Section 3 Flashcards
Different types of warranties.
Express
1. That which is contained in the policy or in a document or referred to by the policy.
2. Written into the policy or attached to it.
Implied
1. That which do not appear in the policy.
2. However, are understood by law to exist.
Essential contents of a marine policy.
- Description of ship and voyage
- The perils insured against
- Premium, value, period of start and end
- The sue and labour clause
- The waiver clause
- The franchise
- The warranties
- The name(s) of the Underwriters themselves and their faithful promise to pay.
Types of marine policies.
Valued Policy: Specifies the agreed value of the subject matter insured.
Unvalued Policy: Value of the subject matter left blank but agreed upon in the event of
a claim.
Voyage Policy: A policy with cover of the subject matter from one place to another.
Time Policy: A policy for a stated period of a cover. A time policy cannot exceed 12 months and would be extended until arrival of destination.
Floating Policy: Is used mainly for goods and also for ships. Covers subject matter in
general terms, leaving particulars to be defined by subsequently at the time of shipment.
Construction (or Builders) Policy: Designed to cover the risk in building a vessel.
Open Cover (Normally for Cargos): Similar to floating policy but no value mentioned.
The open cover is binding in honour only and is not legally enforceable.
Risks covered by marine policy.
Perils of the Sea: Accidents and casualties of the sea.
Fire: Caused by accident or negligence of the crew but not by inherent vice.
Barratry: Wrongful acts wilfully committed by the Master or crew to the prejudice of the Owner.
Thieves: Covers only theft with violence and excludes crew and passengers.
Restraint of Princes: Covers losses caused only by political unrests and not caused by rioting or judicial processes.
Pirates and Rovers: Covers losses caused by marauders plundering indiscriminately, includes crew and passenger attacking the vessel and also rioters attacking from ashore.
Jettisons: Casting of goods overboard to lighten a vessel to save the maritime adventure.
Risks not covered by marine policy.
- Loss due to wilful misconduct of the assured.
- Loss due delay.
- Ordinary wear & tear, leakage and/or breakage.
- Rat and worming damage.
- Machinery damage but not caused by a marine peril.
Standard clause in marine policies.
- Sue and Labour / Duty of Assured, In the event of a damage or loss the Master is bound to act to minimize loss. Any expenses incurred from such actions are recoverable from the insurer. They are recoverable from the underwriters when,
1. They are incurred for the benefit of the subject matter insured
2. They are reasonable
3. They are incurred by the insured himself or his servants
4. They are incurred to avert or minimize a loss covered by the policy - Inchmare / Negligence, covers accidents which are not included in the ordinary marine perils and extends U/W’s liability to cover damage to hull and machinery directly caused by:
a) Accidents in handling cargo or fuel
b) Explosion on board or elsewhere including nuclear
c) Break-down of machinery, hull due to latent deflects.
d) Negligence of the Master, crew or pilot provided damage is not due to lack of diligence on the part of the insured. - Running down / 3/4 Collision Liabiltiy, If the insured vessel collides with another, and the insured vessel is held wholly or partly to blame, the insured own damage is covered by his own policy. This clause covers up to ¾th of the liable damage suffered by the other ship.
- Constructive Total Loss
Types of losses.
- Total Loss
i) Actual Total Loss (ATL), is when the subject insured is destroyed, or so damaged, that it cease to be insured. No notice of abandonment need be given.
ii) Constructive Total Loss (CTL), In the case of damage to a ship, where she is so damaged by a peril insured against that the cost of repairing the damage would exceed the value of the ship when repaired. - Partial Loss, when only part of the insured goods is lost or damaged.
What is NOA?
Notice of Abandonment, If the assured suffers a CTL and wants to abandon his property a notice of abandonment must be presented.
The notice may be given in any form, but it must indicate the intention of the assured to unconditionally abandon his interest in his property to the insurers.
Once the notice is accepted by the underwriters it cannot be revoked and UW become responsible for all assets and liabilities related to the subject matter.
Types of partial loss.
- Particular Average, falls directly upon the owner of the insured property, and it is up to him to prove to his underwriters that the loss was caused by a peril which was insured against.
Few Examples of Particular Average are,
1. Damage to the ship/cargo due to extra ordinary bad-weather.
2. Damage to hull or machinery or cargo caused by fire.
3. Damage to ship or cargo caused by grounding or stranding.
- General Average, happens when, any extraordinary sacrifice or expenditure is intentionally and reasonably made or incurred for the common safety for the purpose of preserving from peril the property involved in a common maritime adventure.
Interested parties could include:
1. Ship owner
2. Cargo owner
3. Freight holder
4. Charterer with vessel
What is the principal for utmost good faith.
Legally obliging all parties to act honestly and not mislead or withhold critical information from one another.
Define P&I.
Protection and Indemnity (P & I) clubs are mutual assurance associations which offer shipowners insurance against liabilities which are normally outside the scope of Marine
Insurance Policies.
- It is a non-profit making organisation.
- Protect - means protecting hull and machinery against the ¼ collision liability.
- Indemnity - means covering expenses due to claims like cargo, pollution, personal etc
Important clauses contained in marine policy.
- 3/4th Collision Liability / Running Down Clause
- Inchmaree / Negligence Clause
- E.g Accidents in handling cargo or fuel.
- Free from capture or seizure Clause
- The insurance company will not be liable for the capture or serizure of the vessel.
- F.P.A and F.A.A Clause
- Free from Particular Average Clause. Exemption of the insurance company from paying any compensation other than the loss incurred by a general average sacrifice.
- Free from All Average Clause. Insurance company is exempted from both particular and general average losses.
Other important Clauses:
- Excepted Peril Clause
- Arbitration Clause
- Memorandum or Nota Bene (N.B.) Clause
- Waiver Clause
- Franchise Clause
- Tender Clause
- Cancellation / Change of Ownership Clause
- Valuation Clause
- Sister Ship Clause
- Towage Clause
- Breach of Warranty Clause
- General Average Clause
- Continuation Clause
- Average Clause
- Grounding Clause
- Frieght Abandonment Clause
What are the elements required to classify a general average act?
- Must be a common maritime adventure.
- The venture must be in peril.
- There must be a sacrifice in property.
- Must have been reasonably incurred for the common safety.
- Must have been successful.
