Marine Insurance
The general principles of marine insurance are the same as with other
types of insurance in that there are two parties: the assured and assurer
(or carrier). The assured or insured agrees to pay a premium and the insurer
agrees that, if certain losses or damage occurs to certain interests of
the insured, the insurer will indemnify the insured. The similarities
pretty much end here. The complex circumstances involved in sea voyages
require very specific arrangements for the provision of marine insurance.
The fixing of rates and special conditions, for example, requires a vast
knowledge of the nature of vessels and cargos and of the conditions of
navigation.
The marine policy may cover the risks of a single voyage, or may insure
for a certain period of time. Cargo is almost always insured by voyage.
Vessels are usually insured for a certain duration of time, usually year
by the year. Cargo policies may be on a single lot or may be open to cover
cargo as shipped by the insured. Hull insurance, or vessel insurance,
may cover a ship or a whole fleet.
Typical of marine insurance is the principle that no contract of marine
insurance is valid unless the insured has an insurable interest in the
subject matter at the time of loss. The term insurable interest has been
variously defined. According to the English Marine Insurance
Act of 1906, "every person has an insurable interest who is interested
in a marine adventure.... a person is interested in a marine adventure
where he stands in any legal or equitable relation to the adventure or
to any insurable property at risk therein, in consequence of which he
may benefit by the safety or due arrival of insurable property, or may
be prejudiced by its loss, or damage thereto, or by the detention thereof,
or may incur liability in respect thereof".
Another issue important in the marine insurance area is misrepresentation
or concealment. The marine insurance contract is one which requires the
highest degree of good faith. Any misrepresentation of a fact which is
material to the underwriter will void the policy. In addition, a policy
can be void for breach of any of the warranties implied by law or expressed
in the policy. The most common is the implied warranty of seaworthiness
of the insured vessel or of the vessel carrying insured goods. Seaworthiness
is a general term but is has been narrowed by case law. A ship which is
seaworthy for a southern voyage may not be so for a transatlantic crossing
in winter. Similarly, in cargo policies, the warranty of seaworthiness
of the vessel includes fitness to carry a particular cargo.
In voyage policies, the doctrine of deviation states that the underwriter
is deemed to have intended to accept only that risk that inheres in the
expeditious prosecution of the voyage by the usual commercial route. If,
without justification, the vessel departs from the route, or delays unreasonably
in pursuing the voyage, the policy will be voided. Once voided by a deviation,
the insurance contract is canceled for good and not restored by a return
to the proper course. Whether or not a ship has deviated is a question
which is either settled by the policy or by usage.
The main risks insured against in a marine policy are stated in the "perils"
clause which is often supplemented by the "specially to cover" clauses,
or restricted by provisions eliminating one or more of the insured risks.
The traditional "perils" clause is contained in the First Schedule of
the British Marine Insurance Act of 1906 from Lloyd's policy.
It reads as follows:
"Touching the adventures and perils we the assurers are contended
to bear and to take upon us in this voyage: they are of the seas, men-of-war,
fire, enemies, pirates, rovers, thieves, jettisons, letters of mart and
countermart, reprisals, takings at sea, arrests, restraints,and detainments
of all kings, princes and people, of what nation, condition or quality
soever, barratry of the master and mariners, and of all other perils,
losses, and misfortunes, that have or shall come to the hurt, detriment
or damage of the said goods and merchandises, and ship, &c., or any
part thereof. "
More recently, war risks have been removed from ordinary marine policies
and are covered by separate war risk policies. Ordinary marine policies
no longer mean what they state and only cover those risks which are not
excluded by the F.C. & S. (Free of capture and seizure) clause. Among
the perils "of the seas" that are deemed to be covered under a marine
policy are the extraordinary action of the wind and waves, collision,
foundering, stranding, striking on rocks and icebergs. Not covered are
ordinary wear and tear and losses which can be anticipated as regular
incidents of sea carriage or navigation.
Hull policies, that is policies insuring ships, used to be quite specific
as the risks they covered. Modern policies are written to cover most forms
of liability. A "collision and running down" provision is contained in
the standard hull policy to cover liability incurred for damage to another
vessel or structure, and sometimes even personal injuries incurred. The
protection and Indemnity policy covers against collision liability not
covered by the "collision and running down" clause, as well as against
all other liability exposure.
Under a marine policy a loss can be partial or total. Total losses can
be actual or constructive. Actual total loss can be defined as the situation
in which a ship or its goods can no longer arrive at their destination
in specie. Actual total loss can also be found where the goods are
so damaged in the course of the voyage that, while they still exist in
specie at that time and can be sold where they are, there is no reasonable
possibility that they can be transported to their destination without
complete destruction or change. Constructive total loss is distinguished
from actual total loss in that no formal abandonment need be made in respect
of the actual total loss whereas the tender of abandonment is a prerequisite
of a claim under constructive loss.
Most marine insurance policies are "agreed value" policies which means that the insured and the underwriter have already set a value for the insured vessel. It should be noted that, in the pleasure boating industry, boats can be insured either under a yacht policy or a boat policy. A boat policy, much like insurance policies in motor vehicles, does not set an agreed value and in the event of loss depreciation is usually deducted from the amount the insured will recover. Pleasure boat policies are usually written to cover a certain geographical area. On the East Coast, for example, the area may be Maine to North Carolina. Or it may cover two or more regions. It is important to understand, however, that while most policies cover the entire United States and sometimes even Canada for occasional trips, the yacht must be based and principally operated within the region selected in the policy. In other words, a cruise to Florida from the mid-Atlantic region in most policies is not a problem. Moving the boat to Florida for six moths, however, definitely would be.
