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Marine insurance law. Trine-Lise Wilhelmsen Scandinavian Institute of Maritime Law. Overview . The main types of marine insurance The legal sources The insurance contract Insurable interest, insurable value and the sum insured Scope of cover . Overview .

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marine insurance law

Marine insurance law

Trine-Lise Wilhelmsen

Scandinavian Institute of Maritime Law

overview
Overview
  • The main types of marine insurance
  • The legal sources
  • The insurance contract
  • Insurable interest, insurable value and the sum insured
  • Scope of cover

Marine insurance

overview3
Overview
  • Duties of disclosure and due care
  • Measures to avert or minimize loss
  • Practical question to be solved
  • Practical question, discussion
  • General approach: Common rules for ship and cargo

Marine insurance

1 the main types of marine insurance
1. The main types of marine insurance
  • Insurance related to ships
  • Insurance of goods under transport
  • Some other distinctions

Marine insurance

1 1 insurance related to ships
1.1 Insurance related to ships
  • Casualty insurance
    • Damage to/loss of property
    • Element of liability
    • Element of loss of income
    • Divided into two:
      • Hull insurance
      • Hull interest insurance

Marine insurance

1 1 insurance related to ships cont
1.1 Insurance related to ships cont.
  • Loss of income
    • Covering income derived from property:
    • Loss of hire, freight interest, strike
  • Liability insurance
    • Covering ship-owners third party liability
    • Main liability insurance: P&I insurance
    • Overlaps with hull/hull interest insurance covering part of the collision liability

Marine insurance

1 2 insurance of cargo under transport
1.2 Insurance of cargo under transport
  • Covers cargo under transport from A to B (seller to buyer)
  • Casualty (damage and loss) insurance
  • Includes owners profit
  • But not
    • loss of income in general
    • owners liability

Marine insurance

1 3 some other distinctions of relevance
1.3 Some other distinctions of relevance.
  • Marine/civil risks vs war risks
    • Marine/civil insurance covers all risks that are not excluded
    • Special exclusion for war risks
    • War insurance covers war and similar perils as defined
    • Distinction used in all marine insurance

Marine insurance

1 3 some other distinctions of relevance9
1.3 Some other distinctions of relevance.
  • Primary insurance – coverage for costs of saving acts
    • Primary insurance: coverage of casualties
      • Caused by perils insured
      • According to the principles of indemnity in the contract.
    • Saving acts: covers
      • expenses incurred to avert/minimize losses
      • according to ordinary tort principles

Marine insurance

2 the legal sources in marine insurance
2. The legal sources in marine insurance
  • The international legal picture
  • The Norwegian legal picture

Marine insurance

2 1 the international legal picture
2.1 The international legal picture
  • No international convention
  • The English marine insurance market
  • The Scandinavian marine insurance market

Marine insurance

2 1 1 no international convention
2.1.1 No international convention
  • Contrary to many other areas of maritime law
  • Has been attempts of harmonization in UNCTAD
  • A new attempt recently by CMI and NIFS
  • The situation today

Marine insurance

2 1 2 the english insurance market
2.1.2 The English insurance market
  • The English MIA = the legislative framework in most common law countries
  • English ITCH clauses used in
    • even more common law countries
    • and in some civil law countries

Marine insurance

2 1 3 the scandinavian market
2.1.3 The Scandinavian market
  • Each country has their own set of conditions
  • During the last century much inspired by the Norwegian Marine Insurance Plan
  • Many similar solutions
  • But different structure and legal framework

Marine insurance

2 2 the norwegian legal picture
2.2 The Norwegian legal picture
  • FAL (ICA) 1989
  • The Norwegian Marine Insurance Plan
  • The Norwegian Cargo Clauses
  • The P&I Conditions

Marine insurance

2 2 1 fal ica 1989
2.2.1 FAL (ICA) 1989
  • Starting point: Mandatory, § 1-3
  • But exception for
    • insurance of ships that should be registered, § 1-3 (c)
    • Insurance of international transport of cargo, § 1-3 (e)
  • However: Cargo insurance follows ICA with certain exceptions

Marine insurance

2 2 2 norwegian marine insurance plan 1996 nmip
2.2.2 Norwegian marine insurance Plan 1996 (NMIP)
  • Standard contract (Agreed document)
  • Developed over 125 years
  • Most of the interested parties have participated in the construction
  • This approach contrary to ITCH/other conditions

Marine insurance

2 2 2 norwegian marine insurance plan 1996 nmip18
2.2.2 Norwegian marine insurance Plan 1996 (NMIP)
  • Covers most of the insurances for the shipowner
  • But: not P&I insurance
  • Extensive preparatory documents (Commentary)
  • Little relationship with the ICA

Marine insurance

2 2 3 norwegian cargo clauses cicg
2.2.3 Norwegian Cargo Clauses (CICG)
  • Conditions relating to insurance for the carriage of goods
  • Many of the same characteristics as NMIP
  • But
    • Less extensive commentaries
    • A stronger connection to the ICA

Marine insurance

2 2 4 the p i conditions
2.2.4 The P&I Conditions
  • Traditionally: Part of the NMIP
  • Today: Skuld and Gard (Norway), Swedish club (Sweden)
  • Part of international network
  • Cover: Protection and Indemnity + other types of cover

Marine insurance

3 the insurance contract
3. The insurance contract
  • The parties to the insurance contract
  • The formation of a marine insurance contract
  • Jurisdiction and choice of law

Marine insurance

3 1 the parties to the insurance contract
3.1. The parties to the insurance contract
  • Definitions, NMIP § 1-1
  • The insurer/company
  • Coinsurance /claims leader (NMIP ch 9)
  • Reinsurance
  • The assured
  • The person effecting the insurance
  • Insurance of third party interest

Marine insurance

the parties to the contract
The parties to the contract

Insurer

Insurance contract

Right to compensation

Person effecting

the insurance

The assured

Marine insurance

insurance of third party interest
Insurance of third party interest

Insurer

Insurance contract

Right to

Compensation

Person effecting

the insurance

The assured

Marine insurance

insurance of third party interest nmip
Insurance of third party interest, NMIP

Co-insured,

Ch. 7 and 8

Insurer

Right to compensation

Insurance

contract

Person effecting

Insurance

Assured

Marine insurance

insurance of third party interest cicg
Insurance of third party interest, CICG

Buyer

Company

Right to compensation

Insurance

contract

Seller

Seller

Marine insurance

co insurance partial insurance with more than one insurer
Co insurance → Partial insurance with more than one insurer

Insurer A

200 mill NOK

1/3

Ship

600 mill NOK

Insurer B

200 mill NOK

1/3

1/3

Insurer C

200 mill NOK

Marine insurance

reinsurance the insurer reinsures the risk undertaken under the direct insurance contract
Reinsurance→ The insurer reinsures the risk undertaken under the direct insurance contract.

Ship:

600 mill NOK

Direct insurance: 100 %

Insurer:

100 mill NOK

Reinsurance: 500 mill NOK

Reinsurer:

500 mill NOK

Marine insurance

3 2 concluding the contract
3.2 Concluding the Contract
  • Starting point: Ordinary contract law
  • The use of broker: NMIP § 1-3
  • “Housekeeping rule”
  • No sanctions
  • The purpose
  • Relationship to the “slip”

Marine insurance

3 2 concluding the contract30
3.2 Concluding the Contract
  • Documents
    • NMIP: Written proof of insurance = policy, see § 1-2
    • CICG:
      • Insurance certificate, ICA § 2-2
      • Insurance document , CICG § 1 nr. 4
        • Single shipment = Insurance certificate
        • Open cover/floating policies = certificate + document
    • Gard 5: Certificate of entry

Marine insurance

3 3 jurisdiction and choice of law
3.3. Jurisdiction and choice of law
  • NMIP § 1-4, CICG § 59, Gard 90/91
  • Main rule:
    • Norwegian jurisdiction and
    • Background law
  • But: NMIP § 1-4.3: foreign claims leader
  • The relationship to the ICA

Marine insurance

4 insurable interest insurable value and the sum insured
4. Insurable interest, insurable value and the sum insured
  • Insurance unrelated to any interest
  • Insurable value and sum insured
  • Underinsurance and overinsurance
  • Double insurance
  • Calculating the insurable value
  • The sum insured as limit to the insurer’s liability

Marine insurance

4 1 insurance unrelated to any interest
4.1 Insurance unrelated to any interest
  • Insurance unrelated to any interest is void, NMIP § 2-1, Criminal Enactments Act § 12 (wager insurance)
  • MIA sec. 4.1
  • The relationship with provisions concerning legal interest:
    • NL 5-1-2
    • NMIP § 3-16 concerning illegal activities
    • CICG § 18 nr. 4

Marine insurance

4 2 insurable value and sum insured
4.2 Insurable value and sum insured
  • Insurable value, NMIP §2-2, CICG §29 =
    • Value of the insured interest
    • at the commencement of the insurance
    • Maximum for liability
    • Not possible in P&I insurance
  • Sum insured = the sum the assured has chosen to insure

Marine insurance

4 2 under insurance
4.2 Under insurance
  • Under-insurance = insurable value exceeds sum insured
  • Regulated in NMIP § 2-4, CICG § 30
  • Not possible in P&I insurance
  • Pro rata reduction in coverage
  • Not common in hull insurance except for co insurance

Marine insurance

under insurance
Under insurance

Insurable

value:

1000

Potential

loss

Sum

insured:

500

Compensation

500/1000

= 50 %

Of each damage

Marine insurance

4 2 overinsurance
4.2 Overinsurance
  • Over-insurance = sum insured exceeds insurable value
  • Regulated in NMIP § 2-5, CICG § 31
  • Liability limited to the insurable value
  • No liability in case of fraud
  • Not good business

Marine insurance

over insurance
Over insurance:

Sum

insured:

1000

Insurable

value:

660

Basis for premium

Max.

compensation

Marine insurance

4 2 double insurance
4.2 Double insurance
  • Double insurance = same interest insured against same peril under two or more contracts
  • NMIP § 2-6, ICA § 6-3
  • Main rule: joint liability
  • Exclusion: Subsidiarity, NMIP § 2-6.2

Marine insurance

4 3 calculating the insurable value
4.3. Calculating the insurable value
  • ”Open” insurable value, NMIP § 2-2 = full market value when the insurance commences
  • Assessed insurable value, NMIP § 2-3 = as agreed between the parties
  • CICG § 29: Market value + costs

Marine insurance

4 4 the sum insured as limit to the insurer s liability
4.4 The sum insured as limit to the insurer’s liability
  • NMIP § 4-18: Three times the sum insured:
    • The ”ordinary” sum insured
    • + the ”collision liability” sum
    • + the ”costs of measures to avert or minimize a loss” sum
  • CICG § 32-33:
    • Sum insured for casualties, § 32
    • + losses according to § 39-43, i.e. salvage measures etc.

Marine insurance

5 scope of cover
5. Scope of cover
  • Terminology
  • Perils insured against in marine insurance
  • Causation

Marine insurance

slide43

Terminologi

The

casualty

Perils insured

Heavy weather

Theft

Leakage

Fire

Etc

Losses covered

Damage

Total loss

Collision liability

Loss of time

Etc

Causation

Causation

Marine insurance

5 2 perils insured against
5.2. Perils insured against
  • The main distinction: Marine insurance and war risk insurance
  • NMIP § 2-8 and § 2-9
  • CICG § 3 to § 5 and § 18 nr. 6
  • Gard 58
  • General distinction in international marine insurance

Marine insurance

5 2 perils insured against45
5.2. Perils insured against
  • Marine risks
    • The all risks principle, NMIP § 2-8 / CICG § 3
    • Exceptions:
      • CICG § 4 and 5: Limited cover
      • War perils, § 2-8 letter a), CICG § 18 nr. 3 and 6
      • Intervention by state power, NMIP § 2-8 b), CICG § 18 nr. 7 and 18
      • RACE II, NMIP § 2-8 d) and CICG § nr. 10 and 11.
      • NMIP: Insolvency, letter c)

Marine insurance

5 2 perils insured against46
5.2. Perils insured against
  • War insurance
    • Named perils principle, NMIP § 2-9, CICG Special clauses for Strikes, sabotage, acts of terrorism, etc
    • NMIP: Common exceptions, see above
    • The relationship between the two branches

Marine insurance

5 3 causation
5.3 Causation
  • The problem
  • General insurance law
  • NSPL/CICG: The main rule
  • Combination of war and marine perils
  • Combination of perils over different insurance periods

Marine insurance

5 3 1 the problem
5.3.1 The problem
  • Presumption:
    • Two causes are necessary to result in a loss,
    • none of them are sufficient.
  • Combination of perils in different situations
    • Covered and uncovered perils
    • Perils covered under different branches
    • Perils occurring in different insurance periods

Marine insurance

presumption two necessary causes
Presumption: Two necessary causes

Collision

damage

The ship

sinks

Ship collides

Mine

Two sufficient causes

Marine insurance

combination of covered and uncovered causes
Combination of covered and uncovered causes

Marine

insurance

Grounding

Bad weather

Combination

of causes

Breach of

Safety rule

Marine insurance

combination of causes covered under separate insurances
Combination of causes covered under separate insurances

Marine

insurance

Failure

of navigation

Grounding

Combination of causes

Darkening of

lighthouse

War

insurance

Marine insurance

causes in different periods
Causes in different periods

2004

2005

Casualty

Fracture

Bad

weather

Marine insurance

5 3 2 general insurance law
5.3.2 General insurance law
  • The main rule: The dominant cause rule
  • Legal basis: ND 1916.76 jfr. 1916.209 Skotfos
  • The content
  • Anglo American solution: Causa proxima
  • P& I insurance: Gard 90: ordinary insurance law

Marine insurance

rt 1916 209 skotfos
Rt 1916.209 Skotfos

Marine

insurance

Liability

”Dominant cause”

= the most important

Failure of

navigation

The ship

runs aground

Combination

of causes

Darkening of

lighthouse

Not relevant

cause

War

insurance

Marine insurance

5 4 3 nmip cicg the main rule
5.4.3 NMIP/CICG The main rule
  • NMIP §2-13/CICG § 20
  • Apportionment principle, not the dominant cause rule
  • Special Norwegian principle
  • Only applied in marine insurance
  • Combination of covered and uncovered perils

Marine insurance

nmip 2 13 cicg 20
NMIP § 2-13/CICG § 20:

Coverage 70 %

Covered risk

Casualty

70 %

30 %

Uncovered

Risk

Uncovered 30 %

Marine insurance

5 4 4 combination of war and marine perils
5.4.4 Combination of war and marine perils
  • NMIP § 2-14
  • Reinstates the dominant cause rule as a main rule
  • If neither cause is dominant, equal division

Marine insurance

5 4 5 combination of perils in different periods
5.4.5 Combination of perils in different periods
  • NMIP § 2-11
  • Starting point: When the peril strikes
  • Exception for unknown defect or damage

Marine insurance

nmip 2 11
NMIP § 2-11

The insurer is liable for loss occurred when the interest insured is struck by an insured perilduring the insurance period.

A defect or damage which is unknown at the inception or on expiry of an insurance, shall be deemed to be a marine peril which strikes the ship at the time the casualty or damage to other parts occurs, or at such earlier time as the defect or the first damage became known.

Marine insurance

incidence of loss nmip 2 11 1
Incidence of loss, NMIP § 2-11, 1:

Peril strikes

Casualty

31.12.2005

Renewal

Time

2005 - policy

No liability for the 2006 insurer

Marine insurance

incidence of loss nmip 2 11 2
Incidence of loss, NMIP § 2-11, 2:

2006

Develop

ment

2004

Fracture

2004 - policy

2006 - Policy

Viz:

-Primary damage attributed to the point in time when the peril struck

-Consequential damage covered when development occurs

Marine insurance

incidence of loss nmip 2 11 262
Incidence of loss, NMIP § 2-11, 2:

2000

2004

2006

Develop

ment

Defect

Fracture

2004 - Policy

2006 - Policy

”Peril

strikes”

Marine insurance

incidence of loss nmip 2 11 263
Incidence of loss, NMIP § 2-11, 2:

2000

2004

Develop

ment

2006

Defect

Fracture

”Peril

strikes”

2004 - Policy

2006 - Policy

But: deemed to be a marine peril

which strikes at the time of the extension

Marine insurance