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MARINE INSURANCE

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  1. MARINE INSURANCE Lecture 15 Week 8

  2. DEVELOPMENT • One of the earliest forms of insurance • Developed out of bottomry and respondentia bonds • Standard forms used by Lloyds • Marine Insurance Act 1906 • Often includes aviation insurance • Different terminology

  3. TYPES OF COVER • Hull • Cargo • Freight • Voyage • Collision

  4. TYPES OF VESSELS COVERED • Dinghies • Yachts • Cargo vessels • Liners • Super tankers • Oil rigs • Fishing vessels

  5. BASIC COVER • Perils of the sea and other navigable waters • Restraint of princes • Piracy • All risks

  6. FURTHER COVER • Pollution Hazard • War and strikes clause • Bursting boilers or breaking shafts • accident or negligence of a third party

  7. IMPLIED WARRANTIES • Seaworthiness • Damaged bottom • Insufficient crew • Legality • Marine Insurance Act 1906

  8. PARTICULAR AVERAGE • This means a partial loss • Covers loss caused by: • Perils of the sea rivers lakes or other navigable waters • fire, explosion • violent theft • jettison • piracy

  9. MEASURE OF INDEMNITY • s.69 Marine Insurance Act 1906 • Where ship has been repaired the reasonable cost of repairs less the customary deductions but not exceeding sum insured • Where partially repaired cost of repairs plus reasonable depreciation subject to not exceeding cost of complete repair • Not repaired - the reasonable depreciation

  10. EXAMPLES OF ADJUSTMENTS • Bottom end bearing fractured in generator as a result of latent defect led to damage to liner. • Cost • Bearing £5000 • Liner £4000 • Cylinder £3000 • Piston £6000 • Total £18000

  11. ADJUSTMENT • Excess £2000 • Standard policy would exclude replacing defective part • Thus total amount payable is £11000 • £18000 - £5000 (bearing) - £2000 (Excess) • Additional perils clause would have covered bearing

  12. TOTAL LOSS CLAIMS (SHIP) • Institute time clauses • Hulls total loss only including salvage, salvage charges and sue and labour • Hull total loss, general average and 3/4ths collision including salvage etc • Hulls disbursements

  13. TYPES OF TOTAL LOSS • Constructive total loss • Deprived of ship by insured peril • Recovery would exceed value • or repair exceeds value • Abandonment • Insured entitled to abandon loss when constructive total loss • Consequence is that if insured accepts notice of abandonment subject to assets and liabilities. May not accept abandonment

  14. SUE AND LABOUR CLAUSES • Covers expenses reasonably incurred by insured to save vessel and cargo • Paid in excess of sum insured.

  15. COLLISION LIABILITY • Covers three quarters of the cost of liability • Rest paid by Protection and Indemnity associations • It is a liability policy

  16. CARGO • Same risks and same methods • General average clause • Losses arising for the preservation of ship and cargo • Salvage loss • Follows forced sale of badly damaged cargo

  17. CARGO PARTIAL LOSS • Where goods delivered damage measure of indemnity is • Proportion of sum fixed by policy • equal to the gross sound value less damaged value at place of delivery • Example • Goods insured at £120,000; Damaged value = £80,000: Sound value = £100,000 • Depreciation or proportion is 20% • Apply this to £120,000 gives £24,000

  18. FREIGHT • Profit made by a shipowners out of ships used to carry cargo, both their own and others • The cargo includes all moveables • Loss occurs when cargo is not deliverable

  19. FREIGHT LOSS • Valued and unvalued policies • Indemnity is the proportion of freight lost to freight at risk applied to insured • This could be subject to Measure of indemnity clause which limits freight to amount actually lost.

  20. THE END ANY QUESTIONS