INTRODUCTION

Background of the Marine Insurance

The modern Marine Insurance business, is one of the oldest type of business. It is not only
the ancient category of shield against the trade losses1 but also a source to ensure the oceanic
business.2It was practiced by the Babylonians (2250 BC),3 who prepared the register of the
goods, 4 and the Rhodes (nearby 916 BCE).5 The Greeks followed the Babylonian, 6 and also
established speedy maritime ships and spy system.7 The Romans (533 AD), fixed the interest
rates8 and Jews familiarised it in Lombardy in 1182,9 and the Italians improved it (1310 AD),
and the word Assured was used in historic their book, “The Chronyk Van Vean Vern,”10
Portugal (1367AD), it also established a Court to decide the disputes,11Netherlands(1377
AD),12 and Barcelona (1435 AD).13

Pre-Marine Insurance Act, 1906 And Great Britain.

Marine Insurance Acts.
The beginning of the 17th century in Great Britain shaped the ground-breaking history of
Marine Insurance, when first time the Parliament passed, ''An Act Concerning Matters of
Assurances Amongst Merchants," 1601” and also established a Court of Insurance.14 Lombard
Street London was known for global market and established this trade and the first standard
Marine Insurance policy was delivered in 1622, which is identified as SG form, issued by the
Insurer in London.15 The llyod’s Coffee House established in 1652, it benefitted the insurer,
shippers and the suppliers. The flourishing business caused competition, fraud and disputes,
resulting in multiple litigation among the parties. However, the British Government in order to
protect the interests of the parties and to support the business had promulgated various Acts,
i.e,i) Marine Insurance Act (MIA), 1745, to shelter the Insurable Interest,16 ii), Marine
Insurance Act, 1788, to obtain the required details of the interested parties17 and iii), Marine
Insurance Act, 1845 to prohibit the complaints of gaming and wagering.18

1
(2007) The history and legislative framework of marine insurance, “The Principle of Indemnity in Marine Insurance Contracts”. Springer,
Berlin, Heidelberg
2
Legal and documentary Aspects of Marine Insurance contract, United Nations Conference on Trade and Development Report, <
file:///C:/Users/User/Desktop/c4isl27rev1_en.pdf> accessed on 04/03/2018
3
Barrie G Jervis, Reeds Marine Insurance (1st Edition), 2005, Bedford Squire London, UK. Page. 1
4
A credit policy where, in case of a mishap of the loss, the debtor was discharged from the payment of the loan of the ship R. L. Carter,
Reinsurance (Brentford, Middlesex: Kluwer Publishing Limited, (c) Mercantile & General Reinsurance Company Limited, 1979), p. 10-11.
5
A Naval laws, containing the principles for the settlement of losses, John A. Bogardus, Jr. and Robert H. Moore, Spreading the Risks (Chevy
Chase: Posterity Press, Inc., 2003), p. 4.
6
The Magazine of the Institute and Faculty of Actuary, http://www.theactuary.com/archive/old-articles/part-3/reinsurance-3A-a-brief-history/
accessed on 11/03/2018
7
Supra No. 3
8 Ibid
9 Supra no. No. 3
10 Ibid
11 Ibid page No. 5
12 Ibid Page No. 6
13
Special Edition, Newsletter for Reinsurance, February 2009 Issue No. 65file:///C:/Users/User/Downloads/rsn-2009-iss65%20(1).pdf
accessed on 12/03/2018
14
The History of Marine Insurance Its Origin by Nicholas G. Berketis PhD, <http://docplayer.net/36397658-The-history-of-marine-insurance-
its-origin-by-nicholas-g-berketis-phd.html> accessed on 11/03/2018
15 Supra 3Page No.2
16
Marine Insurance Act, 1745, http://www.lawcom.gov.uk/app/uploads/2015/06/ICL4_Insurable_Interest.pdf accessed on 10/03/2018
17
Marine Insurance Act, 1788, Ibid
18
Marine Insurance Act 1845, Ibid
 British Judiciary and Marine Insurance
The British judiciary has played a vital role in not only interpretation of the law but also
candidly settled the issues regarding payment, assessment of losses, clarification of terms,
categories of policies, intentions and obligations filed by the parties. The judgements revel that
how the courts had decided those matters concerning to the purpose of the insurance (1761),19
its terms (1778),20intentions of the parties (1808),21 and the business ethics (1816).22 The
Courts established the mechanism to assess the losses (1847), and passed the prime
judgements.23 Those verdicts had categorised the Marine Insurance policies,24clarified the
misunderstandings in contracts,25 established the doctrines and laid the foundation of the
laws.26 and determined their effects.27 Those prime rulings had resolved the issues among the
parties and strengthened the concept.28

Marine Insurance Act 1906

The marine insurance is a distinct agreement of protection against the losses of the portable
goods, associated interests and the charges happening throughout the trip. Its fundamental
purpose is to cover the losses happened and to refund the assured. It is practiced throughout
the globe. A bill for “Marine Insurance Codification” was introduced in 1894,29 and
subsequently, “Marine Insurance Act” 1906 was promulgated and the previous Acts of 1745
and 1788 were repealed.30

TYPES OF POLICIES: - The Marine Insurance Industry regulates definite policies and the
Act, 1906, has defined the following policies: -
1) Voyage And Time Policies: It is a policy which provides protection for specific trip
from one harbour to another or from one wharf to another. It is common for cargo and
the insurer remains responsible till the landing of the properties.31
2) Valued Policy: - The valued policy provides for agreed value of the policy of the
insured goods.32
3) Unvalued Policy: - It is a policy which does not require the value of the assured assets
contrary to the valued policy. If any damage happens then the assured after assessing
the value of the goods and the damage shall submit the claim.33
4) Floating Policy By Ship Or Ships: - It is a variable policy based on general standings,
wherein the remaining terms are declared subsequently. Moreover, there is also
provision of rectification of any omission or error at any time.34

19
In Lewis V Pucker (1761), Lord Mansfield, held that the purpose of the valued policy.
20
Warranty, Pawson v Watson (1778)
21
Insurable Interest, Lucena v Craufurd: HL 1808
22
In Brotherston v Barba (1816), J. Abbot, held that A contract of Indemnity is the great principle of Marine Insurance Law.
23
In Irving V Manning (1847), the issue regarding the Constructive Total Loss (CLT) was settled.
24
In Lewis V Pucker (1761), Lord Mansfield, declared that Valued Policy could not be a Wager Policy.
25
In Irving V Manning (1847), the issue of Time policy was settled.
26
In case of Carter V Boehm , the Lord Mansfield, established the doctrine of “Duty of utmost good faith.”
27
In Liddgett V sactertan (1871), it was held that valued policy is beneficial for both parties, i.e Assured and the Insurer.
28
Castellan v Preston (1883), Brett, LJ reiterated the basic concept of Marin Insurance case.
29
https://www.ctplc.com/media/72258/The-Marine-Insurance-Act-Centenary-Cause-For-Celebration.pdf accessed on 07/03/2018
30
Marine Insurance Act 1906 1906, “An Act to codify the Law relating to Marine Insurance” [21st December 1906], <<
http://www.legislation.gov.uk/ukpga/Edw7/6/41/data.pdf >> accessed on 11/03/2018
31
Voyage and time policies, Section 25 of Marine Insurance Act, 1906
32
What policy must specify, Section. 23 of Marine Insurance Act, 1906
33
Unvalued policy, Section 28 of Marine Insurance Act, 1906
34
Floating Policy, Section 29 of Marine Insurance Act, 1906
 Significance of Agreement in Valued Policy
Section 27(3) of the Marine Insurance Act 1906 provides:
“Subject to the provisions of this Act35, and in the absence of fraud36, the value fixed37
by the policy38 is, as between the insurer39 and the assured,40 conclusive of the insurable
value41 of the subject intended to be insured,42 whether the loss be total43 or partial.44”

The significance of the Agreed policy

The valued policy45is the spirit of the Marine Insurance Act, 1906,46 which provides for
a mutual agreement,47 wherein an insurer undertakes,48 the assured for the losses,49and he (the
assured), discloses to him (the insurer),50 finally the terms are accepted,51 and contract
finalised.52 The proprietor who has insurable interest53 of the whole,54 fixes the value with the
insurer thus it becomes conclusive.55

35
36
37
38
39
40
41
42
43
44
45
Valued policy, Section 27 of Marine Insurance Act, 1906
46
Definition of Marine Insurance Section 1, MIA, 1906 , http://www.legislation.gov.uk/ukpga/Edw7/6/41/data.pdf dated 07/03/2018.
47
Contract must be embodied in policy, Section. 22 of Marine Insurance Act, 1906
48
Signature of insurer, Section. 24 of Marine Insurance Act, 1906
49
What policy must specify, Section. 23 of Marine Insurance Act, 1906
50
Disclosure by Assured, Section. 18 of Marine Insurance Act, 1906
51
When contract deemed to be concluded, Section. 21 of Marine Insurance Act, 1906
52
Insurable interest, Section 5 of Marine Insurance Act, 1906
53
Definition of Insurable Interest, Section, 5 of MIA, 1906
54
Quantum of interest, Section 14 of the MIA, 1906
55
Valued Policy, Section, 27 (3) of MIA, 1906
Judicial background of the Marine Insurance Act, 1906 and the policy adopted the courts
The Marine Insurance Act 1906, is mirror of the hundred years judicious decisions
made during the judicial journey of the law Lords and the jurists, who after considering the
speculations,56 terms, 57 intentions of the parties58, categorising the contracts and the losses,
passed the judgements. It is a bouquet of those thoughtful rulings, which strengthened the
canons,59 thus are still celebrated throughout the globe. 60

Courts approach towards Conclusive value

TYPES OF LOSSES COVERED IN MARINE INSURANCE

The apprehension of loss in Sea trade is the basic element of the insurance.61 Moreover,
the Marine insurance is based on speculations,62 and the assured has insurable interest, 63 who
therefore makes an agreement with insurer. The act provides for payment of total or partial
losses.64 The act has defined various types of the losses as under: -
A. TOTAL LOSS
The Act has plainly clarified the total loss,65 and has identified the types of losses, i) Total
and 2) Partial. The total loss has further been elaborated, i.e, (i) Actual Total Loss and
(ii) Constructive Total Loss.66
i. ACTUAL TOTAL LOSS :- It happens when the covered goods are completely ruined
and cannot be restored or refurbished for utilization.67
ii. CONSTRUCTIVE TOTAL LOSS:- The provision of constructive loss has been kept
to meet the losses, in case the ship destroyed and could not be restored, the goods could
not be preserved or the expenditure of the repair exceeds from the actual value of ship.68
B. PARTIAL LOSSES
The act has simplified about the partial losses that a loss except total loss is partial loss.69

56
Carter v Boehm (1766)
57 Warranty, Pawson v Watson(1778)
58 Insurable Interest, Lucena v Craufurd: HL 1808
59 Duty of utmost good faith, established in Carter v Boehm (1766), Lord Mansfield.
60
The Faculty of Law, National University of Singapore, invited papers from the scholars and celebrated the above milestone judgement
after 250 years, <https://law.nus.edu.sg/pdfs/cbfl/events/CartervBoehmAfter250Years.pdf
61
Mixed sea and land risks, Section 2 of MIA, 1906
62
Carter v Boehm (1766)
63
Section 6
64
Section 56
65
Section 68
66
Section 56 (2)
67
Section 57
68
Section 60
69
Section 56