INTRODUCTION

MARINE INSURANCE

Gitanjali Singh
Assistant Professor
IBM - UG
GLA University
 Marine insurance
• Marine insurance plays an important role in domestic trade as well as in
international trade.
• The Indian Marine Insurance Act came in to operation on 1 Aug.,1963.
• Prior to this insurance was on the principles of General contract Act and The
English marine Insurance Law.
• Most contracts of sale require that the goods must be covered, either by the
seller or the buyer, against loss or damage.
• It depends on the terms of the sale contract. A contract of sale involves mainly
a seller and a buyer, apart from other associated parties like carriers, banks,
clearing agents, etc.
• Meritime Perils/Risk- Perils incidental to the navigation through the sea e.g.
fire, war, cyclones, rovers, strikes etc.
• Sinking , grounding of ship/boat.
• Collision of vessel with internal & external objects.
 Who is responsible for affecting insurance on the goods?

• Sales Contract
• Banks
• Clearing Agents
• Carriers etc.
• Buyer Seller
 Marine insurance- Concept
• A contract of marine insurance is “an agreement whereby the insurer undertakes
to indemnify the assured, in the manner and to the extent thereby agreed, against
losses incidental losses to marine adventure.

-Indian marine Insurance Act ,1963

• There is maritime adventure when any insurable propperty (ship/cargo/aluable securities) is exposed to marine perils.
It is also there when the owner of or other peson interested in or responsible for, insurable property by reason of
maritime perils may insure any liabilities to the third party.

• A contract whereby one party for an agreed consideration, undertakes to

indemnify the other against loss arising from certain perils and sea risks to which a
shipment and other interest in a marine adventure may be exposed during a
certain age / time.
-Arnold
 The marine insurance classification
 Marine Cargo Insurance Which provides insurance cover in respect of loss of or
damage to goods during transit. It caters specifically to the marine cargo carried
by ship and also pertains to the belongings of a ship’s voyages. It protects the
cargo owner against damage or loss of cargo due to ship accident or due to
delay in the voyage or unloading. Marine cargo insurance has third-party liability
covering the damage to the port, ship or other transport forms (rail or truck)
resulted from the dangerous cargo carried by them
 Hull & Machinery Insurance- can protect the ship owner for any operational
damages in machines and investment in the ship. Hull insurance - concerned
with the insurance of the ship
 Freight Insurance- Under freight insurance, the loss of freight suffered by the
vessel operator is covered. In many cases of marine transportation, the vessel
operator is supposed to receive the freight amount for carriage of goods only
when the goods are delivered safely to their destination. If, however, the goods
are damaged in transit, the operator would lose the freight receivable. A freight
insurance policy, therefore, provides compensation for the loss of freight.
 Marine Liability insurance- Liability occurring on account of a ship
crashing/Collision. It is often taken as a part of hull insurance policy.
Chapter-19
 Types of (TOTAL) loss in marine insurance
1. Actual Total Loss- It happens when-
• Goods are completely damaged & cannot be repaired
• Ship is missing, and there is no trace of it
• Policyholder is entitled to get the full amount of loss. When the
insured has been compensated, the title of goods is also passed on
to the insurance company.
2. Constructive Total Loss-
• Ship is not completely damaged, but still, it is not practical to get it
repaired and restored to its original state.
• In this case, where the cost of repairing a ship is more than its
value, it is advised to abandon the ship.
 caselet Constructive Total Loss
• MJ Ship, laden with merchandise belonging to German merchants
for sale in Maldives, was on a voyage when the war broke out
between Germany and UK. Unfortunately, the ship was in UK water
when the war broke out, and therefore, UK navy personnel took it
into their custody and released their crew members but refused to
release the goods. The crewmembers returned to Germany, and MJ
Ship approached its marine insurance company for the claim
settlement. The insurer appointed a surveyor who found out that
expenses incurred in bringing the cargo to coast were more than
the actual cost of the cargo. The surveyor considered it as a case of
constructive total loss and on the basis of the report, the insurer
settled the claim accordingly.
 Types of (PARTIAL) loss in marine insurance

2. Partial Loss
• Particular Average Loss= It is a partial loss which is caused by an
insured peril.
• Case: The ship was carrying a cargo of Rs 50 lakh when suddenly it
started overheating due to mechanical issues. The captain informed
the same to the shipowner who tried to find ways to curtail the
losses in order to protect goods. Finally, the cargo owner decided to
sell a part of the cargo at the lower value in the immediate port
much before the cargo reached the destination. Here, the goods
were sold for Rs 4 lakh, however, if they would have been sold in
the market the cargo owner would have fetched Rs 12 lakh. As
cargo owner incurred losses due to urgent selling, it approached its
marine cargo insurance company who considered it as a case of
particular average loss and decided to settle the claim accordingly.
 Types of (PARTIAL) loss in marine insurance
• General Average Loss= It is a loss which is caused
voluntarily in order to avoid any impending danger.
• A Ship was on its way to chennai when it started sinking
due to overloading. At this point, the captain allowed
some of the cargo to be thrown out of the ship in order to
save the ship and the crew member from sinking. Any loss
happened to this would be covered by marine insurance
as items were thrown off to save the ship and human life.
 FEATURES OF MARINE INSURANCE
• Offer & Acceptance
• Payment of premium
• Contract of Indemnity
• Utmost good faith:
• Insurable Interest
• Period of marine Insurance
• Contribution
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 Insurable interest in Marine
• The marine insurance will be valid if the
person is having insurable interest at the
time of loss.
Example: Mr. A sends the goods to Mr. B on
CIF (Cost, Insurance and Freight) basis
It means the insurance is to be arranged by
Mr. A. And if any loss arises during transit then
Mr. A is entitled to get the compensation from
the insurance company.
FOB , CIF
 Caselet- Dove Shipping International Inc
• We had a client ship an outdoor tent to the Europe for a party rental company.
• The goods were received in good order, however, upon unpacking the pallet the
importer noticed what appeared to be holes from a forklift.
• We made a claim on the shipper’s behalf and the value insured was $20 thousand
over what they declared with Customs.
• We made a claim on the shipper’s behalf and the value insured was $20 thousand
over what they declared with Customs.
• Even though the goods were damaged, the importer was still using them for their
events and made it impossible for the adjuster to go inspect the damage as it
moved around the country.
• The importer wanted a brand-new tent, the insurance company noted they were
using it so the tent was not considered a total loss.
• A settlement was reached based on the value declared with Customs
 Types of Marine Insurance policy
• Floating policy – When a person ships goods regularly in a particular geographical area, he
will have to purchase a marine policy every time. It involves a lot of time and formalities. He
purchases a policy for a lump sum amount without mentioning the value of goods and name
of the ship etc.
• When he sends the goods, a declaration is made about the particulars of goods and the name
of the ship. The insurer will make an entry in the policy and the amount of policy will be
reduced to that extent. This policy is called an open or a floating policy. For clients who
undertake frequent trips of cargo transportation through waters, this is the most ideal and
feasible marine insurance policy.
• Marine Cargo Special Declaration Policy-This is basically an open policy of 12 months
duration and such policies are issued to Concerns having estimated annual turnover of Rs 2
crores or above. All transits upto the sum insured are covered without any exception and total
value of goods in transit are required to be declared atleast once in a quarter in the form of a
certified statement. Period of insurance for this policy is one year.
• Coverage: All Risks subject to Inland Transit ( Rail or Road) Clause –A
•  Inland transit ( Rail or Road)  Clause (B) ( Basic Cover)
• https://nationalinsurance.nic.co.in/en/commercial-risk-insurance/marine-insurance-marine-
cargo-special-declaration-policy
 Types of Marine Insurance policy
• Voyage Policy-
• This policy covers risks in transit( related to the place of particular voyage) e.g.
Chennai to Singapore. It is used for cargo insurance rarely for hull.
• But sometimes ship owner prefers to insure his vessel for each separate voyage
under Voyage Policy
• Time Policy-This policy covers some specified period of time e.g 1.1.2020 to noon
1.1.2021. It is generally for Hull insurance.
• Voyage & Time Policy(Mixed) Policy
• Subject matter+ voyage+ time duration
• Single Vessel Policy: This policy is suitable for small shipowner having only one
ship or having one ship in different fleets. It covers the risk of one vessel of the
insured.
• Fleet Policy: In this policy, several ships belonging to one owner are insured under
the same policy.
• Port Risk Policy: Policy is taken out in order to ensure the safety of the ship while it
is stationed in a port.
 Types of Marine Insurance Policy
• Valued Policy-
• Value of the cargo being transported is mentioned beforehand which specifies the coverage
level of the plan.
• In case of loss of cargo, the value mentioned in the policy is paid as claim
• Value includes -Invoice price, freight, insurance charges, shipping charges, certain % of profit.
• Un Valued policy 
• When the value of the cargo is not determined beforehand, it is called an unvalued policy.
• Under this policy, the loss suffered would be estimated when the loss happens.
• Insurable value is decided by considering-Invoice price, freight, insurance charges, shipping
charges, no profit is added.

• Annual Policy: This policy, issued for 12 months to overs goods belonging to the insured,
which are not under contract of sale, and which are in transit by rail / road from specified
depots / processing units to other specified depots / processing units
 Clauses incorporated in Marine policy
• Touch & stay clause- In the absence of any further
license, the liberty to touch & stay at any port
/place whatsoever” does not authorize the ship to
depart from the course of her voyage from the
port of departure to the port of destination
• Foreign General Average Clause-.The average
settlement made in foreign country will be
adopted as the basis for settlement
 Contents of Marine Insurance policy
• Name of insured
• Policy number
• Sum Assured
• The subject matter insured and the
perils covered
• Place where claims are payable
• Premium
• Stamp duty
• Voyage
• Number/ date of bill of lading/Air
freight Receipt
• Place of issue of policy & date
• Signature of the authorized person
signing on behalf of the insurers.
• Every marine policy must b e
stamped in accordance with
provisions of the Indian Stamp
Act,1899.
 Steps to be taken for Buying Marine Insurance Policy

• Choose between Broker or Insurance Company (Bharti AXA, ICICI

Lombard)
• Fill Marine Declaration Form
• Assessment of Risks
• Payment of Premium
• Issuance of Cover Note
• Issuance of Marine Insurance Policy
 How to file a claim under Marine Insurance?

• In case of loss or damage to the cargo or the ship, you need to

immediately inform the insurance provider
• A surveyor will assess the damage or loss mentioned
• All the proofs and witnesses need to be submitted along with the duly
filled in claim form
• For a missing package, the insured must lodge file a monetary claim
with the insurance provider and get an acknowledgement for it
• If the provider finds the case fit, it would approve the claim, else it
would reject it
• In case you are not satisfied with the case, you can approach the court
of law
 Documents Required for Claim Process

• Duly filled in claim form

• Original insurance certificate with the policy
number
• Copy of Billing Lading
• Survey report or missing certificate
• Original invoice, packing list, shipping
specification
• Copies of correspondence exchanged
 Case Study

• Founded in 2013, K.S Steels exported a consignment of steel pipes. However, upon
arrival of the cargo, the buyer rejected delivery, claiming that steel pipes were
rusted and not as per the contractual requirements. As K.S Steel had bought a 
marine insurance, the company approached the insurer for claim settlement who
appointed a surveyor to ascertain the damage. The surveyor found out despite
good packaging, the shipment of steel pipe had suffered exposure to salt water
during transit. As goods were partially damaged, the insurer asked K.S Steels to
submit a damage certificate along with a proof of dispatch. After receiving and
reviewing all documents, the insurer approved the claim settlement. As the claim
amount was Rs 5 lakhs, K.S Steels also submitted their KYC documents.