Insurance granted to cover loss or damage to ships or goods in transit either by sea, air or land is called Marine Insurance. Insurance of ships is called " Hull Insurance" while cover provided in respect of goods sis termed as cargo insurance.
The fundamental principles of marine insurance are explained below::
Insurance Interest: A person has an insurable interest in a thing if he will be benefited by its safety or due arrival or be prejudicial by its loss, damage or detention or incur in respect thereof.
Utmost Good Faith: It is the duty of the proposer to disclose clearly and accurately all material facts related to the risk.
Indemnity: Marine insurance is a contract of indemnity whereby the underwriter or assurer or the insurance company agrees for a stated consideration known as premium, to protect and indemnity the shipper or the owner of the goods against loss or damage or expense in connection with the goods at the risk, if the damage is caused by perils specified in the contract known of policy of the insurance.
Subrogation: The insurer upon payment of loss is entitled to the benefits of any rights against third parties that may be held by the assured himself.
Contribution: If there are more than one insurer it is desirable not only to ensure that the insured does not receive more than indemnity but that any loss is fairly spread between all the insurers involved.
Proximate Cause: Proximate cause means the active efficient cause that sets in motion a train of events, which brings about a result, without the intervention of any force started and working actively from a new and independent source.
How to Insure:
Under marine insurance the policy will be taken by two ways. One is open policy and another one is specific policy. In open policy the insurance will be made for all the shipments made in a period.
Whereas in specific policy the insurance will be made by shipment wise.
RISKS COVERED:
Perils of the Sea: It includes out-of-the ordinary wind and wave action, lightning, collision and damage by sea water when caused by perils such as opening of the seams of the vessel by collision.
Fire: Fire includes both direct fire damage and also consequential damage as by smoke or stream, and loss resulting from efforts to extinguish a fire.
Assailing thieves: This refers to a forcible taking rather than clandestine theft or mere pilferage.
Jettison: Jettison is the throwing of articles over board, usually to lighten the ship in times of emergency.
Barratry: Barratry is the willful misconduct of master or crew and would include theft, wrongful conversion, intentional casting a way of vessel or any breach of trust with dishonest intent.
All other perils: This clause does not mean all the perils that be fall a shipment, but sea perils of the sort listed in the clause.
RISKS NOT COVERED:
Marine insurance does not cover the losses or damages expected to occur in the following cases:
Under Normal Conditions: Because of the nature of goods themselves their inherent vice such as breakage of fragile glasses packaged inadequately. Damage caused by original packing is excluded no matter when the damage itself may occur.
Leakages or hook losses on goods packed in bags, solidification of palm and coconut oil unless heated storage is provided.
Delay: This means that loss of market and loss, damage or deterioration arising out of delay in transit are not covered.
Ordinary unavoidable Trade Losses: These losses such as shrinkage and evaporation in bulk shipment are also not covered unless specially insured.
Wars, Strikes and Commotions: Such as these perils are commonly excluded unless endorsed.
Dangerous Drugs Clause: The dangerous drugs clause stipulates that losses connected with the shipment of optimum and other dangerous drugs will not be paid for unless certain specified conditions are met.
IMPLIED CONDITIONS:
In a contract of marine insurance the following conditions are implied:
i. that the assured will exercise utmost good faith in disclosing the actual facts.
ii. That the generally accepted usages of trade applicable to the insured subject-matter are followed; and
iii. That the assured shall not contribute to the loss through willful fault or negligence.
HOW MUCH TO INSURE FOR?
In a marine insurance the polices are normally 'valued'. That is insurance is done at the agreed value, i.e. Cost of the price of the cargo plus freight and all charges plus an allowance for normal expected profit. Normally, the expected profit is calculated at 10% of CIF value, but this figure may be increased upon the consignee's specific request.In the case of total loss, the agreed price is paid and in the case of partial loss, a percentage of the total insured value is recoverable.
HOW TO MAKE A CLAIM WHEN LOSS ARISES:
Duties of Assured: Before making a claim the assured must perform certain duties. They are:The assured must make reasonable effort to minimize the loss.
o He must immediately inform the nearest agent of his underwriter, arrange for a survey of the damage and supply the necessary commercial documents.
o He must make timely written claim upon the carrier for the loss or damage within a reasonable time with the necessary documents.
The following documents are usually sent with the claim application.
Original and duplicate copies of the marine insurance policy or the certificate.
Ocean bill of lading
Original shippers invoice
Packing list, weight certificate or other evidence of the nature and conditions of the goods at the time of shipment.
Survey report of the underwriter's re[representative .
Claim bill: This sets out the actual claim giving the details of the loss or damage of the cargo.
TOTAL LOSS:
A total loss may be actual or constructive. An actual total loss may occur when the goods are destroyed or when they arrive so damaged as to cease to be a thing of the description insured. A constructive total loss occurs when the expenses of recovering or repairing the goods would exceed their value after the expenditure has been incurred.
PARTIAL LOSS:
If loss is less than total it is called average in insurance term. Average may be particular or general.
PARTIAL: There are two types of particular average losses.i.e. Total loss of a part of the goods and goods arrived in a damaged condition. That means when a part of the total consignment is completely lost, the insured value of such goods shall be calculated proportionately. The second type is that the part goods are arrived with damaged condition.