Marine insurance may be defined as an agreement where by the insurer undertakes to indemnify the assured, in the manner and to the extent hereby agreed, against marine loses, that is to say, the losses incidental to marine adventure. Though, to begin with, Marine insurance evolved as a contract insuring ocean transit of cargoes, overland and air transits also came to be insured under marine policies, in course of time. Accordingly, all types of transits, i.e., sea, road, rail, air and registered post are now insured under marine policies.
The Marine Cargo business is universal in the sense that the practice followed by the insurers in the world is more or less uniform and it reflects the principles and practices prevailing in the London Market, popularly known as ‘LLOYDS’. The Law of Marine insurance obtaining in UK has been adopted in India and codified as Marine Insurance Act in 1963 and the conduct of Marine insurance Business is governed by this Marine Insurance Act and the rules and regulations framed by respective insurer.
VARIOUS TYPES OF POLICIES/CLAUSES:
The Marine Policy is a simple document setting out the bare details of contract of insurance viz., the name of Assured, description of commodity, details of voyage/transit, terms cover, i.e., Insurance protection etc. The scope of cover is to be understood by reference to the cargo clauses specified in and attached to policy.Different types of Marine documents are listed and briefly explained below:
- Specific policies
- Open policies/open covers
- Cover Notes
- Certificate of insurance
These are polices issued for a particular shipment. As and when a shipment is made, the insured approach insurers and take out a policy insuring that particular shipment only.
OPEN POLICIES/ OPEN COVERS:
These are agreements in general terms, between the insureds and insurers where by the latter undertakes to cover all shipment/dispatches falling within the provisions of the agreement during the agreed period of insurance which is normally one year. This sill suit insureds who are frequently making dispatches. The insureds are relieved of the burden of placing insurance for each and every dispatch. Details of dispatches are declared for an agreed period. Open policy is normally issued for inland transit and open cover for overseas shipment.
These are issued by insurers when a policy cannot be issued for want of important details like name of vessel, Bill of lading or Railway Receipt(RR)/Lorry Receipt(LR)/Air Way Bill(AWB)No and date. These are valid for a particular period only and should be replaced by policies when dispatch particulars are obtained.
CERTIFICATE OF INSURANCE:
This is nothing but a declaration made by the insurers certifying that a particular consignment is duly insured. This is normally issued when specific policies are not required to be issued under Open policies, mainly to comply with Bank stipulations.The various types of insurance cover available can be better understood when studied according to the mode of transit involved. The common modes of transit are:-
- Registered post
CARGO SENT BY SEA:-
The cargoes involved in ocean transit by steamers/ vessels are normally insured subject to any of the following clauses:
- Institute Cargo Clauses “C”
- Institute Cargo Clauses “B”
- Institute Cargo Clauses ”A”
The above are standard types of covers and modification of cover restricting or widening the scope of cover is possible according to insured’s need.
INSTITUTE CARGO CLAUSES “C”(IC-C):
This is the most restricted form of cover, mainly intended for providing security against major casualties. Under this set of clauses, the losses or damages arising out of the following will be paid.
- Fire or Explosion
- Stranding, sinking, Grounding, Capsizing of the Vessel
- Overturning or derailment of land conveyance
- Collision of vessel
- Discharge of cargo at a port of distress
- General Average sacrifice
In addition to above losses/damages, following expenses are also reimbursed/paid.
- General Average expenses
- Salvage charges
- Expenses properly and reasonably incurred in unloading, storing and forwarding the insured cargo to the destination, in the event of transit being terminated by any of the insured perils, before completion of voyage
- Sue and Labour charges, i.e., the expenses reasonably incurred by insured’s/their Agents in preventing or minimizing a loss covered under the policy.
INSTITUTE CARGO CLAUSE ‘B’(ICC-B):
This set of clauses offer a slightly wider cover against the following risks also, in addition to what is covered as per ICC ’C’.
- Earthquake, Volcanic eruption or Lightning
- Washing overboard
- Entry of sea, lake or river water into vessel, craft, hold conveyance, container, lift-van or place of storage.
- Total loss of any package lost overboard or dropped whilst loading or unloading.
The scope of cover under ICC ‘B’ or ‘C’ can be widened according to the requirements of insured’s by including the risks of the Theft, Pilferage, Non-delivery, Leakage, Breakage, contamination, Mud, Hook and Oil damages.
INSTITUTE CARGO CLAUSES ‘A’(ICC-A):
This is the widest of the covers granted. IC”A” protects against All Risks of loss or damage to the insured cargo except the losses/damages arising out of the following:
- Willful misconduct of the Assured
- Ordinary leakage, loss in weight or volume or ordinary wear and tear of the insured cargo.
- Insufficiency or unsuitability of the packing or preparation of the subject matter insured.
- Inherent vice or nature of the cargo.
- Insolvency or financial default of the owners, managers, characters or operations of the vessel
- Weapon of war employing atomic or nuclear fission or fusion.
IT MAY BE INTERESTING TO NOTE THAT WHILST ICC ‘C’ AND ‘B’ GO BY WHAT IS SPECIALLY STATED TO BE COVERED, ICC ‘A’A GOES BY WHAT ARE EXCLUDED FROM THE SCOPE OF COVER.
This risks of War and allied perils, strike and kindred perils are excluded from scope of cover under IC ‘A’, “B” or ”C” clauses. All the same, war/SRCC cover for Ocean/air transits involving two nations are available at additional premium, subject to institute War Clauses And institute Strike clauses.
DURATION OR PERIOD OF COVER:The cover under above clauses ‘A’ ‘B’ & ‘C’ attaches from the time and insured goods leave the consignor’s warehouse for the purpose of transit, continues during the ordinary course of the transit and terminates.
- On delivery to the final warehouse of the consignees at destination named in the policy.
- On delivery to any other warehouse or place of storage before named destination, for storage other than in the ordinary course of transit or for allocation/distribution purposes.
- On expiry of 60days after completion of discharges from the vessel at port of discharge. WHICHEVER SHALL FIRST OCCUR.
Where interior overland transit is involved from the port of discharge, the insured’s should examine if the goods will reach ultimate destination before expiry of 60 days and whether the period should be suitably increased beyond 60 days.If under circumstances beyond the control of the Assured, the contract of carriage is terminated before vessel reaches final port of discharge, then the cover will expire on expiry of 60 days after arrival of goods at such port of place or on sale of cargo at such place whichever shall first occur.If the goods are forwarded from that place to the already intended port before 60 days, then the cover will continue till expiry as explained above earlier. It is the duty of the insured’s to seek appropriate extension of cover under the above circumstances, before expiry of cover.
The standard types of cover available are as per following clauses:
- Inland transit(rail/Road) clauses ‘B’
- Inland transit(Rail/Road) clauses ‘A’
INLAND TRANSIT(RAIL/ROAD)CLAUSE ‘B’:
This set of clauses, otherwise also called as BASIC COVER, provides against loss/damage caused only by
- Breakage of Bridges
- Derailment or accidents of like nature to the carrying wagon/vehicle
THIS COVER CAN BE EXTENDED TO INCLUDE THEFT, PILFER, AGE, NON-DELIVERY,LEAKAGE, BREAKAGE,ETC.,ON PAYMENT OF ADDITIONAL PREMIUM.
INLAND TRANSIT(RAIL/ROAD)CLAUSES ‘A’:
These clauses ensure maximum protection against All Risks of loss or damage other than those arising from willful misconduct of the Assured, ordinary leakage or loss in weight or volume, ordinary wear and tear, insufficiency or unsuitability of the packing or preparation of the insured cargo, delay and inherent vice or nature of the subject matter insured.The duration of these clauses A or B starts from the time the goods leave the ware house of the consignor till the time of delivery to consignee’s warehouse or on expiry of 7 days after arrival of goods at carrier’s go-down at destination whichever shall first occur. This period of 7 days can be extended to maximum 8 weeks from the date of arrival of goods at carrier’s go-down at additional premium at the request of the insured’s.THESE CLAUSES DO NOT PROVIDE COVER AGAINST STRIKES and other related perils. All the same, COVER CAN BE OBTAINED FOR THESE RISKS ON PAYMENT OF ADDITIONAL PREMIUM subject to the appropriate strikes clauses.
The only standard clauses available, namely the institute cargo clauses (AIR) grants cover against All Risks of loss or damage other than the specifically excluded losses. The scope of cover and exclusion are the same as the institute cargo clauses ‘A’ detailed earlier. The duration of the cover is also same as in institute cargo clauses ‘A’ ‘B’ & ‘C’ except that THE PERIOD OF 60 DAYS ALLOWED UNDER ICC ‘A’ OR ‘B’ OR ‘C’ IS REDUCED TO 30 DAYS UNDER AIR CARGO CLAUSES. COVER AGAINST WAR/SRCC RISKS IS AVAILABLE AS IN THE CASE OF OCEAN TRANSIT, AT ADDITIONAL PREMIUM.
Though there is no standard clause dealing with this type of sendings, over is granted subject to certain is granted subject to certain printed clauses known as ‘REGISTERED POST WARRANTIES’ according to which cover is given for all risks and the duration of the cover is from the time the goods are handed over to the postal Authorities on obtaining the Receipt till delivery to the consignee. Insurances of Registered post parcel sendings coming up for insurances are very rare and few. Only when precious commodities small in size but high in value like diamond, Jewelery, etc are insured.
INSURANCE OF DUTY:
Custom Duty on imports can be insured in addition to the CIF value. This insurance is governed by the Tariff policies should be taken before arrival of vessel/aircraft, that too for actual amount involved. If the exact quantum of duty is not known, the insured’s can insure for a reasonable amount of duty and seek downward adjustment of sum insured in the light of actual duty. The tariff does not permit upward adjustment and hence the need for realistic estimate of duty.EITHER A SEPARATE POLICY CAN BE TAKEN OR IT CAN BE INCLUDED IN THE SUM INSURED WITH CIF VALUE.
SPECIAL FEATURES OF MARINE INSURANCE:
- The Marine policy is freely assignable. It traces ownership and changes hands with other documents of title to the goods.
- The sum insured mentioned in the policy is the blue agreed between the insured’s and insurers and will not be re-opened except under extenuation circumstances.
- Unlike other classes of insurance is sufficient if the insured has insurable interest at the time of loss.
DUTIES OF INSURED ON UNDERWRITING:
- Under the principle of good faith, insurers have to disclose all material facts concerning the risk. They should have insurable interesting the subject matter or bonafide expectation of acquiring such interest They should have insurable interest at least at the time of loss.
- When Open policies/covers are issued, the insured should ENSURE THAT ALL DESPATCHES FALLING WITHIN THE SCOPE OF OPEN/COVER ARE DECLARED WITHOUT EXCEPTION and declaration should be made well before risk attachment so that insurer may arrange Reinsurance if necessary.
- PACKING OF GOODS SHOULD BE ADEQUATE to withstand the normal transit hazards such as jerks and jolts experienced en-route, and also handling by workmen at time of loading, transshipment and unloading. IF THE PACKING IS VERY POOR, ITS TANTAMOUNTS TO INHERENT VICE, AND UNDER SUCH CIRCUMSTANCES, LOSS MAY NOT BE RECOVERABLE UNDER THE POLICY. Many of the losses safe to some extent attributed to inadequate packing and goods may be lost or goods than claim and therefore the importance of adequate packing cannot be over emphasized. There are professional bodies like Indian Institute of Packaging who are giving expert advice on suitable methods of packing consistent with economy in cost.
- Timely extension of Transit cover must be sought if transit is not over within duration allowed under the policy.