UNIT 5 (INSURANCE LAW)

MARINE INSURANCE

History

Marine insurance has a long and rich history, evolving from informal agreements to a
sophisticated system that is vital for global trade.

1. Ancient Origins
● Informal Agreements: Marine insurance can be traced back to ancient times when
merchants pooled their resources to protect goods during sea voyages.

● Mutual Protection: Merchants contributed to a common fund to compensate for losses if

a ship was lost or damaged, laying the foundation for modern marine insurance through
shared risk.

2. Expansion in the Middle Ages

● Growth of Maritime Trade: As maritime trade expanded during the Middle Ages, the
need for more formal insurance arrangements grew.

● Specialized Policies: The emergence of specialized marine insurance policies began,

covering not just cargo but also ships and risks like piracy and war.

3. Age of Exploration
● Increased Risks: The 15th and 16th centuries saw European nations embarking on
long-distance voyages to explore new trade routes and colonies, significantly increasing
maritime risks.

● Essential Insurance: Marine insurance became crucial during this period, providing
financial protection against the uncertainties of sea voyages and enabling global
exploration and trade.

4. Establishment of Lloyd’s of London

● Lloyd’s Beginnings: In the late 17th century, Lloyd’s of London started as a coffee house
where merchants, shipowners, and underwriters gathered to negotiate insurance deals.

● Formal Organization: Over time, Lloyd’s evolved into a formal organization

specializing in marine insurance, known for its expertise in assessing risk and providing
comprehensive coverage for maritime perils.

5. Industrialization and Global Trade

● 18th and 19th Century Developments: The growth of industrialization and global trade
led to the creation of specialized marine insurance markets in major port cities
worldwide.
 ● Comprehensive Coverage: Marine insurance became integral to international trade, with
policies covering a wide range of risks, including hull damage, cargo loss, and liability
claims.

6. Modern Marine Insurance

● Vital Role in Global Economy: Today, marine insurance continues to be a crucial
component of the global economy, providing coverage for physical damage to ships,
cargo, liability for accidents, pollution, and loss of income due to business interruption.

● Adaptation to Modern Challenges: The industry has adapted to modern challenges by

incorporating new technologies and risk assessment models, ensuring its continued
relevance and effectiveness.

Marine Insurance :-
A contract of marine insurance is a contract whereby the insurer undertakes to indemnify the
assured in the manner and the extent thereby agreed, against marine losses, that is to say, the
losses incidental to marine adventure

In Lloyd v. Fleming, Blackburn J define a policy of marine insurance as a contract of indemnity

against all losses occurring to the subject matter of the policy from certain perils during the
adventure

Basic principles of Marine Insurance

● Insurable Interest - Sec 7 of Marine Insurance Act,1963 refers that every person has
insurable interest who is interested in marine adventure. Sec 8 of MI Act refers that the
assured must be interested in the subject matter insured at the time of the loss though he
need not be interested when the insurance is effected.
● Indemnity - Sec 67 of Marine Insurance Act 1963 refers that the sum which the assured
can recover in respect of a loss on a policy by which he is insured
In the case of an unvalued policy to the full extent of the insurable value, or, in the case
of a valued policy to the full extent of the value fixed by the policy. Therefore, the
Assured is allowed to set the insured value while effecting the insurance according to the
value of consignment shown in the invoice issued by them.
● Utmost good faith - Sec 19 of Marine Insurance Act, 1963 refers that a contract of
marine insurance is a contract based upon the utmost good faith, and if the utmost good
faith be not observed by either party, the contract may be avoided by the other party.
The insurance contract is based on mutual trust. The insured should disclose all the
material fact about the subject matter of insurance. A breach of good faith by one party
entitles the other to avoid the contract- “Uberima fida”
● Subrogation - Sec 79 of Marine Insurance Act,1963 states that where the insurer pays
for a total loss, either of the whole, or in case of any apportionable part, of the subject
matter insured, he thereupon becomes entitled to take over the interest of the assured in
whatever may remain of the subject matter so paid for, and he is thereby subrogated to all
 the rights and remedies of the assured in and in respect of that subject matter as from the
time of the casualty causing the loss.
● Proximate Cause - Sec 55 of MI Act provides that unless the insurer is liable for any
loss proximately caused by a peril insured against, but subject as aforesaid, he is not
liable for any loss which is not proximately caused by perils insured against.
● Contribution - Sec 80 (1) of Marine Insurance Act, 1963 states that where the assured is
over-insured by double insurance , each insurer is bound, as between himself and the
other insurers, to contribute rateably to the loss in proportion to the amount for which he
is liable under this contract.
Conditions giving rise to right of contribution
1. The loss must be due to a peril which is common to both policies.
2. The same interest must be covered by both policies.
3.Both policies must be enforceable.

Marine Insurance contract is no contract without insurable interest

Section 7 - Insurance interest defined

● every person has an insurable interest who is interested in a marine adventure.
● a person has an interest in a marine adventure if they have a legal or equitable connection
to the adventure or to any property that is at risk during the adventure. This interest arises
because the person could benefit if the property arrives safely or could suffer a loss if the
property is damaged, lost, or detained. Additionally, the person may also be liable for any
issues related to the property
Section 8 - When interest must attach
● The assured must have an interest in the insured property at the time the loss occurs, even
if they did not have that interest when they first took out the insurance policy.
Illustration - goods are lost at sea on March 1st, but you didn't officially purchase the
goods until March 5th. However, you had already taken out an insurance policy before
March 1st. Even though you didn't own the goods at the time you bought the insurance,
you owned them at the time of the loss (on March 5th), so you can claim insurance.
Exception - insurance covers property that is "lost or not lost," the assured can still
recover the loss even if they acquired the interest in the property after the loss happened,
as long as they were unaware of the loss when they took out the insurance and the insurer
wasn't aware either.
Illustration - insurance policy includes a "lost or not lost" clause. This means the policy
covers the goods whether they were already lost or not when you bought the insurance. If
the goods were lost on March 1st, but you bought them and the insurance on March 5th
without knowing about the loss, you could still claim the insurance as long as neither you
nor the insurer knew about the loss when you took out the policy.
● No interest after loss - If the assured does not have an interest in the property at the time
of the loss, they cannot take any action to acquire that interest after they have become
aware of the loss.
Illustration - goods were lost on March 1st and you only purchased them and took out
insurance on March 10th, knowing they were lost, you cannot claim insurance because you
didn't have an interest in the goods at the time of the loss. Even if you tried to acquire an
interest after knowing the goods were lost, it wouldn't count.
Without an insurable interest, the contract is only a wager. In marine insurance contracts,
insurable interest of the insured is a special requirement for the contract to be valid. In a marine
insurance contract, the insured is promised by the insurer to be indemnified against any loss
which is caused by sea perils to the subject matter which may be the ship or goods carried in it
depending on the policy clauses.
To qualify as an insurable interest, the subject matter should be a physical one that has exposure
to marine perils and there must be a legal relationship between the assured and the subject matter
in which case he would be harmed by the loss or damage of the subject matter. Such Insurable
interest should be in existence at the time the damage occurred and it is not necessary for the
insurable interest to exist at the time the policy was effectuated. The marine policy is considered
valid even if it is insured without the assured being interested in the subject matter but later on
acquires interest at the time of loss.

Without an insurable interest, a marine insurance contract is not merely voidable but is
completely void and considered a wagering contract. According to section 6 of the act , a
contract is deemed a wagering contract when:-
● If the person taking out the insurance (the assured) has no insurable interest in the subject
matter (e.g., the ship or cargo) and has no intention of acquiring such an interest, the
contract is a wagering contract. Essentially, this means they are just betting on the
occurrence of an event without having a legitimate stake in it.
● If the policy is taken out with terms like "interest or no interest," meaning the assured
will get paid regardless of whether they have an actual interest in the subject matter, it’s
considered a wagering contract. Other terms like "without further proof of interest than
the policy itself" or "without benefit of salvage to the insurer" also make it a wagering
contract. These terms essentially remove the requirement for the assured to prove they
have something to lose.
Illustration - buys an insurance policy on a ship with a clause that says they will get paid
whether or not they have any interest in the ship, this is a wagering contract and is void.
● However, there is an exception to the "without benefit of salvage" clause. If there's no
chance that anything can be saved from a loss (no salvage), a policy can still be valid
even if it includes this term.
Illustration - If a ship sinks in a way that nothing can be salvaged, the insurer might agree
to pay out without any salvage rights. This could be valid even if the policy says "without
benefit of salvage to the insurer.

This principle upholds the purpose of insurance as a tool for risk management and loss
indemnification, rather than as a speculative venture.

TYPES OF POLICIES

1. Voyage Policy: Section 27

It covers the risk from the port of departure up to the port of destination. The policy ends when
the ship reaches the port of arrival. This type of policy is purchased generally for cargo. The risk
coverage starts when the ship leaves the port of departure.
2. Time Policy: section 27
This policy is issued for a particular period. All the marine perils during that period are insured.
This type of policy is suitable for full insurance. The ship is insured for a fixed period
irrespective of voyages. The policy is generally issued for one year. Time policies may
sometimes be issued for more than a year or they may be extended beyond a year to enable a
ship to complete a voyage. In India, a time policy is not issued for more than a year.
3. Mixed Policy: section 29
This policy is a mixture of time and voyage policies. A ship may be insured during a particular
voyage for a period, e.g., a ship may be insured between Bombay and London for one year.
These policies are issued to ships operating on a particular route.
4. Valued Policy: section 29
Under this policy the value of the policy is decided at the time of contract. The value is written
on the face of the policy. In case of loss, the agreed amount will be paid. There is no dispute later
on for determining the value of compensation. The value of goods includes cost, freight,
insurance charges, some margin of profit and other incidental expenses. The ships are insured in
this manner.
5. Unvalued Policy: section 30
When the value of insurance policy is not decided at the time of taking up a policy, it is called
unvalued policy. The amount of loss is ascertained when a loss occurs. At the time of loss or
damage the value of the subject-matter is determined. In finding out the value of goods, freight,
insurance charges and some margin of profit is allowed to the policy in common use.
6. Floating Policy: section 31
When a person ships goods regularly in a particular geographical area, he will have to purchase a
marine policy every time. It involves a lot of time and formalities. He purchases a policy for a
lump sum amount without mentioning the value of goods and name of the ship etc.
When he sends the goods, a declaration is made about the particulars of goods and the name of
the ship. The insurer will make an entry in the policy and the amount of policy will be reduced to
that extent. This policy is called an open or a floating policy.
The declaration by the insured is a must. When the total amount of policy is reduced, it is called
‘fully declared’ or ‘run off. The underwriter will inform the insured who will take another policy.
The premium is called on the basis of declarations made.
7. Block Policy:
Sometimes a policy is issued to cover both land and sea risks. If the goods are sent by rail or by
truck to the departure, then it will involve risk on land also. One single policy can be issued to
cover risks from the point of despatch to the point of ultimate arrival. This policy is called a
8. Wager Policy:
This is a policy held by a person who does not have any insurable interest in the subject insured.
He simply bets or gambles with the underwriter. The policy is not enforced by law. But still
underwriters claim under this policy. The wager policy is also called ‘Honour Policy’ or ‘Policies
Proof of Interest’ (P.P.I.).
9. Composite Policy:
A policy may be undertaken by more than one underwriter. The obligation of each underwriter is
distinctly fixed. This is called a composite policy.
10. Fleet Policy.
A policy may be taken up for one ship or for the whole fleet. If it is taken for each ship, it is
called a single vessel policy. When a company purchases one policy for all its ships, it is called a
fleet policy. The insured has an advantage of covering even old ships at an average rate of
premium. This policy is generally a time policy.
11. Port Policy:
It covers the risks when a ship is anchored in a port.

KINDS OF LOSSES

If the loss takes place on account of any of the perils insured against with the insurer, the insurer
will be liable for it and shall have to make good the losses to the assured. If the peril is insured,
the insurer will indemnify the assured, otherwise not. The doctrine of causa-proxima is to be
applied while calculating the amount of loss

Can be divided into main parts and several subparts

A. TOTAL LOSS
insured property or cargo loses 100% or nearly 100% of its value, or when the insured is
irretrievably deprived of it.
Losses are deemed to be total or complete when the subject- matter is fully destroyed or lost or
ceases to be a thing of its kind. It should be distinguished from a partial loss where only part of
the property insured is lost or destroyed.

1. Actual total loss (Section 57)- The actual total loss is a material and physical loss of the
subject matter insured.. No notice of abandonment need be given

• The insured cargo or goods are completely or irreparably damaged, such as when a storm or
fire sinks a ship, or seawater spoils perishable goods.
• The insured cargo or goods are inaccessible, such as when pirates capture a ship or thieves steal
valuable goods.
• The vessel transporting the shipment is missing with no reasonable chance of recovery, such as
a ship lost at sea with no news for a long time.
insured business is entitled to the full value of the insured goods according to the policy. The
insurance company pays the claim and takes ownership of the goods or their remains. If the
goods are found later, the insurance company has the right to claim

2. Constructive total loss (Section 60) - The subject matter is not lost in the above manner but
is reasonably abandoned when its actual total joss is unavoidable or when it cannot be preserved
from total loss without involving expenditure that would exceed the value of the subject matter.
It allows you to claim a total loss when the cost of saving or repairing the insured goods is more
than their value after the loss. This happens under the following conditions:

• The insured goods are not completely destroyed but are so damaged that restoring them would
cost more than their value. For example, a fire damages a ship but it can still float.
• You can only access the goods by spending more than their value. For example, a ship is
stranded on a remote island but can still be salvaged.

• You choose to abandon the insured goods because saving or repairing them is not worthwhile.
For instance, your ship is in a war zone but can still escape.

In a constructive total loss, you can abandon the insured goods and claim the full policy value, or
keep them and claim a partial loss based on their condition. The insurance company will decide
on acceptance and payment.

Illustration - • You choose to abandon the insured goods because saving or repairing them is not
worthwhile. For instance, your ship is in a war zone but can still escape.

In a constructive total loss, you can abandon the insured goods and claim the full policy value, or
keep them and claim a partial loss based on their condition. The insurance company will decide
on acceptance and payment.
Effect of constructive total loss (Section 61) - the assured may either treat the loss as a partial
loss, or abandon the subject – matter insured to the insurer and treat the loss as if it were an
actual total loss.
Notice of abandonment (Section 62) -
Requirement of Notice: The assured must notify the insurer if they choose to abandon the
insured subject-matter. Failure to do so limits the claim to a partial loss.
Form of Notice: Notice can be given in writing, verbally, or a combination of both, and must
clearly show the assured's intention to unconditionally abandon their interest to the insurer.
Timing: The notice must be given promptly after receiving reliable information about the loss. If
the information is uncertain, the assured has reasonable time to investigate.
Insurer's Response: The insurer's acceptance of the abandonment can be explicit or implied
through their actions, but mere silence does not constitute acceptance.
Irrevocability: Once accepted, the abandonment is irrevocable, and the insurer is fully liable for
the loss.
Exceptions:

● No notice is needed if the insurer wouldn't benefit from it at the time the assured learns of
the loss.
● The insurer may waive the notice requirement.
● No notice is necessary for reinsurers.

B. PARTIAL LOSS
Any loss other than a total loss is a partial loss. The partial loss is there where only part of the
property insured is lost or destroyed or damaged partial losses, in contradiction from total losses,
include;
1. Particular average losses, i.e., damage or total loss of a part,(Section 64) - affects only one
party or interest in the marine venture. It occurs when the loss or damage, caused by an insured
peril, is not shared among other parties. loss is fortuitous or accidental, and it cannot be partially
shifted to others but will be borne by the persons directly affected.
Illustration - export textiles from India to Australia and have paid 15 lakhs as their market
value. You also take a marine insurance policy to cover the goods for any loss or damage during
transit. Unfortunately, heavy rainfall during shipment causes some of your textiles to become
moldy, reducing their market value. You sell them in Australia for 10 lakhs instead of 15 lakhs.
Since you have suffered a partial loss of ₹5 lakhs, the insurance company will compensate you
for this amount, and you can keep the remaining textiles

2. General average losses (general average) le., the sacrifice expenditure,

etc., done for the common safety of subject-matter insured, - loss caused by or directly
consequential on a general average act that includes a general average expenditure and general
average sacrifices.
The general average loss will be there where the loss is caused by an extraordinary sacrifice or
expenditure voluntarily and reasonably made or incurred in time of peril to preserve the property
imperiled in the common adventure.
It occurs when loss or damage results from a deliberate sacrifice or expenditure made to ensure
the safety of the ship and cargo. For instance, the crew might jettison some cargo to lighten the
ship and prevent it from sinking, or a ship's captain might hire a tugboat to tow the ship to port
after an engine breakdown.

If a general average loss occurs in marine insurance, your insurer will compensate you based on
a contribution rate determined by an average adjuster. This rate is calculated by dividing the
value of your interest by the total value of all parties involved in the marine venture. You retain
ownership and possession of the insured goods

The following elements are involved in the general average. The loss must be extraordinary, and
the sacrifice or expenditure must not be related to the performance of routine work.

3. Particular or special charges, i.e., expenses incurred in special

circumstances, and
4. Salvage charges.

WARRANTIES
Special promises or statements made by the person getting insured (usually ship owner or cargo
owner) to the insurance company about a certain act that shall or shall not be conducted by him.
These are specific conditions that must be strictly complied with by the insure to maintain
coverage.
. Warranties are strongly insisted upon and therefore, irrespective of the fact that the warranty
was important or not, the contract becomes null and void in case warranties are broken.

Importance of warranties in marine insurance :-

● Risk prevention - outline obligations so adhering = minimize risks
● Legal framework- establishing legal foundation - clarifying responsibility- resolution rule
● Good faith - ensure right info - agree upon terms - fairness
● Compliance with regulations - inclu. Compliance with marital rules nd standards
● Claim settlement
Express Warranties :-
specific and explicitly stated promise or conditions that are clearly outlined within the insurance
policy.
• Any deviation or breach, can result in the nullification of the insurance contract

Ship's suitability for the intended journey: o the vessel is fit for the intended voyage.
The insured must ensure that the vessel is in seaworthy condition at the commencement of the
voyage
Usage and Purpose: Warranties may specify the purpose for whic e which the vessel is insured
and its intended use.

Compliance with Laws and Regulations: This can include adherence to the prescribed
operational and safety standards, navigation rules, and other legal requirements governing
maritime activities.

Qualifications of the Crew: Ensuring that the crew meets certain standards of training and
experience is essential to fulfilling this warranty.

Geographical Limits and Routes Express warranties may specify geographical limits within
which the vessel is allowed to operate or particular routes that must be followed.

Notification Warranties: the insured may be required to promptly report any changes in the
vessel's condition or modifications to the intended voyage (notify the insurer of certain events or
changes within a specified timefram

Implied Warranties
are not explicitly stated in the insurance contract but are understood to be inherent or assumed as
part of the agreement.

Seaworthiness of ship - at the commencement of voyage. If voyage is at carried out in different

stages then must be seaworthy at each stage. Bear ordinary strain of winds and storm. This
applies to voyage policies.
Seaworth - if well constructed, properly equipped, sufficiently fueled
Determine seaworthy depend on type of cargo , ocea, destination.

Legality of venture : the insured implicitly assures that the voyage, trade, and all associated
activities comply with applicable laws and regulations.
This warranty implies that the adventure insured shall be lawful and that sold as the assured can
control the matter it shall be carried out in a lawful manner of the country.
Marine policies cannot be applied to protect illegal voyage or adventure.
The example of illegal venture may be trading with an enemy, smuggling, breach of blocked and
similar venture prohibited by law.

Illegality must not be confused with illegal conduct of the third party, e.g. theft, pirates.
Warranty of Good Faith providing accurate information during the underwriting process and
adhering to the terms of the policy.
Warranty of insurable interest - insured stands to suffer a financial loss if the insured subject is
damaged or lost
Warranty of full disclosure -
Other implied warranties :-
★ No change in voyage - When the destination of voyage's changed intentionally after the
beginning of the risk, it is called change in voyage.
★ N o delay in voyage - This warranty applies only to voyage policies.
There should not be delay in starting of voyage and not laziness or delay during the
course of journey.This is implied condition that venture must start within the reasonable
time.Moreover the insured venture must be despatched within the reasonable time
★ Non Deviation - Means removal from the common route or given path. The liability of
the insurer ends in deviation of journey. If reasonable ground , then can change.
As soon as the route is changed the implied warranty is breached. Its immaterial if ship
returned to her original route before loss.

DEVIATION

Excuse for deviation or delay [Section 51]

Deviation or delay in prosecuting the voyage contemplated by the policy is excused –
(a) Where authorized by any special term in the policy;
(b) Where caused by circumstances beyond the contract of master and his employer; or
(c) Where reasonably necessary in order to comply with an express or implied warranty; or
(d) Where reasonably necessary for the safety of the ship or the subject matter insured; or
(e) For the purpose of saving hunter life on aiding a ship in distress where human life may be
in danger; or
(f) Where reasonably necessary for the purpose of obtaining medical or surgical aid for any
person on board the ship; or
(g) Where caused by the barratrous conduct of the master or crew; if barratry be one of the
perils insured against.

PERILS OF SEA
Broadly speaking a peril of the sea may be defined to cover everything that happens to the ship
in course of a voyage by the immediate act of God without the intervention of human agency.

It refer only to accidents or casualties not attributable to the free will and desire of a human
being.

Even in the act of God it does not include the natural and ordinary action of the winds and
waves.
The burden of proving a loss by perils of the sea lies on the insured.
The reason for placing the burden of proof on the ship owner in such a case is that they are likely
to have all the relevant information

Examples of Perils of the Sea

1. Foundering at sea. (sinking) - If the ship is missing and after a reasonable time no news has
been received, the loss may be presumed to be by the perils of the sea.
2. Ship wreck (destruction of ship) It is loss caused by the perils of the sea when it happens by
the ship striking against the rock or driven to the shore by the violence of winds.
The shipwreck may occur in various ways e.g. the ship may be so shattered that it becomes a
mere collection of planks or it is unable to navigate except at a great cost.
3. Stranding. It happens when a ship by an accident gets out of the ordinary course of her
voyage and gets struck up in shallow regions of sand and received injury.
4. Collision. - Collision is regarded as a peril of the sea and it may arise by the ship striking
against another ship or any other subject matter
5. Loss by fire. - If fire is caused on board the ship and if the goods or ship is damaged, the
insurance company will be liable.
But it will not include the loss caused by the inherent vice of the subject matter insured. It covers
also a fire voluntarily caused in order to avoid capture by an enemy.
6. Loss by capture, seizure. - The term capture will include not only taking by an enemy but by
revenue and statutory authorities.
7. Loss by arrest detention. - Loss due to any restraint by political or executive acts generally
called restraint of princes, kings etc. will be included under the marine policy. But does not
include loss by mob in a riot, or arrest by a judicial process or embargo l.e. order of the govt.
prohibiting a ship or goods from a port
8. Jettison -

Excluded Loss

1. Wear & tear. - The term is used to denotes the natural decay and deterioration which
invariably happens to a ship or any portion due to the action of the winds and waves.
In case of ship it means decay of the body of the ship and its accessory e.g. splitting (break) of a
sail, breakage of rope or cable, and in case of cargo of perishable nature like fruits, vegetables,
weakness and defects.

2. Springing a leak. - If a ship develop a leak, it is not a peril of the sea unless it is due to an
accident.

3. Breakage of goods. - If the goods are broken or damaged during the voyage due to movement
o father ship it is not a peril of the sea.
But if it is due to violent action of the waves and consequent labouring of the ship, it is a peril of
the sea.

4. Inherent vice. - The insurer will not be liable for any loss caused due to the defect in the
goods etc. if the fruits becomes rotten or wine becomes bad due to inherent decomposition.
 5. Death of animals due to nature's cause.

6. Loss by rats and vermin.

If loss is caused by rats etc. it will not be deemed to be peril of the sea.

In Hamilton v. Pandorf where the rats make a hole in a pipe and sea water entered damaging the
cargo of rice and there was no negligence on the port of the carrier, it was held that the insurer
was not liable

War and Warlike Operations: Losses or damages resulting from war, civil war, rebellion,
revolution, or any hostile actions between nations are typically excluded from standard marine
insurance policies.
Strikes, Riots, and Civil Commotions: Damages caused by strikes, riots, civil disturbances, or
labor disputes are generally not covered under "perils of the sea."
Nuclear or Radioactive Contamination: Losses or damages resulting from nuclear reactions,
nuclear radiation, or radioactive contamination are usually excluded.
Willful Misconduct or Negligence: Losses due to willful misconduct or gross negligence of the
insured or their representatives may not be covered.

MARINE ADVENTURE

It is an adventure in which:
● Any property that is insured (Ship, Goods or Cargo) is exposed to maritime perils
(Risks).
● Any earnings or acquisitions of freight, commissions, profits, financial benefits, any
security on advances, loans, disbursements etc. are endangered by exposure of the
insured property to maritime perils. Ex: Bottomry Bond, Respondentia Bond.
● Any liability to third party, which may be incurred by the owner, or any person
responsible for the insured property is exposed to maritime perils.

PRINCIPLE OF GENERAL AVERAGE AND JETTISON

In marine insurance, the principle of general average comes into play when a shipowner decides
to jettison some cargo to prevent a greater peril. This principle requires that all parties involved
in a sea voyage share the losses proportionately. This means that the value of the sacrificed cargo
is shared by all parties, including the cargo owner, shipowner, and insurers. The contribution of
each party is calculated based on the value of their respective interests.

BOTTOMRY RESPONDENTIA

similar type of loan but is secured against the ship rather financial arrangement where a loan is secured against the
than the cargo. The repayment of this loan is contingent cargo of a ship. The borrower is required to repay the loan
upon the safe arrival of the ship at its intended destination. upon the safe arrival of the cargo at its destination.

based on the value of the ship itself. This distinction makes specifically tied to the value of the cargo, allowing
bottomry loans potentially larger in value, given that the merchants to raise funds based on the cargo they are
ship is usually more valuable than its cargo. transporting,

risk is tied to the ship's voyage and its safe arrival, which risk to the lender is primarily associated with the loss or
includes potential threats like piracy, weather, and other damage of the cargo.
perils at sea.

command high interest rates, reflecting the high risk of Interest rates can vary significantly depending on the
maritime lending, where the entire investment hinges on the perceived risk of the cargo's voyage.
successful completion of a perilous journey.

BILL OF LADING
legal document in shipping that records the traded goods received onboard. It establishes an
agreement between a shipper and the transportation company (carrier). The carrier issues a Bill
of Lading to the shipper, which has details about the goods being shipped, the starting point
and destination of the shipment, and information about the shipper, carrier, and consignee.

● A shipper is the one which is supplying the commodities being transported. They pack
and prepare the shipment for transportation.
● The carrier is the company which moves the cargo; for instance, it could be any shipping
line like Maersk.
● The consignee is the party which receives the shipment. This can be your firm or a
manufacturer who requires the goods you are shipping.

Bill of Lading is significant as it allows the person having it to rightfully claim the ownership of
the cargo. It also serves as proof of a carriage contract, which mentions the responsibilities of the
carrier towards the other parties involved in the transportation of cargo.
It is a contract between a carrier and shipper for the transportation of goods and also serves as a
receipt issued by a carrier to the shipper

Voyage Deviation and Perils of the Sea in Marine Insurance

1. Voyage Deviation - In marine insurance, "deviation" refers to any departure from the agreed or
customary route during a voyage. According to the Marine Insurance Act, 1963, if a ship
deviates from its agreed course without proper justification, the insurer's liability may be
affected.

● Legal Provisions:
○ Section 46: Deviation occurs when the ship departs from the voyage as planned,
unless such deviation is justified by necessity or authorized by the insured.
Justifiable reasons include:
■ Saving human life or aiding other vessels in distress.
■ Avoiding perils that could threaten the safety of the vessel or cargo.
 ■ Mandatory deviation under the terms of the insurance policy.
○ Consequences: An unjustified deviation can discharge the insurer from liability
from the time of deviation. However, if the ship returns to the agreed route before
any loss occurs, the insurer's liability might be reinstated.

2. Perils of the Sea

● Definition: Perils of the sea encompass the natural dangers that are peculiar to the sea and
not caused by human actions. These include storms, waves, lightning, and other natural
maritime hazards.

● Legal Provisions:
○ Section 55(1)(a): The insurer is liable for losses caused by perils of the sea unless
specifically excluded in the policy. The term "perils of the sea" refers to accidents
or casualties of a fortuitous nature, such as shipwrecks or collisions.
○ Examples:
■ Storms and Tempests: Severe weather conditions causing damage to the
ship or cargo.
■ Collisions: Accidental impacts with other vessels or underwater obstacles.
■ Grounding: The ship running aground on a reef or sandbank.
● Exclusions:
○ Perils caused by the inherent vice of the cargo or the ship's unseaworthiness at
the commencement of the voyage are generally not covered under the policy
unless explicitly included.

3. Interrelation between Deviation and Perils of the Sea

● A deviation increases the risk of encountering perils of the sea, as the vessel might enter
uncharted or more hazardous waters. Therefore, adherence to the planned route is crucial
in maintaining the insurer's liability for sea perils.

4. Impact on Insurance Claims

● If a loss occurs due to perils of the sea following an unjustified deviation, the insurer may
deny the claim based on the deviation. The Marine Insurance Act ensures that the
shipowner or insured must strictly follow the terms of the policy to preserve their
coverage.

Conclusion

Voyage deviation and perils of the sea are significant considerations in marine insurance, directly
impacting the insurer's liability.