be satisfied before a contribution can
be said to arise. The condition is that “Each policy must be in force at the time of the loss.
There is no contribution if one of the policies has already become void or the risk under it
has not yet attached; the insurer from whom contribution is claimed can repudiate liability
under his policy on the ground that the assured has broken a condition.”16

Under Section 81 of the Act, the insurer is not liable to the assured for any sum in excess of
the amount actually insured, and thus in a case of under insurance rather it is the assured who
himself will be the insurer for the balance amount.

5.11. RISK NOT COVERED UNDER MARINE INSURANCE
Whether it was haunting giant elk in a group to spread the risk of being the one gored to
death or shipping cargo in several different caravans to avoid losing the whole shipment to a
marauding tribe, people have always been wary of risk.

“The hazardous nature of maritime commerce during the Age of Sail made marine insurance
a crucial input in the expansion of trade, and this impelled the development of increasingly
complex institutions for sharing marine risks.”17


becomes an equity that the person who has already paid the full indemnity is entitled to be recouped by having
that amount back: Burnard v. Rodocanachi (1882) 7 App. Cas. 333, HL (per lord Blackburn).
16 Eagle Star Insurance Co. v. Provincial Insurance plc., [1993]
17 Supra note 1.

“In order to accurately assess the risk of a voyage, an underwriter had to have access to
prompt and accurate intelligence on the movements and condition of particular ships, on
political developments at home and abroad, and on the character of the merchant being
insured and the captain of the vessel, as well as the experience to weigh this information
correctly in order to determine what premium to charge.”

5.12. RISKS COVERED BY MARINE INSURANCE
Total loss is the kind of loss that makes the property worthless to the insured. It is
categorized into two types:
- Actual total loss, wherein the object or the subject-matter insured is destroyed or
damaged in a way that it ceases to be a thing of that kind insured.
- Constructive total loss is wherein the object or the subject-matter insured is
abandoned on account of the total loss appearing to be inevitable.
- Particular average signifies a partial loss or damage sustained by a ship or cargo or
freight due to an accidental cause.
General average is actually a voluntary sacrifice considering the common safety.
Several other risks that covered by marine insurance clause are perils of the sea, fire,
war, pirates and thieves, Jettison, strikes and barratry.

5.13. DANGERS THAT ARE PARTICULARLY PROHIBITED FROM THE
INSURANCE CONTRACT

Any occurrence of misfortunes because of spillage or boathook misfortunes should be an
occurrence of goods gathered in sacks might be barred by the insurance contract itself.
Hardening of palm and coconut oil might be prohibited unless warmed storage is accessible.

Deferred Arrival: Loss of profit, showcase misfortune because of postponed landing
or deterioration emerging because of deferral is rejected.
Ordinary and Unavoidable Trade Losses: Shrinkage and evaporation in the mass
shipment or invasion if there should arise an occurrence of copra are prohibited unless
particularly given.
Savagery: Certain hazards, for example, wars, strikes, revolt and common wars are
barred, unless particularly endorsed.

Unsafe Drugs Clause: Insurance policy stipulates misfortunes associated with the
shipment of opium and different risky medications are not paid unless determined
conditions are met.

Under Normal conditions certain goods undeniably convey a natural bad habit like simple
breakage. Any harm caused to any effectively delicate or delicate dish sets or good might not
be secured under marine insurance on the off chance that it has not been pressed
appropriately. Likewise, harm caused amid the original bundling is rejected.

The word “risk” being in this context to refer to the risk of loss occurring in connection with
insured property, and the risk of loss can include not only actual property in return for the
payment of premium by the assured losses but also financial losses, such as those resulting
from the loss of freight, passage money, commission or profit as well as certain types of
liabilities incurred to third party. 18

Insurance was created as a mechanism to protect insured’s against the financial consequences
of an unforeseen, potentially catastrophic individual loss. The number of covered perils has
expanded and contracted over time to match the changes in exposure’s severity, frequency
and ultimate costs , however, the original concept of protecting the insured’s.

In order to understand the six reasons for excluding certain risks from the marine insurance
clause, we need to first understand the three major categories of exclusion. The categories
being:

Excluded “perils” wherein the peril is defined as any actual loss arising out of any
damage that results in a financial loss
Excluded “hazards” wherein the hazard is defined as something that increases the
chance of occurrence of a financial loss
Excluded “property” wherein the property may include anything tangible or
intangible. After understanding the three main categories of exclusion.

Further losses that are not covered in above-mentioned six categories are stated below:

PM),
18 Legal Aspects Of Marine Insurance In India, LAW TEACHER (Aug. 15,2014, 13:05
http://www.lawteacher.net/commercial-law/essays/legal-aspects-of-marine-insurance-law-essays.php.

The exclusion categories namely the peril, or the hazard or the property can be
covered in a better manner elsewhere. For instance, any money lost is not covered
under commercial property loss because this can be better covered under any ‘crime
policy’.
The damage or loss may be catastrophic in nature. The marine insurance policy
usually covers individual disasters, not a community disaster.
The loss that has occurred may not be accidental or unforeseen in nature. According
to the general marine policy, any insurable loss is that which is either accidental or
unforeseen in nature. Intentional acts done in order to gain the benefit of insurance
will not be termed as insurable.
The carrier of the insurance may be willing to provide the insurance but just need
more information and premiums. The reason sometimes certain risks are excluded
from the marine insurance is that the insurance carrier may be willing to have a higher
premium of the risk insured and the insurer may not be willing to do so.
The carrier of the insurance wants to control the granted amount of coverage. This
happens when the coverage of risk is excluded from the policy but additional
coverage is given to cover the risk. It may seem confusing but giving the additional
coverage in predetermined amounts actually reduces the confusion. The tactic is
highly used in property and liability coverage.
The loss of the damage is arising out of any business risk. In such type of exclusions,
it involves the business risk wherein the chances of loss or of no changes or gain.
Insurance is not given for any bad business decision. Also, any voluntary delay or loss
of the market will not amount to risk getting insured.

5.14. PRECAUTIONARY MEASURES FOR FRAUD PREVENTION
There are certain basic precautions against maritime fraud that commercial stakeholders like
exporter and importers, banks and insurance companies must be aware of and implement.

5.14.1. Exporters and Importers

The checks and safety measures that these stakeholders can execute are:

Care ought to be practised when managing for the first time with unknown parties.
Watchful request ought to be made as to their standing and uprightness before going
into an authoritative understanding.
Shipment ought to be by settled delivering lines. In India, vessels affirmed by GIC
ought to be favoured.
The load proprietors ought to be careful with features and price quotations of the
vessel, such as singleton vessels at excessively appealing rates usually mean that the
vessel has gone through different proprietors.
Payment by unalterable narrative credit, affirmed by a bank in vender's country gives
the best protection to the dealer. Should the dealer have any uncertainty about the
validity of the narrative credit, he ought to quickly counsel his bank before separating
with the goods.
As far as the purchaser is concerned, the dealer ought to guarantee that he gets the
reports he has stipulated in his narrative credit application. Therefore, the purchaser
must consider painstakingly which records he requires. For instance, an autonomous
‘stacking testament’ would add fundamentally to his security as would point by point
directions on which shipping line or forwarding operator is to be utilized. The review
of payload ought to be as near the time of stacking on load up as could reasonably be
expected.
In order to guarantee that the subject payload is in truth stacked on the predefined
conveying vessel, the purchaser may stipulate for a ‘report on the vessel’ from an
autonomous vendor.
Conference or national lines bills of filling ought to be utilized and stamped ‘cargo
paid ahead of time’ with the amount of cargo plainly expressed in the bill of
replenishing.
Services of reliable and understood forwarding specialists, who are additional
individuals from a national affiliation, ought to be locked in.
Buyers and vendors should endeavour to distinguish whether the conveying vessel is
on sanction and who the babblers and proprietors are and in the case of contracting is
done just through specialists or respectable establishments.

5.14.2. Piracy

Theft is normally a demonstration of burglary or criminal brutality adrift. The term can
incorporate acts submitted ashore, noticeable all around, or in other major waterways or on a
shore. It doesn't normally incorporate wrongdoings conferred against people going on an
indistinguishable vessel from the perpetrator.

Example: one traveller taking from others on a similar vessel.

The term has been utilized all through history to allude to strikes crosswise over land borders
by non-state specialists. Robbery is the name of particular wrongdoing under standard global
law and furthermore the name of various violations under the municipal law of various
States.

It is recognized from privateering, which is authorized by national authorities and therefore a
true blue form of war-like action by non-state actors. Privateering is considered trade striking
and was banned by the Peace of Westphalia of 1648 for signatories to those arrangements.

The individuals who participate in demonstrations of robbery are called pirates. Historically,
offenders have more often than not been secured by the military workforce and attempted by
military tribunals. Unfortunately, in the 21st century, the worldwide community is still
confronting numerous issues in conveying pirates to equity.

5.15. CONCLUSION

Marine insurance goes about as an instrument that aids in alleviating hazard caused amid any

unsafe circumstance which as an outcome makes money related misfortune ship, freight or

any products or, on the other hand, property while transporting it abroad. The motivation

behind marine insurance is to secure the danger of the ship-proprietor, or the freight or any

portable property that may experience the ill effects of any money related flimsiness amid a

voyage. Be that as it may, there are sure dangers that a backup plan does not favour to

guarantee to keep in mind the end goal to influence his position to secure as a financier.

These dangers which are most certainly not canvassed in marine insurance are normally the

dangers which are either the carelessness of the send proprietor or the freight proprietor or a

bundling deficiency which is carelessness emerging because of human activities which a

guarantor would not want to guarantee.

With the advancement of Maritime law in India, a few statutory arrangements that with
different parts of admiral's office law and certain judgment from different courts have set
points of reference for managing admiral's office law issues. Be that as it may, the
advancement can be followed back to a few centuries where Lloyd's café turned into the
primary Marine insurance advertise.
There have been a few understandings in past decades concerning the dangers that ought to
be canvassed in marine insurance. Marine insurance is a system that mitigates the dangers of
money related misfortune to the property, for example, ship, products or different movables,
in maritime transport, on the instalment of premium by the guaranteed to the backup plan.
Guarantor gives hazard cover to the ship-proprietors or the payload proprietors against
misfortune or harm that the ship or load may endure in travel because of mischances and
disasters in the idea of a budgetary reimbursement. The insurance organization embraces to
influence greatly to the misfortune to the most extreme incentive as concurred with the
protected dangers or dangers. Misfortune is payable just when it has been proximately caused
by the protected risk.


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