The policy of marine insurance contains the following clauses:-

(i) Lot of Not Lot-This clause protects the insured, which in good faith insures goods which are on a ship which has left a foreign port, in case they were destroyed unknown to him, before he affected the policy. In this case both the injured as well as the insurer ought not to have been aware of the loss of the goods or the steamer at the time of the insurance.

If the insured knew of the loss and did not inform the insurer at the time of effecting insurance the policy would be void.

(ii) Name of the Ship and Master-Here is given the name of the ship and the master for the voyage which is insured.

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(iii) Valuation Clause-This clause states the actual value of the goods as agreed upon between the underwriter and the insured in the case of a valued policy, and in the ca se of an open policy a bland is left after the words, ‘and shall be valued at..’

(iv) The Parties-All persons competent to contract may be parties to policy of insurance. A policy may be underwritten or undertaken either by an insurance company or an individual underwriter as is the case with Lloyd’s in England.

The expression for and in the name of all and every other person or persons, etc.’ protects all persons who has insurable interest at the time of effecting the policy or who acquired insurable interest during the continuation of the risk.

(v) Description of the Voyage or Duration of the Risk- This clause begins with the works ‘at and from’ and in the blank left in the policy is inserted the description of the voyage intended to be insured. The risk begins from the place at which the steamer is at the time of insurance and ends when she arrives at the port of destination.

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(vi) Sea Perils Insured Against, or the Perils of the Sea-These perils include in detail all the perils against which the insured is protected. This clause in Lloyd’s embraces almost all the sea perils including ‘periods of the seas, men-of-war, fire, pirates, rovers, thieves, jettisons, arrests restraints and detention of all kings, princes and people, and mariners and of all other perils, losses, and misfortunes that have or shall come to the hurt, detriment, or damage of the sail goods or merchandise and the ship.’

(vii) Receipt of Premium and the Rate Charge-The receipt of premium and the rate charged are stated in this clause. Premium is the consideration paid by the insured to the underwriter for undertaking to indemnify him against the loss as per the terms of the policy.

The form of Lloyd’s policy clearly uses the words, ‘confessing ourselves paid the consideration due…’, as if the premium had already been paid to the underwriter, at the time the policy was affected. In practice, however, the premium in London on Lloyd’s is not paid by the broker at the time of affecting the policy. The practice there is to pass the amount in account between the insurance broker and the underwriter.

(viii) Sea Perils Insured Against, or the Perils of the Sea-These perils include in detail all the perils against which the insured is protected. This clause in Llyod’s embraces almost all the sea perils including ‘perils of the seas, men-of-war, fire, pirates, rovers, thieves, jettisons, arrests, restraints and detention of all kings, princes and people, barratry of masters 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 or merchandise and the ship.’

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(ix) Memorandum-The commodities which are the subject matter of marine insurance comprise various articles which are liable to undergo deterioration or damage to a greater or lesser extent according to their peculiar nature.

Some of these commodities may even perish or be damaged through detention or delay. To avoid, therefore, claims arising through the inherent vice in the nature of such commodities, almost every policy of insurance includes a clause or memorandum; in the case of the Lloyd’s policy it is called the F.P.A. clause.

Under the F.P.A. clause the underwriter is liable for total loss but is not liable for particular average or partial loss. Partial loss is agreed to be paid if it exceeds three per cent in certain cases, and five per cent in others.

(x) Waiver Clause-This is in fact continuation of the ‘sue and labour’ clause because it lays down that ‘no acts of the assurer or assured in recovering, saving or preserving the property insured, shall be considered as a waiver or acceptance of abandonment. ‘This clause is nowadays found in almost all public policies of Lloyds’s.

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(xi) Sue and Labour Clause-Under this clause it is specifically provided that it shall be lawful to the assured, his factors, agents and assigns to do all in their power to defend the property insured in case of damage or loss; and in return in the underwriter agrees that the insured’s rights to his insurance claim are not in any way prejudiced; and that all the expense thought lawful in such prejudiced; and that all the expenses though lawful in such attempt shall, save costs against the damage insured, be made good by the underwriter.

Implied Warranties

Besides the actual conditions the following are implied by law:-

(a) Seaworthiness-i.e. at the time of insurance the ship is en every respect fit for the voyage.

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(b) Legality of Voyage-i.e. it is for a legal purpose and is not, for example, a smuggling adventure.

(c) Non-deviation-i.e. where a voyage is between two specified ports that the ship will take the usual route and not deviate from it except through unavoidable necessity.

Losses

The losses of insurance may be either (i) Partial or (ii) Total. Total losses are again sub-divided into (a) Actual Total loss, and (b) constructive Total Loss. The various causes of partial losses were considered while dealing with the expression, ‘Perils of the sea.’

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A partial loss rises where the subject matter insured in damaged only partially, or where it is not damaged at all, but a contribution by way of general average is exacted. An actual total loss arises when the thing is (i) wholly destroyed or annihilated by any of the risks against which it was insured, as when thing is broken to pieces and no longer answers the original description, or is burnt to ashes, or goes down to the bottom of the sea; or (ii) is through the same risk lost to the assured absolutely or irrecoverably so that it is beyond the powers of the insured party to recover, it, as where in one case a ship ran on an island and was wrecked and the goods thereon were plundered by salvaged who lived there.

Constructive total loss arises when the thing insured, though not wholly destroyed, is reduced to such a state or is placed in such a position that to get it repaired would be most expensive and no prudent man would care to do so, or its ultimate safety would be most doubtful.

This may arise when a ship has run on a rock and is stranded there badly damaged and to send out steamers to save and bring back and repair it would involve an expense greater than the actual value of the steamer, or when the risk involved is so great that no prudent businessman would care to undertake the adventure.

Average

In connection with Averages, various abbreviations are used, which are as follow: –

(i) F.P.A-Here the underwriter will only pay for general average loss.

(ii) A.A.R-Here the policy covers all risks.

(iii) F.C.S-Here the underwriter does not take the war risk, which is capture and seizure of the ship by the enemy.

(iv) W.P.A-Here the underwriter agrees to pay for all partial losses caused by the perils at sea.

(v) F.G.A-This means that the general average would be prepared according to the law of the port of destination or in the nearest port after the loss is suffered. If it happens to be a foreign port, the statement will naturally be prepared according to its law.

Particular Average

The losses in marine insurance are also divided into two special divisions know as (a) Particular Average Loss, and (b) General Average Loss. Arnold defines particular average loss as follow: –

It is thus seen that the particular average loss is a loss sustained through the perils insured against, not for the general safety of the ship, but through a mere accident. It would have to be borne by the owner of the goods if they were not insured against the particular accident.

General Average

General Average Los stand on quite a different footing from particular average. In the case of general average the loss arises from a voluntary sacrifice by the captain of a part of the cargo, or some part of the furniture of-the ship itself, or some extraordinary expenditure incurred by way of repairs, etc., to enable the ship on its voyage meets with a heavy storm and is drifting towards rocks, or is leaking and the captain thinks, after due deliberation in the circumstances that a part of the cargo must be sacrificed by being thrown overboard; if the mast and the ship’s cable have to be detached to effect urgent repairs consequent to the damages suffered by his ship; or if the assistance of some other ship is taken to two to a port of safety, to the owner of which salvage has to be paid all these losses and the extraordinary expenses voluntarily incurred would make up the total of the general average loss.

Now as this general average loss is voluntarily incurred in order to save the ship and the balance of the cargo, all the persons interested in the voyage must each contribute towards this loss ratably. If, for example, a ship has on board the goods of A b, C and D and the captain has to sacrifice all the goods of A and half of those of B and has also to break and throw overboard the mast, it would be inequitable to allow C and D to receive their goods without contribution. The loss incurred in this case by A and B as well as by the ship-owner was for the general safety, and therefore, all the parties interested, viz. A, B, C, D, and the ship-owner, should bear their relative proportion of the loss.

York-Antwerp Rules

As General Average causes many difficulties particularly where adjustments have to be made in foreign courts, to facilitate matters, an international code has been compiled known as the York-Antwerp Rules.

This code admits as general Average certain losses, e.g. masts, sidle or rigging cut away for the common safety during a storm; loss of cargo or freight through jettison; damage done to cargo by water used to extinguish other cargo on fire, etc.

Policy Proof of Interest or P.P.I. Policy

The contract of insurance is said to be a contract of indemnity, and thus all that the insured can claim is tc be indemnified for the actual loss suffered. In other words, he cannot by insuring property which does not belong to him, or in which he has no interest either as a money-lender or mortgagee, or in any other capacity, or where the destruction or damage to the property does not entail a pecuniary loss, claim to recover the amount covered by the policy; and the policy in such a case is voiding law and is known as a wager policy.

This is because here the insured is taking out a policy with a view to bet or gamble on the chances of the goods or the ship that he has insured being damaged or destroyed, and the law sternly discourages such transactions. On Lloyds, however, policies known as “P.P.I.” or “Policies proof interest” or “Honour Policies” or “Wager” or “Gambling” policies are taken out, where the underwriter guarantees that even if the insured may not have any insurable interest in the subject-matter insured, the policy shall be payable in case of loss or damage to the subject matter insured. This of course does not make the policy enforceable at law though members of Lloyds may be relied on to carry out their engagements to the letter.

Respondentia

When money is borrowed on the security of the cargo the bond is known as ‘respondentia.’ In this case also, the captain must in the first instance try to communicate with the car owner and this money should have been borrowed exclusively for the benefit of the cargo.

Causa Proxima

The literal meaning of this Latin expression is “Proximate Cause.’ This arises when a property is insured at sea and more than one cause operates to bring about loss, in which case the proximate cause ought to be considered.

Thus, in a case where the cargo was damaged by sea- water which trickled from a pipe gnawed by rats, it was held that the proximate cause was the sea-water, and the insured was entitled to damages, the rat’s beings remote cause.

Bottomry Bond

When the master of a ship is in urgent need of money which he cannot raise on the owner’s credit, or is unable to communicate with the owner, he has the power to give a bond known as the “bottomry bond,’ by which he pledges the ship as a security to the person advancing money.

The peculiarity of this bond is that the capital and interest on the loan is payable only if the ship reaches its destination if therefore, after this bond is given, the master proceeds its destination. If, therefore, after this bond is given, the master proceeds with the voyage and has, at women other port, to raise further money for urgent repairs, for which he gives a second bottomry bond to some other person, this second part acquires a prior right over that of the lender on the first bond.

If, however, after setting out on a voyage, it cannot be completed, or has to be abandoned, either owing to any act of the master, or through some impossibility which the bond holder cannot control, the bond becomes due and payable. Where the ship is totally lost, the bond becomes void; but if a part of it is saved the amount of the bond can be recovered there from.