Marine Insurance

Marine insurance, also known as transportation insurance, covers both ocean and inland marine insurance. Ocean marine insurance covers the risks related to navigation which a ship, its cargo, profits of the shippers/consignees or other insurable interest may be exposed to.

Inland marine insurance, on the other hand, deals with risks concerning land and overland transportation like. property in transit (on railroads, aircraft, etc.,) "floater" policies on jewelry, works of art and other movables, fixed transport instrumentalities (bridges, runways, etc.,) bailees  with the custody of another's property (warehousemen, carriers, etc.) 

A "floater" policy is so-called because it "floats" (i.e. follows movable property wherever the latter is brought.) It covers jewelry, works of art and other valuable movables. Sometimes, however, "floaters" are issued even to things that aren't moved from their location.

If the policy is "all risk," it will cover all losses including those not attributable to maritime peril, such as war and pilferage.

If the policy contains a "lost or not lost" provision, the insurer will be liable not only when the vessel is lost but also if it was lost when the contract was entered into.

The concepts of concealment and misrepresentation in marine insurance are stricter than in fire insurance. Failure to communicate information that the insured possesses (even if he's not aware of it personally) will make the contract void. The insured is also bound to communicate the beliefs, opinions or expectations of third persons in reference to a material fact to the insurer.

Liabilities

The insurer is liable for loss or damage due to the perils of the sea, but not for perils of the ship. Perils of the sea are those dangers related to the unusual movement of the wind and waves. They include losses caused by collision, shipwreck, barattry (deliberate misconduct of the captain and crew for an illegal purpose and without the shipowner's consent,) stranding, jettisoning of the cargo in order to save the ship and other navigation-related causes.

Perils of the ship are related to the natural and unavoidable action of the sea, wear and tear of the ship or negilgence or failure to provide the proper crew, supplies and equipment.

Implied Warranties

1.) The ship must be seaworthy at the time of the voyage. It doesn't have to be seaworthy all the time except if:

a.) Time Policy -the ship must be seaworthy at the beginning of each voyage

b.) Voyage Policy -the ship must be seaworthy at the beginning of each stage of the voyage

c.) Cargo Policy -the ship receiving the cargo must be seaworthy at the beginning of each voyage

It's possible that the ship could be seaworthy for insurance purposes but not when it comes to insuring the cargo.

2.) It must not deviate from the voyage. Deviation includes departing from the course of the voyage, going on a completely different one or even an unreasonable delay in undertaking the voyage. A deviation is allowed if:

a.) Made in good faith to save human life or relieving another ship in distress (but not to save cargo)

b.) It is necessary to comply with a warranty or avoid peril

c.) Caused by circumstances beyond the captain's and shipowner's control

d.) Made in good faith and with reasonable ground to avoid peril

3.) The ship must not engage in an illegal venture

4.) It must carry the required nationality or neutrality papers if such is expressly warranted

Inchamaree Clause

This is a marine insurance policy covering loss or damage to the ship's hull or machinery via the following:

1.) Negligence of the captain or crew

2.) Explosion or breakage of shafts

3.) Latent defect in the machinery or hull

Constructive Loss and Abandonment

Loss can be total or partial. If the loss is total it can be either actual (the thing is lost in its entirety) or constructive. Constructive loss takes place when the thing isn't totally lost but, legally speaking, it is totally lost and there is a proper abandonment.

In abandonment, the insured relinquishes his interest in the thing to the insurer if the damage/loss exceeds 3/4 of the thing's value. The loss must be more than 3/4 or it will be considered a partial loss and can't be abandoned. If abandonment is proper, it is an absolute right and acceptance on the insurer's part isn't necessary. If there is a valid abandonment, the insurer now has an interest over the abandoned thing and whatever is recovered belongs to him.

Computation

Insurer's liability = (partial loss/ship's value) x insurance

Example: the MV Indestructible is a local cargo vessel valued at Php10,000,000.00. The same is the amount in its insurance policy is the same. It is damaged and the damage amounts to Php6,000,000.00. We compute:

(6,000,000/10,000,000) x 10,000,000 = 6,000,000

Note: if the value of the ship is greater than the insurance policy, the excess will be borne by the shipowner (he becomes a co-insurer.) Example: MV Unsinkable is an international cargo vessel owned by Oxymoron Shipping Lines. It is valued at Php100,000,000.00 but has an insurance policy for only Php80,000,000.00. During a voyage it suffers a massive damage amounting to Php60,000,000.00. The computation is:

(60,000,000/10,000,000) x 80,000,000 = 48,000,000

The insurance company is liable only for Php48,000,000.00. Oxymoron Shipping, as a co-insurer, will bear the remaining Php12,000,000.00 loss.

1/3 New for Old Rule

This applies when there is a partial loss or its equipment. During repairs, old materials are deducted from the cost of the repairs. When the repairs are completed, 2/3 of the remaining cost is borne by the insurer and 1/3  by the insured. This is because after the repairs, the law considers the vessel more valuable than before, thus "1/3 new for old."