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| Floating Marine Insurance Format. |
The importance of insurance
in the field of commerce cannot
be overestimated especially in connection
with the shipping industry and the transport of goods
by sea. The work of Lloyd’s
has already been
mentioned, but there are
many independent insurance
companies who undertake the
business of insuring ships , freights and cargoes, such as for example, The Thames and Mersey Marine insurance company
Ltd of Liverpool, Macs & Bucks Marine insurance company Nigeria Ltd.
KINDS OF POLICIES-
Marine policies though usually I
one form are of different kinds and known by different names as follows-
VOYAGE POLICY-
One in which
the limits of the risk are
defined by termini or places , the subject – matter being
insured for a particular voyage, e.g. New York to Liverpool , Manchester to Lagos.
TIME POLICY-
A policy where the insurance subsist
for a specified
period of time e.g. , Noon
January 1st 2016 to
noon January 1st 2018.
This sort of insurance is usually
adopted for hulls , although some
owners prefer to insure hulls for each separate voyage. A time policy made for a period
exceeding twelve months is
invalid , except so far as the
twelvemonths extended under
a separate contract known as a continuation clause. A policy may cover
both for voyage and time e.g. where a
hull or goods are insured
for a particular voyage and for say
sixty days after arrival at port of destination.
Construction Policy- A policy
insuring against risks incidental to ship construction known also as a Builders
Policy.
PORT POLICY-
A policy insuring a vessel for a period
during which it is in a particular port.
The two kinds of policy of most
concern to the shipper of goods are the valued policy for voyage and the floating policy
for voyages.
VALUED POLICY-
This policy specifies the agreed
value of the subject – matter insured e.g.
6,000 dollars on 750 bags of cocoa
valued at 6,000 dollars . There is also
an unvalued policy which in the event
of a claim , leaves the insurable
value of which in the event
of a claim leaves the insurable value
of the subject matter at risk to be ascertained according
to the rules laid
down by the marine insurance Act of 1906. This form of policy is not frequently
used. In a valued policy
on merchandise the sum
insured may in addition to the value
of the merchandise include
all shipping and insurance charges
plus a sum to cover
anticipated profit but in
an unvalued policy
there can be no inclusion of
profit.
FLOATING POLICY-
This kind of policy is one
that describes the insurance in general terms and leaves
the name of the ship
or ships and other particulars
to be defined by subsequent declaration.
A large and constant shipper of goods
may take out a floating policy for say 50, 000 dollars on which
the agreed premium is immediately paid , the insurance to attach
to steamer or steamers or ship
or ships for certain specified
voyages e.g. New York to Brazil or London to Los
Angeles, e .tic As and
when each shipment
is made , the insured
declares to the insurer or his agent , particulars of the shipment , its value, the name , the insured declares
to the insurer or his agent ,
particulars of the shipment , its each
declaration is acknowledged by
the insurer or his agent and a formal
certificate may be issued.
This goes on until the combined
valued of the declaration equals
the amount of the policy when
the policy is said to be
fully declared or to have
run off. Thereupon, by arrangement, a new floating policy takes its
place. The insurer or his agents
keeps a record of the
declarations as they made
and advises the insured when
the policy is nearing full
declaration but the insured
will also keep his/her own
record and know at any time
how he stands. The insurer is bound
to declare each shipment as it is made. He cannot declare
some and not others or delay
his declarations until he knows
that a vessel has arrived and then not declare. But omissions or errors
made in good faith can subsequently be rectified even after loss. The omission must
be rectified by inserting the declaration in its due order and sequence. It is
the practice to insert in a floating
policy the basis on value
of the declarations shall be
arrived at , so that
should a loss occur before
the interest is declared against
the policy , the basis on
which the loss is to be settled is already
defined. A floating policy usually provides that no shipment in any one vessel
shall exceed a stated maximum value. A floating policy can by its terms cover
different routes e.g. from any port in
Nigeria or Great Britain to any
port in the far west . Basically the policy
is restricted to particular
ports on particular routes and
all ports and every class
of vessel.
Marine policies at the present
time normally insure
shipments from the warehouse
of the seller to that of the
buyer . Premiums can however be adjusted to cover say loading to unloading if
this is desired.
OPEN COVER-
This is a agreement for twelve months whereby
the insurer undertakes to insure
all shipments or interest of the insured for certain
voyages or trades
either at specified rates
of premium or at rates to be
arranged. In this kind of insurance,
the insured notifies the insurance
when the ship shipments
are made such notifications
being known as declarations off
cover. Stamped policies are issued from time to time as may be required.
Invariably the stipulated is made by the insurer that no shipment in any one
vessel shall exceed in value a stated sum.
Insurable interest and Good
faith-A person who effects a policy of
marine insurance or gives
instructions for it to be effected, must have
an insurable interest in the subject matter
of the insurance , otherwise the
policy is void. Every person has an insurable interest
in a marine adventure if he is
interested in it, in
particular if he stands in any legal
or equitable relation to the
adventure or to any insurable
property at risk therein, in
consequence of which he may
benefit by the safety or due
arrival of insurable property
or may be prejudiced by its loss
or by damage thereto or by the detention there of, incur liability in respect thereof.
Gaming or wagering policies i.e. policies
issued without there being
any insurable interest are void
so too are policies which
bear evidence on the face
of them that the
underwriter is willing to dispense
with any proof of interest as
where the policy contains
such words as policy
proof of interest
or interest or without
benefit of salvage. Policy proof
of interest (PPI) policies is also known as Honor Policies. They are binding in
honor only and being void in law, no action can be maintained on them. A
contract of marine insurance is
known as a WHERRIMAE FIDEI- that is it is a contract based
upon the utmost good faith
and if the utmost good faith
be not observed by
either party. The assured must , before
the contract is concluded
disclose to the insurer every material circumstance known to him which will
influence the judgment a prudent
insurer in fixing the
premium or determining whether
he will take the risk. Fraud , of
course , invalidates the insurance and deprives
the fraudulent party
of all his rights under the
contract , but concealment of material facts and misinterpretation,
not amounting to fraud
will also avoid the policy.
RISK COVERED-
Policies of marine insurance may be
taken out to cover
(1) All risk
(2) With particular average
(3) Free particular average.
The All risk and With particular average policies
insure against partial
and total loss arising from perils at sea, like pirates robbery or rather
from perils insured against, since some
of the risks covered are not sea risks at all. The Free of particular
average policy excludes compensation for partial loss unless or in collision.
By additional clauses a marine
policy may be extended
to cover the risks attending the
transport e.g. the risk incidental to
transport by craft to and from
the carrying where the vessel is loading; delivery at the port
of arrival to the dock where the vessel is loading; delivery at port of arrival to the consignee’s warehouse and so on. The greater the variety of risk covered,
the greater the premium charged. In time of policies are sometimes issued F.C
and S. (free of capture and seizure) at lower rates. When about to insure goods , a shipper would
consider the possibilities of damage to which
they may be subject during transit and insure
accordingly. Thus a shipment of
iron pipes might
be insured F.P.A but
a shipment of dress goods A.A.R.
PARTICULAR AVERAGE-
The term particular Average is distinguished
from general and from total loss. A particular average loss is a partial loss
of the subject matter insured against and which is not a general average loss.
If a vessel meets with heavy
weather and sustains serious
damage , the cost of repair is a particular average on cargo. If the cargo consist of sugar and the sea water
dissolves part of it, the part dissolved
represents a particular average
loss on freight. In all three
cases , under an All risk policy
the underwriters insuring the
hull or the cargo or freight
would have to make good
the loss to be insured. But if
the policy contains the F.F.A. clause is that of the institute of London
underwriters which reads as follows-
“Warranted free from Particular
Average unless the vessel or
craft be stranded , sunk or burnt but
not withstanding this warranty , the
underwriters are to pay the
insured value of any package or packages
which may be totally lost
in loading , transshipment or discharge
also for any loss or damage to the interest insured
which may reasonably be attributed
to fire , collision or contract of
the substance (ice included) other than
water or to discharge of cargo at
port of distress , also to pay
landing , warehousing , forwarding and special charges if incurred for which
underwriters would be liable under a policy covering particular Average. This clause shall operate
during the whole period covered by the policy. Under the section clause for
warranty as such clauses are known and. s.76
of the marine insurance Act of
1906, under writers are not liable
for total loss of a part the
subject matter insured , unless the warranty
is broken by the happening of any
of the contingencies enumerated
or the subject matter comprises a number
of apportion able parts . In the latter
case, the underwriter is liable for the total loss of any one apportion able
part, notwithstanding the F.P.A warranty. Insured property may be held to be apportion
able where the property is divisible into separate species or where the whole
is divided up into parts separately valued.
THE MEMORANDUM-
This is part of a Lloyd’s policy
exempts underwriters from liability in respect
of claims for particular average
unless the loss exceeds
a certain percentage of the value
of the subject matter insured, except the ship be stranded. The memorandum reads as
follows-
“ f lour, fish, salt and cocoa are warranted free from average unless
general or the ship is stranded –
Hemp , flax , wheat rubber wax are warranted
free from average , under
five pounds per cent
and all other goods , also the ship
and freight are warranted
free from average under
three pounds percent , unless
general or the ship
be stranded”. After the word
“stranded” it is now
customary to insert the words
“sunk or burnt or in collision “
The words “average unless general”
mean particular average. Although the percentages stated
in the memorandum are low in themselves , yet where the interest at
risk is of high value ,there would have to
be a correspondingly heavy
particular average loss before
the underwriters were liable. For
example , if a shipment of say , general
merchandise be valued at and
insured for 30, 000 dollars , the
particular average loss would have to exceed 900 dollars. In order to counteract this , the subject matter
at risk is reached on any one valuations or into series , underwriters are liable. Thus, the average on flour is
ordinarily each ten chests. Series are
computed in the order in which they are
landed, following landing
numbers and if the total of the
packages insured is not exactly divisible by the average figure , the last incomplete series
termed a tail series is admitted
for claim if the damages reaches the required
percentage of its value.
Computation of Underwriters’
Liability-Where a claim arises in respect
of particular average on cargo , the pecuniary liability of the underwriters is determined as follows-
The damage may be assessed by
brokers who certify (A) The
value of the goods had
they arrived in sound condition and (B) The
value in the damaged condition or the damage
may be expressed as so much per cent; or
it may be determined
by sale at public auction. The sound and damaged
values having been
ascertained , the
depreciation is arrived at by
comparing the gross sound
value with the gross
proceeds. If the gross sound value
be 500dollars and the gross proceeds
be 250dollars there is a depreciation
of 50% and the underwriters will
be liable for 50% of the insured value of
the goods . If the insured value
be 550 dollars , then the underwriters
must pay 50% of 500dollars =275
dollars and in addition any extra charges incurred
in consequence of the damage e.g.
survey fee, sale charges (if
any).
TOTAL LOSS-
Under a policy insuring against
the risk of total loss, the underwriters, if a total loss occurs, become liable
to pay to insured the full value of the interest insured. The measure of
indemnity in the case of an unvalued
policy is the full extent of the insurable value ;in
the case of a valued policy , it is the full
extent of the value fixed
by the policy. Where the
policy is underwritten by more
than one underwriter , the underwriters
are each severally liable
to contribute such proportion
of the measure of indemnity as the amount
each has underwritten bears
to the insurable value or the value
fixed by the policy. In order to substantiate a claim
for total loss, a document termed the PROTEST, giving a detailed
narrative of the circumstances of the casualty signed by the master and one or more officers of ship, is executed and attested
before a Notary and submitted to the underwriters .
With this the merchant shipper has nothing to do. He will look to his insurance
broker and produce to a copy of the invoice, the bill of lading covering the insured
shipment and the insurance policy. The invoice is required as evidence that the
insurance is not fraudulent as regards value; the bill of lading as evidence
that the goods were actually shipped. The policy and the bill of lading are
retained by the underwriters as proof of their title to any recovery by way of
salvage or otherwise. On payment of a total loss, the underwriters have the right to use the name of the insured in any legal
action they may think
it right to institute and the insured usually
s gins a formal letter
confirming that right .This right
of the underwriters to take the place of the insured is known as “SUBROGATION”. This term is
defined as the right by which an underwriter having settled a loss is entitled
to place himself in the position of the assured, to the extent of acquiring all
the rights and remedies.
In respect of loss which the assured may have
possessed, either in the nature of proceedings for compensation or recovery
in the name of the assured
against third parties or in obtaining
general average contribution
thereto. This right extends , in cases
where the underwriters has settled a
total loss , to entitle him to
take over what , if anything , remains of the property . Subrogation is one of the
first principles of insurance and applies equally to all contracts of
indemnity. There are two kinds of total loss which are
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