Marine Insurance

Question 1

MAJOR DIVISIONS OF TRANSPORTATION INSURANCE

Answer 1

1. OCEAN MARINE INSURANE

one of the oldest written forms of insurance

has to do primarily with the insurance of SEA PERILS

2. INLAND MARINE INSURANCE

of comparatively recent origin and cover primarily LAND or OVER THE LAND TRANSPORTATION PERILS of property shipped by

RAILROADS

AIRPLANES

MOTOR TRUCKS and

OTHER MEANS OF TRANSPORTATION

Question 2

Transportation Insurance

Answer 2

concerned with the PERILS OF PROPERTY in TRANSIT (or incidental to) as opposed to property perils at generally fixed location

Question 3

SCOPE of Ocean Marine Insurance

Answer 3

1. SHIPS or Hulls
2. GOODS or cargoes
3. EARNINGS such as freight, passage money, commissions, or profits
4. LIABILITY for the INSURED PROPERTY by reason of MARINE PERILS

Question 4

SCOPE of Marine Insurance

Answer 4

1. Insurance against LOSS OR DAMAGE
2. MARINE PROTECTION and INDEMNITY INSURANCE

Question 5

RISK INSURED AGAINST

Answer 5

only PERILS OF THE SEA unless PERILS OF THE SHIP are covered by an ALL-RISK policy

Question 6

PERILS OF THE SEA

Answer 6

(UEO)

1. UNUSUAL violence
2. EXTRAORDINARY action of wind and wave; and
3. OTHER extraordinary causes connected with navigation

Question 7

PERILS OF THE SHIP

Answer 7

(NON)

1. NATURAL and inevitable action of the sea
2. ORDINARY wear and tear of the ship

3, NEGLIGENT failure of the ship’s owner to PROVIDE the vessel with proper equipment to convey the cargo under ordinary conditions

Question 8

Sue and Labor Clause

Answer 8

clause under which the insurer may become LIABLE TO PAY the insured, IN ADDITION to the loss actually suffered, such EXPENSES as he may have INCURRED in his EFFORTS TO PROTECT the property against a peril for which the insurer would have been liable

(Sec. 165)

Question 9

INSURABLE INTEREST in Marine Insurance

Answer 9

1. SHIPOWNER

VESSEL - to the extent of its value. Provided that if CHARTERED, the recovery is only up to the AMOUNT NOT RECOVERABLE from the charterer

EXPECTED FREIGHTAGE

2. CARGO OWNER

CARGO

EXPECTED PROFITS

3. CHARTERER

AMOUNT he is LIABLE TO THE SHIPOWNER, if the ship is LOST or DAMAGED during the voyage

EXPECTED PROFITS or FREIGHTAGE if he accepts cargoes from other persons for a fee

HIS OWN CARGO or his CLIENT’S CARGO

4. OWNER/DEBTOR

where the vessel is HYPOTHECATED by bottmry or respondentia

• DIFFERENCE between the value of vessel or goods and the amount of loan
• in loans the repayment is subject to the condition that the vessel or goods given as a security shall arrive safely at the port of destination
• only the EXCESS is INSURABLE, since a loan on bottomry partakes of the nature of an insurance coverage to the extent of the loan accommodation. Same rule applies to hypothecation by respondentia.

5. CREDITOR/LENDER

AMOUNT OF THE LOAN

Question 10

FREIGHTAGE

Answer 10

BENEFITS derived by the owner either from

• CHARTERING
• EMPLOYMENT FOR THE CARRIAGE
• his OWN goods
• goods of OTHERS

Question 11

CONCEALMENT

Answer 11

FAILURE TO DISCLOSE any material fact or circumstance which in fact or law is WITHIN, or which OUGHT TO BE WITHIN the knowledge of one party and of which the other HAS NO ACTUAL or PRESUMPTIVE KNOWLEDGE

Question 12

When Concealment DOES NOT vitiate entire contract

Answer 12

a concealment in MARINE INSURANCE in respect to the following matters DOES NOT VITIATE the ENTIRE CONTRACT but merely EXONERATES THE INSURER from a loss RESULTING FROM the risk concealed:

(WLLNU)

• (Sec.112)*
  1. WANT of necessary documents
  2. LIABILITY of the thing insured to capture or detention
  3. LIABILITY to seizure from breach of foreign laws of trade
  4. NATIONAL CHARACTER of the insured
  5. USE of false or simulated papers

Question 13

DISTINCTIONS on Concealment

Answer 13

1. INFORMATION OF 3RD PERSONS

MI - information or belief or expectation of 3rd persons in reference to a material fact is MATERIAL and MUST BE COMMUNICATED

OTHERS - NOT MATERIAL, need not be communicated UNLESS it proceeds from the AGENT OF THE INSURED whose duty is to give information

2. EFFECT OF CONCEALMENT

MI - concealment of any matter under Sec 112 (WLLNU) DOES NOT VITIATE the entire contract but MERELY EXONERATES the insurer from damages arising therefrom

OTHERS - concealment of ANY MATERIAL FACT will VITIATE THE ENTIRE CONTRACT whether or not the loss results from the fact concealed

Question 14

REPRESENTATION

Answer 14

if a representation by a person insured by a contract of MI is INTENTIONALLY FALSE,

in any material respect, or

in respect of any fact on which the character and nature of the risk depends

the insurer MAY RESCIND the ENTIRE CONTRACT

Question 15

EFFECT of False Representation by the Insured

Answer 15

1. INTENTIONAL

any misrepresentation of a material fact AVOIDS the policy

2. NOT INTENTIONAL

if the fact misrepresented is MATERIAL to the risk, the insurer MAY ALSO RESCIND the contract FROM THE TIME THE REPRESENTATION BECOMES FALSE

Question 16

EFFECT of Falsity as to EXPECTATION

Answer 16

eventual falsity of representation as to expectation DOES NOT, in the absence of fraud, AVOID a contract of MI

Question 17

WARRANTY

Answer 17

STIPULATION, express or implied, FORMING PART of the policy as to some

FACT

CONDITION

CIRCUMSTANCE

in relation to the risk

Question 18

IMPLIED WARRANTIES

Answer 18

(PA²NS)

1. PRESENCE of Insurable Interest (Sec. 102)
2. AGAINST improper deviation (Sec. 126, 127, 128)
3. AGAINST illegal venture***
4. NEUTRALITY (Sec. 122)

the ship will carry the REQUISITE DOCUMENTS of nationality or neutrality of the ship or cargo where such nationality or neutrality is EXPRESSLY WARRANTED

5. SEAWORTHINESS (Sec. 115)

Question 19

SEAWORTHINESS

Answer 19

(Sec. 116)

relative term depending upon the NATURE of the ship, voyage, service and goods denoting in general a ship’s REASONABLE FITNESS to perform the service and to encounter the ordinary perils of the voyage contemplated by the parties in the policy

NOTE: (Sec. 119)

a ship which is SEAWORTHY for the purpose of INSURANCE UPON THE SHIP may be UNSEAWORTHY for the purpose of the INSURANCE UPON THE CARGO

Question 20

TEST OF SEAWORTHINESS

Answer 20

whether or not the ship is REASONABLY FIT to PERFORM the service and to ENCOUNTER the ordinary perils of the voyage

GR: (Sec. 117)

warranty of seaworthiness is COMPLIED WITH if the ship is seaworthy AT THE TIME OF THE COMMENCEMENT of the risk

Note:

prior or subsequent is NOT a BREACH OF WARRANTY nor is it material;

when the ship becomes unseaworthy DURING the voyage to which an insurance relates, an UNREASONABLE DELAY in repairing the defect EXONERATES the insurer from liability from loss arising therefrom

XP:

1. TIME POLICY (Sec. 117[a])

must be seaworthy AT THE COMMENCEMENT of EVERY VOYAGE she may undertake DURING the PERIOD of the coverage

2. CARGO POLICY (Sec. 117[b])

EACH VESSEL upon which the cargo is SHIPPED or TRANSSHIPPED must be seaworthy AT THE COMMENCEMENT of EACH PARTICULAR VOYAGE

3. VOYAGE POLICY (Sec. 119)

(contemplating voyage in different stages)

the ship must be seaworthy AT THE COMMENCEMENT of EACH stage of the voyage

Question 21

COVERAGE of the Warranty of Seaworthiness

Answer 21

(CPC-SRO)

• (Sec. 118)*
  1. CONDITION of the STRUCTURE OF THE SHIP
  2. PROPERLY LADEN
  3. provided with a COMPETENT MASTER
  4. SUFFICIENT NUMBER of competent officers and seamen
  5. REQUISITE appurtenances and equipments
• (b-ca-cs-fwfl)*
• ballasts*
• cables and anchors*
• cordage and sail*
• food*
• water*
• fuel*
• lights*
  6. OTHER necessary or proper STORES AND IMPLEMENTS for the voyage

Question 22

DEVIATION

Answer 22

(SEC. 125)

(DUC)

DEPARTURE from the course of the voyage

UNREASONABLE DELAY in pursuing the voyage

COMMENCEMENT of an entirely different voyage

Question 23

INSTANCES OF DEVIATION

Answer 23

(D³UC)

• (Sec. 125-127)*
  1. DEVIATION from the agreed voyage
  2. DEPARTURE of vessel from the course of the sailing fixed by mercantile usage
  3. DEPARTURE of vessel from the most natural, direct, and advantageous route if NOT fixed by mercantile usage
  4. UNREASONABLE DELAY in pursuing the voyage
  5. COMMENCEMENT of an entirely different voyage

Question 24

PROPER DEVIATION

Answer 24

(CANS)

(Sec. 126)

1. CAUSED by circumstances OUTSIDE THE CONTROL of the ship captain or shipowner
2. made in good faith to AVOID a peril (non-existing/assumed peril)
3. NECESSARY to COMPLY WITH WARRANTY or AVOID a peril (real peril)
4. made in good faith to SAVE human life, or to RELEIVE another vessel in distress

Question 25

IMPROPER DEVIATION

Answer 25

every deviation not under PROPER DEVIATION

Question 26

ACTUAL TOTAL LOSS

Answer 26

ABSOLUTE LOSS which exists when the subject matter of the insurance is WHOLLY DESTROYED or LOST when it is SO DAMAGED as NO LONGER TO EXIST in its original character

Question 27

CAUSES of Actual Total Loss

Answer 27

**(DITO)** (Sec. 132) 1. **_DAMAGE_** rendering the thing VALUELESS to the owner for the PURPOSE FOR WHICH he held it 2. **_IRRETRIEVABLE LOSS_** by sinking or by being broken up 3. **_TOTAL DESTRUCTION_** 4. **_OTHER EVENT_** which EFFECTIVELY DEPRIVES the owner of the POSSESSION, at the port of destination of the thing insured

Question 28

PRESUMPTION OF ACTUAL LOSS

Answer 28

Actual loss may be PRESUMED from the CONTINUED ABSENCE of a ship without being heard of. The LENGTH OF TIME which is sufficient to raise this presumption depends on the circumstances of each case ## Footnote *(Sec. 132)*

Question 29

CONSTRUCTIVE OR TECHNICAL LOSS

Answer 29

one in which the loss, although NOT ACTUALLY TOTAL, is such CHARACTER that the insured is entitled, if he think fit, to treat it as total by ABANDONMENT, and gives the insured the right to abandon

Question 30

CAUSES of Constructive Loss

Answer 30

**(DEAC)** ## Footnote 1. **_DAMAGE_** reducing by more than 3/4 the VALUE OF THE VESSEL (or) of CARGO *(Sec. 141)* 2. **_EXPENSE_** OF transshipment EXCEEDS 3/4 of the value of the cargo *(Sec. 133 in relation to 141)* 3. **_ACTUAL LOSS_** of more thhan 3/4 of the VALUE OF THE OBJECT or expense to recover it *(Sec. 141)* 4. if the thing insured is a ship, **_CONTEMPLATED VOYAGE_** CANNOT be LAWFULLY PERFORMED without incurring an EXPENSE of more than 3/4 of the value of the thing abandoned *(Sec. 132)* * NOTE:* * freightage cannot be abandoned unless the ship is also abandoned*

Question 31

OPTIONS of Insured in case of Contructive Total Loss

Answer 31

1. **ABANDON** goods or vessel to the insurer and CLAIM FOR WHOLE INSURED VALUE *(Sec. 141)* 2. WITHOUT ABANDONING the thing insured, **CLAIM FOR ACTUAL LOSS** *(Sec. 157)*

Question 32

ABANDONMENT

Answer 32

*(Sec. 140)* an act of the INSURED by which, AFTER a CONSTRUCTIVE TOTAL LOSS, he **DECLARES THE RELINQUISHMENT** to the insurer of his interest in the thing insured NOTE: ACCEPTANCE of an abandonment is NOT NECESSARY *(Sec. 149)*

Question 33

EFFECTS OF ACCEPTANCE

Answer 33

(ESIF2) (Sec. 151-153) 1. Insurer admits the **_EXISTENCE_** of the loss 2. Insurer admits the **_SUFFICIENCY_** of the abandonment 3. Abandonment becomes **_IRREVOCABLE_** unless the ground upon which it was made prove to be unfounded 4. **_FREIGHTAGE_** earned _PREVIOUS_ to the loss belong to the INSURER OF SAID FREIGHTAGE 5. **_FREIGHTAGE_** earned _SUBSEQUENTLY_ belongs to the INSURER OF THE SHIP

Question 34

REQUISITES FOR VALIDITY OF ABANDONMENT

Answer 34

**(PEN FACT)** ## Footnote 1. **_NEITHER_** partial nor conditional 2. The NOTICE of abandonment must be **_EXPLICIT_** and must SPECIFY the PARTICULAR CAUSE of the abandonment 3. Must be made by giving **_NOTICE_** thereof to the insurer which may be done ORALLY or IN WRITING 4. **_FACTUAL_** 5. **_ACTUAL RELINQUISHMENT_** by the person insured of his interest in the thing insured 6. **_CONSTRUCTIVE TOTAL LOSS_** 7. must be made within a REASONABLE **_TIME_** after receipt of reliable information of the loss

Question 35

EFFECTS OF ABANDONMENT

Answer 35

**1. TRANSFER OF INTEREST** equivalent to the transfer by the insured of his interest to the insurer with ALL the CHANCES of RECOVERY and INDEMNITY **2. TRANSFER OF AGENCY** acts done in GOOD FAITH by those who were agents of the insured in respect of the thing insured, SUBSEQUENT TO THE LOSS are AT THE RISK of the insurer and FOR HIS BENEFIT

Question 36

INSURER'S LIABILITY for REFUSAL of Abandonment

Answer 36

he is liable upon an ACTUAL TOTAL LOSS, deducting from the amount ANY PROCEEDS of the thing insured which MAY HAVE COME TO THE HANDS of the insured

Question 37

Measure of Indemnity VALUED POLICY

Answer 37

**_GR:_** The parties are BOUND by the valuation, if - insured HAD SOME INTEREST AT RISK (**and**) - NO FRAUD **_XP:_** may SHOW THE REAL VALUE - HYPOTHECATED by bottomry or respondentia BEFORE its insurance (**and**) - WITHOUT THE KNOWLEDGE of the person actually procuring the insurance

Question 38

Measure of Indemnity OPEN POLICY

Answer 38

the following rules shall apply: ## Footnote **1. value of the _SHIP_** value AT THE BEGINNING of the risk **2. value of the _CARGO_** actual cost when LADEN ON BOARD or MARKET VALUE at the TIME AND PLACE of lading **3. value of _FREIGHTAGE_** gross freightage exclusive of primage **4. _COST OF INSURANCE_** in each case to be added to the estimated value

Question 39

RECOVERY When Profits are SEPARATELY INSURED

Answer 39

insured is entitled to recover a PROPORTION OF SUCH PROFITS equivalent to the PROPORTION which the value lost of the property bears to the value of the whole

Question 40

PRESUMPTION OF LOSS OF PROFITS

Answer 40

when profits are INSURED and VALUED by an MI, a loss of them is CONCLUSIVELY PRESUMED from a loss of the PROPERTY OUT OF WHICH they are EXPECTED TO ARISE, and the VALUATION FIXES THEIR AMOUNT

Question 41

AVERAGE

Answer 41

EXTRAORDINARY or ACCIDENTAL EXPENSE incurred during the voyage for the PRESERVATION of the VESSEL, CARGO, OR BOTH and ALL DAMAGES to the vessel or carge from the time it is loaded and the voyage commenced until it ends and the cargo unloaded

Question 42

KINDS OF AVERAGES

Answer 42

**1. SIMPLE OR PARTICULAR** all expenses and damages caused to the vessel or cargo which have NOT INURED to the COMMON BENEFIT of ALL PERSONS INTERESTED in the vessel or cargo. IR has NO LIABILITY if the parties stipulated that his liability is for general average only **2. GENERAL OR GROSS** all the damage and expenses which are DELIBERATELY CAUSED in order to SAVE the vessel, the cargo, or both from real and known risks. LIABILITY of IR is his portion

Question 43

RIGHT OF THE INSURED IN GENERAL AVERAGE

Answer 43

**_GR:_** When the parties agree that the insurance shall be free from a particular average, the insurer is LIABLE ONLY for a general average loss unless such particular average loss has the EFFECT of DEPRIVING INSURED of POSSESSION at the port of DESTINATION of the WHOLE THING INSURED (in effect there is actual total loss) The ID may HOLD THE IR DIRECTLY LIABLE for the WHOLE of the INSURED VALUE of the property sacrificed for the general benefit _SUBROGATING_ HIM TO HIS OWN RIGHT OF CONTRIBUTION (**or**) DEMAND CONTRIBUTION from the other interested parties as soon as the vessel arrives at her destination **_XP: (insured cannot claim)_** 1. AFTER the separation of INTERESTS liable to contribution 2. ID has NEGLECTED or WAIVED his right to contributon

Question 44

FREE FROM PARTICULAR AVERAGE CLAUSE | (FPA CLAUSE)

Answer 44

insurer shall NOT be liable for a particular average but he shall CONTINUE to be LIABLE for his PROPORTION of all general average lossess assessed upon the thing insured ***_EXCEPTION:_*** when there is TOTAL DEPRIVATION on the part of the insured of the POSSESSION OF THE THING insured

Question 45

NEW FOR OLD RULE

Answer 45

In case of PARTIAL LOSS of ship or its equipment, the OLD MATERIALS are to be APPLIED towards PAYMENT FOR THE NEW

Question 46

CO-INSURANCE

Answer 46

a marine insurer is liable upon a partial loss, ONLY FOR SUCH PROPORTION of the AMOUNT INSURED BY HIM as the loss bears to the value of the whole interest of the insured in the property insured when the property is insured for LESS THAN its value, the INSURED IS CONSIDERED AS A CO-INSURER of the DIFFERENCE between the AMOUNT OF INSURANCE and the VALUE OF THE PROPERTY

Question 47

REQUISITES of Co-Insurance

Answer 47

1. LOSS is partial 2. AMOUNT OF INSURANCE is LESS THAN the VALUE OF THE PROPERTY INSURED

Question 48

RULES ON CO-INSURANCE

Answer 48

1. applies only to marine insurance 2. no co-insurance in life insurance 3. applies in fire insurance when expressly stipulated