32756341 Marine Insurance

8/9/2019 32756341 Marine Insurance

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Marine Insurance

Prof Mahesh Kumar

Amity Business School

[email protected]


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HistoryHistorically marine insurance were of twotypes:

a) Bottomary loan which was a transactionprotecting an owner from financial loss if hisship was destroyed. Premiums were calculatedon the basis of intuition instead ofmathematical estimates.

b) Respondentia loans were comparable tobottomary loans. The difference being a

merchant would take a loan using cargo as acollateral. The money lender for a premium inaddition to the regular interest charged,agreed to forgive the loan if the cargo waslost.


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History

The Indian Marine Insurance Act came intooperation on August 1, 1963 and is acomprehensive document containing all

regulations of marine insurance business in India. Prior to this Act, the insurance business was

conducted on the basis of the principles ofGeneral Contract Act and English MarineInsurance Law.

Marine insurance includes two types of insurancei.e. Cargo insurance and hull insurance.


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History

The cargo insurance includes the goods intransit from the place insured to the sea andfrom sea to the exporter.

The hull insurance is concerned with body, the

machinery and technical know-how, stores toolsetc of the ship.

Marine Insurance covers the loss or damage ofships, cargo, terminals and any transport orproperty by which cargo is transferred, acquired

or held between the points of origin and finaldestination. Marine Insurance has been made mandatory in

export-import business.


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Advantage to Business Marine insurance also provides liquidity to the

exporter as he can discount his bills with localbanker without waiting for the bills being by

the overseas importer which is usually afterthey receive the goods which may takemonths in ocean transit.


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Definition of Marine Insurance Business

A contract of marine insurance is defined by theMarine Insurance Act 1963 as an agreementwhereby the insurer undertakes to indemnify the

assured, in the manner and to the extent therebyagreed losses incidental to marine adventure. Itmay cover loss or damage to vessels, cargo orfreight.

Sec 2 (C & F) of the Marine Insurance Act, 1963

defines marine insurance and includes themovables exposed to maritime perils. Movablesmean movable tangible property, which includesmoney, valuable securities and documents etc.


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Types of Marine InsuranceThere are four types / classes of marine insurance:

a) Hull Insurance: covers physical damage to theship or vessel. In addition it contains a collisionliability clause that covers the owners liability ifthe ship collides with another vessel or damagesits cargo.

b) Cargo Insurance: covers the shipper of goods ifthe goods are damaged or lost. The policy can bewritten to cover a single shipment. If regular

shipments are made, an open cargo policy can beused that insures the goods automatically when ashipment is made. The open cargo policy has noexpiration date and remains in force till it iscancelled.


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Types of Marine Insurancec) Protection and Indemnity (P&I) insurance: is

usually written as a separate contract thatprovides comprehensive liability insurance forproperty damage or bodily injury to third

parties. P&I insurance protects the ship ownerfor damage caused by ship to piers, docks andharbor installations, damage to ships cargo,illness or injury to the passenger or crew andfines and penalties.

d) Freight Insurance: indemnifies the ship ownerfrom the loss of earnings if the goods aredamaged or lost and are not delivered.


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Insurable Property Insurable property means any ship, goods or

other movables exposed to maritime perils.

Insurable property must be stated in the policy

with reasonable certainty.


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Marine Adventure There is a marine adventure, when-

1. Any insurable property is exposed to marine perils.

2. The earning of freight, passage money, commission,

profit or other pecuniary benefit or security for anyadvances, loans or disbursements is endangered bythe exposure of insurable property to maritimeperils.

3. The owner of or other person interested in orresponsible for insurable property by reason ofmaritime perils may insure any liability to the thirdparty.


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Voyage

Voyage is the journey that the vessel undertakes.

The ship could carry on the voyage in the specifiedroute which is mentioned in the policy.

Change of voyage is permitted only in a fewspecified circumstances.


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Maritime Perils / Perils of the Sea Maritime Perils are also called Perils of the Sea.

It means the perils consequent on or incidental tothe navigation through the sea for example- fire,

war perils, rovers, thieves, captures, seizures,jettisons, barratry and other perils.

The term Perils of the Sea refers only to fortuitousaccidents or casualties of the seas and does notinclude the ordinary action of winds and waves.


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Types of Risks/ Perils covered by the

Marine Insurance Policy1) Sinking, stranding and grounding of ship/vessel/boat

or craft.

2) Collision or contact of vessels, ships, boats with

internal and external objects.3) Discharge of cargo at a port of distress.

4) Average general sacrifice.

5) Volcanic eruption or lightning or fire or explosion.

6) Loss of goods or packages containing goods orarticles, dropping of packets or package duringloading or unloading while on board or off the broad.


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Marine Insurance Policy7) Loss caused by delay, wrongful delivery, malicious damage.8) War, sea pirates, other perils like cyclones, typhoons,

spirals.9) Strikes, riots, lockout, civil commotions & terrorism.

10) Theft, pilferage, breakage & leakage.11) Loss caused by heating due to the closure of ventilators to

prevent the entry of sea waters.12) Loss caused by rats i.e. a hole made in the bottom of the

ship, through which sea water enters the ship and damagesthe cargo.

Marine insurance apart from indemnifying the assuredagainst the maritime perils also includes liability of the thirdparty incurred by the owner of the ship or other personinterested in the property assured on happening of themaritime event.


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Marine Insurance Policy Thus marine insurance includes:

1) Insurance of vessels (hull) of any description.(Hull insurance is concerned with body, the

machinery & technical know how, stores tools etc.It also includes ships, mechanized boats etc andconsignments transported by rail and road.)

2) Insurance of cargo in vessels ( Cargo insuranceincludes goods in transit from the place of insured

to the sea and from the sea to the exporter.3) Freight paid or received by the assured.

4) Insurance of third party liability


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Marine Insurance Policy

4) Insurance of transactions which are incidental tothe marine adventure or marine transport or

transport of cargo from go down to the vessel.5) Insurance also includes all perils and risks

incidental to money, documents, securities &other valuable goods in the ship.

6) Other incidental activities concerned with building,

launching of ship or transport of storesconcerned.


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Summary Marine insurance is a contract:

The contract is made to indemnify the assured forthe marine losses and other losses incidental to

marine adventure. The parties to the contract agree about the

manner and the extent of indemnification in theevent of loss.

The subject matter of the agreement or the

contract of marine insurance includes: cargoes,vessels of any description, freights and otherinterest in relation to such vessels, cargoes.


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Summary Property of whatever description can be assured

for any transit by land or water or by both.

May exclude or include warehouse risks or similar

risks in addition or as incidental to transit. Any other risks customarily included among the

risks assured against marine insurance policies.


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Marine Policy The document containing the contract of

insurance is known as the Marine Policy or SeaPolicy.

The clauses are framed in relation to risk covered,risk excluded and other terms and conditions ofthe insurance.


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Contents of Marine Policy1. Name of the insured.

2. Policy Number

3. Sum Assured

4. The subject matter insured and the perils covered

5. Place where claims were payable

6. Streamer (or) other conveyance.

7. Stamp duty (as per the provisions of the Indian Stamp Act 1879)

8. Voyage or Journey

9. Number or date of bill of lading or Registered Port or Air freight

receipt. (as the case may be)10. Place of issue of policy and date.

11. Signature of authorized person signing on behalf of the insurers.


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Essentials Elements or Principles of Marine

Insurance1. Fundamentals of general contract

2. Insurable interest

3. Utmost Good Faith

4. Indemnity

5. Subrogation

6. Contribution

7. Warranties

8. Causa proxima

9. Assignment & Nomination of a policy


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Features of A General Contract A marine policy must fulfill all the essentials of

a valid contract namely

1. Offer and Acceptance

2. Consideration

3. Capacity

4. Legal Purpose


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Insurable Interest According to Marine Insurance Act 1963, every person

has an insurable interest who is interested in a marineadventure. The following persons have insurableinterest in Marine Insurance.

1. Owner of the Ship2. Owner of the Cargo

3. Creditor who has advanced money on a ship or cargo tothe extent of his interest in such ship or cargo

4. Mortgager

5. Mortgagee6. Master and crew for wages

7. Bottomry bond hold

8. Person who pays advance freight is recoverable on loss


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Utmost Good Faith The insured must disclose all those relevant

facts to the insurer which are likely to affecthis willingness to undertake the risk.

If either party does not disclose full facts, theother party can avoid the contract at any time.


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Contract of Indemnity Under this contract, the underwriter agrees to

indemnify the insured against losses by searisk to the extent of the amount insured.

The insured can recover only the actual losssuffered and nothing more.


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Principle of Subrogation According to this principle after meeting the

loss agreed, the insurer steps into the shoes ofthe insured and becomes entitled to all rights

and remedies available to the insured againstthe insured property or third persons.


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Principle of Contribution/D

ouble Insurance The doctrine of contribution applies to marine

insurance. If the subject has been insured with more than one

insurer, each insurer has to pay only the ratableproportion of loss subject to the maximum loss.

The principle supports the concept that the insuredcannot recover amounts on the same property for thesame peril from more than one insurer.Thus, according to Sc 34, the pre requisites of doubleinsurance/contribution are:

a) There must be two or more policies.

b) The policies must relate to the same adventure andinterest or any part thereof.

c) The sums insured must exceed the indemnity allowedby this Act


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Warranties According to Marine Insurance Act, a warranty

means a stipulation or term, the breach ofwhich entitles the insurers to avoid the policy

altogether and this is so even though thebreach arises through circumstances beyondthe control of the warrantor.

Warranties can be expressed (written) orimplied.


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Express Warranties The expressly stated written warranties and

may be like

1. The ship is safe on a particular day

2. The ship & goods are neutral and continue tobe so

3. The ship will proceed to its destination withoutany deviation

4. The ship will sail on or before a certain date


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Implied Warranties There are certain warranties which are implied

in every contract of marine insurance unlessexcluded expressly. These are:

1. Warranty of sea worthiness2. Warranty of non deviation from path

3. Warranty as to the legality of the voyage

4. Proper documentation related to the ship


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Implied WarrantiesWarranty of Sea Worthiness

The ship must be sound as regards her hull.

The gear must be sufficient and must be fully

equipped, officered and manned

Ship must not be overloaded

If the voyage is to be performed in stages, theship must be sea worthy at the

commencement of each stage. Sea worthiness also includes cargo worthiness

i.e. must be fit to carry the cargo


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Implied Warranties

Warranty of Non Deviation

In the case of voyage policy, where, a voyageis contemplated between two given ports,

there is an implied warranty of non deviationon the part of the insured except in caseswhere it is excusable by the law.

The insurer is discharged from the liability as

from the time of deviation. The intention to deviate is immaterial.


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Implied Warranties

Warranty of Non Deviation

What is a Deviation?

1. When the course of the voyage specially designated inthe policy, is departed from or

2. Where the course of the voyage was not speciallydesignated by the policy, but the usual & customarycourse is departed from or

3. Where several ports of discharge were specified by thepolicy, but the ship did not process to them in the orderdesignated by the policy or

4. Where the policy did not specify the ports of dischargebut the ship (which should have) did not proceed tothem in geographical order.


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Implied Warranties

Warranty of Non Deviation- Deviations that can be excused Destination or delay is excused (justified) under the following

circumstances when1. It is authorized by the contract (or)2. It is caused by circumstances beyond the control of the

master and his employer (or)3. It is caused by the barratrously conduct of the master or crew

if barratry were one of the perils insured against (or)4. It is necessary in order to comply with an express or implied

warranty (or)5. It is necessary to arrange medical or surgical aid for any

person on board the ship (or)

6. It is very necessary for the safety of the ship and subjectmatter insured (or)

7. It is necessary to avoid being captured or destroyed by theenemy of the Government.


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Implied Warranties

Legality ofVoyage

This is an implied warranty on the part of theinsured that the adventure insures is a lawful

one, and that, so far as the assured cancontrol the matter, the adventure shall becarried out in a lawful manner.

This warranty implies that the ship will not be

used for undertaking any illegal voyage e.g.smuggling, trading with enemy etc.


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Proximate Cause

According to the Marine Insurance Act, theinsurer is liable for any loss proximatelycaused by a peril insured against.

Insurer is not liable for any loss which is notproximately caused by a peril insured against.


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Assignment Of Policy

A marine insurance policy is assignable unlessit contains terms expressly prohibitingassignment.

It may be assigned either before or after loss. A marine policy may be assigned by

endorsement thereon or in any othercustomary manner.


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Reinsurance

According to Marine Insurance Act, the insurerunder a contract of marine insurance has aninsurable interest in his risk and may reinsure

the subject matter fully or partly as per hisrequirement. This is called Reinsurance orInsurance of Insurance.

In reinsurance, unless the policy providesotherwise, the original assured has no right orinterest in respect of such reinsurance.


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Calculation of Rates of Premium

Calculation of rates of premium depends on:

1. Description of goods: Full description of thegoods to be insured must be given.

The nature of commodity is very important for ratingand underwriting.

Different types of commodities are subject todifferent types of risk.

Ex: Commodities like cement sugar, etc are easily

damaged by sea water; cotton or some chemicalsmay easily catch fire; liquids can get leaked andcrockery and glassware are susceptible to breakage.


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Calculation of Rates of Premium

2. Method and Manner of Packaging: Thepossibility of loss or damage depends verymuch on the type of packing.

Generally goods are required to be packed incommodity friendly bales, bags, bundles,crates, drums, barrels, loose packing, cartonetc.


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Clauses Incorporated In A Marine Policy

The following are the important clauses:

a. Assignment Clause: This clause makes it clear that themarine policy is assignable unless it contains termsexpressly prohibiting assignment.

Marine policy may be assigned either before or after theloss.

Assignment my be through endorsement or in othercustomary manner.

Where the assured has parted with or lost his interest inthe subject matter insured, any subsequent assignment

is inoperative. The assignee who has acquired the beneficial interest in

the policy is entitled to see thereon in his own name.


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d. Transit Clause or Warehouse to Warehouse Clause: Transit clause provides with respect to goods, for the

risk to attach from the loading thereof aboard the saidship and for the insurance to continue until the goodsare discharged and safely landed at the port of

discharge. Warehouse to Warehouse clause helps to provide

protection for the entire period of transit. The period ofcover extends from the time the goods leave theexporters warehouse until they are delivered to theimporter warehouse at the named destination or to anyother warehouse whether prior to or at the nameddestination, which the assured elect to use either forstorage or for allocation or distribution or on expiry of60 days after discharge from the overseas vessel at thefinal port of discharge whichever occurs first.


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e. Change of Voyage Clause (or) DeviationClause

According to Marine Insurance Act, where

there is a change in voyage, unless the policyotherwise provides, the insurer is dischargedfrom liability as from the time of the change.

Through this clause, the policy does provide

otherwise (that means permits deviation) andthe event is held covered.


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e. Touch and Stay Clause

The liberty to touch and stay at any port orplace whatsoever does not authorize the ship

to depart from the course of her voyage fromthe port of departure to the port ofdestination.


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f. Inchmaree Clause or Negligence Clause This clause extend the underwriter liability to cover risks of a

kind, which are not included within the ordinary meaning ofmaritime perils.

It provides for the insurance to cover loss or damage to hull

or machinery directly caused by:i. Accident in loading or shifting cargo or fuel explosion on shipboard and or elsewhere

ii. Bursting of boilersiii. Negligence of master, officersiv. Negligence of repairs provided such repairs are not assured

hereunder

v. Contact with aircraftvi. Contact with any land conveyance, dock or harbor

equipments or installationsvii. Earthquake, volcanic eruption or lightning


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g. Running Down Clause:

This clause provides a supplementary contractwhereby the assured is given some protection

against third party damages. It provides that if the insured vessel collide

with another vessel, the underwriter agree topay three quarters of the amount of damageto which the assured becomes liable.


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h. Sue and Labor Clause:

This clause provides that liability shall not beexceeding the proportion that the amount

insured bears to the value of the vessels. In absence of this provision, underwriters

would be liable for the full amount of sue andlabor charges even when there was underinsurance.


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i. Memorandum Clause:

This clause is meant to provide a minimum limit to theunderwriters liability regarding claims for particularaverage by exempting him from such claims.

j) Continuation Clause:

This clause refers that the vessel shall continue to becovered even after the completion of voyage under thepolicy at a pro rata premium to her port of destination.

k) Perils of the Sea Clause:

The term perils of the sea refers to fortuitous accidentsand casualties of the sea. It does not include ordinaryaction of the winds and waves.


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l. Warrior Clause:

This is supplementary to Sue and Labor clause.

In this clause, either party to the contract may takesuch steps, or incur such expenses, as are contemplatedunder the sue and labor clause, to minimize a losswithout prejudice in the light of the assured on the onehand and the underwriter on the other

m) All Risk Clause:

This clause provides that the insurance is against all

risks of loss or damage to the subject matter insuresand the claims are payable irrespective of percentage ofloss.


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n. General Average Clause:

The general average clause refer to the lossesthat must be partly borne by someone other

than the owner of the goods that weredamaged or lost.

General average losses may be total or partial,whereas particular average losses, bydefinition are always partial.


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n. General Average Clause:Ex: Suppose that a certain cargo of lumber wrapped in alarge bundle is stored on deck. To lighten the ship duringheavy storm that is threatening the safety of the voyage,the captain orders the limber worth Rs.50000 to be

jettisoned. The action of the captain is successful in savingthe ship and all other interests. Such a sacrifice is termedas general average, and the interests that were savedwould be required to share a pro-rata part of the loss.Thus is the ship and freight interests were valued atRs.1000000 and other cargo interests at Rs.950000, theship owner would pay one half (100/200) of the value ofthe lumber. The other cargo interests would share 95/200of the loss and the owner of the lumber would bear 5/200of the loss

All marine policies provide coverage for general averageclaims that may be made against the insured.


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q. Free of Particular Average Clause (FPA):

This clause restricts the liability of theinsurer/underwriter.

Insurer is liable only for total loss and not for particular

average or partial loss

Particular average means partial loss to an interest thatmust be borne entirely by that interest.

The free-of-particular average clause provides that nopartial loss will be paid to single cargo interest unless

the loss is caused by certain perils such as stranding,sinking, burning or collision.


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b. Lost or Not Loss Clause:

c. At or From Clause


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Types of Marine Insurance Policies

1. Bottomry Bond

It is a bond representing loan raised by themaster of the ship so as to meet certain

urgent expenses like repairing a ship or forsecurity of ship or cargo.

It is repayable after a certain agreed numberof days after the arrival of the ship asspecified in the bond.

If the vessel is lost before the arrival atdestination, the lender losses his money.


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2. Respondentia Bond:

Like Bottomry Bond, Respondentia Bond also representsa monetary loan borrowed by the master of a ship tomeet certain urgent expenses.

The loan is raised on the security ofCARGO ONLY.

The loan is to be repaid within a certain period after thearrival of the cargo at the destination as specified in theRespondentia Bond.

If the cargo is lost on its way, the lender losses his

money.


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Marine policies are known by different namesaccording to their manner of execution andthe nature of risks covered.

Following are the various kinds of marine

insurance policies as contained in the MarineInsurance Act, 1963.1. Voyage Policy: As the name suggests this

policy covers a voyage. This is a policy in which the limits of the risk are

determined by place of particular voyage e.g.

Chennai to Singapore , Chennai to London Such policies are always used for goods insurance,

sometimes for freight insurance but only rarelynowadays for hull insurance.


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2. Time Policy: This policy is designed to givecover for some specified period of time say forexample noon of 1st January 2009 to noon of

1st

January 2012 Time policies are usual in case of hull insurance.

3. Voyage & Time Policy or Mixed Policy: It is acombination of voyage and time policy.

It is a policy which covers the risk during a particular

voyage for a specified period. Example A ship maybe insured for voyages between Chennai to Londonfor a period of one year


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4. Valued Policy: This policy specifies agreed value of thesubject matter insured, which is not necessarily theactual value. This agreed value is also known as insuredvalue.

Once agreed these values cannot be changed andremains binding on the parties.

5. Unvalued Policy/ Open Policy: In case of unvalued policy,the value of the subject matter insured is not specified atthe time of effecting insurance.

It is taken for a specified amount and the insurable value is

ascertained at the time of loss. The insurer is liable to pay only up to actual loss incurred

to the policy amount.


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6. Floating Policy: A floating policy describes the insurance ingeneral terms, leaving the name of the ship or ships to bedefined by subsequent declarations.

The declaration may be made by endorsement on the policyor in another customary manner.

Declaration must be made in the order of shipment unless thepolicy provides otherwise.

It must comprise all the consignments within the terms of thepolicy and the values must be stated honestly.

Errors and omissions however, may be rectified even after theloss has occurred, if made in good faith.

When the total amount declared exhausts for which the policy

has been issued, it is said to be run off or fully declared. The assured may then arrange for a new policy to be issued tosucceed the one about to lapse, otherwise the coverterminates when the policy is fully declared.


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7. Wagering Policy/ PPI Policy: This policy isissued without there being any insurableinterest or policy bearing evidence that theinsured is willing to dispense with any proof of

interest If policy contains such words as Policy Proof

of Interest (PPI) or Interest or No Interest itis a Wagering or Honour Policy.

Under Sc 4 of the Marine Insurance Act, suchpolicies are void in Law but such policiescontinue to be common.


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8. Construction or Builder Risk Policy: This is designed tocover risks incidental to the building of a vessel, usuallygiving cover from the time of laying the keel until thecompletion of trials and handing over to the owners.

In the case of very large vessel, the period may extend

over several years.9. Blanket/ Open Cover Policy: In order to arrange theirmarine insurance in advance and to be assured to becovered at all times, and also to avoid the effects ofpossible rapidly fluctuating rates, it is practice of regularimporters and exporters to avail Blanket Insurance.

An open cover policy is an agreement between the assured

and his underwriter under which the former agrees todeclare and the latter to accept, all shipments comingwithin the scope of the open general cover during somestipulated period of time.


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10. Duty Policy : In case of CIF contracts, theexporter would have arranged for insuranceonly up to CIF value. Customs duty payable ifany is the responsibility of the importer and

they can separately obtain custom duty policyon standalone basis.

11. Increased Value Policy: If goods imported aredamaged in transit and such goods can beprocured locally at prices higher than the CIF+

Customs duty, the increase value policy coverssuch difference in values.


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Variants: Marine InsuranceProducts

12. Marine Delays: Any loss or damage to theequipment during transit which leads to the delayin completion of the project , commencement ofproduction and thereby loss in profit is coveredunder this policy and is also known as

Consequential loss due to marine delays orsimply Delay Start Up.

13. Marine Cum Erection Policy: In standard marinecargo policy, the cover ceases after the goods aredelivered at the site of erection. If any damage

attributable to transit risk was found at the timeof erection, then marine policy and erection policybear 50% each of the cost of damage.


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14. Port Risk Policy: This is to cover a ship orcargo during a period in port against the riskspeculiar to a port as distinguished from

voyage risks.


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Marine Losses

According to Marine Insurance Act, unless the policyprovides otherwise,

a. The insurer is liable for any loss proximately caused bya peril insured against

b. The insurer is not liable for any loss attributable to the

willful misconduct of the assured but unless the policyotherwise provides, he is liable for any loss proximatelycaused by a peril insured against even though the losswould not have happened but for the misconduct ornegligence of the Master or Crew of the Ship.

c. Unless the policy otherwise provides, the insurer is notliable for ordinary wear and tear, ordinary leakage andbreakage, inherent vice or nature of subject matterinsured or for any loss proximately caused by rat orvermin or any injury to machinery not caused bymaritime perils.


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Types of Marine Losses

Marine Losses

Total Loss Partial Loss

Actual LossConstructive Total

LossParticular

Average LossGeneral Average

Loss


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It is said that actual total loss has arisen :

1. When the subject matter insured is destroyed or is sodamaged that it ceases to be a thing or a kind insured.

2. When the assured is irretrievably deprived of the

subject matter.3. When the ship concerned in the adventure is missing,

and after the lapse of a reasonable time period, still nonews of it is received.

In the case of Actual Total Loss, the insurer has to payeither the insured amount or the actual loss whichever

is less but the cause of the loss must be one of theperils insured against.


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Constructive total loss is said to have occurred :1. When the assured is deprived of the possession of ship or

goods by a peril insured against and it is unlikely that he canrecover the ship or goods as the case may be or the cost ofrecovering the ship or goods, as the case may be, wouldexceed their value when recovered

2. In the case of damage of goods, where cost of repairing thedamage and forwarding the goods to their destination wouldexceed their value.

3. In case of damage of the ship, where it is so damaged by theperil insured against that the cost of repairing the damagewould exceed the value of the ship.

EffectEffect ofof ConstructiveConstructive TotalTotal LossLoss:: When there is a constructivetotal loss, the assured may either treat the loss as a particularloss or abandon the subject matter insured to the insurer andtreat the loss as if it were an Actual Total Loss.


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5. When the notice of abandonment is properly given, therights of the assured are not prejudiced by the fact thatthe insurer refuses to accept the abandonment.

6. The acceptance of abandonment may be either expressor implied from the conduct of the insurer. The mere

silence of the insurer after the notice does not amountto an acceptance.7. Once the notice of abandonment is accepted, the

abandonment is irrevocable. The acceptance of thenotice conclusively admits liability for the loss.

Effect of Abandonment: Whenever there is a validabandonment, the insured is entitled to take over theinterest of the assured in whatever may remain in thesubject matter insured, and all proprietary rightsincidental thereto.


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Partial Loss

Any loss other than total loss is Partial Lossand may be classified into:

a) Particular Average Loss

b) General Average Loss


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Particular Average Loss

When the subject matter is partially lost ordamaged by a peril insured against, it is calledParticular Average Loss.

A Particular Average Loss must fulfill thefollowing conditions:

1. Only a particular subject matter is lost ordamaged.

2. The loss should be accidental.

3. It should be caused by peril insured against.4. The damage should not have suffered for a

general benefit.


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York Antwerp Rules

As General Average causes many difficulties particularlywhen adjustments has to be made in foreign courts, aninternational code has been compiled known as York-Antwerp Rules.

The association for reform and codification of the law ofnature meet at Antwerp in 1877, where code of ruleswere adapted and known as York Antwerp Rules. Therules were further revised in 1890 and 1924.

These rules deal only with certain specific method

relating to General Average Loss and further providedthat in case of matters not included in the rules, thatshould be dealt with according to the law and practice ofthe court of destination.


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Difference Between General AverageLoss and Particular Average Loss

General Average Loss

1. It is incurred for thebenefits of all parties.

2. It is always done

voluntarily and isreasonably incurred.

3. General Average isshared by all those whoare benefited by theAverage Act.

4. It includes expenditureand sacrifice along withloss.

Particular Average Loss

1. It is in connection withany of the parties.

2. It is accidental and

fortuitous.

3. It is paid by the insurers.

4. It results from anaccident or normal perilsof the sea.


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32756341 Marine Insurance

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