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Flashcards in Marine Insurance Deck (48)
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1

MAJOR DIVISIONS OF TRANSPORTATION INSURANCE

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

2

Transportation Insurance

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

3

SCOPE of Ocean Marine Insurance

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

4

SCOPE of Marine Insurance 

1. Insurance against LOSS OR DAMAGE

2. MARINE PROTECTION and INDEMNITY INSURANCE

5

RISK INSURED AGAINST

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

6

PERILS OF THE SEA

(UEO)

 

1. UNUSUAL violence

2. EXTRAORDINARY action of wind and wave; and

3. OTHER extraordinary causes connected with navigation 

7

PERILS OF THE SHIP

(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

8

Sue and Labor Clause

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)

9

INSURABLE INTEREST in Marine Insurance

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

10

FREIGHTAGE

BENEFITS derived by the owner either from 

- CHARTERING 

- EMPLOYMENT FOR THE CARRIAGE

  • his OWN goods
  • goods of OTHERS

11

CONCEALMENT

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

12

When Concealment DOES NOT vitiate entire contract

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

 

13

DISTINCTIONS on Concealment

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

14

REPRESENTATION

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

15

EFFECT of False Representation by the Insured

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

16

EFFECT of Falsity as to EXPECTATION

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

17

WARRANTY

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

FACT 

CONDITION

CIRCUMSTANCE 

in relation to the risk

18

IMPLIED WARRANTIES

(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)

19

SEAWORTHINESS

(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

20

TEST OF SEAWORTHINESS

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

21

COVERAGE of the Warranty of Seaworthiness

(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

 

22

DEVIATION

(SEC. 125)

(DUC)

DEPARTURE from the course of the voyage

UNREASONABLE DELAY in pursuing the voyage

COMMENCEMENT of an entirely different voyage

 

23

INSTANCES OF DEVIATION

(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

24

PROPER DEVIATION

(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

 

25

IMPROPER DEVIATION

every deviation not under PROPER DEVIATION

26

ACTUAL TOTAL LOSS

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

27

CAUSES of Actual Total Loss

(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

28

PRESUMPTION OF ACTUAL LOSS

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

(Sec. 132)

29

CONSTRUCTIVE OR TECHNICAL LOSS

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

 

30

CAUSES of Constructive Loss

(DEAC)

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