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Marine insurance covers the physical loss or damage of ships, cargo, terminals, and any transport by which the property is transferred, acquired, or held between the points of origin and the final destination. Cargo insurance is the sub-branch of marine insurance, though Marine insurance also includes Onshore and Offshore exposed property, (
container terminal A container port or container terminal is a facility where cargo containers are transshipped between different transport vehicles, for onward transportation. The transshipment may be between container ships and land vehicles, for example train ...
s, ports,
oil platform An oil platform (or oil rig, offshore platform, oil production platform, and similar terms) is a large structure with facilities to extract and process petroleum and natural gas that lie in rock formations beneath the seabed. Many oil platfor ...
s, pipelines), Hull, Marine Casualty, and Marine Liability. When goods are transported by mail or courier or related post, shipping insurance is used instead.


History

In December 1901 and January 1902, at the direction of archaeologist
Jacques de Morgan Jean-Jacques de Morgan (3 June 1857, Huisseau-sur-Cosson, Loir-et-Cher – 14 June 1924) was a French mining engineer, geologist, and archaeologist. He was the director of antiquities in Egypt during the 19th century, and excavated in Memp ...
, Father
Jean-Vincent Scheil Father Jean-Vincent Scheil (born 10 June 1858, Kœnigsmacker – died 21 September 1940, Paris) was a French Dominican scholar and Assyriologist. He is credited as the discoverer of the Code of Hammurabi in Persia. In 1911 he came into possessio ...
, OP found a 2.25 meter (or 88.5
inch Measuring tape with inches The inch (symbol: in or ″) is a unit of length in the British imperial and the United States customary systems of measurement. It is equal to yard or of a foot. Derived from the Roman uncia ("twelfth ...
) tall
basalt Basalt (; ) is an aphanitic (fine-grained) extrusive igneous rock formed from the rapid cooling of low-viscosity lava rich in magnesium and iron (mafic lava) exposed at or very near the surface of a rocky planet or moon. More than 90 ...
or
diorite Diorite ( ) is an intrusive igneous rock formed by the slow cooling underground of magma (molten rock) that has a moderate content of silica and a relatively low content of alkali metals. It is intermediate in composition between low-sil ...
stele A stele ( ),Anglicized plural steles ( ); Greek plural stelai ( ), from Greek language, Greek , ''stēlē''. The Greek plural is written , ''stēlai'', but this is only rarely encountered in English. or occasionally stela (plural ''stelas'' or ...
in three pieces inscribed with 4,130 lines of
cuneiform law Cuneiform law refers to any of the legal codes written in cuneiform script, that were developed and used throughout the ancient Middle East among the Sumerians, Babylonians, Assyrians, Elamites, Hurrians, Kassites, and Hittites. The Code of ...
dictated by Hammurabi (c. 1792–1750 BC) of the First Babylonian Empire in the city of Shush, Iran. Code of Hammurabi Law 100 stipulated repayment by a
debtor A debtor or debitor is a legal entity (legal person) that owes a debt to another entity. The entity may be an individual, a firm, a government, a company or other legal person. The counterparty is called a creditor. When the counterpart of this ...
of a
loan In finance, a loan is the lending of money by one or more individuals, organizations, or other entities to other individuals, organizations, etc. The recipient (i.e., the borrower) incurs a debt and is usually liable to pay interest on that ...
to a
creditor A creditor or lender is a party (e.g., person, organization, company, or government) that has a claim on the services of a second party. It is a person or institution to whom money is owed. The first party, in general, has provided some property ...
on a
schedule A schedule or a timetable, as a basic time-management tool, consists of a list of times at which possible tasks, events, or actions are intended to take place, or of a sequence of events in the chronological order in which such things are ...
with a maturity date specified in written contractual terms. Laws 101 and 102 stipulated that a shipping agent, factor, or ship charterer was only required to repay the principal of a loan to their
creditor A creditor or lender is a party (e.g., person, organization, company, or government) that has a claim on the services of a second party. It is a person or institution to whom money is owed. The first party, in general, has provided some property ...
in the event of a
net income In business and accounting, net income (also total comprehensive income, net earnings, net profit, bottom line, sales profit, or credit sales) is an entity's income minus cost of goods sold, expenses, depreciation and amortization, interest ...
loss or a total loss due to an
Act of God In legal usage in the English-speaking world, an act of God is a natural hazard outside human control, such as an earthquake or tsunami, for which no person can be held responsible. An act of God may amount to an exception to liability in co ...
. Law 103 stipulated that an agent, factor, or charterer was by ''
force majeure In contract law, (from Law French: 'overwhelming force', ) is a common clause in contracts which essentially frees both parties from liability or obligation when an extraordinary event or circumstance beyond the control of the parties, suc ...
'' relieved of their liability for an entire loan in the event that the agent, factor, or charterer was the victim of theft during the term of their
charterparty A charterparty (sometimes charter-party) is a maritime contract between a shipowner and a "charterer" for the hire of either a ship for the carriage of passengers or cargo, or a yacht for pleasure purposes. Charter party is a contract of carriage ...
upon provision of an
affidavit An ( ; Medieval Latin for "he has declared under oath") is a written statement voluntarily made by an ''affiant'' or '' deponent'' under an oath or affirmation which is administered by a person who is authorized to do so by law. Such a stateme ...
of the theft to their creditor. Code of Hammurabi Law 104 stipulated that a
carrier Carrier may refer to: Entertainment * ''Carrier'' (album), a 2013 album by The Dodos * ''Carrier'' (board game), a South Pacific World War II board game * ''Carrier'' (TV series), a ten-part documentary miniseries that aired on PBS in April 20 ...
(agents, factors, or charterers) issue a
waybill A waybill ( UIC) is a document issued by a carrier giving details and instructions relating to the shipment of a consignment of goods. Typically it will show the names of the consignor and consignee, the point of origin of the consignment, its d ...
and
invoice An invoice, bill or tab is a commercial document issued by a seller to a buyer relating to a sale transaction and indicating the products, quantities, and agreed-upon prices for products or services the seller had provided the buyer. Paym ...
for a contract of carriage to a
consignee {{Admiralty law In a contract of carriage, the consignee is the entity who is financially responsible (the buyer) for the receipt of a shipment. Generally, but not always, the consignee is the same as the receiver. If a sender dispatches an it ...
outlining contractual terms for
sales Sales are activities related to selling or the number of goods sold in a given targeted time period. The delivery of a service for a cost is also considered a sale. The seller, or the provider of the goods or services, completes a sale in r ...
, commissions, and laytime and receive a bill of parcel and lien authorizing
consignment Consignment involves selling one's personal goods (clothing, furniture, etc.) through a third-party vendor such as a consignment store or online thrift store. The owner of the goods pays the third-party a portion of the sale for facilitating ...
from the consignee. Law 105 stipulated that claims for losses filed by agents, factors, and charterers without receipts were without standing. Law 126 stipulated that filing a false claim of a loss was punishable by law. Law 235 stipulated that a
shipbuilder Shipbuilding is the construction of ships and other floating vessels. It normally takes place in a specialized facility known as a shipyard. Shipbuilders, also called shipwrights, follow a specialized occupation that traces its roots to befor ...
was liable within one year of construction for the replacement of an unseaworthy vessel to the ship-owner that was
lost Lost may refer to getting lost, or to: Geography * Lost, Aberdeenshire, a hamlet in Scotland *Lake Okeechobee Scenic Trail, or LOST, a hiking and cycling trail in Florida, US History *Abbreviation of lost work, any work which is known to have bee ...
during the term of a charterparty. Laws 236 and 237 stipulated that a
sea captain A sea captain, ship's captain, captain, master, or shipmaster, is a high-grade licensed mariner who holds ultimate command and responsibility of a merchant vessel.Aragon and Messner, 2001, p.3. The captain is responsible for the safe and effici ...
, ship-manager, or charterer was liable for the replacement of a lost vessel and cargo to the shipowner and consignees respectively that was negligently operated during the term of a charterparty. Law 238 stipulated that a captain, manager, or charterer that saved a ship from total loss was only required to pay one-half the value of the ship to the shipowner. Law 240 stipulated that the owner of a
cargo ship A cargo ship or freighter is a merchant ship that carries cargo, goods, and materials from one port to another. Thousands of cargo carriers ply the world's seas and oceans each year, handling the bulk of international trade. Cargo ships are usu ...
that destroyed a
passenger ship A passenger ship is a merchant ship whose primary function is to carry passengers on the sea. The category does not include cargo vessels which have accommodations for limited numbers of passengers, such as the ubiquitous twelve-passenger freig ...
in a collision was liable for replacement of the passenger ship and cargo it held upon provision of an affidavit of the collision by the owner of the passenger ship. In the '' Digesta seu Pandectae'' (533), the second volume of the codification of laws ordered by
Justinian I Justinian I (; la, Iustinianus, ; grc-gre, Ἰουστινιανός ; 48214 November 565), also known as Justinian the Great, was the Byzantine emperor from 527 to 565. His reign is marked by the ambitious but only partly realized '' renov ...
(527–565) of the
Eastern Roman Empire The Byzantine Empire, also referred to as the Eastern Roman Empire or Byzantium, was the continuation of the Roman Empire primarily in its eastern provinces during Late Antiquity and the Middle Ages, when its capital city was Constantino ...
, a
legal opinion In law, a legal opinion is in certain jurisdictions a written explanation by a judge or group of judges that accompanies an order or ruling in a case, laying out the rationale and legal principles for the ruling. Opinions are in those jurisdic ...
written by the Roman jurist Paulus at the beginning of the Crisis of the Third Century in 235 AD was included about the '' Lex Rhodia'' ("Rhodian law") that articulates the general average principle of marine insurance established on the island of
Rhodes Rhodes (; el, Ρόδος , translit=Ródos ) is the largest and the historical capital of the Dodecanese islands of Greece. Administratively, the island forms a separate municipality within the Rhodes regional unit, which is part of the S ...
in approximately 1000 to 800 BC as a member of the
Doric Hexapolis The Doric or Dorian Hexapolis ( grc-gre, Δωρικὴ Ἑξάπολις or Δωριέων Ἑξάπολις) was a federation of six cities of Dorian foundation in southwest Asia Minor and adjacent islands, largely coextensive with the region ...
, plausibly by the
Phoenicians Phoenicia () was an ancient thalassocratic civilization originating in the Levant region of the eastern Mediterranean, primarily located in modern Lebanon. The territory of the Phoenician city-states extended and shrank throughout their his ...
during the proposed Dorian invasion and emergence of the purported
Sea Peoples The Sea Peoples are a hypothesized seafaring confederation that attacked ancient Egypt and other regions in the East Mediterranean prior to and during the Late Bronze Age collapse (1200–900 BCE).. Quote: "First coined in 1881 by the Fren ...
during the
Greek Dark Ages The term Greek Dark Ages refers to the period of History of Greece, Greek history from the end of the Mycenaean civilization, Mycenaean palatial civilization, around 1100 BC, to the beginning of the Archaic Greece, Archaic age, around 750 ...
(c. 1100–c. 750) that led to the proliferation of the
Doric Greek Doric or Dorian ( grc, Δωρισμός, Dōrismós), also known as West Greek, was a group of Ancient Greek dialects; its varieties are divided into the Doric proper and Northwest Doric subgroups. Doric was spoken in a vast area, that includ ...
dialect The term dialect (from Latin , , from the Ancient Greek word , 'discourse', from , 'through' and , 'I speak') can refer to either of two distinctly different types of linguistic phenomena: One usage refers to a variety of a language that is ...
. The law of general average constitutes the fundamental
principle A principle is a proposition or value that is a guide for behavior or evaluation. In law, it is a rule that has to be or usually is to be followed. It can be desirably followed, or it can be an inevitable consequence of something, such as the l ...
that underlies all
insurance Insurance is a means of protection from financial loss in which, in exchange for a fee, a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of risk management, primarily used to hedge ...
. It is the oldest risk hedging instruments to mitigate risk in medieval times were sea/marine (Mutuum) loans, commenda contract, and bill of exchanges. Separate marine insurance contracts were developed near
Genoa Genoa ( ; it, Genova ; lij, Zêna ). is the capital of the Italian region of Liguria and the sixth-largest city in Italy. In 2015, 594,733 people lived within the city's administrative limits. As of the 2011 Italian census, the Province of ...
, in Camogli in 1853 and other Italian cities in the fourteenth century and spread to northern Europe. Premiums varied with intuitive estimates of the variable risk from seasons and pirates. Modern marine insurance law originated in the
Lex mercatoria ''Lex mercatoria'' (from the Latin for "merchant law"), often referred to as "the Law Merchant" in English, is the body of commercial law used by merchants throughout Europe during the medieval period. It evolved similar to English common law as ...
(law merchant). In 1601, a specialized chamber of assurance separate from the other Courts was established in
England England is a country that is part of the United Kingdom. It shares land borders with Wales to its west and Scotland to its north. The Irish Sea lies northwest and the Celtic Sea to the southwest. It is separated from continental Europe ...
. By the end of the seventeenth century, London's growing importance as a centre for trade was increasing demand for marine insurance. In the late 1680s, Edward Lloyd opened a coffee house on
Tower Street Tower Street is the name of: * Great Tower Street, originally named "Tower Street", in the City of London * Tower Street, Covent Garden, in London * Tower Street (York), in England See also * Tower Street Adult Correctional Centre __NOTOC__ To ...
in
London London is the capital and List of urban areas in the United Kingdom, largest city of England and the United Kingdom, with a population of just under 9 million. It stands on the River Thames in south-east England at the head of a estuary dow ...
. It soon became a popular haunt for ship owners, merchants, and ships' captains, and thereby a reliable source of the latest shipping news.
Lloyd's Coffee House A 19th-century drawing of Lloyd's Coffee House Lloyd's Coffee House was a significant meeting place in London in the 17th and 18th centuries. It was opened by Edward Lloyd (c. 1648 – 15 February 1713) on Tower Street in 1686. The establis ...
was the first marine insurance market. It became the meeting place for parties in the shipping industry wishing to insure cargoes and ships, and those willing to underwrite such ventures. These informal beginnings led to the establishment of the insurance market Lloyd's of London and several related shipping and insurance businesses. The participating members of the insurance arrangement eventually formed a committee and moved to the Royal Exchange on Cornhill as the Society of Lloyd's. The establishment of insurance companies, a developing infrastructure of specialists (such as shipbrokers,
admiralty Admiralty most often refers to: *Admiralty, Hong Kong *Admiralty (United Kingdom), military department in command of the Royal Navy from 1707 to 1964 *The rank of admiral *Admiralty law Admiralty can also refer to: Buildings * Admiralty, Traf ...
lawyers, bankers, surveyors, loss adjusters, general average adjusters, ''et al.''), and the growth of the
British Empire The British Empire was composed of the dominions, colonies, protectorates, mandates, and other territories ruled or administered by the United Kingdom and its predecessor states. It began with the overseas possessions and trading posts e ...
gave English law a prominence in this area which it largely maintains and forms the basis of almost all modern practice. Lord Mansfield, Lord Chief Justice in the mid-eighteenth century, began the merging of law merchant and
common law In law, common law (also known as judicial precedent, judge-made law, or case law) is the body of law created by judges and similar quasi-judicial tribunals by virtue of being stated in written opinions."The common law is not a brooding omniprese ...
principles. The growth of the London insurance market led to the standardization of policies and judicial
precedent A precedent is a principle or rule established in a previous legal case that is either binding on or persuasive for a court or other tribunal when deciding subsequent cases with similar issues or facts. Common-law legal systems place great v ...
further developed marine insurance law. In 1906 the Marine Insurance Act codified the previous common law; it is both an extremely thorough and concise piece of work. Although the title of the Act refers to marine insurance, the general principles have been applied to all non-life insurance. In the 19th century, Lloyd's and the Institute of London Underwriters (a grouping of London company insurers) developed between them standardized clauses for the use of marine insurance, and these have been maintained since. These are known as the Institute Clauses because the Institute covered the cost of their publication. Out of marine insurance, grew non-marine insurance and
reinsurance Reinsurance is insurance that an insurance company purchases from another insurance company to insulate itself (at least in part) from the risk of a major claims event. With reinsurance, the company passes on ("cedes") some part of its own ins ...
. Marine insurance traditionally formed the majority of business underwritten at Lloyd's. Nowadays, Marine insurance is often grouped with Aviation and Transit (cargo) risks, and in this form is known by the acronym 'MAT'. It is common for marine insurance agencies to compete with the offerings provided by local insurers. These specialist agencies often fill market gaps by providing cover for hard-to-place or obscure marine insurance risks that would otherwise be difficult or impossible to find insurance cover for. These agencies can become quite large and eventually become market makers. They operate best when their day-to-day management is independent of the insurers who provide them with the capital to underwrite risks on their behalf. As of 2020, the Nordic region was the largest provider of marine hull insurance at 14% of the world market, China second at 12.4% and Lloyd's of London third at 8.6%, according to the International Union of Marine Insurance.


Practice

The Marine Insurance Act includes, as a schedule, a standard policy (known as the "SG form"), which parties were at liberty to use if they wished. Because each term in the policy had been tested through at least two centuries of judicial precedent, the policy was extremely thorough. However, it was also expressed in rather archaic terms. In 1991, the London market produced a new standard policy wording known as the MAR 91 form using the Institute Clauses. The MAR form is simply a general statement of insurance; the Institute Clauses are used to set out the detail of the insurance cover. In practice, the policy document usually consists of the MAR form used as a cover, with the Clauses stapled to the inside. Typically, each clause will be stamped, with the stamp overlapping both onto the inside cover and to other clauses; this practice is used to avoid the substitution or removal of clauses. Because marine insurance is typically underwritten on a subscription basis, the MAR form begins: ''We, the Underwriters, agree to bind ourselves each for his own part and not one for another ..'. In legal terms, liability under the policy is several and not joint, i.e., the underwriters are all liable together, but only for their share or proportion of the risk. If one underwriter should default, the remainder are not liable to pick his share of the claim. Typically, marine insurance is split between the vessels and the cargo. Insurance of the vessels is generally known as "Hull and Machinery" (H&M). A more restricted form of cover is "Total Loss Only" (TLO), generally used as a reinsurance, which only covers the total loss of the vessel and not any partial loss. Cover may be on either a "voyage" or "time" basis. The "voyage" basis covers transit between the ports set out in the policy; the "time" basis covers a period, typically one year, and is more common.


Protection and indemnity

A marine policy typically covered only three-quarter of the insured's liabilities towards third parties (Institute Time Clauses Hulls 1.10.83). The typical liabilities arise in respect of collision with another ship, known as "running down" (collision with a fixed object is a "allision"), and wreck removal (a wreck may serve to block a harbour, for example). In the 19th century, shipowners banded together in mutual underwriting clubs known as Protection and Indemnity Clubs (P&I), to insure the remaining one-quarter liability amongst themselves. These Clubs are still in existence today and have become the model for other specialized and noncommercial marine and non-marine mutuals, for example in relation to oil pollution and nuclear risks. Clubs work on the basis of agreeing to accept a shipowner as a member and levying an initial "call" (premium). With the fund accumulated, reinsurance will be purchased; however, if the loss experience is unfavourable one or more "supplementary calls" may be made. Clubs also typically try to build up reserves, but this puts them at odds with their mutual status. Because liability regimes vary throughout the world, insurers are usually careful to limit or exclude American Jones Act liability.


Actual total loss and constructive total loss

These two terms are used to differentiate the degree of proof that a vessel or cargo has been lost. An actual total loss occurs when the property has been destroyed, or so damaged as to cease to be a thing of the kind insured. A constructive total loss is a situation in which the cost of repairs plus the cost of salvage equal or exceed the value. The use of these terms is contingent on there being property remaining to assess damages, which is not always possible in losses to ships at sea or in total theft situations. In this respect, marine insurance differs from non-marine insurance, with which the insured is required to prove his loss. Traditionally, in law, marine insurance was seen as an insurance of "the adventure", with insurers having a stake and an interest in the vessel and/or the cargo rather than simply an interest in the financial consequences of the subject-matter's survival.


CTL - US Navy usage

The term "constructive total loss" or CTL was also used by the
United States Navy The United States Navy (USN) is the maritime service branch of the United States Armed Forces and one of the eight uniformed services of the United States. It is the largest and most powerful navy in the world, with the estimated tonnage ...
during and after
World War II World War II or the Second World War, often abbreviated as WWII or WW2, was a world war that lasted from 1939 to 1945. It involved the World War II by country, vast majority of the world's countries—including all of the great power ...
to describe naval vessels that were damaged to such an extent that they were beyond economical repair. This was most often applied to small-type ships (
destroyer In naval terminology, a destroyer is a fast, manoeuvrable, long-endurance warship intended to escort larger vessels in a fleet, convoy or battle group and defend them against powerful short range attackers. They were originally developed ...
, patrol boats, landing ships, mine warfare vessels, etc.) in 1945, the last year of the war, many of which were damaged by
kamikaze , officially , were a part of the Japanese Special Attack Units of military aviators who flew suicide attacks for the Empire of Japan against Allied naval vessels in the closing stages of the Pacific campaign of World War II, intending ...
s; postwar the term was also used for ships damaged in typhoons. By this time enough ships were available for the war that some could be disposed of if severely damaged.


General averages

''Average'' in marine insurance terms is "an equitable apportionment among all the interested parties of such an expense or loss". General average stands apart for marine insurance. In order for ''general average'' to be properly declared, 1) there must be an event which is beyond the shipowner's control, which imperils the entire adventure; 2) there must be a voluntary sacrifice, 3) there must be something saved. The voluntary sacrifice might be the jettison of certain cargo, the use of tugs, or salvors, or damage to the ship, be it, voluntary grounding, knowingly working the engines that will result in damages. '' General average'' requires all parties concerned in the maritime venture (hull/cargo/freight/bunkers) to contribute to make good the voluntary sacrifice. They share the expense in proportion to the 'value at risk" in the adventure. ''Particular average'' is the term applied to partial loss be it hull or cargo. Average – is the situation in which the insured has under-insured, i.e., insured an item for less than it is worth. Average will apply to reduce the claim amount payable. An ''average adjuster'' is a marine claims specialist responsible for adjusting and providing the general average statement. An Average Adjuster in North America is a 'member of the association of Average Adjusters' To insure the fairness of the adjustment a General Average adjuster is appointed by the shipowner and paid by the insurer.


Excess, deductible, retention, co-insurance, and franchise

An excess is the amount payable by the insured and is usually expressed as the first amount falling due, up to a ceiling, in the event of a loss. An excess may or may not be applied. It may be expressed in either monetary or percentage terms. An excess is typically used to discourage moral hazard and to remove small claims, which are disproportionately expensive to handle. The term "excess" signifies the "deductible" or "retention". A co-insurance, which typically governs non-proportional treaty reinsurance, is an excess expressed as a proportion of a claim in percentage terms and applied to the entirety of a claim. Co-insurance is a penalty imposed on the insured by the insurance carrier for under reporting/declaring/insuring the value of tangible property or business income. The penalty is based on a percentage stated within the policy and the amount under reported. As an example: a vessel actually valued at $1,000,000 has an 80% co-insurance clause but is insured for only $750,000. Since its insured value is less than 80% of its actual value, when it suffers a loss, the insurance payout will be subject to the under-reporting penalty, the insured will receive 750000/1000000th (75%) of the claim made less the deductible.


Tonners and chinamen

These are both obsolete forms of early reinsurance. Both are technically unlawful, as not having insurable interest, and so were unenforceable in law. Policies were typically marked P.P.I. (Policy is Proof of Interest). Their use continued into the 1970s before they were banned by Lloyd's, the main market, by which time they had become nothing more than crude bets. A "tonner" was simply a "policy" setting out the global gross tonnage loss for a year. If that loss was reached or exceeded, the policy paid out. A "chinaman" applied the same principle but in reverse: thus, if the limit was not reached, the policy paid out.


Specialist policies

Various specialist policies exist, including: *Newbuilding risks: This covers the risk of damage to the hull while it is under construction. *Open Cargo or Shipper's Interest Insurance: This policy may be purchased by a carrier, freight broker, or shipper, as coverage for the shipper's goods. In the event of loss or damage, this type of insurance will pay for the true value of the shipment, rather than only the legal amount that the carrier is liable for. *Annual Cover: is issued for twelve month period subject to at inception of a minimum deposit premium. Often used by regular shippers of goods such as importers and exporters including freight forwarding agents, where a policy is issued to cover a number of consignments being shipped to and from various ports and destinations throughout the year *Yacht Insurance: Insurance of pleasure craft is generally known as "
yacht A yacht is a sailing or power vessel used for pleasure, cruising, or racing. There is no standard definition, though the term generally applies to vessels with a cabin intended for overnight use. To be termed a , as opposed to a , such a pleasu ...
insurance" and includes liability coverage. Smaller vessels such as yachts and fishing vessels are typically underwritten on a "binding authority" or "line slip" basis. *War risks: General hull insurance does not cover the risks of a vessel sailing into a war zone. A typical example is the risk to a tanker sailing in the
Persian Gulf The Persian Gulf ( fa, خلیج فارس, translit=xalij-e fârs, lit=Gulf of Fars, ), sometimes called the ( ar, اَلْخَلِيْجُ ٱلْعَرَبِيُّ, Al-Khalīj al-ˁArabī), is a mediterranean sea in Western Asia. The bo ...
during the
Gulf War The Gulf War was a 1990–1991 armed campaign waged by a 35-country military coalition in response to the Iraqi invasion of Kuwait. Spearheaded by the United States, the coalition's efforts against Iraq were carried out in two key phases: ...
. The war risks areas are established by the London-based Joint War Committee, which has recently (when?) moved to include the Malacca Straits as a war risks area due to
piracy Piracy is an act of robbery or criminal violence by ship or boat-borne attackers upon another ship or a coastal area, typically with the goal of stealing cargo and other valuable goods. Those who conduct acts of piracy are called pirates, v ...
. If an attack is classified as a "riot" then it would be covered by war-risk insurers. *Increased Value (IV): Increased Value cover protects the shipowner against any difference between the insured value of the vessel and the market value of the vessel. *Overdue insurance: This is a form of insurance now largely obsolete due to advances in communications. It was an early form of reinsurance and was bought by an insurer when a ship was late at arriving at her destination port and there was a risk that she might have been lost (but, equally, might simply have been delayed). The overdue insurance of the ''Titanic'' was famously underwritten on the doorstep of Lloyd's. *Cargo insurance: Cargo insurance is underwritten on the Institute Cargo Clauses, with coverage on an A, B, or C basis, A having the widest cover and C the most restricted. Valuable cargo is known as specie. Institute Clauses also exist for the insurance of specific types of cargo, such as
frozen food Freezing food preserves it from the time it is prepared to the time it is eaten. Since early times, farmers, fishermen, and trappers have preserved grains and produce in unheated buildings during the winter season. Freezing food slows decompositi ...
, frozen meat, and particular commodities such as bulk oil,
coal Coal is a combustible black or brownish-black sedimentary rock, formed as rock strata called coal seams. Coal is mostly carbon with variable amounts of other elements, chiefly hydrogen, sulfur, oxygen, and nitrogen. Coal is formed when ...
, and
jute Jute is a long, soft, shiny bast fiber that can be spun into coarse, strong threads. It is produced from flowering plants in the genus ''Corchorus'', which is in the mallow family Malvaceae. The primary source of the fiber is '' Corchorus ol ...
. Often these insurance conditions are developed for a specific group as is the case with the Institute Federation of Oils, Seeds and Fats Associations (FOFSA) Trades Clauses which have been agreed with the Federation of Oils, Seeds and Fats Associations and Institute Commodity Trades Clauses which are used for the insurance of shipments of
cocoa Cocoa may refer to: Chocolate * Chocolate * ''Theobroma cacao'', the cocoa tree * Cocoa bean, seed of ''Theobroma cacao'' * Chocolate liquor, or cocoa liquor, pure, liquid chocolate extracted from the cocoa bean, including both cocoa butter an ...
,
coffee Coffee is a drink prepared from roasted coffee beans. Darkly colored, bitter, and slightly acidic, coffee has a stimulating effect on humans, primarily due to its caffeine content. It is the most popular hot drink in the world. Seeds of ...
,
cotton Cotton is a soft, fluffy staple fiber that grows in a boll, or protective case, around the seeds of the cotton plants of the genus '' Gossypium'' in the mallow family Malvaceae. The fiber is almost pure cellulose, and can contain minor pe ...
, fats and oils, hides and skins, metals, oil seeds, refined sugar, and tea and have been agreed with the Federation of Commodity Associations. There has also been discussion about insurance policies to address
plastic pollution Plastic pollution is the accumulation of plastic objects and particles (e.g. plastic bottles, bags and microbeads) in the Earth's environment that adversely affects humans, wildlife and their habitat. Plastics that act as pollutants are cate ...
as a result of plastic cargo losses at sea. For example, marine insurance policies should factor in liability for marine plastic pollution, marine clean-up and conservation.


Warranties and conditions

A peculiarity of marine insurance, and insurance law generally, is the use of the terms condition and
warranty In contract law, a warranty is a promise which is not a condition of the contract or an innominate term: (1) it is a term "not going to the root of the contract",Hogg M. (2011). ''Promises and Contract Law: Comparative Perspectives''p. 48 Cambri ...
. In English law, a condition typically describes a part of the contract that is fundamental to the performance of that contract, and, if breached, the non-breaching party is entitled not only to claim damages but to terminate the contract on the basis that it has been repudiated by the party in breach. By contrast, a warranty is not fundamental to the performance of the contract and breach of a warranty, while giving rise to a claim for damages, does not entitle the non-breaching party to terminate the contract. The meaning of these terms is reversed in insurance law. Indeed, a warranty if not strictly complied with will automatically discharge the insurer from further liability under the contract of insurance. The assured has no defense to his breach, unless he can prove that the insurer, by his conduct, has waived his right to invoke the breach, possibility provided in section 34(3) of the Marine Insurance Act 1906 (MIA). Furthermore, in the absence of express warranties the MIA will imply them, notably a warranty to provide a seaworthy vessel at the commencement of the voyage in a voyage policy (section 39(1)) and a warranty of legality of the insured voyage (section 41).see also: ''Bank of Nova Scotia v. Hellenic Mutual War Risks Association (Bermuda) Ltd. ("The Good Luck")''
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2 WLR 1279 and at 1294-5


Salvage and prizes

The term " salvage" refers to the practice of rendering aid to a vessel in distress. Apart from the consideration that the sea is traditionally "a place of safety", with sailors honour-bound to render assistance as required, it is obviously in underwriters' interests to encourage assistance to vessels in danger of being wrecked. A policy will usually include a "sue and labour" clause which will cover the reasonable costs incurred by a shipowner in his avoiding a greater loss. At sea, a ship in distress will typically agree to " Lloyd's Open Form" with any potential salvor. The Lloyd's Open Form (LOF) is the standard contract, although other forms exist. The Lloyd's Open Form is headed "No cure — no pay"; the intention being that if the attempted salvage is unsuccessful, no award will be made. However, this principle has been weakened in recent years, and awards are now permitted in cases where, although the ship might have sunk, pollution has been avoided or mitigated. In other circumstances the "salvor" may invoke the SCOPIC terms (most recent and commonly used rendition is SCOPIC 2000) in contrast to the LOF these terms mean that the salvor will be paid even if the salvage attempt is unsuccessful. The amount the salvor receives is limited to cover the costs of the salvage attempt and 25% above it. One of the main negative factors in invoking SCOPIC (on the salvor's behalf) is if the salvage attempt is successful the amount at which the salvor can claim under article 13 of LOF is discounted. The Lloyd's Open Form, once agreed, allows salvage attempts to begin immediately. The extent of any award is determined later; although the standard wording refers to the Chairman of Lloyd's arbitrating any award, in practice the role of arbitrator is passed to specialist admiralty QCs. A ship captured in war is referred to as a prize, and the captors entitled to
prize money Prize money refers in particular to naval prize money, usually arising in naval warfare, but also in other circumstances. It was a monetary reward paid in accordance with the prize law of a belligerent state to the crew of a ship belonging to ...
. Again, this risk is covered by standard policies.


Marine Insurance Act, 1906

The most important sections of this Act include::§4: a policy without insurable interest is void.:§17: imposes a duty on the insured of '' uberrimae fides'' (as opposed to ''
caveat emptor ''Caveat emptor'' (; from ''caveat'', "may he/she beware", a subjunctive form of ''cavēre'', "to beware" + ''ēmptor'', "buyer") is Latin for "Let the buyer beware". It has become a proverb in English. Generally, ''caveat emptor'' is the contra ...
''), i.e., that questions must be answered honestly and the risk not misrepresented.:§18: the proposer of the insurer has a duty to disclose all material facts relevant to the acceptance and rating of the risk. Failure to do so is known as ''non-disclosure'' or ''concealment'' (there are minor differences in the two terms) and renders the insurance voidable by the insurer.:§33(3): ''If warrantybe not
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complied with, then, subject to any express provision in the policy, the insurer is discharged from liability as from the date of the breach of warranty, but without prejudice to any liability incurred by him before that date.'':§34(2): where a warranty has been broken, it is no defense to the insured that the breach has been remedied, and the warranty complied with, prior to the loss.:§34(3): a breach of warranty may be ''waived'' (ignored) by the insurer.:§39(1): implied warranty that the vessel must be seaworthy at the start of her voyage and for the purpose of it (''voyage policy'' only).:§39(5): no warranty that a vessel shall be seaworthy during the policy period (''time'' policy). However, if the assured knowingly allows an unseaworthy vessel to set sail the insurer is not liable for losses caused by unseasworthiness.:§50: a policy may be assigned. Typically, a shipowner might assign the benefit of a policy to the ship-mortgagor.:§§60-63: deals with the issues of a constructive total loss. The insured can, by notice, claim for a constructive total loss with the insurer becoming entitled to the ship or cargo if it should later turn up. (By contrast an ''actual total loss'' describes the physical destruction of a vessel or cargo.):§79: deals with subrogation, i.e., the rights of the insurer to stand in the shoes of an indemnified insured and recover salvage for his own benefit. Schedule 1 of the Act contains a list of definitions; schedule 2 contains the model policy wording. Australia has adopted an amended version of this Act, being the Marine Insurance Act 1909.


Claims basis and deductibles

Marine insurance is always written on an occurrence basis, covering claims that arise out of damage or injury that took place during the policy period, regardless when claims are made. Policy features often include extensions of coverage for items typical to a marine business such as liability for container damage and removal of debris. A deductible is the first amount of a claim that the policy holders bears themselves. There can occasionally be a zero deductible but in most cases a deductible applies to claims made under a policy of marine insurance.


See also

*
CEFOR {{Notability, Institutions, date=July 2016 The Central Union of Marine Underwriters (CEFOR) was founded August 15, 1911 by Norwegian and foreign insurance companies and is the marine insurance market organization of Norway. The members of CEFOR ...
*
History of insurance The history of insurance traces the development of the modern business of insurance against risks, especially regarding cargo, property, death, automobile accidents, and medical treatment. The insurance industry helps to eliminate risks (as whe ...
* Classification society * Legal definitions of wreckage * Inland marine insurance * Seaworthiness (law)


References


Further reading

* Birds, J. '' Birds' Modern Insurance Law''. Sweet & Maxwell, 2004. () * Donaldson, Ellis, Wilson (Editor), Cooke (Editor), ''Lowndes and Rudolf: Law of General Average and the York-Antwerp Rules''. Sweet & Maxwell, 1990. () * John, A. H. "The London Assurance Company and the Marine Insurance Market of the Eighteenth Century," ''Economica'' New Series, Vol. 25, No. 98 (May 1958), pp. 126–14
in JSTOR
* Roover, Florence Edler de. "Early Examples of Marine Insurance," ''Journal of Economic History'' Vol. 5, No. 2 (Nov., 1945), pp. 172–20
in JSTOR
*


External links

* UK case relating t
legal definitions
(''The No. 1 Dae Bu'') {{Authority control