Fundamental Principles In Every Insurance Cover
- Utmost Good Faith – The Contract of Insurance requires not only from the Insurer but also from the Insured the observance of Utmost Good Faith or Uberrimae Fidae. Both parties must disclose conditions affecting the risk and other material facts, as such shall be the basis of the agreements of the contracting parties. Failure of either party to declare in utmost good faith may avoid the contract.
- Insurable Interest – It is the relationship of the Insured to the thing that is subject of insurance, where the former would suffer loss, pecuniary or otherwise, in case of loss.
- Indemnity – The obligation of the Insurer to make good any loss or damage which the Insured has incurred, provided the cause of loss or damage and the thing are covered in the contract of insurance, within a given period of coverage.
- Subrogation – It is the substitution of the Insurer to the rights of the Insured after the former has paid or settled, in whole or in part, the supposed obligation of the latter to a third person.
- Premium – It is the consideration being required by the Insurer for undertaking to indemnify the Insured against loss, damage or liability arising from unforeseen, unknown or contingent event.
- Proximate Cause – It is the Responsible Cause of an event or happening. That cause, which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury, and without which the result event or result would not have occurred.
Definition of Marine Insurance
‘A contract of marine insurance is a contract whereby the insurer undertakes to indemnify the assured, in manner and to the extent thereby agreed, against marine losses, that is to say, that is the losses incident to marine adventure’.
Marine Insurance Includes:
Vessels, craft, aircraft, vehicles, goods, freight, cargoes, merchandise, effects, disbursements, profits, money, securities, cases in action, evidence of debt, valuable papers, bottomry, and respondentia interest and all other kinds of property and interests therein, in respect to, appertaining to or in connection with any and all risks and perils of navigation, transit or transportation, or while being assembled, packed, crated, baled, compressed or similarly prepared for shipment or while awaiting shipment, or during any delays, storage or transshipment incident thereto, including war risks, marine builder’s risks, and all personal property floater risks; Persons or property in connection with or appertaining to a marine, inland marine, transit or transportation insurance, including liability for loss of or damage arising out of or in connection with the construction, repair, operation, maintenance or use of the subject matter of such insurance (but not including life insurance or surety bonds nor insurance against loss by reason of bodily injury to any person arising out of the ownership, maintenance, or use of automobiles); Precious stones, jewels, jewelry, precious metals, whether in the course of transportation or otherwise; Bridges or tunnels and other instrumentalities of transportation and communication (excluding buildings, their furniture and furnishing, fixed contents and supplier held in storage); piers, wharves, docks and slips, and other aids in navigation and transportation, including dry docks and marine railways, dams and appurtenant facilities for the control if waterways.
Kinds of Marine Insurance
1. Subject Matter
MARINE HULL POLICIES
1. Standard Hull Policy- normally issued to cover one vessel only for a period of one year or pro-rata to expire with other insured vessels owned by assured.
2. Fleet policy- Issued to cover fleet of vessels so assured has to maintain only one record of Insurance of all his vessels.
MARINE CARGO POLICIES
1. Ordinary or Standard Cargo Policy- single voyage policy and is good for one use only.
2. Open Policy- intended for automatic protection of the assured from the consequences of loss. It is a cargo policy expressed in general terms and effected with pre-agreed limit of liability, conditions and rates and the basis of valuation to determine sum insured.
2. Risk Area
a. Ocean Marine (Overseas)
b. Inter-island Marine
c. Inland Cargo
Types of Marine Policies
1. Time Policy. A time policy insures the subject matter for a definite period of time.
2. Voyage Policy. A voyage policy insures the subject matter for one shipment or voyage only irrespective of the length of time it take the vessel to reach the port of destination.
There are (6) Basic Perils in marine insurance.
1. Perils of the Seas – One which arises from the extra ordinary action of the seas which can not be expressly guarded against, such as:
a. Stranding – A vessel strands when out of the ordinary course of navigation, she is forced by some accidental and extraordinary cause to take ground, and stays aground for some reasonable time.
b. Foundering – The vessel becomes filled with water and sinks. The sinking must generally be of such nature that the vessel is completely covered with water. The fact that the vessel is partially under water will not be regarded unless it can be proven that owing to the nature of the cargo it is impossible for the vessel to sink deeper.
c. Shipwreck. A vessel driven to shore or against rocks by violent action of the winds and waves causing destruction or loss of the vessel.
d. Collision. Actual violent contact with another vessel or any stationary object.
Direct fire loss Caused by lightning. Fire attributed to negligence Damage done by measures to extinguish a fire, i.e., water damage
3. Rovers, Pirates, Thieves
Rovers and Pirates. Persons who without legal commission plunder other vessels indiscriminately on the high seas.
Assailing Thieves. Refer to persons who with the use of violence commit robbery; this does not include ordinary theft or pilferage.
4. Jettison. The throwing of cargo or ship’s gear, and usually occurs as a measure to preserve the ship and cargo from loss in time of common danger. Loss by jettison of deck cargo is not a general average loss if the cargo has been carried on deck without knowledge of the shipper and against recognized custom or trade. The shipowner is generally liable.
5. Barratry. Includes every wrongful act willfully committed by the master or crew to the prejudice of the owner of the ship, or as the case may be, by the charterer and owner of the cargo. If the master and crew engage in smuggling without the consent of the owners, there is barratry, but if the owners are guilty of gross negligence in not taking proper measures to prevent a repetition of the offence, the insurer is not liable.
6. All Other Perils. Subject to the principle of ejusdem generis or “of the like kind”, the marine policy covers losses arising from perils of the same nature as those previously named in the policy.