Marine Insurance Policy : The Risks Covered and Not Covered under it

A marine insurance contract is a contract whereby the insurer undertakes to compensate the insured against loss arising out of perils of sea or other specific risks insured against to which the goods covered by the contract are exposed. In consideration the insurer receives from the insured payment of premium. The document  embodying the contract is the marine insurance policy. The insurance company  is known as the underwriter.

Basic risks covered by marine insurance policy:

The basic risks covered by any marine insurance policy, are :

1. Perils of sea which include damage to vessel or cargo by forces of waves, storms, stranding of the vessel, sinking of the vessel and collision with other vessel , etc.

2. Fire which includes damage directly due to fire or efforts to extinguish the

3. Jettison which means voluntary throwing overboard of some cargo to save the ship and the rest of the cargo.

4. Barratry which means loss due to fraudulent or wrongful acts of the captain  of the vessel or its crew.

Types of Marine losses

The loss of goods insured may be a total loss or partial loss. Where the goods insured are destroyed or so damaged as to cease to be a thing of the kind insured or if the cost of its retrieval is more than its value, there is a total loss. A loss other than the total loss is partial loss.

Partial loss may be general average loss or particular average loss. General average loss refers to extraordinary sacrifice or expenditure incurred for the purpose  of preserving the properties in common. For example, jettisoning the cargo in an effort to re float the vessel. Where there is a general average loss, the party on whom it falls is entitled to a rate-able contribution from other parties interested. A particular average loss is a partial loss of the goods insured, caused by a peril insured against, and which is not a general average loss.

While the general average loss is voluntarily undertaken for the common safety of all the parties insured, a particular average loss is fortuitous or accidental. It has to be borne in full by the person directly affected.

Types of Marine insurance  Policies

The insured can get cover for different risks according to his choice. The risks covered are indicated by attaching the relevant cargo clause to the policy. The standard cargo clauses used in many countries, including India, are known as the Institute Cargo Clauses as they have been evolved by the London Institute of Underwriters. The principal cargo clauses are Clause C, Clause B and Clause A, affording greater protection in the same order.

Risks not covered under marine insurance policy:

There are certain risks which are not covered by a marine insurance policy under any of the cargo clauses mentioned above. They are:

(a) loss, damage or expense caused by delay and inherent vice or nature of the subject-matter;

(b) loss, damage or expense attributable to willful misconduct of the insured;

(c) ordinary leakage, ordinary loss in weight or volume, or ordinary wear and tear of the subject-matter;

(d) insufficiency or unsuitability of packing;

(e) deliberate damage to or deliberate destruction of the goods;

(f) loss, damage or expense arising from insolvency or financial default of the owners, managers, charterers or operators of the vessel; and

(g) loss, damage or expense arising from the use of atomic weapons or nuclear fission and/or other like reaction or radioactive force.

1. Institute Cargo Clause (C).

The policy under Cargo Clause (C) covers loss of or damage to goods by:

(i) fire or explosion;

(ii) stranding, grounding, sinking or capsizing of the vessel;

(iii) overturning or derailment of land conveyance;

(iv) collision or contact of vessel or craft or conveyance with any external object other than water;

(v) discharge of cargo at the port of distress;

(vi) general average sacrifice; and

(vii) jettison.

2. Institute Cargo Clause (B).

In addition to the risks covered by Institute Cargo Clause (C), the following risks are covered by a policy with Cargo Clause (B):

(i) loss or damage to the goods attributable to earthquake, volcanic eruption  or lightning;

(ii) washing overboard;

(iii) loss or damage to the goods caused by entry of sea, lake or river water into vessel, craft, hold, conveyance, container, lift-van or place of storage; and

(iv) total loss of any package lost overboard  while loading on to, or unloading from vessel or craft.

3. Institute Cargo Clause (A).

The policy with Cargo Clause (A) offers the widest cover. It provides cover against all risks except war and strike, not commotion.

4. War and SRCSC Cover. The exporter can obtain war, strike, riot and civil commotion cover along with all the three types of policies by payment of an additional premium. The above cover is granted by attaching Institute War Clauses (Cargo) to the policy of insurance.

5. Warehouse-to-Warehouse Clause. Marine policies usually provide for warehouse-to-warehouse clause which states that the goods are insured from the time they leave the warehouse of the exporter and remain in force till the goods reach the destination and are stored in a warehouse there. But on the ship reaching the destination, if the goods cannot be taken delivery of due to reasons beyond the control of the consignee, the insurance will be valid for 60 days from the date of arrival of the ship after which it will expire. Thus, the insurance will expire on the goods being placed in a warehouse in the importer’s country or expiry of 60 days from the date of arrival of the ship whichever in earlier. But the period of 60 days is allowed only in cases where the delay is beyond the control of the importer.

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